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Dr. Tony Wright:
My right hon. Friend the Member for Birkenhead (Mr. Field) mentioned the word “justice”, which is the right word. Fundamentally, we all have to decide whether we want to do justice to a group of people who, through no fault of their own, lost their occupational pension scheme. Either we do, or we do not. The Government certainly want to help them and today’s announcement is welcome. I am not sure whether it is the fourth or fifth extension of the original FAS scheme; I do not disparage that, and it is welcome. We have travelled a long way, but we have not yet arrived at a position of justice. For all the reasons that we have rehearsed endlessly, there is still a big gap between what we think these people should get, as
under the PPS, and what they will get, even under a more generous FAS. That is and always has been the fundamental point.
My hon. Friend the Member for Birmingham, Northfield (Richard Burden) asked the Minister a very good question: was the 90 per cent. core pension entitlement now seen as a ceiling, or as the review continued and assets were discovered would there perhaps not be a ceiling? Might we go as far as we could to get some sort of parity with the PPF? I was not sure what the answer was; perhaps the Minister was not sure. I hope that he will become more sure as it would be helpful to have the answer.
We have made awfully heavy weather of this matter. Many of us simply wanted to vote at some point for a proposition that said that some public money would have to be spent in order to do justice. The Government began by saying that it was not a question of money. As we have finished, we see that it is entirely a question of money. The official Opposition said that they wanted to see justice done, but did not want to spend any public money up front. It would have been better to say, “There is cost involved in doing justice, but it is justified.” This involves the whole House because both main parties are part of the story as to how we have got here and there is a collective responsibility on the House to put this right.
Kelvin Hopkins (Luton, North) (Lab): I support my hon. Friend. The amount of public money involved has been estimated at £20 million for the first year, although it might rise beyond that. The amount of money that we lose every year from tobacco smuggling alone is £2.5 billion, more than 100 times that amount. There is also VAT carousel fraud and mistakes in benefits. Hundreds of millions, if not billions, of pounds are lost or wasted every year—money that could easily pay these tiny amounts of money.
Dr. Wright: As ever, my hon. Friend and fellow Select Committee member makes telling points.
I would have preferred us to address this matter in a more direct up-front way. We did not, and we now have to do it through an indirect route of a loan and the expectation that assets will be recovered. If that is the way to get the commitment, let us have it by that route; it is better than no route at all.
The Select Committee has become preoccupied with the solvent employer schemes. We have had continuing dialogue with the Government on that and while it may seem arcane to some, people who have lost their pension in those schemes are in exactly the same position as those in all the other schemes. The Government have said that they are prepared to help members of schemes where trustees have agreed to a compromise agreement with employers because the alternative would have been to force the employer into insolvency, but they have not addressed the position, despite much prompting, of those whose schemes were closed before June 2003. That is an important date; it is when schemes could be closed without funding full buy-outs.
The Government, rightly, have repeatedly refined the rules governing the closure of pension schemes, and after 11 June 2003 employers were allowed to close their pension schemes only if they provided a full buy-out value for both those receiving pensions and scheme members who had not yet reached pensionable
age. However, before that date employers were able to close company pension schemes provided that certain funding requirements were met. There was no question of trustees being able to prevent it.
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We asked the Government directly whether it was correct that until 11 June 2003, it was legal for employers to close a pension scheme funded to the minimum funding requirement level even if the benefits promised could not be secured; and, if so, whether trustees or scheme members would have any legal means by which they might ensure full benefits were paid. The Government said:
“No legal recourse would be available in relation to the employer debt legislation for pre 11 June 2003 wind-ups, if solvent employers had met their legal obligation to pay the debt calculated in accordance with the legislation.”
We know now that the Government and the regulator are considering what more can be done to compel employers. However, it is okay for the Government to talk about the need to compel employers and to talk about their moral obligation, when they clearly do have a moral obligation. There has been deplorable behaviour, but the point is that what was done was legal. For the members of the schemes, the effect is just the same—they have lost their pensions. That is the point from which we should start.
Amendment (a), which reflects the continuing discussion that we have been having with the Government about the importance of the sequence of events and the dates, is intended to secure support for those who suffered because of the inadequate legal framework before June 2003. My amendment answers completely the Government’s worry that somehow the floodgates will be opened and they will not be able to exercise moral suasion on employers. There is none of that, because it simply establishes the legal position. After that date, the Government are right that there is a case for supporting only schemes where the trustees correctly decided that compromise was in the best interests of members. Before that date, compromise, as I understand it, was not a relevant consideration.
The question to be decided now is whether we simply trust to the process that is under way—I understand that the Government want that and have moved in that direction. They have said that we can always take care of such issues through secondary legislation. However, it is only now that we can ensure, through primary legislation, that the solvent employer schemes are brought within the FAS. I accept the Government’s worries about opening the floodgates; but in that case they should bite the hand off with amendment (a), which would give them a circumscribed statement of the kind of schemes that should be properly brought inside the FAS. It is on that basis that I shall be asking the House to support it.
Miss Julie Kirkbride (Bromsgrove) (Con):
I am particularly honoured to follow the hon. Member for Cannock Chase (Dr. Wright), who is Chairman of the Public Administration Committee. His argument about the moral imperative to do something for pensioners who have lost their pensions through no fault of their own is, along with his other arguments, absolutely right. I do not intend to take up too much of the
House’s time, because as hon. Members will know there is other business in this group of amendments that is also important, particularly to women. It would therefore be helpful to conclude these arguments quickly.
However, I have a particularly good example from my constituency of the injustice of the current arrangements. I represent two groups of people who have lost their pensions: those scheme members who worked for United Engineering Forgings, the old steel company that collapsed before the Pension Protection Fund came into being, and who therefore have to rely on inadequate compensation from the financial assistance scheme; and the people who used to work for the old Rover car company. Although they lost their jobs in the collapse of that company, mercifully that happened days after the Pension Protection Fund came into being, so they were not in the appalling situation of losing both their jobs and the pension contributions that they had made over the years working for that company.
There are other companies that I might mention, such as Kalamazoo. It would be helpful to put on the record my appreciation for the efforts of Mr. Peter Wheeler from Kalamazoo, who has been one of the major campaigners in getting the Opposition and Government Members focused on the issue, as well as the Government. There is also Turner and Newall, which is another company in our region whose employees have included constituents of mine who have lost their pension provision.
The situation is simple. Those people did absolutely the right thing. They did what society asked of them, what their families asked of them and what the Government could ask of them. Those people sought to look after themselves by forgoing income that they could have spent today, in order to look after themselves and their families in the future. In that sense, the House surely owes it to them to put together a scheme that compensates them for doing what we could ask of them, but which many others do not do. We have a moral imperative to try to protect those people in their predicament, now that they have lost their pension savings.
That is particularly urgent, given that many of the people who have lost their pensions and who have looked to the financial assistance scheme have either died while waiting for the money to be forthcoming or become much more ill or retired, while remaining in a penurious position. It is simply not fair that that group of 125,000 people, whose numbers will not grow, because of the existence of the Pension Protection Fund, should find themselves in the particularly injurious position of not being properly compensated for the loss of pension savings that they made in the past.
The words of the right hon. Member for Birkenhead (Mr. Field) were particularly accurate. The Government could have done something about the problem years ago and saved people from that predicament because they had the assets of banks and building societies, which they could have plundered to protect those people and offer them compensation. However, the Government made a distinct decision to spend that money on something else. Although provision for young people in our communities is welcome, I agree with the right hon.
Gentleman that the priority should have been those people who had done the right things by themselves and society. They deserved to be compensated.
It is not good enough for the Government to um and ah, and to keep giving the House a little bit more, in an attempt to buy off any opposition to their plans. They could have dealt with the situation some years ago, but they chose not to do so. However, the House will not let the issue go. I applaud the willingness of Labour Members to put the issue on the table and say that the Government must come forward with proper compensation that matches the protection offered by the Pension Protection Fund, because that is the right thing to do.
I agree with Opposition Members in general that the urgency of the current situation is paramount. We must prevent the £1.3 billion that has been itemised in the Government-commissioned report from being made into annuities, by passing a law in the House today. We must also force the Government’s hand into looking again at offering full compensation, whether through the lifeboat fund or through an alternative scheme that the Government have in mind. Frankly, it does not matter to my constituents; what matters to them is seeing justice done. The justice that is acceptable is to have parity with the Pension Protection Fund. I urge the Minister to listen to the pleas of the House and do just that.
Alan Simpson: I would like to address some of the misleading arguments that have been used to try to create a case for rejecting the Lords amendments.
I begin with the point that my right hon. Friend the Member for Birkenhead (Mr. Field) made. It is just not true that the Young review has sunk the lifeboat argument. His own experience, in floating the argument in the first place, was to be met by direct Treasury opposition, which sought to block a claim that unclaimed assets could be used to meet a public good. The situation now is that the Treasury has changed its position. It has decided not only that those funds can be used, but that it will decide—or has decided—what the public good should be in this case. Saying that someone has pinched the lifeboat is quite different from saying that someone has sunk it. If the lifeboat has been pinched, it is perfectly legitimate for the House to pinch it back and put it on a proper course again.
It would be terrible to suggest that the Young review was the basis on which the claims of the old were to be rejected. I suspect that, if we were to widen the remit of the Young review, that is not a claim that he would make either. The terms set for him specifically involved looking at pension scheme assets, not at those of banks and building societies. It is therefore implausible to say that, on the basis of an area that he has been precluded from considering, he has concluded that there is no case for supporting a lifeboat fund.
Let us think about that for a moment. The reality is probably that a significant proportion of funds accrued as banks’ and building societies’ unclaimed assets have come from people who have died without an estate to pass their savings on to. The majority of those people will be older, rather than younger. Let us try to project ourselves into the minds of such people and ask whether, on their death-bed, they would be more likely to have said, “Give it away to the kids” than “Give it
away to my mates. Make sure that people of my generation don’t live in poverty as a result of my dying with an estate that isn’t able to make use of my savings.” It is morally implausible to claim that it is unacceptable for the House to decide that pensioners have a prior claim to those orphan assets.
Lynne Jones (Birmingham, Selly Oak) (Lab): I am not sure that it is reasonable to speculate on people’s dying wishes. Many elderly people are just as concerned about the needs of the young people in our society. The fact is, however, that the sums involved are relatively small, and if the Government wanted to deal with this matter, they could do so. The Prime Minister, when he was Chancellor, would often pull a rabbit out of the hat and spend lots of extra money, to cheers on the Labour Benches. Surely we ought to cheer if he were to find the £25 million or so a year to deal with this problem.
Alan Simpson: That is absolutely right. The sums involved are relatively small in the context of any of the major functions of the Government Departments. It cannot be beyond the wit or the financial reach of the House to say that we could provide those resources up front to ensure that the lifeboat floats, and that it sails in the right direction.
I want to make a brief point about the insurance companies. We have all received letters from the Pru, lobbying us and saying that such action would be robbing Peter to pay Paul. The hon. Member for Bromsgrove (Miss Kirkbride) mentioned a company scheme that had collapsed. The company was UEF. She could have gone on to say that UEF was owned by the Pru. The Pru has not paid out a penny to help the pensioners who lost their pensions in a scheme that it owned.
The insurance industry is terrified that the House could take a decision to hold a wide-ranging investigation into the scale of the assets that it is sitting on, and that we would find a legitimate case for saying that it should have been paying out from those assets. It is terrified that, were we to hold such an investigation, we would discover that it is sitting on shed loads of money that ought, quite properly, to be part of the subject of this House’s decision making. This is a fundamental decision about democracy. It is a question whether the House has the right and the courage to hold such an investigation, come back with conclusions and to make decisions on an informed basis. To rule out our right to hold such a wide-ranging investigation is an insult to ourselves as much as to the pensioners who are pleading for us to take action on their behalf.
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Although I sort of welcome moves in the direction of the payments of 80 per cent. and 90 per cent. of core pensions, the reality is that the 90 per cent. will not turn out to be 90 per cent. any more than the 80 per cent. turned out to be 80 per cent. The idea of core pensions involves taking the member’s expected pension, deducting all the inflation linking, some of the revaluation, the tax-free lump sum, some widow’s benefits and the ill health benefits, and then calculating 80 per cent. of the resulting figure. A further 22 per cent. is then deducted as tax at source to get to the final figure. And this is calculated only from the age of 65, not from the scheme pension age.
That is why Members are correct in saying that many of the scheme-affected members who are included in the FAS will struggle to get 50 per cent. of their expected pension. Those pensioners assail us in Parliament square and on the streets of our constituencies with the absurdity of the claim that they will somehow get 90 per cent. of their core pension; they will get only a sliver of their real entitlement.
Mr. Frank Field: Can my hon. Friend imagine what the reaction in the House would be if our pension scheme went belly up and our expectations of a modest retirement were ripped away from us? Would the House be this empty, or would all the Benches be overflowing with anger?
Alan Simpson: I am a huge admirer of my right hon. Friend, but he sometimes steals my final lines. This is kind of difficult, because that was going to be my concluding point. Were Members of this House to be told that, despite our contributions to our final salary scheme pensions, we were not going to receive the full entitlement that existed on paper, and that we ourselves were to be “FAS-ed”, our response would be unprintable. We would struggle to find a place to sit in the Chamber for such a debate, the Division Lobby would be crowded and we would vote to ensure that what had been promised to us, and what we had paid into, would be delivered. This is the issue that we have to address for ourselves. If that kind of approach is good enough for us, it has to be good enough for the pensioners outside Parliament who have been lobbying us for goodness knows how many years. Throughout their entire working lives, they have been honest contributors to what they believed were honest schemes.
Sir Patrick Cormack (South Staffordshire) (Con): Will the hon. Gentleman give way?
Alan Simpson: I will not give way; this is almost my final sentence.
We owe a debt of gratitude to the Lords for the amendments that they have passed, which get us all off the hook. Financially, it is a small hook, but morally and democratically, it is a huge hook. The best way in which we can thank the Lords is to vote to support their amendments when we have the chance to do so this evening.
Mike Penning (Hemel Hempstead) (Con): First, may I put on record what a pleasure it is to follow the hon. Member for Nottingham, South (Alan Simpson)? Listening to someone speaking from the heart as he did on behalf of his constituents for the five or six minutes that I heard him was a pleasure. We could all learn a lesson from the speech that he has just made.
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