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Mr. Kenneth Clarke (Rushcliffe) (Con):
Does the Secretary of State accept that the commission's proposals assume that the generation consisting of today's schoolchildren will pay higher taxes than we are prepared to pay, and will contribute a significantly higher proportion of their gross domestic product to state pensions than we are prepared to contribute? There is legitimate room for debate about whether that is
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affordable without damage to the future competitiveness of the British economy. Given that after eight years in office the Government obviously have no pensions policy of their own, does the Secretary of State accept that the alternative is to do more to encourage personal and private provision of pensions and more personal and private accumulation of savings? That will involve a complete reversal of the Chancellor's policies of the last eight years, in which he has raised taxation on pension funds, reduced incentives to enter tax-free savings schemes, and extended means-testing so far that he has positively discouraged everyone of modest means from going into savings at all.
Mr. Hutton: I have a great deal of respect for the right hon. and learned Gentleman, but I think that he is completely wrong when he said that the Government had no pensions policy. That is palpably not the case. As to his points on taxation and public spending, he is charmingly inviting me to announce the Government's proposals on the Turner report right now, but I am clearly not in a position to do so. I have made it clear that we have a principal responsibility, as a sensible Government, to ensure that we manage public expenditure within the rules laid out by my right hon. Friend the Chancellor of the Exchequer, and we certainly intend to do that.
Laura Moffatt (Crawley) (Lab): Does my right hon. Friend agree with the Turner commission that voluntary contributions for both employees and employers are not the way forward? If there were an element of opting out, it would prove enormously successful. Crawley residents joined me on a citizens panel on this issue and they totally agreed that there should be a system to allow people to opt out, and I have the results with me, though it is not a weighty tome. Will the Secretary of State seriously reflect on that in the ensuing deliberations on this matter and will he thank the Turner commission very much for echoing what Crawley residents were saying?
Mr. Hutton: I am certainly not going to contradict anyone from Crawley, as that would not be sensible. My hon. Friend will see that the Pensions Commission proposes auto-enrolment, which will provide the option for employees to decide not to invest in any of the low-cost saving schemes or existing employer pension schemes. The Pensions Commission estimates that about 30 per cent. of staff may well want to exercise their right to opt out, but we will be studying such matters of detail very carefully over the next few months.
Peter Viggers (Gosport) (Con):
I declare an interest in the pensions industry and I wish the Secretary of State well in finding a solution to its problems, which have largely been created by the present Government over the past eight years. May I tell the right hon. Gentleman that he will not succeed in his search if he shackles himself to the deal with the public sector unions, which will allow public sector employees to retire at the age of 60? A great deal of sacrifice is expected from everyone, as there is no such thing as a cheap pension. If he allows the combination of a complacent Secretary of State for Trade and Industry and the bullying and blackmailing attitude of a union before an election in threatening a strike to dominate the starting point of his search, he will not succeed.
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Mr. Hutton: The hon. Gentleman started well enough, but I am afraid that it got worse quite quickly. He raised his concerns about public sector pension provision and people are aware of the detailed proposals about that. However, the hon. Gentleman and Conservative Members more widely are confusing two wholly different things. They are confusing the state pension age with the occupational retirement age under these schemes. I tried to make it clear in response to the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind) that nearly half of all private sector occupational schemes have a retirement age of 60, and we should not lose sight of that. It is quite wrong to stigmatise the agreement that we made with the public sector in the way that the hon. Gentleman has. I hope that what he said is not a foretelling of his position on the search for a national consensus, as it seems to me that he has already made up his mind.
Rob Marris (Wolverhampton, South-West) (Lab): I congratulate Lord Turner—or, as we call him in Wolverhampton, the other Lord Turner—on his report. My right hon. Friend may be a little optimistic in envisaging a White Paper next spring, as the public debate may need to go on rather longer than that. On the matter of affordability, I urge him and the Government to look again into the matter of tax relief on pension contributions. His own Department's evidence is that it has no bearing whatever on encouraging savings for pensions and it is the most regressive income tax measure in this country, with 50 per cent. going to the top 10 per cent. of income earners and 25 per cent. to the top 2.5 per cent. of earners. It is £14 billion of forgone taxation, which would be better spent on poorer pensioners.
Mr. Hutton: I certainly think that we should continue to work on the assumption that we will produce our proposals in the spring. The Prime Minister and I have made that very clear. It may well be difficult, but we should do all we can to ensure that it happens then. The Turner report deals in some detail—I think, in chapter 9—with some of the issues that my hon. Friend mentioned, and we will all need to study those proposals carefully. Ultimately, any issues to do with taxation are a matter for the Chancellor.
Hywel Williams (Caernarfon) (PC): Lord Turner specifically said that he did not recommend a major reform to the overall system of tax relief. Will the Secretary of State confirm that in the forthcoming debate that issue will be ruled in, rather than ruled out?
Mr. Hutton: I think that Lord Turner is quite right to refer to the issue in those terms, because, as we suspect, any changes would have a significant administrative burden, particularly in respect of defined benefit schemes. We would need to think very carefully indeed before deciding that we wanted to proceed with that.
Mr. Jim Devine (Livingston) (Lab):
May I tell my right hon. Friend that the debate will be welcomed by many groups in my constituency—particularly, dare I say it, among health service workers in Scotland—because it may help to resolve the anomalous position of part-time women workers, people living in single-sex
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relationships and others that do not benefit from pension provision on the death of their partner? Does he acknowledge that the former director-general of the CBI and the president of the TUC were on the commission, thereby making it a unanimous report?
Mr. Hutton: Yes, certainly, I can confirm that the recommendations in the report were all unanimous. I also agree with my hon. Friend that it has long been recognised that there is a problem in the present pension arrangements as they apply to women. It is now clear that we will have broadly reached convergence between men and women in respect of entitlement to the basic state pension by 2025, but I do not believe that it is acceptable for us to wait until then before taking any further measures.
Mr. Peter Lilley (Hitchin and Harpenden) (Con): Does the Secretary of State agree that Lord Turner's main and correct conclusion is that Governments must either encourage or require people to save more or work longer? Was that not as obvious eight years ago as it is today, so why have the Government done nothing for eight years—nearly a fifth of people's working lives—to encourage more savings and have instead drawn off £5 billion a year from their savings? Will not this Government's record be as damaging to the savings of the nation as Robert Maxwell's was to his employees?
Mr. Hutton: No, I do not accept any of that. As to the hoary old myths that are traded by Opposition Members about decisions taken back in 1997, let me make it absolutely clear that they were the right decisions and they formed part of an overall package of tax reform measures that were welcomed by the CBI at the time. They were partly designed to deliver, and succeeded in delivering, a significant improvement in respect of investment in British companies, so we should not be under any illusions about that. I have great respect for the right hon. Gentleman, who was a former Secretary of State, but he is mistaken and quite wrong to suggest that the Government have taken no measures since 1997 to encourage savings. As with similar comments made by the right hon. and learned Member for Rushcliffe (Mr. Clarke), that is palpably not the case.
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