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Sir Malcolm Rifkind: I am grateful to the Minister, who is giving a constructive response. Before he comes to any further view on these matters, will he consult his Canadian colleagues? These are not theoretical proposals. They have worked for 20 years in Canada and almost half the Canadian pensioner population enjoy such a structure. The problems to which he refers have not been created. That should give him the reassurance he seeks.
Mr. Timms: The right hon. and learned Gentleman makes a fair point. I have a couple of points to put to him. The rest of the system is rather different in Canada, but the concern I have raised has been a real issue there. For example, I draw his attention to the warning from the university of British Columbia:
"As there is no maximum withdrawal limit, you must be careful not to exhaust your account balance earlier than you would like".
The Canadian Bankers Association said:
It is difficult to say to people in their 80s or 90s, "Watch out, you're running out of money. You'd better cut back." That is the danger of the proposal, which has been evidenced in Canada.
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The upshot is that if the proposal was put in place it would be available only to people with large pension pots. That is what my hon. Friends were drawing attention to: the worry here is that the proposal is attractive only to people with large pension savings.
Mr. Laws: Would not the Minister's concerns be addressed if Lord Turner were to propose a higher basic state pension without the extent of means-testing that we have currently? The Government could loosen up the rules without running the risk of people having to fall back on means-tested benefits.
Mr. Timms: I shall not anticipate what Lord Turner might recommend. Certainly, if there was a change along those lines that would help, although it would not by any means remove the problem. Only about 10 per cent. of defined contribution pension pots hold more than £50,000. Of that 10 per cent., on the basis of some quick calculations, it looks to me as though only a minority could safely go down this road and be confident that they would still have money in their pot if they lived to their late 90s or thereabouts.
Even if someone was assured of an income of £109.45 a week, that would not be enough to keep them out of income-related benefits. There is also the question of housing benefit and council tax benefit, as well as the issue of savings credit, which, for a single person, can be available for an income of up to £151 a week. There are some real issues here involving how widely this mechanism would be attractive and valued.
I shall conclude by congratulating the right hon. and learned Member for Kensington and Chelsea and thanking him for making these proposals.
Mr. Hurd: I have listened very carefully to the Minister's detailed response, but what did not come through was any sense of urgency. The World Economic Forum ranks Britain's savings ratio 98th out of 117 countries. Does he share the view expressed in the debate from the Labour Benches that that is somehow a symptom of economic success and therefore something about which this country can be complacent?
Mr. Timms: The UK savings ratio is about twice that of the US. What my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said about the factors that people have in their mind is absolutely right. People were saving a great deal more in 1991 and 1992 because they were rightly scared about the prospects for the economy. Today, we have benefited from unprecedented stability and rapid rises in property values, which enter the equation for many people in the arrangements that they want to make.
I hope that I have been able to persuade the right hon. and learned Gentleman that we share many of the Bill's objectives and very much welcome his contribution to this important debate, which I hope will lead to a consensus on the long-term future of our pension system. I hope that he will understand why I am not able to support his proposals at this time, and indeed why I have some serious misgivings about a number of them.
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I will not, however, press my hon. Friends to deny a Second Reading to the Bill. I look forward to continuing the debate on future occasions, in the House and elsewhere.
1.31 pm
Sir Malcolm Rifkind: If this debate was memorable for no other reason, it will be remembered for many years as a result of the extraordinary theory endorsed by the Minister that the collapse in the savings ratio is a sign of our healthy economy and that people only save to a significant extent when the economy is in desperate straits. Why, then, was the Adair Turner commission appointed in the first place? We understood the Government to believe that there was a savings and pensions crisis. It appears that the Minister has not yet been persuaded of that view.
Notwithstanding that, I want to thank my right hon. and hon. Friends for their welcome to this Bill, and the Liberal Democrat spokesman who, with all the necessary qualifications, has also spoken warmly of many parts of it. As my hon. Friend the Member for Eastbourne (Mr. Waterson) said, it was significant that while Conservative Members spoke about the Bill, both pointing out its strengths and asking questions about the detail, which is perfectly fair, the contributions from Labour Back Benchers hardly touched on the content of the Bill.
Over the years, I have noticed that there is a code on such occasions. When one finds it difficult to attack a measure, one does one of two things. The first is to say, as virtually every Labour Back Bencher did, "Whatever is in the Bill, it doesn't deal with the real problem, which is terrible." I freely concede that the Bill will probably be relevant to only about 40 to 50 million people in this country. I acknowledge that there are millions of people for whom the Bill will be completely irrelevant. It could be said that that is probably true of most Bills that the House considers, but Labour Members have never used that as an argument before.
It was also suggested that this Bill will help the wealthy. First, that is wrong—it will not; it is designed for lower and middle-income persons. If that is the preoccupation of hon. Ladies opposite—it was almost entirely hon. Ladies who were speaking—I should have thought that, at some stage during the debate, they would have commented on the Government's proposals, which from April next year will allow the wealthy in this country to put their pension savings into Picasso paintings, second homes, yachts and various other forms of investment. For those hon. Ladies to show such passion in the interests of the poor and to excoriate my poor, harmless little Bill because it does not deal with the problems of poverty and shows a preoccupation with the needs of the wealthy, while not saying a word about the extraordinary largesse that the Government are offering to many of my constituents in Kensington and Chelsea—for which I ought to be extremely grateful—suggests a slight absence of proper proportions.
The other code on these occasions is to say, "Whatever the good or bad in the Bill, we must wait. It is premature. The Turner report is coming out." It is rather like "Waiting for Godot". It gives a splendid catch-all excuse for not even expressing a view, never mind coming to a conclusion. Labour Members know perfectly well that that is a pretty bogus approach.
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The Minister will not be surprised to know that I was following his words extremely carefully. He is a careful and cautious man, and I found some interesting comfort in his choice of words. Perhaps I am grossly exaggerating the significance of what he said, but he concluded by saying that he could not support the Bill "at this time". Quite right, too—this is a Second Reading debate, and I am not sure that even I can support the Bill until we know what its final shape will be.
The Minister kindly said that in part 1, which deals with the proposed SaRAs, I had made a good case for the increased flexibility that such accounts would represent. I thank him for that. Referring to the possible implications for small businesses, he said that more exploration would be needed before the proposals could be supported. That is a perfectly reasonable qualification. The Minister conceded that the proposal in part 2, relating to the retirement income fund, was significantly different from earlier proposals that had been debated in the House and had incurred the Government's wrath. He said that it deserved a considered response.
By ministerial standards, that strikes me as encouraging, although I may be unwise to find it so. I am delighted that the Minister is not going to ask his hon. Friends to oppose the Bill. Let me emphasise that the Bill contains nothing ideological. The Government maintain that they are keen to revive the habit of saving. My proposals may not deal with every single problem that Members have raised, but they will do no harm and would do significant good.
I make no apology for repeating a crucial point relating to, in particular, the retirement income fund. There may be concerns about it, and the Minister has a duty to express potential concerns before any measure can be endorsed. I reiterate, however, that these are not just theoretical ideas; they have been put into practice for 20 years in Canada. In a less charitable comment, the Minister said that they were mainly designed for the better off. That cannot be true. In Canada, half the pensioner population use the system and have found it worthwhile.
I welcome the Minister's qualified comments. Of course I understand why he cannot simply say that he supports the Bill at this stage. It will, I hope, proceed to Committee, when it will be subject to detailed discussion. No doubt changes will be needed in order for it to win the Government's support, but the Committee stage will be an important test of whether the Government genuinely want national consensus. National consensus means responding to serious and constructive proposals from the Opposition or from other sources, not just those made in the Government's own factory.
I thank the House for the responses given to the Bill, and commend it to the House.
Bill accordingly read a Second time.
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