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Although it is invidious to mention individuals at the end of a debate such as this, I should like to pay particular tribute to my right hon. Friend the Member for North-West Hampshire (Sir George Young). He made an excellent contribution and may have showed the Government how they can get out of this mess. I also want to pay tribute to my hon. Friend the Member for Hemel Hempstead (Mike Penning), who has been a truly doughty campaigner for those of his constituents who have suffered so badly. After nine long years, this Government are finally tackling the pensions crisis. The Opposition have been working hard with Ministers and officials to try to achieve a consensus on pensions reform. We embarked on the task for three reasons. First, it is the right thing to do, given the breadth and depth of the pensions crisis. Some 2 million pensioners are still living in poverty, and a recent report showed that, unlike the rest of the population, pensioners have to live with a 9 per cent. rate of inflation. Council tax has soared, and half of all pensioners are subject to means-tested benefits. Recent figures from the Office
for National Statistics show a further decline in private sector pension provision. Since 1997, 60,000 occupational pension schemes have closed, and 125,000 people have lost their pensions.
When Labour took office in 1997, Britain had the strongest pension provision in Europe, but now it is among the weakest. The charge sheet laid at the Government’s door in respect of pensions goes beyond mere inaction in the face of a growing crisis: it makes it clear that the Government have heaped additional costs and red tape on companies that have tried to keep their pension schemes going.
Moreover, it is this Chancellor—the clunking fist himself—who through his annual £5 billion tax raid on pensions has forced schemes into deficit or to close to new, or even existing, members.
Mr. Bellingham: Does my hon. Friend not think it extraordinary that no one on the Government Benches mentioned the Chancellor’s 1998 Budget changes, which have heaped these extra costs on pension funds? Is he aware that the total cost now is not £50 billion? The total cost, including all the opportunity costs, is nearer £100 billion.
Mr. Waterson: My hon. Friend is right. What is also extraordinary is how fiercely the Chancellor is resisting freedom of information applications to obtain the advice that he received at the time on his decision to scrap dividend tax credit.
I mentioned that there were three reasons for building a consensus. The second is that any decisions made, or not made, now will have an effect 40 or 50 years on. Any number of Ministers and Governments will have come and gone by then. Thirdly, there is every possibility that it will fall to the Conservatives to implement many of the reforms. That serves to concentrate the mind in opposition. We want to ensure that whatever happens is workable and can deliver a sustained and meaningful benefit to future generations of people in retirement.
I will say little in this debate about the state pension changes. The restoration of the earnings link and help for women pensioners, for example, were both in our last manifesto. Retirement must become more of a process, rather than an event. Yes, we should gradually extend the state pension age, but we must build in flexibility in retirement. A massively important part of the Turner-inspired reforms is the setting up of personal accounts. We support the general direction of travel on that, but we have a number of serious concerns—as the Minister knows, because we share them fairly regularly. I do not have time to go into them in this debate. They include means-testing, levelling down, some of the cliff edges in the state pension changes and the whole issue of public sector pensions, where the total liabilities are now estimated at over £1 trillion.
It is interesting that research to be published by the pensions industry tomorrow includes some quite serious figures on the effect that levelling down could have under the personal accounts regime. If personal accounts are to fill the yawning gap in savings for retirement in this country, they must command the confidence of British workers. That in itself is a good
enough reason for trying to achieve consensus. If people pick up on the fact that the official Opposition and Government-in-waiting have concerns and might change everything in due course, it would be yet another excuse for putting off decisions about their own pensions.
There is another factor that has caused untold damage to people’s confidence in pensions: the regular publicity surrounding those who through no fault of their own have lost their pensions. We have heard a great deal about that tonight. On any view—I choose my words carefully—the Government’s handling of the situation has been both shabby and inept. It has been an insult to the 125,000 people involved. However, the Government have also undermined the pivotal position of the ombudsman in our constitutional system.
Mr. David Burrowes (Enfield, Southgate) (Con): Does my hon. Friend agree, in thinking about the Government’s response to the report by the Public Administration Committee, the role of the ombudsman and the relationship between Parliament and the Executive, with the reference to this matter as a litmus test? Does he agree with the comments made by my constituent, Thomas Ackland, who is one of the 1 million former Equitable Life victims? He says:
“There would seem to be little point in an independent investigative body, designed to uncover departmental failure and maladministration, if the Government then, bald-faced, refuses to act on the recommendations and, worse still, contests the Parliamentary Ombudsman’s findings.”
Mr. Waterson: My hon. Friend is absolutely right. I remember, as a fresh-faced law student in 1968, learning about the exciting new post of the parliamentary ombudsman and the massive significance that it would have. The Government have also undermined confidence in the whole pensions system at precisely the moment when restoring confidence is so important to underpin durable pensions reform.
Mr. Bailey: In the event of the Government being unable to get a package of further support from the private sector, is the hon. Gentleman making a commitment that his party would totally fund the recommendations of the ombudsman’s report and the Select Committee report?
Mr. Waterson: I shall come in a moment to what should happen and what the Government should be doing, if the hon. Gentleman will bear with me.
Various hon. Members have quoted from the ombudsman’s report and I shall not pursue it further, particularly in view of the shortage of time. However, I would like to mention the ombudsman’s views on the financial assistance scheme. She said:
“I am quite clear that the FAS will not constitute an adequate and appropriate remedy for the injustice claimed by those who have complained to me”.
I would also like to take the opportunity to pay tribute to Ros Altmann, who has been an extremely energetic campaigner for various pensioner groups and has quite rightly pursued all of us at different times to come up to the mark on this issue.
Before responding to the question of what the Government should be doing, I would like to cite one passage from the Select Committee report. I could use many, but time does not allow. It states:
“We have made our own investigations. We believe the Government is being, at best, naïve and, at worst, misleading... It would be extremely damaging if Government became accustomed simply to reject findings of maladministration”.
What are the Opposition’s views about how the Government should properly address this matter? First, the Government should agree without equivocation or evasion that there has been maladministration. It is not their job to decide whether there has been maladministration, but the ombudsman’s job—and she has decided. Why should these desperate people have to resort to taking the Government to court to obtain justice?
I shall now provide one quote to illustrate what the Government’s approach should be:
“The giving of wrong information by a Department is inexcusable. There is a clear responsibility to ensure that the information that Departments provide is accurate and complete... 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. 307-8.]
Those were the remarks of the then Secretary of State for Work and Pensions, the right hon. Member for Edinburgh, South-West (Mr. Darling).
Secondly, the Government should apologise, as directed by the ombudsman. An apology costs nothing. If it helps, Conservative Members will accept a modest share of the blame arising from our stewardship in 1996-97, while being clear that the problem of the weakening of the minimum funding requirement on more than one occasion, the change in the priority order, the collapsing pension funds and the ombudsman’s investigation and report all took place on this Government’s watch.
Dr. Tony Wright: As the hon. Gentleman has heard, I have been critical of the Government and I agree with all who say that this is a matter between the House of Commons and the Executive, but I would like to hear from him—lest he mislead anyone—why the Conservative party has officially said that none of its Front Benchers can sign a cross-party early-day motion on the matter because it might just incur some spending of public money. It would be helpful if the hon. Gentleman could clarify exactly the Conservative party position.
Mr. Waterson: The answer is very clear: it was not a cross-party early-day motion. If the hon. Gentleman, for whom I have utmost respect, had troubled to talk to us before tabling his early-day motion, we might have been able to agree a slightly different wording with which we would have been content. It is unfortunate that the impression has somehow been gained by some of the pensioner groups outside the House that that did happen when it did not.
Mr. Laws: Will the hon. Gentleman tell us which part of the early-day motion he disagrees with? We were not consulted either, but it is a broad early-day motion and I would not have thought that it would lead to any objections. Which part, then, does the hon. Gentleman object to?
Mr. Waterson: In my next life, I hope to be a Liberal Democrat, as it is so much easier and any early-day motion can be signed. If the hon. Gentleman will bear with me, I am coming on to the substance of his point.
Thirdly, the Government should finally recognise that the recommendations to ensure an appropriate level of support for those who have lost out must be taken seriously. They should stop floating absurdly inflated figures such as the £15 billion figure tossed around by, among others, the Prime Minister. That sort of thing is insulting to our intelligence and, indeed, to the victims.
The Government should do some serious and credible work on calculating the real likely cost of helping the victims. In their calculations, they should give credit for benefit payments saved, pool the assets of the failed funds and take full account of the possible benefits of deemed buy-back—one of the best kept secrets in the DWP and the Treasury. They should examine whether purchasing bulk annuities is the best way forward. Perhaps they could also provide relevant information about how much money is left for that purpose in the relevant funds. They should scrap altogether the wasteful and unnecessary administrative machinery of the FAS and run the compensation scheme in parallel with the PPF, using the same skills base.
It seems to us a matter of principle that those who deserve help, following the ombudsman’s report, should expect that help to be at a reasonable level. Will the Government estimate the real cost of providing support at a level similar to that available under the PPF? In making those calculations, they should factor in the money already committed, as well as using unclaimed assets—something on which we have campaigned for some time, as has the right hon. Member for Birkenhead (Mr. Field). The Chancellor now accepts that unclaimed assets can be used for certain purposes, and we agree. It is interesting that according to the unclaimed assets register unclaimed pensions alone amount to about £3 billion.
Above all, the Government must recognise the immense damage that this episode has inflicted and continues to inflict on long-term pensions confidence and stability. If the system of personal accounts foreshadowed by Turner and picked up by the Government, and which we broadly support, is to succeed, confidence-building must happen. In short, we and the victims expect the Government to show leadership on the issue. That means examining the options realistically, providing the necessary information and promoting an informed and sensible debate. Then we will see whether the positive benefits of consensus can apply in this situation, too.
In some ways it is unfortunate that we shall not be voting on the motion. I leave Members—including Labour colleagues, many of whom are sympathetic to the case—with the words of Dick Crossman, on the Second Reading of the Parliamentary Commissioner Bill:
“Wisely used, this can be a potent instrument for the protection of the good name of the Civil Service, for the restoration of Parliamentary authority and for the redress of individual grievances.”—[ Official Report, 18 October 1966; Vol. 734, c. 61.]
5.47 pm
The Minister for Pensions Reform (James Purnell): I will try to get through as much of the material covered in the speeches as I can. If I do not cover points made by Members I shall be happy to meet them to discuss matters with them and their constituents.
I congratulate my hon. Friend the Member for Cannock Chase (Dr. Wright) and the Select Committee on their work. I hope to go through as many of the points they raised as I can.
I want to make it clear that the Government respect the role played by the ombudsman, and we will continue to do so. The case we have been discussing is exceptional. The Committee asked us to explain whether it was a new policy or a new approach. The case is exceptional. We shall continue our approach, which is to respect the ombudsman. In fact, in 39 years, this is the first time that my Department has not responded positively to an ombudsman’s findings.
Mr. Laws: In the Government response to the Select Committee report, there is an indication that in future an official in the Treasury or Her Majesty’s Revenue and Customs will be regarded as the ombudsman’s champion. I think the House is meant to be reassured by that. Does the Minister think we will be? What will the role of that official be?
James Purnell: As I understand it, their role will be to work with the whole Government to make sure that we follow good principles of administration and that we respond to the ombudsman appropriately. She has been working with us on some good principles of administration. If the hon. Gentleman asked her, I think he would find that she was relatively happy with those proposals.
It is worth making the point that although what happened was exceptional, it is not unprecedented. The ombudsman herself recognises that the Government may
“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”.
As the right hon. Member for North-West Hampshire (Sir George Young) said, we have two duties to Parliament: first, to take proper account of the ombudsman’s findings and, secondly, properly to account for the use of public money. It is not our money, it is taxpayers’ money. We have been trying to strike a balance between those two duties—our respect for the ombudsman and the proper use of public money.
Mr. Burrowes: The Minister quotes the ombudsman, but why did he not continue the quote, which shows that it is unprecedented for the Government to reject her findings? The ombudsman says:
“The Government appears to draw no distinction between a rejection of the Ombudsman’s findings of maladministration and injustice and a rejection of the Ombudsman’s recommendations for redress.”
It is both rejections that make the action unprecedented.
James Purnell: It is not unprecedented for a Government to reject findings of maladministration. The previous Conservative Government did precisely that. In that case, the then Secretary of State for Trade and Industry said:
“I want to make it clear that the Government do not accept the Parliamentary Commissioner’s main findings”.—[ Official Report, 19 December 1989; Vol. 164, c. 203.]
The question that we should be asking today is not whether people have suffered—we realise that they have suffered, which is exactly why we put in place the financial assistance scheme—but what is the proportionate response?
Richard Burden: My hon. Friend might recall that during Question Time on 16 October I suggested that this matter might well end up in the courts. Although it would be quite wrong to talk about the substance of the court case, the pensioners themselves feel that the Government are threatening them with costs if the case is pursued to judicial review. My hon. Friend said that the Government were waiting to hear from the pensioners’ representatives, but it has now been established that it is the other way round. When will the representatives of the pensioners be hearing from the Government?
James Purnell: That has not been established. I said—this continues to be the situation—that the representatives have not made the case that the matter fits into the normal precedent whereby the Government would waive costs. We have said not that we will enforce costs, but that we will consider them, as we always do, at the end of the case.
We have tried to respond to the Public Administration Committee’s report as constructively as possible. We are implementing several of its recommendations. For example, there will now be a two-year wind-up. We have also made it clear that survivors will be paid and that people can be paid from the age of 65. It is true that the support that we have put in place continues to be less than what it asked for.
It is worth saying that the scheme has been extended to 40,000 people since the ombudsman first published her report. We took that report into account when we made the extension, and I think that the House has welcomed our action.
Kitty Ussher (Burnley) (Lab): I am grateful to my hon. Friend for giving way because I know that time is short. He will be aware that MB Aerospace in my constituency restructured and closed its pension scheme in 2003. I have written to the Minister about this matter, but will he confirm today that employees of the company in their 50s will be eligible for financial assistance? Will he urge the administrators to complete the wind-up, because while it is not completed great uncertainty is being caused?
James Purnell: I am happy to give my hon. Friend that confirmation. I think that there are some members in payment in that scheme.
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