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The hon. Gentleman mentions past warnings that he has given, which presumably include his saying that raising the basic state pension in line with earnings is a wild and uncosted policy. He is a man of logic and he has mentioned the Turner report, which states that the implication of raising the basic state pension is that
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either taxation or the retirement age will have to go up. Which of those alternatives is the Conservative party proposing?
Sir Archy Kirkwood (Roxburgh and Berwickshire) (LD): I understand political foreplay when I hear it, and the hon. Gentleman is obviously enjoying himself. Now that he has got it off his chest, will he not recognise that the Adair Turner report is a rather special moment in time? It is the next best thing to a royal commission in terms of setting out the extent of the problem, so is this not a sober moment at which we should try to deal with the issues and the context in a more deliberative way, rather than exciting all this party political clap-trap?
Mr. Willetts: Spoken like a true Liberal Democrat! They are so superior, so above the rest of us. I think that it is part of the real Opposition's job to hold the Government to account for what they have done on pensions, and that is what I am doing.
I want to remind Ministers of what they have said in the past, as set against the conclusions of what is indeed a very sober and important report. In the days of the Soviet bloc, one east European country had a law that made it a criminal offence to keep old newspapers. That made it very difficult for people ever to hold any Government to account for what they had promised or done in the past. Fortunately, in this country we can hold Ministers to account for what they have said or done, and I want to remind the Secretary of State of what we have heard from this Government on pensions since they took office in 1997.
In March 1998, a document entitled "New Ambitions for our Country: A New Contract for Welfare" rather rashly set outI am sure that the Government would not risk this nowwhat they called their "success measures" for pensions. Success measure 1 states:
"At the end of the process of reform, there should be a guarantee of a decent income in retirement for all."
"An increase in the amount of money going towards savings and insurance, but without increasing the proportion borne by government."
"Current state plans and private savings patterns . . . will only deliver a small increase and contrary to the government's stated aspiration, the balance of provision will not shift from state to private savings."
"This Green Paper sets out our plans for radical reform of the whole pension system, to rebuild trust and ensure that everyone can look forward to a secure retirement."
"These reforms mean that the total income of pensioners will rise in years to come, mainly fuelled by rising private contributions. Public spending on pensions will rise too in real terms, but less sharply, and will fall as a proportion of national income. This will ensure that the pension system remains both fair and affordable.
This is our New Insurance Contract for pensions. This Contract will deliver the security we all want, now and for the future."
"In the Green Paper on Pension Reform of 1998"
"the Government projected that government expenditure on pensions would remain constant as a percentage of GDP, and set a target that the balance of pensioner income should shift from 60 per cent. public: 40 per cent. private to 40 per cent. public: 60 per cent. private. This aspiration is extremely unlikely to be met".
It gets worse for Ministers. I do not know whether the Secretary of State has ever read the pensions documents previously produced by his own Government, but I hope that they would cause him at least one or two blushes. The Turner report states:
"Britain's funded private pension system is in serious decline. The percentage of the workforce covered is not rising and the average level of pension provision is declining."
"Overall contributions to pension funds increased by nearly 40 per cent. in real terms between 1997 and 2001".
I should tell the Secretary of State that I have a nice collection of letters of apology from previous Secretaries of State. His two predecessors had to write to me to apologise for their mistake in claiming that we are saving more than we really are. Adair Turner's report finally shows that all those assertions were false. It shows that the December 2002 assertion, on which rests the policy that is still being defended, was also false.
"it has been reported that around a third of FTSE 100 companies have recently moved away from defined benefit provision".
"But this trend should not be overstated. The latest figures . . . suggest that . . . only just over 1 per cent. of defined benefit schemes reported as having closed to new members. And only 0.5 per cent. closed to existing members."
"active membership of open DB schemes in the private sector has fallen by 60 per cent. since 1995."
Mr. Willetts: I see a former Minister wanting to enter the debate. Perhaps he is about to accept some responsibilityit would be a nice changefor some of those extraordinary assertions of the past. I am happy to give way to him.
Mr. Denham: I should like to remind the hon. Gentleman of two points. The first is that the Turner commission clearly concluded that the current problems that we face arise from the "cumulative impact" of the decisions and commitments made, often with unintended consequences, by Governments over "several decades". People outside the House would be interested to know whether the hon. Gentleman accepts his party's share of responsibility for what happened. In particular, will he now accept that when he stood in the 1997 election on the Conservative policy to phase out the basic state pension over the coming years, he and his party were completely and utterly wrong? [Hon. Members: "What?"] Those hon. Members who shouted out "What?" should have read the policy that was advocated by the right hon. Member for Hitchin and Harpenden (Mr. Lilley) when he was Secretary of State, which was to abolish the basic state pension. They were wrong, and Conservative Members should accept responsibility for it. [Interruption.]
Mr. Willetts: If the right hon. Gentleman wants to debate pensions and the 1997 election, it is about time that we received an apology from Labour Members for the way that they shamelessly misrepresented our views. Pensioners throughout the country thought that they were about to lose their pensions under the policy proposed by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), but that was absolutely not his intention, as the right hon. Gentleman well knows.
I accept, of course, that the serious pensions crisis that we currently face arises from a range of factors. The right hon. Gentleman is quite right about that. Not everything is under the Government's control and not everything is the responsibility of the present Government. I accept that. The evidence in the Turner report shows that it is a complicated story. The fact that Governments cannot control everything makes it even more important that the factors that Governments can control and influence are got right. The trouble with the present Government is that they have made a complete mess of the factors that they do controlthe tax regime on pension and the benefit regime on pensioners. That is the case against the Government and the challenge that they face.
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