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Mr. Miller: A constituent of mine has suffered from that outrageous situation. The complaint that he suffers

8 Mar 2001 : Column 478

from got worse and worse and he had to take early retirement. The day that he reached terms with his employer, the cheque from that wretched insurance company was withdrawn. That cannot be allowed to continue.

Mr. Worthington: I am glad to have my hon. Friend's support. I am so incensed because my constituency has the highest concentration in the country of people who suffer from asbestos-related diseases. More and more hon. Members will receive representations by people who think that the situation is outrageous.

The Insurance Times says:

Indeed, it sold it off for £77 million less than its book valuation. The result, which the regulator should have seen coming, was that the paying ability of the residual lump was not enough to cover its liabilities with regard to long-term claims. Chester Street has gone belly up and the supposed regulator--the FSA--washes its hands of the problem while thousands of seriously ill claimants lose out.

There was much fuss when Equitable Life turned a bit dodgy, but that was because prosperous people had policies with it, including some MPs. However, when asbestos sufferers lose out, the reaction is fairly quiet.

Mr. Nicholas Winterton: The hon. Gentleman spoke eloquently the other day in a Chamber of this House. I was unable to participate in the debate because I was in the Chair. However, I am pleased to be able to tell him that he has proper cross-party support for the campaign that he is leading. In Macclesfield, Mr. McCreery, who is a resident of Bollington, is dying of asbestos poisoning and needs the money to ensure that he has some quality of life in his remaining days. The hon. Gentleman has my full support. What has happened is an abuse by the insurance industry.

Mr. Worthington: I am deeply grateful for that. I am sure that we can make a change. It would be utterly wrong if anyone lost a penny out of the activities of Chester Street. Our aim has to be 100 per cent. restitution of the claimants' civil rights. I hope that the Government will come forward soon with proposals to do that. I believe that the insurance industry should put it right. It should have a collective scheme to prevent its name being blackened in this way. The Government were very active on pensions mis-selling, and all credit to them for that. We cannot allow an insurance company to restructure itself in order to fail. We have to act, and the industry has to act.

Another issue that I want to raise is VAT. My compassion goes out to the poor souls on the Front Bench who have to understand VAT. Many good things were said in the Budget about VAT, such as relaxing VAT rules on refurbishment of derelict property. VAT on repairs to listed buildings has been cut from 17.5 to 5 per cent. There has been a VAT cut for small businesses, for museums, and so on. I welcome all that, and the consideration of VAT relaxations for sports clubs. However, those proposals make even more anomalous the imposition of VAT on hospices.

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There are 185 hospices in this country. I have one in my constituency. It is a magnificent institution that is tremendously respected by local people. It is run by the Sisters of Charity, under the dedicated and committed leadership of Sister Rita Dawson. It is the largest hospice in the west of Scotland. It has 60 in-patient places and 60 day care places, and it provides a great deal of home care. It costs about £2.5 million a year to run. It receives about half of that from the Greater Glasgow health board, so it has to raise £1.2 million or £1.3 million a year to tick over to provide a service that would cost millions more to provide ourselves.

I am told that the cost of an NHS acute care bed in that area is about £500 a day, yet the hospice receives only £64 a day. Every time nurses' salaries go up, as they should, more fundraising has to be done. The hospice's costs are mainly staff costs. Hospices are treated in an absurdly hostile way in VAT terms. My local hospice successfully runs a tea room and restaurant for patients, carers, the bereaved and the wider community. It is in no sense a commercial restaurant, but it has to pay VAT. The hospice built a laundry and staff facilities. If it had had the money, it would have built them when the hospice was originally built, but it had to build them separately so it was clobbered for £34,000 of VAT. It built an education centre that is totally non-profit making, for which it was clobbered for £132,000 of VAT. It built a spa pool for the patients, and it was clobbered for £50,000 of VAT.

The cost to the NHS of providing such a service would be huge. The fundraising that has to be done is enormous, and we are not treating our 185 hospices correctly. I appeal to my colleagues on the Front Bench to reconsider the issue. They are considering sports centres and sports clubs and they have done good things in many other areas of VAT. There is no case for putting VAT on hospice activities. I am told by the hospice people that the percentage of funds given by the state to support hospices is falling year by year, so I ask for that to be attended to.

The Myners report came out yesterday. I thoroughly approve of it. It looked at institutional investment in this country. It is immensely important. My interest in this goes back to when I was with Strathclyde regional council. I was chair of the finance committee. On day two of the job, I was told that I was also chair of the pension fund. My knowledge of pension funds was not voluminous. It was the largest local authority pension fund in the United Kingdom. It was responsible for the pensions of all the regional council and the 19 district council employees in Strathclyde. I see that my impact was not too damaging, because the assets of the pension fund are now £6.7 billion--a lot of money.

The Myners report accurately describes trustees. It says that they do not know what they are doing. There is no training for them. There is no guidance on what their role is, and that needs to be looked at. I remember when I started the job of chairman that I asked naive questions. I asked what good the fund did for Strathclyde. The response was silence. That was not the point of the fund. I wanted to know what good all that investment did for the Strathclyde area. It was there simply to provide a guaranteed income for the pensioners. I got a strange look.

The money was being gathered together by the workers of Strathclyde, put in a big bag and shipped down to London. There was a beauty contest between Schroders--Barings in those days--Robert Fleming and so on. We asked the fund managers how they intended to conduct

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the fund, and they gave their story. I asked the local pension fund controllers what benefits there would be to our investing through them, as they knew the local scene. They said that there would be none at all, because they would invest in just the same way, in equities and so on.

The Myners document is useful because it makes us think about how our pension funds invest. I was astonished to see that in the 1960s more than half of British industry was owned by individual shareholdings. That is now down to about 15 per cent. The great bulk of British industry is in a sense owned by pension funds, insurance companies and so on. If one wants to put it that way, we nationalised the industries. People own companies, but they do not know that they own them.

A key sentence in the Myners report is:

It is likely to follow that capital is being inefficiently allocated in the economy. I think that that is so. Pension funds are not creating as much wealth as they could. We have an enormous asset in our pension funds. That is one of the reasons why we will not face the same difficulties as other countries in Europe as people age. They have brought about immense improvement.

The Myners report illustrates that there is too much of the herd instinct in the investment industry. The key thing for people is that they do not slip behind the line in terms of investment performance. It used to be called the Wood Mackenzie line. All the institutions jump the same way at the same time so as to be average. They all go into dotcoms, and they all come out. It is a case of "Do not panic, but panic first". The report illustrates that there has not been much investment in private equity by pension and insurance companies. By private equity, it means unlisted companies that are not on the stock exchange. It says that it is striking that the growth in venture capital has been led by United States companies investing in this country in a given way.

I am aware that others want to speak, so I shall conclude my remarks by saying that although some of the Myners report was implemented immediately, I hope that the House will find time to debate it, because it deals with big money and the future of our country's investment policy. I have not had time to study the report in full, but I hope that many others--including the Select Committee on the Treasury--will do so and that extensive consideration will be given to ways in which we can ensure that money in this country is used more effectively. The subject should not be left merely as a reference in a Budget statement.

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