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Mrs. Jacqui Lait (Beckenham) (Con):
It is a great pleasure to follow my hon. Friend the Member for Stamford and Spalding[Interruption.] Sorry, I meant my hon. Friend the Member for Grantham and Stamford (Mr. Davies). Historically, I have always
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made a mistake with his constituency, even though I worked with him on various Pensions Bills and can endorse his attacks on the means-testing introduced by this Government.
I came to the Chamber today thinking that we would probably concentrate primarily on the Turner report. I was glad that the hon. Member for Aberdeen, South (Miss Begg) differentiated the immediate crisis facing many pensioners today because of the actions taken by this Governmentalthough I acknowledge that some pensioners are better offand the longer-term view. I want to concentrate on the longer-term view. I see from a hasty reading of the Turner report that it reiterates most of the principles that have created the foundations for a long-term debate on the future of pensions. My age dictates that I am interested in this subject, and I share the concern of the hon. Members for Colne Valley (Kali Mountford) and for Aberdeen, South about the need for the young to learn to save as early as possible.
It was interesting to hear some big ideas exploded today. First, the Liberal Democrats and one or two Labour Members urged the ending of the insurance principle. Then it was suggested that we should have a nationally funded scheme for pensions through national insurance. That was the bones of one of our policies at the last general election, which I endorsed, but what bothered me slightly was the thought that it could be one huge national fund. I am sure that my hon. Friend the Member for Grantham and Stamford and others with City experience will know that the size of such a fund could distort marketsand especially if it became a politically correct fund, invested for reasons other than the best interests of the pensioners. Then it was suggested that reducing tax was not an incentive to save and that we would all be happy to pay an extra 2 per cent. in national insurance. That, I have to say, is not my experience. I hope that the Turner commission will not take that suggestion on board.
It is too early to draw any firm conclusions. Alan Pickering castigated us as mere politicians rather than statesmen if we were to have a knee-jerk reaction today, but there is general consensus about certain clear issues. We all agree that the system is far too complex in both state and private provision, and we tend to lump everything together rather than look at each aspect clearly, while recognising that there is an interrelationship.
In the last Parliament, we debated the introduction of the state second pension. My party objected to the principles entirely, apart from the suggestion that carers, and especially women carers, should have access to such a pension, which would go some way in the longer run to helping poorer women pensioners and carers. The state second pension is an additional complexity in a state system that is already so complex that most people do not understand it, beyond knowing that they have to pay national insurance.
We have barely talked about the public sector system and the need for the Government to be able to draw back from the unfunded liabilities of that sector. Luckily, we are not in the position that the French
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Government are in, where to fund the pensions for Electricité de Franceand perhaps Gaz de Francealone has put them in hock to the tune of £57 billion, which is allegedly the total black hole for all pension provision in the UK. Our own Government face a huge future commitment that will have to be met one way or another. Someone will have to get to grips in the long run with the unfunded public sector pensions.
Direct benefit and direct contribution schemes are both complex issues and there have been mistakes, so changes are needed. We have the opportunity to stand back and ask what is the principle behind pension provision. At present, legally, it is an insurance. Occupational pension funds are definitely an insurance principle, but there is a question whether direct contribution personal pension funds are an insurance or a form of relatively tax-free saving.
If we were more honest about the direct contribution sector of private pensions, we might be able to resolve some of the associated complexities, including, indeed, the question of annuities. The legal position is that we have to have annuities because they are insurance rather than, as most people regard them, their own pot of money. I was honoured to be the person who officially announced our policy on this issue to the Conservative party conference, but I should point out that my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) and other colleagues present have been very active in campaigning for an end to the annuity provision at 75. One of the easiest ways to solve this technical problem is to consider whether such provision should constitute an insurance policy.
We need to consider other issues, such as the housing market and people contemplating investing in housing as a way of replacing pension provision. We should think about what would happen if the Deputy Prime Minister were allowed to get away with his housing proposals. People need to be aware that a significant increase in housing provision would down bring prices, rather than increasing them, so it would not be sensible for them to rely on investing in housing as a way of replacing their entire pension provision.
The Turner report is the basis for extensive discussions and I am sure that we will have plenty of them in this Chamber. I look forward to participating in them in greater depth, and at perhaps boringly greater length. We must consider carefully what we do with pensions. The Government, however, are on a very pleasurable hook of their own making. We will accuse them, as my hon. Friend the Member for Grantham and Stamford said, of going into the next election with no pensions policy whatsoever. The voters will be buying, as usual, a pig in a poke.
Mr. Mark Field (Cities of London and Westminster) (Con):
It is finally dawning on many of our fellow countrymen that pension provision is an important issue, but I fear that there is a risk that the political class will regard it as an electoral issue and an electoral problem alone. In my view, the question should not be how to solve, spin or sweep under the carpet this issue in the next six and a half months; instead, we need to look ahead with real vision and leadership at how pension provision should develop in the next 20 to 30 years and beyond.
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This has been a very interesting debate and I endorse the comments of the right hon. Member for Birkenhead (Mr. Field). Looking ahead in pension provision is indeed very much a political judgment, rather than a question of amassing ever more evidence. A number of contributors have referred today to the need for consensus. If we accept that our collectiveand, indeed, our individualpension shortfall will be a major problem in future decades, we need to create a consensus among the political class on the correct way forward. We do, however, need to start by discussing with some candour how we have come to this pass.
I shall not reheat the arguments of my hon. Friends the Members for Havant (Mr. Willetts) and for Grantham and Stamford (Mr. Davies), other than to say that some of the blame must lie at the door of No. 11 Downing Street. I fear that, somewhat tragically, because the incoming Labour Government of 1997 was so committed to maintaining Conservative spending plans, the pensions "hit" became a very easy pool of money for the Chancellor of the Exchequer to draw onor so it seemed at the timein order to bring about his various spending plans.
Mr. John Horam (Orpington) (Con): My hon. Friend makes a very important point about the Chancellor of the Exchequer's position regarding these matters. Is it not a great pity that no Treasury representative has been present at any stage during this debate?
One of my great concerns about pensions is the real risk of a battle, almost, between the generations. History shows that almost every generation has been able to look ahead in the hope and confidence that, except perhaps in time of war, economic life gets better for progressive generations; but no longer.
Part of the problem is down to what has been described as the demographic time bomb, but there is also the perception that in order to maintain the somewhat unrealistic and often uncosted expectations of an older generation, those either in their 20s or not even among the work force today will have an increasing burden to bear. That applies not just to pensions, but to the increasingly irresponsible public-private partnerships favoured by an imprudent Chancellor. There is nothing prudent in his "jam today" policy with its off-balance-sheet financing, which will have to be paid for in the generations ahead. It strikes me that if public policy continues to be constructed on the basis of pitting the interests of one generation of taxpayers and electors against another, we are heading for some very serious unrest in the years ahead.
I was going to say that I was speaking as a 30-something, but I am not quite that any more, having celebrated my 40th birthday last week. I still consider myself relatively young and I believe that my generation lacks confidence in the whole area of pensions. My hon. Friend the Member for Beckenham (Mrs. Lait) rightly pointed out that all too many people in their 20s and 30s feel that the only safe investment is that of property, particularly in London and the south-east, but it now looks as though even that market is over-heating so we are seeing the first signs of further problems there.
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Some hon. Members have touched on the issue of compulsion. I must confess that after the mis-selling scandalsome of it occurring prior to 1997it seems to me that the Government's refusal to take responsibility for Equitable Life makes it very difficult to make a supportable case in favour of compulsory saving. The lack of confidence among many would-be savers is tangible. Only if the pensions industry can be made much safer can we seriously contemplate compelling people to place their trust in it. If the law forces you or me to hand over an unspent surplus of our hard-earned cash to the unqualified or incompetent, there will be little incentive for anyone to save. I would reiterate the words of many Conservative Membersthat experience shows that the Government, above all, are often the most unqualified and incompetent of savings vehicles.
Amid all the talk on compulsion, there is also a lack of appreciation of why so many people fail to make provision for their future. No amount of new legislation and no new initiatives will overcome the fact that the great majority of people in Britain today are too poor to make adequate savings for their retirement much beyond the state pension. I believe that compulsory saving can be only a small part of the solution.
There is an argument that goes against that. If the Government simply use taxation to spend for the future, it is in a sense the most compulsory vehicle of all, but I believe that there is a lesson to be learned from experience across the world that lower taxes may be the best incentive to save. The dismal and disappointing stock market performance of recent years in this countryit is poor compared even to many of the European bourseshas in large part been affected by the increasing tax burden. We should perhaps consider allowing people to keep more of what they earn and hope that they will put it into saving for their future.
Many contributors to today's debate have mentioned the possibility of raising the retirement age, and I must confess that I take on board some of the concerns of Labour Members about the difficulties of hard-working manual labourers. It is easy in a service economy, such as my constituency of the Cities of London and Westminster, to think of 65 and 70 as a relatively young age at which people could continue to work, but it is much more difficult for those who have carried out manual work either in the agricultural industry or manufacturing. We need to get that right. Younger people in the work force increasingly seem to appreciatefor the reasons set out todaythat the retirement age will have to go up. Clearly, expectations of life have increased rapidly in recent decades.
We also have to ensure that those in retirement have realistic expectations. I do not wish to sound overly negative, but I believe that politicians of all parties have failed in the past to tell it as it is. Pensioners may well have paid their stamp, but they have not contributed anything like enough to justify receiving the state pension for the number of years that many require it, or their health care or other welfare benefits. However, we are where we are: clearly, we cannot expect pensioners to go back to work, but politicians of all parties must not raise unrealistic expectations as part of a Dutch auction aimed at winning the votes of pensioners and of people who are soon to be pensioners.
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Many older folk feel insecure and very worried about what the future holds. All of us, as constituency MPs, will discover from the contents of our mailbags in the weeks and months ahead that many of our older electors are becoming very worried by what they read in headlines about a pensions crisis. Yet we must face facts. As a nation we cannot go on as we have over recent years. I hope that we will discuss this urgent problem in the months before the next election, and it is beholden on all parties to produce sensible plans for the future.
I entirely agree with the right hon. Member for Birkenhead, who made a plaintive cry to his colleagues on the Front Bench, but this matter in a sense transcends some aspects of party politics. We need to get it right, and politicians of all parties will pay a large penalty if we fail so to do.
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