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Mr. Tynan: I thank the hon. Gentleman for his intervention but the final part of it was a disgrace. My position is clear. I am speaking from the perspective of the constituents whom I represent. I was not a Member in 1996 but I understand the damage that the Conservative party did to the poorest people in this country during its 18-year reign—that was a disgrace, as far as I am concerned. If we continue to have the mindset of depriving each other due to the means-testing provision, we will destroy a great opportunity for the people whom he and I represent.
Lynne Jones: Although my hon. Friend is right that we must try to encourage people to apply for the benefits to which they are entitled, stigma is not the only problem with means-tested benefits. Does he agree that there is a problem relating to younger constituents who try to make an informed choice about how to save for their retirement? We are not addressing the disincentive for younger people to save for retirement when they do not have a clue what the state will provide for them in 20, 30 or 40 years.
Mr. Tynan: Occupational pension schemes are the key to moving forward on retirement. I was fortunate to be a member of a good occupational pension scheme. It was a sixtieth scheme that allowed me to transfer to a full-time officials' pension scheme and then the parliamentary scheme. No hon. Member will need the state pension when they retire because they will earn much more than £400 a week. I hear people talking about pensions as a universal benefit and saying that everyone should receive the same benefit. If that system is put against one that allows the poorest people to get more, I believe that the system should be run in the latter fashion. People might think that I am wrong but we should target the poor. I understand that one third of pensioners in this country receive more than £400 a week, although I am sure that I will be corrected if I am wrong. They do not need to be targeted because they receive a substantial pension. We need to target those who do not have a substantial pension at present, which is what the Government are doing.
I accept that there are problems with occupational pension schemes. As I said, a constituent contacted me about Melville Dundas. He was a foreman but, unfortunately, he had no union representation at the plant. As a union official, I recognise the benefits of trade unionism—I am sure that some hon. Members disagree with that. After 36 years' service with two years left to go, my constituent thought that he was protected for his retirement. He thought that his pension scheme would give him £17,000 a year but he is now in despair because he does not know how much he will receive. I ask the Government to consider seriously redressing the
problem experienced by the 20,000 people who have been identified. It will not be easy to decide how to do that because those people will find themselves in a situation in which they might receive some money from the pension scheme. We may need to compensate people on a universal basis if, through no fault of their own, and through no fault of the Government, they are suffering because a company and its pension scheme, run by trustees, has gone bust. We should apportion blame where blame exists. We must be sympathetic and deal with the problem. The Government should seriously consider that.As for compulsion, I believe that employer contributions, whether they be 2.5 per cent. or 4 per cent., to occupational pension schemes are the best way forward for this country's future. We need to grasp the nettle on compulsion.
David Hamilton (Midlothian): Does my hon. Friend agree, however, that occupational pension schemes will not deal with the many hundreds of thousands of people who receive just above the minimum guaranteed wage? We will always have to look after that group because when they reach retirement age they might not have contributed enough.
Mr. Tynan: I agree wholeheartedly, but we have to start somewhere. Once we address the problem of occupational pension schemes, we can move forward and deal with other problems.
I am grateful for the opportunity to participate in the debate. We need cross-party consensus on pensions because that will enable us to make progress on eradicating poverty. We make no apology for what this Government have done for pensioners. We no longer talk about the changes to the rules governing the 52-week stay in hospital, but those changes were sought for a long time. We have taken a great step forward. The debate is essential. I look forward to the Government considering the suggestions made.
2.22 pm
Mr. Peter Lilley (Hitchin and Harpenden): It is a pleasure to follow the hon. Member for Hamilton, South (Mr. Tynan), whose concern for pensioners is obviously genuine. All I say in response is that pensioners in my constituency do not think that it is politicians who stigmatise the means test, but that it is the means test that stigmatises them. They hate having to prove how little they have saved or have by way of income in order to claim benefits and to find that every extra pound of savings that they have made results in a loss of some, all or a commensurate amount of benefit.
I congratulate my hon. Friend the Member for Havant (Mr. Willetts) on securing the debate and putting the focus on means-testing. That is central to the consideration of pension issues. It is good that the Opposition have chosen to debate pensions because the most important single issue facing every modern Government in developed countries is how to provide pensions for an ageing population with fewer children.
The UK used to be better placed to face that problem than most of our European partners because we had persuaded more of our population to put aside savings.
As a result, we had more funds to meet future pension liabilities not just than any other country in Europe, but than all our partners in the European Community put together. Now that very healthy situation is under threat. The situation with regard to the provision of occupational pensions, not least of defined-benefit pensions, is little short of meltdown. According to Adair Turner, the pensions tsar appointed by the Government, 60 per cent. of occupational schemes have already closed to new members and a further 10 per cent. have closed entirely, and that is weighted by membership of those funds. Employers are contracting members back wholesale into the state system. We know that that is not purely the Government's fault. The stock market fall was a shock to the system and the anticipated rises in longevity have increased the liabilities of pension funds, but the Government must stand convicted of imposing a £5 billion a year tax on pension funds and introducing means-testing, which will increasingly affect the majority of pensioners, thus making it less likely that they will save for the future.Four key questions have to be asked and, more important, answered when we consider what to do about pension provision. For those who cannot stay until the end of my speech, they can obtain a copy of "Save Our Pensions" for £15 from the Social Market Foundation or free from my website, www.peterlilley.co.uk.
The first key question is how much, if any, pension provision should people be required to make during their working life? My conclusion is simple. Everyone in work should be required to provide for a pension that will be sufficient to avoid dependence on means-tested benefits when they retire. That is the ideal. I do not prejudge whether that provision should be made through a state pay-as-you-go system or funded savings. When I initially considered the matter, I was hostile to compulsion until I reflected that we already compel people to contribute towards the basic state pension and the state second pension if they are in employment. We also compel taxpayers, including those who have made voluntary provision for themselves over and above anything required by the state, so ensuring that they do not need means-tested benefits, to pay through the tax system for those who do need means-tested benefits.
We would all agree that everyone should pay through the tax system to provide help for those in retirement who need means-tested benefits because during their working lives they could not provide a sufficient pension for retirement, perhaps as a result of disability, unemployment or some other misfortune. But is it right to compel people to pay through the tax system to provide state benefits for those who could have made provision for their old age but failed to do so? It is better that the compulsion, if it exists in the system at all, should compel everyone to provide for a basic minimum pension for their retirement, sufficient to ensure that they do not need state means-tested benefits if at all possible.
John Robertson: I know that the right hon. Gentleman is knowledgeable about pensions. He talks about compulsion for the employee. What about the employer?
Mr. Lilley: The compulsion applies to employee and employer because they both contribute to the national
insurance system and, through that, to the state system, and to people who contract out but who receive rebates from national insurance. I hope that that answers the hon. Gentleman's question.The second key question is, how much of any compulsory requirement of provision for retirement income should be funded by saving? I concluded that the state second pension should be replaced by a mandatory funded pension system set at a level, together with the basic state pension—which would remain unchanged—that is sufficient to float clear of means-tested benefits. The Government have set an admirable target of increasing the proportion of future pension liabilities that are met from genuine savings to 60 per cent. against the current 40 per cent. That is good and I am glad that my Front-Bench colleagues have endorsed it. I cannot envisage an alternative way of achieving that target other than to require people to have a funded state pension. That would avoid leaving many people—indeed, an increasing proportion of people—contracted back into the state second pension when they could be contracted out.
I propose that everyone in work should be required to have a pension fund of their own into which national insurance rebates would be paid that are sufficient to meet the level of pension that I have described. That rebate would mirror the structure of the present state second pension, having a strong flat-rate element that is the same for everyone, even if their income is below half the average earnings, which is probably the rough target. That element of the pension should be guaranteed by the state. If, when people retire, they find that, owing to bad investments or for any other reason, their pensions cannot be provided at target level, the Government should top them up—just as, in a defined-benefit scheme, an employer guarantees a certain pension level.
The system that I propose would be introduced gradually. Initially everyone under 30, say, would benefit from the fund, but eventually it would apply to everyone entering the labour market.
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