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7.38 pm
Mr. Paul Flynn (Newport, West): We were delighted to hear what could well be a new Tory slogan for the forthcoming campaign--"Vote Tory and Pay Twice". That would be at least as effective as the lion with conjunctivitis and the handsome photographs of Labour's best asset--our leader--that the Conservatives are kindly putting on posters throughout London. Both pictures have the words "New Labour" above them. Most people conclude that both posters are paid for by the Labour party. The hon. Member for Aylesbury (Mr. Lidington) has told us frankly that the Government's proposals mean that to vote Tory is to vote for paying twice.
I appreciate the reasonable nature of the debate, but it is extraordinary how rare it is for us to be debating pensions. Four of my hon. Friends and I put down a motion when we debated our salaries recently suggesting forging an unbreakable link between our pay and the level of the basic pension. It seems reasonable that the pay of the poorest in the land should be linked to the pay of those in this House, where I understand that there are 200 millionaires. If we had established that link, it would have been impossible to fund the unreasonable pay rises that the House voted itself recently, but it would have had the beneficial effect of concentrating the attention of the House on the level of the basic pension. If our income were tied to that of the poorest pensioners, instead of a debate caused by a death-bed move by the Government, we would have constant, lively interest in the issue.
It is difficult to take the Government's proposal seriously. The subject is enormously serious and we must tackle it, but the Government's proposal is another death-bed gasp from a Government who have had a lifetime of sin. We do not expect them to be experienced in virtue in their dying days. This incompetent proposal will shortly be forgotten. What can we expect of a guarantee from a party that will be in opposition for a long time?
I have an example of how hopelessly confused the proposal is. The Government are contradicting their own words, not over a period of years, months or even days, but in one day. The proposal hangs by the thread of the great promise headlined in many papers of a £175-a-week pension in 2040. A written answer appeared today from the Under-Secretary of State for Social Security, the hon. Member for North Hertfordshire (Mr. Heald), making the basis of that figure clear to me and to my hon. Friend the Member for Peckham (Ms Harman). The Minister said that it would represent 26 per cent. of average earnings in 2040. A similar answer was printed in Hansard a few days ago.
I have collected my late mail in the past two hours and received a charming letter from the Minister, saying:
The Minister confesses in the letter that the amount will not be 26 per cent. of average earnings. It is almost impossible to believe, but in their answers, some of them printed alongside one another, the Government have used two different measures, one assuming a 1.5 per cent. increase in average earnings and one assuming a 2 per cent. increase. The final sentence in the letter is:
The fact that the Government had still not got their sums right even two hours ago shows that the scheme has been cobbled together. We have heard several other extraordinary ideas recently and many of us are becoming seriously worried about the lean, mean electioneering machine that we have admired and been in awe of for so long. The Conservatives have come up with gimmicks such as the royal yacht, to be paid for by taxpayers, which was denounced by 75 per cent. of the population, the scheme for privatising the underground, which was denounced by 92 per cent. of the population and the extraordinary idea announced yesterday of privatising care, which has struck fear into the hearts of all those who might one day be in residential care--which is all of us. What the Government are offering goes against the reality that people know of private residential care, particularly where cost is the main factor. People know that services are often cut, diets become poorer, people share rooms and there is increasing degradation and indignity. The scheme has been produced by a Government who know the cost of everything and the quality of very little. Yesterday's stunt proves that and the people will rightly treat the privatised pensions scheme with the same suspicion.
This was a lively issue in the House back in the 1980s, before the hon. Member for Aylesbury was here. I commend to him Andrew Marr's book "Ruling Britannia", in which he goes through the speeches made on the Social Security Act 1986. The then hon. Member for Ashfield, Mr. Frank Haynes, made prophetic speeches about what would happen when the Conservatives decided to scrap SERPS. The Conservatives promised to get rid of SERPS. They did not fulfil that promise because of the might of the pensions lobby, which wanted it cut but not abolished. Insurance firms did not want the lower, poorer end of the market dumped on them. They preferred to keep the cream. That is why SERPS was not abolished, as promised before the 1986 Act.
The hon. Member for Aylesbury talked about consensus. Nothing will come from the nonsense before us tonight, but there will be major reform from a consensus among all parties. I remind Conservative Members that SERPS was set up by consensus. It had the agreement of all parties. The destruction of half of SERPS was fought tooth and nail by Labour.
The Government's excuse for abolishing the state pension is that by 2030 there will be three pensioners for every five working people. The book by the hon. Member for Havant (Mr. Willetts) includes a chapter entitled, "The myth of the demographic timebomb", in which he describes how the Government deliberately exaggerated the effect of the demographic time bomb for their own ends. He justifies that because he is against SERPS anyway. It will be a time bomb, but not a series of time bombs that go on for ever--the baby boom generation will reach pensionable age in 10 to 13 years' time and the problem will then diminish. We know that because the people in that generation are alive now.
It is nonsense, therefore, to distort all our policies for that period. Whatever Government are in power, a larger proportion of our national wealth must be paid to pensioners during that period than before or after it, but that must not determine the shape of our policies.
The hon. Member for Gainsborough and Horncastle (Mr. Leigh) mentioned Beveridge, who wrote that the most inefficient aspect of pensions that he knew of was where men--they were usually men--went around collecting 1s 11d from one house and 2s 7d from a house in another street, mostly for industrial policies and insurance. It was a highly inefficient, wasteful system. Beveridge said that 50 per cent. of the premiums paid in those days were lost in commissions, administration and the inefficiency of the system. We replaced it with a system that has less than 2 per cent. administrative charges. It is an efficient system in that respect. We also avoided the main problem with money purchase schemes: they are a gamble. Few people have mentioned that.
The hon. Member for Aylesbury referred to the Maxwell case. Although it affected a relatively small number of people, it should not have happened and the system must be strengthened. I hope that the reforms will work.
What about the people in money purchase schemes, who took their pensions on the basis of annuity in 1994? They would have received 35 per cent. less than they would have had in 1990 because of changes in the value of the annuity rate between those years. Nobody expected or forecast that, but those whose scheme was with the Norwich Union saw the value of their pension drop by 35 per cent. For others, the drop was even greater. If we cannot work out what will happen to annuity values within the space of a few years, how can we say what they will be in the future? Naturally, money purchase schemes are popular with firms because they represent less risk.
The Government's proposed scheme is nonsense because only people now aged 20 or less will lose their state pension under it, and none of them will have reached pension age by 2040. At that point, the proposal's effect will be to reduce the income of the national insurance fund by some £15 billion a year--a figure contained in a written answer to my hon. Friend the Member for Peckham a few days ago--while leaving its expenditure unchanged. It is absurd, but that was the answer from the Government about their cobbled-together scheme. The full effect of the proposals will not be seen until 2070, when no one has the slightest idea what the demographic circumstances will be.
Whatever the proposal's purpose, it has nothing to do with demography but everything to do with presenting a plausible scheme that is transparently unworkable before
the election. There is no room anywhere--in this House or in any party--for those with an ideological view on this matter. We shall soon move away from the politics of ideology to the politics of reason under a new Government--[Interruption.] The Under-Secretary of State for Social Security, the hon. Member for North Hertfordshire, is chuntering away on the Front Bench. He cannot get his figures right in the course of a single day, but has the cheek to have a go at me.
In 1989, I took Barclays bank and the Midland bank to the advertising authorities for misselling and misadvertising personal pensions. I went to one of the biggest pension providers in the country--one of the famous names with a good reputation--which assured me that it had never missold personal pensions. Almost every question that I asked Baroness Thatcher at Prime Minister's Question Time was about the misselling of personal pensions. Many people knew what was happening when that wicked misselling was going on. It was fuelled and encouraged by the Government through their ideology and belief that everything that is private has a halo around it and everything that is public bears the mark of the devil. We must escape from that ideological nonsense.
My hon. Friend the Member for Peckham said that there is a place for SERPS and that we should continue with it. People on average male earnings, who were on SERPS from its introduction in 1978, would now have been enjoying double the state pension--an extra£70--from that scheme, which is good value and has paid out some of the best pensions. Many people who joined other schemes in the private sector have lost out and have little hope of receiving compensation in their lifetime.
"I am sorry that, in the haste to answer the large number of Questions"--
poor man--
"you tabled . . . about the Government's proposed new scheme . . . one of my Written Answers . . . was not as clear as I would like it to have been."
That is a grand understatement. His answers were grossly misleading and the figures were untrue by a large amount. I do not want to burden the House with the full details unless hon. Members want to hear them, but the Minister confesses to having--inadvertently, of course--misled the House in recent days on the crucial issue of the sum that the Government were promising in 2040.
"Using 2 per cent. per annum real earnings growth, £175 represents 21 per cent. of average earnings in 2040."
That is a monumental mistake. After all the wonderful reforms of the marvellous new scheme praised by hon. and gullible Conservative Members, in 2040 a pensioner is likely to have a pension worth one fifth of average earnings. That is pitiful compared with what Governments of both parties have been able to pay for the greater part of the century. It is extraordinary that we are expected to believe that, although we could afford pensions worth one third or more of average earnings in the 1940s and 1950s, when the country was a great deal poorer, in future the best that we can manage is one fifth of average earnings.
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