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Mr. Betts: As my hon. Friend the Member for Edinburgh, Central (Mr. Darling) just said, Labour Members welcome the clause, although we do not welcome its background or the reasons that have made it necessary. It is incredible that we have a major national
scandal that is not merely a general problem but a problem for all those individuals who have suffered a great deal. They initially suffered a potential loss of their pensions, but, even now that they recognise that there may be some light at the end of a long tunnel and that the problem may eventually be sorted out with a bit of further relief provided by the clause, they have still undergone the agony of uncertainty, and the matter has still not been finalised. That lack of progress concerns Labour Members, and it is a pity that the Minister did not show the same concern when she spoke to the clause.
It is incredible that the Government blame the private sector and unscrupulous private individuals for creating the problem, while, at the same time, taking no responsibility at all for their legislation, which allowed private individuals to behave in such a manner. That is the reality. Why will the Minister not admit that and say, "The Government got it wrong. Yes, we were responsible for bad legislation and we apologise for the heartache and problems that we have created"? The legislation was wrong and, as my hon. Friend the Member for Edinburgh, Central has pointed out, the regulatory regime was totally inadequate because it was self-regulatory.
Self-regulation was of course a product of the deregulation mania of the 1980s and the Government's attempt to create the spectre of the nanny state--from which they were saving people. Whenever problems about the recession are mentioned, Conservative Members happily get to their feet and say, "It was not our fault, not as individuals. It was all the fault of Lord Lawson, in his role as Chancellor of the Exchequer. He created the boom, and he was responsible for the recession." Why do not they do the same thing with this issue? They could speak to this clause and say, "We have reached the position where we have to introduce this clause, but the problems are from way back in the 1980s. Lord Lawson, who was then the Chancellor of the Exchequer, was to blame for the scenario and for all the problems that have occurred, but we have since moved on."
Conservative Members cannot do that, however, because so many Government Members are completely and utterly tied up in this mess. When those measures were introduced, the right hon. Member for Sutton Coldfield (Sir N. Fowler), advocated the proposals and launched the advertising campaign, about which we have already heard, to persuade people to take up personal pensions. We all know that his assistant and junior social security Minister at that time was the Prime Minister.
The Prime Minister had the hands-on responsibility for creating this disaster, and it took him a long time to do it. In 1990, when the Prime Minister was the Chancellor of the Exchequer, he told the House during the Budget statement:
That statement is a sick joke. That was the Chancellor of the Exchequer, now the Prime Minister, telling the House in 1990 that personal pensions were a great bonus for all those people who had taken them out. He had not a shadow of a doubt that it may have gone wrong.
He spoke about a reduction in public spending, when we now know from this clause that there will be a cost, not only from the initial advertising campaign but to rectify the problems that the campaign created. It is time for the Government to admit that they and the private sector are responsible for those problems.
The Economic Secretary to the Treasury said that the Government still cannot discover, after all this time, how many people are involved, how many pensions were sold or how much it will cost in total in compensation. If the Government do not know, how do journalists manage to obtain figures? The Financial Times, on 17 January, was able to obtain such figures. Pension companies give journalists estimates of the compensation levels that they expect to pay out. Journalists can apparently pick up a telephone and obtain figures from Allied Dunbar of£100 million; Lloyds Abbey Life, £80 million; and Barclays Life, nearly £50 million. They can get figures from a substantial number of the pension companies. Some of the pension funds would not respond to the questions, but presumably they would have responded had the Government bothered to find out for themselves the scale of the problem. Instead, they sit back and say that they do not know and are not interested in discovering what has happened.
On 20 January, Weekend Money, a supplement of The Times, contained estimates and figures from Pearl Insurance, which admitted that it thought there would be about 40,000 opt-out cases. It said that it had sent out 300,000 letters. Companies have that information and are making their estimates. Why cannot the Government collect that information and come to an overview of the problem? The Minister has denied being able to do that.
In the end, as my hon. Friend the Member for Edinburgh, Central said, it is down to ensuring that the scandal does not happen again. Surely that would be simple to do. When we are examining a regulation, we must think of its purpose. First, regulation is meant to stop problems occurring and to ensure that things are done properly. On that first test, the self-regulation of the selling of personal pensions that the Government had in place has been an absolute failure. It is time for the Government to accept that and put in place statutory regulations.
The Government do not want to do that and choose to ignore the problem. In this case, however, they must admit that this is not a theoretical argument but a clear case with evidence that self-regulation has been an absolute failure. Secondly, presumably, recognising that
whatever system of regulation one has in place things will go wrong and some people will not abide by the regulations, the purpose of regulations and a regulatory system is to be able to identify when the things go wrong. In this case, it was not the SIB or the self-regulatory organisations that discovered the problem. The SRAs were oblivious to the problem even though in 91 per cent. of cases people were not being advised properly and in 400,000 cases pensions were mis-sold. That is a scandal. So the second function of regulations failed. The Government have to accept the need for change.
The third reason for regulations is to ensure that, having identified a problem, there is a speedy resolution. No one would accept that the current regulatory system provides for a speedy resolution. Certain pension companies have said that they could not send out the letters and questionnaires quickly enough because they did not get advice from the SIB quickly enough.
I do not really want to go over the details of a financial scandal for which the Government were responsible. I am making a serious request that the Government accept that the regulatory regime failed on three counts: first, it did not stop the problem happening; secondly, it did not identify it when it had happened--indeed, it seemed oblivious to the problem; and, thirdly, it did not correct the problem speedily. Is not it time that the Government accepted that they got it wrong and joined us to find a proper statutory system of regulation that will stop such scandals occurring again?
Mr. MacShane:
I have listened to the debate with some interest. I am waiting for the word "sorry" to pass the Minister's lips. After all, she is proposing to put aside an immense amount of new money--money that would otherwise be in the public coffers--to rectify the mistakes of her predecessors. We do not blame the hon. Lady because she was not in the House when the scheme was introduced. She has to come here with a giant dustpan and brush. In Paris and Orlando, the younger and more dynamic members of the Disneyworld team, wearing bright blue uniforms, walk behind the elephants with giant dustpans and brushes, trying to clear up the mess. The Minister is clearing up the droppings from the elephantine figure of Lord Lawson, so perhaps she feels she does not have to say "sorry".
The scandal has affected many of our constituents. The Government say that no figures are available, but last year Hansard reported a figure of 500,000 and the Personal Investment Authority has cited a figure of 400,000. A large amount of public money is involved and it is irresponsible of the Government not to tell the House the precise sum.
Pension companies have accepted responsibility for the mistakes. Norwich Union, Legal and General and Barclays have fired people and shaken up their systems. We may all feel that it is a little late for that, but at least they have accepted a direct responsibility and have dismissed their incompetent staff. I invite the Minister to accept some retrospective responsibility. It would not hurt her career if the word "sorry" passed her lips.
This is one of the great scandals of the last decade. As long ago as 1991--before the Minister came to the House, so it is not her direct responsibility--the SIB published a report showing that one third of all personal pensions taken out were terminated within two years. Either an
awful lot of pensions were sold to 58 or 63-year-olds or it was one of the biggest financial scandals of the century. The SIB reported losses to individuals running at£250 million a year, mainly from up-front commission charges and the front-loading of monthly premiums. The money disappeared into the pockets of people whom the pension companies later had to dismiss. That is a Maxwell every year, inflicted by this Conservative Government on those who were conned into taking out personal pensions. It is all part of the wider question of how the Government relate to citizens on the question of pensions.
I welcome the forceful speech of my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts). He correctly identified the need for regulation. To place an adjective before "regulation"--for example, self, state, independent, autonomous or agency--would be a misnomer. We are talking about people's investments to provide for their old age, so the principle of caveat emptor is not good enough. We need a flexible and friendly system; it must not be onerous or devised exclusively by civil servants. We need to move away from caveat emptor and allow people to have a direct stake in their pension schemes, in the knowledge that that stake will be safe from corruption.
"This extension of choice is a considerable tribute to my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). Over 3.5 million people have now taken out personal pensions. As well as benefiting the individuals concerned, in the long term this will reduce public spending".--[Official Report, 20 March 1990;Vol. 169, c. 1017.]
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