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Mr. Steve Webb (Northavon): I thank the Secretary of State for his statement because today's workers are experiencing a crisis of confidence in their pension funds and some of the measures that he has announced will help to alleviate it. We welcome the proposal to crack down on solvent firms that try to wind up underfunded schemes. That is a welcome change.
We also welcome the proposal to give workers who have worked for their company for a long time better pension protection if the firm becomes insolvent. It is immoral that someone can put a lifetime's savings in a pension scheme and find that they have been taken away. As the Secretary of State said, there is all-party support for that. It is therefore all the more regrettable that, six months on from the publication of the Green Paper, no concrete proposals have been published. Can the Secretary of State confirm that he has not yet put on the table exact details of how the proposal is going to work? The longer this process is delayed, when insolvent employers wind up a scheme, the more workers will be vulnerable.
I have a number of concerns about the measures that the Secretary of State has proposed. Can he confirm that he is watering down the protection that future pensioners will get against inflation? Inflation is running at 3.1 per cent. today, which is higher than the 2.5 per cent. protection that company pensions will get in the future. If those circumstances repeat themselves in the future, will every company pensioner in the land see a year-on-year fall in their real living standards? Does this not also mean that the oldest pensioners, after years of falls in their living standards, could yet again be the poor relation?
By far the most substantial announcement today is the proposed pension protection fund. I absolutely sympathise with the Secretary of State's desire to give people security, but there is a real problem here. Insuring pensions is not like insuring holidays or cars. If a holiday firm goes bankrupt, a few hundred pounds of compensation might be required; if a car crashes, a few thousand might be needed; but if a major company pension fund winds up, we might need a few billion. Is the Secretary of State really saying that the insurance scheme will be allowed to borrow billions of poundsand, if not, will the Government guarantee to stand behind it? If they will not, this could be a cruel
Mr. Smith: I thank the hon. Gentleman for his positive welcomefor the most partfor our proposals. He put it to us last week that he might be applying for the job of Pensions Minister, and if that was his first interview, perhaps he is making some progressbut it is still a case of "Don't call us, we'll call you." He asked about the timing of the measures. As I said in my statement, as far as the proposals on the wind-up of solvent companies are concerned, we are publishing the regulations today and they will, after consultation and due process, take effect from today. He will understand that that is an essential corollary to bringing in the pension protection fund. Firms will have to meet their obligations in full if they wind up their schemes. We shall be laying the regulations relating to the priority orders shortly.
Yes, of course there will need to be a period between now and when the legislation takes effect in which to set up the pension protection fund. As I said, we will introduce those provisions just as soon as parliamentary time allows. No one is more seized than I am of the importance of getting on with this. To return to a point raised by the hon. Member for Havant (Mr. Willetts) about a pensions crisis, I have to tell the House that I would not be introducing these wide-ranging radical measures if I did not accept the scale of the challenge, and the scale of anxiety that is afflicting pensioners in this country[Interruption.] We are taking action, whereas the Conservatives have no alternative remedy to offer.
The hon. Member for Northavon (Mr. Webb) asked about inflation protection. As I explained in my statement, the 5 per cent. mandatory cap was brought in at a time when long-term market expectations of inflation were running at 5 per cent. They are now running at 2.5 per cent. This is therefore a reasonable adjustment. To put it in even more commonsense terms, I believe that the person in the street would readily trade some of their inflation protection for the knowledge that they have security for their pension scheme, which they do not have at the moment. People are worried that other firms will go the way that some already have, and that they will lose their pensions altogether. That is why it is so important that the Government act to introduce these proposals.
The hon. Gentleman referred to the analogy of holiday protection and motor insurance, but I think that he actually reinforced my argument. If people can count on the fact that firms providing that kind of insurance will be covered if they go bust, surely it is much more important that we have protection for pensions. Yes, the pension protection fund will have to deal with very large sums of money indeed. I am confident, however, having learned from the American experiencerather than replicating itthat we can make the fund work very successfully here on the basis that I have set out.
May I suggest that, in building a consensus across the House, the Government give some of their own time to discussing the Pensions (Winding-up) Bill, which will come before the House on 20 June? Will the Secretary of State also tell us his ideas for people who will not be covered by anything that he has said todaythose of our constituents who have already lost all or part of their pensions? Will he consider putting a levy on the £13 billion in unclaimed assets held by banks and building societies, so that we can deliver justice to that group of workers, as well as planning carefullyas he has outlined todayfor any of our other constituents who might find themselves in the same awful pit as those people who have been made to save for more than 40 years and have lost every penny of their savings?
Mr. Smith: I thank my right hon. Friend for his kind opening remarks, and for what I take to be a general welcome for the Government's proposals. As he says, the content of today's statement really means something to our constituents. All hon. Members know that when people see that the pension that they have been paying intowhich they assumed would afford them some protectionis not there, they are shocked, horrified and very angry. This touches the lives of our constituents in a very real way, and I am proud that it is this Government who are introducing protection for occupational pension schemes, and protection under the TUPE regulations for transfers within the private sector.
As for the creation of the pension protection fund, it has been a long-standing aspiration of the trade union movement that something such as that could be put in place. In terms of my right hon. Friend's metaphor about foundations, I hope that he and our constituents will see this as a substantial building block for rebuilding confidence. He raised the agonisingly awful issue of people who have already lost their pension entitlements. Nothing would be more cruel than for me to come to the Dispatch Box and raise false hopes about what might happen. If we are legislating for the future, in terms of establishing a pension protection fund, that would apply in the future and not retrospectively.
I have taken note of the proposals of my right hon. Friend the Member for Birkenhead (Mr. Field) about orphan assets. The Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Liverpool, Garston (Maria Eagle), pointed out in the debate last week that just because those assets are unclaimed does not mean that they do not belong to anyone. She also said, however, that she and I stand ready to meet people and to engage constructively with any sensible proposals on the subject. The experience of
Mr. Nigel Waterson (Eastbourne): Like many hon. Members, I have constituents who have seen their pensions disappear when a company has gone bust. I therefore welcome, on the face of it, what the Secretary of State has said about changing the priority for creditors in such situations. I want to ask him a specific question, however. After the recent scrapping of priority for the Inland Revenue and Customs and Excise, exactly which interests will be leapfrogged by the interests of pensioners, and will pensioners really have the full protection that they deserve in such circumstances?