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Mr. Nigel Waterson (Eastbourne) (Con): I am delighted to take part in this debate, and to follow my hon. Friend the Member for Bridgwater (Mr. Liddell-Grainger), who spoke about the subject with passion and knowledge.

It is difficult not to have considerable sympathy with the former Secretary of State, the right hon. Member for Oxford, East (Mr. Smith), and I join the Members who have queued up to pay him abundant plaudits today. On Monday morning, he woke up and faced a triple whammy. He was supposed to appear before the Work and Pensions Committee this morning, would meet the pensioners' lobby today, and speak in our debate this afternoon. No wonder he resigned. However, we do not need the resignation of the Secretary of State to tell us that the Government's policies on pensions are in deep trouble. Means-testing is set to rise inexorably, and only a couple of days ago, the latest figures on the pension credit showed that almost 2 million pensioners are still not receiving the benefits to which they are entitled. As we know, the Department itself assumes that 1.4 million pensioners will not claim pension credit even though they are entitled to it. No wonder a recent poll by Age Concern revealed that the majority of people who receive pension credit do not like it at all.

The collapse of a savings culture was discussed eloquently by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), and the problems of the computer crash and direct payments more generally were discussed by my hon. Friend the Member for North Thanet (Mr. Gale). Recent figures confirm that more than 1 million workers are working beyond the usual retirement age, which is another sign of the crisis in pensions. Importantly, my right hon. Friend the Member for Charnwood (Mr. Dorrell), discussed the need to rebuild co-funding to tackle the crisis. Demonstrators have come to Parliament today because they want a decent state pension, and support our policy of restoring the link between the state pension and earnings. I am pleased that in our debate the right hon. Member for Birkenhead (Mr. Field) supported that policy.

There are therefore many problems, but every time Ministers think that the situation cannot get worse, it does.

Just today it is revealed that the main steel union is pressing ahead with its court case against the Government over the inadequacy of their rescue package. On occupational pensions, the sad truth is that the Government's plans are fundamentally flawed and the PPF is likely to end up as a clumsy and unstable political creation that cannot deliver the guarantee of which Ministers have boasted.

Ministers claim to have drawn lessons from the Pension Benefit Guaranty Corporation in America, but they are not starting off with a fully risk-based levy so that the PPF is properly funded and good schemes do not subsidise the bad. In the first few years there will be a flat-rate levy for the PPF. We believe that will make it financially vulnerable.

As my hon. Friend the Member for Havant (Mr. Willetts) said in opening the debate, perhaps the most disturbing aspect of all this is the growing gap between the Government's spin on the lifeboat that it is creating
 
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for individuals through the PPF, and the reality. As we heard, people who have not yet retired will get only 90 per cent. of their entitlement at best. Indeed, there is to be a cap on the compensation payable in each case. Also, the Government are diluting the indexation rules so pensioners will receive even less. As if all this were not enough, the Government are taking powers, as we heard, to cut benefits payable under the scheme if the resources are not available—a point that has clearly not been lost on the new chairman of the PPF and which was, in effect, conceded by the Minister during his speech. The PPF is very far from being a total guarantee.

We, the CBI and the National Association of Pension Funds, among others, have been warning that the totality of the Government's proposals, including the ill-considered anti-avoidance provisions, may well have unintended consequences and deny decent pension security to future generations. With her typical delicacy, Christine Farnish of the NAPF said of the Department for Work and Pensions:

"I think they are very challenged by the complexities of these issues."

A recent survey by the Engineering Employers Federation shows that one in three employers might scrap their final salary schemes if the Bill goes through in its present form. That is on top of all the final salary schemes that have already closed under the Government.

The Bill has been largely overshadowed by legitimate concerns about the 65,000 workers who have already lost substantial pension rights when their companies went bust and who will not receive any compensation from the PPF. We have always recognised that we cannot use the levy of the PPF retrospectively, but we have consistently argued for compensation to be provided through the use of so-called unclaimed assets. At the very last moment, when they were facing defeat in the Commons by a cross-party coalition, the Government cobbled together their rescue package, but details of that package are still in short supply. One aspect that has emerged is that there is to be no cash for the victims of solvent wind-ups. Once the Government deemed that workers who had lost out were deserving of help, what moral basis can there be to exclude those who were involved in wind-ups of solvent companies that still left them potentially destitute?

More workers are continuing to become potential claimants on the £400 million before the PPF is up and running in April next year. It is already clear that £400 million will not be enough to go round. Assuming a pensioner lives for 20 years, it will provide less than £1 a day on average. Over the summer the Government promised to put more flesh on the bones of their financial assistance scheme, but what has begun to emerge is deeply disturbing. I have touched on the blatant unfairness with respect to solvent wind-ups, but there are other questions. Will compensation paid under the scheme be subject to tax and will it be means-tested? People need to know the answer to such questions. If further funds are not available from the pensions industry or industry more generally, do the Government intend to top up the £400 million if it proves inadequate? Will they reconsider the issue of unclaimed assets?

As the hon. Member for High Peak (Tom Levitt) and others eloquently described, in the early summer massive problems came to light at Turner and Newall.
 
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Forty thousand pensioners and future pensioners could be affected. The possible shortfall could be £875 million. I am meeting a delegation from Derbyshire tomorrow, including the Tory prospective candidate for High Peak, Mr. Andrew Bingham, who has been very energetic on the issue. I shall be interested to hear what he has to say.

On the face of it, such a massive pensions failure could swamp the PPF, if it happens on its watch. In the short term, it demonstrates the inadequacy of the financial assistance scheme. It has been suggested that schemes that collapse between May this year and April next year, when the PPF is supposed to open its doors, will not benefit from the financial assistance scheme. The Government's briefing suggests that those people will be protected by the new priority order on wind-up, but all that does is change how the cake is divided up; it does not increase the size of the cake.

Will those people risk falling between two stools? The Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond), should come clean about that matter, because the Minister for Pensions carefully avoided the question. Will the workers of a company such as Turner and Newall benefit from the financial assistance scheme—yes or no?

Tom Levitt: I shall put the hon. Gentleman's question straight back to him: if he were in the Minister's shoes, would he find £875 million of taxpayers' money to bail out that scheme?

Mr. Waterson: Unlike the Labour party, we have a policy. We would re-examine the use of unclaimed assets to compensate people, and I shall tell that to the delegation tomorrow.

We currently have no Secretary of State—the Department is rudderless; everyone except Ministers agrees that the financial assistance scheme is inadequate; the Pensions Bill lurches from disaster to disaster; the PPF will not provide a full guarantee; and the pensions crisis deepens and worsens as Ministers come and go. In the past few days, we have finally learned just how much the Government really care about pensions. The Government have spun the idea that they are prepared to jettison their Pensions Bill in its entirety to allow the hunting Bill on to the statute book, which is designed to pacify their own Back Benchers. They should ask the workers at Turner and Newall whether they prefer a hunting Bill or a Pensions Bill—I can imagine the workers' answer.

Under this Government, things are rarely as they seem on the surface. Perhaps it has finally dawned on those deep in the Department for Work and Pensions that their strategy is hopelessly flawed and that Ministers have been pursuing the wrong issues, in the wrong way and at the wrong time. Perhaps it is with quiet relief that they prepare to sacrifice the Pensions Bill and return to the drawing board, hoping that they can blame somebody else.

Oscar Wilde described hunting as

"the unspeakable in full pursuit of the uneatable."

Under this Government, pensions policy has become the incompetent in pursuit of the unworkable.
 
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3.48 pm

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