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The Secretary of State for Work and Pensions (Mr. John Hutton): First, I congratulate all my hon. Friends, who made excellent speeches in the debate. I will come to their speeches in a second. We heard two interesting things from the Opposition Front-Bench spokesmen today. [Interruption.] No, they were interesting. I was here for all of the debate, and I counted two interesting things. The first was that, according to the hon. Member for Runnymede and Weybridge (Mr. Hammond), the Conservatives did not cut the dividend tax credit; they simply adjusted it. I think that we will keep a close eye on that type of rhetoric, and perhaps we will find that it applies more widely when we come to consider their record in government.
The more substantive point that the Conservatives made, which we Labour Members completely and totally reject, concerned the idea that my right hon. Friend, who has done a superb job as the Chancellor of the Exchequer, was, in any way, shape or form, not straight or honest about the changes that he made in the Budget in 1997. That is a charge that we completely and totally refute.
Mr. Lilley: Will the right hon. Gentleman give way?
Mr. Hutton: I will give way in a minute; I will refer to the right hon. Gentlemans contribution soon.
We heard excellent speeches from my right hon. Friend the Member for West Dunbartonshire (John McFall) and my hon. Friends the Members for Coventry, North-West (Mr. Robinson), for Birmingham, Erdington (Mr. Simon), for Caerphilly (Mr. David), for Amber Valley (Judy Mallaber), for Stourbridge (Lynda Waltho), for Wirral, West (Stephen Hesford) and for Hartlepool (Mr. Wright). My right hon. Friend the Member for West Dunbartonshire referred to the hypocrisy and hullabaloo around the issue, and in particular to the way in which the shadow Chancellor presented his so-called argument. He made the important point that in the Chamber, personal abuse and personal attacks are not really a substitute for a sound argument. There was no substance whatever to the remarks that the hon. Member for Tatton (Mr. Osborne) made today; that is absolutely clear.
My hon. Friends the Members for Birmingham, Erdington, for Caerphilly, for Amber Valley, for Stourbridge and for Wirral, West all argued in principle in favour of the changes that we made in the Budget of 1997. They did so with conviction, and their remarks were in contrast
to those made by Opposition Members. My hon. Friend the Member for Hartlepool made an excellent speech. I think that I am right in saying that he was the only accountant to speak today. [Interruption.] Well, there may have been other accountants, but my hon. Friend has my business any time that he wants to take it on.
The hon. Member for Twickenham (Dr. Cable), who spoke for the Liberal Democrats, suggested that the attacks made on the Chancellor by the Opposition were unfair, but said that he would vote with the Opposition anyway. That summarises in a nutshell the position that the Liberal Democrats usually end up taking. Of the speeches made by Conservative Members, I shall refer briefly to those made by the former Chancellor of the Exchequer, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who I see is in the Chamber; the right hon. Member for Charnwood (Mr. Dorrell), who served with the former Chancellor in the Treasury; and the right hon. Member for Hitchin and Harpenden, who also has an interesting track record on the matters that we are discussing. He served in the Treasury at the time of cutsI am sorry, adjustmentsto the dividend tax credits. In additionand this is probably a unique achievementhe was a Minister during the pensions mis-selling crisis. Not only that, he was the author of the disastrous reforms that the Conservative Government proposed to make to the basic state pension, which, we should remember, would have abolished personal tax relief for pensions. He asked me earlier to give way, and I am happy to do so now.
Mr. Lilley: The right hon. Gentleman said that he entirely repudiated any suggestion that the Chancellor had been less than forthcoming about his announcement when he made the Budget statement. Can he tell us where in the Budget statement the Chancellor indicated that the measure would take £5 billion out of pension funds, or even a penny?
Mr. Hutton: I will furnish the right hon. Gentleman with the details, but I think that he will find that figure in the Red Book. He should remember that that is part of the Budget process.
I always carefully follow the remarks of the right hon. Member for Charnwood because I have a lot of respect for him both as a Member and as a former Minister. However, I must correct one claim that he made, because it was not correct. He said that the dividend tax credit changes that my right hon. Friend the Chancellor introduced in 1997 broke the principle that pension contributions are exempt on investment and taxed on receipt. I remind him that my right hon. Friends changes did not change any of the fundamental principles of the taxation of pensions. Contributions to pensions remain exempt from tax and, indeed, my right hon. Friend has introduced important simplifications to the tax regime for pensions. Investment returns in pension schemes remain exempt from taxation.
Mr. Dorrell: That is simply not right. Payments by companies of dividends come out of taxed income. Dividends received by pension funds are therefore taxed income. It was to avoid that double taxation of income received as dividends being taxed again when distributed as pensions that the original imputation system of corporation tax was established. It was precisely to avoid the double taxation that the Secretary of State says does not exist.
Mr. Hutton: No, I think that the right hon. Gentleman has conflated a number of different arguments. That was, however, a useful clarification of his speech [ Interruption. ] It was, because it contradicted what he said in his speech, in which he made it clear that we had broken the principle of investments being exempt from taxation. [ Interruption. ]
Mr. Speaker: Order. Hon. Members must let the Secretary of State speak.
Hon. Members: We want the Chancellor to speak.
Mr. Speaker: Order. The Chancellor spoke earlier. It is important that hon. Members allow the Secretary of State to speak.
Mr. Hutton: I am grateful, Mr. Speaker. The problemand it is a problem not just for the right hon. Member for Charnwood but for all the Opposition Members who spoke in the debateis that the logic of his speech is that he would reverse the changes to dividend tax credit. That is the one policy that we all waited to hear about today, but we did not hear it. It was conspicuous that in the speeches of Opposition Members [ Interruption. ] There is no point in their trying to barrack me and make their speeches again, as they had an opportunity, which they completely fluffed. It is evident to everyone watching the debate that the Tories have no policy to address the problem that they have spent the past six and a half hours describing in detail to the House.
Opposition Members have had plenty of time to make their position clear. We made those changes to the tax regime 10 years ago, and there have been two general elections in the intervening period. Just to remind them, we won those general elections because of the stewardship of my right hon. Friend the Chancellor and because of the way in which we have governed the country. After two general elections and 10 years of waiting, there is still no hint of a Tory policy and no commitment to reverse the changes about which they have complained. This has been one of the worst performances by the Opposition that I have witnessed in my time in this House.
According to Conservative Memberswe heard this throughout their speechesthis Government supposedly inherited one of the best pension environments in the world in 1997, which explicitly underpinned most of what the right hon. and learned Member for Rushcliffe said in his speech. The only problem with that argument is that the facts tell a different story. In 1997, nearly 3 million pensioners were living in poverty. Many women were denied the opportunity to secure a full basic state pension in their own right, and carers were similarly mistreated by the system. It was no golden age of private pension schemes, either. The mis-selling of private pensions, which was overseen by the previous Government, many of whose members are still here today, was a national disgrace. Millions of workers had no access to occupational pensions. That was no utopia.
We need to be clear about one more thing, too. As my right hon. Friend the Chancellor has said, the shift from defined benefit schemes towards defined contribution schemes is not a UK phenomenon brought about by changes to corporation tax. Far from itas the Chancellor and many Labour Members have made clear, the effects of demographic change have impacted on pension schemes and systems right across the globe. My argument today
is that this Government have acted properly and responsibly in meeting the challenges that our pension system has faced since 1997.
Mr. Kenneth Clarke: I do not understand the point that the Secretary of State has just made about the situation in 1997, when, of course, everything was not perfect in the occupational pensions world. Does he accept that it was precisely because the three new Labour leaders believed that pension funds were in an impregnable financial position that they thought that the pension funds could stand a £5 billion a year loss without anybody having anything to worry about? There has been a move away from direct benefit pensions elsewhere, because other problems have occurred for pensions everywhere. In this country, the avalanche out of defined benefit schemes into other types of schemes, or none at all, grotesquely exceeds anything in any other jurisdiction.
Mr. Hutton: I am sorry, but I cannot remember what the right hon. and learned Gentleman was saying at the beginning of his intervention. The changes were part of a series of reforms to corporation tax that were designed to address what many people, including the Conservative party when it was in government, had identified as a distortion in the tax system. The Conservative Government made their five separate adjustments to dividend tax credits, but the point of my right hon. Friends reforms was to make sure that we could then go further and cut corporation tax. They cut the dividend tax credit, but they never cut the main rate of corporation tax, which is the problem that the right hon. and learned Gentleman must address.
I have only two minutes left, and everyone will be glad to know that the remaining 12 pages of my speech will probably never be heard in this House. [ Interruption. ] Having read them, that is probably a good idea. In conclusion, the Opposition have made a lot of the process and also the policy behind the changes made by my right hon. Friend, but we have still not heard the Conservative response to any of those changes, and I have a very strong sense that we will never hear it.
Mr. Patrick McLoughlin (West Derbyshire) (Con) rose in his place and claimed to move, That the Question be now put.
Question, That the Question be now put, put and agreed to.
Question put accordingly, That the original words stand part of the Question:
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