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Mr. John Greenway (Ryedale): Is my hon. Friend aware that the Association of British Insurers informed the all-party group on insurance and financial services this morning that it calculates that the savings gap is now £27 billion, most of which relates to pensions? Will he look carefully at proposals to encourage employers to operate better schemes?
I wish to press the Secretary of State for more information on the two serious errors made by his Department in the past few months. The first mistake was in respect of the assets in our pension funds. Originally, the Government said that at the end of 1999 we had £784 billion in our pension fundsquite a lot of money. Then, without any explanation or prior notice, they produced a revised set of figures that showed that at the same dateat the end of 1999they had reduced their estimate of the assets in our pension funds to £679 billion. That is a reduction of £104 billionprobably the biggest single change in the history of British economic statistics.
The sum that the Government managed to lose is equivalent to the entire national output of Portugal, but, fortunately, three and a half months later we discovered that the money had only been mislaid, and it popped up again. The Government put out a new set of figures, announcing that they had discovered, after all, that in 1999 our pension fund assets were worth £812 billion. So the figure for the value of the assets at one date in time had moved around by £150 billion. Then the Government carried forward the series, to show that having been £812 billion in 1999, the figure was down to £765 billion in 2000 and, on the latest estimates from UBS in the City, £684 billion in 2001.
That would mean that the assets in our pension funds peaked in 1999 and have been in decline ever since. It might be that 1999 was the peak year of our funded pension assets, not to be seen again. That was the first mistake: the Department revealed a £104 billion reduction in the value of the assets in our pension funds, with no explanation whatsoever. That surely should have set the alarm bells ringing about how unreliable the Government's statistics were, but no.
We investigated the figures that the Government were producing for the annual flows into our pension funds. Ministers were saying, "Don't worry. Everybody else might say that there is a crisis in our funded pensions, but we know that everything is all right, because we are saving £86 billion a year in our pension funds." If that figure were true, if the Government had stood back and thought about it for a moment, it would have meant that almost 9 per cent. of the entire national output of our
There is now an unseemly row going on between the Secretary of State and his own officials. The Secretary of State, in a way that is all too typical of Ministers nowadays, is happy to blame everybody but himself. Referring to statistics on pension contributions, he said yesterday in the House:
I hope that the Secretary of State will today give us an end to that briefing and counter-briefing between him and his officials and a clear explanation of when they were first warned by the ONS about the mistakes in the figures, what steps they took to correct them as soon as they heard about them and what advice he was given by the ONS when the Department received my letter of 8 March.
Mr. Patrick McLoughlin (West Derbyshire): My hon. Friend referred to the letter that he sent on 8 March. Presumably, a letter sent by the shadow Secretary of State for Work and Pensions containing such serious accusations would have had an immediate reply from the Secretary of State. Can he tell me when he received the reply and what it said?
Of course, this is not just a matter of whether Ministers have confidence in the advice of their statisticians and whether statisticians have confidence that Ministers will take heed of their warnings. It ranges beyond that, as it also raises the question whether the structure of pensions
Mr. Douglas Hogg (Sleaford and North Hykeham): My hon. Friend is coming to the question of the structure of pensions. Will he confirm that a pensioner would have to accumulate a fund of about £100,000 to be better off than he or she would be having saved nothing at all? That is the case because of the deprivation of top-up payments on the basis of the fund.
Mr. Willetts: My right hon. and learned Friend makes a very important point on which we have regularly pressed Ministers. The least that people who are considering taking out a stakeholder pension, for example, are entitled to expect is information from Ministers about how much they believe that they need to build up in that pension during their working lives to float them off means-tested benefits. That is the $64,000 question; indeed, the answer might be $64,000, but we have never had any answer from Ministers. The level could be £100,000, but they have never been willing to address the important point that he makes. Again, I hope that we will hear about that from the Secretary of State.
The real question is not just misleading statisticssomething with which we are all too familiar from this Governmentbut what is going on with the pension funds and pension savings of the people of this country. That is the central question that the House is debating. Before the Secretary of State points it out, I accept that there are many reasons for the decline of final salary pension schemes in this country. I understand that there is a range of factors, some of which are not in the Government's control. We are seeing improvements in longevity, and I am sure that hon. Members in all parts of the House will welcome that as good news. The fact that people are living longer is a success that we can celebrate. There have also been changes in the labour market that will change the pattern of pension provision.
We understand that not everything can be controlled by Ministers, but that very fact makes it even more important that the things that they do control are got right; and that, in so far as the Government control the environment in which people plan for their retirement, they get that right. Our central criticism of the Government is that Ministers have got the things that they controlabove all, the burden of tax on occupational pensionscatastrophically wrong.
Mr. Michael Connarty (Falkirk, East): While the hon. Gentleman was recounting some of the things that might have had an effect and which Ministers controlled, did he not think that the Conservative Government's decision to encourage and allow withdrawal of contributions and the taking of holidays by pension fundholders might have caused the massive deficit in the pension funds on which people are now looking to draw for their retirement?
Mr. Willetts: I undertake to cover that point later in my speech, but I want to set it in the context of the other changes. If the hon. Gentleman then thinks that I have still not addressed his question, he can come back to me.