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Mr. Andrew Smith: If restoring the link is so important, will the hon. Gentleman give a commitment to extending it beyond four years?
Mr. Waterson: It is a bit of a cheek when Ministers make such interventions. I invariably ask them in return when the Government will tell us whether the pension credit will be increased in the next Parliament, should they, by happenstance, be re-elected. When will they give a commitment to increase it in line with either earnings or prices? The answer is currently that they will not, but we might hear more about that in July.
I want to consider means-testing and the importance of the relationship between occupational pensions, which are largely but not entirely the concern of the Pensions Bill, and the state retirement pension. The latter should be a decent and sufficient platform on which people can build provision for their retirement. Under the Government, savings have fallen by roughly half. Is it any wonder given that people, especially young people, read bad news stories almost every day about pensions? In the long-term, that could prove to be the worst part of the pensions crisis that we face.
At the moment, 59 per cent. of pensioners are subject to means-testing. On the Government's projections, that figure will increase to 82 per cent. by the middle of the century. That is an extraordinary figure, which means that we are going entirely in the wrong direction. I shall not embarrass the Minister again by trotting out his views on means-testing when he did not bear the burdens of office.
Mr. Waterson: I shall if the Minister presses me, although we can agree that matters should not progress in the way that I have described in the 21st century. Despite spending some £47 million of taxpayers' money on advertising and publicity for the pension credit, the take-up remains little more than 50 per cent. The Government's working assumption is that 1.4 million of the poorest pensioners will never get around to claiming it.
Mr. Tynan:
In the unlikely event of the hon. Gentleman being in government, would he guarantee to
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pensioners in Hamilton, South that they would not lose any of the money that they currently receive under the pension credit if the Conservatives restored the earnings link to pensions?
Mr. Waterson: I pay tribute to the hon. Gentleman's role in Committee. I give him an absolute assurance on the point that he makes. I shall shortly put it in context. He referred to my being in government. Two things have to happen: the Conservative party has to win an election and the new Prime Minister has to recognise my talents. I do not want to be too hypothetical.
Richard Burden: I fully recognise the hon. Gentleman's talents, but the first criterion of the Conservative party convincing the electorate might be more difficult to achieve. Let me revert to the question that my right hon. Friend the Secretary of State asked. The hon. Gentleman bases his arguments about means-testing on what will happen in several years' time. Given that the earnings link is not a figure but a formula, why cannot he project beyond four years?
Mr. Waterson: We shall enter the next election campaign on promises that are based on a Parliament. We would hope and intend to continue with the same formula. An amendment that we tabled referred to whichever was higher: earnings or prices, because we do not know what the future holds.
To revert to the subject of means-testing, there has been a collapse in savings.
Miss Anne Begg (Aberdeen, South) (Lab): The biggest means test is the income tax system. Do Conservative Front Benchers now suggest that that should not be means-tested? Or is means-testing considered good when the Government are taking money from somebody but bad when they are giving people money?
Mr. Deputy Speaker (Sir Michael Lord): Order. I remind hon. Members that we are debating the Bill's contents, that many Members are trying to catch my eye and that the debate is time limited. Although interventions are understandable, they take time out of the debate. Those who wish to catch my eye might think twice before they intervene.
Mr. Waterson: On the basis of your ruling, Mr. Deputy Speaker, I shall not rise to the previous intervention. [Hon. Members: "Oh!"] All right then, I shall—
Mr. Deputy Speaker: Order. I would be grateful if the hon. Gentleman did not, because it is definitely outside the terms of the Bill.
Mr. Waterson: Then I will not, Mr. Deputy Speaker. I am just too easily provoked.
I should like to pull together the points that I was making on means-testing. It is too complex, too intrusive and too demeaning. The high marginal rates of withdrawal are difficult to defend, and our proposal is to reverse the level of means-testing and restore dignity to pensioners. No pensioner will lose under our proposals, to answer the question of the hon. Member for Hamilton, South (Mr. Tynan), and most will gain. For
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the record, we have no plans to remove the Christmas bonus or the winter fuel payment, and we are not—I repeat, not—scrapping the pension credit. We shall merely let it wither on the vine as the level of the state pension rises. All these proposals have been very carefully costed.
Gregory Barker: Before my hon. Friend leaves the issue of the Government's favourite policy of more and more means-testing, will he tell me whether he shares my surprise that the Bill contains nothing that would make their means-testing policies more effective? The most damning thing that can be said about the Government's means-testing feast is that it is singularly ineffective, because so many people slip out of the system and do not take up the means-tested benefits to which they are entitled. That is why it is wrong, and that is why it must go.
Mr. Waterson: My hon. Friend makes my point better than I did.
One thing that we know about the state retirement pension is that the take-up rate is more or less 100 per cent. Our provisions would therefore be a way of ensuring that every pensioner had a decent state retirement pension and that the poorest pensioners would be helped. It is paradoxical that it is often the very poorest people who do not get around to claiming means-tested benefits such as council tax benefit, for example, despite the sterling efforts of the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond).
There is a significant read-across between that argument and the question of occupational pensions. As the system of means-tested benefits for pensioners becomes ever more complex and confusing, how are pensioners or would-be pensioners to divine whether they are doing the right thing in saving money for their retirement? More than once we have put to Ministers a figure produced for us by independent actuaries showing the amount that an average couple would have to set aside in their lifetime—over and above the equity in their house—to be sure of not being subject to means-testing when they retired. That figure is £180,000. It has been comprehensively rubbished by the Secretary of State and other Ministers, but it is important for the Government to come up with their own figure. It is important not just from the point of view of future pensioners, who have to make a judgment as to whether they are wasting their time saving money for their retirement—that could well be an explanation for the collapse of the savings culture since this Government came to power—but from the point of view of the industry. How is the industry to be aware of whether it is mis-selling products to people if no one knows whether those people will get a net benefit from them?
Nowhere has this argument been better put than in the briefing produced for this debate by Age Concern, which states:
"To tackle pensioner poverty in the long-term, pension policy must be built around a higher and more inclusive basic state pension. This Government must move away from means-testing: it is costly, complex and too many pensioners miss out on their
- entitlement. Instead of putting money into pensioners' pockets once they are in poverty, the Government must address the causes of that poverty."
Vera Baird (Redcar) (Lab): Can we hear the Conservatives' proposals for making the basic state pension more inclusive, in relation to women in particular?
Mr. Deputy Speaker: Order. I do not think that that is part of the content of the Bill before the House.
Mr. Waterson: I think that the answer is no. In passing, however, may I pay tribute to the sterling efforts of the hon. and learned Lady in raising those issues in Committee? If she has not squeezed an annual report on women's pensions out of the Minister, she can at least expect one report some time next year.
The Bill is riven by the law of unintended consequences. A problem that we faced in Committee was that an awful lot of very important issues came up only at the last minute. One example, to which the Secretary of State has quite reasonably referred, was the section 67 issue. When I first started chatting to people in the industry, when the Bill was merely a twinkle in some parliamentary draftsman's eye, they all said that the most important issue was simplification, because it is clearly easier to shut down a scheme than it is to make a minor amendment to it. Typically, the Government produced amendments or new clauses right at the end of the Committee stage—proposals that ran to pages and pages—in an attempt to simplify that part of the previous legislation.
Another example, which has been highlighted in the business press this week, is to be found in the anti-avoidance measures. Early on, people were saying that in many ways the key to this Bill will be the anti-avoidance provisions, which are sometimes called the moral hazard provisions, although anti-avoidance is more appropriate in this regard. Those are measures to ensure that badly disposed people and companies will not find a way round the provisions. We debated that quite a lot in the latter part of the Committee stage, and earlier on Report. I have no difficulty at all with anti-avoidance provisions: when the House passes a law on whatever subject, it is absolutely right that we try to limit the options for people to get round it. By definition, however, such provisions should be properly consulted on, at length, with some of the very people who might be paid large fees to find a way round the legislation in the first place.
Among the issues that have been raised by Messrs Cameron McKenna, who are highly respected lawyers in this field, are the financial support directions, which we have had precious little opportunity to consider, let alone debate. The regulator may decide that an employer is either a service company or insufficiently resourced, and may be required to make payments to the pension scheme. There are wide-ranging powers to draw in other related people and companies. As Mr. Nigel Moore of Cameron McKenna says:
"These reforms are potentially very wide ranging and implications go beyond simple anti-avoidance activity . . . For trustees, the financial support provisions are very significant and are likely to lead to trustees seeking support from group companies who are not currently employers under the pension scheme, failing which they could apply to the regulator to issue a financial support direction."
I believe that the Secretary of State has received a letter from the venture capital industry expressing real concerns about whether in future there will be takeovers and so on. I saw his rather blustering response reported in The Times—I am sure that it did not do it justice. The reality, however, is that there may be situations—on the basis of the law of unintended consequences—in which another company that has the potential to take over a struggling company and keep it going, thereby keeping the pension scheme going, will be deterred from doing so by the provisions. That is one of the clear messages in the British Venture Capital Association's comments to the Secretary of State. There are other examples.
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