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Paul Flynn (Newport, West): Is not the truth that most with-profits policies are now with-losses policies? The public have been confused, bamboozled and cheated by so-called advisers whose main interest was earning fat commissions rather than selling good-value products. Is it not right that the orgy of deregulation in the 1980s led to the impoverishment of millions of people because of mis-sold personal pensions, endowments, general insurance and savings products? Should my hon. Friend not take comfort from the report's suggestion that the way out is to simplify policies on the lines of stakeholder pensions, which have the great virtue of having very low commissions while offering very good value for those who take them out? Is that not the way forward?

Ruth Kelly: I thank my hon. Friend for his comments, although some of them were perhaps geared towards the shadow Chancellor.

My hon. Friend makes a valuable point about commissions and the issue has been analysed in detail in the report. Ron Sandler accepts the principle and the need for genuinely independent financial advice to be available to consumers. He also accepts the research that suggests

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that commissions can skew the sales process and are perceived as doing so. He is determined to see a viable and truly independent future for financial advice.

Sir Teddy Taylor (Rochford and Southend, East): Will the Minister say whether the new type of with-profits schemes—as set out on page 27 of the report, which calls for a separate management company—will do away with the appalling situation in which countless millions are offered to pay for mis-selling, with the money coming out of the assets of innocent policyholders? Should not that problem be sorted out, and will the report do that through its recommendations on page 27?

Ruth Kelly: The hon. Gentleman makes an interesting point. When Ron Sandler looked at the issue, he proposed establishing an ideal with-profits fund that would separate shareholder and policy interests. It would have a separate smoothing account, which would not be intertwined with the operation of the rest of the account, that would fully separate charges from investment returns. The idea behind his proposals for stakeholder products is that they should be completely transparent, so that no inherited estates lack transparency and conceal charges. Ron Sandler makes an interesting contribution to the debate and I look forward to working with the FSA and the industry on the proposals.

Alan Howarth (Newport, East): Does my hon. Friend accept that it is entirely appropriate that she should be at the Dispatch Box and we welcome her to it?

Does my hon. Friend agree that the host of constructive suggestions in the Sandler report, which the Government did well to commission, are welcome given the need to do more to support young adults to save, faced as they are with the prospect of contributing to the costs of their further and higher education and their lifelong learning, and of buying a home, providing a pension and, eventually, providing for long-term care? Does she further accept that in seeking to provide more security for savers, it is important to make it clear that the principle of caveat emptor is not set aside, because no amount of transparency or simplification of regulation will abolish folly and greed?

Ruth Kelly: I completely agree that it is vital to protect consumer interests. As Ron Sandler usefully sets out, the problem with the current regime is that consumer interests are not properly protected and skew and distort the market for financial savings products. He proposes a new way forward that protects the consumer by regulating the product rather than the advice process. There are, of course, many safeguards built into the process, but it is right that the consumer interest is at the heart of the vision.

Mr. Michael Weir (Angus): I welcome some of the interesting suggestions in the report, but does the Minister agree that one of the problems is that some large financial institutions sell only their own products, to which they are tied? We have anecdotal evidence of people attending so-called financial reviews and being pushed an institution's products without the costs of changing policies and taking out new policies being clearly explained. Many such cases mark a return to the churning that was prevalent before the Financial Services Act 1986.

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The Minister talks about the transparency of the new products. Will financial institutions continue to be allowed to be tied to their own products? If so, how will we avoid that problem recurring with the new products, as there are bound to be differences between products? Will she take up the plea by the hon. Member for Twickenham (Dr. Cable) to ensure that everyone receives independent financial advice before they take out many of these products, which are so important for their future?

Ruth Kelly: Ron Sandler endorses the view made clear by the Financial Services Authority that genuinely independent financial advice needs to be available to the consumer. That means that it cannot tied to the commission of the provider when a sales person makes a sale. He does not rule out the fact that tied agents may still exist, but he endorses the vision that if a sales person calls himself an independent financial adviser he must be truly and genuinely independent.

Mr. Tam Dalyell (Linlithgow): A significant number of my constituents work in the financial institutions in Edinburgh, as indeed do those of my parliamentary neighbour, the Chancellor. What was the Treasury's initial reaction to recommendation 10.172? It states that there should be thorough consideration of

and recommends

Ruth Kelly: My hon. Friend asks a very serious question. In his report, Ron Sandler specifically points to the fact that although unit trusts and unit-linked life policies are effectively the same product, it is almost impossible to compare them or their underlying investment performance because of their different tax treatment. We endorse the idea of having a regulatory and tax treatment system that is as streamlined as possible, but clearly I shall not now commit my right hon. Friend the Chancellor on matters that will, rightly, be considered in the Budget.

Mr. Peter Lilley (Hitchin and Harpenden): I congratulate the Financial Secretary on her role, which when I held it, I was told, often involved downplaying the significance of embarrassing U-turns in the policies of the Chancellor.

May I return to the question posed by my hon. Friend the Member for Chichester (Mr. Tyrie)? Why was it thought necessary two years ago to protect small savers by imposing a complex and costly system of regulation, when now it is thought that the only way to make savings products affordable for small savers is to exempt them from that system of regulation and to regulate the product separately?

Ruth Kelly: We are consulting on and taking forward the proposals in Ron Sandler's report. He correctly

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identifies the trade-off between the regulation of the conduct of business or of the sales process and regulation of the product. What is proposed now is a suite of stakeholder products that are simple, transparent, easy to understand, easy to sell and easy to take advice on. It is appropriate that we attempt to make that trade-off and to put the consumer in the driving seat. In the process we will drive much greater competition and transparency into the industry.

Laura Moffatt (Crawley): Does my hon. Friend agree that there are providers, particularly of stakeholder pensions, who are doing an excellent job? For example, B&CE, which is based in Crawley, provides more than 175,000 stakeholder pensions to construction workers, who traditionally would never save at all for their future. Does she agree that, following the Sandler review, it is vital that we continue to work with the best providers in the industry to ensure not only that we protect the people buying the products but that it is as simple as possible to sign up for a stakeholder pension so that those who would not traditionally be interested in such products have access to them?

Ruth Kelly: I thank my hon. Friend for her question. At the heart of the proposals is the idea that people should have access to simple, transparent and easy-to-understand products, such as stakeholder pensions. As the proposals are taken forward, they will make access to stakeholder pensions even easier. We started out by encouraging access throughout the workplace, making it as easy as possible for people to save, and we now intend to develop that process.

Mr. John Redwood (Wokingham): I have declared my interest in the register. Given that the biggest problem facing the savings industry in this country has been brought on by the collapse in the stock market, can the Minister explain why the British stock market has fallen further and faster than the American or the European ones? Do we not need a Government wealth warning on all savings products in Britain: "This Government's taxes and regulations can damage your wealth"?

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