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7 Mar 2003 : Column 1107—continued
12.55 pm
Mr. Chris Bryant (Rhondda): I am grateful for the opportunity to speak in the debate on the Bill, not least because it seemed a bit ungracious of the hon. Member for Arundel and South Downs (Mr. Flight) to condemn the House for not allowing proper debate when he took no interventions himself. Anyway, be that as it may, I should make some declarations, although I am slightly uncertain as to exactly what level of declaration one has
to make when talking about pensions in the generality. If I get to the age of 65, I anticipate drawing pensions from the BBC, the Labour party and the Church of England.
Mr. Bryant: A church mouse, I fear, rather than a fat cat.
I do not think that there can be many who have that combination of pensions. I also have some AVCs with Equitable Life—sadly—and with the Prudential, and a private pension with Virgin. I do not know whether there are any financial advisers in the House who can tell me whether that is good provision or not, but if there are, perhaps they could see me afterwards.
The Chief Secretary to the Treasury (Mr. Paul Boateng): It is certainly comprehensive.
Mr. Bryant: I am not sure that it is very comprehensive.
The important thing that we have to decide today is whether to send the Bill forward into Committee. As in all Second Readings, the important question, first and foremost, is: is the Bill necessary in the present context? If a Bill is necessary, is this the right Bill? Is it legally correct, and, for that matter, is it politically desirable? Finally, is it amendable? If it were broadly acceptable but needed just a few amendments, it would be right for the House to send it into Committee, where we could amend it, do our bits and pieces and come up with the perfect Bill. I note, however, that when the hon. and learned Member for Harborough (Mr. Garnier) introduced it at the beginning of the day, he said that it was not perfect. It is unusual to hear Members start such a speech with an announcement that their Bill is not perfect. When we consider that this Bill has been before us in various different forms over the past few years, one might have hoped that it might have achieved a sufficient degree of perfection by now for him to have the confidence to stand up in the House and say that he had got it at least pretty well right. Clearly he did not feel that confidence.
Let me go through the issues. First, is the Bill necessary in the present context? I believe that it is not, first for the obvious reason that divergent mortality rates are significant in the United Kingdom. Several hon. Members have referred to the divergence of mortality rates between men and women and noted that there is roughly a three-and-a-half-year difference between them. It is also significant that there is a dramatic difference between mortality rates in different parts of the country and different types of constituency. My own constituency is a former mining constituency, as many hon. Members will know, and many people would assume that the poor mortality rate in the Rhondda is directly associated with the fact that people worked in the mines, even though the last mine closed in 1991, in Maerdy. In fact, industrial disease is not the sole, or even the primary, reason for the difference in mortality rates. The primary reason is the socio-economic conditions in which many people in the Rhondda live. Historically, through the rough and tough 18 years of Conservative rule, people found it very
difficult to live in anything other than poverty. For many young people brought up in households with not one but two generations of unemployment, there was a general supposition that a life on benefit was the best that people could aspire to. That has meant that many people growing up in the Rhondda suffer from a whole host of medical conditions, which have led to our mortality problems. For example, there are high rates of coronary heart disease, partly due to poor diet and partly due to smoking and other problems associated with poverty.In the Rhondda, 86 per cent. of households own their home—
Mr. Deputy Speaker (Sir Michael Lord): The hon. Gentleman has given a little bit of background, but now he should come back specifically to the Bill.
Mr. Bryant: I am grateful to you, Mr. Deputy Speaker, for steering me away from steering away from the Bill.
The point that I am keen to make is that the divergences in mortality rates, which are obviously essential to the process of establishing an annuity, are important in determining whether hon. Members should choose, on unwhipped business, to support the Bill. The pooling of mortality rates, which is essential in buying annuities, is an important principle and we should adhere to it, contrary to the views of the Plymouth Brethren to which some hon. Members referred earlier.
The establishment of a separate annuity rate for men and women, as opposed to the Bill's provisions, is also important. About 40 per cent. of my constituents are pensioners and many of them are women who live on their own. The maintenance of divergent annuity rates for men and women would be very much in their interests.
As the hon. Member for Arundel and South Downs pointed out, we have low annuity rates at present. That is the second important point to explore in considering whether the Bill is necessary. However, inflation is also low. That is a double-edged sword. Low inflation means that there are low gilt returns, which affect annuity levels, but, because the majority of people who buy annuities buy a fixed annuity, the prospect of low inflation in the future means that their annuity is likely to be worth more in the years to come than would otherwise have been the case. At present, there is an unusual convergence of good and bad news for annuities. I think that the vast majority of pensioners would assert that low inflation can only be a good thing for pensioners and that the Government should be congratulated on their running of the economy.
As many hon. Members would agree, we also have a strong and effective annuities market. There are more than 100 annuity providers although the majority of annuities are sold by the top 10 or 20 companies. However, the market shows that those companies provide good value and that there is strong competition. None of the changes proposed in the Bill would be of assistance in maintaining that strong and competitive market.
A further point to consider in relation to any private Member's Bill is whether other changes declared or proposed by the Govt are already in the pipeline and
would make the suggested legislation unnecessary or wrong. Several changes have already been enacted, or will come into force, which make the Bill both unnecessary and wrong.The first is the introduction of the minimum income guarantee. Several hon. Members have referred to its provisions and have pointed out that the relationship between it and the minimum retirement income suggested in the Bill would be extremely problematic. The Government have committed themselves, in the lifetime of this Parliament, to raising the MIG not in line with prices but with average earnings. I hope that that commitment will continue into another Labour term. It would be very difficult to match that commitment with the provisions in the Bill, which are very sketchy regarding the increases in minimum retirement income; the Bill simply provides that the Chancellor of the Exchequer will decide annually the level of the minimum retirement income. Despite a concerted campaign over the past 10 years for reform—which the hon. Member for Arundel and South Downs mentioned—that has been waged by certain organisations in certain parts of the industry, and despite considerable discussion on the Floor of the House and in Committee of issues relating to a minimum retirement income, a major problem with the Bill is that it makes no clear and direct provision as to how the Chancellor of the Exchequer should determine that minimum retirement income.
It is not only the minimum retirement income that gives rise to difficulties. The second difficulty arises from the pension credit, which will come into force later in the year. The credit will be of advantage to many of my constituents, who have argued for a considerable time that one of the bedrocks of pensions policy must be the fact that it rewards, not penalises, those who have set a little bit aside during their lifetime, otherwise we shall be sending young people the message, "Spend as you go; do not worry about the future because in the end the state will provide." That is another danger with the Bill. Its broad message is, "Do not worry about the future. Spend. We shall try to ensure that there is some kind of failsafe arrangement, but broadly speaking use your money as you want and do not worry for the future." It is a vital and essential principle of all our pension policy that we should encourage our young people to make long-term and secure financial provision for themselves; the Bill does the opposite.
Thirdly, and perhaps most importantly the clause relating to how the Chancellor of the Exchequer would set the rate of minimum retirement income each year does not say how that would fit with the pension credit. The pension credit was deliberately intended to increase the amount of money in the household, and not to impact on benefits. But if the minimum retirement income is intended to ensure that people are not reliant on the state, as a result of not having used the whole of their pension fund to buy an annuity but having used some of the additional capital for some other projects, or for some other form of investment, how would one ensure that individual pensioners did not fall foul of the pension credit provisions?
The other problem that I have with the Bill in terms of legal changes relates directly to clause 3, which is the provision for the short title and commencement of the Bill. It says:
- "This Act shall come into force on 6th April 2005"—
If asked for my analysis of whether the Bill is necessary in the present context, I would have to say no. Is this the right Bill? No hon. Member who supports the Bill—only two have spoken so far—has said this, but, as far as I can see, the aim of the Bill is, broadly speaking, to avoid the pooling process that occurs by virtue of people taking out their annuities and, instead, ensure that people can either use their money for other investments of whatever kind or hand on money to their estates.
What would the Bill do for the people of the Rhondda and ordinary working families in return for that change? It seems clear that the first and perhaps most dramatic effect of the Bill would be to deprive the Chancellor of the Exchequer of a significant amount of taxation. The two Conservative Members who have spoken referred to the notorious £6 billion—or was it £5 billion?
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