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“The Government agrees there should be a significant package of support and believes that FAS, as extended, constitutes such a package.”
The hon. Member for Cannock Chase gave a detailed explanation of all the ways in which the financial assistance scheme is deficient in relation to the Pension Protection Fund, and all the ways in which the headline statistics in the scheme relating to the proportion of pensions that people can expect to be returned to them are let down by the proportion of the total pension package that is returned. In the Committee’s report, the hon. Gentleman has also described all the ways in which the FAS is deficient. We debated the issue yesterday with regard to new regulations to improve the FAS. The improvements are welcomed by Members on both sides of the House, but they are still a long way short of adequate compensation.
The Minister acknowledged that the Prime Minister was questioned on that specific issue yesterday. In response to a question from one of his hon. Friends, it seemed that the Prime Minister left open the possibility of further changes and improvements to the scheme. He said:
“I agree that it is important to keep the terms of the scheme under review”.—[ Official Report, 6 December 2006; Vol. 454, c. 301.]
I hope that that was not simply the sort of comment that Prime Ministers make under pressure, as a way of fobbing of their own Back Benchers who are concerned about injustices of this type. When the Minister responded to my question about the Prime Minister’s commitment, he did so in rather lukewarm and ambiguous terms. He said that the Government keep all their policies under review and will continue to do so. That was not particularly cheery and it rather made me think that the Prime Minister had been giving a brush-off rather than a hope of real improvement.
Perhaps we should not be so gloomy, however. The Minister looked unimpressed when the hon. Member for Nottingham, South described some of the ways in which the financial assistance scheme could be improved, and some of the ways in which a fairer compensation package should be delivered. I remind him that his predecessors were similarly unimpressed when the arguments for such a scheme were first made. At that stage, the Government did not want to give way on the issue. Eventually, they found the money to introduce a scheme, and then maintained that it was good enough. Yesterday, we debated the new scheme and the improvements to be made. Ministers always say that improvements to such schemes are unaffordable, and go on saying that until they are forced to make changes and improvements. The right hon. Member for North-West Hampshire made a helpful suggestion to the Minister, and demonstrated how Governments can make rather elegant U-turns if they want to do so. I seem to recall that the Government of which he was a member had a habit of making quite a few U-turns, not all of which were elegant, but he showed how Governments, if they wish to do so, can change their opinion.
Given the Government’s formal response, I do not have high hopes that today’s ministerial summing-up will take on board the criticisms made by the Select Committee and the ombudsman. I hope, however, that the strength of opinion expressed in the House during the debate, and the strength of opinion in a cross-party report, will cause the Government to keep the issue under review. I hope that the Prime Minister’s comments yesterday will allow further improvements to be made to provide a fair package of compensation to people who have lost their pensions under such circumstances.
Madam Deputy Speaker (Sylvia Heal): Order. Approximately 17 minutes are left for Back-Bench contributions to the debate. Under the circumstances, may I ask hon. Members to make their contributions brief?
5.13 pm
Julie Morgan (Cardiff, North) (Lab): As a member of the Public Administration Committee, I am very pleased to speak in this debate. This is an important debate in two respects: first, in relation to the fate of the estimated 125,000 people affected; and secondly, in relation to the status of the ombudsman’s office and the Government’s response to her recommendations.
The Public Administration Committee, ably led by my hon. Friend the Member for Cannock Chase (Dr. Wright), interviewed many people who had suffered the loss of most of their pensions. They gave moving testimonies. As a Cardiff MP, my constituency was very much affected by the closure of Allied Steel and Wire, which, in 2002, went into receivership, resulting in 838 employees losing their jobs. In the summer, I met a large group of Allied Steel and Wire workers in my constituency, who told me how upset they were when they first learned that the plant would close, although at least they thought that their pensions were safe. Ten days later, however, they learned that they had lost most of their pensions. When the ombudsman’s report came out, they believed that they were saved. They thought that the Government always took notice of the ombudsman
and that there would be a solution. The issue of the ASW workers’ pensions is still a running sore, and they continue to campaign on it to this day. They strongly believed that the ombudsman was an independent voice that the Government would heed, but that has not happened in this case.
On Monday, the ombudsman made a speech at a seminar at the constitution unit. She mentioned three prominent cases where there was disagreement but where the Government changed their mind and, to some extent at least, remedied the injustice. As a result of our debate, I hope that the Government will think again, and that they will look back to see how the Government did change their mind in those three cases and moved, at least in part, towards what the ombudsman recommended. There are now two outstanding cases, one of which is the occupational pensions issue.
I do not suggest that the Government have done nothing. The Pension Protection Fund has been mentioned and it will in future protect pensioners who fall into such circumstances. The Government have also set up a financial assistance scheme, but we have heard about that today and we know that it is woefully inadequate. I pay tribute to the hard work that has been done, led by ASW pensioners and by the unions Amicus and Community, to keep the issue on the agenda by taking it to the European courts and trying to get recompense for their members. The changes that were made to the financial assistance scheme—which must have been brought in partly as a result of the ombudsman’s report—improved things by extending the scheme to those within 15 years of retirement. That was a step forward. But there are still huge inadequacies.
I have constituents who miss out on the 15-year extension even though they paid into the pension fund for more than 30 years. One of my constituents, from Whitchurch in Cardiff, misses the 15-year extension by three months. It is impossible to underestimate the stress and anxiety that is caused to entire families.
Another constituent from Heath worked in the steel industry in Cardiff from the age of 15. He worked with ASW until the closure in 2002, contributing to the works pension scheme. He had previously contributed to the state earnings-related pension scheme, and he transferred to the final salary works pension scheme believing—under the guidance of the Government, as he saw it—that that was guaranteed. When he heard about the increased funding under the financial assistance scheme he wrote to me:
“To my utter dismay, I find that no assistance is available to me, since I do not fall into the category of being within 15 years of retirement, being 2 months short of the qualifying period. This is totally unjust, as up to the closure of ASW, I was employed in a very harsh environment, paying taxes fully, while doing my utmost to secure my future for retirement via the works pension scheme, as recommended by the Government...After 34 years contributing, I face a bleak retirement.”
The ASW pensioners whom I have met in Cardiff all believed that they were following the Government’s guidance, and they also believed that the Government would act on the ombudsman’s recommendations. This is a matter of trust, and the Government should address it. It will be good if the Minister confirms today that they will at least look at what can be done to address the important issues that have been raised.
Attention has been drawn to the ombudsman’s recommendations. She has not asked for the Government to fork out the entire amount. She was not asking for a blank cheque. As she said:
“I did not say, “Write a blank cheque”, but to organise a remedy.”
The Government’s response to the ombudsman has, however, been very disappointing. It states that
“the Government does not believe that the information issued by the Government can be regarded as having caused the losses”.
The Government cannot of course be blamed for the failure of the schemes. The failure was that member schemes were not protected by the Government in the way that the members believed they were. That is what they said in evidence to the Committee. They believed that they were protected. However, although we are not blaming the Government for the fact that these schemes have collapsed, it is in this context that they should look at the matter.
On the question of the leaflets, the Government reject the notion of maladministration because they believe that it was clear that the information on the leaflets should not have been taken in isolation. However, the ombudsman made it clear to us in Committee that the information did influence many of the people affected. She described individuals coming to see her and showing her the parts of the leaflets to which they had paid attention. There is no doubt in my mind that the ASW pensioners in Cardiff strongly believed that they had been following Government advice, and that, as far as they were able, they had looked into protecting themselves responsibly for their retirement.
Most of the past disagreements between the Government and the ombudsman have reached a satisfactory conclusion, and the ombudsman herself says that she sees no need for a power to make her recommendations legally binding. Surely Parliament can work out a solution to this situation. The evidence is strong and compelling. The Government should listen to what is being said in the House today and find some way of sorting out a grievous situation and running sore that will otherwise continue.
5.21 pm
Mike Penning (Hemel Hempstead) (Con): I think and hope that the Government have listened to the compelling arguments made by all those who have spoken this afternoon in this very important debate, which has sadly been cut short, not least by an obviously orchestrated campaign by the Government Whips Office to intervene in order, it would seem, to put the ombudsman on trial. However, I shall not waste time discussing that; the members of the public who have been listening to this debate, and the 700 members of the former Dexion scheme, will have heard that for themselves.
I pay tribute to the Chairman of the Select Committee and to the ombudsman for a brave report and for sticking to their guns. There is an old-fashioned phrase that is not heard much these days: natural justice. Their report is an attempt to secure natural
justice for many of our constituents and their families and loved ones, who have had their pensions stolen from them.
I became a Member of this House only some 18 months ago, but approximately five years ago the campaign team for the former Dexion workers approached me and showed me the documentation that they had been given over the many years that they had worked for Dexion. They left that documentation with me and it did not take me long to realise that they had a very strong case, in the light not just of the recommendations and actions of this Government, but of those of my own Government in the period since 1995. The leaflets were flawed; that was my view before the election, and the reason why I have worked tirelessly to help them.
The 120,000-plus people whose pensions were affected are not just numbers. We have heard about the fantastic work that Ros Altmann has done on behalf of the campaign group, and I pay tribute to Ros today. These are ordinary people who were going about their business; in my company’s case, they had worked for the company for a very long time. They had done the right thing. They had paid into a Government-recommended, perfectly safe pension scheme, so that they would rely not on state benefit, charity or a handout from a scheme, but on a pension scheme that they had purchased on behalf of their families and loved ones.
Marlene Cheshire—a delightful lady—had to tell her husband David on the day he died that the compensation had come through and that everything was okay, so that he would pass away thinking that everything was okay for her, and that she had been left with the money. The Minister met the widows group that I brought to him. The stories that they tell are massively distressing. Marlene is one of 400-odd members of such schemes who receive some money from the financial assistance scheme. The Minister knows how much she gets—£20.00 a week. If the decimal point were shifted, that would be somewhere near what she should have got.
I am not saying that the taxpayer should pay everything, and nor are the former Dexion workers campaign group, the ombudsman or the Select Committee. What we are saying is that we need to come up with a plan. The hon. Member for Nottingham, South (Alan Simpson) has come close with the ideas that he put forward today, some of which I was going to offer myself. I shall raise other issues. For instance, the schemes are still being forced to purchase annuities. Why? How much is left in the schemes? Perhaps the Minister can tell us when he winds up the debate, because the figure is missing and there is a lot of money still being administered by the trustees.
Many of the unclaimed assets that the Chancellor thinks that he can use are from pension schemes in insurance companies. What better use could there be for that money than to compensate those wonderful people?
Mr. Bellingham:
My hon. Friend makes a compelling case. He will be aware that I represent several Albert Fisher pensioners, many of whom have lost more than 20 years of occupational pension benefits. They were forced to contract out of SERPS and put their NI
contributions into the Albert Fisher scheme, but they will get only about 50 per cent. of their expected pensions. What my hon. Friend is saying about the unused assts and other approaches that the Government must consider is absolutely correct.
Mike Penning: I am grateful for my hon. Friend’s support. So many of those people joined their companies on apprenticeships when they were 15, 16 or 17. I was lucky in that I joined an apprenticeship in the armed forces at 16, so my pension is safe. Those people worked for one company, loyally, for their working life and, if they are not within 15 years of retirement, they have lost everything. The scheme will not give them a farthing. They have to go back out to work and build up a whole new pension all over again. What faith can they, their families and friends or anybody who reads the report of this debate today have in pension schemes? They will be frightened because they will not get many of the benefits of the Pension Protection Fund that the Government have introduced. It is not index-linked and they cannot take any of the benefits in a tax-free lump sum, which they would have been able to do in their own schemes. The widows are suffering enormously. There are so many issues that make one scheme right for one group of people but wrong for another. Where is the natural justice in that?
I would have loved to speak for longer, but the debate has been cut short, as I have said. I hope that we can all come together as a Parliament to accept the ombudsman’s report. Parliament appointed her to assess cases and she can find for the Government or against them. In this case, she happens to have found against the Government and that there was maladministration. I hope that we can accept the Committee’s report, sit down, bang some heads together and set up a fund that will give the people the living that they deserve and the pensions that they should have had.
5.27 pm
Andrew Miller (Ellesmere Port and Neston) (Lab): I can tell the hon. Member for Hemel Hempstead (Mike Penning) why he should not just simply accept the ombudsman’s report. She should have started back in 1986 when a 5 per cent. cap on surpluses was established by Nigel Lawson, who said in his Budget statement that he needed
“to deal with the growing problem of the rules governing pension fund surpluses.”—[ Official Report, 18 March 1986; Vol. 94, c. 176.]
He thought that there was too much money in pension funds, but in hindsight that was a lunatic’s decision. Soon after that, through the combination of the impact of his changes and the raids that companies conducted on their pension funds, we saw the beginning of the end for many of our big pension funds. Had the ombudsman started at that point, I am certain that she would have got further down the route. The decision was of course made at a time of 10 per cent. inflation.
There are still £1,000 billion-worth of assets in our pension funds and we should not pretend that all the funds are on their knees; there are still some extremely good ones. The pension fund failure that resulted in my being the first Member of Parliament to say that the Government should put their hand in their pocket was
that of H. H. Robertson, which collapsed at the fag-end of the previous Conservative Government. I have already thanked John Taylor, the Minister at the time, for the work that he did in getting the Serious Fraud Office involved in the matter. I am glad to tell my hon. Friend the Minister that members of that scheme are now receiving some payments through the financial assistance scheme.
Some details remain to be sorted out to make sure that the transition works, but I shall take my hon. Friend through them at another time. However, if a pension scheme had collapsed when regulations under the 1995 Act came into force in April 1997, the actuary would have been required to value the scheme using the benchmark minimum funding valuation. The contributions due to the scheme would have been certified by the actuary as adequate to increase the funding level over the five years, bringing it up to the statutory minimum level.
The House needs to ask serious questions about the competence of the actuarial professionals who certified the schemes year after year. They did not make sure that the standards of their professional associations were met. In addition, I remind my hon. Friend the Minister of an observation that I made to one of his predecessors in 1998. I said that, because of the losses incurred as a result of pension fund collapses, the state was paying out a huge amount of money in benefits and pension credits. If the Government were to conduct an analysis of the money involved, they could determine a better figure for what needs to go into the FAS, and that solution could meet the requirements set out in the report presented by my hon. Friend the Member for Cannock Chase (Dr. Wright). I therefore urge the Minister to keep probing away down that route.
5.32 pm
Mr. Nigel Waterson (Eastbourne) (Con): It is always a pleasure to follow the hon. Member for Ellesmere Port and Neston (Andrew Miller), and I am very pleased to contribute to a debate that is rather shorter than originally envisaged. I begin by joining others in paying tribute to the hon. Member for Cannock Chase (Dr. Wright) for the report that he has produced and the masterful way in which he opened the debate.
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