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17 Dec 2002 : Column 697—continued

Mr. David Willetts (Havant): May I begin by thanking the Secretary of State for his statement? It was due in the autumn and it comes not a moment too soon. What is at stake is nothing less than the prospects for a decent retirement for millions of our fellow citizens.

This time, the Government must get their pensions policy right. They have tried many times before. Can the Secretary of State tell the House how many consultation documents on pensions the Government have produced since 1997? When I tabled a question about how many documents there had been, the Department replied that the information could be obtained only at disproportionate cost. That is not a good sign—on my reckoning there are at least 38. In fact, I have some of the previous consultation documents here, and, as they have poured out of the right hon. Gentleman's Department, the crisis in our funded pensions has got steadily worse.

Does the Secretary of State recognise how serious the problem is? Does he realise that the speed at which pension funds are closing to new members has doubled in the past year? Does he know that more than half Britain's leading companies have now closed their pension schemes to new members? Does he know that the number of people who are retiring with an occupational pension is going down and that the number of pensioners claiming means-tested benefits is going up?

Not all the causes are under the Government's control, but that makes it all the more important that Governments get right the things that they do control. Instead, we have had the Chancellor's notorious #5 billion a year grab on our pension funds; another

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#1.5 billion a year taken from our pensions because contracted-out rebates are too low; and nine out of 10 stakeholder pensions with not a penny in them.

So why did not the Secretary of State come to the House of Commons this afternoon and apologise on behalf of the Government for turning what was one of our great post-war successes into an economic and social disaster? There was no recognition of the scale of the crisis, and there was certainly no strategy for getting out of it. Because they have not got a solution, they pretend there is no problem.

The Secretary of State did not even repeat the Government's original objective, published in a previous pensions Green Paper, to increase from 40 to 60 per cent. the proportion of pensioners' incomes that comes from funded savings. Are they doing so badly that they have given that up altogether? Will he offer any estimate of the increase in pension savings that he expects as a result of today's announcement?

I warn the Secretary of State that he appears to base his arguments on the assumption that flows of savings into our pension funds have grown by 40 per cent. since 1997. He has already had to write me one letter of apology for producing incorrect statistics on the size of our pension flow, and I warn him that he might have to write a second one if he uses such statistics.

We will look carefully at the Secretary of State's proposals in the days and weeks ahead, but there seem to be too many old ideas rehashed and relaunched. Of course we want flexible retirement, but what the Secretary of State has announced—or rather reannounced—today has been announced by the Government five times already. In fact, it was in the original pensions Green Paper, published in December 1998. We do not need more consultation; we need action.

Yes, we need to offer more protection to employees who have been working for a company for years and find their hopes for a decent pension dashed. In fact, the Government had a consultation document on that as well—XSecurity for Occupational Pensions". It is more than two years old and nothing has been done. Meanwhile, the workers at Maersk and ASW, as well as those in dozens of other schemes that have wound up, have paid the price.

We agree with the Secretary of State that it would be better to offer people more flexibility in taking the state pension, but, again, his proposals are not new. Will he confirm that Parliament passed legislation to make such changes in 1995, in our Pensions Act? That was when the Labour party was arguing for a pension age of 63, by the way. Of course we understand the need for consensus and stability to encourage long-term saving, and we will support his measures where we can, but it is no use pretending that what he has announced today will somehow reverse our pension crisis. It is too little, too late.

We believe that the burden of regulation and red tape on pensions is too great. That is why we supported Alan Pickering's inquiry, but it is typical of the Government that they produced another 251 pages of regulation even after they had introduced the deregulation review. Can the Secretary of State tell us more about the basis on which the new simplified tax regime will be constructed? He has referred to the eight tax regimes that already exist, but it appears as though he is adding a ninth to

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apply in future alongside the eight that will continue to apply in respect of previous contributions. So will he confirm whether he will be keeping the 1,300 pages of tax regulations for contributions already made and adding another tax regime on top?

Does the Secretary of State accept that we need better incentives for people to save for their pension instead of cutting back on the incentives that already exist in the tax system? Will there be losers in the proposals that he has put forward today? If so, how many will there be, and how much will they lose? Can he give a cast-iron assurance that the Chancellor is not using the simplification exercise as an excuse for another stealth tax?

The other day, the Secretary of State said that he was not offering a quick fix. I agree with him on that. His proposals are certainly not quick and they will not fix the problem either. The truth is that British pensions are in deep crisis. Millions of our fellow citizens face an impoverished retirement. All that has happened while the Government have been consulting and reviewing. At the end of that process, British pensions are in a far worse state than they were before it started.

The Secretary of State could have come to the House and admitted that the old approach was not working and that a radically new one was needed. We need new flexible ways of saving that match the way people live their lives today. We need a far simpler benefits regime for pensioners and we need to reverse the spread of means-tested benefits. Why will the Secretary of State not recognise that problem and do something about it? Without that, there is a gaping hole at the heart of his pensions proposals. He would have had support in all parts of the House for a bold reform, but he missed that opportunity. Instead, he offered us more of the same.

Today's statement simply fails to match the scale of the crisis in the savings of our country. Governments should encourage people to save, but, under this Government, savings are penalised as they never have been before. Pension funds which only five years ago seemed solid and prosperous are now insecure and under threat. After today, and after this missed opportunity, millions of people will face a new era of financial insecurity, knowing that this Government, their mistakes and their wasted opportunities are to blame. Will the Secretary of State start his response today by apologising to the millions of people whose pensions have lost value as a result of the Government's policies?

Mr. Smith: What was abundantly clear from that statement is that there is a gaping hole where any alternative policies from the Opposition ought to be. It was very clear that, even in the time that the hon. Gentleman had to study our Green Paper and my statement, he had not grasped the sweep and radicalism of our tax simplification. It does not add a ninth tax regime—that is the sort of thing that the Tories used to do. It scraps the eight and brings in a new simple regime that will encourage and promote saving where the Conservatives—as well as presiding over pension mis-selling—erected, often with the very best of intentions, walls of complexity around pensions and long-term saving, which serve this country very badly.

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The Conservatives should support not only the simplification of taxation but the stunning reforms that we are carrying through on contracting out the reference scheme test and the guaranteed minimum pension. The right hon. Member for Wokingham (Mr. Redwood) is nodding—he at least realises the radicalism of what we are doing.

The hon. Member for Havant (Mr. Willetts) spoke about the ending of the tax credit and taking #5 billion out of pension funds. But the country will know that the Conservatives' attack is worthless and that they are shedding crocodile tears, as there is no commitment on their part to reversing that position. If it is doing such damage, why has the shadow Chancellor not pledged that his party will reverse it?

The hon. Gentleman, as he has done before, referred to what he called means-tested benefits. As we all know, that is Conservative code for abolishing the pension credit, the measure that we are introducing and which, from next October will reward—as opposed to the Conservative party in government who penalised—those with modest occupational pensions and savings. The Opposition are proposing to take an average #8 a week off half the pensioner households in the country. They should support our proposals.

I welcome one thing—it is important—that the hon. Gentleman said, namely, that on the simplification proposals where we can build consensus, we will. There is a particular responsibility on pensions Ministers and spokespeople of all parties to endeavour to establish the broadest possible consensus on this issue so that we can together build the foundations for long-term saving and security for older people. I am pleased to see that some Conservative Back Benchers are nodding, even if those on the Front Bench are not.

The other parts of the hon. Gentleman's remarks were muddled, damaging and would hit the poorest hardest. That is not compassionate conservatism but the same old Tory Front-Bench view, which is more extreme than ever.

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