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14 Nov 2002 : Column 219—continued

4.59 pm

Mr. John Butterfill (Bournemouth, West): The debate on the health service has been interesting. I believe that foundation hospitals are a good idea provided that they

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are given the opportunity of raising their own money. The proposal to constrain them means that the exercise will not be as good as it might be.

The Government were probably wise to drop the proposal for those with severe personality disorder. The prospect of Members of Parliament legislating to detain compulsorily people with severe personality disorders might be viewed in some quarters as resembling turkeys voting for Christmas.

I want to concentrate on pensions. I am sorry that I missed the speech of the hon. Member for Stalybridge and Hyde (James Purnell). I gather that his contribution was interesting and I shall take care to read it. The hon. Member for Cardiff, West (Kevin Brennan) also made an interesting speech in which he mentioned some subjects to which I shall refer, albeit briefly.

I disagree with the hon. Gentleman that the Government were right to take their time. The pensions problem has existed for a long time. The Government have been in office for five years and they have been much too dilatory in dealing with it. If the health service is in crisis, the pensions system is a disaster. It needed much more urgent attention than it received. The Sandler and Pickering reports have been belatedly published. They should have been produced a long time ago. I look forward to the Green Paper, but I should have preferred to look forward to legislation in this Session.

There are two crises, the first of which is in occupational pension schemes. Why is there a crisis? It is partly due to the regulatory burden on pension providers—that is, employers. That is partly our fault because some of the provisions in the Pensions Act 1995 imposed unnecessary burdens and that needs to be redressed. The crisis is partly due to FRS 17—the new accounting standard—which has drawn to shareholders' attention the true burdens of pensions on companies. However, it is mostly due to lack of funds.

The falling stock market has led to a serious predicament and, as my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) said, the Government's advance corporation tax changes are criminal. They bear a huge responsibility for the crisis.

As the hon. Member for Cardiff, West said, there is a severe problem when the schemes get into trouble. That happens for some of the reasons that I outlined. There is not enough money, and the schemes rely on the employer's continuing prosperity to sustain them. When they begin, there is no money, and employees and employers decide that if they stay together for 25 or 30 years, pensions will be provided. However, as the hon. Gentleman said, the hierarchy is wrong. Moneys should be withdrawn from partially completed schemes in proportion to the amount that people paid in, the length of time that they served and the amount that they can reasonably expect to take out. The nearer they get to retirement, the greater the difficulty of finding alternative employment or making up the contributions in another scheme.

The hierarchy should reflect the proximity of the employee to retirement and the amount that has been paid in over the years. An employee who was approaching retirement and had served less time would therefore get less than another who had served longer

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and paid in more. That is logical and fair and I hope that the Government will deal with that when they produce a Bill.

I also hope that the Government accept the need to provide incentives for employers to produce such schemes. Everything that the Government have done so far has proved a disincentive to the schemes. If we are to continue with final salary schemes, which are the best that most people can expect, the Government must reintroduce some form of incentive.

I come now to personal pensions—people's private savings where they do not have a company scheme. Here there has been a terrible loss of confidence among the public, most notably because of the difficulties with Equitable Life, but also many others. Again, the ACT changes and the stock market falls have meant that bonus rates are considerably reduced and people are wondering whether such pension schemes are really a good place for their money.

The other disincentive is the rumours about possible tax changes. The Government do no service to the industry by letting rumours float about that they are about to abolish the tax-free lump sum and higher rate tax relief. All that creates uncertainty in the eyes of those who are saving for their retirement.

There is a huge anomaly in any suggestion about the tax-free lump sum. The tax-free lump sum encourages people, many of whom should not do so, to take the tax-free lump sum to obtain their tax relief. In fact, the Government should be telling many people with smaller pension pots that they should put all their money into the purchase of an annuity, and then perhaps say, to offset the fact that they do not get the tax-free lump sum, that they should have a 25 per cent. reduction in the tax that they will pay on that part of the annuity that they might have taken as a tax-free lump sum. That is what happens elsewhere in Europe.

For example, the Spanish say that an annuity is largely a repayment of capital and only a small amount of it reflects interest earned by that capital. Therefore, they charge people on only 25 per cent. of their annuity; 25 per cent. becomes taxable income and all the rest is tax-free. That happens throughout Europe. Europe has much lower rates of taxation on pensions than on other forms of income.

If the Government want to encourage people to save for themselves, they will have to look at what happens elsewhere in Europe and take such action. The problem with pensions is that they are inflexible and a long-term lock up—30 or 40 years—compared with alternative forms of saving.

The difficulty is that many people prefer an alternative means of saving because they are not prepared to accept such a lock-up and the risks that are inherent in pensions. Many young people today put their money in buy-to-let properties. That has the beneficial effect of increasing the pool of properties available to let, but it also adds to instability in the housing market. A lot of buy-to-let purchases have forced up the price of property and contributed to a huge escalation in property prices. If, as it appears, some of the buy-to-let properties are now proving difficult to

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let because of over-supply, that may contribute to an artificially steep downturn in property prices. It has induced an element of instability in the property market.

The Government should consider all those aspects and urgently introduce legislation. I hope that once they have the results of the consultation on the Green Paper they will bring legislation to the House with all possible speed.

5.8 pm

Glenda Jackson (Hampstead and Highgate): I endorse the remarks made by my right hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson). Not only do I share his dubiety over the creation of foundation hospitals but we share constituency boundaries, we comprise the parliamentary seats within the London borough of Camden and we also share, in a sense, the health facilities that are provided in that part of north-west London, which are not exclusively within the borough of Camden. There is close working with Islington, and the Royal Free hospital in my constituency takes patients from Brent and Haringey and the whole of north-west London.

I shall not reiterate the points made by my right hon. Friend. I am concerned that the creation of foundation hospitals could have a deleterious effect on other hospitals. The hospitals that comprise health provision within my constituency in north-west London already work closely with each other and with other partners both within and without the NHS. I do not believe that the creation of a foundation hospital in the area of London that my right hon. Friend and I represent would necessarily achieve an improvement across the range of treatments for people who require them, whether they live in the area or travel to it every day to work.

I am also concerned about who will be the voters in this particular democratic process. I intervened on my right hon. Friend the Secretary of State to ask whether he could give more detail on what comprises localism, and he attempted to allay my fears about who would be the decision makers in the creation of a foundation hospital by pinning his faith on the ballot box. Well, I am no psephologist, but I have read sufficient reviews of general and local elections to know that a great many more Labour votes are required in certain parts of the country to return a Labour representative to the House.

In other parts of the country, a great many more Conservative votes are required to return a Conservative MP to the House. Of course, the Liberal Democrats believe that there will be no genuine representation of the feeling that resides in the country for their party and their policies until there is a complete abdication of the first-past-the-post system, under which people are sent to sit on these green Benches.

Dr. Tonge: Hear, hear.

Glenda Jackson: I share the hon. Lady's view, but that is not the point that I am attempting to make here.

It is not the case that everyone who lives in my constituency and depends on the NHS has the same quality or volume of voice on making decisions about the priorities for health care provision in that constituency. I very much welcome the changes that the

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Government have implemented in attempting to make the voice of the patient more pertinent and more directly heard by those who decide health provision, but we still have a long way to go to ensure that everyone has an equal voice. One of my concerns is that the creation of foundation hospitals, far from increasing transparency, openness and—that dread word in this context—choice, will have exactly the opposite effect.

I am concerned about choice because every year it is the big issue in educational provision in my constituency. My constituents who are parents believe that such a choice is in fact a right to the first choice of school for their children as they go into secondary education. All the schools in Camden are extremely good. All the secondary schools are invariably oversubscribed, and they all have waiting lists. That is the one issue that turns up every year when parents discover the truth that they have a choice, but no right, and we must examine it in respect of health care provision.

I can think of individuals and many groups that will campaign vociferously and vigorously for what they perceive to be their choice and, indeed, even their right with regard to health provision. If they win that argument—there is no bottomless pit of money, although I understand that foundation hospitals will be able to borrow—the pursuit of a priority health need by a particular group could have a deleterious effect on people whose health needs may be just as great, but whose ability to phrase their argument, capacity to make it, and access to those who should be listening are limited.

I am somewhat concerned about whose voice is listened to most closely in the still-hierarchical structure of the NHS. I am all for modernisation if it achieves an improvement of our public services, but I do not believe that the voice of a consultant carries equal weight to that of a hospital porter or a hospital cleaner. I am sorry, but I have never yet come across such a situation.

There is also not the same equality of voice when it comes to a patient who may be elderly, who may be chronically alcoholic, who may have certain personality disorders, who invariably smells, or who can be more than a little abusive when receiving care and treatment from hospital staff. I am not arguing that anyone who works in the NHS should put up with abusive treatment, be it physical or verbal, but fortunately our NHS is served by human beings and they can be as selective in their prejudices as in those areas that they wish to support.

If a foundation hospital is created, for example, in the area that I and my right hon. Friend the Member for Holborn and St. Pancras serve in this Parliament, other hospitals that are doing a sterling job and that may have not three stars but two could feel that their contribution had been diminished, demeaned and reduced. Their patients could easily feel that the quality of service that they as users of the NHS will receive there may not be as good as that at a foundation hospital a little further down the road. If funding, up to a point, and the prioritisation of services still depend on what general practitioners tell primary care trusts their patients require, and if patients say, XI do not want to go to hospital A because hospital B is a foundation hospital," despite the arguments that my right hon. Friend the

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Secretary of State has advanced, I can see there being a diminution in funds for those hospitals that do not achieve foundation status.

As we all must know, inevitably there would be poaching. We have seen poaching in every area of virtually every industry and business over past years. If foundation hospitals come into being, I have no doubt that managers, boards and the chief executives of hospitals, probably at the behest of their consultants, will attempt to poach individuals.

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