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Mr. D. N. Campbell-Savours (Workington): Early in her speech, the hon. Lady used the word "mis-sold", and she used that word rather quietly. Will she explain to us how it was that so many people managed to buy a product that was obviously not one that they should have purchased? How was it that they were mis-sold that product?
Mrs. Knight: The clause is entitled "Mis-sold personal pensions etc." Perhaps the hon. Gentleman would care to read it, because it goes into some detail--
Mr. Campbell-Savours: What about the background?
Mrs. Knight: It goes into some detail of the aspects that we propose to help in such cases.
Mr. Campbell-Savours: That is not what I asked.
Mrs. Knight: In reply to the substance of thehon. Gentleman's question, the background to the
investigation that is taking place at the moment is well documented. He will have read it in many of the reports by the various regulators who are inquiring into the matter, and I shall say more about it later. If the hon. Gentleman would care to wait a few moments and allow me to proceed, I believe that he will find that the questions he asks will be answered.
The hon. Gentleman will recall--we all recall--that my predecessor, my hon. Friend the Member for Chichester (Mr. Nelson), made a statement to the House on25 October 1994. He announced that anyone with a personal pension who was found to face financial hardship as a result of mis-selling would be entitled to redress. The aim is to put people in a financial position equivalent to that in which they would have been if the mis-selling had not taken place. But to do that, a considerable amount of work needs to be done to identify those who have suffered loss as a result of the mis-selling and to assess how much compensation is due.
Mr. Campbell-Savours:
The hon. Lady keeps using the word "mis-selling". I understand that, in so far as she is giving a taxpayer a subsidy towards redressing the difficulties that have arisen, we are in fact talking about taxpayers' money being used to deal with a problem that was generated by mis-selling. In this debate, we are surely entitled to know why it happened. Why did people find themselves in a position where they bought products that were obviously inappropriate in the circumstances? May we be given a little background information, because we are spending taxpayers' money today, are we not?
Mrs. Knight:
People were given wrong advice--in most instances as a consequence of the mis-selling; people may well find that their financial position is not as beneficial as it would have been if, for example, they had stayed within the occupational pension scheme.
The proposals are designed to identify those people and, where possible, to reinstate them into the occupational pension scheme. For some individuals, such redress--entry into either the occupational pension scheme or the personal pension scheme that they took out--is not available, because they have retired. Under those circumstances, a cash payment will be made--the Government do not consider it correct to tax in those circumstances.
Mr. Campbell-Savours:
Is it fair to say that there was a deficiency in the regulatory approach adopted by the Government for regulating the industry, which is why the problem occurred? Is it fair to say that we are paying today because of a lack of Government regulation in a sector where clearly there should have been regulation? Is that what the hon. Lady is saying?
Mrs. Knight:
No. I am saying that some people did not pay proper attention to the regulation that was in place. Personal pensions have been sold correctly to a considerable number of people. However, it is those pensions that have not been sold correctly to some other people that we are addressing. In certain circumstances, where compensation is paid in the way that I have just explained to the hon. Gentleman, people may be liable for tax, but the Government do not consider it right to tax people in these circumstances. I hope that that is something with which the hon. Gentleman and other Labour Members will agree.
Mr. Alistair Darling (Edinburgh, Central):
I wonder whether what the hon. Lady has just said is correct. It is common ground throughout the industry and among all the regulators that the regulations in force when the mis-selling took place were deficient. Her assertion that certain salesmen ignored regulations that were adequate is not right, unless the Government are changing their view. There used to be common ground between thehon. Lady's predecessor and myself that the regulations were deficient at the time, which is why they were subsequently changed.
Mrs. Knight:
The hon. Gentleman knows full well that we have tightened up the regulations, and rightly so. He also knows full well that a considerable number of pensions have been sold, and the circumstances in which they were sold were good, and the consequences for the individuals who bought them have been good.
We are today talking about a small minority.A considerable number of people were sold pensions that were fine and a considerable number of people have made prudent provision, and will receive its benefit under the regulations that were in place at the time. One must, if necessary, tighten up the existing regulations, and we have done so. But one must also put the problem in perspective, which is what my predecessor did in his statement to the House on 25 October. The clause takes the issue forward from that statement.
Mr. Dennis Skinner (Bolsover):
Is not the truth of the matter that the Minister is saying that the Government made a mistake, the regulations were deficient, the Government did not know, and now, today, they are putting that right? People did not make a mistake on their own account--the regulations were there and people made their investments.
Now the taxpayer is going to bail them out, and that could be called a subsidy. The Government are involved in a subsidy because of a deficiency in their regulations. I want to know how many people are involved, and how much in total the taxpayers out there in the hon. Lady's constituency and mine will have to find to foot the bill for that mistake by the Government.
Mrs. Knight:
The Committee will not be surprised to learn that I do not agree with the construction that the hon. Gentleman has put on the issue. However, I am sure that he will agree--I look forward to hearing his confirmation--that those people who are affected, who have retired and who therefore cannot be helped by the restitution to an occupational pension or a top-up to a personal pension--should be compensated, and should not have to pay tax on that compensation. I am sure that people in the hon. Gentleman's constituency who find themselves in that position will welcome the fact that the Government have decided not to tax their compensation.
I am not able now to give the hon. Member for Bolsover (Mr. Skinner) the total numbers involved, nor am I prepared to speculate. We will all have the numbers when the review is complete.
It is clear from the review so far that the majority of cases are people who either transferred out of or opted out of pensions, and that redress for those people will be achieved by restoring them to the occupational pension or by topping up their existing personal pensions. That is a different issue,
but the majority will come into that category. However, a few will have retired, so cash compensation will be the only help available to them.
If I might proceed, that would be of real help to the Committee.
Mr. Darling:
May I help the hon. Lady out again? The figure that she is grasping for is 400,000.
Mrs. Knight
indicated dissent.
Mr. Darling:
It is. The Personal Investment Authority, which has taken the lead in investigating the matter, believes that 400,000 pensions were wrongly sold. On that basis, surely the Government must have some estimate as to the cost of the measure.
Mrs. Knight:
The hon. Gentleman should be careful about bandying numbers around. Until the review is complete, there is no way in which accurate numbers can be given. That is the reason why I do not propose to do so. No doubt the hon. Gentleman will have read press reports in which the numbers were much lower, but I cannot confirm, deny or comment on them. It would be better for the Committee to deal with the problem before us, rather than to speculate on numbers which may not be even reasonably accurate, because, until the review is complete, we will not know.
Mr. Clive Betts (Sheffield, Attercliffe)
rose--
The Chairman of Ways and Means (Mr. Michael Morris):
Order. To which hon. Member is the hon. Lady giving way?
Mr. Betts:
I think that the hon. Lady has given way to me.
The Chairman:
Order. I would be grateful if the hon. Lady would indicate to which of the two hon. Members she has given way.
Mrs. Knight:
I apologise, Mr. Morris. I gave way to the hon. Member for Sheffield, Attercliffe (Mr. Betts).
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