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5.18 pm
Mr. John MacGregor (South Norfolk): In view of the time limitation, I must be selective, and I will concentrate on three areas--agriculture, transport and pensions. I am aware that there have been debates earlier on those matters, but all the points that I wish to make are Treasury points. It is right to raise them today, and I hope to get a response to them.
I want to declare an interest, in that I am a non-executive director of companies involved in all three of those matters. These are included in the Register of Members' Interests. I say this in a positive way, as it gives me a detailed insight into the issues--especially pensions.
On agriculture, I wish to refer to the pesticides tax. On 9 November, I asked the Chancellor whether he would make a commitment not to proceed with the tax. He did not answer. He turned to one of his colleagues, seeking an answer--but he did not get it there. He did not answer any questions today. His speech was one of the emptiest that I have ever heard from a Chancellor; it was contemptuous of the House.
I hope that I will get an answer today. After failing to get one from the Chancellor, I read the pre-Budget report, which says:
Sir Teddy Taylor:
Why is it beleaguered?
Mr. MacGregor:
For many reasons that I do not want to go into now, as I am talking about the pesticides tax. I urge the Government to make a commitment not to proceed with the tax and to lift the threat.
The pig and poultry sectors are in difficulties and the pig sector is going through an exceptional crisis. I cannot remember such a situation in the industry, which is used to pig cycles. As a result of the events of the past 18 months, many people will come out of pig production because they are incurring great capital losses and, in some cases, facing bankruptcy.
This is an exceptional period, and, although I have always been resistant to substantial subsidies for such industries, it is important for the Government to see what they can do, as we face the threat of the pig industry diminishing seriously. I urge the Chancellor to meet the costs of the additional measures that are being imposed on our pig farmers, but not on those in the rest of the European Union or elsewhere. We impose higher standards of animal welfare, environmental protection and food safety, with a cost amounting to 5.7p per kg. I understand that the Agriculture Commissioner has said that he has no objection to such state aid in the present circumstances. Some such action is required if the pig industry is to survive.
We have had many discussions about labelling in the past 18 months. If I understand it aright, the agreement that is about to be reached with the French at last--after missing all the deadlines--contains a provision, on which the French have insisted, that British beef be labelled British. If that can be imposed on us, I see no reason at all why the same should not apply to products from other European Union countries and from Thailand and Brazil. We have urged that for a long time.
I want to follow up a point about the road fuel duty escalator made by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I think that it should be scrapped. We are committed to that, and I very much regret the fact that the Chancellor is not. The Deputy Prime Minister last week described the hypothecation or ring-fencing of any duties coming from above-inflation elements in the escalator as "a radical departure". It is not a radical departure: in May 1993, when I produced a document recommending motorway charging, we made it clear that direct charges for road use could provide additional sources of finance for improving the road network.
I could not have made that commitment without the agreement of the then Chancellor. It was the best way of persuading people to incur the charges. We were already committed to hypothecation, but we were talking about motorway tolling--there is still a good case for that when we can get the technology right--whereas the Government are talking about congestion charging, the dangers and difficulties of which make it a political minefield into which they will regret going. I am not at all surprised that the Deputy Prime Minister now says that, it will not be implemented before 2005. I believe that it is a mistake to embark on it, and we must consider the details extremely carefully.
I understand from the tax documents that we have that, if the Chancellor decided to increase fuel duty by 2 per cent. above inflation, for example, that would yield about £230 million. That could easily be balanced by reductions in the general transport programme. I suspect that the Chancellor will do that, because he has so savagely cut the transport programme already. The danger, therefore, is that he will introduce a further increase in fuel duty that will clobber rural motorists, but claim that he is helping the motorist by hypothecating that amount of money to the road programme. That is nonsense, because even if he reverted to the full 6 per cent. of last year, it would not compensate for the cuts already suffered. I hope that the Chancellor will not make a virtue out of the so-called radical departure of hypothecation.
My right hon. Friend the Member for Horsham (Mr. Maude) rightly castigated the Chancellor on his record on pensions and savings. The decrease in the savings ratio from 10.6 per cent. when we left office to 5 per cent. now is deeply worrying, but it is not surprising. My right hon. Friend listed some of the reasons, of which the most obvious--to us, if not yet to the public at large--is the removal of £5 billion a year from pension funds through the advance corporation tax changes, which will have an increasingly adverse effect on pensions. Another factor is that ISAs are a poor substitute for PEPs and TESSAs. The dithering over what to do with pensions and long-term savings has left everyone in a state of limbo while the Government make up their mind.
The danger of the stakeholding pension scheme is that it will turn out to be the biggest pension mis-selling of all, because those with incomes between £9,000 and £15,000 would do better not to enter the stakeholder scheme, but to wait and claim the minimum income guarantee--under current Government arrangements--which will rise much faster than the basic state pension. My hon. Friend the Member for Grantham and Stamford (Mr. Davies) drew attention to that point in an extremely good speech.
The Government constantly denounce the pensions industry, but they will need to depend on it to ensure the delivery of their objectives. I was interested to note that the new director general of the Association of British Insurers, Mary Francis, who is a distinguished former Treasury civil servant, warned recently about the signals that the Government were sending to the consumer. She said:
The result of the past two years of this Government is that many people who should be saving for pensions at a much younger age have been encouraged to put offthat decision until tomorrow. Meanwhile, while the Government dither, a new threat develops, which could have more serious negative consequences than any positive effects from the stakeholder scheme. That threat
has not been discussed in the House yet, but my knowledge of the pension industry has led me to believe that it is one of the most serious threats we face on policy grounds. Two of the great virtues of UK pension schemes--as compared with those of other countries and as they have developed over the past 40 years--are the strong growth in defined benefit occupational pension schemes, which is one of the reasons why pensioners retiring in the past seven or eight years have been so much better off, and the heavy investment of those schemes in equities. Both those virtues are now at serious risk.
I can elaborate only a few of the reasons, which include the costs to employers of defined benefit schemes compared with defined contribution money purchase schemes; the requirements of the minimum funding requirement, which encourage employers to abandon defined benefit schemes because they carry so many risks; the heavy regulation that employers face, which encourage them and the pension industry to play safe by investing much more in gilts; the low inflation era and the actuarial response to it; and a new Accounting Standards Board financial reporting exposure draft--known as FRED20. I just want to say a word or two about FRED20, and to draw the Government's attention to the dangers of going down that route.
Although FRED20 is the international standard, pension development in this country has followed a different course, which has been much to our benefit. Given that FRED20 will have a considerable impact on big companies' balance sheets and, because of its volatility, sometimes on their profit and loss accounts as well, it is likely that it will accelerate the trend towards money purchase schemes, as those big companies look to get out of defined benefit schemes. It will thus encourage people to move into corporate bonds and gilts--the latter of which are in short supply for the very good and laudable reason that the Government have cut back on borrowing--but that will drive down the overall yield for pension funds. For policy reasons, therefore, we are about to enter a regime in which much of what the Government want to do for pensions--and of what I want to see done for pensioners--will be undermined.
In conclusion, I urge the Government to do the following things. First, they should consider introducing compulsion into the stakeholder pension scheme, which will not work without it. I say that very reluctantly, as I have always opposed compulsion in regard to pensions. It is certainly important that the Government address the problem of mis-selling. They have been warned about it, and the Opposition will return to the matter if mis-selling is proved to have taken place.
Secondly, the Government should examine FRED20 very thoroughly, as it is about more than accountancy standards. It has big policy implications for the United Kingdom, and we should consider seriously whether it is right for us.
"The Government believes that a tax or charge could be a useful tool, in conjunction with other measures, in addressing the environmental impact of pesticides."
It goes on to say that the Government will have further discussions with the industry. It is questionable whether a pesticides tax is the best of way of dealing with pesticides
issues in agriculture and the environment. All my farmers tell me that to impose such a tax now would be a further threat to an already heavily beleaguered industry.
"the government, which advocates the Third Way--that new partnership between private and public sectors, in which those that can should provide for their own needs without relying on the state--is simultaneously telling people they cannot trust the private sector.
The Government run grave risks to grab a cheap headline or make a cheap point.
Where does that leave the employee thinking about a personal or a stakeholder pension?"
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