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There has thus been a reduction in people’s confidence in providing for themselves, but we also know that people lack confidence in the state’s ability to provide
for them. We are left with an intractable situation with the result that young people are choosing not to save at all. They are hoping against hope that things will be okay by the time that they retire, although I am sure that many of them would not be able to explain why they necessarily think that that will happen.
Many young people have seen what has happened to house prices. There have been many negative stories about occupational pensions and we have only to read the papers to find out about the Government’s utter dismissal of the parliamentary ombudsman’s report and their response to the mis-selling of pensions. People are thus being given the message that they should not trust the Government, especially not this one. When young people think about where they might want to put their money, the message that seems to be getting through to them is that rather than investing in pensions, it would be far better for them to invest in houses, given that that is the way in which their parents have made most money in recent years. All of us in the Chamber know that that is not necessarily a wise long-term investment strategy.
I am worried that a generation of young people in this country do not think that there is any reason why they should want to invest in a pension. That has been a problem for a long time, and we understand why: retirement seems to be long in the future for young people. However, the steps that the Government have taken have undermined people’s confidence in investing in pensions, as is shown by the statistics in the ONS survey to which I referred.
If young people choose not to invest in pensions, they will end up with no pension provision for themselves and be dependent on the state for support. At the moment, people talk about a grey pound that keeps the economy going, but there is a real danger that people will talk in the future about a grey penny because our pensioners will not be well-off, so they will not be spending money and keeping the economy going, which has been the case up until now.
The problem is serious. We should not ignore the damage of the Chancellor’s change to tax credits on dividends and the dismissal of the ombudsman’s report. Young people latch on to that, as well as the lack of confidence and their parents’ experience of pensions. Eventually, the effects of what we are doing now will come home to roost. I am greatly worried that we have a Chancellor, who is likely to become Prime Minister, who is so dismissive of this.
8.14 pm
Stephen Hesford (Wirral, West) (Lab): Rather like one of my colleagues, I want to treat the debate as what it is. It has been set up by the official Opposition not for a serious discussion of pensions, but as a purely political debate.
I welcome the hon. Member for Twickenham (Dr. Cable) back to the Chamber. If one were to consider the debate as a prosecution of the Government by Conservative Members, the hon. Gentleman, in what others have called a thoughtful address, acquitted the Chancellor of the main charge. However, he then strangely declared that he would vote with the official Opposition. That is a matter for him, but I suggest that he is taking a populist stance. If there is no conviction, there can be no real support for the Conservative motion.
Like many hon. Members, I have listened to the debate as it has unfolded. The contributions made by
senior Conservative Members were revealing, unlike the sixth-form debating style of the shadow Chancellor. The right hon. and learned Member for Rushcliffe (Mr. Clarke), who has some unclean hands here, was long on rhetoric but short on facts. I suggest to the House that that encapsulates what he was like when he was in office. When my hon. Friend the Economic Secretary to the Treasury forensically probed the right hon. Member for Charnwood (Mr. Dorrell) about what the Dorrell review would have shown, if we had seen the papers, there was a strong suspicion in my mind that the review would have supported what my right hon. Friend the Chancellor went on to do and that the proposal was rejected by the former Chancellor, the right hon. and learned Member for Rushcliffe, on the basis of not argument, but politics. It seemed to me that there was some mileage in the accusation made by my hon. Friend the Member for Coventry, North-West (Mr. Robinson), in his cuddly way, that the right hon. and learned Member for Rushcliffe did not have the guts to take that political decision. The House will want to ponder that.
We then heard the speech of the right hon. Member for Charnwood. The charge sheet for today’s debate is:
“That this House has no confidence in the Chancellor of the Exchequer’s handling of occupational pensions”,
and the basis of that charge is the cut in DTC, but the right hon. Gentleman ended up saying that what the Chancellor did was, to use his words, relevant at the margins. It seems to me, as it might seem to the House later on, that it is difficult to convict someone of an offence if what they did was relevant only at the margins, even if that were true.
The next senior Conservative Back Bencher from whom we heard was the right hon. Member for Hitchin and Harpenden (Mr. Lilley). He got himself in a twist by seeming to accept at one point that there was probably no deficit as a result of the DTC cut. If we were relying on that speech to convict the Chancellor of the charge in the motion—it is a serious charge, and I will come on to the motion’s wording in a moment—it would be very flimsy evidence.
The next senior Conservative figure to make a speech was the right hon. Member for Wokingham (Mr. Redwood). He seemed to take a different tack from the shadow Chancellor. The burden of what he said seemed to be that the Chancellor’s decision to cut DTC had had an effect on the stock market. The problem with that argument was not only that it abandoned the main burden of what the hon. Member for Tatton (Mr. Osborne) had been saying, but that—I pointed this out in an intervention—if the right hon. Gentleman’s logic was right, the stock market could not have recovered under this Government, although it has. It seemed to me— [Interruption.] Does the hon. Member for Runnymede and Weybridge (Mr. Hammond) wish to intervene?
Mr. Hammond: I will, if the hon. Gentleman insists. I was simply making the point that just because a man loses a pound, it does not mean that he cannot get richer over time. We argue that the tax grab has had a serious, negative effect on the value of pension funds, and his argument does not counter that point at all.
Stephen Hesford:
The hon. Gentleman is not listening; I said that the right hon. Member for Wokingham was making a different point. He had abandoned the point that the hon. Member for Runnymede and Weybridge
just made, and was making the point that the dividend tax credit cut had somehow affected stock market value, and that that was why there was a pensions crisis. So the right hon. Member for Wokingham was making a different point, but what I am saying to the House is that even that point was wrong because the stock market recovered under current conditions. Logically, it could not have done so if the right hon. Gentleman had been correct in his assertion.
In an intervention on the right hon. Member for Charnwood, I made the point—and the right hon. Member for Wokingham emphasised this—that the one thing on which no one in the House has been able to agree tonight is the figures that are attached to the alleged raid. I may not have noted all the figures put forward by various Members, but none of the figures that I have heard agrees. There has been mention of £550 billion, £79 billion, £54 billion and £100 billion, and somebody even put forward a figure of £1,000 billion.
Mr. Charles Walker (Broxbourne) (Con): A trillion.
Stephen Hesford: The hon. Gentleman says, ridiculously, a trillion, but if—
Mike Penning (Hemel Hempstead) (Con): A trillion is a thousand billion.
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. No insults from a sedentary position, please. Interventions are fine, but not comments from a sedentary position.
Stephen Hesford: I am obliged, Mr. Deputy Speaker.
We have heard many figures, but not all of them can be right. If someone sought to convict the Chancellor of the serious charge made in the motion, we would expect them to agree on what his so-called smash-and-grab raid has done, but no one in the House tonight has been able to agree on the figure. To carry on with my analogy, if this was an ordinary workaday court rather than Parliament, on the evidence that has been laid before us tonight a judge would have to withdraw the case from the jury, because there is not sufficient evidence that stands up to scrutiny to make a serious case of the sort that the Opposition wish to put forward.
I said that I would turn to the politics of the matter, and I will. Why are we having this debate? That question has been asked by a number of right hon. and hon. Members. We are having the debate on the back of research by The Times that was taken up by those of a Daily Mail tendency. The Opposition are being entirely bandwagon-like and opportunistic about the matter. It is not that they had an interest in the subject and so brought it forward; they are running with the subject on the back of that research. There is synthetic anger from Members on the Opposition Benches.
Mike Penning: On the cynical point that the hon. Gentleman just made, I have 700 constituents who have had their pensions stolen, and the ombudsman ruled that there had been misadministration by the Government. That is why we are having this debate.
Stephen Hesford:
I am afraid that that synthetic anger just does not work, because if the hon. Gentleman had been in the Chamber when the hon. Member for Tatton
opened the debate, he would know that the shadow Chancellor never mentioned any part of that issue.
Mike Penning: Will the hon. Gentleman give way?
Stephen Hesford: No. That issue is not part of the charge put before the Chancellor, so the hon. Gentleman is making a different point entirely.
I differ slightly with my right hon. Friend the Member for West Dunbartonshire (John McFall), the Chair of the Treasury Committee, who called the debate hypocritical. I disagree with him on that; it is not just hypocritical, but cowardly. It is cowardly because there would be a possible justification for what Opposition Members say if it was their policy to reverse the decision, but it is not and it never has been. Theirs is synthetic anger because they will not reverse the decision, and that is fatal to their argument. Their argument is hypocritical because, as has become clear in the debate, they do not come to the subject with clean hands—what my right hon. Friend the Chancellor did was continue a policy that was started under the Conservative Government, and my right hon. Friend made that point.
Let us say that a defence needed to be put forward, although I do not think that we have even got to that stage, as my right hon. Friend the Chancellor made a strong case for us when he spoke in the debate. Putting aside party politics, I want to consider, in the cold light of day, what the City makes of the debate. Last week in the business section of The Independent, Jeremy Warner talked about the fact that the issue had been raised. [Interruption.] I know that Opposition Members do not want to listen to this, but they may find it just a little instructive. Mr. Warner found himself slightly embarrassed to have to return to the subject. He had, quite properly, been on Easter holiday. He came back and found that there had been a row about the issue, and he found that he was a bit out of the loop. He was genuinely surprised and mystified about why the matter was being discussed. He starts his piece by saying:
“Forgive me for returning to the subject of pension...deficits.”
He talks about the idea of the subject being raised by those of Daily Mail tendencies, and he uses the word “revelation”, and puts it in inverted commas. In other words, there was genuinely nothing new that was being discussed. He, an economic commentator, makes a point that I have already made: the anger is synthetic.
“I can confidently dismiss the rantings as somewhat exaggerated in view of the story’s significance.”
There are many charges, he says, that others may wish to level at the Government but
“destroying the private sector pension industry through a single act of taxation is not one of them.”
That acquits the Government on the central point, and I urge Opposition Members to reflect on it. He goes on to say:
“Nor in truth was the policy as outrageous as it has come to be seen.”
After 10 years, it was a case of déjà vu. He said that
“removing the tax credit on dividends was a relatively minor adjustment in policy or even an evolution of it”—
I have made that point already—
“since the process had begun under the previous Tory Administration as an apparently painless way politically of rebuilding the public finances.
In the 10 years since the tax credit was abolished, the measure has cost...£30 billion.”
That figure is lower than the figures that have been bandied about, but he says that it is “a small fraction”—and this is the point—
“of the total liabilities faced by these funds and by no means the biggest contributory factor to the current problem”.
Hon. Members have made that point. He continued:
“Indeed, the tax raid barely figures in the ‘Big Three’ factors...cited by Stephen Yeo”—
who, I understand, was pensions adviser to the hon. Member for Havant (Mr. Willetts) when he shadowed the pensions portfolio—
“as the primary cause of the meltdown in final salary pensions.”
That primary cause, I reiterate for the benefit of Opposition Members, is growing longevity, the cost of providing for which is much higher than originally anticipated. The second major factor is lower investment returns, and we have heard about the so-called crash on the stock market. Opposition Members have asked why my right hon. Friend the Chancellor stopped quoting figures at 2000 or thereabouts. He did so because that date delineates the point at which conditions changed. That had nothing to do with my right hon. Friend, and that is the point. In conclusion, this has been a synthetic debate.
8.31 pm
Mr. David Gauke (South-West Hertfordshire) (Con): As always, it is a great pleasure to follow the hon. Member for Wirral, West (Stephen Hesford), whose contribution was in the style of a winding-up speech. I certainly look forward to the day when he can deliver a winding-up speech from the Dispatch Box.
It has been a curious debate, because there is an argument, which is wrong but respectable, for the abolition of tax credits. That argument is simply that the Government need to find revenue somewhere, and they can do so by abolishing tax credits. That was certainly touched on by the hon. Member for Coventry, North-West (Mr. Robinson) in his speech and made explicit in his book “The Unconventional Minister”, in which he argued that the Government needed the money. That is a valid argument, because any taxation has a downside effect. If one increases taxes on income, that acts as a disincentive, and if one introduces high rates of corporation tax that forces businesses overseas. That tax on pensions caused harm but, on balance, the Government took the view that it was worth introducing. That is a wrong but respectable argument. However, we have consistently heard Government Members, particularly the Chancellor, advocate a rather different approach, which sticks doggedly to the position taken in 1997 and stipulates that, first, the abolition of tax credits on pension funds will not damage pension funds and secondly, it will be good investment.
That extraordinary argument was made by the Chancellor in his 1997 Budget, and he and a number of his colleagues made it earlier today. First, the notion that taking £5 billion a year out of pension funds does not damage those funds is ridiculous. Secondly, the belief that it is good for investment is not supported by the facts. With the benefit of hindsight, there is absolutely no evidence that it has encouraged investment. As we have heard, business investment as a proportion of gross domestic product has fallen to record low levels under the Government. Adair Turner, the then chairman of the CBI, said at the time that
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