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Tom Levitt (High Peak) (Lab) rose—

Mr. Patrick McLoughlin (West Derbyshire) (Con): I am grateful that my hon. Friend has used part of his speech to highlight the problems that a great number of our constituents will face. Would it not be a disgrace if the employees at Turner and Newall, who paid into a pension scheme in good faith, fall between the two schemes, as my hon. Friend described? Even though
 
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there is no Secretary of State, should we not expect the Minister to make it clear that the Government will not allow that to happen?

Mr. Willetts: My hon. Friend is right. I know that near his constituency, in High Peak—I see the hon. Member for High Peak (Tom Levitt) trying to intervene—in Chapel-en-le-Frith, many workers are affected. Workers in Lydney in the Forest of Dean are also affected. Those people are extremely concerned, so I hope we will hear from the Minister. As I have referred to his constituency, I shall happily take an intervention from the hon. Member for High Peak, although I hope that he is not present just because of the rather desperate e-mail sent round by the Minister's office to Labour Members, saying that it was very concerned about the pensions debate and that

"it would be greatly appreciated if you were able to attend at least part of the debate, especially the beginning".

I do not know whether that includes the Minister's speech. If the hon. Member for High Peak can assure us that he is not present in response to the e-mail, we might be interested in his intervention.

Tom Levitt: I am happy to assure the hon. Gentleman and the House that I have not even seen the e-mail. I am here to represent my constituents, who have been mentioned by the hon. Gentleman and others. He and his hon. Friends should not go around giving the impression that the Turner and Newall scheme has collapsed. It has not. Talks are continuing between the trustees, the company's administrators, the trade unions and others to reach a resolution that will enable the company to fulfil the moral obligation that it undertook when it took on its employees who joined the scheme. That must be the primary aim of what is taking place now. Does the hon. Gentleman agree that the more we speak about safety nets and about bailing out, the more likely it is that company schemes will fold in the knowledge that they will be bailed out in future? That is not the way to proceed.

Mr. Willetts: That is a point that the hon. Gentleman might like to put to those on the Government Front Bench. It raises a rather fundamental question about his Government's strategy and the Minister might wish to comment on it. I very much hope that the scheme does not wind up. We are discussing elementary security and insurance for the workers at Turner and Newall if it does wind up in the course of this year. I repeat: I very much hope the Minister will respond to that in his speech. Even in the absence of a Secretary of State, that is the first issue on which we hope the Minister will respond.

The second issue concerns the pension protection fund—the new insurance scheme coming into force next year. Here, I am afraid, the Minister is in danger of misleading many people who are led by him to expect, after the fund is in place, a degree of security in their pensions much greater than it can offer.Let me quote to the Minister his own words in the past few months about the scheme. He said, for example, on Channel 4 news on 21 July that

"our pension protection fund when it comes in in April . . . will bring real guarantees to Britain's pensioners in final salary schemes"—

real guarantees.
 
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He said in the same programme that

"existing pensioners in that company will get 100 per cent. of their pension, workers will get 90 per cent."

I often meet the Minister in TV studios nowadays. We ought to meet more in the Chamber as well. He said on "Newsnight" the other week:

"From April, we'll have a Pension Protection Fund. So if their schemes go bust, they won't be left with 30 per cent., they'll get 100 per cent. or 90 per cent., depending on whether they've retired or not."

Everybody has been led by such remarks to believe that there is a guarantee of 100 per cent. or 90 per cent. of their pension, but may I put to the Minister the words of the person whom he has just appointed to chair the pension protection fund, Mr. Lawrence Churchill, who was asked about the belief that the fund will guarantee the pension? Mr. Churchill was asked whether the fund offers a guarantee. The Government-appointed chairman of the pension protection fund said:

"No. 'Guarantee' is a very misleading and misunderstood word—a very dangerous word to use in financial services."

When challenged about how the fund was supposed to pay all the benefits that were promised when it might not have the money to do so, he said:

"We have been given specific powers to vary the levy to make sure our funding position is adequate and have been given powers to vary the liabilities so I do not see how that situation will arise."

"Vary the liabilities" is technical language for changing the pension promise, so the chairman of the pension protection fund has specifically, in public, warned about the use of the word "guarantee", although the Minister has been using it. The chairman specifically said in public that one of his options is to cut the liabilities—to cut the value of the pension promise. If that is what he is saying in public, the Minister should make it clear now at the Dispatch Box that the pension protection fund is not a guarantee and that there is no way that he can promise that people will get 100 per cent. or 90 per cent. of the pension that has been promised.

There are specific powers in the Bill for the chairman and managers of the scheme to cut the level of benefits way below 100 per cent. and 90 per cent., and the incoming chairman has made it clear that he will use those powers if necessary. In the light of that, I hope that the Minister will choose his words much more carefully in future than he has so far on this extremely important subject.

I very much hope that we will have support for our motion from all parts of the House today, because it tackles a widespread concern. I believe that the majority of pensioners and the majority of people in this country want to see the reverse of means-tested benefits.

Sir Nicholas Winterton: My hon. Friend has given a great deal of detail about where the Conservative party stands. Will he go further? Does he agree that the standard old age pension should be exempted from taxation for everyone? Will he go even further and say that the first £10,000 of occupational pension for people who have saved consistently throughout their working
 
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lives should be taxed at a lower rate than the marginal rate of tax—at a rate of 20 per cent., rather than 40 per cent. as at present?

Mr. Willetts: My hon. Friend tempts me. One of the many differences between the Opposition and the Government is that the debate on the Government Benches is about which taxes to put up and by how much, whereas the debate on the Conservative Benches is about which taxes we should cut and by how much. I am sure that my hon. Friend's proposal is one of the many imaginative proposals that the shadow Chancellor, our right hon. Friend the Member for West Dorset (Mr. Letwin), will be considering.

1.18 pm

The Minister for Pensions (Malcolm Wicks): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

"supports the Government's strategy to enable people to save securely for their retirement and to promote retirement flexibility and informed choice; welcomes the Government's Pensions Bill and Pension Protection Fund, which will bring real security for over 10 million defined benefit pension scheme members if their employer becomes insolvent and their pension scheme winds up; further welcomes the £400 million Financial Assistance Scheme which will help people who have already lost out; believes that the Pensions Bill will enable many more people to save with confidence with a new proactive pensions regulator, measures to simplify pensions legislation and improved incentives to work past the state pension age; supports the pensions tax simplification proposals being taken forward in the Finance Act 2004, which will replace eight tax regimes with one simplified system; commends proposals in the Pensions Bill to allow individuals to defer their state pension and draw it as a lump sum; welcomes measures to enable people to make an informed choice in pension provision, including new pilots to provide information and advice in the workplace; condemns the inheritance of 1997, with the legacy of pension mis-selling and millions in poverty, whereby many were expected by the previous Government to live on under £69 a week; believes that the Opposition parties' policies will be unfair to the poorest pensioners, unaffordable and unsustainable; commends the Government's historic commitment to tackling pensioner poverty; and welcomes the extra £10 billion that the Government is spending on pensioners in 2004–05 compared with the 1997 system."

First, I take this opportunity to pay tribute to the important work of our former Secretary of State, my right hon. Friend the Member for Oxford, East (Mr. Smith). He served the Government well as a champion of disability rights and as a creator of the new deal, and most recently by driving through the groundbreaking pension protection fund. I and my colleagues shall miss him as a friend in Government, and I hope that hon. Members will join me in thanking him for all his hard work and in wishing him well for the future and for the contributions that he will make in the future.

I start by asking hon. Members to sit back for a moment and imagine a Britain where there are 2.7 million pensioners living in poverty; where the value of the basic state pension has been increased just once in 18 years; where many pensioners are expected to live on just £68.80 a week—and, as a result, some face a stark choice between eating and keeping warm in winter; where pound-for-pound withdrawal undermines the whole benefit system by showing that it sometimes pays not to have saved; where pensioners' benefit forms are 40 pages long; where confidence has been rocked by
 
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pensions mis-selling; and where carers and people with long-term disabilities lose out on building up rights to the state pension.

We have all lived in a Britain like that and we have all got constituents who have suffered in a Britain like that. What new Government could possibly fail to act? That was the Britain that the Labour Government inherited in 1997, and we could not sit back and preside over such an unjust mess.

We are proud that we have cut absolute pensioner poverty by two thirds, lifting 1.8 million pensioners out of poverty; we are proud that about 20 million people gained from the introduction of state second pensions in April 2002, including 5 million carers and long-term disabled people; and we are proud that pension credit rewards those who have saved something for their retirement, but have missed out in the past because the system knocked such savings straight off their benefits.

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