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17 Dec 2002 : Column 700—continued
Mr. Steve Webb (Northavon): If there were an offence of mis-selling Government pension policies, the Secretary of State should be bang to rights this afternoon. It sounded like an Arthur Daley scheme. He says that he will reward pensioners who defer their state pension by five years and go without their #4,000 a year state pension for that time, but what will they get in the end? Only #20,000. Well, that is a great incentive. The Secretary of State has failed to address the tough choices that needed to be addressed. A company such as BAE Systems, which is a large employer, projects a #1 billion deficit in its scheme in three years' time. There was nothing in the statement that was up to the scale of that problem. Is there anything that would match a #1 billion deficit in one scheme?
What about the position of women? I am pleased that, finally, there is a chapter about women in the document. We have put women's pensions back on the political agenda, but I have read that chapter and it is empty. It has nothing for the women who feel cheated by their pension provision. In the past two days, more than 150 women have written to me describing their anger at their pension position. What have the Government got that is concrete for women other than more information? What will they deliver for the needs of women?
What about the hope that people will save more? The Government have ducked the tough choice. They have set up a commission to consider the matter, but presumably it will have to wait until the issue has had years to run and then it might recommend compulsion. That would take years more, so it could be 10 years before we make sure that people save. Hoping that people will save has failed. We need to make sure that Government, employees and employers all put money into pension schemes for people on middle and higher earnings. If we do not do that, another decade will be wasted.
The Secretary of State rightly talks about consensus, but that implies that all sides are willing to move. Sitting next to him is a Chancellor who is so wedded to mass means-testing that he is in a minority of one. If the Government will not give ground on mass means-testing, what scope is there for consensus? We have heard about a task force, a commission and a proactive regulator, but we have not had the tough choices for a crisis. This is a missed opportunity.
Mr. Smith: The hon. Gentleman talks about mass means-testing. However, the truth is that, with the pension credit, we are rewarding people on modest occupational and savings incomes. Like the Tories, he would obviously take us back to pound-for-pound withdrawal, which penalises those on the lowest incomes.It is difficult to take seriously proposals on public spending from a party that, since the general election alone, has made 80 promises for extra public expenditure.
The hon. Gentleman attempted to deride the opportunity for people who defer taking their pension to receive a #20,000 or #30,000 lump sum. The matter is out for consultation, so, if he thinks that the sums are wrong or that the figures should be actuarially adjusted, he can make recommendations to that affect. However, does he not realise the radical potential of allowing people who have never before in their lives had access to that sort of money to have access to the sort of lump sums that people on much higher incomes in much more generous schemes can have? Why not give those people that choice, which has hitherto been confined to the rich?
I acknowledge the seriousness with which the hon. Gentleman addresses the needs of women in the pension system. He is right to raise that issue. As he says, we have dedicated a chapter in the Green Paper to it. He asks what we are doing for women pensioners. Does he not realise that the majority of the beneficiaries of the very minimum income guarantee and pension credit that he attacks are women? Does he not realise that in introducing the state second pension, the overwhelming majority of beneficiaries will be women, including carers and those with broken work records? It is difficult to take the hon. Gentleman's criticisms seriously when he does not recognise the huge steps forward that our policies have represented for women and other pensioners.
Mr. Frank Field (Birkenhead): May I welcome unreservedly the Secretary of State's statement on simplification, especially the move towards a fairer winding-up system, and on getting those with annuities a better deal? Does he accept, however, that his
statement will be viewed as the last throw in making the voluntary system work? As the voluntary system is failing to give a growing proportion of pensioners a minimum adequate pension, does his Green Paper list the criteria by which we will judge the success or otherwise of his strategy? Can we expect to see success, or failure, this side of the election?
Mr. Smith: I thank my right hon. Friend for welcoming the simplification of the provisions on winding-up, the greater security that we are extending to people and the improvements to the annuities regime. Like other hon. Members, I respect his expertise and long-standing interest in such matters. Indeed, the idea that we could give an option on wind-up to pensioners based on the length of their time in a pension scheme is something that he proposed, as we acknowledge in the Green Paper.
My right hon. Friend says that our proposal might be seen as a last throw for the voluntary system. Let me make it clear, as I did in my statement, that by strengthening the voluntary system through introducing measures to simplify the regime, by enhancing protection for scheme members and pensioners through the radical reform of taxation, and by cutting costs on pension schemes and employers, we hold out the prospect of delivering our promise and renewing and refreshing the partnership on pensions.
We are equally clear in the Green Paper, however, that that has to be reviewed. My right hon. Friend asks about the criteria for that. They must include the trends in pension provision and long-term saving. The review must be based on an assessment of whether each partner to the pensions partnership meets its responsibilities. That has to be part of the test. It is why we need a regular review and why Adair Turner, who leads the commission, will report regularly to me. If the evidence shows that we need to move beyond the voluntary system—for example, by additional compulsion—we have a duty to make that clear to the country.
Mr. Peter Lilley (Hitchin and Harpenden): The Secretary of State will know that I welcomed the Government's commitment to increase by up to 60 per cent. the share of pensions liabilities which will be met by funded private pensions. Since then, however, the crisis in private pension schemes, aggravated by the pensions tax and the disincentive effects of increasing means-testing, has moved us in the opposite direction. Although I welcome some small measures announced in the statement, nothing in it is commensurate with the scale of the challenge or the crisis facing private pensions. Is he still committed to that 60 per cent. target?
Mr. Smith: That indeed remains our objective. It is why the Green Paper sets out all those proposals for radical simplification. There is a sweep and a stunning simplicity to what we propose, not only on tax, but on the reforms on contracting out the reference scheme test and the rest of it. Coupled with stronger protection for scheme members, that is the way to renew confidence in private pension provision. Of course, I share the right hon. Gentleman's goal of providing a higher proportion through the private sector. With our proposals, we can renew confidence so that we move in that direction.
Mr. Terry Rooney (Bradford, North): My right hon. Friend should be wary of building consensus with
people responsible both for raiding SERPS and for the personal pensions mis-selling scandal. Does he agree that over the years all Governments have deceived people about the real cost of providing a decent pension? In the light of that, does he think that a lifetime tax-free limit of #1.4 million, equivalent to #35,000 a year in someone's working life, is the right way to use tax rebates from the Government?
Mr. Smith: I hear what my hon. Friend has said about consensus, but I genuinely believe that there must be durability in pension regimes and confidence in pensions that should transcend individual Parliaments and, indeed, individual Governments. We are all responsible for trying to make this work in the best interests of the country and future generations of pensioners—I know that my hon. Friend will want to do so. As for the #1.4 million limit, all that we have done is translate into a lifetime limit the current maximum entitlement on tax relief. That is the right thing to do so as not to disappoint people who have planned their retirement on their expectations of the existing system.
Mr. Archy Kirkwood (Roxburgh and Berwickshire): There is much that the House will welcome in the Secretary of State's statement this afternoon, and much that will repay careful study. However, there will be disappointment about some of the longer-term aspects of what he said. Is the independent pensions commission, to be chaired by Adair Turner, to be limited merely, if I can put it that way, to the question of voluntarism versus compulsion, or is the Secretary of State prepared to expand its remit so that Mr. Turner can consider longer-term cases and continue to give advice about the way in which the pensions industry needs to be reconfigured in the longer term?
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