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The new clauses have been tabled in the name of my right hon. Friend the Leader of the Opposition, who has taken a particular interest in this, not least because he has a special constituency interest in a particularly heartbreaking case. They are supported by the leader of the Liberal Democrat party, by the right hon. Member for Birkenhead (Mr. Field), and by other Labour Members who have seen the need for a cross-party solution. I hope that that cross-party approach sends a message to the Government about the strength of feeling and sense of moral obligation across the House. This is one of those occasions when we as parliamentarians have to stand up and be counted and be seen to be doing the right thing.
Before I go through the new clauses, there is a procedural issue that I should like to explain to hon. Members. I understand that for reasons of time it is unlikely that it will be possible to vote on more than one new clause in the group. I should like to indicate to you now, Mr. Deputy Speaker, that I will, if possible, seek a Division on new clause 41. It is our understanding, on advice, that new clauses 42, 43, 44, 45 and 47 are essentially consequential, and if the House agreed to new clause 41 there would then be an opportunity to consider the other new clauses. That leaves out new clauses 39 and 46, which are not consequential but would do slightly different things. I will deal with those separately.
I hope that the Government will accept that this is a package and look constructively at its proposals, including the proposal for a moratorium on annuitisation, which, despite the Ministers being so critical, was intended to be helpful and supportive of the review process. There is no point in reviewing the possible use of residual scheme assets if by the time that the review has completed its course and the Minister has considered it the residual scheme assets have all been given to the Pru and Legal and General. That is why we need a moratorium.
New clause 39 would provide that the PPF board should take over from the Secretary of State the role of scheme manager, for two reasons: on the merits of the case for the PPF board, which has demonstrated its competence by winding up the MG Rover scheme and taking it into the PPF in less than two years; and secondly, as part of a wider architecture in this group of new clauses, which would put the PPF board in overall control board of pension compensationseparate funds, for very good reasons, but under a single administration with single payment structures and, it is to be hoped, administrative savings to be made and efficiencies to be gained. The new clause would achieve its objective simply by substituting the PPF board for the Secretary of State in the 2005 regulations.
The substantive new clause is new clause 41, which would create the lifeboat fund, also to be placed under PPF management. We need a separate fund, as opposed to one merely incorporated into the FAS. The source of funds for the lifeboat fund would be different from that of the FAS. The FAS is a body publicly funded with taxpayers money; the lifeboat fund is intended to be funded with unclaimed assets, perhaps with residual scheme assets or some part of them, if they become available, and in the interim to be allowed to go about its work with the benefit of a Treasury
loan. The lifeboat fund would be mandated to pay top-up benefits so that people who are being paid under the FAS would be topped up to PPF levels, and people who are below the FAS qualifying age but above the scheme retirement age would be paid from the lifeboat fund. Crucially, it would provide for loans from the Secretary of State to allow immediate operations. Later new clauses would provide for the collection of assets.
I have acknowledged, and will do so again, that in granting a loan there is a residual risk of a liability to the public purse. However, having considered it carefully and looked at the moral obligation that falls upon us, we think that it is a tiny risk that it is right and reasonable to ask the taxpayer to bear. The costs would be slightly more than the £2 billion in cash over 50 or 60 years, or £600 million net present value, that the parliamentary Labour party briefing document set out, because it appears that the Secretary of States briefing to the PLP did not factor in the cost of including those who were under 65.
We estimate that the initial cost of the lifeboat fundits initial cash flow needwould be about £30 million a year, rising to £100 million in 2033 and then tailing off to zero. Today, the Prime Minister quoted a figure of £2.48 billion in cash, or about £750 million NPV, as the total cost of the package of proposals that stand in the name of the Leader of the Opposition. That estimate does not look unreasonable, although we all recognise that in calculating such figures there is a fairly wide degree of error. I should emphasise, however, that the figure would not have to be found immediately but over a period of 50 or 60 yearsexactly the same as the £8 billion that the Secretary of State has committed to the FAS.
The lifeboat fund would receive unclaimed assets and residual scheme assets if those become available. New clauses 42 to 45 would create the rather inelegantly named pensions unclaimed assets recovery agency. I pay tribute to the right hon. Member for Birkenhead, who will have recognised in the new clauses a large chunk of his private Members Bill, the Pensions (Unclaimed Assets) Bill. I am grateful to him for doing a large amount of the drafting work. The agency would be charged with first identifying these assets, then collecting and supplying information to the Secretary of State, and then collecting the assets in. The new clause would provide that the Secretary of State specified the classes of unclaimed assets to be collected by the agency. Our focus is on unclaimed pension assets, including the possibility of residual scheme assets. We think that there is an elegance and a justice in using unclaimed pension assets to deal with a pensions problem. However, the House should be aware that the new clause would enable the Secretary of State, over time, should he wish, to widen or change the scope of the classes of unclaimed assets that could be included.
The Unclaimed Assets Register says that there is about £3 billion in pension sector unclaimed assets. We are rather more cautious. On the basis of private discussions with companies, we think that there may be £600 million to £800 million of readily accessible pension unclaimed assets and a modest flow thereafter. However, Members who have looked into this will be aware of the Irish experience whereby the initial
estimates, based largely on information volunteered by the companies holding these assets, turned out to be understated by a factor of 10 or 15-fold.
Together, the new clauses would create a framework for a fair settlement at PPF levels, with a single payment mechanism based on putting the PPF board in control of the FAS and the lifeboat fund. Although there would be two streams of funding, there would be a single payment mechanism delivering efficiency and seamlessness for recipients. The system would minimise the risk to the public purse, while a loan would allow for an immediate start to payments to those most in need. It would be flexible as to the classes of asset that could be used, so that the Secretary of State would have wide discretion in managing the process in future. It would deliver the objectives of new clauses 26 and 27 and amendment (a) to new clause 38. As far as beneficiaries are concerned, its effect would be no different, but it would be achieved without placing the burden on to the taxpayer.
New clause 46 proposes a moratorium on annuities. As I have already said, its intention is to support the review that the Government are undertaking. We acknowledge that there are problems with the use of residual scheme assets but our discussions suggest that there is between £1 billion and £2 billion in the schemes that is not already committed to the purchase of annuities, as well as a further sum, which may be subject to some penalty costs when annuity option arrangements have been entered into. That is a sizeable sum. If just part of it could be released to support the lifeboat fund, it would be a useful additional source. That is worth pursuing and we would be happy to engage in the review that the Secretary of State has set up and examine with him some of the problems, which we acknowledge must be overcome to make the proposal work.
New clause 47 deals with schemes that are still being wound up and places on the trustees a duty to make interim payments. They already have the power to make interim payments if they choose, but trustees, by their nature, tend to be conservative people. Their inclination to ask for interim payments has been disappointing, as the Minister acknowledged. He has written letters to encourage them to do so. We believe that it would be right to impose a duty on them to make such payments, the cost of which they would recover from the FAS and the lifeboat fund in due course when the scheme was wound up. The new clause also provides for the unlikely position whereby a scheme does not have the liquid resources to make payments and Treasury loans might be made to trustees to bridge the gap while they get their assets into liquid form.
There is a consensus across the House and with outside bodies that represent the victims of the crisis that new clauses 25which incorporates what the Minister told us about solvent schemesand 41 are the way forward. The House today has it in its power to resolve the problem and bring to an end a blot on the reputation not only of Governments but of Parliament. We could deal with the issue now. The overwhelming majority of the victims will accept PPF level benefits as a fair compromise. Parliament, as well
as the Government, has been damaged by the continuing disaster. Parliament at least now has the opportunity to set party politics aside and do the right thing. I urge hon. Members of all parties to support new clauses 25 and 41.
The debate is important to the 125,000 people who have been affected by the collapse of their pension schemes. The experience of my constituents who are former employees of Allied Steel and Wire is much in my mind as we debate the subject today. I, along with other hon. Members, have been campaigning for a long time to get justice for the Allied Steel and Wire workers and others throughout the country.
In Cardiff, 893 employees from Allied Steel and Wire lost their pensions when the private company went bankrupt. All hon. Members have had experience of the utter misery that that caused and its awful effect on families. Many people have come to my surgery and spoken about the personal devastation that was brought upon them. Losing their jobs was one thing and losing their pensions came right on top of it. That was a devastating blow. Many had worked in the steel industry all their livesand we all know that working in that industry is hard.
Some people have never talked about the trauma of what happened to them. A woman came to my constituency office last week and said that her husband lost his job and his pension and had never spoken of it. The overwhelming horror of what happened to him has meant that he has never been able to talk about it. We are talking about those peoples lives today.
It is important to acknowledge what the Government have done to respond to that devastation in peoples lives. The former employees, the unions, especially Community and Amicus, with which I have worked closely, and Members of Parliament, especially, at the beginning, my hon. Friend the Member for Cardiff, West (Kevin Brennan), led a campaign that resulted in setting up the Pension Protection Fund, which will protect pensions in that position from now on. That was a big step forward. I also applaud the Governments establishment of the financial assistance scheme and their work to improve it. When it was originally set up, it applied only to members who had reached retirement age or were within three years of doing so. It was woefully inadequate to address the needs of all the pensioners.
The pensions White Paper of 2006 extended the scheme to those within 15 years of retirement, with total funding of £2.3 billion, which the new clause increases to 80 per cent. of core benefits. The FAS has been gradually extended, but the process has been long and tortuous. It has taken five years and it has felt as though the campaigning of Members of Parliament, the unions and others forced the Government to improve the provision in the FAS. Nevertheless, they have done that. Many hon. Members, the Community and Amicus unions and I welcome the major step forward that the Government have taken in recognising that the FAS was not adequate to provide a decent
income in retirement for the estimated 125,000 people who lost their pensions through no fault of their own.
The new clause means that all those people will get some help. Some were previously excluded. In my constituency, there are people who had worked for 30 years but, until the new clause is enacted, are eligible for nothing because they started work at an early agesome at 14in the steelworks in Cardiff and were only 54 when they lost their jobs. They were thus not eligible for any of the benefits. Now all of them will get something. That is a big step forward, but we need to go further.
Amendment (a) has the support of the Community and Amicus unions and I pay tribute to their work. They took the case to the European Court of Justice and have worked tirelessly on the issue. The new clause would ensure that those who lost their pensions before the establishment of the PPF receive the same support as those who benefit it from it in future. Amendment (a) does not prescribe where the funding for the PPF level of benefit should come from. Much discussion has taken place about how the £8 billion over 50 years will work outhow much it will cost and whether it will stretch further than we think. I do not know the answer, but there have been queries about how far the money will go.
Mark Pritchard: Does the hon. Lady share my concern that the review will not report until later this year? There is no immediacy in tackling some of the problems that hon. Members of all parties face in their constituency surgeries week in, week out. Does she also share my concern that there is no obvious legislative time slot to include any outcomes of the review in primary legislation? We could sort the matter out today.
Julie Morgan: I thank the hon. Gentleman for that intervention. I understand from what the Minister said earlier that the initial recommendations will be made by the summer. We certainly want them to be made as soon as possible. We did get a commitment to a time scale from the Minister today, and I welcome that fact that it is to happen by the summer.
The combination of the extra funds already committed by the Government and the review of how best to use the assets of the schemes in wind-up might be enough to fund an increase up to the PPF level. The Government have not given a commitment to do that, but there is a possibility that it will happen.
Mr. David Winnick (Walsall, North) (Lab):
I am obviously sympathetic to what my hon. Friend and other colleagues are saying. A constituent of mine who is due to retire shortly came to see me in my surgery. He told me that the Armstrong Pension Group, which was connected with Corus, had collapsed, and that he was going to receive only about £2,500 a year instead of the £10,000 he had expected. He was shattered by that. I took up his case and I am glad to say that he is going to receive more money, through the Pension Protection Fund. I am told that it will be about 80 per cent. of what he was expecting to get. I am very sympathetic to the arguments being put about certain other cases, but we should also pay tribute to the way in which the Pension Protection Fund is helping so many people
who would otherwise be living in acute poverty. I also raised this case on the Floor of the House before I received that recent information.
I welcome the review announced by the Government today, and I hope that it will produce the results that we need. My concern, however, is that it will not give any certainty. Amendment (a) would ensure that those who currently receive the reduced FAS level would receive 90 per cent. of their expected pension, capped at about £26,000, rather than 80 per cent. Since 1997, pensions have been index-linked, either to the retail prices index or to 2.5 per cent., whichever is the lower, rather than being index-linked only until people draw them at 65 years of age. According to what the unions have told me, they would then decline by more than a third in the first 10 years, and by more than 50 per cent. should the pensioner live to over 85 years old. Immediate benefits could be gained if we were to adopt the PPF proposals.
Jenny Willott (Cardiff, Central) (LD): Does the hon. Lady share my concern that the proposal to provide 80 per cent. of the expected pension relates only to the core pension benefits? For many of the people getting this support, that would equate to only about 60 per cent. of the amount that they had planned for, which represents a significant drop in their expected retirement income.
Julie Morgan: Yes, that is a matter of concern. Another issue is that there is a provision under the Pension Protection Fund for the payment of a lump sum, which many people were relying on to pay off their mortgages but which they cannot do under the FAS provisions. There would therefore be many advantages to bringing the FAS provisions up to the PPF levels.
We have come a long way, but we need to do just a little more to sort this out in a way that is satisfactory to me and other hon. Members whose constituents have suffered as a result of these problems, and to bring the unions in to support what the Government are doing. If the problem is not sorted out now, there is always a possibility that the Government could be forced, either by the UK High Court or by the European Commission, to introduce PPF-equivalent benefits for those who currently qualify for the FAS. This issue has been a running sore. It has been going on for five years and caused huge anxiety to many people. It would be very good if we could now settle the matter and put it behind us.
Community and Amicus took their cases to the European Court of Justice, and might be intending to go the High Court here. However, they have not started any such court action yet, because they are waiting to see whether we can sort the matter out politically. They were confident that a Labour Government would be able to sort out the different levels of the benefits.
The High Court ruled in February this year that the Government should not have rejected the report by the parliamentary ombudsman, Ann Abraham, on pension schemes that had collapsed. The Government were
asked to reconsider; they have now done so and come back with their proposals in new clause 38. The High Court decision did not mean that the Government had to compensate workers for their losses, but the ruling by Mr. Justice Bean meant that they had to rethink the issue of compensation. That has been done, and we have made huge progress, but I would like to see this go one step further so that full justice can be done. The injustice suffered by Allied Steel and Wire workers in my constituency has made me see at first hand how awful this situation has been. Thank goodness it is unlikely to happen again, now that we have the Pension Protection Fund in place, but there is still a defined group of pensioners whom we need to help.
I am considering what the Minister has said today at the Dispatch Box. I was pleased that he guaranteed that Community and Amicus would become involved in the review process and that they would be consulted about it. I am also glad that there was a definite commitment to ensuring that the available funds would be applied to supplementing the FAS provision, to get it nearer to 90 per cent. I realise, however, that that was not a guarantee, and that some uncertainty therefore remains. I was pleased that the Minister said that the review would make its initial recommendations by the summer, and that it would report publicly. That also represents a big move forward. I know that Community and Amicus now want to work with the Government to ensure that the 80 per cent. figure moves closer to 90 per cent., which is what most hon. Members want.
The past five years have been a sorry time for those pensioners. We have had a lot of improvements from the Government, but I want things to go a step further. However, I am considering what the Minister has said today at the Dispatch Box.
Mr. Laws: This is an extremely important debate. We have heard two excellent speeches, from the hon. Member for Cardiff, North (Julie Morgan) and the hon. Member for Runnymede and Weybridge (Mr. Hammond). We have also heard some useful points from the Minister, albeit in a slightly more partisan tone than we are used to from him. In his opening speech, he commented on what he claimed was a pattern of behaviour by the Conservatives on this issue. As that is not the major issue that we are debating today, I shall comment not on that but on the pattern of behaviour over the past three years or more by the Government. That behaviour pattern was illustrated extremely well by the hon. Member for Cardiff, North, when she described the process undertaken over the past three years as tortuous. That is precisely what it has been.
We know that we ended up with the financial assistance scheme in the first place only because of the determination of Labour Members and others in the House to insist on it when the Pensions Bill went through in 2004. We were then told by the Government that that was the only concession that they could make. Further improvements were then made to the financial assistance scheme and, earlier this year, it was announced that the level of compensation would be increased yet again.
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