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17 Dec 2002 : Column 706—continued

Rob Marris (Wolverhampton, South-West): The target used by many commentators and academics in describing what constitutes a reasonable pension is 67 per cent. of final earnings. Does the Secretary of State agree with that target and, if not, what percentage does he suggest?

Mr. Smith: I am very sceptical of the idea that expert commentators, the state or anybody else can specify what the replacement rate or, indeed, the long-term savings rate should be. I think that those decisions are better taken by families and individuals jointly with their employers throughout the country. As I said in my statement, for that to happen, people must have accurate information about their prospects and a simple range of products that they can trust, and they must be incentivised to do the right thing. Our proposals do all of that.

Annabelle Ewing (Perth): The Secretary of State has been less than convincing on how the provision of a decent state pension is compatible with the Government's increased reliance on means-testing.

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Does he accept that means-testing is demeaning, unduly complex, acts as a disincentive to save, has a negative impact on take-up, and hence is failing our pensioners?

Mr. Smith: It is a distortion to refer to the proposal as though it is some old-style measure. Actually, it gets us away from weekly means-testing, with an assessment made every five years. Does the hon. Lady feel demeaned when her tax is assessed on that basis? What is the difference? If we are to make the best use of the limited funds available, it makes sense to give an entitlement that benefits everybody, but to have a system that enables us to get the most help to those who need it most. The logical implication of what the hon. Lady and those who think like her advocate is that we should take money from the poorest pensioners and give it to those who are better off. That does not commend itself to me.

Mr. George Mudie (Leeds, East): I welcome the Minister strengthening the position of workers when a final salary pension scheme is wound up, but does that mean that he is giving up the ghost on final salary pension schemes, or is there enough in the Green Paper to persuade employers to continue to run them? On shareholders, does anything in the Green Paper increase the 1 per cent. cap in view of the low take-up? If not, what measures are in the Green Paper to increase take-up?

Mr. Smith: We certainly have not given up on final salary pension schemes. Employers, together with their employees, must determine those matters for the future. One welcome implication of our proposals is that employers will have to consult their employees before they change a scheme. I hope that hon. Members on both sides of the House support that. We shall encourage employers to provide good schemes by cutting administration costs by #150 million to #200 million.

As has been acknowledged in the industry, the 1 per cent. cap on charges has been of great benefit in driving down the level of charges. We shall consult early next year on the stakeholder suite of products, and evidence on the impact of the cap will be taken into account.

Angela Watkinson (Upminster): Will the Minister clarify his intentions for the many very small businesses that are struggling for survival? Will there be a lower limit, in terms of annual turnover and the number of employees, below which there will be no requirement to participate in employees' pension schemes?

Mr. Smith: We are consulting on the proposals in the Green Paper precisely to take those views closely into account. Earlier, Conservative Front-Bench Members complained about our consulting. I think that it is right that we consult, so that we take into account the interests of the general public and, importantly, of small businesses as well as larger ones.

Paul Flynn (Newport, West): As it is virtually impossible to convince young people that they will ever grow old and need a pension, and very difficult to persuade young couples in the early furniture-buying,

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child-rearing days of marriage to make adequate pension contributions, is not the only practical long-term solution a scheme based on compulsory contributions, guaranteed and underwritten by the Government because all parts of the private sector are no longer to be trusted? If compulsion is inevitable, why not have it sooner rather than later?

Mr. Smith: I take my hon. Friend's point about the difficulty of encouraging younger people to save. There are plenty of pressures on them to consume and spend their money in other directions. Our proposals include working in partnership with the Financial Services Authority and the financial services industry to intensify the drive to promote education and improve financial literacy so that people better understand what they need to do to save for the long term. The evidence shows that sending people a combined state and occupational pensions forecast has an impact, even on younger people's saving behaviour. However, the great merit of our lifetime limit on taxing pension contributions is the greater flexibility that it gives people to determine the period in their lives when they want to make the bulk of their savings for retirement.

My hon. Friend made the point that any compulsory system would have to be underwritten. If it were compulsory to contribute additional sums towards a pension, people would expect the state to stand behind what was guaranteed. That would resemble a tax to many people. I do not perceive much enthusiasm among young people for higher taxation.

Rev. Martin Smyth (Belfast, South): The Secretary of State knows that self-employment is a growth industry. Many self-employed people in manual and construction industries live their lives according to the proverb that a bird in the hand is worth two in the bush. In the light of past pension mis-selling, and even the occasional failure of Governments to advise women about the reality of their choices, what guidance will be given to self-employed workers to take up a state second pension?

Mr. Smith: We must ensure that the self-employed are a priority for receiving the pension forecasts that we will give out to an increasing number of the working population. Evidence shows that the self-employed are polarised in their savings behaviour between those who have made adequate provision and those whose under-saving is potentially calamitous. It is important that they are alerted to the need to save more.

The Green Paper contains two pieces of especially good news for the self-employed. First, they will be able to opt into the state second pension. They need to judge for themselves whether to do that. Secondly, our new tax regime will allow much greater flexibility, for example, for people to transfer savings that are in an individual savings account, or released from housing or business equity, into a pension plan later in life that will attract tax relief. That could be especially beneficial to the self-employed.

Ms Candy Atherton (Falmouth and Camborne): I welcome the Government's intention to legislate against age discrimination and enable older workers to choose when they retire. However, many employers find it

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difficult to obtain insurance to enable them to continue to employ older workers. Will my right hon. Friend look into that?

Mr. Smith: Yes, I shall be pleased to do that. It is right to record that, in proceeding with our commitment to counter age discrimination, we are building on my hon. Friend's past legislative initiatives.

Several hon. Members rose—

Mr. Speaker: Order. Hon. Members know that we shall return to these matters. I therefore now call the next statement.

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Transport Investment Plan

4.33 pm

The Secretary of State for Transport (Mr. Alistair Darling): With permission, I should like to make a statement on transport investment. Today, I am publishing a report on progress since April 2001 on the 10-year investment plan for transport.

The plan commits the Government to spending more than #180 billion of public and private investment over 10 years. It is an unprecedented commitment, which will provide stability and increasing spending in the long-term. Maintaining the investment year after year is essential to make up for decades of under-investment and neglect.

Over 10 years, that means public expenditure of more than #22 billion on strategic roads, #33 billion on the railways and #51 billion on local transport. The plan marks the first time that a Government have been willing to commit themselves to such a level of funding over a long period. The funding makes and will continue to make a genuine difference.

If we examine other countries' successes in transport, the common factor is sustained investment year after year, decade after decade. That is why we remain committed to updating and rolling forward the plan in 2004 to coincide with the next public expenditure review. It will take account of progress so far and the challenges that have to be met in the years to 2015 and beyond.

Such long-term commitment and planning is essential to rebuild and maintain the transport infrastructure that we need for continued growth and prosperity. The report sets out the achievements of the first 18 months since the plan came into effect. As I told the House last week, our objective is to improve Britain's rail and road network. We take a balanced approach with investment to tackle congestion, improve reliability and make journeys safer, and to do so in a way that is consistent with our wider social and environmental obligations. I shall set out some of the key points.

Last week, I announced major investment designed to tackle congestion and improve journey times. Schemes will range from major enhancements of some of our key strategic routes—for example, the M1 and M6—as well as bypasses and smaller schemes to tackle bottlenecks. We have also introduced measures to manage better existing roads, and I also announced further investment in local transport and rail.

As the report makes clear, the latest analysis shows that there was more traffic in 2000 than had been thought. That, coupled with the fact that economic growth over the next 10 years is projected to be higher than anticipated, means that the forecasts made two years ago almost certainly underestimated the congestion that we face. Without the investment in the 10-year plan, congestion would have continued to rise unchecked. The report shows that we will not only stem that growth, but deliver considerable reductions in the congestion that we would otherwise have seen.

To tackle congestion, it is necessary to tackle its causes, which is why we are spending more to deal with bottlenecks on the roads system and spending more on public transport. Measures to tackle congestion are

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beginning to make an impact. Bus use nationally has begun to grow after years of decline and stagnation, light rail use has grown by a third over the past two years and the number of rail passengers has increased by nearly a quarter since 1997. We clearly need to do more, but all that will be possible only because of the commitment to sustained investment year on year. I shall announce further measures next year.

The House will also wish to know that there has been a 15 per cent. reduction in deaths and serious accidents on roads. For children, there has been a 27 per cent. reduction, which is a tribute to all those who have done so much to improve road safety. On railways, public expenditure is estimated to be #33 billion compared with #29 billion 18 months ago. We are committed to sustaining that investment, as it is essential to improve both reliability and safety, but it is also essential that the industry get a grip of major projects.

The public rightly expect us to ensure that their money is well spent and that there is rigorous control of costs. Spending in the next few years will rise from #2.1 billion in 2001–02 to #4.3 billion in 2005–06, which means that, although there is #312 million less for the SRA over the coming three years than was forecast earlier this year, spending on rail is double that at the start of the plan.

That investment will deliver results only if costs in the industry are brought under control, which is why Richard Bowker, the Strategic Rail Authority chairman, is right to insist that the railway industry gets a proper grip on its costs—something that was conspicuously absent in the past. The report shows that the railways are carrying nearly a quarter more people than they were five years ago, but we will sustain that increase in use only if we can show that the service is better and, crucially, more reliable.

That needs more investment, but it also requires better management of the existing network, which is what the SRA is providing. The SRA is carrying out a review to ensure that the best use is being made of existing capacity, projects are more tightly managed and costs are driven down. As the report shows, significant public investment is going into the west coast main line, which will allow greater reliability, but only because the SRA and the industry showed their determination to exercise rigorous control of the project and its costs.

Progress is being made elsewhere, too: sustained investment year on year—over #1 billion-worth of new rolling stock has been introduced since April 2001 and a further 2,100 railway vehicles are on order; 90 per cent. of the first phase of the new channel tunnel rail link is complete, which is the first major new rail line for over 100 years; the installation of a new safety system, the train protection warning system, on about 70 per cent. of the track and about 90 per cent. of the passenger fleet; upgrading of the power supply for London commuter trains; and more maintenance, more renewals.

Investment yes, but, just as elsewhere, with investment must come reform. Every one of us knows that standards on our railways can be improved. The report shows that we are prepared to spend more, but, in return, the railway industry has to do far more to drive up standards and reliability. Our priority is to

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deliver a safe and reliable transport system that enables people and goods to move around the country as easily and efficiently as possible. The plan sets out the investment to achieve that over a 10-year period.

There are no quick fixes or easy solutions. Sustained investment is needed year on year and over many decades. We are committed to the long haul, and to the sustained investment and improvements in services that are essential to our continued economic and social prosperity.

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