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To continue with the deficiencies, spouse benefits are much lower than scheme benefits. Members of schemes
winding up with solvent employers are excluded altogether. Those over 15 years from pension age are excluded. People in their 50s, who have contributed for more than 25 years, still have no means of redressing the loss and will get no help. Finally, the FAS does not provide any explicit recognition for the losses of the so-called guaranteed minimum pension—the second state pension that was lost. That turned out to be neither guaranteed, nor minimum. The complexities of the so-called deemed buy-back scheme are proving impossible to negotiate and access.
Mr. Bailey: Earlier, my hon. Friend said that there was a moderate response from the ombudsman about the financial implications. Reference was made to not writing a blank cheque. However, the report also says that
“the Government should consider whether it should make arrangements for the restoration of the core pension and non-core benefits”.
It seems that there is confusion about what the ombudsman recommended and the Select Committee recommended. What is being denied is the accurate figure that the Government say is the implication of what is being recommended. My hon. Friend is not bringing that point out adequately.
Dr. Wright: As was pointed out earlier, what the ombudsman really said was, “Look, it’s not my job to tell you what kind of redress package to put in. That is not what I am charged with doing. I am charged with telling you that there has been maladministration, and there has to be effective redress package.” Then she said, as someone pointed out, “Put your best people on to it. Send them away to put together an effective package, combining public funding and other sources of funding.”
That takes me quickly and neatly to my next point. At the moment, the Government are saying that they are not liable, but what if their proposition was that they accepted that there had been some maladministration and that they therefore had some liability? Let us say that they accepted that they must put together a more effective package than they have so far. What might such a package involve? It might involve taking the contracted-out state pension back into the national insurance scheme for free, possibly issuing an interest-free loan to trustees to cover the costs. Something like that happened with Maxwell. It might involve setting up a trust fund to collect money and use unclaimed assets for a rescue scheme. We could try to encourage actuaries, venture capitalists, employers and the pensions industry to contribute, as well as investing taxpayers’ money.
If the guaranteed minimum pensions are taken care of, compensation for the rest of members’ pensions could be paid at Pension Protection Fund levels, as hon. Members have suggested. Alternatively, we could stick with a level of 80 per cent. of the FAS, but make payments tax free and linked to inflation. We could set up a mechanism for members who have suffered severely or who could prove that they read and relied on Government information to claim direct compensation from the Department for Work and Pensions.
Mr. Bellingham: Will the hon. Gentleman give way?
Members who could have retired already should receive their pensions. It is obvious that if they had known about the priority order, they would have retired and secured their pension rather than stay at work and lose it. Tax-free lump sums should be paid, which would make a huge difference to many victims. Finally, spouse benefits could be improved beyond what is currently suggested. That package of effective measures could be adopted by a Government who were not committed to full compensation or full liability, but had come to think that they had some liability after maladministration and should be able to do much better.
Mr. Frank Field: For two years I tried to promote a private Member’s Bill that dealt with that very issue. I did not think that we should always assume that taxpayers should foot every bill, so I suggested that we use the unclaimed assets of banks and building societies. The response from the Treasury Bench was, “We cannot do that; they are not our assets”. What is my hon. Friend’s response to the fact that the Government are now going to use those assets to fund charitable activities in another special scheme? Surely the first priority of any moneys drawn down from those sources should be to people who have already lost, in effect, a large part of their life savings.
Dr. Wright: I thank my right hon. Friend for that. When things that are said to be impossible suddenly become possible, I get very interested. It is right to think about which people should have first claim on such moneys and I believe that the people we are talking about today should have that first claim.
I conclude by emphasising again what I view as the fundamental point. Whatever we say about this whole story, when we have traced all the events, read all the reports and expressed our sympathies, the fact remains that only the Government can organise a remedy. It is not a blank cheque argument. Whatever else we say, the truth is that only the Government can organise a remedy and only the Government can put together the package that we need. That is the argument: it is what the ombudsman told the Government and what the Select Committee told the Government. As I said earlier, both parties who have been in government and who have had a role in this should accept that they have an obligation to take the necessary action together.
I end by taking us back to where I started, which is what the ombudsman herself told us about the constitutional significance of the issue. After the ombudsman read the Government response to her findings and recommendations, she told us that she saw a
“worrying trend—that the Department for Work and Pensions, the body whose actions were under investigation, considers that it is appropriate for it to decide whether to accept the findings of the Ombudsman, which Parliament has decided should on its behalf investigate and adjudge the administrative actions of government bodies...It is one thing for the Department for Work and Pensions or another government body to reject recommendations that I may make, after proper consideration of the public interest, and other calls on the public purse, and any other relevant matters. That is a decision that it is entitled to take, was one envisaged by Parliament when it decided that I would
not have powers to make binding recommendations, and would be one for which the relevant Department would have to account to Parliament...However, it is entirely inappropriate, within a system of scrutiny of the way in which public bodies deal with citizens, for those whose actions are subject to such scrutiny to seek to over-ride the judgment of the independent arbiter established by Parliament to act on its behalf—and for the Department for Work and Pensions’ response to be merely to say that it does not accept that judgment”.
“This goes to the heart of the Ombudsman system—and of parliamentary scrutiny of the executive—and is a matter on which the Committee may wish to reflect.”
The Committee has reflected and has reported to the House. I hope that the House will reflect on the importance of the issue and that the Government will reflect further and respond appropriately. We responded to Maxwell’s fraud. We responded to the pensions mis-selling scandal. We now have an obligation to respond to a failure of regulatory protection that has deprived tens of thousands of people of the pensions to which they were properly entitled.
4.27 pm
Sir George Young (North-West Hampshire) (Con): I congratulate the hon. Member for Cannock Chase (Dr. Wright) both on a compelling speech in support of his Select Committee’s report and on chairing what must have been a difficult report to produce, as it has some uncomfortable recommendations for the Government. I also congratulate the Committee on not simply rubber-stamping the findings of the ombudsman, but going round the course again and satisfying itself about the integrity of her arguments.
Many Members want to speak in the debate, so I shall intervene only briefly. I do so for three reasons. First, like other Members, I have constituents who have been hit by the failure of their occupational scheme. Secondly, I believe the matter raises constitutional issues, which were touched on by the hon. Member for Cannock Chase at the end of his speech. Thirdly—perhaps uniquely, in relation to this debate—when I was Secretary of State for Transport, my Department had a similar run-in with the ombudsman, which was satisfactorily concluded and might offer a model for a way out of the impasse in which we find ourselves.
Like everyone else, I have constituents who have lost money in occupational schemes, and who are hoping for justice from the ombudsman’s findings. Former employees of Croydex, a manufacturer of bathroom accessories in Andover, are now members of the Lionheart pension scheme. In 2000, the scheme was funded 98 per cent. on a minimum funding requirement basis, but by the end of 2001 the amount was only 87 per cent. and the company stopped making contributions. Following some complex legal arguments, the trustees had to accept a final settlement that left the scheme with a deficit of £8 million. If they had not agreed, they would have been even worse-off, as the company, which had negative net assets, would have gone into receivership. None of the approximately 600 deferred members of the Lionheart scheme will receive any assistance from the financial assistance scheme, because Croydex continues to trade. None of them will receive any assistance from the Pension Protection Fund because the scheme entered wind-up before April 2005. Most will receive only 10 to 20 per
cent. of their pension. One employee who had worked for the company since 1958 found out two years before his retirement that he would lose 90 per cent. of his pension. He will receive no assistance whatsoever.
My constituent, Mr. Hawkes, has campaigned tirelessly on behalf of these constituents and, along with others, he is understandably bitter about the recent letter that I and others received from the Secretary of State that made it clear that he may seek the costs of judicial review from the pensioners. Mr. Hawkes’s confidence in the democratic process, and that of others who have read the Select Committee’s report, will depend on how the issue is resolved.
Mr. Bellingham: My right hon. Friend has highlighted two important problems with the FAS: first, solvent employer schemes are excluded; and, secondly, anyone more than 15 years from pension age is excluded, which affects quite a few of my constituents. The Government said that the extension to the FAS would be worth £1.9 billion. Is my right hon. Friend aware that the present cash value of the extension is only £540 million? The Government have to be clear about what the extension is worth.
Sir George Young: The Select Committee began to query some of the estimates that the Government have given about costs.
The second reason I wished to speak was to comment on the constitutional aspect of the situation. At a time at which neither MPs nor Parliament are held in high regard, this matter is a litmus test for the democratic process. We are all sent here to hold the Government to account. This is not the Opposition against the Government, but Parliament against the Executive. On the one hand, we have the unanimous conclusion of a Select Committee of the House that supports the findings of our parliamentary ombudsman, and on the other we have the Department for Work and Pensions, which is accountable, through its Secretary of State, to the House. The House, through its Select Committee, heard the Secretary of State’s defence and unanimously rejected it. My constituents know that if Members of Parliament have the will, they can compel the Government to think again. If we do not, their worst fears—and those of others who have faith in Parliament—will be fulfilled.
I have a third and final reason for speaking in the debate. As Secretary of State for Transport in the previous Administration, my Department was involved in a similar stand-off with the ombudsman and the Select Committee. I say this in defence of the Secretary of State: he is pulled two ways because although the ombudsman and the Select Committee may be pulling him one way, he might well have his accounting officer and his permanent secretary, and perhaps the Treasury and the National Audit Office, pulling him the other way, reminding him that he is accountable for public funds.
A letter dated 5 December was perhaps sent out in anticipation of the debate. It enclosed some Q and A—questions and answers—but there was no A to the most frequently asked Q: why have the Government rejected the Select Committee’s report? I found the letter rather dismissive of the Select Committee. Its unanimous recommendation is dismissed with the comment:
“While recognising some members disagree with that view”.
The case in which I was involved, which is referred to in the report, involved compensation for blight caused by the Channel tunnel rail link. I believe that it offers a way out of the current impasse. In that case, a satisfactory resolution was achieved—it is referred to on page 36 of the report. Initially, the Department rejected the recommendations of the ombudsman and the Select Committee on compensation for blight. At this stage in the proceedings, however, the Government thought again.
The letter that I wrote to the Select Committee on 1 November 1995 identifies the route that should be used on this occasion. I wrote:
“Despite the doubts recorded earlier, the Government is prepared to consider afresh whether a scheme might be formulated to implement the Committee’s recommendation that redress should be granted”.
“The Government would of course consult the Committee as proposals are being developed. I should add that in agreeing to look again at a compensation scheme, the Government does so out of respect for the PCA Select Committee and the office of the Parliamentary Commissioner, and without admission of fault or liability.”
I then added two somewhat pompous sentences:
“While being prepared to look at the possibility of a scheme, I hope you will also understand my making it clear at this early stage that we will need to consider seriously the possible costs of a scheme, which cannot yet be established. As Chairman of the Select Committee whose remit is good administration, you will understand that I would not be discharging my responsibility to the taxpayer by offering an open-ended commitment on an uncosted basis.”
The Select Committee that made the recommendations that we are debating today is looking for a similar response from the Government. All that the Minister need do at the end of the debate is say my exact words—there is no copyright on them. If he does, he will begin to build a bridge between the Government and Parliament, instead of further widening the chasm, and setting the Government on a collision course with the House.
Finally, I offer a quote that the Minister might find helpful in his negotiations with the Treasury. Who said that there was
“clear and unmistakable evidence in the ombudsman’s report of five significant areas of maladministration by the Department...Many pensioners have...lost their life savings, and retired workers their redundancy payments...I must ask why we have had to rely on the ombudsman to confirm the mismanagement...and incompetence that was widely known about more than one year ago...Does the Secretary of State agree that the House will find it strange that he...continues to deny the Government’s responsibility for mistakes and does not even apologise for his Department’s role?”?—[ Official Report, 19 December 1989; Vol. 164, c. 204.]
Those are the words of the Chancellor of the Exchequer, spoken in 1989. When the Minister writes to the Treasury, asking whether he can reopen the matter of the Government’s decision, he might like to pray in aid that quotation, to secure a response from the Treasury. When he makes his winding-up speech, I ask him to put to one side the line that his Department might have drafted for him, and instead to respond to the mood of the House, which is, as I see it, that the Government should think again.
4.36 pm
Alan Simpson (Nottingham, South) (Lab): In truth, it ought not to be me speaking in this debate, but my constituent Brian Wilson, who is one of the pensioners who had their pensions stolen. He has turned out to be an incredibly valuable source of knowledge to me. I suspect that virtually all hon. Members have someone like Brian Wilson on their patch. If they do not, they should count themselves lucky to have missed out on the problem, but they are also missing out on an education as to where we went wrong.
It is puzzling to understand why we should still need to hold such debates, because if we had followed a principle of “three strikes and you’re out”, the Government would already be out. The comprehensive and damning report from the parliamentary ombudsman sets out why the Government are responsible—not for the collapse of schemes, but for failing to set a rules framework for the schemes that made secure what the Government promised was secure. A report from the Public Administration Committee pretty much endorsed that conclusion, and it endorsed the call for the Government to intervene to set the matter fully, not partly, right.
On the deliberations held in the High Court, only this week, in the case brought by the pensioners, the Government received an almighty rollicking from the High Court judge for failing to produce an outline of their defence until what was almost literally the last minute. They finally did so on Monday night. The words of rebuke uttered by the High Court judge on Tuesday morning, and the grovelling presentation made by Government legal representatives, demonstrated how poor a position the Government are in. When successive independent verdicts ultimately trace the line of responsibility back to the Government, the Government cannot say, “We just don’t care about those independent judgments; we won’t accept responsibility for redressing the balance, whatever form that balance takes.”
It is with sadness that I approach our debate, because ultimately the courts will require the Government to accept the responsibilities set out by the ombudsman. As a result, those pensioners will be failed not just by the Government but by Parliament, which will be failing in its duty of scrutiny if it does not tell the Government of the day that they must accept responsibility, and if it does not introduce measures to provide full redress.
I am pleased that it has been established that the matter does not rest solely on the Government’s shoulders. In fact, it stems from the provisions put in place after the Pensions Act 1995, and the guarantees made by the Conservative Government that were endorsed when Labour came to power in 1997. It cannot be argued, however, that the Government fail to understand the nature of weaknesses and deficiencies that were built into the scheme that they put in place. After Maxwell, the actuaries advising the Government expressed doubts on several occasions about the weaknesses of the pension guarantee. The executive summary of the review of the minimum funding requirement published in May 2000 stated:
“there is a large and worrying gap between the level of security which the MFR test actually delivers and the public’s perception of what it will deliver”.
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