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14 Nov 2002 : Column 207—continued

4.6 pm

James Purnell (Stalybridge and Hyde): Pensions are often a dangerous subject. One of our colleagues spoke to members of Age Concern recently and told them that pensions was an important subject because they did not have much time left. After that, the audience gave him a rather hard time.

The cruel irony of the health inequality figures is that my constituents in the north-west literally have less time to live than people in other parts of the country. Life expectancy in the north-west is about five years lower than the average in the rest of the country. Indeed, The Guardian reported this week that Manchester is the most dangerous place in Britain to live.

It goes without saying that the national health service is one of the great creations of any Government in this country. Since the 1950s when it was created, however, health has not improved in the north-west according to many indicators. One reason is that we have spent much more money on acute services and hospitals than on primary care. Recently, I met primary care workers from my constituency and I was extremely impressed by their dedication and professionalism. They pointed out that until we have a big shift in resources from curing problems to preventing them, we will not be able to deal with health inequality. I hope that we will see more attention paid to that in these reforms of the health service.

We will be able to tackle health inequality only if we have a health funding formula that reflects the problems. At the moment, the formula does not reflect deprivation or health problems. I was encouraged to hear the Secretary of State say that the new formula will take that into account when it is published and I look forward to that being the case.

Unlike my right hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), I support foundation hospitals, and I make no apology for that. It is a deception to say that we have had only one tier of hospitals. There has been a great variation in the performance of different institutions. If we can have a mechanism that will encourage institutions to aspire to foundation hospital status, it may lift average performance throughout the service and everyone will benefit. Foundation hospitals could also be an engine for innovation, allowing things to be pioneered that are not possible in the rest of the service, which could then spread to the rest of the NHS. I would certainly welcome that.

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The health service alone cannot tackle health inequality, which is caused by poverty, poor housing and basic lack of information on parenting and nutritional skills, among other reasons. My right hon. Friend the Member for Birkenhead (Mr. Field) has done some interesting research showing that many health and educational problems can be predicted by looking at children's birth weight and focusing on those whose weight at birth is significantly lower than average. I therefore find it incredible that Conservative Members seem to be saying that they will not support sure start—I give them the opportunity now to deny that. Sure start is aimed exactly at that problem of inequality—it gives people early parenting advice, as well as nutritional and health advice that can address that very fundamental inequality of opportunity. I am not surprised that no one from the Conservative party has stood up to deny that principle. As on so many other issues, their problem is not so much disunity as having made the wrong judgment on major policy issues.

The hon. Member for Woodspring (Dr. Fox) refused to say that he would match our spending commitments. Yet again, his defence was that he was not writing the health budget now. However, the Conservatives have already written their budget for defence spending; they have said that they will match the Government's spending. If they cannot say the same for health, the suspicion is that they have a hidden agenda of cuts.

It is not surprising that the Conservatives have fallen back on the tired idea of encouraging people to opt into the private sector. That is a counsel of despair. They have decided that as they will never be convincing on public services, all they can do is give a very few—the richer few—the ability to opt out of the NHS and go into the private sector. In that way, they are giving up on the right goal of improving public services in general.

The Conservatives have the same problem regarding spending on pensions. Since the last election, we have spent more on helping pensioners than it would have cost to restore the earnings link. We will continue to do so through the pension credit, which was supported by the Conservative members of the Select Committee on Work and Pensions and also by Lord Fowler. I am not sure whether the Conservative Members who are here will support that.

Mr. Goodman: Will the hon. Gentleman acknowledge that the Select Committee report was critical of the pension credit in some, though not all, respects, especially with reference to take-up rates, to which I will be referring later?

James Purnell: The hon. Gentleman has a good record of campaigning on these issues. He will know that the Committee welcomed the principle of the pension credit. It made some comments but they were, in my view, mainly on the implementation and the detail of the policy.

It is quite right that the pension credit is being introduced, because it is targeting the first major problem in pensions—the poverty of current pensioners. The second major problem is that workers are not saving enough, and I want to float an idea for dealing with that.

There is a growing consensus among some people that we should raise the retirement age to 70 to fund a much higher universal state pension. I do not share that view.

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The recent YouGov poll showed that about two thirds of people were opposed to raising the state pension age. We must ask ourselves why. It may be all very well for people in sedentary occupations, like ourselves, to work beyond the age of 65, but it is the exception for those in manual occupations to work beyond the age of 60, and many do not work after 55. It would be difficult to persuade them that it was reasonable to wait another five years before they get their state pension. Nor am I attracted to the idea of compulsion. It is illiberal and poorer people would end up saving money towards a pension when they would be better off using it to spend on consumption today.

I should like to suggest a third way, if I dare call it that, between those two options—that of introducing a presumption to save. As in many 401(k) systems in America, we would have an automatic opt-in. People would automatically be included in a second tier of private saving. We would deduct from their salary a proportion of their income; that would be invested in private pension funds, which would be chosen and regulated as they are in Sweden by an independent pensions agency. Because of the size of those funds and because their recruitment and advertising costs would be low as they would attract members automatically, the pensions could operate with very low charges. In Sweden, they expect charges to be somewhere between $25 and $40 a year. That is significantly lower even than the current limit in stakeholder pensions.

Under that system, people would have a proportion of their salary deducted to put into saving for a pension. That money would go into safe investments which would be regulated and weighted towards low-risk investments, with low charges. If they wanted, people could opt out completely. If they wanted to spend the money on current consumption or to save in a riskier pensions vehicle, they could do so. It would not be a tax. We would be using the basic problem with the current pension system—inertia. People do not get round to saving, they are put off by charges and the choice on offer. Basically, they never send off the forms. Instead of inertia creating a problem, it will help to solve the pensions problem.

In the United States where this system has been tried, the evidence suggests that between 85 per cent. and 95 per cent. of people stay in the pension scheme to which they are automatically allocated. The evidence also shows that the policy is effective at reaching those groups that currently save less than they need to for a good income in retirement—women, part-timers, people from ethnic minorities and those in lower paid occupations. The system would be well targeted at the current policy problem—the lower and middle income earners who are not saving enough. It would not have the problem of illiberality, which compulsion does and because people would be saving from day one of their working life, it would reduce the need to raise the retirement age.

As the Government approach their Green Paper proposals, if they reject compulsion and raising the retirement age, people may be waiting for a big idea that will respond to the scale of the perceived problem in pensions. I think that introducing a presumption to save would be an effective way of targeting the real pensions

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problem of people not saving enough. I commend it to the House, and I commend the Queen's Speech to the House.

4.17 pm

Mr. Peter Lilley (Hitchin and Harpenden): We have had some interesting, constructive and distinguished speeches in this debate, not least from my right hon. Friend the Member for South-West Surrey (Virginia Bottomley) and her counterpart, the right hon. Member for Holborn and St. Pancras (Mr. Dobson). I have to say, however, that of the 20 or so Queen's Speeches that I have heard in my time in Parliament, the speech made by the Prime Minister in introducing and defending the programme in the Gracious Speech was probably the worst—the thinnest, the least substantial and the one which contained the least attempt to justify any of the measures in the programme. At first, I wondered why that was so. I think that it is because the Prime Minister sees those measures essentially as pegs on which a headline can be hung by the complacent elements of our media, rather than as substantive measures to make real changes to the governance of this country.

I want to begin by speaking about health—rather rashly, perhaps, given that two former Secretaries of State for Health have already spoken. I spelled out in a recent ten-minute Bill speech, and previously in a Demos pamphlet, my views on the need to restore patient choice in the health service. Choice is the dynamic force which drives improvements in quality and efficiency when it is allowed to operate and people are given a choice between different suppliers. Unfortunately, choice within the NHS was abolished by the Government in 1999 by circular 117. We no longer have the right to choose a hospital other than that to which our local health authority, or health bureaucracy, is contracted to send us. We cannot choose to go to one with a shorter waiting time, with better outcomes, for a particular operation, or to one which is known to be cleaner or is more convenient for any reason.

When I put forward my proposals for restoring choice, they were, sadly, derided, by the present Front-Bench health team. They said that to restore choice in the health service would mean individuals running all over the country looking for better care or shorter waiting times. That is a bit rich, coming from a Government who subsequently have sent people running all over the Mediterranean on the same search. But today the Secretary of State invoked the language of choice and diversity of provision. Have the Government changed? Have they been converted? If so, no one would be more joyful than me. There is more joy in heaven—and in Hitchin and Harpenden—over the conversion of one sinner who repenteth than over 99 of my colleagues who need no repentance.

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