We debated pensions last Tuesday and Wednesday. I was in the Chamber for part of Tuesdays debate, and I think that the hon. Gentleman was present at the time. He will know my views on some of those figures. He will also know my view that actuaries were a bigger factor than those that I have mentioned. I suspect that if one makes negative comments in this
place about a particular profession, one is often then contacted by representatives of that profession, who take the opportunity to explain their position by saying that ones remarks in the House were either incorrect or demonstrated a misunderstanding of the probity and history of their profession.
Last Tuesday I again made the remarks, which I shall repeat, about my views about the responsibility of the actuarial professionnot every actuaryfor the difficulties in which some private sector pension schemes have found themselves. I made those remarks on two occasions many months ago, and I have never been contacted by even one actuary suggesting that I was wrong.
As many right hon. and hon. Members will know, I was on the panel of the Law Society of England and Wales as a personal injury specialist from its inception in, I think, 1991. That is roughly equivalent of being a hospital consultant. It is a recognition of ones professional expertise in a particular area of legal endeavour and practice. As a personal injury lawyer, I would calculate lifetime losses. If someone has a fairly catastrophic injury and suffers a loss that will continue for the rest of their natural life, one cannot calculate in most casesalthough sadly, in some cases one canwhat their individual life expectancy will be. For the purposes of the calculation, one notes their age and gender and takes it from there.
I used to get new life tables every year or two and would adjust my calculations. Rising life expectancy meant that in calculating a lifetime loss for any client, it would have been negligent of me, as a solicitor, not to take into account the fact that statistically, that individual was now expected to live longer than had been the statistical expectation perhaps two years previously for someone of the same gender and age. I would adjust the calculations that I would otherwise have made under old life tables and make them under the new life tables to reflect the longer life expectancy.
I was not the only solicitor doing that, I hasten to add. It was standard throughout the profession. We were taking into account rising life expectancies in our professional practice. It appears that far too many actuaries were ignoring rising life expectancy when doing their calculations and advising pension schemes on how much funding a scheme should havefor example, how much the employer should contribute or whether that employer should continue their pension contribution holiday. Although that was not the only driver, it was one of the major drivers, and probably the biggest single driver, of the pensions difficulties that have been disclosed in the past 10 years. They have been disclosed because of FSR 17 and pension organisations having to come clean about how much, or how little, they have in the kitty.
The reasoned amendment refers to a pensions crisis. There is a crisis for many people, and that is appalling, but another driver, which will feed through to those who have not yet started to receive their pension, is the change from final salary schemes to money purchase
schemesfrom what are sometimes called defined benefit schemes to defined contribution schemes. I am not a defender of final salary schemes in the private sector. They are a historic dead end. They cannot be underwritten by, say, a trading company, because we all know that companies that trade, such as H. H. Robertson or Chart Heat Exchangers, go bust and cannot top up the scheme.
Our constituents are understandably saying, Im going to get a worse pension than I thought I would because the companys changed the scheme, and in almost every case of which I am awareI am aware of quite a lot, because I was on the Select Committee on Work and Pensions throughout the last Parliamentemployers who are changing from a final salary scheme to a money purchase scheme are cutting their contributions as a percentage of payroll. It is not simply a technical move, with them deciding to restructure the scheme in a different way to give greater securityalthough that is how they may try to sell the change to their employees. They are markedly cutting contributions.
Quite a big private sector employer in my constituency commendably puts in to a final salary scheme that is now closed about 26 per cent. of payroll every yearI think my figures are right; I am doing them from memory, but they are something of that order. The employee contributions are 7 or 8 per cent. for those who are in the scheme, which closed to new entrants about five years ago. Under the new scheme, the employers contributions are markedly lower. I cannot remember them precisely, but I think that they are in the order of 7 or 8 per cent.
I understand why the company has made that change. It is trying to remain competitive with other companies, and some bright spark came up with that idea in some part of the country, and it snowballed from there. However, the demise of final salary schemes, which continue to exist in as much as they are not insolvent, has been driven not by changes made by the Government, but by employers trying to lower the pension contributions that they make on behalf of staffeffectively, to cut their wage bills. There are many things for which one can try to blame a Government, but one cannot blame any Government, of whatever political party, for employers effectively cutting the wages of their employees. I do not think that they should do that, but that is what has been happening.
As for the third category of prospective pensionersin particular, those who were in a scheme that is now insolventthe official Opposition appear to think that the Government should be the insurer of last resort for every private pension scheme. I disagree. I have made it clear to the Government many times that they have a responsibilityas did the previous Conservative Governmentfor allowing misleading leaflets to be put out to prospective members of schemes and members of private company occupational pension schemes on how secure those might be.
Others also bear responsibility in that regard. Those who were advising individuals on pension schemesindependent financial advisers and so onshould have known better, as should, dare I say it, trade unions on some occasions. I say that as a proud member of the Transport and General Workers Union. There was a
somewhat cavalier attitude across the board, with individuals who were involved in giving advice to employees not stopping and thinking enough about how secureor, as it sadly turns out in all too many casesinsecure private occupational pension schemes were.
The Government, reacting to pressure from Ministers as constituency MPs and Members on both sides of the House, have done a pretty good job with an 80 per cent. guarantee and a commitment last week from the Secretary of State for Work and Pensions to see whether that could be higher, although we do not have the costs of that. Through the budgetary mechanisms of the Treasury, the Government are putting forward £8 billion in future value, not in net current value, for the financial assistance scheme. They are also acting to try to stop the shenanigans of companies playing fast and loose with their pension schemes. We all know that that was going on in the 1990s: we know that the amount of money in a pension scheme fund predicated whether there would be a takeover. The Pension Protection Fund, which I believe came into force in April 2005, was introduced by this Government to prevent a repetition of the scandalous behaviour that had been so devastating for pension scheme members.
Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): My hon. Friend mentioned Government leaflets and advice. Does he accept that any Government must depend on the honesty and integrity of the managers of pension funds, and that there has been dishonesty in the case of a considerable number of pension failures? My hon. Friend referred to FRS 17, which opened a Pandoras box, but any Government must give advice on the basis that people will be honest and obey the law. Surely the system has collapsed not because of bad advice, but simply because some employers have been blatantly dishonest in the management of pension funds.
Rob Marris: I agree with my hon. Friend and neighbour. To put it succinctly, there were some rip-off merchants around. This Government introduced schemes such as the financial assistance scheme to help those who suffered as a result of past rip-offs, the aim being to clamp down on past rip-offs and any prospective future rip-offs; and if any more rip-offs do occur, the Pension Protection Fund is there to prevent more people from suffering. There were bad people around, and, as my hon. Friend says, there is only so much that a Government can do to deal with that. Sometimes they have to act after the horse as bolted, as with the financial assistance scheme or the Pension Protection Fund.
I am sure that the Paymaster General has the figures at her fingertips and will correct me if I am wrong but, according to my recollection, in recent years, during the so-called pensions crisis referred to in the amendment, the amount in pension funds has more or less doubled. It is up to about £790 billion. The Opposition may speak of a pensions crisis, but although there are problems with pensions and peoples lives have been devastatedI do not want my position to be misunderstood in that regardit does not strike me as very illuminating to use the term pensions
crisis in a general sense when the amount of money in pension funds has doubled. I repeat that I do not underestimate the devastation of peoples lives, but I would not describe it as a general crisis, as the amendment seems to. Of course it is a crisis for some individualsabout 125,000and it must be absolutely awful for them.
Mr. Flello: My hon. Friend is a very learned Member, if I may use that term in its widest sense. What effect does he think a proceeds of growth rule would have on funds for the financial assistance scheme?
Rob Marris: It could be disastrous. Any subsequent Government might not have enough money to meet the commitment that this Government had madein so far as any Government can bind their successorsof a considerable amount of taxpayers money for the future.
As my hon. Friend will know, some Members have suggested what is sometimes described as a lifeboat scheme. Indeed, I hear rumours that there may be an amendment to the Pensions Bill to that effect. Interestingly, the lifeboat scheme has been decried by the Association of British Insurers, which regards it as being akin to ripping off other peoples money, so I am not sure that it would be a very good idea.
Stewart Hosie: The hon. Gentleman raised the question of pensions on the basis of the Conservatives amendment, which refers to a pensions crisis. He mentioned the FAS and the £8 billion, which of course is welcome, but does he understand the frustration felt by people who, although their schemes are eligible, are still not receiving money because the full schemes have not been wound up? That may happen in the case of even a small scheme if a single ex-member cannot be identified. Does he share our frustration? We may welcome the extra money for the FAS, but it is not yet quite delivering for all the people for whom it should be delivering.
Rob Marris: I think that there is frustration throughout the House about the fact that, although the Government have committed a considerable amount to assist the 125,000 pensioners, only about 1,500 have received any money. Surprise, surprise, some accountants who are acting as receivers for insolvent schemes appear not to have been exactly speedy in dealing with the paperwork to enable members of those schemes to obtain money from the FAS. If I am going to slag off professions, I might as well go for bust, although there are exceptions such as my hon. Friend the Member for Stoke-on-Trent, South (Mr. Flello)
Chart Heat Exchangers is a prime example. It is based in the constituency of my hon. Friend the Member for Wolverhampton, North-East, but three of my constituents have notified me of their interest. It is all very sad. From correspondence that I have received, and I suspect from correspondence that he has received, as I understand he has led on the issue in Wolverhampton, it seems that PricewaterhouseCoopers has not been very speedy.
According to my understanding of the way in which these things workperhaps PricewaterhouseCoopers will write to me tomorrow and tell me that I am wrongthe company is being paid but the pensioners are not being paid, and some are indigent for that reason. One suspects that not many people who work for PricewaterhouseCoopers or similar organisations are exactly indigent, so it appears that the cash is in the wrong place.
The hon. Member for Dundee, East (Stewart Hosie) is right: the slowness of the system has been extremely frustrating. However, I see cogs turning in his brain, for he is a smart man. Could we have made the system work more quickly? I am not sure that we could. As he said, there are technical difficulties with tracing people and getting the trustees to act. If there had been an immediate payout, we would have risked a situation like the one that we have experienced, to a small extent, with tax creditsoverpayments, and people having to pay some of the money back. We have carefully avoided that in the case of the disastrous rural payments scheme.
Members will be relieved to learn that that concludes my brief remarks about pensions. I now want to speak about climate change, as I warned the House that I would at the beginning of my speech. Those who know me, and Members who take an interest in Finance Bills and associated matters, will be aware that climate change is a particular concern of mine.
Both the hon. Member for Chipping Barnet and the hon. Member for Falmouth and Camborne properly highlighted green issues such as climate change in their speeches, and the amendment refers to tackling climate change, but yet again we have heard about only one side of the equation. Of course cutting emissions is important, but we do not hear about the other side of the equationadaptation. The right hon. Member for Wokingham (Mr. Redwood) nods. He and I have had conversations about the issue; I know that he takes an interest in it, and I know that the Government do as well. This is the third or fourth time that I have spoken about this in the last 12 months, and I am about to do so again at some length, and I urge the House once more to start talking about both sides of the equation. We must talk about adaptation to climate change as well as emissions. We must talk about dealing with the effects as well as the causes.
The point that I always make, and will continue to make until Opposition Front Benchers understand it a little betterI believe that my Front Benchers have understood it, and I will explain why in a momentis that we are dealing with the half of the equation that is broadly beyond our control, because the United Kingdom is responsible for roughly 2 per cent. of world emissions. It is important for us to show global leadership. We emit roughly twice the world average because we are a rich country, and it is important for us to reduce our emissions, but we persist in talking about the half of the equation that is 98 per cent. beyond our control unless we can secure international agreements that can then be enforcedKyoto, for example, has not been enforced because there is no enforcement mechanismwhile not talking about the half that is wholly within our control: effects. We should of course talk about the half that is not within our control, but not at the expense of talking about the half that is.
Julia Goldsworthy: The hon. Gentleman is making an important point. The Bill is concerned with revenue-raising measures, and investment is one of the key ways of mitigating climate change. I note that the Department for Environment, Food and Rural Affairs is cutting the flood defence budget by £200 million. Will he ensure that there is cross-departmental co-operation to ensure that the critical issue he has raised is not ignored or understated?
Rob Marris: I understand the hon. Ladys point and will come on to how what I am talking about intersects with the Budget. I am mentioning it because it is raised in the amendment of the right hon. Member for Witney (Mr. Cameron). On flood defence budgets, the hon. Lady really must do her homework. The Government cut flood defences by about £15 million in the last financial year, but they have increased that budget this year. The cut was not of a sum such as £200 million; the hon. Lady has a rural constituency, so she ought to know that. In my constituency in Wolverhampton, flood defences are not a big issue. They are a big national issue, and I agree that they are important but, as the hon. Member for Northampton, South (Mr. Binley) is aware as he knows the area well, flood defences are not a big issue there. The flooding of Smestow brook in my constituency is not a big deal. The hon. Member for Falmouth and Camborne might know that Wolverhampton does not have any coastline, so there is no coastal defences issue. We are quite high up: about 120 m above sea level. It is said that our arch rivals at football, West Bromwich Albion, have the highest league football ground in England, which is about 135 m above sea level and we are about the same height above sea level. Let me say again that flooding is an important issue, and that the Government have rightly reversed the budget cut mentioned.
Let me now turn to what the Environment Agency says about the difficulties that we face. I will, Mr. Deputy Speaker, link this point not only with the amendment but with the contents of the Finance Bill, and with the measures that I would have preferred to have been included in the Finance Bill. The difficulties that we face
Climate change is already happening in the United Kingdom. The Government are taking steps to adapt, such as by enabling us to build things such as flood defences, but we are not doing enough in that regard, and the Finance Bill represents a missed opportunity. Let me set out the sorts of steps that we should be taking, and for which there should have been tax reliefs in the Budgetto refer to the point of the hon. Member for Falmouth and Camborne as to how the Budget as a revenue-raising measure intersects with this issue. We should have more tax reliefs than those that currently exist in our financial regime, and those that the Finance Bill introduces should be stronger. We should also have had some new tax reliefs.
There should be tax reliefs for adaptation measures. I broadly agree with a point made by the right hon. Member for Wokingham, when he told me to look at what his Conservative Government did when they were faced with a campaign for lead-free air. A tax regime was introduced whereby there was a tax discount not a tax relieffor unleaded petrol. When it was introduced, some people found that their car needed no adaptation whatsoever. I was putting in unleaded petrol before there was a tax break and, at one point in 1985, there were only two petrol stations in the entire city of Wolverhampton that offered unleaded petrol. I was driving a Volkswagen, which did not need any adaptation at all. However, other cars, on slightly different technology, needed adaptation, which at that time cost about £30, if I remember correctly. A tax differential of lower excise duty for unleaded petrol than for leaded petrol massively boosted what had been a tiny market almost overnight. It happened very quicklywithin a year, I estimate. There was at that point no legislation banning leaded petrol; perhaps there should have been, but there was not. The shift was driven by the market, which was driven by fiscal changes. In the Finance Bill, there should have been more such general measures to do with adaptation for dealing with the effects of climate change.
I would like boosted research and development tax credits. They have already been boosted a lot by the Government, and there are also some changes to them in the Finance Bill. I understand that what I say on this is open to a charge of complexity, but we will need boosted R and D for endeavours such as research into the medicines that we will need to deal with the new diseases that we will get in this country, such as malaria. It will not just be cases of malaria in people who have been on holiday: we will also have malaria in southern England because of climate change as rising temperatures mean that malarial mosquitoes will come into our country. Research must be done on that.
We also need research on the kind of crops that we will be able to grow in this country. We will not simply be able to transplant a crop that has grown in a more southerly latitude, because the configuration of daylight hours is different the further north we go. In some places, there are longer summers and shorter winters, so we cannot always simply transplant a crop from Algeria or Malaga, for instance, up to Margate or Manchester to replace those that might no longer be viable because of shortages of water and higher temperatures. There must be a research and development push on that. Steps are being taken, but we need to encourage that further with fiscal measures that I would have liked included in the Finance Bill.