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I shall continue, as I was about to tell the House how much I enjoyed reading the new book on the Chancellor by Mr. Tom Bower. It is very illuminating and I strongly recommend it to Labour Members, especially on account of its passages on the pensions crisis and the notorious pensions tax.
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Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): On the subject of commitments given by parties, I seem to recall an interview recorded on Sunday nightI cannot quite remember the punch linein which the hon. Gentleman was asked to confirm that the only pensioners who would benefit under his proposals were those who did not claim tax credit. Can he please remind me of the conclusion of that interview?
Mr. Willetts: I am afraid that I am not wholly clear about what the hon. Lady is referring to. Is she talking about the Chancellor and the tax credit or the Secretary of State and his pension credit? The Prime Minister gets confused between the two, so I would not be at all surprised if the hon. Lady is confused.
I was talking about the tax credit that people used to enjoy in the pension funds, whereby dividends from British companies did not bear tax, and the Chancellor's decision in 1997 to withdraw it. That is what I am talking about. The discussion about that policy in the book that I mentioned is fascinating. For Labour Members who have yet to decide whether they are Blairite or Brownite, I strongly recommend it. I particularly refer them to pages 22223, where this crucial incident that affected our pensions so badly is discussed. Under the heading, "The Chancellor and his Tax", it states:
"To those who warned that his policies would cause permanent damage to savers and pensioners, Brown retorted that the stock market was booming and the funds were now richer than ever"
"'Many pension funds are in substantial surplus', he repeated. It was 'the right time to undertake a long needed reform.' He dismissed any contradictory opinion . . . Blair was urged to restrain the Chancellor."
"Blair told Brown that everyone agreed that taxing pensions 'was not a good idea.' 'It is a manifesto commitment', replied Brown inaccurately."
I do not know about defending the policy and I am not going to engage in fairy stories. I do recall that period and I recall going into the House of Commons Library for an independent assessment of the taxing pensions policy. If the hon. Gentleman wants to do his homework, he could get a copy of that document. The argument in favour of the tax was that the profits made from pension schemes were being paid out in dividends rather than being ploughed back into the schemes. How does the hon. Gentleman answer that one? I repeat that it was an independent report.
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Mr. Willetts: That was the argument that companies had to be stopped from distributing their dividends because it was bad for investment. It amounts to the constipation theory of investmentthe idea that the only way to acquire investment is for companies never to distribute any cash. The whole purpose of having a modern financial system is that companies with a large amount of cash flow can distribute dividends, while others that want to invest can secure funds from the financial markets to do so. There is absolutely no reason to stop companies distributing dividends in order to encourage investment.
Mr. Tom Harris: The hon. Gentleman has previously made clear his opposition to the abolition of tax credit dividends in the past. Can he therefore tell the House when the next Conservative Government will reverse the move? Will it be in the first week, the first month or the first year? I would be most grateful if the hon. Gentleman could tell us that.
Mr. Willetts: We will be publishing our consultation document on tax reform in the near future. [Hon. Members: "Ah!"] I have to tell the hon. Gentleman that when it comes to tackling the burden of tax under the Government, we are spoiled for choice in identifying the areas requiring reform. Taxes on pension funds are one of many candidates for reform.
Helen Jackson: I have been listening to the hon. Gentleman for nearly half an hour [Hon. Members: "Too long."] and it does not really surprise me that he has made no comment on chapter 8 of Adair Turner's report, which relates to the huge discrepancy between women and men when they reach pensionable age. One thing that the pension credit has done is to help overcome that discrepancy. Failing to acknowledge that aspect of what the Government have achieved in their pensions policy is, I would suggest, a gross mistake from the point of view of any of the women pensionersor women about-to-be pensionerswho might be watching or listening to the debate.
Mr. Willetts: I accept that that chapter, like every chapter of Adair Turner's report, is well worth studying and I accept that there is a problem about women and pensions. However, I remind the hon. Lady that 1.7 million pensioners who are entitled to the pension credit do not claim it, and many of those are the women whom she fondly imagines the pension credit is helping. The problem with the means tests is simply that many people do not get the help to which they are entitled. That is one of the biggest single objections to the policy.
I now want to make some progress. What have we had from the Government? On Monday we had a grand vision, and on Tuesday a grim reality. What we lack are any policies to connect the Government's vision with the
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reality contained in Adair Turner's report. It is at this point that we all turn to the Secretary of State. It is his responsibility to be the missing link
The Turner report contains some very grim evidence about the seriousness of the pensions crisis. The Secretary of State has that report and a vision from the Prime Minister. His job is to come up with the policies that tackle the problem. For the past 24 hours, he has been using some rather colourful turns of phrase. For example, he said that there is no "fairy dust" or "silver bullet" in this matter. It is as though we all live in a fantasy world and that the Opposition have a fairy-dust policy manifesto. What we want are good, solid, practical policy proposals. That is not too much to ask for, and it is why we produced on Monday our eight-point action plan aimed specifically at tackling the pensions crisis.
In contrast, the Government have asserted that the question is so serious and difficult that they will produce their policies after the next election. Am I right to be just a little suspicious about that approach? I thought that a party put its policies in its manifesto in order to get elected. The idea that a party tries to get elected and then launches policies when in government is not the conventional way of doing things in a modern democracy.
I do not know whether the Government's approach strikes the Secretary of State as a bit odd. Does it mean that he has no idea or policies at all, or that the policies that he has are so unpopular that he dare not reveal them to the electorate before people are able to vote? After seven and a half years of this Government, it is not unreasonable for the Opposition to ask him to put some policies on pensions before the electorate in advance of the next election. That is all that we are asking for, and it would be extremely helpful if the right hon. Gentleman felt able to do so.
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