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On mis-selling, I am very much on the same wavelength as the right hon. Member for Birkenhead. There is a real issue here, and the Secretary of State will not yet have had time to absorb this kind of detail, but his attention will no doubt be drawn to the conclusions of the Pensions Policy Institute and the crucial differences between its research as to the likely level of means-testing after the reforms and the Governments own projections. Again, the crucial difference between the two models is that the PPI model takes account of housing benefit and the Government model does not, which affects the position of people who rent in retirement.
I shall come on to issues of confidence in a minute, but I want to deal with the valedictory remarks of the hon. Member for Yeovil (Mr. Laws)for all I know, my remarks may be valedictory, but nobody has informed me yet. Although the Liberal position may improve or change with the arrival of the new spokesman, it is at best confusing and at worst likely to discourage pension saving. The Liberal Democrats want to abolish tax relief for pension contributions, certainly for higher rate taxpayers. It is the only party, apart from the Government, which backs the continuation of compulsory annuitisation. It is still peddling its idea of a citizens pension, which is unworkable, unaffordable and a total non-starter, because no major party is prepared to do it. I say in a caring way to the hon. Member for Yeovil that the Liberal Democrats have consistently placed themselves outside a serious and responsible consensus on long-term pensions reform. We will see whether the new broom produces different results.
The crucial priority for any Government must be to restore confidence in pensions saving. How can we expect younger workers to save for their retirement, when almost every week they see bad news stories about people who have lost their pensions? Shortly before the new Prime Minister relinquished his iron grip on the Treasury, he was taken to task in this House for his £5 billion-a-year raid on pension funds. Was he embarrassed, abashed or apologetic? Not a bit of it. He said:
I tell the House that I do not apologise.
We made the right decision.[ Official Report, 17 April 2007; Vol. 459, c. 176, 183.]
That was a slap in the face for the 125,000 victims who lost all or most of their pensions through no fault of their own. However, we must not forget that absolutely everyone with a pension scheme has lost because of the £100 billion or more that the Chancellor has stripped from their retirement savings.
Having created the problem in large measure, the then Chancellor was happy to leave those people without help, or to the tender mercies of the failed financial assistance scheme. As my hon. Friend the Member for Epsom and Ewell (Chris Grayling) has said, the latest FAS annual report was sneaked out on the very day that the new Prime Minister took office. It is a dismal and depressing document, cementing the impression that the FAS is a failing, incompetent and useless organisation. In some two years, it has succeeded in getting payments to little more than 1,000 pensioners, but no fewer than 10,000 victims are
already eligible for help. Amazingly, the FAS spent more on running itself, £4 million, than it paid out, £3.5 million.
The former Chancellor, among others, continues to claim that victims will get 80 per cent. of their entitlement, but that is patently untrue. The Secretary of State fell into the same trap himself, although perhaps with more excuse, when he discussed 80 per cent. of core expected pension. He was mixing two different ideas. Expected pension is a lot more than the concept of the core pension, which has been introduced through the FAS. Most people will get half of what they expected to get.
As has been said, the Government have been told on several occasions by the ombudsman, the European Court, the Select Committee and the High Court that there has been maladministration, and they are now appealing the High Court decision. However, they are still ignoring the legitimate demands of the pension victims. The Government will have another opportunity to right that wrong, because the Lords have voted in favour of the cross-party amendments setting up a lifeboat fund, which would provide PPF-level compensation for those victims. Back-Bench Labour MPs who have constituents in this predicament, or who just want to see justice done, will soon have the opportunity to do something about it. The hon. Member for Nottingham, South (Alan Simpson), who speaks with great knowledge on these matters, made a similar point.
If removing dividend tax credit was such a great idea, why did the Chancellor fight for those two long years to resist the freedom of information request from The Times? Why did we also hear from the former Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), that he had had this very idea put to him by officials and had decided not to do it? It is incredible that when questioned in this House by my hon. Friend the Member for Bromsgrove (Miss Kirkbride), the Chancellor said, with effortless effrontery:
I support the release of the papers.[ Official Report, 17 April 2007; Vol. 459, c. 183.]
Presumably it was some other Chancellor who had fought so hard to keep them secret. It was a bit like the prisoner on his climb up to the gallows declaring his enthusiastic support for the death penalty.
Ministers should hang their heads in shame at their persistent refusal to draw a line under this scandal and help to give long-term pensions reform a fresh start. The new Secretary of State has a clean slate. He can choose to look at this matter again; in some ways, he suggested that he would. If the former Chancellor, now the Prime Minister, wants to have a honeymoon with 100 days of spectacularly popular announcements, this would be a very good start. If not, it is difficult to disagree with the conclusion of The Daily Telegraph when it said that on this issue the new Prime Minister
is not fit to lead, not fit to govern and not fit to be trusted.
The Minister of State, Department for Work and Pensions (Mr. Mike O'Brien):
Let me begin by welcoming the hon. Member for Epsom and Ewell (Chris Grayling) to his new position. I wish the hon. Member for Eastbourne (Mr. Waterson) well in the reshuffle that appears to be
under way; we understand these matters ourselves. I also wish well the hon. Member for Yeovil (Mr. Laws), who gave us his valedictory speech. It was a thoughtful speech, and I shall certainly bear in mind many of the points that he made in his interesting reflections on matters that he has raised while he has been a Liberal Democrat spokesperson on pensions.
Having listened to the hon. Member for Epsom and Ewell make his opening speech as a Front-Bench spokesperson on pensions, it looks to me as though there is a greater degree of difference between us than that which unites us. In fact, his speech was a lot of partisan knockabout. The reality is that we agree on many of the things that we need to agree on as regards the future of pensions. It is right that we should, because, over timeover decadesGovernments might change their colour, and hence a consensus on long-term pension policy is a crucial obligation on all political parties. That consensus has been built up, across a range of issues, around the Turner report.
I welcome the extent of the agreement that exists, certainly between the two main parties. I also welcome the comments by the hon. Member for Yeovil about wanting the consensus to be built up. I hope that that view is shared by his colleague, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), whom I welcome to his Front-Bench position. I hope that he, too, will feel that he can participate in building that long-term consensus. As we continue to do that, I look forward, in the coming weeks and months, to meeting the various stakeholder groups, and indeed the Opposition parties.
However, there are disagreements between us and it is right that the debate should reflect on and deal with them. First, let me comment on some of the points that were made during the debate. My hon. Friend the Member for Nottingham, South (Alan Simpson) was right to claim, in a challenging and powerful speech, that the tax changes in 1997 were about strengthening investment. He raised a range of issues about the financial assistance scheme and the number of people who have been assisted by it so far. We are anxious to bring more people into the scheme and to ascertain whether we can get more people assisted by it.
We need information from some of the trustees of schemes to ensure that we have sufficient detail to start making payments. That has been a problem, but we have now simplified some of the information requests that are made to the schemes to ensure that compliance is easier. Through officials in the Department, we have been trying to meet representatives of the schemes to ascertain whether we can get them to participate more fully so that we can achieve precisely what my hon. Friend wants: more people able to be helped by the FAS.
My hon. Friend raised a couple of other issues, which I shall tackle briefly. He said that the FAS benefits did not include revaluation, indexation or survivor benefits. However, they protect pensions against inflation until the age of 65. The survivor benefits are paid at 50 per cent. of FAS entitlement. Given that FAS is a sort of top-up, some of the non-core benefits may therefore be included in the annuity that the pension scheme pays.
My hon. Friend the Member for High Peak (Tom Levitt) referred especially to Federal Mogul and the Turner and Newall pension fund. I declare an interest in that I, too, have constituents who are directly affected by that matter; they work in Coventry. I look forward to meeting him to discuss those issues. I pay tribute to his work in leading the fight for the Turner and Newall pension fund members to ensure that they get a better deal.
On average, current pensioners are as well provided relative to average earnings as any previous generation, and many will continue to be well provided over the next 15 years. There is therefore no general and immediate crisis.
When we came to office, our first priority was to tackle pensioner poverty. Nearly one third of pensioners were living in relative poverty. Compared with the policies that we inherited in 1997, we now spend more than £11 billion extra on pensioners. Around half of that goes to the poorest third of pensioners. Consequently, more than 1 million pensioners have been lifted out of relative poverty for the first time in a generation. Pensioners are no more likely to be poor than any other group.
Our second challenge was to improve the security of private pensions. That included dealing with the pensions mis-selling scandal and the impact of the falling stock market on occupational pension schemes. We introduced the Pension Protection Fund, which offers security to more than 12 million members of occupational schemes and provides compensation if their employers become insolvent.
The pensions regulator helps protect members benefits and promote the good administration of workplace schemes. The significantly expanded FAS will help to some extent those who lost their workplace pensions before the PPF was established.
Let me deal with some of the concerns about the FAS. The scheme provides critical support for those who have lost their pensions. As a result of the Budget announcement, the newly expanded scheme will support all the 125,000 people whose occupational pension schemes were affected by employer insolvency before the PPF was created.
As my right hon. Friend the Secretary of State explained in his opening speech, we would like to go further if funding can be found from other sources. We invite contributions to the current review, which is looking for viable and sustainable solutions. As hon. Members know, the review will examine whether the alternative treatment of the residual funds in affected schemes could complement the £8 billion that the Government have committed, supplementing the increased support.
We look forward to the results of that review and we will all return to the Chamber later this month to
debate the Pensions Bill. I hope that we will all agree that sustainable, affordable, effective and deliverable solutions provide the only realistic and responsible way to proceed.
We have been asked why we will not support the lifeboat fund or the lifeboat proposals that came from the other place. Let me be clear that the Government want to get the right money to people who have lost their pensions. We have already committed £8 billion of taxpayers money to the financial assistance scheme and we have set up a review led and advised by experts. Putting the FAS on a par with the benefits offered by the PPF is simply unaffordable. Such a policy would effectively increase costs by a third. We do not believe that the taxpayer should be expected to provide high levels of compensation for schemes run by private employers. It would not be right to put FAS recipients in the same position through taxpayers money as those whose schemes contribute to the PPF by way of a levy. We are not averse to the idea of making more money available if it is feasible, but at this stage, we do not know what assets, if any, are available. It seems sensible to find that out before putting any proposals forward.
There are clear objections to the proposals coming from the other place. First, the lifeboat proposals depart from the principle that evidence should guide policy. We need evidence of what is available and how it can be accessed before we start putting in place legislation that obliges us to access funds. Lord Turnbull described the proposal in the other place as rather like introducing a Dangerous Dogs Act without finding out where the dangerous dogs are.
Secondly, it is simplistic merely to claim that unclaimed pension assets without clear ownership are some sort of windfall gain to insurance companies. We need to think carefully about the implications of that, but the proposals from the other place do not deal with them at all.
The third objection is, of course, equity. The lifeboat will take from existing policyholders a long-term part of their gain. The Association of British Insurers described it as robbing Peter to pay Paul. As Lord Turnbull said, it might be that some of the Pauls are better off than the Peters. Once again, the issue needs to be looked into with a great deal more care than has been demonstrated by the Conservativesand, indeed, the Liberal Democratsin the other place.
The lifeboat proposals require the state to take away somebody elses property. In other instances, we call that taxation. Lord Turnbull suggested that the Conservatives, after complaining loudly about stealth taxes and pension grabs, now seem to be supporting a proposal that exposes them to exactly the same chargeof imposing a Tory stealth tax. They need to be much more careful about what they are supporting.
Mr. O'Brien: It is the case that the Conservatives have no credibility on pensions. [Interruption.] They presided over the pensions mis-selling scandal, which caused misery to millions, and they destroyed confidence in the pensions industry.
Mr. O'Brien: If the right hon. Member for Wokingham (Mr. Redwood) has some concerns about these issues, he should have been in the Chamber to deal with them. He was not here during the debate, so on that basis I will not give way to him.
The Conservatives left almost 3 million pensioners living in poverty. They expected a pensioner to live on just £68 a week. No wonder pensioners could not afford to keep warm in winter. And then the Conservatives tried to raise VAT on fuel to 17.5 per cent. They passed the Pensions Act 1995
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