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Sir Malcolm Rifkind: As I tried to explain in my opening remarks, the figure of £40,000 was not plucked out of the air. We are trying to help lower and middle income people who might wish to purchase their first house. That means paying a deposit. The average deposit for a first-time buyer—not for a wealthy person buying an expensive property—in London, which is the highest expense area, is £31,000. The figure of £40,00 is geared around that level. It does not mean that people must withdraw that sum. That is the maximum that can be withdrawn, in order to help people on low or middle incomes. The hon. Lady has many young married couples in Stockton, South who will wish to purchase their first property and will wish not to be deterred from saving in order to do so.

Ms Taylor: I entirely accept what the right hon. and learned Gentleman says. However good or bad the example is, the opportunity of withdrawing £40,000 suggests to all of us that the proposal has no universal intention. It is only those on above-average incomes who can afford to benefit from the proposal.

I am pleased to have the opportunity to speak in the debate. It is a useful debate, although I disagree with the right hon. and learned Gentleman's proposal. It is important for all of us to consider such a proposal, even if, as I shall do, we gut it and throw it out.

11.58 am

Justine Greening (Putney) (Con): I am grateful for the chance to speak in the debate. I shall start by expelling a few myths that seem to exist among those on the Labour Benches. My constituency, Putney, includes what may be Europe's largest council estate, the Alton estate in Roehampton. I have 12,000 people there, many of whom experience exactly the problems outlined by Labour Members. As their MP, I am determined to represent those people and their interests to the best of
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my ability. Of the Labour Members who are promoting private Members' Bills, I see none introducing Bills relating to pensions.

Anne Snelgrove : Labour Members have not introduced private Members' Bills on pensions because we are waiting for the Government's pensions review.

Justine Greening: The hon. Member for West Ham (Lyn Brown) has discussed not jumping the gun, but we have waited a long time for it to be fired—it has been primed, but we are still waiting. Once the final Adair report is published on 30 November, I hope that the Government have the guts to consider introducing the proposals. Given the problems that Labour Members have outlined so eloquently, pensioners and my constituents have waited a long time for concrete proposals. I speak on behalf of not only my constituents, but my generation—the 30-something generation—who tend to move from role to role, generating pension pots as they go. Such diverse lifestyles allow some women to come out of work, possibly bring up a family and then return to work.

The Bill would introduce flexibility into system. It is not a complete solution to the pensions crisis in this country, but it is part of the solution and should be welcomed as such, instead of being thrown out because it does not address all the issues. Urgent action is required to address the root causes of the pensions and savings crisis in this country.

The current system is neither simple nor certain, which sometimes prevents people from making financial choices, and the Bill addresses both of those problems. My right hon. and learned Friend has outlined the savings and retirement vehicle, which would allow people to contribute, to stop contributing and to contribute again, and the choices on annuity provision, which include value-protected annuities. Hon. Members should welcome those measures, which should become law.

The Bill addresses the problems that we face in today's Britain. The law must change, because Britain is changing. Britain is a place where people lead diverse lifestyles and have diverse financial situations. All the Bill seeks to do is to give people diverse choices that are simple enough for them to manage throughout their lifetimes. I hope that it becomes law, and I commend it to the House.

12.2 pm

Andrew Gwynne (Denton and Reddish) (Lab): It is a pleasure to contribute to this interesting and wide-ranging debate. I congratulate the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind) on securing his place in the private Members' Bill ballot and on choosing this important topic. It is a pleasure to follow the hon. Member for Putney (Justine Greening), who has made a valuable contribution to today's debate.

I shall be brief, because much of what I wanted to say has already been said, particularly by my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry), who made an eloquent speech. Although I have some specific concerns about the Bill, the right hon. and
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learned Member for Kensington and Chelsea has raised some important issues about pensions and savings that will not go away and which must be discussed.

Whoever won the election on 5 May—thankfully it was my party—knew that they would have to examine the issue very seriously, which is precisely what the Government are doing. As the right hon. and learned Member for Kensington and Chelsea knows, and as other hon. Members have confirmed, the Government set up the Pensions Commission, led by Adair Turner, to consider many of the issues that hon. Members have raised in today's debate. The commission is due to publish its second report in a month's time, and it is right to wait and see what it has to say and place the proposals in the Bill within the context of its findings.

There is a Bill before us that must be debated, however, and there is no hiding from the fact that the United Kingdom is facing a stark demographic challenge. As has been said, we are living longer but tend not to work for longer. People retiring today are likely to spend nearly twice as long in retirement as previous generations did. While it is undoubtedly good news that we are living longer and healthier lives, these demographic changes mean that sadly we cannot rely on the existing pension system to support us in retirement. Therefore, the way in which we meet the challenge of an ageing society and what it means for lifetime income, savings and how long we work is an issue for all of us.

Many Members have mentioned the so-called savings slump. However, there remains a healthy level of saving, and we should not lose sight of that fact. I could say that I am surprised that Conservative Members have not pointed out that back in 1992 the savings ratio reached a peak at 11.5 per cent., but then again, given the reasons behind that, I am not surprised that they have remained quiet about it. Trends in saving are cyclical. When the economy is doing well and people are confident about their future and feel secure, they tend to save less. I am not suggesting that that is necessarily the right thing to do, but it is a fact.

Likewise, when the economy hits the buffers people tighten their belts. I suggest to Conservative Members that back in 1992 people saved more through uncertainty. They were uncertain whether they would still be in jobs as unemployment topped 3 million and factories closed.

Several hon. Members rose—

Andrew Gwynne: I will give way to the hon. Member for Weston-super-Mare (John Penrose) when I have finished this point.

People were uncertain whether they would still be in business as insolvency soared, whether they would be able to pay their mortgages as interest rates shot up, whether they would still have a house as repossessions increased, and whether they would have enough money to make ends meet. That is why people saved more in 1992 than in any year since, and I suspect that Conservative Members privately accept that.

John Penrose : Is the hon. Gentleman seriously suggesting that falling savings rates are a good thing and rising savings rates a bad thing? If he is, no economist would ever agree with him.

Andrew Gwynne: Clearly the hon. Gentleman was not listening. I said that it is not necessarily a good thing, but
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a fact, that when people feel secure and believe that their future is certain they tend to spend more and save less. It is a cyclical trend.

Greg Clark rose—

Andrew Gwynne: I will not give way, as I want to make progress and other Members want to have their say.

Putting to one side that political point, I would like briefly to discuss the proposals from the right hon. and learned Member for Kensington and Chelsea for a savings and retirement account and retirement income fund, which are certainly interesting. Savings and retirement accounts appear to be a wrapper in which people can accumulate long-term savings, mainly for their pensions, while remaining accessible at times of need. On the face of it, the scheme has some clear attractions. But in many ways it is, as the right hon. and learned Gentleman admitted, very much like the Government's individual savings account but operating under the pension tax rules—although the Bill does not outline how that would work in practice, and that requires clarification.

The proposals remain uncosted, and I would be interested to see estimates of the cost of establishing the schemes.

As my hon. Friend the Member for West Ham (Lyn Brown) said, the ISA is the Government's primary method of encouraging savings. Some £180 billion has been subscribed since 1999, and £1.6 billion given in support in the form of tax relief for savers. Perhaps, therefore, it would be more productive to encourage enthusiastically even more people to open an ISA.

The Government also encourage saving through a range of measures including tax relief on employee and employer pension contributions, national insurance relief on employer pension contributions, arrangements to allow those with contracted-out pensions to pay less in national insurance contributions or to receive a rebate from the Government, and the option of taking out a tax-free lump sum when people start to receive their pension.

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