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22 Feb 2007 : Column 417

Mr. Straw: No one could accuse my right hon. Friend the Secretary of State of acting in that way. He has been forthcoming in turning up to the House to make oral statements, as he has done in respect of avian flu twice this week. A written ministerial statement on the single payment scheme is on the Order Paper today— [Interruption.] It is not about burying matters; oral statements cannot be made every day of the week. As I have said to many Conservative Members, I am very sorry about the situation. Like the hon. Gentleman, I have farmers in my constituency, and the situation is unacceptable—no one pretends otherwise. My right hon. Friend the Secretary of State is doing his best to put it right.

Helen Jones (Warrington, North) (Lab): Has my right hon. Friend had the opportunity to see early-day motion 859 about Dreams plc, which has cut down a load of trees around its plant in my constituency?

[That this House deplores the actions of Dreams plc in cutting down trees around its site in Woolston, Warrington; condemns the company's cavalier attitude to the concerns of local residents who have raised this issue and its failure to engage in constructive discussions about its plans for re-landscaping the site, together with its dismissive comments about the area; notes that many successful companies in the United Kingdom are both profitable and environmentally responsible; and urges Dreams plc to follow their example.]

Is he aware that, following correspondence, the company has not only insulted the residents of the area, but has sent me what I can only describe as a two-page rant intended to intimidate me out of raising the issue? May we therefore have a debate on the rights and responsibilities of Members of the House, so that we can explain to the company’s chief executive that MPs have a duty to raise matters of concern to their constituents and that he ought to take that seriously?

Mr. Straw: I think that he is taking it very seriously indeed, as he accuses my hon. Friend of acting unfairly and vindictively and pressurising one of the country’s leading and fastest-growing retailers. I congratulate her on doing her duty by her constituents, and I hope that Mr. Mike Clare considers the perils of calling the privilege of Members of Parliament into question.

Mark Hunter (Cheadle) (LD): Will the Leader of the House please find time for a debate on the issue of the UK veterans badge, which can now be awarded to ex-servicemen and women who served in the armed forces before 1969? Does he agree that that will be helpful in assessing the impact of what the Government have done to promote the availability of the award? Does he further agree that it is the least that the House can do to ensure that service veterans are aware of their entitlement to that modest recognition of their immense contribution to our country?

Mr. Straw: I agree with the hon. Gentleman who, in a Liberal Democrat roundabout manner, was, I think, trying to thank the Government for introducing the medal. I take his gratitude with some surprise, but I accept it none the less.

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Mr. Khalid Mahmood (Birmingham, Perry Barr) (Lab): I agree with much of what my hon. Friends the Members for Hackney, North and Stoke Newington (Ms Abbott) and for West Bromwich, East (Mr. Watson) said about a debate on gun crime. Will my right hon. Friend discuss with the Home Secretary the importation of weapons from eastern Europe and Northern Ireland? That is the real issue. Gangs have been around for a long time. We need to debate how to restrict young people’s access to those guns.

Mr. Straw: I accept that the problem is both the use of guns and their availability. My hon. Friend raises an important point. I hope that we can, one way or another, arrange for a debate on that.

John Penrose (Weston-super-Mare) (Con): May I draw the attention of the Leader of the House to the reply that he gave in response to the question asked by my right hon. Friend the Member for Maidenhead (Mrs. May) about the Chancellor of the Exchequer’s special advisers? The ministerial code says that he is supposed to have two; he has in fact got 12, who cost £1.1 million. The council of economic advisers is stuffed full not of senior economics professors, but of special advisers, one of whom recently served as a special adviser to the right hon. Member for North Tyneside (Mr. Byers).

Mr. Straw: That is not a disqualification. My experience of the advisers and the members of the council of economic advisers in the Treasury is that they are of high quality. I have nothing to add to the answer that I gave earlier, which was that they have contributed their advice to the most successful period of economic activity this country has seen since the war.

Barbara Keeley (Worsley) (Lab): I welcome yesterday’s announcement of the Government’s new deal for carers, which includes extra funding for respite care and a national helpline to provide advice and support to carers, for example. Given that the package also includes a review of the Government’s national strategy for carers, will my right hon. Friend find time for a debate on carers in the forthcoming weeks so that hon. Members on both sides of the House, who take carers’ issues seriously, can contribute on the needs of carers in their constituencies, who are one in 10 of the adult population?

Mr. Straw: I share my hon. Friend’s interest in that matter. I am glad that we have been able to find an extra £25 million for carers. She will know that there are opportunities to raise such issues in Westminster Hall and in Adjournment debates in the main Chamber. We will also look at what can be done.

Several hon. Members rose—

Mr. Speaker: Order. We must move on.

Mike Penning: On a point of order, Mr. Speaker.

Mr. Speaker: The hon. Gentleman must wait until after the statement.

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Occupational Pensions

12.12 pm

The Secretary of State for Work and Pensions (Mr. John Hutton): With permission, Mr. Speaker, I want to make a statement on yesterday’s judgment on the Government’s response to the ombudsman’s report concerning the security of final salary occupational pension schemes. Given the importance of the issue to many right hon. and hon. Members, I want to inform the House of the position that we have reached both in the light of that particular ruling and the decision last month of the European Court of Justice on the implementation of the insolvency directive.

The High Court yesterday made five rulings in its judgment. I want to take each in turn. Its first ruling was that the ombudsman was entitled, on the evidence available to her, to reach the conclusion that official information published on the minimum funding requirement for pension schemes was inaccurate and potentially misleading, and therefore amounted to maladministration. The Court particularly criticised the then Government’s guide to the Pensions Act 1995, which was published in 1996. This, it concluded, gave the clear impression that following enactment of the new law, scheme members could be reassured that their pensions were safe whatever happened.

The Government had, in good faith and acting on proper advice, taken a different view from that of the ombudsman, on the basis that the leaflets concerned were not a full statement of the law and were for general guidance only. However, we clearly now need to study the Court’s ruling very carefully. In particular, we need to consider the possible implications across government of the Court’s significant proposition, on which this ruling was based, that findings of fact made by the ombudsman are binding, unless they are flawed, irrational or peripheral, or unless there is fresh evidence.

The Court’s second ruling related to the important issue of causation. The ombudsman had found that maladministration was a significant contributory factor in the creation of the financial losses suffered by individuals. She went on to argue that everyone who between 1997 and 2004 suffered losses on the winding up of their pension scheme was the victim of injustice because of maladministration. The Government had argued that that was not well founded. The Court found in favour of the Government on this point, describing that aspect of the ombudsman’s report as “logically flawed and unreasonable.”

The Court’s third ruling rejected the ombudsman’s finding that the Government were guilty of maladministration when they made changes to the pension scheme funding rules in 2002. It decided that the ombudsman’s finding was not logically sound. In its fourth ruling, the Court also dismissed the claim that the Government’s refusal fully to restore the pension entitlements of all affected scheme members was in breach of the European convention on human rights. The Court’s fifth and final ruling concluded that I should reconsider the ombudsman’s recommendation that the Government should consider making arrangements to restore fully the pension losses of the people concerned when their employers became insolvent.

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In a clear sign of both the complexity and, yes, the importance of these matters, both sides have sought and been granted permission to appeal. We have not yet decided the precise grounds for such an appeal, but it is absolutely right and proper that we take time to study the judgment and consider its implications in detail.

The judgment of the European Court of Justice in January on the implementation of the insolvency directive has an important bearing on the issue of financial redress for those who have lost some or all of their pension entitlement. The decision of the European Court of Justice effectively requires the Government to reconsider whether the present arrangements offer sufficient protection for people’s pensions when their employer becomes insolvent. The European Court of Justice has ruled that the system of protection that was in place before 2004 did not comply with the terms of the directive, even taking account of the subsequent introduction of the financial assistance scheme, albeit before its 2006 extension. We are already reviewing the financial assistance scheme with that finding in mind. It is now for the High Court to be asked to decide whether damages for breach of the directive should be paid, taking account of the steer apparently given by the European Court of Justice that damages may not be payable.

The Government have already acted to provide substantial financial assistance to people who lost pension rights when their employers became insolvent. The financial assistance scheme, supported by £2.3 billion of public money, has been set up precisely for that purpose. Throughout, we have always sought to ensure that those who have suffered the most should receive financial assistance to mitigate their loss. At the same time, we have sought to strike a balance with the interests of taxpayers, who cannot be asked to accept responsibility for effectively underwriting the total value of pension savings.

In considering the right way forward, we are always prepared to consider practical proposals from both sides of the House. I can confirm also that, so as not to add to their financial difficulty, we will meet the costs of the applicants in this case so far, together with the costs associated with our appeal.

People who have lost their pension rights in these circumstances have suffered a great deal. My aim will be to return to the House with our conclusions and our proposals for how we should proceed, and to do that before the conclusion of proceedings on the Pensions Bill.

Mr. Philip Hammond (Runnymede and Weybridge) (Con): We welcome the tone at least of the last part of the Secretary of State’s statement. We welcome in particular his announcement on costs. That was a great burden lifted from the shoulders of the claimants in this case and it reflects the public importance of it.

We accept that important issues of principle are involved where an ombudsman’s findings are binding, and that they have implications across government that the Government will want to consider. However, my reading of the situation is that the clear view of the House is that the ombudsman is an Officer of Parliament and that her office is of no functional value if the Government can simply dismiss her findings when they do not like them.

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The Government have been criticised for their handling of the crisis by four separate bodies—the ombudsman, the Select Committee, the European Court of Justice and the High Court. From the tone of the Secretary of State’s final remarks, it seems that he might be getting the message at last.

The facts of the case are that 125,000 people who paid into occupational pensions, many of them because they were required to do so by law when they joined, have, following the failure of the schemes, lost their pensions in whole or in part, and that the schemes were not as safe and secure as Governments of both political parties suggested they would be. Therefore, people approaching retirement and, in some cases, people who retired early have found that their retirement plans are in ruins. They have been left high and dry.

The Secretary of State has said that the state cannot guarantee private pensions and he is right about that, but because of the creation of the Pension Protection Fund, the state does not have to. This situation cannot arise in future. It is a finite problem affecting a defined group of people. There is a palpable sense of an injustice being done. That sense is shared, I believe, on both sides of the House, in large sections of the media and in the country at large. The Government simply cannot ignore the view of the House of Commons and the sentiment of public opinion. I hope that I was correct in reading into the Secretary of State's final few paragraphs the indication that he is no longer intending to do that, because we as a society have to find a way forward to solve the problem. It has always been my view that the solution will not come through the courts. It has to be a political decision, based on cross-party consensus, with the Government taking a leadership role in building that consensus.

Let me make it clear that no one is suggesting that the Government should simply write a blank cheque with taxpayers' money. There are many other possibilities to be explored. My right hon. Friend the Member for Witney (Mr. Cameron) invited the Prime Minister yesterday to set aside party politics and to seek to work together on the matter. I was pleased to hear what the Secretary of State said, and we are certainly ready to join him and all others in the House in trying to find a sustainable solution, based on the commitment of public money that has already been made through the financial assistance scheme, but also looking at whether better use may be made of the residual assets within the failed schemes, and whether we can make use of unclaimed assets within the financial sector to support a solution.

Is the Secretary of State prepared to commit his Department to doing some serious analysis of the real net costs of different levels of support to this group of victims, taking into account benefit savings and taxation, so that our debate will be properly informed?

The Government have now been told not once but four times that their response to the crisis is inadequate. There is a clear moral case for accepting a share of responsibility for the problem and for showing the leadership to broker a fair and affordable solution, but there is also a practical case. Pension saving is down and millions of people are making inadequate preparation for retirement. The Government rightly are determined
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to do something about that, but unless this issue is resolved, confidence in the pension system will not be restored.

We could seek to make political capital by promising that the next Conservative Government will sort the mess out, and we will do so if we have to, but many of the victims cannot afford to wait another two or three years for a change of Government, so if the Secretary of State is telling us today that he is prepared to work with us and others to find a solution that is affordable and sustainable, I welcome that and I assure him that he will find us ready, willing and able to participate in those discussions.

Mr. Hutton: May I give a general welcome to what the hon. Gentleman said in response to my statement? I think that it is worth pointing out one or two things to him and to his hon. Friends.

It is true that previous Governments have rejected previous findings of ombudsmen’s reports. Anyone listening to the hon. Gentleman would probably conclude that this was the first time it had ever happened, and of course that is not true. Nor is it true to say that people have been left high and dry, which was the term that he used. I think that £2.3 billion of public investment in a financial assistance scheme certainly does not mean leaving people high and dry. We always made it clear that we were not in a position to compensate fully all the losses that people had sustained, and that remains our position.

In relation to how many people have received help, it is worth bearing in mind one important fact. We think that the financial assistance scheme will cover about 40,000 of those who have suffered a loss. Obviously, not all of them have reached retirement age yet, so it is ludicrous and fatuous to say that, because only about 1,000 people have received payment, the whole scheme is failing. That is not an accurate or fair interpretation of events.

On the hon. Gentleman’s wider points about the financial assistance scheme, let me remind him of what I said in my statement about the European Court of Justice ruling. We are already looking at the adequacy or otherwise of the financial assistance scheme as part of our consideration of the implications of that judgment. He repeated the comments of the Leader of the Opposition yesterday. I made it clear in my statement that we are prepared, of course, to discuss these issues with the other political parties in the House. That is the right and sensible way to proceed.

On the hon. Gentleman’s points about unclaimed assets, it is worth all of us keeping our feet firmly on the ground. Initial records searches by banks and building societies suggest that several hundred millions of pounds may currently lie unclaimed. There might be an annual income flow of about £10 million or £20 million, but that is not going to be an income stream on which we can rely to make the pensions commitments that he wants to make. As he must know, there is not a parallel between unclaimed pension assets and unclaimed assets in bank accounts. He must be aware of that.

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