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Stewart Hosie (Dundee, East) (SNP):
The hon. Lady will be aware that one of the problems with the financial assistance scheme is that it does not kick in until a pension scheme is fully wound up, which can be
delayed for many years simply because the people administering the scheme cannot find one or two of its members. That is causing a great deal of worry for people who are due money from the FAS. Will the hon. Lady join me in encouraging the Minister to look at that and to find a remedy for that particular fault with the scheme?
Sandra Osborne: I am aware that there are genuine difficulties in identifying all those who are eligible for the scheme, but that would be the case whatever scheme the Government—any Government—introduced. I believe that the Government are taking steps to try to improve the scheme’s efficiency. The number of people being paid has increased significantly, but I agree that there is a problem and I encourage the Minister to look at it.
I recognise that the Government have made significant progress in providing assistance, but as we all know and as we are discussing today, serious gaps remain. For example, it is perfectly possible for someone who started in a scheme at the age of 21 and who is now 45 to get nothing, even though they have paid in for 20 to 25 years. The Government have made it clear that the financial assistance scheme is not a compensation scheme and that they do not accept liability; the money has been targeted at those closest to retirement. It is certainly true that those closest to retirement will be in the most difficulty, because they have no time to make up the shortfall. But we all know that it will also be difficult for those aged 45 and over to make up the years that they have lost—years for which, in any case, they paid for through deferred wages. They have already paid that money and they feel very strongly that they are entitled to a return on it.
The Minister for Pensions Reform said in last week’s Westminster Hall debate that of the 125,000 people affected, about a third would qualify for the scheme, a third would not qualify because their loss was less than £520 a year, and a further third would not qualify because they are not within 15 years of retirement. Of course, there is also a sliding scale even for the third who will qualify. The Minister has been very candid about the reasons why the arrangement has been made in this way. The scheme is cash-limited, and although the Government have been able to extend it significantly, which we all welcome, the amount available is not sufficient for all 125,000 people. The money has therefore been targeted in the way that the Minister felt most appropriate to meet the greatest need, which is perhaps understandable. But the crux of the matter is that a difference of opinion exists as to whether these workers have been treated unfairly and are entitled to redress, or whether they are entitled simply to assistance, welcome though that may be.
Long before the ombudsman reported, there was a strong view—certainly among Labour Back Benchers—that an injustice had been done, and calls were made for the Government to correct it. Successive Secretaries of State, pensions Ministers and even the Prime Minister have recognised the plight of these workers, and the will has been there to do something. It was repeatedly stated that a pension promised should be a pension paid. How much would it cost to keep that promise?
It is clear from today’s debate that there are differences of opinion on how much it would cost to implement the ombudsman’s recommendations. The Minister said that it was valid to consider future costs according to a net present value calculation, which produces a figure of some £3 billion—not that much more than the Government are already putting in. However, the Government have calculated that the figure is between £13 and £17 billion in cash terms, which is the normal way that they express such figures. This is not a question of anybody being conned or of a lack of transparency, and it is very unhelpful to describe the situation in that way.
I am not an economist, as is probably fairly obvious—nor are most of the people who have lost their pensions. To a lay person, there is a very big difference between the figures that have been bandied about, and further explanation of them is required. For example, it has been said that £25 billion might need to be spent to replace Trident. That seems like a lot of money, but so does the £17 billion required for this proposal. Where does such a figure fit into the overall scheme of things? These differences in the figures are adding to people’s frustrations and we need more clarification. Will the Minister agree to meet my constituents and me to discuss them in detail?
Of course, the official Opposition have never at any stage in this debate, which has been going on for four or five years, committed themselves to spending public money to resolve this issue.
Sandra Osborne: If the hon. Gentleman is about to dispute that, I am happy to give way.
Mr. Waterson: The hon. Lady is absolutely right: at no stage have the official Opposition ever committed taxpayers’ money to this issue above and beyond what the Government have already committed. What we have said consistently is that the Government should look at unclaimed assets, which total some £15 billion; they are now doing so—rather belatedly—but for different purposes. This has been our consistent position from start to finish; indeed, I said the same during the passage of the Pensions Act 2004.
Sandra Osborne: I thank the hon. Gentleman for backing me up—I have certainly heard him say that many times before.
James Purnell: Is my hon. Friend aware that those unclaimed assets are not the Government’s money? It is obviously up to the financial services industry to decide how to spend that money, and it has kindly come forward and said that some of it should be spent on community facilities. But even if all that money were spent on the cause that the Opposition mentioned, it would be nowhere near the amount implied by the £3 billion, or £15 billion, figure. It would amount to barely a few hundred million pounds—even if it were our money to spend, which it is not.
Sandra Osborne: I will ask the Minister about precisely that issue in a moment. The Opposition’s reaction to the money that the Government have put in is slightly disingenuous, as they are not prepared to commit any public money themselves.
I recognise why it is difficult for the Government to come up with any more public money, but I cannot understand why the unclaimed assets cannot be used. There is strong support among Labour Back Benchers for the use of that mechanism. My early-day motion 1868, which deals with this issue, attracted substantial support. Some 113 Members—mainly Labour Members—have signed it. The Chancellor has managed to prise money out of the private sector for other purposes; why can he not do so for this purpose? I ask the Minister to pursue that issue.
So far, the Government have responded with what I call incremental benevolence. There is nothing wrong with benevolence—I am all for it—but it is no substitute for justice. Those of my constituents and others throughout the country who have lost their pensions are seeking justice. They feel that promises have been broken, and that trust has been broken.
Two things are clear. First, as many Members have said, this issue will not go away; indeed, two court cases are outstanding. As I have made clear, I am very proud of what the Government have done so far, but I feel that they can and should do more. Secondly, if this issue is not wholly resolved, confidence in saving will not be restored as quickly as it should be. One Opposition Member pointed out that according to Scottish Widows people are not saving, and in my view, this issue has had an influence in that regard. It appears that ongoing publicity about the problems has put many people off saving.
My hon. Friends will not be surprised to have discovered that, as usual, I have not minced my words on this issue. I have stood four-square behind my constituents since day one, and I will continue to do so. I congratulate the Government on what they have done, but I ask them to do more.
6.8 pm
Mr. Robert Syms (Poole) (Con): This is an important debate. I suspect that security in old age is one of the most important issues that the political parties will argue about over the next few decades. Some 40 per cent. of my constituents are pensioners, and it always surprises me when, as often happens, an elderly individual comes to my constituency surgery to talk about their mother or father, who must be even more elderly. We all appreciate that longevity is a growing issue, and people’s understanding of its impact on the pension system is becoming much clearer than it was perhaps five or 10 years ago.
In future, the rest of the country may well catch Poole up. By 2050, there will be 50 per cent. more pensioners, and the ratio of workers to pensioners will halve. So we have to get this right and not only provide security in old age for those who retire, but ensure that the burdens on the working population do not become so great that we as a nation are no longer competitive in the world economy.
There is a problem, in that, as has already been said today, well in excess of 9 million people are not saving enough for their pension. We have heard that there is a particular problem with one category of person—the self-employed. We also know that there has been tremendous loss of confidence in the pensions industry, which is informing the decisions that people are making today. It is evident that if people have surplus cash they buy a piece of property rather than investing the money in a pension fund, because the experience of friends, neighbours and sometimes family are such that they are put off. The fundamental test of the White Paper, the direction of travel and the recommendations that the Government are making is whether they increase confidence in the pensions system.
It seems to me that a number of problems have brought us to the present position—the first is longevity. Some of the accounting rules may have forced companies to take decisions to close schemes prematurely, and the regulatory regime has sometimes led to illogical investment decisions. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) said, the changes that the Chancellor made to the advance corporation tax regulations in 1997 have had a major impact on pension fund operations. It has been said that the Treasury got £7 billion per annum from a capital value of £170 billion, and I think that all hon. Members would acknowledge that that has made a massive difference to the economics of pension funds. I am glad that the Government are now examining pensions, but I suspect that, as many of my hon. Friends, including my hon. Friend the Member for Bournemouth, West (Sir John Butterfill, predicted when that change was made, it has caused long-term problems.
I am sure that the increase in pension credit has helped many of the poorest pensioners, but as the Secretary of State said, if the predictions that nearly 70 per cent. of pensioners will be in receipt of the credit are accurate, not only will that not be sustainable, but it will be a major disincentive to people continuing to save. What we have to do, in addition to setting up a sensible pensions system, is to reinforce people’s good intentions to save money for all the eventualities of retirement. Unfortunately, predictions that pension credit will be paid to as many as 70 per cent. of pensioners are a major disincentive to saving.
I agree with my hon. Friends about the direction of travel. We have to have a consensus because during the period that we are debating there will, no doubt, be changes of Government. It is tremendously important to get Government and Opposition parties signed up to approximately what is decided.
I shall not go into the detail of the White Paper—it is extremely technical and many hon. Members have a greater understanding of its provisions than I—but I do wish to welcome some of the proposals. All hon. Members know that women, particularly those who stay at home, have not been well treated by our present pensions system. The White Paper’s acknowledgement of that, and the reduction in the number of years needed to qualify in terms of national insurance, are to be welcomed. I also welcome the strengthening of provision for carers, which has already been mentioned. A person who gives up work to look after a loved one, a relative or a
neighbour probably saves the state thousands of pounds, and it is wrong to disadvantage such people in terms of their pension claim. I am glad that the Government have made proposals that will plug that gap.
It is inevitable that the pension age will increase. The proposals in that respect are sensible, but there are associated issues relating to joined-up government. Some of my constituents find it difficult to stay in work because they cannot get the operations that they need. We need a national health service that is responsive to people who develop problems as they age and who want to continue to work, but who now sometimes do not have that choice. In addition, the only way that some people will be able to continue in work until they are 67 or 68 is by changing jobs or careers, so training throughout life will be terribly important. The proposals cannot be seen in isolation; they must be seen as part of a package.
It is extraordinary that as we are talking about increasing the retirement age, the Government have agreed that the retirement age in much of the public sector will remain at 60. I agree that many people who work in the public sector, particularly in local government, are not well paid, but it is extraordinary to design a system in which the retirement age is 60 for one category of worker but 67 or 68 for another.
Miss Anne Begg (Aberdeen, South) (Lab): The hon. Gentleman is in danger of misleading himself—I will not say the House. The state retirement age will be the same whether someone works in the public sector or in the private sector. The age at which a person gets their private or occupational pension will vary, whether they work in the private sector or in the public sector. Some public sector workers can get their full pension, having made full contributions, at 60, but some members of the occupational pension schemes of the oil companies in my constituency can get their full pension, having made full contributions, at 55. This is not a matter of public or private sector; it depends on the rules of the individual occupational pension.
Mr. Syms: The hon. Lady makes her point, but it is clear that as the state pushes up the retirement age many occupational schemes will follow suit, and many people in occupational schemes will be paying through the tax system for the public sector pensions, and through council tax for local government pensions, for people who are perceived to have a better deal. We cannot park that issue to one side or see it in isolation. At some point it must be re-examined.
Stewart Hosie: I have been listening to the hon. Gentleman’s argument and the intervention from the hon. Member for Aberdeen, South (Miss Begg). Surely people in the public sector who are paying into superannuation schemes are paying out of their salaries. The money is not coming directly from council tax, central Government or anywhere else. They happen to work in the public sector, but it is their money—their income—that they pay into superannuation schemes. Is it not a point of principle that if they have signed a contract to pay over the odds into a superannuation scheme from their own salary, they are entitled to have that contract honoured?
Mr. Syms: I agree that it is sensible to honour contracts entered into, but we are talking about the agreement negotiated by the Government extending over the next 20 to 40 years. A change suggested in the White Paper is being phased in and I see no reason why we should not consider phasing in a different retirement age in some of the public sector schemes.
To return to the point I made at the beginning of my speech, the Treasury pulling in more money because of the changes to ACT and corporation tax has had an impact, particularly on local government pension schemes. We all know that our local authorities are having to deal with shortfalls, the burden of which inevitably falls on council tax payers. There is an issue—I put it no higher than that, and I have no magic solution. There is a perception of unfairness, and on behalf of the Conservative party my hon. Friend the Member for Runnymede and Weybridge has set out certain tests that we wish to be applied to the White Paper. Those tests are pension dignity, fairness, affordability, personal responsibility, simplicity and transparency. We shall scrutinise the Government’s proposals and test them against those yardsticks.
It is important that we restore confidence in the industry and that will not be possible unless we deal with some of the perceptions of what has gone wrong in the past, which have been brought to our attention via our postbag and e-mail. We have all had vast amounts of correspondence with people who have suffered because of the Equitable Life affair, and we are all aware of how aggrieved people feel following the parliamentary ombudsman’s report on occupational pensions. We are now starting to get more hard facts, and I hope that the Government will take up our suggestion of using unclaimed assets. We have figures of £2.9 billion to £3.7 billion and annual costs of perhaps £100 million to £150 million to deal with the problem.
Many people who have been severely affected are in no position to repair the damage done to their occupational pension. If a person who is still working, with many years to go before retirement, gets a knock, they might be able to put it right, but someone who is in the last few years of work whose expectation of a particular deal has been lost is in a very different position. Some of these schemes included rights for widows or husbands. It is important to note that some people may go home having lost a pension and some of the security, for example that a husband would have left his wife. One of my constituents, David Cull, e-mailed me the other day. He has possibly lost £15,000 in pension. It was to be index linked and included decent provisions for his wife in the event of his death. He feels aggrieved about that. I hope that the Government will revisit this issue because Members on both sides of the House will feel that there is a degree of unfairness.
We have heard about the financial assistance scheme. Its scope has been widened. I suspect, as is the nature of things, with pressures from parliamentarians, that its scope will be widened still further. There is a legitimate issue of how quickly it will address some of those who accept redress from it. I hope that the Government will examine that carefully.
I am glad that the Government have produced the White Paper. There are some good things in it. I hope that there is a consensus. I hope that we can set up a
scheme that this country can be proud of in the future. However, there is some unfinished business for those who feel that they have been misled, particularly those who had an expectation of different things. If we leave such issues to fester, we will end up with a lack of confidence in the pension system and people will still be putting their money into second homes or into investments because they do not trust the pension system.
6.21 pm
Miss Anne Begg (Aberdeen, South) (Lab): I think that we all come into Parliament with the intention of making a difference. I genuinely believe that since 1997 the Labour Government have made a difference to today’s pensioners. We have already heard tributes paid by hon. Members on both sides of the House, remarkably, to the pension credit scheme and the difference that that has made to the poorest pensioners, especially women. We have the winter fuel allowance, free travel and free televisions licences for the over-75s. In Scotland, there is free help with heating for those who have older houses or houses without central heating. We have done a great deal for today’s pensioners.
Every so often, however, there is a chance in our lives as politicians to change the lives of future generations. The legislation that will come from the White Paper will do just that. The White Paper is not about today’s pensioners. I can understand that when something is called a pensions White Paper or a Pensions Commission the people to whom we turn immediately for an opinion are those who are presently pensioners. However, they will not be the ones to enrol in the national pension savings scheme. They are not the ones who might have to work longer to make the scheme pay. Current female pensioners will not benefit from the changes in accrual rights for national insurance credits. They have already retired. So, by its very nature, the White Paper is not aimed at today’s pensioners. It is aimed instead at ensuring that we have a structure and a basis for future pensioners so that they can also enjoy the benefits of the country’s prosperity.
There are bold aspirations in both the Turner proposals and in the White Paper. I hope that for the first time we are bringing together political parties from both sides of the House and, as my right hon. Friend the Member for Birkenhead (Mr. Field) said, the public as well into a consensus on how we move forward and how we will build for the future on what we have now.
We have come quite a long way. I was on the Select Committee on Work and Pensions for all of the previous Parliament and have been on the same Committee for slightly more than a year during this Parliament. I feel as if I have been living with the proposals from the various Turner commission reports for a long time, but not, I suspect, for quite as long as is felt by Lord Turner and his two fellow commission members. Perhaps it is worth reflecting on Opposition Members’ attitude at the time. That might illustrate how we have come quite a long way.
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