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James Purnell: I will have to write to the hon. Gentleman to set out the situation for the precise scheme to which he refers. We are trying to create a separation between schemes that decided to put in
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place a compromise agreement before the introduction of the FAS and schemes that did not do so. The danger of creating a procedure as set out in new clause 25 is that perfectly viable companies could dump their pension commitments on the taxpayer, which would not be right.

Dr. Tony Wright: I am pleased by what my hon. Friend has said, but I do not understand the basis on which he argues that he therefore could not accept new clause 25. The new clause refers explicitly to schemes that are eligible for assistance under section 286 of the Pensions Act 2004. That measure specifies that its provisions apply only to schemes that were in the process of winding up before the specified date on which schemes became eligible for the PPF. His argument that the new clause would open the door to problems thus simply cannot be true.

James Purnell: I am advised that new clause 25 would open the door to a wider range of schemes. When people talk about solvent employers, I believe that they are talking about the category that we have identified today. We have no intention of doing anything other than delivering for those schemes. I hope that my hon. Friend will be reassured by what I have said. If he makes a speech, I will try to intervene on him to confirm the exact situation.

Several hon. Members rose

James Purnell: I think that I should make some progress because we have been debating the group for 15 minutes.

I am delighted that the Government have committed more money, as the Chancellor announced in the Budget on 21 March. The scheme was going to benefit 45,000 people; now it will benefit all 125,000 affected, in addition to members of the solvent schemes that I have just mentioned. The scheme was going to benefit people up to £12,000 per year, but it will now benefit people up to £26,000 a year. It was going to taper down to 50 per cent. and then to nothing for people who were not covered. Now it will be at 80 per cent. for everyone, and an extra 100,000 people will get more benefit. In all, we are allocating a further £5.6 billion in cash terms. The original amount committed to the FAS in 2004 was £400 million in cash. We then extended that figure to £2.3 billion. With this further extension, we have reached £8 billion in cash, or £1.9 billon in net present value. That represents a significant commitment to helping the people whom we are aiming to address through our measure, which I hope that the House will welcome.

Alan Simpson (Nottingham, South) (Lab): I appreciate the Minister’s clarification about the increase in overall funds. However, the last figures on payouts from the FAS that I received suggested that the amounts were not in the region of billions. So far, £12 million has been allocated to 1,000 of the 10,000 eligible pensioners. Of that £12 million, £4 million has gone to the pensioners, while £8 million has been spent on administration. Can the Minister give us any
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indication of how we can address this incredible delay during which the vast majority of pensioners have received nothing?

James Purnell: I am afraid that there is a misunderstanding about the task that the financial assistance scheme has had to undertake, which the PPF or whoever else was tasked with running it would have had to undertake. The FAS has had to go through hundreds of schemes to see whether they are eligible; it has had to set up a new IT system; and it has had to get data from the trustees about exactly what people are entitled to and compare that with FAS. That is why there has been a significant up-front cost. That work is now largely complete, and we are paying everybody whom we are in a position to pay. Everybody who has asked for initial payments is being paid. There is no delay in FAS; the delay is in requests for initial payments. We need schemes to come forward and ask for those. I will return to that matter later in my speech.

Mr. Hammond: Because people outside may not understand what the Minister has just said, will he clarify that he is talking about the trustees having asked for payments to be made? This is not a question of individual potential recipients having failed to ask for payments.

James Purnell: That is absolutely right; it is the trustees who we are encouraging to ask for payments. I have written to a number of them, which has helped in certain cases. I encourage all Members of the House who are aware of schemes in which there are delays to contact the trustees. Some are very good and some have been too slow. The right way to seek to get more money for people is to encourage the trustees to apply for initial payments.

I want to pay tribute to Community and Amicus for their tireless work at the forefront of the campaign on this issue. They have been joined in that by many Members in the House, including my hon. Friends the Members for Aberdeen, South (Miss Begg), for Ayr, Carrick and Cumnock (Sandra Osborne), for Jarrow (Mr. Hepburn), for Cardiff, North (Julie Morgan), for Sittingbourne and Sheppey (Derek Wyatt), for Aberavon (Dr. Francis), for St. Helens, North (Mr. Watts) and for Vale of Glamorgan (John Smith), and my right hon. Friends the Members for Cardiff, South and Penarth (Alun Michael) and for Islwyn (Mr. Touhig). That list shows the strength of feeling in the House about this policy. We believe that 80 per cent. of the funding is the right amount for the public purse to bear.

New clauses 24, 26 and 27 all call for the taxpayer to fund FAS assistance at the same level as the pension protection fund, which would essentially be 90 per cent. with some limited indexation. What is the Tory position on the new clauses? We look forward to finding out later. We have a clue, however. The hon. Member for Runnymede and Weybridge has obviously been pestering the shadow Chancellor for more money. We had evidence of that in yesterday’s debate, when it emerged that the shadow Chancellor had said that

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Presumably, he was referring to his Front-Bench colleagues. Unfortunately, the hon. Member for Runnymede and Weybridge has been slightly disappointed because the shadow Chancellor is obviously feeling under such pressure that he had to say publicly, at the Conservative party conference, that

If the Conservatives vote for these new clauses, they will be failing that test. They will be making an unfunded commitment to an additional £2.7 billion. If they vote for the new clauses, they will be tearing another hole in their already tattered reputation for fiscal discipline.

Let me be clear: the Conservatives’ proposal for a lifeboat fund is just another uncosted policy. They propose to make a loan from the Treasury. What is a loan from the Treasury other than public expenditure? It is a bit like going to a bank and saying, “Give me a mortgage. I am going to find someone round the corner to pay it back.” It is a public spending commitment, and if the Conservatives vote for it that is exactly what they will be making. [Interruption.] Oh, it is a costed public spending commitment—costed, but not funded. That is the problem with the Conservatives’ policy. They make commitments, but they have absolutely no idea of how to fund them.

Mr. Henry Bellingham (North-West Norfolk) (Con): I thank the Minister, who is obviously in a combative mood, for giving way. He implied that our new clauses and amendments were put together on the back of a fag packet over the weekend. Is he not aware that Ros Altmann, the pensions expert who has advised the Government, supports them? She has made it clear that she believes that they are workable and affordable, and that the Government should accept them.

James Purnell: I have great respect for Ros Altmann, but as far as I know she never worked as an adviser to No. 10 or No. 11, as is often said. We are happy to look at her suggestions as well as others made by Conservative Front Benchers. My point is that the Conservatives are starting to emulate the hon. Member for Yeovil (Mr. Laws) in making policy proposals that they have no idea how to fund. No wonder they are reputedly trying to lure him to their Front Bench; they are obviously learning from his example. We believe that there is a better approach.

1.45 pm

Mr. Laws: We are very entertained by these parts of the Minister’s speech, but before he wraps up his comments—we never know when he is going to sit down—will he explain the point that he left unresolved earlier? What is the difference between the proposal that he makes today, for the first time, to the hon. Member for Sheffield, Attercliffe (Mr. Betts) and that in new clauses 25 and 40? What would be the problem with accepting those new clauses? How many people who would be included in that proposal are left out of the one that he is making? Surely we need to know that before we vote.

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James Purnell: Healthy, solvent employers may have wound up their scheme when employer debt was set at the minimum funding requirement. Such employers should have made good their pensions promise—they were funded at the MFR—so new clause 25, which would allow those schemes in, is inappropriately wide. That is a consequence of the drafting of the new clause rather than any difference of policy. People were asking for the scheme to cover 6,000 pensioners in solvent companies; we are actually covering 8,000. The House is getting slightly over-excited about a point on which there is not a difference.

Mr. Hammond: The Minister has given a very technical answer to the question asked by the hon. Member for Yeovil (Mr. Laws). How many additional scheme members would get through the gateway if new clause 25, rather than the Minister’s proposals, were accepted?

James Purnell: The whole point is that people do not know—[Hon. Members: “Ah!”] We can quantify the people who have compromise agreements because we know exactly who they are. They are people for whom the ombudsman and Members of the House have been campaigning. We have done exactly what people have asked us to.

Dr. Tony Wright: This is important so we must be clear about it. Is the Minister saying that he accepts the substance of new clause 25, reflecting the announcement that he has made this afternoon, but he thinks that it is technically deficient—although I am advised that that is not the case—so he will incorporate it in the Bill at a later stage, to remedy its technical deficiency?

James Purnell: I am saying that we have the same intention and that we will make proposals to make sure that what we have said is exactly what happens. I am happy to meet my hon. Friend to discuss the matter, but I am pretty sure that he will be happy with what we have done because our intention is the same.

We believe that 80 per cent. is the right amount from the taxpayer, but we are not saying that that is all that should be considered. The taxpayer should fund up to 80 per cent. but there should then be a review of alternative sources of funding that have been suggested. The taxpayer does not fund the 90 per cent. level provided by the PPF. There is no taxpayer money at all in the PPF. There will now be nearly £2 billion of taxpayers’ money in net present value terms in FAS. In contrast, the PPF is funded entirely by the levy payments of member companies, which are paying to insure themselves against future possible insolvency. We therefore think that the balance that we are striking of nearly £2 billion of public money in FAS and no public money in the PPF, with a review to look at what more could be done, is the right one for the taxpayer and for the people involved.

Mr. Laws: Can the Minister tell the House what would be the additional net present value cost of granting the PPF level of benefits after the offsets for tax and lower means-tested benefit payments?

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James Purnell: Yes, if the hon. Gentleman can tell me what tax and benefit policy will be for the next 50 years. So far there is very little interaction between FAS payments and pension credits. Very few of the current recipients get pension credits, so that will not reduce the cost significantly. The difference for the payments that I set out earlier is the additional £2.7 billion, which in net present value terms is about £600 million, or an increase of a third in the current scheme.

Mr. Frank Field: The Minister has talked about an additional £2 billion going into the fund. Where is that money? I cannot find it anywhere in the Department’s accounts. Has anyone received it? Is it a fund with pension trustees who are accountable for its expenditure or is it something that maybe, at some stage, a Government will pay?

James Purnell: That is a very good point. There is a misunderstanding about this. People think that the sum is a pot of money that has been put into the scheme; it is not. It is a guarantee from the Government to pay at least 80 per cent. We have estimates of how much that will cost, but it could cost more than £8 billion—for example, if people in the schemes live longer. However, the Government are giving that guarantee, which is not available elsewhere, so it is significantly worth while to the people involved.

The right thing to do is to carry out a further review. We are doing precisely what is suggested in new clause 11 and holding a review, which will be led by Andrew Young, directing actuary at the Government Actuary’s Department, who helped to set up the PPF and who therefore has real expertise in this area. He will be advised by a panel of leading external experts. The review will provide an initial view in the summer and will then report by the end of the year. I can make it clear today that any extra funding that the review identifies will be put into topping up the financial assistance scheme beyond 80 per cent.

The review will be able to consider the suggestions made by the Opposition today. However, I say with all due respect that the Opposition have no idea whether the amendments that they have tabled would work. As I said before, if we compelled people to stop annuitising and they lost out, we could be open to compensation claims, and if annuity rates fell, we could be open to compensation claims. The Opposition have no idea whether their amendments would override scheme rules. The amendments cannot be guaranteed to work, so it would not be appropriate to move forward without the proper review.

Counter-intuitively, the Tories like picking rows with business these days, but in a pretty spectacular example, the Association of British Insurers has come out—even before the amendments are debated—and described the Opposition proposals as

and another raid on pension funds.

Mr. Philip Hammond rose—

James Purnell: I see that the hon. Gentleman wants to continue his row with the ABI and get himself into even deeper trouble.

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Mr. Hammond: I have had a discussion with the ABI this morning to find out what its concern is, and I have been able to allay that concern, which was about trust-based defined benefit schemes. We recognise that there are no unclaimed assets available in such schemes.

James Purnell: The hon. Gentleman has just shown again why we cannot accept the amendments. He has no idea what they are about and people outside are confused. Every time he intervenes, the policy changes. That is precisely why we need to have a proper review by experts before deciding what to do.

Mr. Hammond: If the Minister wants to talk about the new clauses, he should read them. They give the Secretary of State the power to specify the classes of unclaimed assets; they say nothing about the specific classes involved. The hon. Gentleman simply cannot say that we do not know what we are talking about.

James Purnell: The hon. Gentleman has contradicted the answer that he just gave. He said that the amendments were about only one class of assets, but now says that they can be about any class of assets. Today, he has shown why what we should be doing is waiting for pensions experts to complete their review, rather than accepting his amendments.

Our key concern should be getting as much money as possible to people. In Prime Minister’s questions, the Leader of the Opposition said that we should be doing more for people who are retired today, and we agree entirely. That is why the Government amendment will increase the amount that people get in initial payments from 60 per cent. to 80 per cent. That means more money for more people immediately.

That brings me to new clause 47, whose purposes appear to be twofold: first, to transfer the delivery of the financial assistance scheme to pension schemes; and, secondly, to provide that funds for those payments should be provided by FAS or by the lifeboat, whether by loan or by retrospective repayment. The problem with the new clause is that scheme administrators, who are expert in what they do, would have to learn a new set of skills that FAS is currently delivering. We would be ignoring the expertise that exists in FAS—a single centralised unit, which has assessed hundreds of schemes—and instead asking hundreds of scheme administrators to learn those skills. Those scheme administrators would then come to us saying that they should be paid for having done so.

Instead of increasing the cost to pension schemes, thus depleting the amount available to members, and slowing the process of making payments to people, we should be working with scheme administrators so that they provide the information that we need to make initial payments to people which, as I have just announced, will increase from 60 per cent. to 80 per cent. Government new clause 38 is the only amendment that will enable us to give more people more money immediately, and I urge hon. Members to support it.

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