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Sir Norman Fowler: I shall give way for the last time.
Mr. Field: Will the right hon. Gentleman compare the £4.5 billion cut with the cut that was achieved by decoupling pensions uprating from earnings?
Sir Norman Fowler: I would not mind making that comparison, but it is not the Labour party's policy to restore the link, so it is an academic point. I will come to the point on earnings, because it underlines the peculiar and strange policies that the Labour party is pursuing.
Labour Members cheered the announcement of the £4.5 billion cut in pensions spending. We know that because we have the benefit of Mrs. Castle's diaries. Diaries are a great help to the public debate. We have the diaries of Alan Clark, although they are not always read for the politics, and the Opposition have the diaries of the right hon. Member for Chesterfield (Mr. Benn) and of Baroness Castle. She describes the Budget that contained the uprating statement as follows:
I now come to the point that the hon. Member for Birkenhead--I almost called him my hon. Friend, but that would embarrass him--made about uprating and earnings. That is another issue that cannot be taken to the Personal Investment Authority. Labour's promise to uprate pensions in line with earnings was made more solemnly and more often than any promise I can remember. It was made in the 1983 election and in the 1987 election.
Before the 1992 election, when my right hon. Friend the Leader of the House and I were responsible for social security, we were frequently attacked for not uprating pensions by the increase in earnings. What has happened? Much to the dismay of the hon. Member for Islington, North (Mr. Corbyn), who is in his place, Labour Front Benchers have decided to abandon the earnings-related uprating. They talk about the misselling of pensions, but the public would not be well advised to buy a pension policy offered by the Labour party, given its record in the past few years.
Mr. Corbyn:
Will the right hon. Gentleman give way?
Sir Norman Fowler:
I suppose I should give way, because I referred to the hon. Gentleman.
Mr. Corbyn:
The right hon. Gentleman will recall the halcyon days of 1986 when we were members of the Standing Committee that considered the legislation to introduce the personal portable pension scheme. I am sure that he will also recall the warnings by my right hon. Friend the Member for Derby, South (Mrs. Beckett) about the inherent dangers and consequences of misselling. He brushed all those warnings aside. Does he now have even one iota of remorse about the legislation that he and the Prime Minister introduced?
Sir Norman Fowler:
I do not feel remorse about it, and I have just dealt with the point. I thought that the hon. Gentleman might say something sensible about earnings and uprating, but I will not embarrass him further.
In the past 18 years, the Government have tackled two of the central problems of pensions policy. They have tackled some of the basic dishonesty in the pay-as-you-go system, and exposed the errors in it. I remember when Mr. Kinnock was Leader of the Opposition and intervened in a debate--when my right hon. Friend the Leader of the House was winding up--under the misapprehension that the national insurance scheme was a funded scheme. He was the Leader of the Opposition, but he did not know that, of course, it is not.
National insurance contributions are, in effect, a tax. Today's contributors pay for today's pensions in the hope that when their turn comes, others will pay for their pensions. The trouble with that system is that Governments can make promises knowing that the bill will not be presented for 10, 20 or 30 years. That is the dishonesty in the pay-as-you-go system, and that is why France, Italy and Germany have enormous pension debts and will struggle in the future. Thanks to the courage of the Government, we have tackled that problem and we will be able to manage the future pension debt. That is an immense advantage for public finances.
Our policies also have immense advantages for the individual. All the evidence suggests that the public value a pension that they can call their own. Personal pensions
are so popular because people have a personal fund, and that is what they want. SERPS is unpopular because it is complex and badly understood, and people do not recognise the pension as their pension. My right hon. Friend the Secretary of State for Social Security, to his credit, has moved the argument on. He has tackled not only the second-tier pension, but the basic pension.
Furthermore, the fund offers the prospect of a startlingly better deal and a bigger pension than one would have received under the present basic pension scheme. The entitlement that goes up in the fund cannot be altered, swindled or fiddled by the Government, as happened in 1976. We are using the tax system to encourage occupational provision, and that is important. The public and the pensions press will draw their own conclusions from the failure of the hon. Member for Peckham to give any assurance on tax relief.
I wish to make two final points. First, this is clearly a new scheme that, inevitably, is for the future. We cannot go back to the period after the second world war, when mistakes were made. Beveridge proposed a funded scheme--an idea that we never took up. Instead, we adopted a pay-as-you-go system, and we must not make the same mistake again.
We also need to concern ourselves with today's pensioners, including people who never had the opportunity of entering an occupational scheme--not because they did not want to, but because none was available--and people who were badly affected by the restrictive rules that existed in occupational schemes before the Government's reforms.
Those people did not have the opportunity to build up a pension of their own. Therefore, I advocate the development of family credit into a system of pension credit to give help where it is most needed--that is, to people in their 70s and 80s. We should not give a general pension increase for everyone, irrespective of income, but we should try to add to the income of those who need it.
Secondly, I hope that both sides will agree that we need to examine how we can improve the advice that we give to individuals in the public and the private sector. I have constituents who have lost out on their state pension entitlement because they were not provided with sensible advice. One constituent has lost about £10 a week because of that lack of advice. That has nothing to do with private advisers, and everything to do with the local DSS office and the information provided.
If we are to expand personal provision further, good advice is essential. We must learn the lessons of the past. The advice that companies provide on their products is reasonably good, but I want to see more independent advice on all companies' products. There are such advisers, but there are not enough of them.
Mr. Frank Field (Birkenhead):
One should not always believe what one reads in the newspapers, so what I am about to say may be unfounded in fact. Most of the newspapers reported that, when the proposals were first put to the Cabinet, the Secretary of State's slide show and introduction lasted 17 minutes. I noticed that he spent three times that long with us. I was not sure whether that was because he thought we would understand more than his Cabinet colleagues, and it was therefore worth spending longer with us, or because he felt that we would understand less and needed more time.
I welcome the debate, although I do not entirely agree with its temper--perhaps that is inevitable as close as we are to an important general election. I wanted to say--I hope that my comments will not be misinterpreted--that I welcome the proposals from the Government, but I register some surprise at the debate, which is developing as if we were debating a Bill. The Government have rightly suggested that we debate the proposals that were outlined last week, but they are merely proposals. Nevertheless, the proposals help to change the debate in a way that I believe to be constructive, and it is in that context that I want to make my contribution.
The announcement last week so changed the debate that it has become necessary to rewrite so much of the Select Committee on Social Security report, which was ready to present, that we are not sure whether we can present it this side of a general election, if at all. The Government have influenced and opened the debate, and questioned areas that some people thought one should never question. The roof has not fallen in, and one hopes that, as the months progress, the lead that the Government have given will be accepted and that the proposals will become one set of a series which future Parliaments and the country will debate in trying to find the best way forward.
On one area in which I am interested--the extension of compulsion--there was a great divide between the parties until last Wednesday. The Secretary of State always used to suggest that nobody would understand such a move and that to extend compulsion would be read by the country as increasing taxation, as people could not see the difference between compulsory savings and compulsory taxation. Since last Wednesday, we have moved on, and so dead is that part of the debate that it is hardly worth mentioning.
I stress that the proposals are for the long run. The proposals that the Secretary of State put to his Cabinet colleagues for the first time last week, and to the nation a day later, are addressed to a world that is as far in the distance as Beveridge is in the past to us now. If we look back on all the changes that have occurred in the world since the Beveridge proposals were implemented by the House--and if we look at how wrong most people were in that debate in prophesying what the world would be like--we should be cautious in thinking that our generation can read the stars better than our predecessors or that we can address with certainty a world 40 years hence with only one set of pension proposals.
It is with those long-term proposals in mind that I want to pick up one point made by the right hon. Member for Sutton Coldfield (Sir N. Fowler). I hope that the debate will provide us with an agenda of the issues for which we need answers in the context of the Government's major proposals. The right hon. Gentleman touched on one
issue, which was that we must think seriously about the sort of financial advice that people can get. That will be an important part of the agenda.
I wish to add another issue to that agenda--trust. We have touched on that. My hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) has referred to one aspect of trust, or lack of it, to which I shall return in a moment. If we are talking about pension reforms that will not take effect until as far in the future as Beveridge's reforms are in the past, they stand little chance of being successful if they are not operated with a degree of trust that does not exist now.
There is not only the issue of the security of pension funds, which was raised vividly by the case of Robert Maxwell, but yesterday, in the Chamber, another pension fund affecting the Chester, Ellesmere Port and Wirral area was debated--H. H. Robertson--where something similar may have happened. That has occurred despite the introduction of the minimum solvency requirements of the Pensions Act 1995 in an attempt to give extra security to funds. The minimum solvency requirements may help with the better running of well-run occupational schemes, but hon. Members representing Chester, Birkenhead and elsewhere are seeing that they produce no funds for those pension schemes where funds appear to have gone missing.
"I slipped back on to the front bench in time to hear Denis"--
Denis Healey--
"deal with social security. All my officials' valiant efforts to make him stand up and be counted on the change from the historical to the forecasting method for the pensions uprating have failed. He skimmed over it and so got a cheer from our side for the amount of the increase, whose relevance they did not understand."
Labour Members may not have realised the significance at the time, but the people who lost out did not have the opportunity to ask the Personal Investment Authority for their money back. The cut was permanent and it has never been paid back. That is a real difference between the public and the private sectors, and it is a real plus for the private sector that mistakes are dealt with.
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