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Kevin Brennan: Given that all parts of the United Kingdom are expected to contribute to the savings that the hon. Gentleman says he can use to create the new benefit for pensioners and, as a believer in the contributory principle, why is he limiting the new council tax benefit to England?
Mr. Willetts: Council tax is a devolved matter for Scotland and Wales. We have set out carefully costed proposals for the earnings link of the basic state pension to show how that can be delivered. It does not involve savings on S2P, taking money from an earnings-linked pension credit to put into a price-linked pension credit, or any savings affecting Wales or Scotland particularly. We announced our costings 18 months ago and they still stand.
Miss Anne Begg (Aberdeen, South) (Lab): I want to be clear about what savings the hon. Gentleman is talking about. Is he talking about the £35 billion of savings that the Conservatives hope to make throughout all Departments and that when they have found those savings, pensioners may receive extra, but only after all those savings have been made?
Mr. Willetts:
We announced our policy of increasing the basic state pension at the same rate as earnings, not
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prices, in autumn 2003—before the David James exercise—with carefully identified savings. We said that the new deal is not working and that remains my view. Abolition of the new deal and replacing it with something more effective is one saving. Others were also identified. The figures in our original proposal stand and are independent of the David James exercise. They do not depend on that exercise and were set out clearly when we announced our policy. I am grateful for this opportunity to make it clear that the savings never required money to be taken from an earnings-linked pension credit and putting it into some other form of benefit. I was careful not to assume that.
Kevin Brennan: Is the hon. Gentleman saying, therefore, that part of the savings that he says his party will collect and use to pay for the new council tax benefit that they are proposing only for England will generate a Barnett consequence for Scotland and Wales, which the Scottish Parliament and the Welsh Assembly can use in any way they please?
Mr. Willetts: Council tax is a devolved matter. We strongly support the proposals that have been put forward by our Scottish and Welsh friends. We know what they want to do. The council tax is an English matter and the basic state pension is a UK matter. I am happy to make that clear.
I hope that we might hear from the Minister and the hon. Member for Northavon their thoughts on the citizen's pension. It is so easily endorsed as a marvellous solution to all our problems in the pensions system and I would very much like to have some practical answers to questions about how it would work, whether it would be a completely individualised payment, and whether it would be at a lower rate for couples. If the rate for couples is to be lower, on what basis will that be because it is not obvious how that could be done?
I want to ask the Secretary of State for more information about what he said about the financial assistance scheme. We warned all along that £400 million would not be enough. The Government were lucky to get away with their announcement of £400 million when it was perfectly clear that that was completely inadequate given the scale of the crisis. That is why we supported the suggestion of the right hon. Member for Birkenhead (Mr. Field)—he is no longer in his place—of using the unclaimed assets of banks properly to replenish these funds.
It is useful to have the Secretary of State's belated announcement of how the scheme would work, but it will be an ad hoc arrangement. In his written statement this morning, he merely set out the basis for people aged more than 62—he gave a slightly wider age range in his speech. People who are not yet in the final three years before retirement now have several more years of uncertainty before they know where they stand. Does that not tell him that there is something wrong with the fundamental design of the FAS and that it would have been better to have considered properly replenishing the funds of the pension schemes involved? Why was he unable to give any indication today of his thinking about how he would help the majority of people who have already seen their pensions wound up and who are
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already concerned about their financial future? It is not acceptable to leave people who are more than three years from retirement in a state of complete uncertainty about how the FAS may or may not assist them. I hope that we shall hear some more information about that from the Minister of State.
It would also be helpful to have an update on the latest estimate of the number of people affected by pension wind-ups. If the Minister can provide a list of a large number of company pension schemes that are covered, it should presumably also be possible to offer an update of the figure of 65,000, which has been around for some time. It would be useful and interesting to hear his latest assessment of the total number of people who are likely to be eligible. As the 65,000 estimate has had to be revised, are the Government hinting at having to increase the scale of the £400 million total, too?
What about the interaction between the financial assistance scheme and the Pension Protection Fund? Can the Minister tell us more about that? What would happen, for example, if a scheme wound up before April 2005? It is possible that there could still be large schemes in those circumstances. At what point does the FAS stop and the PPF take over? The Minister has caused considerable confusion on that point over the past six months, so it would be helpful to hear his comments about that.
I hope that it will not be too outrageous if I speak briefly about the other motion—on guaranteed minimum pensions, often regarded as a technical subject for nerds and anoraks—[Interruption.] We will not name names. In practice, the subject affects large numbers of people who contracted out of the state earnings-related pension scheme—now the S2P—into a funded company pension scheme and who may find that there is not even enough money in the company pension scheme to pay the guaranteed minimum pension to which they believed they were entitled as their minimum insurance, so to speak, when they contracted out. Ministers sometimes talk as though there was no pension insurance before the PPF, but the guaranteed minimum pension is in fact a type of insurance for people who contracted out of the state system.
People who contracted out and whose company pension schemes are winding up are experiencing many problems in securing the basic GMP. I hope that the Minister will comment briefly on that when he winds up. He will recall that in one of our least exciting parliamentary question and answer sessions, I put a question to the Secretary of State on 9 June 2004—[Interruption.] It was indeed a classic.
My question was about deemed buy-backs, which occur when schemes have insufficient assets to secure the guaranteed minimum pension and the Department is asked for full reinstatement of the state pension. There is a strong feeling in the industry that the process of securing the deemed buy-back is slow and cumbersome. When the Under-Secretary of State for Work and Pensions answered me in June, he said that the Inland Revenue had received expressions of interest in deemed buy-back from 59 schemes, 33 schemes had formally requested calculations and eight of those had been issued with the necessary calculations. The crucial sentence in his answer was the final one. He stated:
"As yet no-one is receiving reinstated benefits."—[Official Report, 9 June 2004; Vol. 422, c. 478W.]
May we have an update on that?
There are rumours that one or two real human beings have actually received a payment under the deemed buy-back arrangements. If that were happening, it would be marvellous, but the Minister owes the House a fuller explanation of how deemed buy-backs are working, as well as an explanation of the workings of the GMP. The guaranteed minimum pension is not delivering the security that it was supposed to deliver. Does the Minister agree that it is outrageous that the Inland Revenue issued guidance that schemes could discharge their GMP liabilities by purchasing annuities that would provide an income well below the level of the GMP? In other words, the guaranteed minimum pension has turned out to be neither a guarantee nor a minimum for people who are having to manage on much lower incomes. How can the Minister defend those arrangements?
What about the idea that has appeared in the pension press that people who have contracted out will be asked whether they have taken out additional voluntary contributions and that, if they have an AVC, it will be included in the calculation of their pension income and they will only be able to buy back into the state system if, even with their AVC, they are still below the level of the GMP? Those are important questions that are at least as relevant for the victims of pension wind-ups as the scale of the FAS. They can appear technical and are easy to gloss over but, between consenting adults, we should all welcome a bit more information from the Minister today.
I have a few brief questions on some other aspects of the benefits system that are relevant to the uprating statement. We did not hear about the Child Support Agency. We were all fascinated to learn that the chief executive of the CSA was no longer in place. The Secretary of State gave the Select Committee on Work and Pensions the distinct impression that that was so. But the chief executive is still in place, so perhaps the Minister can tell us how the search for his successor is going? When might we see the outgoing chief executive leave the CSA and a replacement arrive? We shall be interested to hear about that.
I hope, too, that we might hear more about the Government's views on the problem of the 1 million-plus young people who are not studying, working or training. Although the Secretary of State always praises the new deal, if there are now more than 1.1 million young people who are not working, studying or training—a higher figure than in May 1997—surely that suggests, even to those on the Government Benches, who always go out of their way to speak so complacently about the new deal, that there is a problem. Will the Minister for Pensions reflect on why even more young people are part of the lost generation—neither working, nor studying, nor training—than in May 1997? Is it perhaps the case that the arrival of employment zones is a recognition by the Government that the new deal is not working, and that employment zones are intended as an alternative to the new deal and pilot a rather different approach? We would greatly welcome hearing from him on that.
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I will not trouble the Minister by inviting him to comment on the announcement last week on the new basis on which the retail prices index would be calculated, although that is also relevant to uprating. I have given him enough technical questions and I hope that, when he responds to the debate, he can find the time to answer them.
3.35 pm
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