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Mr. Chris Smith: Can the right hon. Gentleman tell us whether it was a bogus or false pledge at the general election when the Prime Minister said--I believe that the right hon. Gentleman was at his right hand--that the Government had
- "no plans and no intention to extend the scope of VAT."?
Sir Norman Fowler: What my right hon. Friend said on tax stands on the record. He also said that income tax would be reduced when and if resources allowed.The hon. Gentleman now wants a debate on VAT. That shows the absurd bankruptcy of his position. We are having a debate on social security and pensions policy, but the main Opposition spokesman wants a debate on anything other than pensions policy. The fact of the matter is--and the hon. Gentleman knows it--that the Opposition's policy is in total shambles. They are now in the process of reneging on a promise that they made year after year to the British electorate. That point needs to be taken on board by the nation, because people need some means of valuing other promises and pledges that the Opposition may make.
There is one very sensible reason why the public want to rely on rather more than state provision. The hon. Member for Islington, South and Finsbury talks about the security of the state. I remind him that in not-too-distant history, under the last Labour Government, the people who lost out most were the state pensioners when Barbara Castle changed the uprating system in mid-stream to make a public spending saving of more than £1 billion.She moved from historic validating by past inflation to forecasts of inflation when inflation was falling. It was a crude device and the people who missed out and suffered as a result of her action were the pensioners.
My own view on the pensions approach that we should be adopting is quite clear. The first duty of any Government is to ensure that present pension provision is adequate. That is why I welcome what the Government have done over the years. I welcome what they have done for war widows, to whom we owe a particular debt. It is right the Government should devote extra resources to them, but the issue is wider than that. It is undoubtedly good news that about 60 per cent. of retired people now have some form of additional provision. We should recognise, however, that some of the additional pension provision will be modest, and 40 per cent. still have no additional provision.
One problem is that a group of people currently living in retirement have been unable to build up occupational pensions, through no fault of their own, for a variety of reasons. Perhaps their firms had no occupational scheme. They may have been members of occupational schemes, but because of the scandalous early leaver rules--which again the Opposition did nothing to reform when last in government--they were deprived of the true value of their savings. They may have been caught by historic employment practices. For whatever reason, they have ended up depending on the basic pension. Those people are probably now in their 80s and 90s.
I mentioned family credit earlier. We introduced it because we were unable to help the families that we wanted to help through the general benefit of child benefit. It is open to us to help those pensioners that we want to help through a pension credit system. In other words, we could add to the basic pension of those whose incomes most urgently need supplementing. Instead of relying on a general increase in the basic pension,we could direct resources to where they are needed. Clearly, the basic pension would remain price protected, but those who have no other retirement income, or only a limited amount, could receive pension credit as an additional weekly payment. If the public are concerned about the effect on incentives, the scheme would not need to go on in perpetuity, but would last for today's generation of 80 and 90-year-olds.
The hon. Member for Islington, South and Finsbury sought to lecture the Government in his speech. I remind him of the position that we inherited from the Labour Government. The limit of their ambitions was the state earnings-related pension scheme. They did nothing to improve the rights of those with frozen pensions--those people forced to leave their pension entitlement frozen in value with their previous employer. That was a scandal and the Labour Government did nothing about it. They did nothing to make it possible for members of occupational schemes to transfer their rights, which was another scandal. Those entirely beneficial changes to occupational schemes were introduced by the Government.
The pensions revolution was carried out by the Government during the past 15 years. The result is that occupational pensioners get a better and fairer deal today than they have ever had previously. Those measures were not forced on us by eager pension funds and even less by the Opposition. The Government put the interests of members of schemes first, and that is the sensible way to carry out any pensions policy.
We also sought to give the public more options. Occupational schemes had made the most enormous contribution, but in the mid-1980s they had ceased to
grow and expand. They were stuck in the mud and some of the attitudes to members' rights were stuck with them. It was clear that many people wanted an individual pension separate from state provision. Every opinion poll showed that fact, so we introduced the extra option of personal pensions.
I do not defend for one moment the actions of those insurance companies which have mis-sold policies--indeed, I feel more strongly about it than most people. Ironically, several of those companies were prominent in their opposition to the introduction of personal pensions. It is no part of my brief to defend wrong advice, but we should distinguish between the personal pension product and the methods used by some companies to sell the product. Andrew Large of the Securities and Investments Board said in relation to personal pensions:
That is exactly the position. Even the Opposition now say that there is a place for personal pensions in pension provision.
Mr. Corbyn:
The right hon. Gentleman will recall that as a Minister he did much to undermine the state earnings-related pension and to promote the private pensions industry. Does he feel one iota of remorse about the sales methods that have been used by some companies to sell private pensions? What has he to say to those people who find themselves in a rather insecure private pension scheme which may not fully pay out? What guarantees are available for those people?
Sir Norman Fowler:
There are no guarantees, in the hon. Gentleman's sense, because personal pensions are money-purchase schemes. Money-purchase schemes cannot provide the kind of guarantee that a two thirds final salary scheme can, but they can provide an additional top-up to an occupational scheme or, if entered early enough and everything else being equal, they will provide a better investment than staying with SERPS. I will deal later with the hon. Gentleman's point about advice, because that is a crucial part of the story.
The Opposition's case so far is a thousand miles from the attitude displayed by the hon. Member for Oldham, West, who opposed the introduction of personal pensions, not because he feared the activities of the insurance companies, but because he was entirely opposed to private provision. His opposition had nothing to do with insurance companies, but everything to do with ideology. The view now being put forward by the Opposition is the exact opposite.
The Secretary of State and the hon. Member for Islington, South and Finsbury both referred to the action being taken to put matters right by those companies whose advisers gave wrong advice. I support the action that has been taken, but a number of additional points should be made. We need to make it clear to the public that personal pensions are an entirely sensible option for many people. It is ludicrous to suggest that all people who have taken out personal pensions have been wrongly advised. Some
have been well advised and will benefit greatly from what they have done. There are some exceptionally good and reputable companies providing such pensions.
I feel strongly that we need to review and improve the independent advice that is available to the public generally. It must usually be the wrong decision for someone to come out of an occupational scheme and take out a personal pension. I cannot speak for what happened after I left the Government, but I never intended in any of my speeches to try to persuade people to come out of occupational schemes to join personal pension schemes. It is obvious that if the employer's contribution does not remain the same, there is little or no chance that the returns will be comparable.
It is not just the private sector that gives bad advice on pension provision. One of my constituents is 69, married and still working. He has not yet drawn his basic pension and he is contributing to a larger pension for when he retires. He has been told about his entitlement, but, because his wife received a graduated pension, she will not benefit in any way. Her graduated pension is 6p per week, or £2.60 per year, but the result of her decision to accept the graduated scheme, which she should not have made, is that the family will lose about £500 per year.If that had been a private scheme, there would be demands for explanations. I hope that I may again send the case to the Department of Social Security with a view to ascertaining what can be done. Justice is not served by such cases. There is no point in banging the table and saying that the private sector is wrong when the public sector has also failed to give the right advice or warnings.
A problem with personal pensions is the level of employers' contributions. If employers' contributions were greater, entitlements would be greater. As a former Secretary of State, one must be careful not to encroach on the territory of one's successor. However, when I was Secretary of State I tried to persuade the public sector, including local government, to give a lead and to contribute a little more than the minimum contribution. Every public sector employer in the country united to resist that proposal. Nevertheless, there is much to be said for those who have personal pensions to have a greater contribution made by the employer, including the public sector employers, than the current one.
It is surely beyond doubt that over the past 10 or15 years the agenda for the reform of pensions has been set by the Government. The hon. Member for Islington, South and Finsbury seeks to make policy, but it was pretty obvious this afternoon that he does so uneasily, glancing over his shoulder to ascertain what he can get past his colleagues. That explains the lack of frankness.
We look forward to the new policy announcement that the hon. Member for Islington, South and Finsbury wishes to put before us in the next few months. I hope that the announcement will be made a few months prior to the general election. We are banking on that, at any rate. I am not putting forward new points. Indeed, I put them to the predecessor of the hon. Member for Islington, South and Finsbury and to earlier Opposition social security spokesmen. In the run-up to the general election, the time has come for the Opposition to come clean on their pensions policy. After all, many things depend on that policy. Opposition spokesmen cannot come to the Dispatch Box and lecture private schemes, personal pension providers and occupational pension providers without coming clean on their own ideas and policies.
"I want to emphasise from the outset that our concern is not with personal pensions products themselves, but with how they were sold. I would add that, because of the action that regulators and the industry have already taken, people can now have greater confidence that personal pension products are being properly sold. They do offer an efficient and flexible way of saving for retirement for many people, provided they are marketed, advised on and sold properly."
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