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John Robertson: I am sorry to disappoint the hon. Gentleman, but I shall not give way, as my hon. Friend the Member for Hamilton, South (Mr. Tynan) wishes to have 10 minutes to make a speech. I am sure that when the hon. Member for Eastbourne (Mr. Waterson) sums up, he will manage to put the record straight.
The hon. Member for Bury St. Edmunds (Mr. Ruffley) said that since 1997 there has been a lack of consultation by the Government. I asked myself what good things happened in the 18 years between 1979 and 1997, then I realised that there were none. The hon. Gentleman is a lawyer and as he knows, ignorance is no excuse. He was happy that his hon. Friend's constituents would lose between £30 and £38 a week. I ask members of his Front-Bench team to give the hon. Gentleman a better brief and a smaller shovel.
The pension protection fund is in many ways the antithesis of the laissez-faire Thatcherism newly reclaimed by the right hon. Member for West Dorset (Mr. Letwin) which, as I witnessed at Defence questions yesterday, caused so much discomfort for the hon. Member for Mid-Sussex (Mr. Soames). The PPF shows the importance of judicious Government intervention to protect those who suffer through no fault of their own.
The Government did not become insolvent, the Government did not employ the people concerned, yet the Government will step in to protect their pensions.The House should deal with pensions as a cross-party issue, but today we have again seen Opposition parties indulge in opportunistic petty point-scoring. The saddest thing about the debate is the fact that the Opposition tabled an amendment. One of the problems discussed earlier by Front-Bench spokesmen was that cost seems to be a sticking point for the Government. Perhaps I could suggest a solution that I have not heard today to cover some of the costs. Why do we not take a windfall tax from the banks, which seem to think nothing of ripping off their customers? The billions of pounds that they have made in profits in the past year would, could and I say should be used to help the people of this country. In that way we would at last see the banks meeting their moral responsibilities, which they have sadly failed to do over a number of years.
There are a few points on which I would appreciate clarification from the Minister. Does the Bill cover measures to protect pensions when trustees compromise a pension fund's debt in an attempt to prevent insolvency? Will the Bill place members of a pension fund higher up the list of priority creditors at insolvency? The other substantive aspect of the Bill on which I would like clarification is the extension of the Transfer of Undertakings (Protection of Employment) Regulations 1981 to private sector transfers. The degree of protection on offer from the Government appears to have been reduced since the launch of the initial consultation document in 2001. What is the Minister's estimate of the sufficiency of the 6 per cent. requirement for a transferee matching an employee's contributions? After all, that could still allow considerable damage to be done to individuals' pension funds. Under such circumstances, my own pension fund with BT would be halved.
Can my hon. Friend clarify whether acquiring employers will have to provide the 6 per cent. maximum contribution, even if the tranferer's contribution was lower? I have said on many occasions that I would support compulsory contributions of about 9 per cent. from employers and of 6 per cent. from employees. Until this or any other Government introduce that, the future financial concerns of an ever-aging population will not be met.
The different ways in which people provide for their retirement and the number of people unable to make such provision require the Government to take a holistic approach to pensions. That has, I believe, been done. First, Labour began tackling pensioner poverty, then we assisted pensioners with modest savings. The Bill addresses many of the concerns of people who have a private pension but lack security. It is the product of considerable thought, it tackles problems of long-term importance and exemplifies the Government's commitment to our pensioners. It may stop short of what I personally would want, but it is a considerable step forward. I am glad the Liberal Democrats will support us in the Lobby tonight, although it is sad that there will be a Division. That says more about the Opposition than about the Government.
In conclusion, I congratulate my right hon. and hon. Friends on the Front Bench. They have done an excellent job. They must consider compulsory contributions and retrospective payments, as I am sure they are intelligent enough to recognise.
6.19 pm
Mr. Bill Tynan (Hamilton, South) (Lab): Security and confidence, protection, complexity and increased choice in place as quickly as possible—the Secretary of State for Work and Pensions has made it clear to pensioners that those are his objectives. I certainly support those ideals and ambitions and welcome much that is in the Bill.
This debate should not be a point-scoring exercise because it is too important. Having listened to hon. Members' contributions, I believe that the Bill can be springboard to encourage people to make provision for their retirement. Nevertheless, I hope that the Minister will acknowledge in his response the many fears and concerns that have been expressed.
The issues involved in pension provision are complex, as is the nature of pensions. The Bill is to do with the past, the present and the future. In the past, it is true that many of my constituents lost their pensions through the failure of a pension scheme and that that has created an enormous void in their current situation. It is important, however, to place on the record our congratulations to the workers who have kept this issue in the minds of the people, including trade union representatives and Members of this House. I pay tribute to the contributions made by my hon. Friends the Members for Sittingbourne and Sheppey (Mr. Wyatt), for Cardiff, West (Kevin Brennan) and for Ayr (Sandra Osborne) in ensuring that all. Members recognise the problem.
We need to encourage employees and employers to work together to create a pension for their retirement. The state pension was never designed to make up for an absence of savings when we retire or to be a substitute for what we earn in full-time employment. Various people who have been unable to save have been given the support of the pension credit. I remind hon. Members that the state second pension offers 20 million people—including 2.5 million carers, 2.5 million long-term disabled people and 13 million low and moderate earners—the prospect of building better pension entitlement than previously. That is important in terms of how we move on.
The Opposition decry the pension credit and the minimum income guarantee, but I believe that those initiatives have been invaluable in protecting pensioners. I hope that the Government will continue to increase pension credit in line with average earnings—that is an important factor that must be taken on board. The loudest voice among pensioner organisations calls for the restoration of the link with earnings. The Conservatives scrapped that, but now that it is popular they have decided to reintroduce it. My advice to pensioners would be to beware because those promises might never take effect—they should never trust a Tory.
Is it possible to restore the link and to maintain the pension credit, but to use the taxation system to recover funds from those pensioners who do not need the basic
pension to ensure that their standard of living is maintained? Some company directors and MPs have a pension that is way beyond that which some pensioners could ever hope to receive. I ask the Minister seriously to consider that proposal. However, it should not be paid for by condemning young jobless people to a lifetime of unemployment through scrapping hugely successful schemes such as the new deal. If we are to convince young people to involve themselves in pension schemes, we have to create the opportunity for occupational schemes to be re-established and to grow.There is currently a crisis of confidence in pension schemes. There are many reasons for that, including pensions mis-selling in the 1980s, the problems of Equitable Life and the squandering of pension scheme surpluses by companies. Many companies raided pension schemes in the halcyon days of stock market growth. Indeed, they were aided and abetted by the previous Government, who legislated for any surplus of more than 105 per cent., based on actuarial assessments, to be taxed at 40 per cent. That encouraged companies to become predators, remove surpluses and take contribution holidays irresponsibly, without caring or recognising that stock markets can go down as well as up.
I had practical experience of such matters when I worked at Hoover. When Chicago Pacific bought the company, the first thing it considered was the £200 million surplus in the pension scheme. It attacked that and tried to take it from the scheme. That sum was more than it had paid for the company.
Many current deficits are the product of earlier over-eagerness by pension schemes. Previously, they adopted a balanced investment strategy, but in the 1980s and 1990s there was a dash towards equities. By the mid-1990s, pension schemes held the majority of UK shares—then the bubble burst. My right hon. Friend the Member for Newport, East (Alan Howarth) made the point that we must have a balance between contributions and investment in pension schemes.
There is hope. A survey that Hewitt Bacon and Woodrow published on 9 January showed that pension scheme shortfalls halved in 2003 owing to the increasing value of the stock market. It suggested that if the FTSE 100 reached a level of 5,000,
- "then leading companies on average may find that their pension deficits have gone".
The Minister must consider how best to implement good investment practice. Perhaps we will decide to ensure that pension schemes should hold a more balanced portfolio of bonds and shares, or at least that they should be more transparent in decision making. We must take account of that.
I welcome many of the Bill's proposals. The new regulator, which the Pickering review initially proposed, will focus on issues of greatest concern and have real teeth, which will be an important step forward. However, there are several matters about which I should like reassurance.
I have several concerns about the working of the pension protection fund. The Department for Work and Pensions stated that it expects the cost of the fund to be
offset by savings in administration costs that will be brought about by the range of simplifications in the Bill. Discussions that I have had with representatives of pension schemes suggest that they believe that there will be few, if any, cost savings through the simplifications. I should like reassurances from the Minister that he is convinced that there will be cost savings.Concerns have been raised that the cost of the fund will be prohibitive, with costs of up to £40 per scheme member a year. Given that Watson Wyatt estimates that the average cost of administering a large pension scheme is currently about £28 per member, I hope that the Minister can reassure us about that.
I also hope that the Minister can reassure me that the fund will protect an adequate level of benefit rather than simply an arbitrary percentage, that safeguards will be established to ensure that the fund is not allowed to slip deeper into the red and that the risk-based levy will not be the straw that breaks the camel's back for the pension schemes of companies that are already struggling to provide final salary schemes. It would be tragic if providing the fund destroyed some occupational pension schemes.
I hope that the Minister will confirm that he would not normally expect the powers to enforce a freeze period on a pension scheme to freeze pensions that were already being paid. Although I welcome the proposals on member-nominated trustees, I hope that the Minister will outline the way in which the Government will encourage ordinary employees to take on that role, educate them about fulfilling it and ensure that individual trustees are adequately protected, for example, through periods of grace, with regard to the requirement for knowledge.
I have one point to make in conclusion. I should like the Minister to instruct his civil servants to conduct a thorough audit of those affected by pension schemes that have wound up in deficit since 1995, the value of the pensions lost and the circumstances in which those schemes have been wound up. Although I understand his point that it would be wrong to give false hope, he must look at what can be done to solve the problem of the people who have lost their pension entitlement. Morally, that is the correct thing to do.
I shall close on that point, because I am sure that the Minister needs time to resolve the problems that we have raised.
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