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Mr. Deputy Speaker (Sir Michael Lord): Order. It is customary to hear statements of this kind in silence. Hon. Members will have their own opportunities to respond in due course.
Mr. Hutton: The financial assistance scheme will top up those people's pensions with financial support, to give a maximum income of up to £12,000 a year. The Government are prepared to look again at all aspects of the scheme as part of the current spending review, and my right hon. Friend the Prime Minister yesterday made it clear that
"we will expedite that review and do it as quickly as we possibly can".—[Official Report, 15 March 2006; Vol. 443, c. 1450.]
Secondly, this Government have led the way in providing greater levels of security for the future. We have replaced the MFR, which is of course a large part of the subject of this report, with new scheme funding arrangements that are more flexible and fit for purpose. The Pension Protection Fund and the new pensions regulator will transform security for members of defined benefit schemes.
We do not underestimate the importance of this issue for those people who have been affected by pension scheme closures, particularly when employers are
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insolvent and cannot make up any deficiency in scheme funding. We will continue to do what we can to help them. That is the fair and sensible way for us to proceed.
Mr. Philip Hammond (Runnymede and Weybridge) (Con): May I start with the bit that the Secretary of State missed out? On behalf of Opposition Members, I should like to express my sympathy for the 85,000 people who have lost their pensions through occupational pension scheme failures. Those are decent people who set out to do the right thing to try to ensure a decent retirement for themselves, and they have seen their dreams of a comfortable and secure retirement cruelly shattered. Their plight is not only a series of personal tragedies, but a tragedy for the cause of increased pension saving as confidence in the system is further undermined.
The ombudsman's report specifically addresses misleading information by Government, but let us not forget the context. In spite of any amount of dodgy information, the problem would never have arisen if the pension funds in question had not failed. The Government must accept their share of responsibility for those failures, as well as for the information that misled people about the consequences. It was this Government who reduced the minimum funding requirement for occupational pension schemes. It was this Government and the present Chancellor who raided pension funds and are still raiding pension funds, to the tune of £5 billion a year with his pension stealth tax, equivalent to £120 billion of capital value wiped off pension funds.
So the Government stand accused not only of misleading about the consequences of the failure of occupational pension funds, but of helping to precipitate that failure. On the first count the ombudsman, an official of Parliament charged with the task of reporting to Parliament on claims of maladministration, has investigated and found that maladministration has occurred. What is the Government's response? It is a direct challenge to the authority of Parliament. The accused in the dock has decided that he will be judge and jury in his own case. He has just spent 10 minutes of his 15-minute statement going over the case again and telling us that the ombudsman, an Officer of the House, got her findings wrong.
The ombudsman rightly replies to the right hon. Gentleman that
"Parliament has decided that it is my role—and not that of any party to a complaint—to determine what constitutes maladministration."
The House must insist that the Government bow to the decision arrived at by the due process which the House put in place in respect of the factual finding of maladministration by the ombudsman. While they are at it, the Government could also comply with the ombudsman's recommendation that they apologise. I do not know whether the right hon. Gentleman's mother ever taught him this, but my mother always taught me that an apology costs nothing.
The real problem for the Government is that the right hon. Member for Edinburgh, South-West (Mr. Darling), then Secretary of State for Social Security, and the present Secretary of State for Transport, has already committed the Government to
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the principle of redress. In March 2000 he told the House that:
"As a matter of principle, we believe that when someone loses out because they were given the wrong information by a Department, they are entitled to redress."—[Official Report, 15 March 2000; Vol. 346, c. 308.]
The Secretary of State has sold the pass, leaving Ministers in the ridiculous position of trying to deny the ombudsman's findings of maladministration because that would-be Chancellor of the Exchequer has already committed them to providing redress in those circumstances.
Surprisingly, yesterday at Prime Minister's questions, the Prime Minister was rather more honest about the situation. He did not say the ombudsman was wrong. He did not question her findings of maladministration. He simply told the House that the Government could not pay what he claimed would be a £15 billion bill.
However, the ombudsman's principal recommendation was that the Government should consider whether they should make arrangements for the restoration of the pensions and other benefits of those who had lost out, in her words
The Prime Minister said yesterday that the Government
"have to look for another way of dealing with the issue"—[Official Report, 15 March 2006; Vol. 443, c. 1456.]
The obvious way, to which the Secretary of State alluded, is the financial assistance scheme, which was put in place to help people who lost their pensions or suffered diminished pensions because their pension funds had failed. I welcome what the right hon. Gentleman said about his willingness to look again at the way the financial assistance scheme works. At present, it does not work. It is limited to people who are already retired or who are within three years of retirement age when the scheme fails. It is slow and cumbersome. Only 27 people have received payments from the scheme, out of 85,000 people who have lost their pensions or suffered diminution of their pensions. The fund is clearly underfunded for its stated purpose, having only £20 million a year at its disposal.
Will the Secretary of State as a matter of urgency look at how the financial assistance scheme can be reconstructed to help a much wider group of people who have suffered loss of pension rights through no fault of their own? He said in his statement that it would be wrong for the whole burden to fall on the taxpayer. With that thought in mind, will he consider the possible use of unclaimed assets, in particular unclaimed pension and insurance assets, to see whether those could be used to support an expanded financial assistance scheme?
When we proposed that last year, the Chancellor said that those assets did not exist, but since the general election he has discovered them and earmarked some of them for one of his own pet schemes. It would be a more appropriate use of unclaimed assets in the pension and insurance sector to use them to fund failures in that sector. I urge the right hon. Gentleman to ask his colleagues at the Treasury to embark upon a serious piece of work to identify the extent and scope of those assets, to see whether they could contribute towards a remedy of the situation.
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When the Secretary of State is talking to his right hon. Friend the Chancellor about additional funding for the financial assistance scheme, will he remind him of the £45 billion that he has had so far from pension funds with his pension stealth tax, and the £5 billion a year that he continues to levy on those pension funds, even as the system is collapsing about his ears? Will he remind the Chancellor of the pension fund failures and the misery suffered by tens of thousands of individual stakeholders in consequence?
Both the Prime Minister and the Secretary of State have used the figure of £15 billion. The Secretary of State today spoke of £13 billion to £17 billion. That is a cash figure and it is meaningless. Will he make a commitment today to put in the Library for the benefit of all Members a properly worked out net present value figure for the cost of making good the pension funds, so that Members can understand what the real figure is, not the hyped-up figure that he and the Prime Minister have been using?
The Government must accept without further delay the ombudsman's factual finding of maladministration. If they do not, the authority of Parliament and the credibility of the ombudsman's office will be critically undermined. The right hon. Member for Edinburgh, South-West had already committed them to the principle of redress in these circumstances, but the ombudsman's recommendations leave scope for examining various ways to deliver that redress—through the financial assistance scheme, or perhaps by revisiting the use of unclaimed assets, as I suggested. The commitment to redress, in whichever form, has already been made by the right hon. Gentleman on behalf of the Government, so Ministers cannot duck it by refusing to accept the ombudsman's finding of fact. It is for the Government to deliver on that commitment, and a great deal is at stake. With national pensions day ahead of us this Saturday, and the Government's response to the Turner report eagerly awaited in the spring, if the Government get this wrong and send the wrong signal about the security and safety of pension funds to the British public, there is a real danger that efforts to address Britain's pension crisis by promoting pension saving will be fatally undermined before they even get off the starting blocks.
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