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Mr. Speaker: That is not a point of order. We well know the rules of the House, but the main thing is that the hon. Member for Grantham and Stamford (Mr. Davies) has a right to refuse to give way. That is his privilege.
Mr. Davies: As you know, Mr. Speaker, I like to give way when I can but the answer to questions on a complicated matter such as pensions can take longer than the extra time that is available. I have now lost about 25 seconds, of course, so well done to the hon. Member for North-West Leicestershire (David Taylor).
Means-testing must be reduced and indexation must be reversed. It is both perverse economically and insulting to those who save to say that a less favourable regime will be applied to savings when one is working and contributing to a pension than when one has a means-tested, non-contributory pension. In my view, one cannot do anything about a second pension going above the basic state retirement pension until the contributory pension, if one is entitled to the maximum pension, is higher than the means-tested tax credit, pension credit or whatever one wants to call it. Only from that point on would it not be mis-selling to force people into a second-tier pension.
Thirdly, on that basis, we should go for compulsion. It is reasonable to do so. It is actually essential because there are enormous external costs in not having universal saving; people tend to fall back on the state unduly. That must be covered. There are also enormous
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internal costs in any pension scheme if it has to be distributed and sold. If we have compulsion, we will get rid of the major cost element in the pension industry: the cost of marketing, distribution and administration, which is very great if there is a voluntary system. I do not believe that the funds should be in the hands of the state. I believe that they should be in the private sector.
The best model that I have come across is the Australian superannuation scheme. That scheme introduced compulsory contributions by both employers and employees very gradually, and we should adopt the same approach. The process in Australia took about 15 years, and no single increase in contribution amounted to more than 1 or 2 per cent. of salary, for either the employer or the employee.
If employers are told that they have to set aside 1 per cent. of their wage bill for contributions in one year, with the same amount to be so allocated in the following year or the year after, they can often take that amount out of the increases in wages or salaries that they would grant in that period. In that way, compulsory contributions can be phased in without creating problems.
The Government and the Turner commission are alive to the fact that problems must not be created for employers, especially for those with small businesses. Such problems can drive people out of business or so raise the cost of labour that demand for it is reduced and unnecessary unemployment is created. The Australians have shown how that circle can be squared to a remarkable degree. Turner has in mind a scheme that would yield about 15 per cent. of beneficiaries' salaries by way of a second pension, but I think that we should be much more ambitious.
I have set out my four basic approaches, but there are more than 600 Members of this House and I accept that there will be at least 500 pet schemes to solve the problem. That is why I reiterate my earlier appeal for another opportunity to debate this matter. Moreover, the subject of pensions deserves a full-day debate. We should not require it to be shared with another big issue of the day, even one as dramatic and exciting as the one on which we spent so much time this afternoon.
Mr. Jim Cunningham (Coventry, South) (Lab): I was interested to hear the previous speaker, the hon. Member for Grantham and Stamford (Mr. Davies), say that he wanted to break the consensus evident in the Chamber in this debate. That was in direct conflict with the comments of the Opposition spokesman, the hon. Member for Runnymede and Weybridge (Mr. Hammond).
One of the problems with Turner is the way in which pension schemes will be funded. If compulsion is chosen, what happens if someone loses their job? We have been here before. The Crossman proposals of 1969 or 1970 introduced expanded social services in this country, and proposed the introduction of SERPS. Conservative Governments since then have always wanted to move away from the SERPS system.
As I have told the House before, I used to work at Rolls-Royce. The previous Conservative Government encouraged people to opt out of SERPS and go into
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private pension schemes. That caused all sorts of problems. People would have what used to be called "pension holidays", when money that should have gone into their pension scheme did not do so. Moreover, it is important to remember that many occupational pension schemes formed part of the wage deals agreed by millions of people, some of whom have retired and some of whom are still in employment.
For example, people might have put in for a wage increase of 5 per cent. and settled for 3 per cent. The difference of 2 per cent. was either put into the pension or took the form of additional holidays. Many people enjoyed the benefit of that, but sadly the practice has disappeared over the past 20 years or so, mainly due to the activities of the previous Conservative Government.
David Taylor: My hon. Friend makes it clear that pensions are often part of an overall wage deal. Does he agree that that is especially true in the public sector? A substantial number of people with public sector pensions earn wages that are significantly below average, in the expectation that they will be compensated by a reasonable pension at the end of their working lives. Does my hon. Friend know why the Opposition attack that approach?
Mr. Cunningham: I was about to elaborate on that very point. The public sector includes the civil service, and the Government have been attacked for the deal that they made in that regard. However, we do not know how local government pension schemes will be funded, and that is a major problem.
I am conscious of the terms of reference for this debate, and do not want to digress too far, but in Coventry the problem of equal status has been around for seven or eight years and still has not been settled. Local authorities will be confronted by both issuespensions and equal statusbut they will receive no assistance to deal with them.
Only 17 per cent. of women have an occupational pension or a SERPS pension. Many of them have brought up a family and found, for a variety of reasonsin some cases, their husband has diedthat they are not entitled to a pension. That is one of the reasons for pensioner poverty and why I welcome the fact that one of the first things that this Government did was to tackle that. It would have been criminal to leave those 3 million pensioners in the state that they were left in by the previous Government.
Edward Miliband : Does my hon. Friend agree that there has been insufficient recognition in this debate so farcertainly by Opposition Membersof the significant gains that have been made in terms of pensioner poverty? If we followed the advice of the hon. Member for Grantham and Stamford (Mr. Davies) and reversed indexation, we would put all those pensioners back into poverty, which would be an absolute scandal.
That occurred to me, too. Some people have been unpaid carers for people with disabilities or serious illness, and they lose out on pension rights. We also have the scandal of Federal-Mogul. Many people in Coventryand some in Derbyshireworked for that company but they cannot
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get their occupational pensions because the money is trapped in the American courts. When that is sorted out, the issue has to come back to the British courts, because Federal-Mogul has gone into liquidation. What should we say to those people when we ask them to contribute to private pension schemes?
I am a little old-fashioned, but I believe in a decent state pension. After we have got that, we can debate whether it should be linked to earnings or something else. It is not easy to achieve and will probably take some time, but it is one of the problems that we will have in implementing Turner.
Other hon. Members have mentioned the mis-selling of pensions. Opposition Members have poured scorn on the pension protection scheme, but at least this Government had the courage to set it up. We should ensure that there is less bureaucracy in the scheme and that the figures are accurate. The scheme also needs to be talked up.
The Opposition strategy is obviousthey are blaming everything on the Chancellor because they know that the Prime Minister is standing down. However, the Opposition spokesman made a good point when he said that pension funds are also invested. They are invested in various schemes, in this country and throughout the world. If there is an economic downturn, as there is in the rest of the world, pension schemes will suffer. We have to be careful that we are not in a Catch-22 situation.
This issue has been around for some 47 years now. We have had many debates and I look forward to many more, especially on Turner. We will see whether the Chancellor is rightit has not yet been proved that he put the blockers on Turner. A wise man would advise waiting until we decide which of Turner's recommendations we will pick. It is natural for the Chancellor to say that we will make an announcement on how we will implement the scheme at the appropriate time. The Opposition speculate about what he will say, but they do not know. As I said earlier, their attacks on the Chancellor are purely political in an attempt to discredit him. We have all read the insulting remarks that the Opposition have made about the Chancellor. However, if they want any consensus on the issue, they will have to bite the bullet as much as anybody else.
There are many issues involved in pensions, including how to fund care for people as they get older. Some pensioners have to delve into their savings to pay for that. I remember when funeral benefits were withdrawn. We have to address a range of matters, not only pensions. We must stop paying lip service and merely saying how much we value our pensioners; we must do something about a decent pension and decent care in old age.
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