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Mrs. Gorman: Will my hon. Friend give way?
Mr. Hayes: No, I understand that I need to speed up rather than give way. I apologise to my hon. Friend. I would normally be happy to give way.
In conclusion--I am moving seamlessly from page three of my notes to page 33--a considerable number of people will be affected by the Government's proposals. A conservative estimate of the numbers involved in the schemes that I have defined is about 7 million. They will be directly and detrimentally affected. I ask Opposition Members, including those on the Front Bench--
The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham):
We are the Government.
Mr. Hayes:
I still think of those who sit on the opposite Benches as the Opposition because they still behave in a slightly amateurish and shambolic way, as they did in opposition.
Mr. Iain Duncan Smith (Chingford and Woodford Green):
We have had a fascinating debate, partly because so many hon. Members who contributed to it seemed to know what they were talking about. During my period in Parliament over the past five years, that is something of an exception to the rule. I shall tread carefully on this one, so as not to upset those hon. Members who clearly did not know what they were talking about.
We seemed this evening to run out of Labour Members who wished to contribute to the debate. This is not the first time that that has happened. It happened last week on Friday during the Budget debate. I say that only in passing and not as a partisan point.
I wish to refer to many of those who have contributed to the debate, and I shall do so as quickly as possible, given the time, in the form of a list. My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) made it clear that his expertise continues. He continues to illustrate the important points that relate to the issues that we are discussing. My neighbour, my hon. Friend the Member for Epping Forest (Mrs. Laing), made a powerful speech in describing the problems for future pensioners when they come to retire. Her points were well made.
My hon. Friends the Members for North Norfolk (Mr. Prior) and for Bognor Regis and Littlehampton(Mr. Gibb) and my right hon. and learned Friend the Member for North-East Bedfordshire (Sir N. Lyell) spoke about the success of our policies and pointed out that the
Government seem intent on attacking ordinary pensioners. They said that the key to our future economic success is the fact that we have so many funded pensions.
My hon. Friend the Member for Ryedale (Mr. Greenway), with his expertise and knowledge, explained the difficulties of sorting out the problem of misselling and why they continue to exist. It is well worth re-reading his speech.
My hon. Friends the Members for Arundel and South Downs (Mr. Flight) and for West Dorset (Mr. Letwin) showed their financial expertise. Their short speeches bear re-reading, because they explained why the Chancellor seems to have misunderstood the way in which markets will invest, particularly the pension fund market. Many of those funds will move into fixed debt or even equities overseas, which is hardly what the Chancellor needed. My hon. Friend the Member for Buckingham (Mr. Bercow) spoke of the Government's smugness and the way in which this measure was presented.
The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) made a good speech. Obviously, I did not agree with all of it, but I particularly agreed with his attack on the withdrawal of ACT dividend tax credits. He made a straightforward point: how can a £5 billion raid on the economy help to increase the trust of pension companies that the Government must have if they are to reform the pension system? That was a powerfully made point, and the hon. Gentleman seemed to agree with us that, as my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) said, we require a Green Paper so that we can discuss this matter. I am glad that Liberal Democrat Members agree with that.
Many Labour Members made interesting speeches. A number of them wanted to restore the earnings link. I hope that the Minister will tell us whether the Government will succumb to the blandishments and pressure from various Labour Members, especially the hon. Member for Hornchurch (Mr. Cryer). Many of us remember his father, who sat in a similar position in the Chamber, although on the other side. He gave us a hard time, but we respected him for his great skill and knowledge, and I welcome the hon. Gentleman to the House.
Some Labour Members even spoke of moving the goalposts. Many of them attacked the way in which actuaries now calculate the funds, as though, having raided them, this could make it all better by having yet another great Government review. No doubt they will come back to that.
I want to correct the Chief Secretary to the Treasury, because he did not complete the quotation from the former Chancellor of the Exchequer, Norman Lamont. In the final part of his speech, he said:
The debate has shown that the Budget is a return to Hutton. The Chancellor has put up this screen--that the Government have made these changes for ideological reasons. In abolishing ACT, taxing pension funds, driving down yields and reducing the equity base of British industry, the Budget was structured around that ideology. The Chancellor's critique was clearly flawed, but he has built the Budget around it.
Two points undermine that thesis. First, it is claimed that the majority of United Kingdom companies, particularly pension funds, are short-termist in their stockholding--in other words, in their total investment policy. A range of evidence undermines the credibility of such claims: WM Co., which is one of the most respected companies monitoring fund performance in the marketplace, has found that the opposite happens. Its recent survey found that funds typically hold individual stocks for between eight and 18 years. That is hardly what anyone could describe as a short-term holding.
The Government claim also that, if the pressure on United Kingdom companies to pay high dividends to institutional investors can be reduced, the number of companies spending on research and development will naturally increase--insinuating that it is low as a result of the present position. However, recent research by the City university business school demonstrated that companies that pay dividends are more likely to invest in research and development, and that the R and D expenditure of dividend-paying companies is significantly higher than that of non-dividend-paying companies. That rather blows that one out of the water. My hon. Friend the Member for Arundel and South Downs (Mr. Flight) put that point very well in his speech.
Even given their own ideas, however, rather than increasing long-term investment, pension funds may now ask the companies whose pension scheme they administer to make good the shortfall that will result from increasing the total contributions of their work force. They could even demand bigger dividends from the companies in which they own shares. Both outcomes would reduce, not increase, resources for investment. The Government seem to be hiding behind a smokescreen in claiming that their proposals will change the way in which the market works, and the way in which businesses invest in the future. That is completely untrue.
The most obvious victims of the abolition of dividend tax credits on ACT are the UK's 6 million personal pension holders, and its 750,000 members of company money purchase schemes.
Dr. George Turner:
I sat here all evening waiting to hear an argument from an Opposition Member that was worthy of a speech, but I decided not to use the time to which I understood I might be limited.
Will the hon. Gentleman consider the position of a pension company that owns an important manufacturing firm in my constituency? Bespak has just reported a 26 per cent. jump in profits; its dividend is up by 13 per cent., and it has an eight-week investment programme in King's Lynn, in my constituency. As a result of its ownership of that company, the pension company's
ACT will be 0.5 per cent. of its capital value. Are we not ignoring the main arguments and dwelling on minor issues, given that the capital value--[Interruption.]
Mr. Deputy Speaker:
Order. The intervention is far too long.
"when the basic rate is eventually brought down to 20p, tax reliefs for basic rate taxpayers will, of course, be worth 20p in the pound, too. In this Budget, I have brought forward that change by restricting three specific tax reliefs to 20 per cent., not just for basic rate taxpayers, but for all taxpayers."--[Official Report, 16 March 1993; Vol. 221, c. 195.]
It was interesting that, in its green budget, the Institute for Fiscal Studies commented on the adjustment to tax reliefs to match the tax. It said:
"By cutting the rate of income tax on dividends to 20 per cent. to be in line with the cut in ACT, the Government of the day ensured that 'most ordinary shareholders' were unaffected by the change."
I am sure that the Chief Secretary wanted to have that corrected before we continued.
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