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Mr. Steve Webb (Northavon): I thank the Secretary of State for advance sight of this detailed report. I welcome the fact that Alan Pickering is seeking to create an all-party consensus on pensions structures, and I can confirm to the Secretary of State that, if he decides to approach prospective legislation in that way, the Liberal Democrats will certainly play a full and constructive part.
I want to raise two areas of concern, however. One involves issues that were in the report, the other matters that should have been in it. It terms of what was in it, I disagree with Alan Pickering in that I do not believe that benefits for widows, or the post-retirement raising of pensions, are bells and whistles. In our view—and, I sense, in the Secretary of State's view—they are an integral part of what pensions should be. Given that many old pensioners—the poorest pensioners in the land—are often elderly widows, can it be right to undermine provision for widows or to have more pensions frozen for 20 years of retirement? I do not believe so, and I hope that the Secretary of State will confirm his intention to look very sceptically at that proposal.
In terms of what the report perhaps should have said, will the Secretary of State accept that, given the tens of billions of pounds shortfall—whatever the figure is—in the amount of saving that should be going on, these proposals, although many are welcome, are not up to tackling that scale of problem? With the best will in the world, the Green Paper, and subsequent legislation a few years down the line that will probably take effect decades down the line, will not tackle the crisis now, though they are part of the overall strategy. Is it not time to require all employers to put money into their employees' pensions, and to give good employers and their employees the incentive to go further and to build on that? Without such provisions, we shall see a continued haemorrhaging of money from pension funds.
Mr. Smith: I thank the hon. Gentleman for his constructive response, and for his commitment to resolving the matter with as much cross-party agreement as possible.
The hon. Gentleman mentioned a description of survivors' benefits as bells and whistles. It is certainly not a description that I would use—such benefits are valued features of current schemes—but we cannot escape the tough choice, and the tough question, posed by Alan Pickering. He says that, in the event of a choice between maintaining those benefits and the closure of schemes—resulting in lower contribution rates—people might end up substantially worse off. I do not find that proposition attractive, but at this stage I am not ruling anything in or out. I want to examine all the proposals and all the responses.
As for the scale of the problem and the extent to which the report addresses it, the terms of reference can be found in the appendix. They refer specifically to simplification of regulation, and Alan Pickering rightly focused on that. Of course this report will have to be judged alongside our response to the Sandler report and the Inland Revenue's work on tax simplification. As I have said, the Green Paper will be a substantial and wide-ranging document that will meet what is a considerable challenge.
We must think carefully about the implications of compulsory employers' contributions. Again, I am ruling nothing in or out at this stage; but if employers withheld wage increases or even cut wages to pay for those contributions, as some might be tempted to do, the cost would be effectively transferred from employer to employee. Furthermore, if employers were tempted or indeed forced to cut jobs, people might lose not just their occupational pensions but their wages.
Those attracted by the Australian example would do well to remember not just the differences in basic state provision in that country, but the fact that compulsion was introduced there as part of an historic compromise with the trade unions. There was a deliberate drive to hold down wages to help pay for pensions. We need to think carefully before embarking on such action.
Mr. Frank Field (Birkenhead): The Secretary of State told us more about what he hopes to do in six minutes than most of his colleagues tell us in five times as long. I thank him for his statement, and join him in thanking Alan Pickering for producing a report on how best we might protect the one obvious welfare success of the last 100 years—and, in so doing, serving up to the Secretary of State not just the soft options but some of the hard options that we may have to take in preserving that great welfare success.
When the Secretary of State drafts his Green Paper in the autumn, taking a radical look at what needs to be done, will he take account of the economic cost to taxpayers of past failures to ensure that everyone has an adequate, decent minimum pension in the first place? The current cost of those welfare failures to each standard-rate taxpayer is 5p in the pound, and according to the Government's own calculations it is expected to rise to 13p. Are there not better ways of spending taxpayers' money than paying the cost of a failure to guarantee adequate pensions for all in the first place?
Mr. Smith: I thank my right hon. Friend for his kind remarks. The whole House greatly admires and respects his expertise, even if we do not always agree with every detail of his proposals.
My right hon. Friend makes a fair point about the importance of fully assessing economic costs, and I shall examine them closely. When considering the proper use of taxpayers' money, however, we must recognise the need for decisions about how thinly to spread resources for pension enhancement across the pensioner population, and about how much sense it makes to concentrate at least some additional state resources on the poorest pensioners. I make no apology for the fact that an important strand of the Government's policy has been concentrating a proportion of the available resources on the poorest pensioners, thus helping many out of poverty.
Mr. Archy Kirkwood (Roxburgh and Berwickshire): Does the Secretary of State agree that Alan Pickering is a wise man and that the report will repay careful study? First, may I tempt the Financial Secretary to whisper in the Minister's ear the possible outcome of the Inland Revenue negotiations. Those in the industry to whom I have spoken are encouraged by the discussions so far and have been led to expect a fruitful outcome. However, it must be an early outcome, so can he say a word about that? Secondly, if he is being sceptical about some of these things—and I hope that he is—may I refer him to some of the advice that he may have been getting from the Government Actuary Department about the loss of cover to ill-health retirement as that would merely increase the number of people who would be passported straight on to incapacity benefit, which is already a huge problem for the Government?
Mr. Smith: I thank the hon. Gentleman for his constructive remarks. He tempts me to say what the outcome of the Inland Revenue tax simplification review will be before it is completed. Sadly, I am not in a position to do that. However, it is important that every dimension of the review is approached in a radical spirit and that we entertain the bold action that is necessary as a consequence properly to secure the future for occupational and personal pensions. I also take his point about incapacity benefit.
Mr. James Arbuthnot (North-East Hampshire): Is the Secretary of State aware that I am one of the culprits in introducing some of the previous legislation? As he rightly says, it was for good reason at the time, whether it was Robert Maxwell or pensions mis-selling or whatever. I thank the Secretary of State not only for what he said but for the tone in which he said it. In the interests of increasing the cross-party support that I am sure that this report will garner over the months, will he consider referring the pensions Bill which the Pickering report mentions to a Special Standing Committee rather than to an ordinary Standing Committee, so that evidence can be taken from pensions experts during the Bill's passage through the House and we can get the detail right on difficult issues such as pensions on divorce?
Mr. Smith: I thank the right hon. Gentleman for his kind remarks on tone and reciprocate by thanking him for the way in which he made his remarks. I have noticed the spirit in which he has contributed to previous debates on this matter. It is good of him to own up as a culprit, having introduced some of the legislation that we are dealing with. I hope that I do not have to do the same at some point in future. He invites me to consider referring a
future pensions Bill to a Special Standing Committee. I shall certainly consider it, but as he will understand, I cannot commit to that at this stage.
Mr. Peter Pike (Burnley): Is it not important that all of us interested in occupational pensions, not only in the House, but in the country, study carefully the proposals in the Pickering report? It is also important that we do not allow a knee-jerk reaction because of the two headline- grabbing proposals that we may not like on index linking and pensions for surviving spouses.
My right hon. Friend referred to important matters to be included in the Green Paper that will be published later in the year. I remind him that pension security is crucial. In my constituency, so many pensioners in different schemes have lost out over the years, including those affected by the Bellings pension fraud, that we should make sure that all workers get what they expect from their pensions when they retire.
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