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8.40 pm
Mr. Robert G. Hughes (Harrow, West): It is a pleasure to follow my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh), as I agree with the tone and the content of his remarks.
One of the most interesting speeches today was by the Chairman of the Select Committee on Social Security, the hon. Member for Birkenhead (Mr. Field). I think that he deserves a prize for acrobatics. He did not want to criticise those on his Front Bench--we understand that, as there is an election coming up--so he tried not to say what he really thinks. He serpentined around the issues, but his views were clear to those of us who are familiar with them and who have read the excellent books and papers that he has published over the years. He recognises that this is precisely the way that we will go and that we must go, for the reasons that my hon. Friend the Member for Gainsborough and Horncastle advanced.
I am certain that my hon. Friend's prediction will come to pass: regardless of who wins the next election and the one after that, this scheme--under whatever name and in whatever form--will be introduced. Why is that so? I refer again to the speech by the hon. Member for Birkenhead. He asked whether we could be any more knowledgeable about the future than those who took decisions following the publication of the Beveridge report. The answer is no; we are bound to do no better than they did. However, we know now that a funded pension scheme should have been introduced following the Beveridge report.
If that had occurred, this country's economy would be in a better state, and people would be stakeholders in society. They would have power over their lives and power over the methods, and perhaps the timing, of their retirement. We would not now be talking about the pain that the Government endured when we broke the link between incomes and pensions, or the pain that the Labour party is suffering--and no doubt will continue to suffer--now that it has made it explicitly clear that it does not intend to reinstate that link. That would be the correct decision for a Labour Government to take: a link between incomes and pensions simply does not make sense.
This scheme is right. It does not matter who is correct--whether it is the hon. Member for Islington, North (Mr. Corbyn) or Conservative Members who have spoken in the debate--about the demographic time bomb. Plainly, the demographics are going in the wrong direction, and schemes will become more expensive.
However, it is not a question of whether the scheme is affordable: if the political will is there, anything is affordable--within reason. We could afford to continue with a pay-as-you-go pension scheme. The question is: is it desirable? Most commentators who have examined my right hon. Friend the Secretary of State's scheme and those who have spoken in this debate on both sides--apart from those who have adopted a purely party political approach--agree that it is undesirable to continue with the old scheme. I hope that we may have the sensible debate to which my hon. Friend the Member for Gainsborough and Horncastle referred.
I agreed with the tone of some of the remarks by the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) about regulation. We should not look backwards--I think that the misselling of pensions is irrelevant to this debate. I hope that my hon. Friend the Minister will take note of the pleas for tight regulation. We met the regulator of the AFPs in Chile, who is very powerful. He can tell the AFPs how to invest, he can direct their actions, and he can threaten them. He can close down schemes--which he has done--and require other schemes to take over their customers. We need someone to act in precisely the same way. There can be no scope for the wrong practices of the pension industry.
We must regulate the industry tightly enough to enable everyone to benefit from the marvellous achievements of our private pensions industry. People should not think that the only achievement of the pensions industry is the misselling of pensions. The industry has guaranteed incomes to a majority of pensioners that were beyond their wildest expectations. After a few years, many retirees receive income in excess of their salaried income.
People did not expect that. There has been expenditure of £600 billion. I am told that people cannot comprehend the difference between a million and a billion. As Ronald Reagan said, "A billion here, a billion there, and very soon you are talking real money."
Mr. John Denham (Southampton, Itchen):
Will the hon. Gentleman tell me where I can buy a policy that will allow me to retire on more than I earn?
Mr. Hughes:
I was talking about the period under the last Labour Government, when they held down incomes, and pensions increased. Because of inflation proofing and the Labour party's dreadful record on inflation, retirees received more cash than when they were working.
Mr. Leigh:
I can give a practical example. My late father was Clerk of the Privy Council, having succeeded the previous Clerk, Sir Godfrey Agnew. Three years after my father took over the Privy Council Office, he was earning less than the previous Clerk, who had retired on an index-linked civil service pension. That was the absurd situation in the mid to late 1970s.
Mr. Hughes:
It bankrupted the Labour Government, and it nearly bankrupted this country. However, it did not bankrupt the remarkable pension schemes. We should pay tribute to them. We must recognise that some people do not benefit from the economy's vitality, and this scheme will put those people in touch with it so that they may share in its benefits.
I welcome my right hon. Friend's announcement very warmly. It is a very good start. It embodies many of the characteristics that my right hon. Friend has always demonstrated: a cautious and detailed approach, testing the water as he goes. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) was correct when he said that there could be bolt-ons. Once the scheme is up and running, there may be scope for other groups to join it.
I return to the Labour party's position, and its proposal for a flexible decade of retirement. I shall be happy to give way to Labour spokesmen as I try to proceed point by point. It is common ground--I am sure that the
hon. Member for Southampton, Itchen (Mr. Denham) will correct me if I am wrong--that most people take their retirement pension immediately it is on offer. They do not defer payment, although everyone understands that there can be deferral so as to obtain a greater pension later. Nearly everyone, however--I think 98 per cent.--takes his or her pension immediately it is on offer.
Therefore, if we have a flexible decade of retirement, or at least an arrangement whereby people can retire early, the likelihood is that the retirement pension will be taken at the first opportunity that it is made available. I hope that I am still on common ground. If the hon. Member for Itchen disagrees, he can intervene. It seems to be accepted that those who retire will take their pension at the first opportunity that it is available to them.
It is also common ground, therefore, that first-opportunity retirement pension has a cost. Indeed, it is bound to have an extra funding cost, and it will be £15 billion. If the Labour party, if it is in government,is not to raise £15 billion in taxation--the spokesperson for the Labour party wrote to my right hon. Friend the Secretary of State on 30 August 1996, angrily making it clear that that was not Labour's intention--the only alternative is to seek the advice of the Government Actuary.
It seems, however, that Labour would say that it is anticipated that those who retired early would receive a lower level of basic state pension. Is that common ground? If Labour is not to raise the necessary money from taxation, there must be a lower state retirement pension.
Mr. Bernard Jenkin:
When we have a good point that we put directly to those who occupy the Opposition Front Bench, they always chat to one another and pretend not to be listening. When the hon. Member for Southampton, Itchen (Mr. Denham) replies, he probably will not respond to my hon. Friend's point.
Mr. Hughes:
I regret that my hon. Friend is right.
I am making an important point, and the Labour party has been caught out. The hon. Member for Peckham (Ms Harman) blushed when she tried to deal with it. Indeed, she became terribly ratty when anyone sought to challenge what she was saying. We know that either expenditure of £15 billion must be raised by taxation or, as the Government Actuary has made clear, pensions will decrease by £20. The reason--[Interruption.] Does the hon. Member for Itchen wish to intervene? I shall be happy to give way.
Mr. Hughes:
I bet that the hon. Gentleman does not. I am sure that the hon. Gentleman would rather hope to find gin or whatever in the carafe on the Opposition Dispatch Box. I am sure that my argument is embarrassing to the Opposition. At least the hon. Gentleman is blushing.
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