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Mr. Bernard Jenkin: Will the hon. Gentleman give way?
Mr. Denham: With respect, the hon. Gentleman spoke for a great deal of time and I should like to proceed with the summing up.
There is just one reason for this debate: the Conservative party's proposals, just before an election, to privatise the state pension system over the next generation. Conservative Members have had their debate; they have had their chance to set out their case and to put their big idea to Parliament. Let me summarise where we are now. Their case is already in a shambles.
As a result of the debate, despite Conservative Members' comments about occupational pensions, we know that the demise of occupational pension schemes will be brought about by these proposals. The best schemes in the past for providing pensions will no longer be with us if the Government proceed with the proposals.
It has been made clear, not just by Labour Members but by Conservative Members, that people will have to pay twice to fund the huge costs of privatising the state pension system. Despite calls from Conservative Members that more should be done for today's elderly poor, we now know that that means that nothing will be done for them because of the cost of privatising the pension system.
It is clear that the policy is the pursuit of dogma for the sake of dogma, but I do not reject it simply on that basis. Let us analyse it, take it apart and find out what it really means because, by and large, Conservative Members have not done that; their speeches have been about theoretical constructs, not what would really happen. Let us consider, therefore, what the policy will cost, where the money will come from, who will go without, who will pay out without any payback and whose needs will not be met because of the cost.
We are told that some people, some time, when my children's children are born, will benefit, so let us consider the benefits. How good are they? Are they so good that the case for the policy is overwhelming? Are the problems of the future so insurmountable that we are forced by events beyond our control to adopt such a policy?
We know that the scheme will cost £312 billion over the next 40 years before there is any reduction in public expenditure. The Government claim that half of that will come from higher taxes on people saving for their pensions over those 40 years. However, as we now know and as the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) said, because the proposals strike at the heart of occupational pensions, the Government cannot be sure that they can raise their funds from those higher taxes. The people who contribute to pension schemes will not benefit from those higher taxes.
We do not know where the rest--£150 billion--will come from. We do not know who will pay or how much they will pay, but we do know that someone will have to pay. The Government say that they have taken those costs in their stride before, but we have had 22 tax increases since 1992 as they have taken those costs and others in their stride.
Who will pay now? Will it be today's pensioners when the Chancellor puts VAT on fuel up to 17.5 per cent or puts VAT on their food bills, or will it be the people in work today who do not have the pension scheme that they would like? What will they pay for no benefit? It is a high cost. There has to be an overwhelming case for spending such a huge amount before any returns can be gained.
The hon. Member for Aylesbury (Mr. Lidington) said that it is inevitable that today's working population will have to pay twice, but it is not inevitable that such a huge cost has to be paid in the way proposed by the Government. It comes about only if the Government choose to privatise the pensions system in this way, and the case for doing that has not been made.
We have an aging population. Enabling that population to enjoy a secure and active retirement and care in years of frailty will demand more of the country's resources. The right hon. Member for South Norfolk (Mr. MacGregor) said that we must act now. The pay-more, get-less policy makes the problem worse, not better, and no Conservative Member has addressed that issue. From 10.3 million today, the number of pensioners will rise to 12.4 million in 2010, 14.7 million in 2030 and 15.7 million in 2040. The hon. Member for Gainsborough and Horncastle (Mr. Leigh) said that today two pensioners are supported by five working people, but by the year 2030 three pensioners will be supported by five working people. That is when the crunch will come.
What are the Government proposing to do to make the problem worse? When those extra 5.5 million people retire they will want security and an active life and they will want to know who will care for them, but that is when the Government want to maximise the cost of privatising the pension scheme. My hon. Friend the Member for Birkenhead (Mr. Field) said that the Government have to tackle the problem of the retiring baby boom generation before they can go ahead with the proposals. In the next 40 years, the Government plan to spend £312 billion on privatising the state pension system--about £11 billion a year between 2020 and 2040, which is when the number of pensioners will rise most sharply. That is twice what is spent by the Government today on residential care, and there is not a penny for pensioners or for long-term care over that time.
The message from the Government to today's pensioners and to those who are to retire in the future is clear: "There is nothing for you in this--go away and stop complaining." However, I heard the calls from the right hon. Member for South Norfolk and the hon. Member for Carshalton and Wallington (Mr. Forman) saying that something needs to be done for today's elderly poor. I heard the call from my hon. Friend the Member for Islington, North (Mr. Corbyn); it is no surprise to hear it from him, but it is interesting to hear it from Conservative Members. Despite those calls, the Government's message is that nothing will be done for today's elderly because the Government's priority is to spend the money privatising the state earnings-related pension scheme and the basic pension system. There is no fairness in the plans--it is simply Conservative policy.
Are there any other reasons for the policy? Is the existing state pension scheme about to go bankrupt? According to the Secretary of State for Social Security, the answer to that question is no. In his Politeia lecture he said that SERPS was affordable, so that cannot be the reason. It is the pursuit of dogma without any care for the cost or the consequences.
Of course we must look to future generations. I must look to the interests of my children's children's children because if any benefits materialise, they will be born at the time when those benefits may arise. What sort of pensions will those generations enjoy? As my hon. Friend the Member for Peckham (Ms Harman) so clearly stated, under the Government's proposals, rising generations will receive pensions that are dramatically smaller relative to earnings than those enjoyed by today's pensioners. A man on average earnings who retires in 2040 will receive 18 per cent. of average earnings, and someone who was out of work for 10 years will retire on 15 per cent. of average earnings. Moreover, as we have heard in this
debate, there will be no occupational pension scheme to top up those amounts, because the Government's proposals would result in the demise of occupational pensions. It is a pay-more, get-less policy intended to privatise the pension system.
The Secretary of State held out the prospect of higher investment growth. I may be the only hon. Member in the Chamber to have been missold a personal pension, but even the man who sold me my pension did not try to pretend that investments only go up and never come down, as the Government have tried to tell us in the past week. The conduct of the Secretary of State and his colleagues is irresponsible and feeds the very type of behaviour that so blighted the financial industry--behaviour which the industry is now working so hard to put behind it.
In reality, at best the basic part of the Government's scheme will produce no more than the basic state pension; at worst, the taxpayer will pick up the bill. In short, the privatisation of the pension system offers the rising generation only a poor pension and a less certain or insecure future. They will pay more and get less in order to privatise the pension system for narrow ideological reasons.
The Government have had their chance today, but they have failed to make their case: their big idea is a bad idea. I say that more in sorrow than in anger because, as the hon. Members for Gainsborough and Horncastle and for Cirencester and Tewkesbury (Mr. Clifton-Brown) said, nothing would be better for the United Kingdom than a new consensus on pensions policy. A 20-year-old starting work today will vote in about 20 general elections before they have retired and ultimately no longer need their pension. Their pension planning cannot be chopped and changed every few years. However, one cannot build consensus by badly thought out pre-election stunts which have damaging consequences.
I shall repeat the features of a sound pensions policy--an affordable and sustainable policy--for the future. First, there are clear strengths in funded, invested pensions. Secondly, many people want their savings to be invested in cost-effective pension schemes. The trouble is that too many people who are in work today--not only those in the rising generation--cannot join a cost-effective pension scheme. There are millions of such people today, and they have been ignored for the past 10 years.
The most striking feature in the speech made by the right hon. Member for Sutton Coldfield (Sir N. Fowler) was his lack of shame over misselling. We have been told, "It just sort of happened like that--it was a problem of market growth." However, not the industry but the Government issued advertisements stating that
Over the past 10 years, women involved in typical rebate-only personal pensions have had 30 per cent. or more of their savings eaten up in fees and charges. They have been ignored. What about all those people on low incomes who in the space of a few years gave up their personal pensions? Within the first five years or less, 2 million low-paid people stopped paying into their pension schemes. According to Money Marketing,
someone on about £9,000 a year can lose between 50 per cent. and 87 per cent. of their savings if they keep their policy for only five years.
The Government have done nothing to meet the needs of people who would like to be in an approved value-for-money, cost-effective pension scheme which ensures that high minimum standards have been set. They would like a scheme that offers them flexibility so that they are not unfairly penalised if they are out of work for a time, and one that is operated in the interests of its members. They want a scheme that recognises the different types of working lives--with periods in and out of work, changes of job, self-employment--and the demands of balancing work, child care and looking after older members of the family.
Today many people lead lives which make such demands. That is why we have been working with the financial services industry to develop our plans for stakeholder pension schemes--to make value-for-money pensions available to people who cannot join them today, and to create new opportunities to establish individual savings.
I suppose that in one way we should be flattered because in launching basic pension plus the Government have been forced to acknowledge much of the truth of what we have been saying. They talk about controlling charges, approving providers and about benchmarks, but those are merely warm words for tomorrow: there is nothing for today and no one will trust a Government who have failed every test for the past 10 years.
The Government have failed to protect savers from high charges and from misselling, as my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) said. More people who were missold personal pensions have died than have been compensated. The Government have failed to protect the taxpayer because the cost of opting out of SERPS has been far greater than the saving that will be made in coming years.
The right way forward lies in addressing in practical terms the real needs of people in work today, and that is to be found in Labour's approach. The way forward lies in developing value-for-money funded pension schemes and in encouraging savings, but also in retaining choice. The Secretary of State tells us that SERPS is affordable, so why remove that choice? It is still the choice of millions. Let us keep the benchmark that SERPS provides and against which alternatives can be judged.
Let us keep a sensible balance between state and private provision and a fair balance between the needs of today's pensioners and those of tomorrow, not an ideologically driven dogma which means privatising the pension system no matter what the cost and no matter who has to suffer and go without in the coming years. Nor, however, do we want an ideologically driven dogma according to which the state must pay for everything: we need a sensible, practical approach that balances the needs and demands of different generations and the strengths and weaknesses of different types of pension provision and which recognises the needs of today's pensioners who have been so hard hit by the Tories.
"soon employees will be able to choose their own Personal Pension scheme instead of staying in . . . an employer's pension scheme."
The Government issued that advertisement, which encouraged misselling and opting out of occupational pension schemes, and they should take responsibility for it.
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