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Justine Greening: Are not the hon. Gentleman's concerns analogous to those that he may well have about the Chancellor's proposal for self-invested personal pensions, in which people can invest in a second home and put it into a pension vehicle where it will be tax-free?

Mr. Laws: The hon. Lady is right. We are concerned that the Government's proposals will be very expensive and that it is higher earners who will take advantage of it, as they will be able to gain even more tax relief on pensions. I return to the figure cited earlier: at the moment, 60 per cent. of tax relief on pensions already goes to upper-rate taxpayers, so the vast majority of people get very little help from it. We would not want to do anything to increase tax relief for, or direct it to, those on higher incomes, as the Government's existing proposals do.

The next consideration is the drawdown mechanism in clause 5. Subsection (6) sets out the terms under which drawdown can occur. There are two problems. One is the practical issue of monitoring the drawdown and ensuring that people pay the amounts back in later on, so that they do not take advantage of the tax relief and then blow it all on other assets without paying it back. The right hon. and learned Gentleman touched on that.

The other issue is whether these are the right items on which to allow people to draw out money from their pensions. The right hon. and learned Gentleman highlighted important events in people's lives, such as purchasing a house or investing in education, but it is not obvious why those particular conditions should be given a higher priority than the many other important events in people's lives; for example, being made
 
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redundant, facing substantial health costs or discovering that a child has a terminal illness. We can all think of many pressures and unexpected events that may be of a higher priority than those identified by the right hon. and learned Gentleman. The conventional way for people to deal with those problems is to have savings on which they can draw at any time and top back up whenever they want. That is the ISA provision already made by the Government. It is not tax advantaged in the same way as pensions, but it is tax advantaged to the extent that there is tax relief when the money is drawn out and the yield received.

Ms Angela C. Smith: Does the hon. Gentleman accept that buying a first home is one of the key events in adult life? The Bill, in a sense, would help people to deal with the problem of the price of housing and the raising of a deposit. Does he agree, however, that the provision of affordable housing, not the Bill, is the key response to that problem?

Mr. Laws: The hon. Lady is absolutely right, but I am sure that if I go too much into the provision of affordable housing, Mr. Deputy Speaker, you will quickly warn me that my remarks are wide of the Bill. Even the right hon. and learned Member for Kensington and Chelsea would not suggest that he is trying to deal with that problem in the Bill. I certainly share the hon. Lady's view that this is not the right way to solve it.

I am concerned about the third aspect of the right hon. and learned Gentleman's proposal. I do not want to end up spending more tax relief on those on higher incomes who may simply be redistributing their existing savings. I wonder whether the complexity of his proposal is worth the extra flexibility it is designed to achieve. Perhaps we ought to be focusing much more on improving the pensions architecture, allowing the existing ISA scheme to continue and making that the vehicle through which people deal with their rising and falling demand for cash as they go through their working life.

We welcome a large element of the Bill: two of the key proposals made by the right hon. and learned Gentleman. We are concerned about the third, as I have said. Like the hon. Member for Portsmouth, North, we think that the debate on pensions must go much further than incentivising people who are typically on high or upper middle incomes to save more. There are many other reasons why people are not saving more at present. They are related to the fantastic complexity of the pension system—the most complex in the world, according to the Turner Commission. They are related to means-testing, an issue raised by an hon. Gentleman earlier, which may ensnare up to 70 or 80 per cent. of the population in 50 years' time. It is leading many financial advisers to be very cautious about advising people to save when they fear that many of them may lose the advantage of those savings because their benefits will be withdrawn.

The problem of saving is exacerbated by people's recent lack of confidence in the pensions system, by their concern about the extent of charges and by the inertia that keeps many people from making private provision when there are so many other demands throughout their working life—demands that are increasing because of the cost of housing and the transfer of tuition costs from
 
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the taxpayer to students who have to pay back throughout their working life. These are the bigger issues that need to be resolved if Britain is to tackle the pensions crisis that it faces.

The Bill is a worthwhile contribution to the debate, but I hope that even the right hon. and learned Gentleman will agree that we will need to debate those other big issues when Lord Turner's report comes out.

Mr. Deputy Speaker: It may be helpful if I say to hon. Members that although spontaneity is never to be discouraged, it is helpful if they notify the Chair of their desire to speak in advance, as is customary.

11.28 am

Lyn Brown (West Ham) (Lab): The Bill is a narrow reflection of the concerns that many of us have about pension policies. The hallmark of a good, decent society is not how well the strong prosper but how the weaker and most vulnerable are supported. A decent society is one that gives its eldest citizens dignity in retirement, and that is what the debate should be about. How can we honour the contribution of the older members of our society to the fortunes of our nation? To that end, I shall outline what I believe the Bill should have addressed, and make it plain why I do not support a Bill that does not face up to those obligations.

I shall start with some general observations on the proposals, then make specific points about the details of the Bill. First and foremost, I believe that the presentation of the Bill jumps the gun in the debate on pension provision in modern Britain. The Government have already acknowledged the importance of the issue not only for current pensioners or for my generation, but for those who are starting their working lives. That is why they set up the independent Pensions Commission to investigate how best society can alleviate the pressures on our pension provision. That reflects the fact that Labour Members are keen to find a solution not just for the short term, but for future generations. I welcome the Government's commitment to consultation, debate and consensus across all political parties and among the wider public, and their recognition of the importance of collective consent on the matter.

The commission has already contributed much to our understanding of the scale of the issues that we must address. It has highlighted the fact that 12 million over-25s are not saving enough for their retirement. Many members of the public share a concern about their financial future. The Henley Centre reports that 55 per cent. of the British public are worried that they will not have enough money on which to retire. I look forward to the final report at the end of the year and to seeing the broader picture that it will offer of the challenges facing us.

Mr. Ellwood : The hon. Lady refers to several reports. Does she not think that a Government who have been in power for seven years—[Hon. Members: "Eight."] How time flies. Have we not had enough reports? Have we not had enough people commenting on the issue? Is it not now time for action? The hon. Member for Portsmouth, North (Sarah McCarthy-Fry) said that Labour inherited a bad system, but I say that the system has got
 
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worse. The longer we wait before getting on with the job of improving our pension system, the worse it will be for pensioners of my generation.

Lyn Brown: It is difficult to know where to start. I come from a poor area of the country. My pensioners would not recognise what you are saying about their position now compared with their position when the Conservatives left government. Perhaps one of the reasons why you are not speaking to my community is that you fail to understand their concerns—

Mr. Deputy Speaker: Order. The hon. Lady may have just guessed what she is getting wrong. She means the hon. Gentleman, not me.

Lyn Brown: Thank you, Mr. Deputy Speaker.

What are the problems facing our society that we must tackle through legislative programmes? We must honestly appraise them, which is why we have had so many reports. We have listened and learned as the demographic profile of this country and many others changes.

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