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Mr. Steen : If the Prime Minister had come to meet the Quakers and to see those peaceful people, he would have heard that their primary concern is the increasing level of council tax and the way in which it funds an army of bureaucrats and administrators rather than front-line services. Will he acknowledge that Devon county council employs as many people as the European Commission in Brussels, and that the managing director of Torbay council is now paid £40,000 more per annum than a Minister of State in the right hon. Gentleman's Government? The Prime Minister could cut council tax at a stroke
The Prime Minister: When the hon. Gentleman began his question, I temporarily turned to the wrong part of my file. I do not want to comment on Devon county council; I am not as aware of the facts of who is employed there as the Quakers. My understanding is that that county council, along with others, has received a very significant increase in the amount of grant from central Government. We believe that the additional amount of grant is important for local authorities. I am sure that when he heard the Quakers' complaints he told them that his party voted against the extra investment that we allocated to local authorities.
Q7.  Mr. Laurence Robertson (Tewkesbury) (Con): Does the Prime Minister value the work carried out by special schools up and down the land that care for children with special educational needs? If he does value their extraordinary work, will he come out in opposition to the plans of the Labour-Lib Dem-controlled Gloucestershire county council to close the only special school in my constituency, Alderman Knight, which is greatly valued not only by the parents and teachers in the area but by the pupils, who really need the school?
The Prime Minister: I cannot comment on the particular school in the hon. Gentleman's constituency, as I do not know the facts about it. In the end, as I hope he realises and other hon. Members appreciate, it is important that these decisions are taken locally and that they are determined by the local process of democracy and consultation. I can only point out to himthis I do knowthat the Gloucestershire local education authority budget has received an extra £670 per pupil in real terms compared with 199798. It is in the end up to the council how to spend that money. I hope that the hon. Gentleman will understand that it is surely right for the Government to point out that we have substantially increased education funding. Once again I point outI say this with no rancourthat he and his colleagues voted against that extra spending.
Q8.  Paddy Tipping (Sherwood) (Lab): Although unemployment in the Nottinghamshire coalfield has fallen by 60 per cent. over the past six years, does the Prime Minister agree that there are still small groups of people who find it difficult to get to work? Will he look closely at today's rural bus challenge announcement of £20 million, which will allow services such as the Boughton Boomerang and the Sherwood Sweeper to be set up to get people from coalfield villages to employment sites?
Sue Doughty presented a Bill to require the drawing up and implementation of a strategy to promote sustainability among local communities; to make provision for the inclusion of targets and indicators in the strategy; to make provision for councils to implement the strategy in their area; to make provision in respect of the powers of electors in relation to the implementation of the strategy; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 23 April, and to be printed [Bill 40].
My Bill would introduce a universal funded second pension to replace the present, largely unfunded, state second pension. Everyone, including the self-employed, would be required to have a pension fund into which they would make payments throughout their working lives sufficient to provide an income in retirement, which, together with their basic state pension, would enable them to avoid being dependent on means-tested benefits.
I started out opposed to compulsion in the sphere of pensions, but we already compel people to contribute towards a state second pension; moreover, we compel prudent people who voluntarily save enough for their own future to pay again through tax to support the less provident who do not save enough and rely on benefits. I concluded that it would therefore be preferable to require everyone in work to contribute towards a pension at least sufficient to ensure that they would not have to depend on means-tested retirement benefits.
To enable everyone to build such a fund during their working life, they would receive a flat-rate rebate from their national insurance contributions paid into their fund sufficient to finance the standard level of pension. Just as employers underwrite the pension provided by defined benefit occupational schemes, the state would guarantee to top up each person's pension if for any reason their fund did not perform well enough to provide a pension at the standard level.
The result of my proposal is that everyone would own their own pension fund. Ownership brings choices and incentives. Once people have their own pension fund, they will find it far easier to put in additional savings. In Australia, the introduction of mandatory superannuation accounts led to a doubling of additional voluntary savings. The effect in this country should be even more marked. The current system of pension credit means that more than three-quarters of the population know that they will face means-testing when they retire, so they will lose 40 per cent. of every extra £1 of pension for which they have saved. Once everyone knows that their minimum contributions to their pension fund will lift them above the means-tested level, they will have every incentive to save more than that basic minimum.
Ownership of a pension fund will give more people more choice about when they retire. They will be free to do so once their fund is sufficient to prevent them from being dependent on state benefit. However, it will give them a double incentive to work beyond the normal state pension age, as every extra year that they work will mean that another year's contributions will be paid into their fund, and there will be a year's less pension for it to finance. There is evidence that people with defined contribution pension funds work longer, whereas groups without such provision retire earlier. Without such incentives, the Government could meet their target of increasing to 60 per cent. the share of pensions funded by savings only by raising the state pension age in line with longevity to make it compulsory for people to work longer. It is better to give people freedom while providing them with an incentive to work longer.
Requiring everyone to have their own pension fund will cut the amount of savings absorbed by the cost of administering pension funds. Over half those costs are due to the cost of acquiring customers. Requiring everyone to have their own fund would eliminate the cost of persuading them to set one up; the amount of advice required and the cost of compliance would be greatly reduced; and the remaining costs would be spread across a far larger pool of savings. My Bill would also make a significant cut in the cost of providing annuities, as I explain in my pamphlet, "Save our Pensions", which is available from the Social Market Foundation for £15, or free at my website, www.peterlilley.co.uk.
Currently, people who contract out of the state second pension must use their fund to purchase an annuity lasting as long as they live. Insurance companies providing those annuities must provide against the risk of unlikely but conceivable increases in life expectancy, for example as a result of the invention of a golden bullet cure for cancer. If those increases in life expectancy do not occur pensioners will have paid too much for their annuities. The need to make such provision would be
At the same time, my Bill would help to tackle the greatest unfairness in our annuity pension system. At present, people on lower incomes, who tend to have a lower life expectancy, subsidise the better-off, who tend to live longer. My Bill would require the national insurance recording system to provide life offices with summarised information about people's lifetime income, similar to the information in someone's tax code, so that they could relate annuity rates to the life expectancy of different income groups. People in lower paid and manual jobs would get better annuities or pensions for a given amount of savings than people on higher earnings.
My Bill would not only ensure that everyone had a comfortable and dignified retirement but would bring about the largest extension of wealth ownership this country has known since the spread of home ownership. It would give more people more choice about when to retire, and more incentive to save and work longer. It would generate a massive flow of committed long-term saving and investment, would enable some of the burden of providing for an ageing population to be spread globally and, ultimately, would reduce the largest single burden on the taxpayer. I commend it to the House.