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Mr. Willetts: I give way to the right hon. Gentleman—that distinguished defender of the rights of the bourgeoisie.
Alan Howarth: I am grateful to the hon. Gentleman. He expresses concern about the interests of the poorest pensioners, but is not his policy—to introduce an earnings link for the basic pension, but remove the earnings link from the minimum income guarantee—regressive?
Mr. Willetts: We shall have to wait to hear from Ministers what their plans are for uprating the pension credit. I have regularly asked the Secretary of State what his plans are for its future. Labour Members assume that the pension credit will be earnings-linked in future, but we shall have to wait and see. So far, we have heard no statement from the right hon. Gentleman about his intentions for the pension credit if he were re-elected.
It is not simply that we need that information so that we can assess our proposals against his but that it is very relevant to the Bill. How can he require private pension providers to deliver pension illustrations stretching way into the future when he will not even come to the Dispatch Box and tell us what may happen to the value of means-tested benefits in two years' time? How can there be proper modelling of people's pension prospects without a reliable and authoritative statement from the Secretary of State about what is to happen to the uprating of means-tested assistance for pensioners?
One of the omissions in the Bill is that it fails to tackle—
Mr. Bill Tynan (Hamilton, South) (Lab): Will the hon. Gentleman give way?
Mr. Willetts: I should like to make some progress, as I know that many Members want to speak.
There are no provisions in the Bill to reform state benefits, although I welcomed the modest encouragement from the Secretary of State to table
amendments in Committee to try to address that serious omission. My hon. Friend the Member for Eastbourne (Mr. Waterson), who will be fighting energetically in Committee, will, I am sure, have taken note of the Secretary of State's remarks.The other failure in the Bill is that it contains no new incentives to save. Over the past few years, the Government have been systematically stripping away incentives to save. Contracted-out rebates are no longer set on an actuarially fair basis and a £5 billion a year tax has been imposed on our pension funds.
Mr. Tynan: Will the hon. Gentleman give way?
Mr. Willetts: I should like to conclude my point.
In a rash moment, when the Secretary of State was challenged on how he expected people to save for the future, he said:
- "The answer is the ISA, a more flexible vehicle which is attracting more savings, especially from younger people."—[Official Report, 2 July 2002; Vol. 388, c. 103.]
Sir John Butterfill: Will my hon. Friend also confirm that the Government have reduced the limits on ISAs?
Mr. Willetts: My hon. Friend is right. The limits have been reduced and now the 10 per cent. tax credit is being withdrawn. In equity, I must now give way to the hon. Member for Hamilton, South (Mr. Tynan).
Mr. Tynan: The hon. Gentleman is most generous. Does he accept that the Conservatives were in power for many years and created the poverty that meant that people could not save for retirement, but that we are changing that culture and he should be ashamed of what happened in the past?
Mr. Willetts: I am afraid that what has happened is that the savings rate—the amount that we save as a nation—has not risen since 1997; it has been declining since 1997. There are many reasons for that, but among them, I am afraid, are the Government's policies. Taxing our savings and spreading means-testing is not the way to encourage people to save. That is why, sadly, the Bill will not tackle the savings crisis facing our country.
Mr. Willetts: Many Members on both sides of the House want to speak, so I shall conclude.
Of course, the Opposition support the need for insurance for pensions, but because the Bill fails to improve incentives to save, fails to tackle the need to reform the state benefits system and fails to answer crucial questions about how the insurance scheme will
work, we have proposed our reasoned amendment, which is a far better approach than the one taken in the Bill. I therefore commend our amendment to the House.
Mr. Deputy Speaker: Order. Before I call the next speaker, I remind the House that Mr. Speaker has placed a 15-minute limit on all Back-Bench speeches, which applies from now on.
2.8 pm
Mr. Frank Field (Birkenhead) (Lab): I rise to congratulate my colleagues on the Treasury Bench on the Bill. In my short contribution, I want to set out four cautions about the Bill, but I do not want anybody to interpret my remarks as criticism of the strategy that the Government are adopting in this aspect of pensions policy.
No great Department is a free agent in any Government. Under this Government, we know that the imperial power of the Treasury has an extensive interest throughout Whitehall, and especially in Work and Pensions, so we should congratulate my right hon. Friend the Secretary of State on what he has been able to bring forward today within the limits set on him.
I hope that we will have changed the Bill in some important respects before it passes into law, but I doubt whether we will be able to deal with the subject of my first caution. Although we cannot expect those on the Treasury Bench to acknowledge this fact publicly at present, we know that we do not have a satisfactory long-term policy on savings and pension provision. One of the reasons for that—it is a paradox—is because the Chancellor, in his proper enthusiasm to help the poorest pensioners, has concentrated help in the form of the minimum income guarantee and pension credit. If help continues to be concentrated in the form of a means test that stands alone with no other measures, it will undermine the long-term confidence of perhaps 40 per cent. of the population in providing for themselves. I do not believe that any free society can operate in the longer run if most working people know that it is not in their interest to save. At some stage, the House will have to return to the consideration of our long-term strategy on pension savings.
The Government expect to receive a report from their Pensions Commission. I appreciate that there might be some logic in believing that when the commission reports in July, although perhaps that will be delayed until the autumn, the Government will ask it to deliver a report on its proposals and suggestions for long-term reform a year hence—after a general election. My caution for those on the Treasury Bench is that the results of the first period of operation of the Pensions Commission, which is exclusively concerned with collecting a coherent set of data on long-term savings for the first time, might be so shocking to us and our constituents that the voters will not give the Government another year in which the commission may think of what fine schemes it would like to commend.
Let us consider what is happening in all our constituencies. The turnout of people below pensionable age at elections has fallen dramatically.
Turnout is falling most gently among people who are approaching retirement age or beyond it, so the next election will probably be the first ever in this country in which the majority of people who vote will be pensioners. There will certainly be a majority of voters who are five years from retirement or retired. Although pensions do not play in the Gallup polls that are useful guide to all of us, long-term savings and security in retirement might be concerns below the surface that will have a joker-type effect when the ballot boxes are opened after the next general election. I make a plea to those on the Treasury Bench to think about long-term reforms. We need to back up the success of the Government's short-term policies of helping the poorest pensioners now.My other three cautions relate to the Bill, and my first refers to the risk factor and its weighting when working out the levy. I make a plea to those on the Treasury Bench to take a totally different approach to working out the levy. The people who are most interested in seeing the scheme up and running are not employers, but our constituents who are members of pension schemes. I happen to believe the trade union line that pension savings are deferred wages. The logic of that position means that those who will benefit from a pension should pay the levy, which should be related to the number of years for which they contribute and the size of the pension that is being insured.
It would not be wise to try to put a risk-based levy on employers, especially given what the Secretary of State said about that possibly taking a firm's credit rating into account. If we go down that avenue, the markets will eagerly wait for the Government to approve the publication of the risk-based levy, after which they will start to punish firms with a low credit rating on the Government's list. The need for an insurance scheme thus might become that much greater because more companies could be driven over the edge as a result of the publication of the information than would otherwise have been the case. I know that such a change to the Bill would be large, but I ask the Government to determine whether there is an alternative way of raising the required funds—we all agree that they are necessary—for an insurance-based scheme before we reach Committee.
My next caution relates to the loss of pensions, which many of our constituents have already suffered and that many more may suffer before the Government's scheme comes into operation. I agree with all those, especially Labour Members, who have said that if the Secretary of State fights his corner in government and comes forward with a scheme to compensate people who have already lost their pensions—I hope that he will be able to do that—all hon. Members will have a duty to ensure that none of us use that scheme to try to ensure that our favoured group is covered.
I was disappointed by Opposition Members the last time we discussed the matter because they immediately jumped up and said, "What about Equitable Life?" I declare an interest because I saved with Equitable Life. That was a foolish decision, in retrospect, but no one made me save with Equitable Life. We are talking about our constituents who, as a condition of employment, were made to join their pension schemes. Even after that
requirement was dropped, most people in pension schemes did not know that the Government had changed the law.
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