| Previous Section | Index | Home Page |
Mr. Flynn: I wonder whether my hon. Friend, in his wide reading, has read the book by the hon. Member for Havant (Mr. Willetts). It is called "The Age of Entitlement". The hon. Member for Havant may need to be reminded that the book describes the vast exaggeration of the demographic time bomb by a Government who wish to change pensions policy and were taking advantage of it.
Mr. Corbyn: I do read very widely, but not that widely. I often visit the bookstalls at stations such as Waterloo or Euston, and I am always looking for remaindered copies. I am sure that it will not be long before there is a pile of that book selling for £1 along with non-pulped copies of Charles Dickens's novels. I will get both and see which is the most interesting.
To return to the cost of pensions, there is a moral argument. The generation that is now in receipt of the state pension or an occupational pension is the generation that campaigned for and achieved the principle of a universal welfare state in the post-war period. There was the Beveridge report, and the idea of full employment and the elimination of poverty. The people of that generation achieved perhaps the single most important landmark piece of legislation in this country when they introduced the National Assistance Act 1948. It essentially worked on the principle that society as a whole is responsible for the welfare of each and every one of the people in it.
There was the idea of universal benefits, a universal welfare state, a universal education system and the provision of housing to ensure that there was an end to homelessness. It was a brilliant concept and a fantastic achievement. People of that generation ask me and others of the age group of many hon. Members how we can allow those achievements to be destroyed on the altar of market economics.
Mr. Leigh:
The hon. Gentleman will recall that Beveridge proposed a funded system. Is his objection to a funded system, or to a privatised system? For example, would he accept a proposal from the Labour Front Bench to do away with the pay-as-you-go pension, which is not
Mr. Corbyn:
My objection is that we will all pay more for less security to promote the interests of private insurance companies, as has happened in Chile. That is the basis of the Government's proposals. We have a pay-as-you-go system in this country which it has been misclaimed is no longer sustainable or affordable. The work by John Hills of the London School of Economics and many others has pointed out that it is affordable if we are prepared to accept the moral issue, which is that we should pay for it.
Germany has a national pensions scheme, independent to some extent of central Government. As a result, pensions are much higher. Many other European countries have much higher pensions as a result of more enlightened social policies. We are heading for what I can describe only as the worst of all worlds. I do not believe that the present system is unsustainable. It is made unsustainable by the principle that one charges so little in taxation at a corporate level and to the richest in society that it becomes unaffordable. We are then blaming the poorest people for the lack of affordability of the pensions system. We should accept the principles surrounding the welfare state.
A number of themes run through social security debates. First, there is the applicability of benefits. This Government more than any other have gone against the principle of universal benefits and moved towards means-tested benefits. The state pension costs 1.1 per cent. of its value to administer. It is universally applied and universally payable and is welcomed by those who receive it--it should be considerably higher. Income support, which is means-tested, costs 10.2 per cent. of its value to administer. A funded pensions scheme costs at least 25 per cent. of its value to administer. I cannot give the figures for every private scheme, but they are all somewhere of that order.
The most ludicrous of all benefits is the social fund, which costs 61 per cent. of its value to administer. In other words, two thirds of its value is spent telling people that they cannot have anything from it. We should think seriously about the effectiveness of benefits such as pensions as well as the efficiency with which they are administered.
We are told that, in the proposed Valhalla of private pensions, we will end up with market efficiency in which a quarter of the entire value goes in commission and administrative charges.
Mr. Clifton-Brown:
I do not know whether the hon. Gentleman was here earlier when I intervened on the hon. Member for Peckham (Ms Harman), but I said that one of the main advantages of basic pension plus is that the market will drive charges down. As I said earlier, I was with one of the main pension providers at lunchtime today. It estimates that it can provide pensions at 0.5 per cent. of the fund's value--nowhere near the 20 per cent. to which the hon. Gentleman referred. What is more, it estimates that the top-up element can be done for nothing.
Mr. Corbyn:
In the interests of transparency in public debate, the hon. Gentleman should tell us with whom he had lunch, where he had lunch, who paid for it and what
Mr. Clifton-Brown:
I have no interest in the company whatsoever. It specifically said that it wanted to remain anonymous because a commercial interest is involved. The company does not wish its competitors to know who it is.
Mr. Corbyn:
That sounds like a very anodyne and anonymous lunch. I should like to hear a little more about it because we need to know about the pressures being used.
Ms Abbott:
Conservative Members talk about market pressures forcing charges down. Does my hon. Friend agree that does not apply to any other aspect of the financial services market? Market pressures have not forced down the cost of mortgages or any other such product. Is not that just wishful thinking on the part ofthe hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown), or is it moonshine?
Mr. Corbyn:
I think "moonshine" would be an appropriate description. There is no evidence that a plethora of pension companies competing with one another, with lots of people in little offices doing the same work, is an efficient use of human resources.
One of the colleagues of the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) once tried to tell me at a radio station that the most efficient thing that could happen to the Post Office would be the introduction of competition, so that, instead of one person delivering letters in a street, there would be two or three. I do not think that that is an efficient use of resources, any more than having dozens of pension companies. Surely it would be better to have a more rational system which would ensure that everybody gets a pension. What we have is a plethora of companies ensuring that not everybody gets a pension.
The arguments about the cost of pensions are set out in the Organisation for Economic Co-operation and Development report. Under the Government's current policy, with which I do not agree, pension expenditure in 1995 was 4.5 per cent. of GDP. By 2030 that would rise to only 5.5 per cent. If wage indexation was introduced, it would rise to 7.8 per cent. and only if there was later retirement would it fall to 3.4 per cent. Those are not particularly big increases when one looks at the social benefit of eliminating poverty among older people within our society as opposed to the ideology of the market.
Other countries have much higher pensions and will be spending more, but in Germany, with wage indexation, the percentage of GDP would rise from 11.1 per cent. to 16.5 per cent. I believe that the argument that there are huge unfunded pension liabilities all over Europe, which has been promoted by many people, is part of the promotion of the private pensions industry. It is heavily suggested by quasi-academic journals, which claim that the current welfare state is unaffordable because they all have a vested interest in proving that to be the case.
There are arguments across Europe over the welfare state. The Maastricht criteria on the single currency require public expenditure cuts and an attack on the
welfare state, and promote the type of privatisation policy that we have been debating today. Many people in the United Kingdom--such as those I was with yesterday, at the Greater London Forum for the Elderly--benefited from the principles of a universal welfare state, and they will not allow the issues to fade away or the welfare state to be destroyed.
| Next Section
| Index | Home Page |