| Previous Section | Index | Home Page |
8 pm
Typically, a 30-year-old with such a money-purchase scheme will now have to pay between £12 and £20 a month extra to maintain his or her benefits. To be told by the Government that that change is good for contributors is an insult.
As the hon. Lady is clearly anxious to respond, I invite her to repudiate the words of the Financial Secretary, or to explain how it can be good for someone to have to pay in between £12 and £20 a month extra for the same prospective pension.
Mrs. Liddell:
I am grateful to the right hon. Gentleman for giving way. I shall deal first with the second point--payments into money-purchase schemes. Will the right hon. Gentleman inform the Committee on what basis his sums were arrived at? Anyone who knows money-purchase schemes knows that there are different impacts at different ages.
Secondly, on the point made by my hon. Friend the Financial Secretary, it is a well known fact that the strength of British companies is mirrored in the
performance of pension funds. Indeed, her point is perfectly correct. If companies perform better and are stronger, with more stable long-term growth, that inevitably benefits pension funds. Will the right hon. Gentleman explain why, whenever the previous Government reduced tax credits, there was no mention of pension funds at that time?
Mr. Heathcoat-Amory:
I am afraid that that simply will not do as an apology or explanation for the extraordinary remarks of the Financial Secretary on 3 July. The Economic Secretary has not explained how it is good for pensions and pensioners to have a sum of £5 billion a year extracted from the schemes.
The hon. Lady asked where my sums came from. I can explain in outline that, if there is a 20 per cent. cut by the abolition of ACT credits accruing to a pension fund, it follows that that income stream, discounted to the present day, has been cut by 20 per cent. Therefore, a pension fund investing purely in UK equities has been affected by that amount.
I generously recognise, however, that most UK pension funds do not invest only in UK equities. I therefore assume, for the sake of argument--the figures have been prepared for me by actuaries and outside commentators--that 60 per cent. is a reasonable figure to assume that many pension funds invest in UK equities. If that is so, the reduction is 12 per cent., not 20 per cent.
It is entirely fair for me to suppose that a man or woman contributing £100 a month to a pension scheme will have to increase contributions by the sum I mentioned. If the hon. Lady has alternative figures, we would be grateful to hear them. There has been a terrible dearth of information about the real reduction in benefits, or the necessary increase in contributions. All we have had is the daft assertion that it is all good for contributors, and that paying in additional sums is somehow helping them to build up higher pensions for their old age.
I concede that a minority of pension schemes are final-salary schemes. Some, at least, have the ability to be in surplus. The National Association of Pension Funds conducted a survey, which showed that most of its members do not have such surpluses, but some do.
The bottom line is that millions of people investing in thousands of pension schemes will have been hit badly and immediately by the Budget. It is deceitful to try to disguise that. I use that word deliberately and with care.
On Budget day, the Government issued "The Pocket Budget", which was designed to be a summary or distillation of what we in Committee know as the Red Book. It is designed to make the Budget clear and easy to understand. It was published so that people could see how the Budget would affect them, and to make it understandable and accessible to people outside.
All are agreed, I think, that the pension fund change was central to the Budget. It is the unexpected tax change in the Budget and the largest one. When it is up and running, it will raise more each year than the windfall tax will raise in total.
The only reference in "The Pocket Budget" to that colossal tax change affecting millions of people is:
Earlier on the same page from which I have quoted, the following is stated:
There is nothing in "The Pocket Budget" about the affect on pension funds. There is no figure. Of course there are plenty of figures to show how the money will be spent. Billions and hundreds of millions of pounds bandied about on the expenditure side of the Budget are explained in the booklet, but there is nothing about this huge tax-raising measure on pension funds.
Even the possibility of investment is a smokescreen. I read out the reference that supposes that the entire purpose of the pension fund tax changes is to encourage investment.
That is not true, because many companies will have to pay more into their pension funds now, and as a result will have less to invest. Companies, especially some of the larger ones that still have final salary schemes, will have to make up the lost income with their own contributions; so a company having to make up the deficit will have less money to invest in plant and machinery, not more. Therefore, even the excuse, or description, offered, incomplete and misleading as it is, is untruthful.
I hope that, when the Minister replies to the debate, which she said she would do with some care and at some length, she will agree that that publication is a disgrace. It is published at public expense, yet it is clearly designed to disguise rather than to illuminate the true nature of the Budget.
I have a practical suggestion about how the Government could compensate for the crime. They should certainly withdraw the "The Pocket Budget" from circulation, but does the Minister agree that the members of pension schemes, even at this late stage, have a right to know what has happened to them? The Government are promising a "right to know" Bill in the next Session, and they could start to implement their words now, by giving the members of pension funds the right to know what the Government have just done to them.
Indeed, if the law of Bristol, South is true, and more taxation really is good for pension funds, perhaps the Government will want to send a letter to all pension fund members explaining exactly how good the Budget was for their pension funds and their eventual pensions.
I hope that the Minister will take the suggestion seriously, and use the fact that pension funds write to their members regularly in any case. If the Government were to help with funding, I am sure that the funds could be persuaded--perhaps they should be told--to explain to all members what happened to them on Budget day.
There are several other unanswered questions about clause 19. One concerns the relationship between the clause and the state earnings-related pension scheme. More than 5 million people have opted out of SERPS, and many did so on a calculation of comparative advantage, having measured SERPS against alternatives such as taking out a personal pension.
A particular aspect of that calculation concerns the national insurance rebates that we made available to those who left SERPS and made alternative arrangements. In the Budget, the Government reduced at a stroke the attractiveness of the alternative personal pension, and that has rendered the original calculation invalid.
I am not talking about anyone being missold a pension; I am describing people who were properly, rationally and objectively advised that the SERPS scheme offered less good prospects than taking out a personal pension, helped by the national insurance rebates. The Government have now rendered that advice invalid.
In previous debates, we have heard that the Government will not increase the rebates. It is the Opposition's contention that the Government are guilty of misselling pensions on a colossal scale. I should like the Minister to return to that issue and explain how she can avoid the charge that she has retrospectively let down the millions of people who took a decision about their future pension provision on what has turned out to be a false prospectus.
Mrs. Liddell:
It is rather rich for the Opposition to talk about pensions misselling, because they blatantly ignored the pensions misselling that took place when they were in government, and completely failed to take into account the fact that 600,000 people at or near retirement had been missold pensions. The people who were missold pensions under the aegis of the previous Government deserve an apology from the right hon. Gentleman.
Mr. Heathcoat-Amory:
The misselling of pensions is always a serious matter, and the Conservative Government put in place a mechanism to find out what had happened and recompense the victims. I draw a clear and immediate contrast between that and what the Government are now doing deliberately to millions of people, in which the Minister seems to take some pride. I hope that, when she replies to the debate, she will deal with the national misselling of pensions scandal on the part of the Treasury Bench, which is taking place before our eyes.
"the Budget. . . makes other tax changes to encourage companies to invest profits in the future".
If that is not deceitful, I do not know what is, especially as it comes from a Government who go on about trust, openness and accountability.
"Openness. The Government is committed to building trust."
They could have started in the very booklet in which those words appear.
| Next Section
| Index | Home Page |