| Previous Section | Index | Home Page |
7.49 pm
Mr. Jim Cousins (Newcastle upon Tyne, Central): I intend to stick solely to the issue of pensions. Individuals have exactly the opposite problems with pensions from Governments. Governments design pension schemes that look good in 40 years' time, but individuals always discover that their pension situation is no good when it is too late to do anything about it. That means that there is a fundamental question of trust that must be resolved, as several hon. Members have pointed out. If the promise of the state second pension is to be believed, the national insurance fund must be protected by independent trustees in exactly the same way as a private pension in order to rebuild trust and to make citizens real stakeholders in their state-provided pensions.
For many years, the minimum pension income guarantee that the Government have introduced will be a more dependable and meaningful part of pensioners' income than the proposals in the Bill. If that continues for very many years, it will destroy public confidence in the proposals that the Government are rightly making. That will be the case especially if the minimum pension income guarantee increases in line with earnings but the state second pension increases only in line with prices. That would produce a gap that would postpone for many years the point at which the state second pension is worth more than the guarantee, which would undermine the whole structure of the scheme. It would also undermine private sector stakeholder schemes, because when people realise that they are saving not for themselves but so that the state may make a smaller contribution to them through the minimum pension income guarantee, they will be angry and demoralised.
The state second pension must, if it is to include carers--which is rightly one of its objectives and one of its strongest features--have at least as generous provision for them as the existing state system. In that respect, we look to the Government to ensure that the existing system of home responsibility protection in the national insurance basic pension is also reflected in the state second pension.
The state second pension has the makings of an excellent product, especially in its earnings-related initial phase. In fact, it is so good that a problem may arise. My right hon. Friend the Secretary of State said that when it ceases to be earnings related, rebates will be offered that will guarantee--to people on moderate incomes who will be forced out of the state second pension scheme structure into stakeholder schemes--that they will be no worse off. However, if we examine the Government's proposals on rebates, it appears that from the very moment the state second pension stops being earnings related the rebates start
to build up enormously. By around 2040-50, those rebates will require a state expenditure of between £12 billion and £15 billion a year to support them, at today's values. When we are told that we cannot afford to increase the state pension scheme, we should consider the cost of the Government's alternatives.
The state second pension scheme is so good that many existing low-paid workers in contracted-out final salary schemes will find that they would have been better off in the state second pension than in their own schemes. The Government have to address that problem and they have two options. One is to force up the benefits of final salary schemes so that they match the benefits of the state second pension scheme for low-paid workers. I understand that the Government are thinking of doing so, and it is important that we are clear about that. The alternative is to allow low-paid workers in contracted-out final salary schemes to opt out of those schemes into the state second pension scheme to maximise their benefits. Those are intricate but important points if these proposals, which contain the basis for a good scheme, are to be credible to low-paid workers in existing final salary schemes.
The stakeholder proposals may assist in a rapid run-down of final salary schemes. We look to the Government to make some proposals that will protect the future of that structure of final salary schemes. That could be done in several ways, perhaps by mixing and matching final salary schemes and stakeholder schemes. The Government must be clear about what they will do before the Bill passes into law.
The Opposition claim that an increasing number of people will be reliant on money-purchase schemes. If that is so, the Government must address the problem of annuities. We are forcing more and more people into an annuity trap that is now acute and that is likely, with the passage of the years, to get worse. If we have low inflation and interest rates, coupled with no gilts going onto the markets because Government finances are in balance and a steady and increasing flow of more private pension pots into the market, annuity rates will be driven down even further. The Government must consider the tax treatment of annuities and whether there is an alternative to the annuity system that will protect the purposes of a long-term tax-supported saving schemes that support people's incomes in retirement.
The Government must also revise some of the tax proposals that accompany the stakeholder scheme. The present proposals allow for contributions of up to £3,600 a year with no link with earnings and net of tax. The purpose of that may be to extend the scheme to carers who have suitable funds, but people in higher income brackets will be able to take advantage of a substantial tax subsidy of up to £3,600 a year for non-earning partners and for children, because there is no lower limit on access to the stakeholder pension scheme and its tax support. From the moment a child is born, its parent could fire into the scheme £3,600 a year net of basic rate tax. It cannot have been the Government's intention to produce such a substantial element of reverse distribution in an overall pension scheme that is heavily focused--rightly--on people with low incomes.
I am unclear what proposals the Liberal Democrats have to make on these issues, but the Conservatives have made it clear that they favour coercing people into private
sector money-purchase schemes. That cannot be a sensible approach until we have sorted out the problems of annuities. That is why it is so important that the state second pension scheme that the Bill will introduce is robust enough to become a permanent part of our pension arrangements. It is too dangerous to leave matters so that pensions could be rewritten at a later date. That would undermine public confidence in the whole scheme, as happened under the previous Administration, as would a shift to coercive contributions to private sector-funded schemes.
Above all, when debating pensions we must remember that we should not be trying to find complex, back-end loaded solutions to what are front-end loaded problems. In an important speech just before Christmas, my right hon. Friend the Secretary of State for Health said that
The people who should be the focus of our deliberations are those who are pensioners now and those who will become pensioners in the next 10 years. They are the people whose years on low incomes have not been supported by any additional pension scheme, and whose few pension rights are so small that they will be caught in the minimum income guarantee system for pensioners--if that system develops in the way that the Government, rightly, intend. We must focus on today's pensioners and pensioners to be, not on those who will be pensioners in 2040 and 2050.
It is therefore extremely important that the Government's proposals for state second pensions will benefit today's pensioners-to-be. It is no use designing a scheme whose very real benefits will be felt only in many years' time. Such a scheme would cause to be forfeit the credibility of the proposals and of the belief that public sector, state-provided pensions will be our best protection, now and in the future, against forced membership of private sector-funded schemes.
I hope that the Government will consider those matters and modify some of the Bill's proposals. The state second pension proposal, especially in its earnings-related phase, is excellent. It could change permanently people's approach to their prospects in retirement and to their activity in the present-day labour market. It could also change their lives as citizens through its promotion of caring for and support of others.
The gains could be huge, but they must be supported by clear proposals to protect the scheme from some of the deficiencies that I have pointed out. If that is achieved, today's pensioners and pensioners-to-be will be able to feel properly covered by the proposals. I hope that the Government will consider some of the matters that I have raised and that we will be able to tease out some solutions in the course of our deliberations.
In constituencies such as mine, there is a restlessness among pensioners and pensioners-to-be. Because of the pensions difficulties of the past few years and the problem of pension mis-selling, they are far more aware of their pension prospects than any previous generation of pensioners-to-be. They are anxious that the Bill will not benefit them in a meaningful way. I hope that the Government are able to respond to their concerns.
8.3 pm
Mr. Elfyn Llwyd (Meirionnydd Nant Conwy):
I listened carefully to the extremely erudite speech from the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) and to the powerful speeches from the hon. Members for Northavon (Mr. Webb) and for Birmingham, Selly Oak (Dr. Jones). They concentrated on pension provision; and although I intend to speak about the Child Support Agency, I want to note that an excellent opportunity for root-and-branch reform of the pension system might have been lost.
The provisions in part III covering loss of benefit are an example of macho politics. They are the stuff of tabloids. They represent populism in extremis and they are legally highly questionable.
I am one of those who believe that the CSA is almost beyond redemption. The ill-fated poll tax was amended three times before it eventually--and deservedly--hit the buffers. Similarly, the CSA is not long for this life either. However, for the purposes of today's debate, I shall accept the second-best position and examine the latest attempts to make the agency work.
One of the basic complaints about the CSA--it is only one of many, I might add--will be familiar to all hon. Members. It is that the formula employed to determine the level of maintenance is complex and too rigid. The proposals in the Bill appear less complex and seem to be far more readily understood. That can only be good; no doubt, absent parents will be able to work out how much 15 per cent.--or 20 or 25 per cent.--of their earnings will be, but commentators in this area have grave reservations about the Bill.
It seems almost bizarre that under no circumstances will the income of the resident mother or of the parent with care be taken into account, regardless of whether that person is very wealthy or on benefit. The Government say that that provision has not been adopted in the Bill because it would be too complicated to include the financial circumstances of that person, who more often than not is female. However, the Australian model, which does take account of that income, works perfectly well. I believe that the Select Committee on Social Security urged that consideration be given to adopting that approach.
Furthermore, there appears to be no upper limit on the amount of child support that can be paid. That will probably affect rich people more than others and does not seem to me to be logical. I believe that earned income should be taken into account. For example, a self-employed father could set up a company and an account and pay himself a dividend from the money earned. Clearly, that would not be right, and proposals to prevent that should be included in the Bill.
It is possible that the Bill will have the effect of reducing child support by about 30 per cent. Would that be good or bad? I believe that it would be bad. Perhaps the Government think that reducing the levy and requiring people to pay less will mean that bad payers will be more likely to pay. I do not know whether that argument holds up or, if it does, where its logic leads us.
I am worried also about the blanket imposition of the CSA jurisdiction on all families. That will undermine and undo settlements that have been reached fairly through the courts. Family proceedings are dealt with in family and county courts. The system is not perfect, but by and large
it is equipped to carry out a comprehensive assessment of the parties' respective financial positions. More to the point, it is equipped to assess financial needs after a relationship breaks down, and the needs of the children involved. It is therefore strange that courts should deal with that part of a family's finances, only for the whole process to begin again with the CSA when the level of child maintenance is assessed.
In the past, clean-break settlements have been a useful way of disposing of interlocutory application in divorce matters. They will now be brought into question again. Why should an agreement be reached, or capital given away, if that arrangement is to be torn up 12 months later and the process started all over again?
Many commentators are worried about the way in which the Bill is framed. The Child Poverty Action Group raised a considerable number of concerns. One of them is very important and has to do with families on income support or income-based jobseeker's allowance. The organisation has stated:
Under the present law, the parent with care is required to authorise the Secretary of State to recover moneys from the other parent if the parent with care is in receipt of income support. That is going to change--probably for the good--but there are matters that must be considered carefully. The parent who authorises--very often, if not always, that parent is female--can show good cause. It is right that the good cause provisions are included in the Bill, especially as there will now be a presumption in favour of collection by the Secretary of State. That will place a burden on a mother at an extremely stressful time, following the breakdown of a relationship. The matter must be handled with great care, and I hope that it will be; otherwise, there is a danger that a person will feel almost harassed in the circumstances.
As always, there are welcome provisions in the Bill, although they may be overshadowed by some of the points I have made. However, I welcome the provisions relating to second families to ensure that youngsters are not treated any differently from the youngsters in the other family unit. The apportionment proposals in schedule 1 are most welcome, as are the shared care provisions. These are important reforms which will rectify several current injustices.
On the matter of compliance and enforcement, I rang the CSA in my area last Friday. A young woman had come to see me who was £11,000 in arrears, having not been paid a single penny over the past two years. I spoke to a gentleman who said that he was sorry and that he should have dealt with the case in November. However, he had been in the Scotland Office, dealing with enforcement there. He said that he would do his best to get on with the job. I do not know him personally, and I know few people who work for the CSA. I know that it is a difficult job, and that it is not well paid. However, I urge the Government to give the staff the resources to do the work.
I wish to refer to the "self-employed dodger", of whom I have several in my constituency. Some have disappeared off the face of the earth, while some have been found but still cannot be pinned down. Unless the people are available to do the enforcing, we might be wasting our time this evening and in Committee. I am sure that the question of resources will be looked at again.
The access to income tax returns in this context is a welcome and common-sense approach. I am sure that that will be handled with care, as there must be some civil liberties questions arising from the matter. There are those who want to beat the system, but the system will take them on. That is quite right. I have seen--as have countless others--the dishonest person get away with it for far too long. On the other hand, the hard-working person in full employment who tries to make payments and who was previously assessed at a crippling level has been seen as a soft target. The emphasis may well shift to the dodgy character who is salting money away and trying to avoid responsibility.
There are some practical improvements in the Bill, but there will be thousands of appeals to tribunals. That is almost inevitable. I echo the remarks of the hon. Member for Greenock and Inverclyde (Dr. Godman), who urged Ministers to consider extending legal aid to those who wish to take matters to a tribunal. I am not pleading on behalf of lawyers. I am saying that many people are not sufficiently able to present their case as it should be presented. I am not saying that every appellant must be represented, but we must make it comfortable for those who are unable to argue their case coherently to take the case to a tribunal. If there has to be some form of legal aid in these limited circumstances, let us do it--legal aid is given for far dafter things. I hope that the Government will consider that in Committee.
The spectre of criminal sanctions for civil wrongs may well raise human rights issues. Previous speakers have mentioned that matter, and I shall not dwell on it. However, such sanctions should be used extremely sparingly, if they prove to be legal. I am extremely unhappy about depriving someone of a driving licence in this context, as other persons in the same situation will not face that penalty. Human rights legislation has been mentioned, but I shall not dwell on that point.
I believe that the system should take account, as far as possible, of all the relevant circumstances. That means taking into account each individual's circumstances. If we
are talking about imposing a totally rigid, concrete system again, I am afraid that we may be looking at a further review in five years' time.
The Law Society has said that a
"the truth is that the elderly population in this country is set to grow in the next 50 years at half the rate of the last 50 years. And the pressures in Britain will be much lower than in many other industrialised countries."
We should take comfort from that.
"Although the average level of assessment falls under the new scheme, some poorer 'second' families will find themselves paying more. 68 per cent. of the 150,000 non-resident parents who have increased assessments are on benefit or have incomes of less than £200 a week . . . Other non-resident parents on income support will be liable to pay the £5 a week minimum. This includes those responsible for children in a second family"--
a point made earlier by other hon. Members and on which I shall not dwell. The briefing continues:
"We understand that the Government wishes to encourage compliance and to ensure that as many children as possible receive maintenance."
That has to be right. It goes on:
"However, income support/income-based jobseekers allowance fall short of the levels of income required to meet the needs of families."
The briefing then highlights points made in the debate today.
"perception of fairness in any new scheme would increase compliance, whereas inflexibility and harsh sanctions may increase the sense of injustice and lead to non-co-operation."
There is some force in that argument.
| Next Section
| Index | Home Page |