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Mr. Rooney: Indeed--unlike that of the police, I have to say. That is the best scheme to be in, provided someone has a guarantee that they will remain in employment until retirement. Sadly, that is no longer the case for tens of millions of people.
Occupational pension schemes are a relatively modern phenomenon. They grew significantly in the 1950s and 1960s because there was a shortage of labour and such schemes were needed to entice people to work for particular companies and particular industries. There is nothing wrong with that, perhaps, but the decline in occupational pension schemes since the late 1960s and early 1970s in terms of their number and the number of members is significant and something that should worry us.
In the 1970s, there was some recognition of the fact that millions of people are not and can never be members of occupational pension schemes. They are principally women and carers, but they also include many people in low income brackets and people who have many breaks in their employment for many reasons. Recognition came in the form of the state earnings-related pension scheme. SERPS has to be recognised as a valuable, solid scheme for millions of people, but, at the same time, we have to
recognise that, during the changes that took place two or three years ago, billions of pounds were taken from the future pension entitlement of members of SERPS without an iota of whingeing from the Conservatives--it was okay, because it affected individuals in a state scheme.
We have heard much hypocrisy today, with talk about a briefing from the National Association of Pension Funds. I have to say that Anne Robinson told a different tale when she was at the Institute of Directors--perhaps it is a case of whoever pays the piper calls the tune. Millions of people will experience a dramatic reduction in their SERPS pension in years to come without an ounce of compassion being shown by the Conservatives.
Much has been said today, wisely, about the misselling of personal pensions, but an issue of financial mismanagement that affected tens of thousands of pensioners in the late 1980s and early 1990s--the infamous home income plans--has not been touched on. Not only did people lose a great deal financially, many pensioners lost their homes because a deregulated system with no statutory back-up allowed people to rip off those who did not know any better and had no access to the right advice. People lost their homes and their investment, and finished up far worse than they ever were before.
Many things affect the value of a pension fund, not least the investment decisions taken by fund managers, the profit record of the companies in which they invest--at this point, I should perhaps mention that the profits declined somewhat in the two recessions that occurred under the previous Government; in fact, they declined significantly--the contributions from employer and employee, and the sort of investments held, whether gilts, bonds or equities, at home and overseas.
It is interesting that, in 1990, the Nikkei index in Japan hit 34,000 and is now down to around 19,000. Is it suggested for one minute that the Government should compensate pension funds for investments in the Nikkei? I think not. The ability of pension fund managers is crucial. There are some very good ones, but many are very bad.
The performance league tables for pension fund managers show the same companies time and again in the top three or four, be it over five, 10 or 25 years, and the same outfits at the bottom, offering a miserable performance and depressing pension fund values, assets and returns. We have had charter marks for many years, but it is noticeable that there has never been one for the pension fund industry. If there had been, very few people would ever have earned one. We now have the minimum funding requirement, which is no bad thing, but perhaps we need a minimum performance requirement of pension fund managers, because some of them have been getting money under false pretences for far too long.
In general, if a company is a mutual or non-commission paying, the investment is safer and will do better. In addition, if the company's title includes the adjective "Scottish", it tends to be one of the better ones--and I do not say that just because of the identity of the Minister on the Front Bench tonight. Certain institutions have a long history of being sound, solid investment vehicles, but there are far too many who are doing nothing for pensioners or investors and they should be weeded out. The sooner we have a regulatory authority that acts against incompetence, the better off pensioners will be.
Before I came to the House, I had the privilege of being the chair of the investment board of what I believe is the largest local government scheme in the country--the West Yorkshire local government superannuation scheme, which had about £2.5 billion of assets. In the six years I was there, the fund grew, we were fairly successful in the investments we chose, and the benefit could be seen in the employers' contribution rate dropping from 11 per cent. to 5.5 per cent. for manual workers and to 4.5 per cent. for white collar workers. Those were significant gains.
At the same time, some of the previous Government's worst anti-public sector attitudes were on display in that, in the late 1980s, when bus companies were deregulated and local authority bus services went into the private sector, we were instructed that bus workers could no longer be members of the local government scheme. They had been in the scheme for years and had a good, well funded final salary scheme, with low employers' contributions. By diktat of the Government, new bus workers were told that they had to make their own pension arrangements, so immediately we had a two-tier pension scheme in the bus industry.
Of course, the Conservative Government were well known for having two-tier schemes throughout the public sector, so they probably thought nothing of it. Now, however, about two thirds of those working in the bus industry have a good scheme, but the other third are at the mercy of the sharks and charlatans about whom we have heard so much today.
The Government had other attitudes towards pension funds and their assets--one remembers their raid on the assets and surpluses of the National Coal Board, the National Bus Company's BEST scheme, British Rail and many others. Not only did they do that: they then spent Government money on behalf of the new trustees, defending them against claims that the money should be paid back. In short, they raided the money and then provided the costs of the legal defence to justify the decision being made in the first place. Many, many thousands of pensioners who worked in those industries will be far, far worse off as a result of that than of anything that might--I stress, might--emerge from the Budget decisions taken last week.
When considering pension values and the rights and living standards of pensioners, there are two sides to the equation. It is like any accounting practice--there is the income side and the expenditure side. We well remember the savage attacks on pensioners in the 1980s: the increase in prescription charges, the introduction of charges for eye tests and dental checks, value added tax on fuel and various other measures, all of which had a disproportionate effect on those on small occupational pensions. Some Conservative Members are looking aghast--they thought pensioners were exempt from those charges, but they must have been given the wrong brief.
Mr. John Hayes (South Holland and The Deepings):
Would the hon. Gentleman care to enlighten us as to which pensioners pay prescription charges?
Mr. Rooney:
Any pensioner who is not on income support. If the hon. Gentleman nips very quickly to the Library, he will see that I am right, and he might get back before I sit down.
Sir Nicholas Lyell (North-East Bedfordshire):
I am glad to follow the hon. Member for Bradford, North (Mr. Rooney), not least because I listened to his speech with great interest for 10 minutes and noticed that it did not contain a single word of justification for what the Government have done in respect of pensions in the Budget--not a single word.
In the light of the Budget, people are rightly concerned about their pensions. The whole cast of this gravely mistaken Budget is wrong. In two short months, the Chancellor has allowed the living costs of the average mortgage payer to rise by about £12 a month, and has cut that individual's prospective pension--if he is around 30 years old and paying the modest enough sum of £100 a month--by some 20 per cent.
In order to provide equally for himself and his family in future retirement, that same citizen will have to increase his contributions by some £20 per month, if he can. That is a combined increase in mortgage and pension payments of £384 a year for a fairly modest earner, and the country should realise that.
That is profoundly wrong. The Government came into power purporting to set a high moral tone, yet they are willing to pretend that taxes can be raised painlessly by so-called windfalls; and, hoping that no one will understand the complexities of advance corporation tax, they have robbed future pensioners--pawning the future to pay for the present. I see that the Chief Secretary does not like to listen to this, and is about to depart the Chamber.
The £5 billion per annum taxes raised from the advance corporation tax changes to pension funds is the equivalent of an extra 3p in the pound on income tax, taken from people's savings. I mean people's savings, not "the people's money", which is how the Government like to refer to public money. We are talking about money taken from real people's savings every year, and millions of pensioners and probably as many as 20 million families will suffer as a result.
Britain can pride herself on having, over the past 18 years under the Conservative Government, increasingly funded pensions, so that, now, not only do we have the largest funded pensions in Europe, but our funding of pensions exceeds all others put together. We have put money by and saved it so that it can grow for the future.
With a constantly aging population, that is the only way to prevent our old people--that means ourselves in the years ahead--from becoming an intolerable burden on our children and grandchildren. At one greedy, misguided stroke, the Chancellor has severely limited that benign process. He has cut our savings and increased the need to save, but has cut the incentive to save. He is spending now what should be saved up for the future.
I am sorry that the Chief Secretary has left the Chamber, because, at the end of his speech, he tried to give some justification for what he had done by saying
that the fact that companies would be taxed on the dividends they pay out would make them more likely to invest. I have never heard such a wafer-thin argument, which was rightly cut to ribbons by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley). The Chief Secretary had not thought of that argument when he was skewered on "Newsnight" the other night, and I suspect that it was dreamed up, either in the Treasury or the Department of Social Security, to provide some sort of fig leaf for this gravely mistaken policy.
We look forward to asking the Government some detailed questions. For example, how much of the money of companies that would have paid dividends is to go into investment, and therefore by how much has the £5 billion tax take been reduced to allow for the increased investment that is to give rise to the compensating bonanza, which was the substance of the Chief Secretary's argument? I do not believe that the figures will add up.
Moreover, by taking his tax increases from these largely unnoticed funds, not from current earnings, the Chancellor is doing nothing to cut current spending, which is feared to be leading to overheating, thus causing the Bank of England to continue to increase interest rates. Hence we are moving from the benign downward spiral in costs and interest rates that has stimulated the remarkable economic recovery in the past four years and left the Chancellor with his unrivalled inheritance, into a vicious upward spiral.
The pound rises, hitting at our competitiveness--the effect on manufacturing orders was dramatically demonstrated yesterday. Companies that increase payments into their pension schemes to replace what the Chancellor has taken out will have correspondingly less for investment; so much for his talk of under-investment. Private citizens with personal pensions who already prudently pay the maximum permitted for tax relief have nowhere to go. If they wish to save more, they must do so without the same tax relief.
Now we hear that the Chancellor has designs on personal equity plans. What will ISA, the individual savings account, have to offer? It seems hardly likely to be better, but we wait with keen anticipation.
Government supporters should realise what their much-vaunted new Labour Government are up to. They are up to hype and deceit, robbing the future to pay for the present. They pretend that money can be raised painlessly by windfalls, when they know that today the principal investors in the companies that they have just taxed are the very pension funds that they are already robbing by abolishing ACT.
Before the general election, one of the aims of the Labour party was to persuade the country that it had changed--that, in its approach to business and to the personal ambitions of ordinary people, it was now more like the Conservatives, only nicer. [Hon. Members: "Hear, hear."] We now know that that is not true.
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