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House of Commons

Monday 24 January 2005

The House met at half-past Two o'clock


[Mr. Speaker in the Chair]

Oral Answers to Questions


The Secretary of State was asked—


1. Ms Meg Munn (Sheffield, Heeley) (Lab/Co-op): If he will make a statement on progress with his Department's measures towards full employment. [209971]

The Secretary of State for Work and Pensions (Alan Johnson): Since 1997, employment is up by more than 2 million to a record level of 28.5 million, with more than 250,000 more people in work in the last year alone. Those extra 2 million people in jobs are not just about the strength of the economy, but about the Government's active labour market measures to help people off benefit and into work and to help them with training, child care and all the things that often stand between them and a decent job. That is why is it is important that the successful new deal programme be maintained and developed.
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Ms Munn: May I thank my right hon. Friend for his reply? I am sure that he is aware of the report that came out last week that identified the fact that more women than ever before are now starting their own businesses. What is in the programmes that his Department runs that encourages people, particularly women who have spent time at home looking after children, to start their own businesses?

Alan Johnson: My hon. Friend is right; the report last week was very encouraging. My Department works very closely with the Department of Trade and Industry and others to ensure that we get as many people as possible starting their own businesses while recognising that the success of the economy very much depends on what is charmingly called the business birth rate. We will continue to encourage that and women, in particular, to start their own businesses.

Sir Archy Kirkwood (Roxburgh and Berwickshire) (LD): Although I acknowledge that a lot has been done in employment zones to contribute to the active labour market policies that have been successful to date, does the Secretary of State accept that it is harder to do that because the client groups with whom the trainers work are further from the labour market? Will he look carefully at how that problem can be addressed in future and, in particular, at the flexibility that is available in the employment zones? Although there is funding, much of it is in silos and it is sometimes difficult to access it.

Alan Johnson: The hon. Gentleman makes a very important point, and we will look at it. It is absolutely true, as he says, that the success of our efforts to get people back into work will inevitably hit up against those who are the most difficult to place into work. We need the flexibility that there is in the employment zones.
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In this situation, with the problem of the individuals mentioned by the hon. Gentleman, the last thing to do is to pretend that some kind of laissez-faire policy would work and to withdraw the programmes and assistance that we provide and which the Conservative party plans to privatise or scrap.

Mr. Tim Boswell (Daventry) (Con): We welcome it when people get into work, but will the Secretary of State not acknowledge that the number of people of working age who are still economically inactive is stuck at almost 7.9 million and the number of unemployed young people—the subject of Labour's flagship new deal programme—has risen from just under 30 per cent. to 42 per cent. as a proportion of the total unemployed? Is it really any longer plausible, as the Secretary of State has argued today after £5 billion worth of investment on the new deal, to say that just because the new deal and falls in unemployment are consecutive, one caused the other—any more than night causes day?

Alan Johnson: Let me address a couple of those points. First, the point about young people is a consistent theme from the Opposition, and they are wrong because they do not take into account the growth in population. Unemployment among those not in education, employment or training as a proportion of the population has fallen by 1.5 per cent. Those figures apply only to those in full-time education or training, and if we look at those in part-time education and training, we see an even more dramatic fall. Only 6,000 young people are now long-term unemployed; the figure was 300,000 in the mid-1980s.

May I say to the hon. Member for Daventry (Mr. Boswell) that today is supposed to be the most miserable day of the year? I understand that has nothing to do with the fact that Department for Work and Pensions questions fall on this day, but we all in the House have a duty to try to cheer the nation up. Let us be absolutely clear. Unemployment is at its lowest level for 30 years; employment is at its highest level ever; and the number of lone parents and disabled people in work has crossed 50 per cent. for the first time. This is good news for the economy and good news for Britain.

Lawrie Quinn (Scarborough and Whitby) (Lab): I join my right hon. Friend in warming up the spirit of the House. From the perspective of Scarborough and Whitby, never before have we had so many people in work. However, he will know that the east coast, like his constituency, faces problems in terms of access and transportation. We are on the periphery. Will he explain to the House and my constituents how Jobcentre Plus, other similar schemes and the new deal can help the people who have access problems to get to where the jobs are?

Alan Johnson: My hon. Friend hits upon an important reason why we need to speak to the individuals concerned, particularly those who have a history of being out of work, to find out what the problems are and seek ways of overcoming them. Jobcentre Plus personal advisers have at their discretion funding to help in such situations, as well as to provide transport in rural areas. It is important for us to
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recognise that it is no good simply hoping that some process of serendipity will get people into work. Of course, the vast majority of people do not need assistance, but many have problems that can only be tackled by a concerted approach, using Jobcentre Plus and the programmes that we have developed with such success since 1997.

Private Pensions

2. Bob Spink (Castle Point) (Con): what plans he has to encourage the take-up of private pension provision. [209972]

6. Angela Watkinson (Upminster) (Con): what plans he has to encourage an increase in private pension provision. [209976]

The Minister for Pensions (Malcolm Wicks): We are keen to increase private pension provision. That is why we introduced stakeholder pensions and are taking forward our radical programme of pension reform.

Measures in the Pensions Act 2004 will increase confidence in pensions, will make it easier for employers to run pension schemes and, along with our programme of informed choice, will help people to plan and save for their retirement.

Adair Turner and the Pensions Commission will also advise us on the future of private pension provision when they report later this year.

Bob Spink: I am grateful to the Minister for his response and for what he is doing on pensions, but it is still far too little. Does he recall the words of the former Minister for Welfare Reform, the right hon. Member for Birkenhead (Mr. Field), who said that the big issue worrying voters

When will the Government start to reverse the trend towards more means-testing, and when will they scrap the £5 billion pensions tax which is doing so much damage?

Malcolm Wicks: That was a broad question. I shall give the hon. Gentleman two reasons to be cheerful. One is that pension credit income testing is helping the poorest elderly people, two thirds of them women who often do not have occupational pensions or the full national insurance pension. The second is that the pension protection fund is not just about rhetoric; it is about making sure that all those hardworking Britons, decent people, who are in final salary company pension schemes will have their pension protected should— we hope that this will not happen too often—their company go bust and the scheme not have enough money to pay out. That is action, not talk.

Angela Watkinson: Many savers are reluctant to be involved in private pension schemes now, because so many of them have lost out so badly when their schemes have wound up. The Conservative Government will utilise balances in dormant accounts to give real
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compensation to those people. Is not that another good policy that the Labour Government would like to plagiarise?

Malcolm Wicks: I normally save my fiction input until the summer holidays, so I will not dwell on the conjecture about a future Conservative Government. The fact is that 10 million active employees—a very considerable number—are members of occupational pension schemes. We are taking action with the new regulator, the pension protection fund, to give those people added security. Surely the hon. Lady would agree that that is a step in the right direction.

Mr. John McFall (Dumbarton) (Lab/Co-op): Given the flight from defined benefit to defined contribution schemes by a number of employers, will the Government encourage employers to look at schemes such as the one introduced by Sainsbury's, in which the pension is based on average earnings over a lifetime? In that vein, does the Minister consider the recent articulation of longevity bonds by the Governor of the Bank of England something worth considering?

Malcolm Wicks: I am sure that the Treasury will look at that and other suggestions. The crucial thing is the percentage of contribution going into a scheme— the combined percentage from the employer and the employee—rather than the particular mechanism, whether it is final salary, defined benefit, defined contribution or a hybrid. The final salary scheme has not always been the best friend of many women and others with caring responsibilities. However, it is the level of contribution that we should be focusing on, and we look forward to the report of the Turner Commission.

Rob Marris (Wolverhampton, South-West) (Lab): Evidence from my hon. Friend's Department shows that tax relief on pension contributions has almost no effect on pension saving yet it costs £14 billion a year in forgone tax revenue. It is intensely regressive because 50 per cent. of that £14 billion is claimed by the top 10 per cent. of earners. Will my hon. Friend agree to consider abolishing tax relief on pension contributions, which could lead to each pensioner household having a £35 per week non-means-tested increase in their pensions? Will he consider also introducing compulsion along the Australian lines?

Malcolm Wicks: The Adair Turner commission will of course advise us on the merits of compulsion vis-à-vis an energised voluntary approach. Tax relief is one method by which we help pension schemes. Its future is a matter for the Treasury and not for my Department.

Mr. Steve Webb (Northavon) (LD): The Minister is aware of the APW case, where the company is still solvent but the scheme is being wound up. Members on both sides of the House have recently come from a meeting with APW workers. I have two questions for the Minister. First, when will the workers be put out of their misery and know whether or not they will come within the scope of the financial assistance scheme? Secondly, is the Minister confident that there are not other APWs—companies that will go to the trustees and say, "You can
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have a very small amount of money or nothing at all."? Firms will allow their pension funds to wind up, grossly underfunded. Is the hon. Gentleman confident that that is not happening more widely?

Malcolm Wicks: I have met APW workers and the Members who are concerned. It is a serious situation that we are considering extremely carefully. We must be very careful before we can embrace schemes where the employer is solvent, as opposed to insolvent. The pension protection fund is about insolvency. We have said that we are still considering issues involving the solvent employer. Surely the obligation to fund a pension scheme should rest primarily on the company? We shall be careful to ensure that it does not, through the financial assistance scheme, rest on the taxpayer; otherwise there will be a slippery slope leading to where Government and Parliament are expected to nationalise all financial risk. Of course it is not the fault of, and I am concerned about and sympathetic to, the group concerned. We are considering the matter.

Mr. John Denham (Southampton, Itchen) (Lab): Will my hon. Friend recognise that the trustees of APW were in a position of accepting a compromise on their scheme because they did not know of the Government's change of policy on the financial assistance scheme? There cannot be many schemes in that position. Will my hon. Friend look again at whether the APW scheme can be brought within the financial assistance scheme? I understand his general concerns about the taxpayer underwriting failing companies, but the APW case is specific.

Malcolm Wicks: Indeed, but not unique. There are several similar schemes and we are considering the matter carefully. I give my right hon. Friend that assurance. I met him and his colleagues to discuss the matter only a few weeks ago.

Mr. Nigel Waterson (Eastbourne) (Con): I too met APW workers today. They were far from cheerful about the fact that many of them will be facing an 80 per cent. pension loss and be excluded from both the financial assistance scheme and the pension protection fund. Does the Minister accept that the continuing uncertainty over the scope of the FAS and the PPF does little to encourage private pension provision? Is not the National Association of Pension Funds right when it says:

Malcolm Wicks: The NAPF is wrong about that. We are on course to establish the pension protection fund in April despite the Conservative party's declining to give the Pensions Bill a Second Reading. We take no lectures from the hon. Gentleman. The financial assistance scheme will be established in the spring and the first payments to those coming up for retirement, or who are already retired, will be made as soon as possible thereafter.
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