House of Commons Hansard Debates for 13 Mar 1997 (pt 29)

Mr. Clifton-Brown: Is not the reality that we shall probably see an increase in public expenditure and a decrease in state retirement pensions? As I made clear earlier, we are likely to see a reduction in the state pension. If, however, we are not to see people retiring in misery, there will have to be an income support top-up, which in itself would have a substantial extra cost.

Mr. Hughes: My hon. Friend is correct. Doubtless the Labour party will huff and puff to try to explain what it is talking about during the election campaign.

The debate has been useful in clarifying the basic pension plus and in flushing out the Labour party's policies on state retirement. It has also been useful to discuss other dangerous Labour party policies. For example, the Labour party does not talk about contributions to a stakeholder pension. It does not wish to discuss by how much national insurance contributions would have to increase. It does not talk about whether there would be a new category of contributions. We hear not a word from the hon. Member for Peckham about how money would come in to pay for the extra pension.

We know, however, what the Labour party plans, and I shall quote from its handbook. It refers to the stakeholder pension as

"a new better-value-for-money framework for second pensions to redeem red tape and improve competition."

I do not know what "redeeming red tape" means. I assume that the meaning is the same as addressing problems. It is another term that has no meaning in the context in which it is used by the Labour party. At the same time, it is designed to sound quite good.

We know, however, that the Labour party's approach would allow political interference in pension funds rather than those funds being invested in the best interests of members. A BBC news release, which paraphrased what the BBC had been told by a previous Labour spokesman, read:

"Chris Smith was particularly interested in Australia's Industry-wide superannuation funds, which are administered jointly by employers and Trade Unions, giving the Unions power over how they are invested."

That is what we shall see in future if there is a Labour Government. The funds that are delivering such good occupational and private pensions would be putinto the hands of trade union barons to invest.It is--[Interruption.] It is no good the hon. Member for

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Itchen moaning from a sedentary position. He is entitled to intervene to explain how the previous Labour spokesman, the hon. Member for Islington, South and Finsbury (Mr. Smith), was wrong. I suspect that he will not bother to do so.

The fact is that the Labour party would put people's pensions at risk. The 20 million who are members of private pension schemes would have their futures put at risk by the Labour party. The Labour party talks about side issues and uses electoral scares. It talks about privatising pensions rather than using private pension and personal pension funds. In so doing, it has done itself no service or credit this evening. Instead, the Labour party has revealed that its words are empty. At the same time, the threat of what it would do in government is real to every pensioner and potential pensioner.

8.56 pm

Mr. Bernard Jenkin (Colchester, North): I am grateful to be called, Mr. Deputy Speaker, even towards the end of the debate. I regret that I had to leave the Chamber for an hour or so, and thus missed one or two speeches. It has obviously been a most interesting afternoon and evening.

I am grateful to be called after my hon. Friend the Member for Harrow, West (Mr. Hughes), who performed an excellent and deft demolition job on the Labour party's position. It is clear that Labour has become impaled on a number of its positions, which are either expensive or damaging to pensioners. It has failed to address fundamental pension problems.

I would, however, caution hon. Members about drawing too many parallels with Chile. I visited that country as a member of the Select Committee, and although some of us went there open-minded and enthusiastic about what the Chilean system might teach us, the differences between the systems were striking; the biggest being that the Chilean system is miles behind what we have established in this country--the very substantial pension funds for investment and for future pensions.

However, the rate at which Chile is catching up is staggering. On coverage and the standard of living of the majority of pensioners, Chile is miles behind. Indeed, it will face many of the problems--pensioner poverty of certain sections of the pensioner population--that provoked my right hon. Friend the Secretary of State to present these proposals to the House today.

I wish to address the comments of the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) about misselling. In an intervention, I asked her two relevant questions, the first being whether misselling is continuing on the same scale as that recorded in the earlier period. She failed to answer.

We are still able to advance the case for private and personal pensions, because the problem was one of transition and of market growth and immaturity. That problem has been dealt with. Of course the cases of misselling that have not yet been addressed must be cleared up. Even though this is not an interest that I am required to declare, I was a former employee and adviser of one of the major insurers. As someone who has a connection with the industry, I see that more evidently, perhaps, than many other hon. Members. For the credibility of the industry and for future schemes of this nature, the problem of misselling must be cleared up.

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The second question that the hon. Lady would not answer was: in how many of the cases where non-compliance has been recorded has the client ended up at a financial disadvantage, with the wrong product? Until all the cases have been looked at, it is not possible to know. The evidence of the cases that have been looked at is that, although there may be not have been all the crossing of the t's and the dotting of the i's in the paperwork, and that information required by the regulator before contracts are signed may not have been exchanged, the client has not necessarily ended up with the wrong product.

I would guess that, in the majority of cases, there has not been a miscarriage of financial justice, only a failure on the part of people selling pensions to observe the proper regulatory requirements, but that does not excuse it. The problem has to be cleared up, and it should have been cleared up much more quickly. I clearly heard my right hon. Friend the Secretary of State say that companies that still have that hanging over them will not be eligible to take part in what will be an opportunity for huge growth for the industry. That was a good warning shot to fire across their bows.

I would add that much of the problem, as the hon. Lady amplified, comes from fees and commissions. I agree that it is much better for advisers to charge fees rather than percentage commissions. As soon as the transparency of commissions was discussed, it was obvious that it was an issue that the pension salesman had lost from the outset.

Commissions should be declared in all cases. The industry is struggling with a tax problem: that it is possible to get tax relief on the commissions or fees charged if they are netted off from the investment being made. It is not possible for the client to get tax relief on the fees and commissions if they are added on. It is a problem of taxation, and perhaps one that the House should address.

The problem is also one of VAT. Fees netted off from the investment being made are not liable for VAT, but fees charged for advice over and above the investment made are, so it becomes instantly more expensive for the client.

An instructive lesson from Chile is that, as a matter of course, the fees are added on to the investment made, and are not chargeable for sales tax. When the client is looking for a provider to make his investment, it is obvious which one is offering the cheapest deal for the client. We should have a simple transparent system of that nature that is not open to abuse. We should not be taking people's tax-relieved money away from them in charges and fees, because it gives a false impression of how much they have saved if some of it has been taken away in that manner.