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20 Jan 2003 : Column 84—continued

7.10 pm

Mr. Julian Brazier (Canterbury): We have had a good debate, despite the fact that the time has been squeezed by two statements. I was particularly struck by the speech of my right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot), who outlined very

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clearly just how serious is the crisis facing the pensions industry in this country. He did not seek to lay all the blame at the Government's door, but he made it clear how much worse they have made the situation.

In 1997, the Government inherited an economy in which private pension savings, across the different categories of schemes, were more than those in the rest of the EU put together. Since then, the proportion of people who reach retirement age with a second pension has fallen from 67 per cent. to 59 per cent. The rate of closure of pension funds to new members is accelerating, and 12 million workers have no pension arrangements at all. That is a shameful record.

We chose today to focus specifically on the wind-up of company pension schemes. The right hon. Member for Birkenhead (Mr. Field) made it clear that that is the most urgent aspect of the entire crisis. I realised how bad the situation was when a constituent of mine who worked for ASW, or Sheerness Steel as we used to call it, came to see me. He was just weeks from retirement, and he told me that after nearly 40 years with the company, he will not know for two or three years what his pension entitlement is, and he may receive less than half of the amount that he was expecting.

We have discussed a number of issues today. First, and central to the crisis and to our motion, is the issue of priority, and we made it clear in our motion how we see that. A number of Members, including my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) and the hon. Member for Bradford, North (Mr. Rooney), mentioned the important issue of the role of the independent trustee. A survey by Higham Nobbs, which looked at many closures, showed that up to £800 million appears to have been wasted in excessive fees. The conclusion of those industry specialists—that the average wind-up takes far too long and is too expensive—should give us all pause for thought. Other issues mentioned include the priority that a debt to a pension fund should take and the question of insurance, compulsory or not.

Against that background it was very depressing to hear the Minister for Pensions take almost a quarter of the total time allocated for the debate to make a speech in which he largely attacked the Opposition on matters that have nothing to do with this. He can argue quite reasonably that when consultation is going on, he cannot give his views on the particular points in our motion. However, hon. Members on both sides of the House have pointed out that we are in the middle of the Department's 26th consultation on pensions, and many people want this narrow and desperately urgent issue unbundled from the rest.

I shall ask Ministers two questions, and the Under-Secretary may choose to answer them in her speech. First, are the Government willing to consider unbundling the issue of wind-ups from the rest of the package? Secondly, is the Minister for Pensions seriously saying that there can be no retrospection at all? I hope that I misheard him, because this matter may affect many thousands of people. Nobody, least of all Opposition Front Benchers, would argue that measures should apply retrospectively to the time before the Green Paper was published. However, many companies at the margins have read its small print very carefully and asked themselves whether, if they are going to bail out, they should not do so quickly before the provisions

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bail in. Why cannot the Under-Secretary say that measures will apply retrospectively from tonight, if not from the publication of the Green Paper? Otherwise, the Government are providing a huge incentive for the problem to get worse and for more companies to back out of their commitments before the rules change.

In a typically articulate speech, the hon. Member for East Carmarthen and Dinefwr (Adam Price) made a powerful case for insurance and a central discontinuance fund. However, he did not fully explore the downside of that idea, which obviously lies in the likely costs that must fall ultimately on the taxpayer or on pension funds, many of which are already struggling. I listened with interest to the hon. Member for Birmingham, Selly Oak (Lynne Jones). I am not sure that I agree with her recipes, but she brought her extreme concern and interest and her knowledge of the subject to the House, as she always does.

I hope that the Under-Secretary will make it clear that the Government understand two points that go beyond the central crisis in the pensions industry and which they have refused to acknowledge—they simply go on and on consulting. First, they must accept that the crisis in winding up is the red-hot tip of the crisis as a whole. Secondly, if they announce possible action and give detailed options that put extra burdens on companies but do not make their measures retrospective to the date of the announcement, they will worsen the problem, and thousands of people will suffer.

Will the Government unbundle this urgent issue from the rest of the package? We have made it clear what we think, and we are willing help them to take legislation through the House, if it is even needed; the central issue of priorities could be handled by secondary legislation. Will the Under-Secretary also address the point about retrospection?

The Opposition take our responsibilities seriously. We have repeatedly drawn attention to this issue. We have set out our views in black and white in the motion about what should be done about the central issue of prioritisation. We have even offered the Government every possible co-operation in taking swift action in the House to tackle the problem. When are the Government going to take action?

7.18 pm

The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): I welcome the debate, which although short, has been robust and fascinating. I welcome the fact that the Opposition are buying into some of the proposals in the Green Paper, which shows a willingness to develop a consensus for moving forward. Certainly, on pensions, the wider the consensus that we can achieve, the better. We look forward to hearing what else they have to say and what other parts of the Green Paper they agree with, because the motion is very narrow.

Many Members from all parties and many people outside the House are concerned about ensuring an appropriate level of protection for the interests of pension scheme members on wind-up, whether or not insolvency is the cause. That is partly because there have been high-profile cases to which right hon. and hon. Members have referred. My hon. Friend the Member for Cardiff, West (Kevin Brennan), the hon. Member for North-East Hertfordshire (Mr. Heald) and others have talked about ASW.

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If we value our voluntary system of private pensions, and we do, pension promises must be kept. That is an important part of the partnership. The question is how we can balance appropriate protection for members, which is tremendously important, with sufficient flexibility and the lowest possible costs, which will make the provision of pension schemes appealing to employers as well.

My right hon. Friend the Minister for Pensions set out our proposals for improving protection on wind up, so I shall refer to only one or two of them before I deal with some of the points that have been raised in the debate. In the Green Paper, we are already consulting on whether there should be a fairer sharing of assets between those with larger and smaller pensions when a scheme winds up. We are looking at capping the level of the highest payment where there are limited assets. In his opening remarks, the hon. Member for North-East Hertfordshire appeared to show some sympathy for that, so we look forward to the support of the Opposition on that proposal.

Where there is a wind-up of an underfunded scheme, we are looking into possible changes to the priority order, introduced in 1995 by the Conservatives, to ensure fairness for those affected. However, it is right that we should listen to what everyone affected might think of the proposals, as the National Association of Pension Funds noted in its parliamentary brief for this debate. Despite the calls for immediate action, citing the ideas of the NAPF, which we heard from Opposition Front-Bench speakers, the association itself says that further discussion with interested parties would be necessary to finalise the fairest and most practical solution. The NAPF does not suggest that we move immediately to producing a set of regulations but that we should get things right before we go forward. I approve of that.

The motion expresses deep concern at the current arrangements for dealing with pension funds affected by employer insolvency. As we have already heard, the Conservatives devised those arrangements, so it is touching that they are now championing workers' rights. I prefer to look at the Conservatives' record, however, and to judge them on the basis of what they did when they had the chance.

During their 18 years in office, the Conservatives did nothing to enhance protection for workers affected by insolvency and redundancy and they themselves devised the order of priority between unsecured creditors on the wind-up of schemes that they now criticise. When prompted, the hon. Member for North-East Hertfordshire remembered that in fact he was responsible for that when he was an Under-Secretary at the former Department of Social Security. As the hon. Member for Northavon (Mr. Webb) kindly reminded us, the responsibility did not lie only with the hon. Member for North-East Hertfordshire; both the current Leader of the Opposition and their previous leader were involved in setting out that order of priority.

It is not as though there was no pressing problem of company insolvency and redundancies during the Conservatives' time in office. They were engaged in systematically wrecking the private pension provision of

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millions of workers by promoting mass unemployment. That did not happen by accident; they did it on purpose. Creating mass unemployment was an instrument of economic policy for the Conservatives. They were also engaged—just for good measure—in allowing the mis-selling of private pensions on a truly staggering scale, so people who did not lose their jobs might have fallen foul of that.

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