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Mr. John Butterfill (Bournemouth, West): Does my hon. Friend agree that the LISA scheme being proposed by the Government is very similar to the 401K scheme in the United States, which has been shown to damage pension fund provision?
Mr. Duncan Smith: My hon. Friend is quite right; there are many similarities between the proposed scheme and the 401K. I shall touch on them in a moment if he will bear with me.
The point is that the two Departments are at odds with each other. To try to avoid the split, the Secretary of State for Social Security has decided to get in on the act--
Mr. Duncan Smith:
The hon. Lady has already had her opportunity but she missed it; she is not going to get a second chance.
In order to save face, the Secretary of State has persuaded the Treasury to allow his name to appear with that of the Chief Secretary in the written answer. The fact that the policy has been worked up away from the Department of Social Security is a clear sign that the Treasury has long since decided that it will take over pensions from the Department of Social Security.
We have here a little advance notice of that. I was concerned. I see the Secretary of State sitting there; he clearly assumes that he is going to lead for the Government in this debate and is going to put the Government's case. He is in charge because he is sitting there. However, the Government amendment to the motion is tabled in the name of "The Prime Minister, Mr. Secretary Prescott, Mr. Chancellor of the Exchequer"--we have heard of him--"Mr. Secretary Cook, Mr. Secretary Straw and Mr. Secretary Blunkett". Where is the Secretary of State for Social Security? Clearly, those further along the Front Bench are trying to send him a message that he has not got yet. I am surprised; it is a very unfortunate way of doing things. Perhaps they should have told him direct that it is a case of "Move over, Darling." I would be much kinder to him and tell him to his face.
The proposals will lead to chaos. The policy worked up by the Association of Unit Trusts and Pension Funds is an interesting one which has some things to recommend it, although there may be problems with it. The problem is not the policy but the framework set up by the Department into which the policy drops and with which it clashes.
For example, the stakeholder scheme is meant to be cheap and it makes no allowance for advice in order to keep costs down. However, the arrival of that alternative scheme means that anyone who has to make decisions about long-term savings will be confused as to what to do
and will need advice but will have to pay for it. In fact, the Secretary of State should talk to his Minister of State who, in The Daily Telegraph on Saturday, said quite clearly:
The scheme is a pensions vehicle that runs counter to the Green Paper on stakeholder pensions. There is no commonality. The stakeholder pension scheme has at its heart trustees; LISAs do not. What is an ordinary member of the public to make of it? I listened to the Secretary of State on the radio and I heard John Humphrys say that he could not understand a word that the right hon. Gentleman was saying. I admit that I agreed with John Humphrys.
The financial page of The Times, a newspaper not known for its failure to understand financial issues, wrote:
David Dunne, the head of production development at NPL, summed up the matter when, conclusively, he said:
The Government set out with very big words on their return to office. We were told that they would complete the reform of pensions, delivering a simpler and better system than that which now exists. Instead, we have seen from the Government a disastrous conflict. The Chancellor of the Exchequer's megalomania means that, bit by bit, he wants to take over the whole of government and, increasingly, chaos and a disincentive to save are the results of the Government's policies.
As I have said, the tremendous shift towards a more means-tested system will act as a disincentive to save and will drive more and more people into the means-test trap. It will work against savings for pensions in future. That will be compounded by the ridiculously complex structure that the Government have set up, which will lead to confusion. That confusion will dissuade people from entering the market, especially as they will have to engage advisers at their own expense.
What is worse is that, because the Government now have a series of savings vehicles that carry the stamp of Government approval, and in the absence of any serious advice, they will find that the public will say, "Were we not mis-sold this? Did the Government not suggest to us that this was the best route for us? Did our companies not
say to us that there was nothing that they could do because the Government had said, 'This is where they shall go'?" Given the investment platform that existed when the Government took office, the lack of constructive and, most of all, joined-up thinking places in jeopardy the investment pattern.
The Secretary of State for Social Security (Mr. Alistair Darling):
I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
We remember that that policy was launched shortly before the general election. We were told that it would be the blueprint for the future. Yet not one word was said about it by the hon. Gentleman this afternoon. Instead, he said that he would be working out Conservative pension policy at the appropriate time. All I can say is that it is just as well that he will have considerable time in which to work out that alternative. On the basis of what he has said this afternoon, I conclude that he has not a clue about what to do on pension reform.
"I would expect the cost of advice to be met by the individual who uses it."
There we have it--the hidden cost. Those seeking advice will have to pay; if they do not, they will be mis-sold something that may be of absolutely no use to them.
"instead potential savers will be confronted with a mindboggling complexity. Anyone on a modest income who has not passed exams as a financial adviser is likely to bury their head in despair."
Remember, this is the Government who brought us the Green Paper on the stakeholder scheme, telling us that they would cut the cost of advice. That will not happen if the Minister of State gets his way.
"I don't see how this can be anything other than a rival to stakeholder pensions but without the trustees. It is certainly confusing. Both will be in effect Government approved bench marked products with low charges and alongside them you will have ISAs . . . with the customer asking--which is right for me? And that is the point at which advice will be required when one of the features of these proposals had been to get rid of the need for advice and its expense."
Instead, quietly, the Government will make people pay. That is what the Government do not tell people, although they squeeze them none the less.
"commends the Government's approach to pensions reform, set out in its Green Paper, Partnership in Pensions; congratulates the Government on its determination to end the scandal of pensions mis-selling and its plans to strengthen the financial regulatory system; commends the Government on its commitment to economic stability and low inflation, which helps pensioners; believes that its reforms to the corporate tax system, which will result in the lowest-ever rate of Corporation Tax, will be in the long-term interests of companies, shareholders and pensioners; and approves of the Government's introduction of the Minimum Pension Guarantee, Winter Fuel Payments, the re-introduction of free eye tests and commitment to concessionary travel for the elderly as part of its strategy to provide security in retirement."
The final flourish of the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) would have had a little more strength behind it if, in 18 years of power, the Conservative Government had done anything about reforming the pension system. It is remarkable that, in the 35 minutes or so that the hon. Gentleman spoke, he said not one word about the Conservatives' flagship policy for reforming pensions--basic pension plus. He said not one word about it.
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