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House of Commons

Monday 28 February 2005

The House met at half-past Two o'clock

PRAYERS

[Mr. Speaker in the Chair]

MESSAGE FROM THE QUEEN

Electoral Commission

The Vice-Chamberlain of Her Majesty's Household (Jim Fitzpatrick): I have to inform the House that the Address of 10 January praying that Her Majesty will reappoint as electoral commissioners Pamela Joan Gordon, for the period of two years, and Sir Neil William David McIntosh KBE, for the period of three years, was presented to Her Majesty, who was graciously pleased to comply with the request.

Oral Answers to Questions

WORK AND PENSIONS

The Secretary of State was asked—

Financial Assistance Scheme

1. Adam Price (East Carmarthen and Dinefwr) (PC): What his current estimate is of the levels of assistance that will be provided by the financial assistance scheme. [218081]

The Secretary of State for Work and Pensions (Alan Johnson): I refer the hon. Gentleman to the written statement on the financial assistance scheme made on 22 February by the Minister for Pensions.

Adam Price: No one should doubt the Secretary of State's sincerity on this issue. Does he accept, however, that although the intention of last week's statement was no doubt to provide peace of mind, it has created another level of uncertainty? In order to dispel that, will he tell us at what level the cap will be set? When will we know for certain which companies are eligible, and how much money will be left at the end of the day for the 50,000 people who are beyond three years from retirement?

Alan Johnson: First, we envisage that the cap will be the same as that in the Pension Protection Fund—£12,000. That is our intention. Secondly, I understand that there is uncertainty for other people, but because we will not know absolutely what the assets and obligations are until all the schemes involved have been wound up, we had to make a choice. The temptation was to say
 
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nothing until the arrival of that happy state, which is some months away, but following representations by both Government and Opposition Members it was absolutely right to give some comfort to people who were three years away from their scheme age retirement. I am unable to say anything more until we have the final details of the schemes involved.

Miss Anne Begg (Aberdeen, South) (Lab): Following last week's news, the workers of the Richards pension scheme in Aberdeen were delighted to find that they were to be included in help from the financial assistance scheme. Notwithstanding what the Secretary of State said in answer to the previous question, can he can give us any idea of time scales? When might all pensioners in such schemes have an idea of what they are going to get and when they are likely to get it?

Alan Johnson: Our intention is to lay the regulations in the spring, to be in a position to have Royal Assent by around July, and then to give a six-month period for people to apply. The list of almost 400 schemes that we published last week is indicative, not definitive, and some schemes may not be on it. We hope that when the application process is completed and we have full details of all those schemes, which is impossible until those particular pension funds have been wound up, we will be in a position—it should be around the beginning of next year—in which to be absolutely sure about what we can offer and to have the scheme fully in place.

Mr. David Willetts (Havant) (Con): Will the Secretary of State confirm a simple point of arithmetic? If the scheme's entire £20 million annual budget were spent on the 15,000 people whom we understand he wants to help, would they get £1,300 a year each—which is not much—and how much would be left over to help the other 50,000 or so victims of pension wind-ups?

Alan Johnson: I had better immediately correct an error that I apparently just made. I said that the cap under the financial assistance scheme would be the same as for the Pension Protection Fund. I apologise, Mr. Speaker, for misleading the House. The cap under the PPF is higher; the cap under this fund will be £12,000.

We have a sum set aside that we think, on the basis of our original calculations, will be enough to give proper compensation to people who are in this situation; that is what we want to do. On 22 February, we announced that the scheme review will now include the finances of the scheme. That process will begin with the next spending review and starts next year. We also said, because this is an issue of great importance to all those affected, that we would not force them to buy annuities, and that we would run the scheme from the DWP, which means that we take the risk rather than the individuals involved. I accept that the full details will have to be laid out at some stage, but I hope that people appreciate that no one has ever tried such an exercise previously. We are taking private sector schemes from 1 January 1997, piecing together all the information on their assets and the gap between their assets and their obligations, and trying to provide help from the centre—from Government. That is a difficult and complex process,
 
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which means that we will not be in a final position to give the sort of details that hon. Members obviously want until some time in the future.

Mr. Willetts: But last week the Secretary of State called for consensus on pensions whenever possible. Can we at least get a consensus that £20 million divided by 15,000 people equals £1,300 per year? I would have thought that all hon. Members could agree about that. Does he accept that many victims of pension wind-ups are working that out and asking, "If we're not in the first 15,000, what is there for us?"? Talking about a review is not good enough. Does not he accept that, if a review is all he can offer, he will leave 50,000 victims of pension wind-ups facing desperate uncertainty? Would not it be far better instead to offer to use banks' unclaimed assets, as the right hon. Member for Birkenhead (Mr. Field) originally proposed, to help those people?

Alan Johnson: I do not accept that. Conservative Members failed to vote for a Second Reading for the Bill that provided the basis for the legislation. If I understand the argument of the hon. Gentleman and his colleagues correctly, they would have stripped away the FAS from the measure and introduced another Bill. That means that we would be starting the process of getting the necessary legislation only now, with the result that people would have had to wait far longer.

Some of the schemes go back to the days when the Conservative party was in power. It never contemplated offering compensation to people in the position that we are considering. [Hon. Members: "Never had to."] Conservative Members claim that they never had to. The number of redundancies associated with the problem is the lowest on record. It was at its highest under the previous Government. There were plenty of people in that position under the previous Government. We have acted to rectify that, whereas they did nothing.

Kevin Brennan (Cardiff, West) (Lab): I congratulate my right hon. Friend the Secretary of State on acting first in the interests of those in the most immediate need, as many of us called on him and his predecessor to do in the many debates on the subject. The hon. Member for East Carmarthen and Dinefwr (Adam Price) described the announcement as a betrayal in the press. Does my right hon. Friend agree that that is nonsense? Is not it the case that opening the door to the possibility of more funding for the FAS means that people can at least see some light at the end of the tunnel?

Alan Johnson: I agree, and I again pay tribute to my hon. Friend for his role in the campaign following the problems at Allied Steel and Wire. If the announcement is a betrayal, I think that working people need a few more such betrayals, given the assistance it provides to people, some of whom I met last week, who believed that they would never get anything. Some of those people are now in their early 70s.

Few people expected us to be able to provide a scheme, and when we did Opposition Members spread cynicism throughout the country and said that it would provide nothing substantial. Now that it has, their next trick is to spread more cynicism and say that people will get no assistance. We are determined to help people in
 
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the position that we are discussing. We are probably the first Government even to attempt such an exercise, and I am proud of that. It is far from being a betrayal.

Mr. Steve Webb (Northavon) (LD): The financial assistance scheme offers 80 per cent., whereas the Pension Protection Fund gives 90 per cent. The Secretary of State has admitted that the cap will be half the level of that for the PPF. There is a third aspect to the problem. Will he confirm that, once the pensions are in payment, they will be frozen until the recipient dies? If so, they will fall in real value year after year. Does he think that that is adequate?

Alan Johnson: The hon. Gentleman is cynicism personified. Yes, the cap has been set at a lower level than that for the Pension Protection Fund, but it is a level at which we estimate that 95 per cent. of people will qualify. It is right that resources should be focused where they are most needed, and that taxpayers do not end up funding pensions paid to executives of failed companies that might have led to the company failing in the first place. Of course the PPF is in a different position: it is an insurance scheme that we are setting up for the future. People cannot insure their house once it has burned down, and we have always made it absolutely clear that the FAS will not be as generous as the PPF. We said that from the start. We also said from the start that we were looking to provide some assistance in an area in which the Government do not have a responsibility to provide compensation. So we are providing assistance in these circumstances. The hon. Gentleman's point is that the PPF scheme guarantees more than the FAS does, but everyone has known that from the start—it is hardly news to anyone involved. It is about time he gave us some praise for seeking to resolve this issue in a way that gives people some meaningful compensation.

I was asked about the issue of freezing last week. Not all the schemes involved were index-linked. To index-link the financial assistance scheme would take resources away rather than concentrating them in the area that we think best for giving people maximum compensation. We shall not index-link the FAS, because many of the schemes involved were not index-linked in the first place.

Mr. Derek Wyatt (Sittingbourne and Sheppey) (Lab): My constituents at ASW in Sheerness are thrilled with this announcement. Kent people who had asbestos-related illnesses in Chatham had to wait 18 years for compensation, as did people with lung disease who had worked in the mines in Kent, yet we have done this in two and a half years. Given that the Secretary of State has now opened the door to the £400 million, will the amount being put in be reviewed every three years, or will he consider putting in £100 million a year over 20 years so that everyone knows that there will be adequate funding for the pensioners?

Alan Johnson: I congratulate my hon. Friend on his involvement in this issue. He makes a very good point about the compensation offered to miners. He might also have mentioned the compensation provided to trawlermen by this Government. Those issues were all thought to have been lost a long time ago. I also
 
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reminded the House last week about the extra money that we put into the Aberfan fund after people had sought to get it from the Conservative Government for 18 years. When I raised that issue last week, Conservative Front Benchers said, "But Aberfan happened under a Labour Government." I suppose that that was their reason for not allowing the money to go into the fund during the 18 years in which they were in power.

On my hon. Friend's question about the triennial review process, we plan to look at the amount available in the next spending review, at which time we shall have full details of all the schemes. That should prevent us from having to have further reviews every three years.

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