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8.38 pm
Ian Lucas (Wrexham): I am glad to have this opportunity to discuss pensions, for two reasons. First, the issue is raised increasingly by my constituents and has always been very important to them. Secondly, as my hon. Friend the Member for Colne Valley (Kali Mountford) said, it heightens the distinction between the Labour and Conservative parties. When we discuss pensions in the House, Conservative Members always talk about advance corporation tax, stocks and shares, annuities and equities, while Labour Members talk about relieving poverty and supporting the weakest in our society.
We need to concentrate on the gaps in the speeches of Conservative Members. I listened carefully to the detailed proposals of the hon. Member for Sutton Coldfield (Mr. Mitchell). I tried to intervene on him, but—because of lack of time, I am sure—he did not give way. I wanted to ask whether his proposed scheme would replace the state pension scheme. That is the hole that exists in everything that has been said by Conservative Members.
I would like a clear statement from the Opposition about whether the pension schemes that they are discussing would replace a state-funded pension scheme.
Mr. Arbuthnot: If a scheme were to be additional to the state-funded pension scheme along the lines of the original Beveridge vision that there should be a good funded pension scheme for everybody, with a basic state pension, would the hon. Gentleman accept it?
Ian Lucas: I would certainly accept that, but I am not convinced that that is what the Conservative party is proposing—quite the contrary, in fact.
This is a vital issue. I believe that the pensioners in my constituency who voted Labour in the last general election did so because they were pleased with the pensions policies that had been pursued between 1997 and 2001. By the time the last Conservative Government left office in 1997, a single pensioner was supposed to live on £68 a week. Pensioners recognised that substantial steps had been made by this Government in improving the lot of the poorest pensioners and of pensioners in general. They did not like the Conservative proposals at both the 1997 and 2001 elections for privatisation of the state pension scheme.
My voters had experienced the private sector before with regard to pensions. I make no apology for returning to the record of the Conservative Government in the 1980s when they presided over the most appalling shambles in the pensions industry. First, they removed the link between earnings and the basic state pension. Secondly, they allowed a completely unregulated private sector to persuade people who were involved in defined benefit schemes to switch over to defined contribution schemes. That was commission-driven, and poor advice was given to individuals at the time that the transactions were made. As a result, it was necessary for the Labour party, when it came to power in 1997, to put together a scheme to solve the pensions mis-selling problem. That cost the pensions industry £34 billion in total. That is the scale of the Conservative party's incompetence. It will have had a substantial effect on the viability of the pension funds that we are discussing today.
We have heard a lot today about advance corporation tax. I genuinely believe that any scheme that encourages long-term investment rather than the short-term swapping or selling of shares is a good thing. One of the weakest aspects of the British economy over many years is that we have invested in the short term far too much and in the long term far too little.
The Chancellor's proposal in 1997 and the action that he took was right. We must remember what he did with that money. He supported the poorest pensioners in our society and increased their income. That was the right thing to do; it was perceived by the public as the right thing to do, and it is why the Government were returned to office in 2001.
It is no good for the Conservatives to try to blame the Government for the present difficulties with final salary pension schemes. Most companies involved in, or terminating their involvement in, such schemes do not seem to understand that the scheme imposes obligations on them. The companies promised to pay their employees a decent pension and they should honour that promise. That means making consistent payments to pension funds—not taking contributions holidays that last for years.
My constituents have been affected by the actions of Iceland and the Caparo group. In the 1990s, both companies took substantial contributions holidays that greatly affected their pension funds. During this debate, I have not heard one criticism from Opposition Members of individual companies which have acted in that way.
Kali Mountford: I am grateful to my hon. Friend for pointing out to the House the folly of drawing out funds too soon. Is he as horrified as I am at the current scam—recently revealed on television—which has affected some of my constituents? People are being encouraged to give up their pension rights by selling them on to another company which gives them a lump sum but they receive a smaller pension later. People do not realise that they can ill afford to do that. Should not such loopholes be covered by regulations?
Ian Lucas: I agree with my hon. Friend, and I am certain that my right hon. Friend the Minister for Pensions will look into that matter if she gives him the details.
Ian Lucas: I have heard no condemnation from the Conservatives of companies that have taken long contributions holidays. Individual employees are being heavily penalised. Companies are merely notifying their employees that the schemes are ending. There is no consultation and no discussion—no partnership at all. That is where blame really lies for the shortfall in pension funds.
As we all know, pensions are complex and difficult. The debate has been interesting—I have sat through all of it—and there have been shafts of light and some consensus on both sides of the House. We all agree that, if possible, pensions should be simplified and we are looking forward to the proposals of the Pickering inquiry in that regard.
I am sure that my right hon. Friend the Minister will take note of the general feeling that is developing that compulsion is a coming idea in the pensions sector. Choice was the mantra in the 1980s, but that did not lead to a happy outcome. We have to accept that there should be compulsion on employers and employees alike to support individuals in their old age. If individuals are not supported in old age by contributions that they made earlier in life, the state will end up footing the bill. Although encouragement is always more popular with our constituents, the time is right for us to listen to the calls on both sides of the House for the introduction of compulsion. It should start with those companies that promised to pay into pension funds and failed to do so.
Mr. Arbuthnot: I am listening with attention to the sensible things that the hon. Gentleman is saying. Does he agree that it is not a question of whether there should be compulsion—it already exists—but of how much that compulsion should be extended?
Ian Lucas: Everything I say is sensible. [Hon. Members: "Hear, hear".]
I am certain that the Minister has listened to all that I have said. The debate has been interesting and I am certain that he will have seen the shafts of light that have
been thrown on the subject—although there have been some dark clouds. I am certain that he will take on board the fact that a consensus is developing on a serious issue that we must all address.8.49 pm
Mr. Julian Brazier (Canterbury): Over the years, I have been privileged to have the opportunity to speak on this subject on several occasions, both in the Chamber and in various Bill Committees. I have also written papers on it. I shall not follow the hon. Member for Wrexham (Ian Lucas) very far: sadly, I do not think that a consensus is emerging at all—far from it—although there is consensus that something needs to be done.
What I found very sad about the Secretary of State's speech was an absolute unwillingness to come to terms with two desperately serious crises—arguably, they are alternative sides of one coin—that have happened on his watch. I shall not try to pretend that either is wholly the Government's fault, although both are partially the Government's fault—my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) split what is the fault of the market from what is the fault of the Government rather neatly. Both these crises have happened on the Government's watch, however, and, before the Government can seek to address them, they must acknowledge that they are happening.
The first crisis is the collapse—not the fall, but the collapse—in the savings ratio. When I intervened on the Secretary of State to ask him how he accounted for the fact that the ratio was 9.5 per cent. when the Government took office and that it is now 3.75 per cent., he brushed it off as a cyclical factor. As for the current state of the economy, it has a modest growth rate and a relatively low unemployment rate—[Laughter.] Almost a quarter of children in Britain live in households in which there is no wage earner, so there are question marks over the unemployment rate. Even if one were to accept that the economy were booming, which no commentator suggests, how is it that at no point since records began almost 40 years ago has this ratio ever been down at the level of 3.75 per cent.? Surely, it should be manifestly clear that we cannot continue in that way.
The second crisis, which is very much the other side of the coin, is the deterioration—which is sliding quickly into what may become a collapse—in the pension expectations of middle-aged and younger people across a wide spectrum of earnings. The hon. Member for Wrexham made the point, which I think has been raised by every Member who has spoken today— I was absent during the middle of the debate—about pension mis-selling. Whatever mis-selling may have taken place—there is no doubt that it existed to a degree—the last Government left behind two immensely powerful statistics. First, more than two thirds of all people on the cusp of retirement had private or occupational pensions. Secondly, we had more pension assets saved than all the other countries in the EU put together. The contrast between that and the position today could hardly be greater.
Already, in just five years, the first of those figures—67 per cent.—has fallen to between 59 per cent. and 60 per cent. The figures for comparability of pension assets are not available because the Government cannot even provide information about our own pension assets at
the moment. The hon. Member for Brent, North (Mr. Gardiner), who made an interesting speech, quoted figures that were undoubtedly wrong. Had they been true, however, they would have been a damning indictment of how that comparability has slipped. When we do have some real figures, we will no doubt see how badly that comparability with the rest of Europe is slipping.When the Conservative party was last in government, the one area of our pension provision that, as an occasionally rebellious Back Bencher, I sought to attack, was the changes that we introduced in 1988 that combined a more generous income support arrangement for the poorest pensioners with stringent capital testing for their counterparts who had managed to save a little. [Interruption.] I see the Minister nodding—
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