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6.30 pm
Mr. Nigel Waterson (Eastbourne) (Con): I begin by declaring an interest, in that I have some private pension provision—[Interruption.] Well, I had the last time I checked, anyway.
We have heard some interesting debating points today on the wording of our reasoned amendment. The whole point, as the House well knows, is that although we will not vote against the Second Reading of the Bill, we have profound reservations about it. We welcome the new regulator—we hope that he will end up with teeth and that he will use them where appropriate. We also support the principle of the pension protection fund, as my hon. Friend the Member for Havant (Mr. Willetts) said in his opening speech. However, we have many reservations about the Bill, not least based on the many crucial details that are absent from it.
Fortunately, the Secretary of State agrees with me on that, because he said in his opening speech, in a slight flurry of embarrassment, that the Government propose to try to amend their own Bill on a whole raft of issues, perhaps even in Committee. We welcome his invitation to a meeting to try to work out how we will get the Government out of that mess.
Mr. Andrew Smith: We will not have one, then.
Mr. Waterson: That invitation seems to have been summarily withdrawn. However, we look forward to hearing at what point the Government amendments will be tabled and, even more importantly, whether the people who actually matter—those who will be affected—will be consulted on any of those amendments, let alone the myriad regulations that I hope we shall see in draft in Committee.
With our reasoned amendment we are saying to the Government, in a nutshell, that they have got six out of 10 and must try harder. It is not just we who have those reservations. In last week's debate, I said that the Bill had been greeted with a chorus of disapproval, and I shall quote just some of the comments made. The Daily Telegraph described the Bill as "Half-baked". The Observer said:
- "In short, it is not facing up to the gravity of the situation and is not framing policy for the long term."
- "The Bill only tinkers at the edges of occupational pensions".
- "Employers, burdened by ever-increasing costs, will choose either to close their schemes or reduce the size of their contributions."
- "it will take a lot more than this Bill to encourage savers to put their money back into pensions."
- "will do little to stem the tide of pension scheme closures."
Mr. Waterson: If I may say so, the real concern that we all, including the right hon. Gentleman, should have is with the schemes that are closing to new members and the schemes that will not be opened as a result of the Bill.
Barnett Waddingham, the leading actuary, has said:
- "It could take just one company with a large pension scheme to become insolvent for the PPF to become untenable."
Let us remind ourselves of the scale of the problem. A new employee joining a company now will have a less than one in five chance of finding a final salary scheme still open for him to join. Mr. Adair Turner, the chairman of the Government's own Pensions Commission, reckons that 60 to 70 per cent. of private sector defined benefit schemes have closed to new members in the past five years. We have also heard, quite rightly, from a number of hon. Members about the 60,000 people who have lost all or some of their pension rights in the past few years.
We believe that the Bill raises issues of over-bureaucracy and over-regulation. We are to have a pension protection fund with a board, a quite separate fraud compensation fund, a regulator with a determinations panel, a pension protection fund ombudsman and a pensions regulator tribunal. That represents a great deal of new bureaucracy, which will need to be examined very closely in Committee.
We bid a cautious welcome to the proposals to defer state pension in certain circumstances, but we will be keen to examine the small print relating to tax and the interrelation with means-testing. We touched on those issues last week—[Interruption.] The Under-Secretary of State for Work and Pensions, the hon. Member for Liverpool, Garston (Maria Eagle), really must contain herself. We wish to ensure that the Bill will contain a cast-iron guarantee that anyone thinking of participating in this particular deal should have all the relevant information made available to them by the Government before taking the plunge. The provision merely underlines the truth that, under this Government, we are all going to have to work longer to be able to afford a decent pension in retirement.
We have had a good debate today, and I apologise to those hon. Members whose comments I cannot deal with in detail. My hon. Friend the Member for Bournemouth, West (Sir John Butterfill) gave his usual magisterial performance, as befits a man who holds the future of our own pensions in his hands. My hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) also showed a good grasp of the subject, as befits a member of the Treasury Committee. My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), as a former Secretary of State, brought his great expertise and original thinking to the problems that we are facing. He also described in a very helpful way the background to the Maxwell saga and the 1995 legislation.
The right hon. Member for Newport, East (Alan Howarth) made an extremely interesting speech, particularly on the importance of defined contribution rather than defined benefit schemes. He made the point, which I entirely endorse, that the Bill will not reverse the trend of the closure of defined benefit schemes. The hon. Member for Sittingbourne and Sheppey (Mr. Wyatt), who has a distinguished record in pursuing these issues, particularly on behalf of his constituents who have lost
out, talked about a Government being morally bankrupt if they did not tackle the problems of those who have lost their pensions.I was delighted that the hon. Member for Cardiff, West (Kevin Brennan) did not content himself merely with making interventions on this occasion. He had a great deal to say on these issues, much of it very helpful. I am surprised, however, that he feels able to support the Bill in its present form, as it conspicuously fails to deal with the problems of the ASW workers and others. He put forward a convincing moral, legal and public interest case for compensation for that group of workers. I hope to say something of interest on that subject to him in just a minute. Of those three arguments, perhaps the most important for this purpose is the public interest case, relating to the 60,000 ghosts at the banquet who, as the hon. Member for Sittingbourne and Sheppey said, cast a shadow over the Bill. They will continue to do so until the Government grasp this particular nettle.
Typically, the right hon. Member for Birkenhead (Mr. Field) made an excellent contribution, in which he made it clear that the Government have no satisfactory long-term policy for pensions and savings. He again expressed the view—rightly, in my opinion—that means-testing undermines confidence in saving and pensions. We look forward to him being appointed to the Standing Committee.
The central provision of the Bill, of course, is to set up a fund on the model of the American Pension Benefit Guaranty Corporation. That model has been going for 30 years, and now seems to be getting into real trouble—at a time when it is getting into severe difficulties, with an $11.5 billion deficit, the Government are trying to follow a similar model. When I was in Washington recently, I met people such as Steve Kandarian, to discover some of the problems that they have faced and continue to face. Of course, the central theme of all those meetings was, "For goodness' sake, whatever you do make sure you have a totally risk-based levy, not a flat-rate levy." We now hear from the Secretary of State that not only will we have a flat-rate levy for at least the first year, but a period of possibly several years will follow of phasing in the risk-based elements of the levy.
The new fund will be extremely vulnerable, especially at the time of its birth and for some time thereafter: first, because of the question of its funding; and secondly, because of the potential for claims that have been stored up to be made against the fund. When the American model was set up, it waited for four or five years before it started paying out on particular claims. In fairness, the Secretary of State could not have been clearer when he said that there is no basis on which this Government will stand behind the fund. The fund therefore sinks or swims on its own.
We had the news only today that Marks and Spencer is starting a trend of issuing bonds to make up the shortfall in its pension fund. The experts tell us that such large companies, which find it easy and relatively cheap to borrow, will use that mechanism to make up any shortfall in funding. If that happens, it will merely accelerate the trend, when we move to a risk-based levy, of the larger companies being able to deal with their shortfall in that sort of way, leaving the somewhat
dodgier companies—companies that are not in a position to have that kind of bond issue—struggling and paying a higher and higher levy into the fund. In other words, in the pensions Titanic under this Government, the first-class passengers, as in the real Titanic, will have lifeboats, but the steerage passengers—the less strong companies and schemes—will be trapped below decks as the vessel's inherent instability drags it inexorably under the water.I have some news for Labour Members who have been chiding the official Opposition all afternoon about our proposals. I can tell them—[Interruption.] I knew that they have been waiting for this moment, especially the Under-Secretary, who can barely contain herself. At the end of the Divisions this evening, I will be tabling a series of amendments, to which I invite all right hon. and hon. Members who expressed concerns about the 60,000 and derided the official Opposition to append their names tomorrow. If they do not do so, their constituents should ask why. Basically, the proposals are to set up a separate interim pension protection fund, still administered by the pension protection fund, to be endowed with any remaining assets of the schemes in wind-up and drawing on those unclaimed assets that we have debated.
I commend our amendments to the House, and I acknowledge with thanks the partial inspiration of the right hon. Member for Birkenhead. Those amendments are not the last word by any means, however. If the Government accept the principles that underlie them, I will happily withdraw them so that the Government can redraft them. I trust that all those who have expressed sympathy for the cause of the ASW workers and so many others will add their names to those amendments tomorrow.
As I have said, there is much in the Bill that we welcome or on which we believe that we can improve in Committee. As it stands, however, does the Bill pass three acid tests? First, will its central provisions encourage employers to keep open existing schemes, let alone new ones? The answer is a resounding "No". Secondly, can the Bill achieve the Government's stated objective of altering the balance between private and state pension provision from 40/60 to 60/40? Again the answer is a resounding "No". Does the Bill set in place a simplified, clear and overarching pensions vision fit for the challenges of the 21st century? Against a background of a system that is complex, difficult to understand and often contradictory, with the savings culture being fatally undermined by an inadequate state pension and the inexorable growth of means-tested benefits, again the answer can only be "No".
I commend our reasoned amendment to the House.
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