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7 Mar 2003 : Column 1056—continued
Mr. Garnier: I am always delighted when people take an interest in any legislation. I suspect that if the hon. Gentleman has done his homework, which I am sure he has, and read the Bill and related it to the Income and Corporation Taxes Act 1988, he will not be in any doubt about the Bill.
Mr. Garnier: I wish to make some progress; I have only been speaking for about two minutes. I know that the hon. Gentleman is keen to get back to Scarborough and I do not want to delay him for any longer than is necessary, so if he will contain himself for a moment—
Lawrie Quinn: Will the hon. and learned Gentleman give way?
Mr. Garnier: I shall give way in a moment, perhaps, but I want to make some progress so that other hon. Members, such as the hon. Gentleman, who have a lot to say will feel that enough time has been permitted for them to speak.
In moving my Bill on Second Reading, I am immensely encouraged by the support that it has engendered both inside and outside the House of Commons. In saying that, may I remind the House that the Bill introduced by my right hon. Friend the Member for Skipton and Ripon was given a Second Reading by a large margin and was not defeated in Committee? It simply ran out of parliamentary time. I would be the first to admit that this is not a perfect world and that this is not a perfect Bill, but its imperfections are mine, not those of my right hon. Friend or my hon. Friend the Member for Bournemouth, West. Any imperfections can be dealt with in Committee, and I hope that the House will let the Bill get to the next stage.
Like my predecessors, I have benefited from the invaluable help of the retirement income reform campaign and in particular from that of Dr. Oonagh McDonald CBE, a former Labour MP and shadow Treasury Minister in the 1980's, and Mr. lain Anderson of Cicero Consulting. I have received a large number of letters from my own and other hon. Members' constituents, wishing the Bill success and asking me why it has taken so long to reform this aspect of the law. Our constituents are suffering from the present low annuity
rates, and share the concerns of so many of us that the pensions system in this country is now in a state of crisis and that the lofty complacency that this country has shown towards the pensions systems of continental Europe is no longer justified, if it ever was.Hardly a day goes by without our reading of large public companies—many of them household names and bywords for integrity and financial probity— announcing that their pension funds are in deficit, that they do not have sufficient resources to honour their obligations to their present or future pensioners and that their boards' strategic and day-to-day decisions about the management and direction of the company are now governed as much by the needs of the company's pension fund as by the commercial needs of the company itself.
Clichés about dogs and tails, carts and horses come to mind, but this is the real world of modern industrial and commercial Britain: a sclerosis has beset our economy that is almost exclusively caused by the collapse in the pensions system. Added to the recession in the manufacturing sector and the export of capacity and jobs to Asia and eastern Europe, we now see at every level of the industrial and commercial parts of our economy enterprises that are in reality no more than overdrafts attached to pension deficits.
Young people years away from pensionable age are not investing in their future security through the pensions system, and the state recognises that before very long it will no longer be able to continue to pay tax-based benefits to pensioners at levels which by themselves will provide a living wage to those not at work. The need to deal with that picture is obvious, but the incentives and the vehicles to do so are either absent or have been damaged by the Government.
I do not want today's debate to become a party political point-scoring exercise because that is boring, it produces no new thinking and it is often unedifying, but it cannot go unremarked that the Chancellor's removal of £5 billion a year from the pensions system through his advance corporation tax changes has had a direct and immediate effect on the ability of this country, its citizens and its financial institutions to provide a sustainable and affordable pensions system through individual and corporate schemes.
Mr. Andrew Love (Edmonton): I note that the hon. and learned Gentleman has already become party political in raising the ACT issue, but does he accept that by far the most important reasons for the difficulties in the pension regime are people's increasing longevity, meaning that their annuities have to last longer, and the collapse in the stock market?
Mr. Garnier: I shall not impose an order of precedence on the factors that affect—
Mr. Oliver Heald (North-East Hertfordshire): Will my hon. and learned Friend give way?
Mr. Garnier: May I just finish the sentence? I shall not impose an order of precedence on the factors that affect the current pensions market, but, clearly, annuity
providers will be influenced by the increasing life expectancy of people at the age of 65, 70 or 75. That is not particularly controversial.
Mr. Heald: Does my hon. and learned Friend agree that those who are independent commentators, such as the Association of Chartered Certified Accounts, describe the Chancellor's tax raid as the most significant factor is the current troubles that we are experiencing?
Mr. Garnier: Yes, I am sure that that is entirely right.
Mr. Chris Bryant (Rhondda): Will the hon. and learned Gentleman give way?
Mr. Garnier: No. I am sure that the hon. Gentleman will attempt to catch your eye, Mr. Deputy Speaker. He is a man of no few words, and I am sure that he will want to give full rein to all his concerns about the pensions system. He tabled, with the hon. Member for Hendon (Mr. Dismore), an amendment, which has not been selected, and I have a suspicion that he is itching to tell me all about it, but he can do so in his own time.
There are a number of difficulties facing the pensions system and, added to the matters that I have mentioned, the collapse of final salary and funded workplace schemes has brought to public attention the dangerous state of affairs in the pensions system. The ABI's latest estimate is that the savings gap is £27 billion and the savings ratio is at a 50-year low. The imposition of over-rigid accounting rule FRS 17 has been unhelpful, as has the Financial Services Authority's reluctance to deal with the current rules relating to the solvency requirements for insurance companies that have sold equities in the past 18 months, so impacting on pension portfolio values.
Millions of people are being forced to take out private defined contribution schemes and are thus forced into poorly performing annuities. On top of that, we learn of the Chancellor's decision to tax pensions savings of more than £1.4 million at 60 per cent., which will hit tens of thousands of people retiring on £100,000-plus salaries.
That may not affect many today, but as inflation increases feed into the system, that tax on pensions will hit millions of middle-income earners in 20 years or so.
Lawrie Quinn: Will the hon. and learned Gentleman give way?
Mr. Garnier: No, I will let the hon. Gentleman make his own speech, as I am very worried about his train to Scarborough.
Set against a context in which public sector employees, including Members of Parliament, are protected from new rules designed to allow pension fund trustees to reduce the retirement benefits of workers who leave company schemes early, we have a recipe for public disenchantment with the governing class and the Government in particular.
Another reason why I do not want the debate to descend into party political point scoring is that the Bill has cross-party support, as we heard a moment ago. That is valuable in itself for a private Member's Bill, but when one considers the names of those who have agreed
to sponsor the Bill, the calibre of that cross-party support is made clear. The right hon. Member for Birkenhead (Mr. Field), an expert on welfare reform, whose writings and speeches on pensions and other aspects of the welfare agenda have proved to be insightful and thought-provoking, has put his name to this Bill, and I am most grateful to him. He has his own pensions measure on the Order Paper today, and I hope, as he does, and, I am sure, many hon. Members do, that the Government will permit it to be debated and passed. He rightly wants to help people trapped in distressed pension schemes that could be closed or have their terms altered, by giving them rights to protect their interests against companies that walk away from their pension obligations.The hon. Member for Northavon (Mr. Webb), an acknowledged expert on welfare and pension policy, has also given my Bill his support. I am grateful to him for telling me that although he cannot be here today, he has asked the hon. Member for Twickenham (Dr. Cable), an economist of no little repute, who spoke in favour of the last such Bill in January 2002, and in Committee, to speak for the Liberal Democrats. The hon. Member for Sheffield, Hallam (Mr. Allan) has also signed the Bill.
From the official Opposition, I have the support of my right hon. and learned Friend the shadow Chancellor, my hon. Friend the shadow Secretary of State for Work and Pensions and my hon. Friend the Member for Wealden (Mr. Hendry), who leads on issues relating to young people: the very people who will be most directly affected by the continuing crisis in the pensions industry. To underline the Conservative party's express support for the policy set out in this Bill, I am pleased that the shadow Chief Secretary to the Treasury, my hon. Friend the Member for Arundel and South Downs (Mr. Flight) is here and will endeavour to catch your eye, Mr. Deputy Speaker. He is an expert in many areas of financial policy, and has a particular knowledge of the issues behind this Bill. Furthermore, he has knowledge of the concerns of the Christian Brethren, and he will speak about the measures in the Bill that assist them. Importantly, the Bill is signed by my right hon. Friend the Member for Skipton and Ripon and my hon. Friend the Member for Bournemouth, West, its parliamentary parents, and I am grateful to them both.
Formidable supporters, all of them, but I do not underestimate the difficulties that are in front of me. The Financial Secretary, in her short but highly productive life, both in politics and elsewhere, has probably forgotten more about pensions and annuities than I, in half a century, ever knew. She also has the resources of the Treasury and the Government machine at her disposal.
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