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Mr. Darling: We already do that.
Mr. Rendel: The Government's policy contains something similar to that, but the scheme is not
compulsory, so it fails the vital test of ensuring that everybody has a pension that is good enough to look after their needs in the long term.
Mr. Leigh: What does the hon. Gentleman estimate that the increase in national insurance or in tax will have to be to pay for a compulsory second pension, and what impact will that have on the popularity of any Government who propose it?
Mr. Rendel: It does not sound as though the hon. Gentleman understood the policy that I was proposing, as it had nothing to do with increasing national insurance or tax. [Laughter.]
Mr. Duncan Smith: Cross-party consensus.
Mr. Rendel: I am delighted that I have created at least a two-party consensus, but I was not talking about a second-tier pension based on national insurance. I am not sure what the intervention was about.
Ms Sally Keeble (Northampton, North): The hon. Gentleman seems to be suggesting that it should be compulsory for the state to provide a second pension, but the idea of compulsion usually applies to the person who has to pay for the pension. If we compel people to contribute to a pension, what sanctions will there be for those who refuse?
Mr. Rendel: There are obviously means of forcing people to pay tax, and the same means could be used to make them pay into a pension fund.
Mr. Rendel: Clearly, the rates of compulsory second-tier pensions would have to be fixed when the legislation was introduced. Our feeling is that we could start at a level equivalent to the current SERPS contributions, so there would be no real increase, but that, once the system was in place, we could increase the contributions as required to ensure that people saved enough to look after themselves properly.
We can do something straight away for the current pensioners, to help to overcome the problem of the gap between the minimum income guarantee and the basic state pension. As the most elderly pensioners are, on the whole, the poorest, we should introduce an extra age payment of £3 a week for the over-75s and £5 for the over-80s.
That would be an affordable start, and the extra payment should be increased beyond that as soon as possible. I am sorry that the Government did not introduce such a payment in the Budget, as it would certainly have helped them to overcome some of the problems in their own proposals on the long-term future of pensioners. In the past few weeks and months, I have travelled around the country advancing that proposal, and it has met with warm acceptance the length and breadth of the land. I hope, therefore, that the Government will adopt it, and earn for themselves the popularity that they would get if they introduced it.
Mr. Tony Colman (Putney):
I support the Government amendment, but first I wish to declare an interest as the former chair of the United Kingdom standing committee on local authority pension funds. I chaired that body up until last year.
The Putney and Roehampton organisation of pensioners met my hon. Friend the Minister of State last week and urged on him the restoration of the earnings link. However, after he told those pensioners the costs that would be involved and reassured them that the Government wished to ensure that the poorest pensioners in the community were dealt with first, they left convinced. Perhaps Opposition Members have not met their pensioners' groups. Mine was pleased to hear from my hon. Friend the Minister about the review of how much capital could be held before it affected the amount of the minimum income guarantee that could be drawn down. My local pensioners were also pleased to hear about the work that was being done in tracking down those people who would benefit from the minimum income guarantee but who are not at the moment registered for it--the 700,000 mentioned by the hon. Member for Newbury (Mr. Rendel).
I support the changes to corporation tax. A few months after I became a Member of Parliament, I wrote a letter to my right hon. Friend the Chancellor of the Exchequer stating the extra sums that would be needed for local authority pension funds, following the changes to ACT. That letter, I am glad to say, was unnecessary, because the stock market has risen and companies have benefited enormously from the removal of ACT from pension funds. The dampener on companies has been removed and, as a result, we have seen a tremendous change--as my hon. Friend the Secretary of State put it--in the way that companies relate to their owners, the pension funds.
One issue that I pursued strongly as the chair of the local authority pension funds committee was the need to ensure that those members who had previously been direct employees of local authorities, but were becoming employees of private sector firms under best-value regimes, should be able to remain members of the local authority pension funds. I hope that my hon. Friend the Minister will take up that point, because the right to remain a member was negotiated over a long time by representatives of the local authority trade unions, by the Confederation of British Industry committee set up to examine the issue and by the local authorities. A solution was worked out and the Department of the Environment, Transport and the Regions had blessed the arrangement. However, I understand from Public Treasurer today that the arrangements have been turned down by the Inland Revenue, which is concerned that the tax-exempt status that would apply to private sector schemes should not be allowed. I want to ensure that the introduction of best-value arrangements is not held up as a result, as I am sure that the Government and all hon. Members support it. I hope that my hon. Friend the Minister, when he winds up the debate, will assure the House that any problems have been, or are being, resolved.
I pay tribute to my hon. Friend the Minister for his work on ethical investments in the context of the financial regulatory system. In particular, I congratulate him on his recent speech, in which he proposed requiring trustees of pension funds to make a statement of the ethical and environmental principles according to which investments are made.
Not all hon. Members will agree that that is the best way forward, but I strongly support the democratic basis of the proposal, which would render pension fund trustees accountable to their members. I remind the House that many of the ethical funds have achieved significantly higher returns than their non-ethical counterparts. Although I do not suggest that it should be mandatory, I would welcome a clear statement from trustees about the way forward for their pension fund.
I presented a Bill in the previous Session requiring independent financial advisers, as part of the regulatory regime, to ask the ethical question--whether the individual investor or pension fund wanted an investment placed in an ethical or environmental fund. I realise that there is a background of mis-selling in the pensions industry and among some independent financial advisers. However, those independent advisers have now put their house in order, and it is important that they are supported. We must ensure that one of the choices that they offer is that of ethical and environmental investment.
Mr. Edward Leigh (Gainsborough):
I think that the hon. Member for Newbury (Mr. Rendel) felt, when I intervened in his speech, that I was trying to be unfair to him or to make a party political point. On the contrary: I think that the hon. Gentleman's contribution to the debate was very fair, and I want to add to his remarks.
Since the second world war, the development of pensions policy in this country has been a notable failure of public policy making. The basic pension developed by Sir William Beveridge stood the test of time until the link with earnings was broken in the 1980s. At first sight, it was a very effective instrument. It provided the elderly with a degree of security and ensured that most people were required to set aside an adequate amount for their pensions. At the same time, the occupational pension movement developed satisfactorily.
The problem came with the break with earnings. I know that, as soon as I say that, some Members on the Government Benches will be tempted to point out that the Government whom I supported made the break. However, the present Government have accepted that the break was
essential, however it was done. Since then, however, the basic pension has been untenable, and it will decline rapidly in value. It is clear that something must be done.
I regret that we did not identify that problem earlier. I had no complaint about the basic pension plus proposal advanced by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) when he was Secretary of State for Social Security. However, his proposal was made right at the end of the period of Conservative government, and it was difficult at that stage to imbue it with all the authority that a Government proposal should have. The politicking of the time did not help.
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