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Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.


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Pensions Policy

Mr. Deputy Speaker (Sir Michael Lord): We now come to the debate on pensions policy. I must advise the House that in the Government amendment, the word “broker” has been misprinted as “broke”. It will be correctly recorded in the minutes of proceedings. I should also tell the House that Mr. Speaker selected the amendment in the name of the Prime Minister, and I remind hon. Members that there will be a 10-minute limit on Back Benchers’ speeches in this debate, as there was in the previous debate.

7.47 pm

Chris Grayling (Epsom and Ewell) (Con): I beg to move,

Before we get to the meat of the debate, may I congratulate the Secretary of State for Work and Pensions on his appointment? I look forward to debating with him over the next few months. I hope that our relationship will be constructive, as well as combative, as is the way with these things. In the past few days, and indeed in the House this afternoon, we have heard the first of what I am sure will be a blizzard of initiatives from the new Prime Minister, but so far almost everything that we have heard has been about the process of government. That is all well and good, but what the people of this country are really looking for is solutions to the real problems that we face, and in particular to the problems that the Government and the Prime Minister have created in the past 10 years.

For the past three hours, we have heard about the way in which decisions made by the Prime Minister have let down our health service, its patients and the people who work in it. I want to address what is probably the Prime Minister’s other big failing: the way in which he has presided over the disasters in Britain’s pension system. It is noticeable that since Tony Blair announced his retirement at the end of April, we have heard a lot of talk from the new Prime Minister about how he will tackle problems such as the out-of-hours crisis in the national health service, even though he and his colleagues caused that crisis through their mishandling of the issue two years ago. I notice that there is one issue on which he has been as quiet as a church mouse, and on which there has been not a word. It is the issue in which, more than any other, the problems that this Government have created lie right at the Prime Minister’s door—our pensions crisis, not entirely made in No. 11 Downing street, but with the Prime Minister’s fingerprints all over the scene of the crime.

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So how can the new occupant of No. 10 Downing street be the change that he claims to be, when he has been so closely involved in one of the great failures of the past decade? Nowhere is that need for change greater than in the delivery of pensions policy, and nowhere will it be more difficult for the new Prime Minister to deliver, as he is the architect of the policies over the past 10 years that have brought us to the position that we are in today.

Mr. David Drew (Stroud) (Lab/Co-op): If we are having a history lesson, will the hon. Gentleman look back at one of the problems under the previous Government—the pension holidays that were taken by pension funds, and how many of those pension funds have subsequently gone into administration? With the benefit of hindsight, does he think it was a good thing to allow those pension holidays?

Chris Grayling: It is funny how these things work out. Before Labour Members leap to their feet in complaint, let me explain that I was about to acknowledge that many of the challenges facing our pensions system are far outside the control of Governments, not least increasing life expectancy and tightened global investment returns, and I do not pretend that every decision taken by every past Government, Conservative or Labour, has been the right one.

Sir John Butterfill (Bournemouth, West) (Con): On contributions holidays, they certainly were introduced under the Conservative Government, at a time when the stock market was roaring ahead, and when Revenue rules permitted them; otherwise pension funds would have been overfunded, according to Revenue rules. The difference is that the pensions holidays were continued under the present Government at a time when the stock market was collapsing, and have been continued to this day by the Government. The parliamentary contributory pension fund, which I have the honour to chair, would be in surplus today if it had not been for the £50 million that the Government have failed to put into it.

Chris Grayling: My hon. Friend makes a good point. One of the great ironies is that the then shadow Chancellor, who subsequently became the Chancellor and is now the Prime Minister, criticised the Conservative Government when he was in opposition, came into office at a more difficult time for pension funds, and then took policy decisions that undermined them fundamentally—so my hon. Friend is right to raise those concerns.

The measure of a Government is how they respond to external challenges. On pensions, the Government have so far failed. It remains the case that, in the words—if he will forgive me for quoting him—of the right hon. Member for Birkenhead (Mr. Field), the Labour Government’s first Minister for Welfare Reform back in 1997:

That does not mean that every decision that was taken before 1997 was right, but it does mean that in his judgment the system in 1997 was in reasonably robust shape.

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Mr. Frank Field (Birkenhead) (Lab): Will the hon. Gentleman also cite me as saying that one of the first attacks on company pension schemes was the Conservative Government’s changes in taxation which led, as my hon. Friend the Member for Stroud (Mr. Drew) said, to the running down of surpluses? With hindsight, does the hon. Gentleman think that a wise or an unwise move, given the position that we moved into afterwards?

Chris Grayling: The right hon. Gentleman is very experienced in these matters and he levels a serious criticism at decisions taken in the past. He heard my remarks. I do not claim that every decision taken before 1997 was the right one. None the less, it is his own case that in 1997 the system was in pretty good shape. That clearly was not the case four or five years later. As I said to my hon. Friend the Member for Bournemouth, West (Sir John Butterfill), one of the supreme ironies is that the same man who was shadow Chancellor before 1997 claimed that the Conservative Government had undermined pension schemes, and claimed that some of the decisions that were taken were flawed, then came into government and took steps that helped wreck that reasonably robust pensions system.

David Taylor (North-West Leicestershire) (Lab/Co-op): This is all pretty scintillating stuff. The motion, like all Conservative pensions motions, refers to the abolition of dividend tax credit, as if that were some central act that has caused particular difficulties, but does the hon. Gentleman agree that in the 18 years of the Conservative Government, successive Conservative Chancellors cut the dividend tax credit on five separate occasions? Can he confirm that, and thereby lift the tone of his speech, which has so enthused his party that all but two Members, it should be noted, feel that he has nothing new to offer?

Chris Grayling: The hon. Gentleman will know from his knowledge of history that many of the changes to the dividend tax credit came as part of reductions in corporation tax, part of the tax-cutting policies of the Conservative Government. Let me challenge him. He implies that that was not an issue. Let me quote to him the words of the Prime Minister’s former pension adviser, who said:

The president of the National Association of Pension Funds said:

In the very experienced judgment of the right hon. Member for Birkenhead, in 1997 the pensions system was in pretty good shape, and subsequently it clearly was not.

Mr. Paul Truswell (Pudsey) (Lab): Will the hon. Gentleman give way?

Chris Grayling: In a moment, but let me set out for the hon. Gentleman some of the current issues. The Government have estimated that 7 million people are not saving enough for retirement. The household savings ratio has hit a record low—2.1 per cent.—under this
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Government. Tens of thousands of occupational pension schemes have closed, 125,000 people have been left high and dry without the pensions that they saved for or the retirement that they planned for, and all the while, as private sector occupational pensions collapsed, the unfunded cost of meeting public sector occupational pension commitments has soared.

Mr. Truswell rose—

Chris Grayling: I will happily give way to the hon. Gentleman. Perhaps he will tell the House whether that is a record with which he is proud to be associated.

Mr. Truswell: Perhaps I can ask a question on the hon. Gentleman’s speech. He is almost on the verge of being remarkably frank and admitting that his predecessors in government had “form” in their impact on pension policy. Will he list the offences that he would like to have taken into consideration? Is it the SERPS scandal, the removal of the earnings link, the promotion of state pension opt-outs, the orgy of pension mis-selling, the ineffectual Pensions Act 1995, or as my hon. Friend the Member for Stroud (Mr. Drew) said, the encouragement of pensions holidays?

Chris Grayling: That was an interestingly well read list. The most experienced analysis of the state of Britain’s pension system from any member of the Government comes from the right hon. Member for Birkenhead, who is more experienced in this area than any member of the Front-Bench team. His judgment is that in 1997 our pensions system was in pretty good shape, so I will take no lessons from the Government about what happened before 1997, as they have done lasting damage to our pensions system since 1997. They have created a crisis of confidence in pension saving that must be addressed as a matter of urgency. It is one of the great challenges facing the Government.

We have a new Prime Minister, a new Secretary of State and a new Minister with responsibility for pensions, but from the new Prime Minister not even a hint that pensions are among his priorities, or that he feels the need to use his new position to right the wrongs of his time as Chancellor. So I make no apology for raising the issue at the earliest opportunity. The truth is that pensions policy has been run from the Treasury since 1997. The new Prime Minister has to take personal responsibility for the decisions that have been made, and must give a personal lead in addressing the crisis that many pensioners and future pensioners face.

As hon. Members know from the debates on the Pensions Bill, we have constantly sought to engage the Government in constructive dialogue about providing solutions to the problems in our pension system. I wait with interest to see how the Government respond to the amendments passed in the other place. My message to the Secretary of State is that we will continue to look constructively at proposals to continue the repair job that has to be done to our pensions system. I hope that in return he will engage constructively with the Opposition on this most long-term of issues. Only by finding lasting solutions and building political consensus around them can public confidence in our pensions system be restored. But that will not change
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the failings of the past by a Prime Minister who is now trying to pretend that somehow, he just was not around for the first 10 years of this Government.

Mr. Jim Devine (Livingston) (Lab): If the Conservatives were in power today, would they reintroduce the dividend tax credit at its 1997 value?

Chris Grayling: I will not write Conservative tax policy three years from a general election, but one of the challenges that we face, as we heard in the earlier debate this afternoon, is the amount of money that the Government have wasted—the trebling of the NHS budget—and still we have debates over a lack of access to service. Labour Members should be ashamed that they have raised all this tax money yet delivered so little for it.

Tom Levitt (High Peak) (Lab): Will the hon. Gentleman give way?

Chris Grayling: Let me make some progress and then I will give way.

We should not forget that before the Prime Minister took office, as Chancellor he promised:

The very next year he imposed the ultimate stealth tax on pension funds, abolishing the tax credits on dividends, costing occupational pension schemes billions of pounds—an estimated £5 billion a year. Cumulatively, about £120 billion was wiped off the capital value of today’s funds.

Then we had the unedifying sight of the Prime Minister, who has come to office claiming that he believes in transparency and openness—what a laugh that is—spending two years trying to prevent The Times from gaining access to the documents that proved that he knew all along about the damage that his policies would do. We know from the documents—I have copies here tonight—that Treasury officials advised the Chancellor that the tax change would cause a massive shortfall in pension funds. The advisers concluded:

They also concluded that poorer pensioners would be hit hardest:

The Prime Minister seems to have it in for the low- paid at the moment, because it is they who will end up paying the price for the decisions taken in this year’s Budget—the tax increases that fall disproportionately on the low-paid. I will give way to the hon. Member for High Peak (Tom Levitt) if he will tell me whether he supports the policy of targeting the low-paid.

Tom Levitt: The hon. Gentleman is the one making the speech and answering the questions posed in interventions—but of course I do not support targeting the low-paid—and that is not what has, happened. If the hon. Gentleman is so reluctant to make up Conservative pensions policy on the hoof, was his hon.
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Friend the Member for Tatton (Mr. Osborne) right when he said that under a Conservative Government no more public money would be going into occupational pensions?

Chris Grayling: I can safely say that my hon. Friend said no such thing in relation to occupational pensions.

Mr. Frank Field: The hon. Gentleman expresses concern about the budgetary impact on the low-paid. Some Labour Members moved an amendment to protect them. Why did not the Conservative Opposition support us?

Chris Grayling: As the right hon. Gentleman knows, the detail of amendments often gives rise to additional issues, and I can only say that the wording put forward was not acceptable to the Opposition. However, we recognise, and we have been saying very clearly, that some of the policy steps that the then Chancellor has been taking, both in 1997 and more recently this year, are bemusing in nature because they target people on lower incomes. The tax changes this year will fall disproportionately on those who come close to the national minimum wage. That seems a strange step for a Labour Chancellor to take.

It is today’s pensioners, people who are on low incomes, who are paying the price for the Prime Minister’s policies. Those same officials added:


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