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Lord Mackay of Ardbrecknish: Answer my questions.
Lord McIntosh of Haringey: My Lords, because the noble Lord has asked a question and because he is a serious politician and a Member of the Opposition Front Bench for whom I have a lot of respect, I shall attempt to answer his questions when time becomes available.
As I think noble Lords would wish, I shall return to the more important issues of savings and pensions. I thank the noble Lord, Lord Dean of Harptree, for introducing a debate which has gathered very serious and thoughtful contributions. As the noble Lord and the House will know, and as we heard last week in the pensions debate to which my noble friend Lady Hollis replied, there is in train a review of pensions. The consultation period runs until the end of October. A White Paper will be published in the first half of next year and then there will be further consultation. Therefore, the words of noble Lords and their reactions to the White Paper will be taken very seriously because no one can claim that this is a simple matter for which there are simple solutions.
It is true that pension provision has become misaligned with the patterns of people's working lives. Someone--and I am afraid that I did not record who it was--asked me whether Beveridge was true now. We know about the devotion of my right honourable friend the Prime Minister to Lord Beveridge; but my answer to the question would be yes, Beveridge was true when
the principle was put forward. It is not a case of Beveridge's analysis having gone wrong, but that the pattern of people's working lives has changed. It is no longer true that very many people stay in jobs for which occupational pensions of the old kind will ultimately produce proper pensions. Therefore, there have to be changes. If those changes are to be effective, as a number of noble Lords have said, it is true that such changes must be achieved by consensus. That is why our consultation is so complex and so interactive.However, I have to say that any claim that the Labour Party has rejected consensus which the Conservative Party has applauded is very wide of the mark. After all, the first serious revision of Beveridge was developed by Mr. Richard Crossman in the Wilson Government during the late 1960s and was immediately abandoned by the Heath Government in 1970. The replacement for that, produced by Barbara Castle with agreement across both parties, was massacred by the Conservative Government in 1988. That is why we have the present difficulties with SERPs and with the balance between occupational and other pensions. That is why we have very largely the scandal of mis-selling of pensions, which I noticed was not a subject of debate today.
It is not enough for the noble Lord, Lord Mackay, in particular, to concentrate that half of his speech, which was about pensions, on the ACT decision as if, somehow, it was a huge change in the funding of pensions. The experience has been that that is not the case; indeed, the experience has been that, although we shall not have the valuation until next year or the year after, pension funds have the ability to absorb such changes. The changes have the advantage of removing an anomaly of double relief on pension funds which had to be done in any event.
Perhaps I may deal with that part of the noble Lord's questions. He talked about research by the City University into the balance between companies which pay dividends and those which do not. Surely the issue is not between those companies which pay dividends and those who do not. That is largely the difference between private and public companies. Of course there will be differences in that respect. The balance for public companies is that in this country such companies pay very much more in dividends than comparable companies of our principal European competitors. That is the comparison which should be made and not one between public and private companies.
To deal with the second question on the matter put forward by the noble Lord, Lord Mackay, I was asked whether the Department of Social Security was consulted before the ACT decision was made and what was its advice. I do not believe that the noble Lord would be likely to reveal officials' advice to Ministers. I do not recall any occasion when he did so when he was in government. However, the decision was a decision of all the Government and not of a particular department.
I return to the issue of savings and pensions. I do not believe that noble Lords made this mistake, but it would be a mistake to equate the two of them too readily. After all, savings are very necessary and they are part of the potential for growth and development in our economy;
but they are not the same as pension funding because the latter is inevitably locked in whereas saving can be reversed. That makes a difference--some economic difference--but, in particular, it makes a difference to the kind of tax concessions which are appropriate for savings and for pensions. I thought that the noble Lord, Lord Taverne, made several very pertinent points in that respect, although I am not sure that I can go along with him in anticipating the outcome of our review and say that some form of compulsory saving will be essential. However, it must be the case that if you make the tax advantages of saving too attractive, there is a danger of people choosing forms of saving which are not locked in rather than those which are to the detriment of pensions. I do not know where the final balance lies, but that balance must be taken into account.I return for a moment to the ACT change. A number of speakers referred to the issue of tax treatment of pension payments and savings. On savings, noble Lords will know that my right honourable friend the Chancellor of the Exchequer referred to developing plans for individual savings accounts in his Budget Statement. I take the advice of the noble Viscount, Lord Brentford, that the arrangements should be kept simple. The details of those individual savings accounts have not yet been finalised, and any discussion which has appeared in press reports in the past week or so is, I am afraid, pure speculation. The noble Viscount will have to wait for the result of the review to see what form such accounts will take. He can then tell me that it is not simple enough.
The changes in the advance corporation tax are nothing like as significant as the changes which Mr. Lilley in his role as Secretary of State for Social Security proposed before the election. Several speakers made it clear that the tax treatment of savings and pension payments are important. Mr. Lilley went as far as to say that the contributions should be taxed rather than the receipts. The implications of that in terms of inter-generational equity are enormous; but, because of the election, I do not believe that they were debated fully. However, such implications will have to be debated if we are to consider the full range of options. I hope that we shall agree that it is right to do what we have done with cross-party agreement for many years; namely, to encourage payments into pension funds by making the tax relief at that stage rather than at the stage of the receipt of pensions.
I now come to something which has not been debated: the inter-relationship between stability in financial markets and pensions--it is not quite true to say that because my noble friend Lord Barnett did mention that aspect. I thought that he talked good sense, as always. My noble friend referred to something quite significant in the light of what the noble Lord, Lord Mackay, said towards the end of his speech about this claimed instability in financial markets. It is often stated in certain sections of the press that markets would be less unstable if there were less discussion of such issues among special advisers, press officers, Ministers or whoever with the public and if there were less of it which was unattributable.
My noble friend referred to Mr. Alan Greenspan. If the latter makes a speech on the record, every single word--every single comma--that he uses is examined with theological intensity and the stock markets in the United States rise and fall according to the journalists' interpretation of what he is saying as if it were a discussion on the number of angels on the head of a pin. I do not think that we get round the problem of instability in financial markets, especially in a free market economy as has been said, by cutting out unofficial briefings and by relying on the words on the record of the chairman of the Federal Reserve Bank or anyone else. As regards the remarks of the noble Lord, Lord Mackay, about Mr. Lilley's letters to the Governor and to the Chancellor, I can give him the assurance that the Treasury will co-operate fully with the Governor in any investigation he chooses to undertake, and that the Chancellor will respond in detail to the letter which he has received from Mr. Lilley, I understand only this morning or yesterday.
To turn to the effect on pensions, they are of course long-term investments. Some of the anxiety which has been expressed has concerned relatively short-term investments. The whole thrust of government policy since the election--as exemplified in the Budget Statement and accompanying papers--is to establish a monetary framework as exemplified by the changes in responsibility for short-term interest rate policy regarding the Treasury and the Bank of England with low inflation targets. As the noble Baroness, Lady O'Cathain, said, that is a pre-condition of stability in our financial markets. At the same time our deficit reduction plan will produce sound, long-term growth and will reduce uncertainty about the interaction of government policy and the markets. That is most important. As I said, the whole thrust of government policy is to increase the stability of financial markets. In the long term, that is the best recipe for an effective savings and pensions policy.
I turn now, in what I think is an appropriate allocation of time, to the questions asked by the noble Lord, Lord Mackay, in relation to the EMU debate. He has accused us of indecision and speculation. That is a bit rich coming from the Opposition Front Bench. The formula expounded by the Conservative Government was that they would go into EMU when the time was right. For Mr. Kenneth Clarke that meant any coming day or any month, and for Mr. William Hague that means not in the lifetime of two Parliaments, not in 10 years, perhaps not in 20 years and perhaps not in 30 years. I listened carefully to his speeches when he was a candidate for the leadership of the Conservative Party. In other words, the reaction of the Conservative Party to this most important issue in our economic life has been fuelled and controlled by dissent within the party rather than by the economic interests of this country. I do not take kindly to accusations of indecision or speculation from noble Lords on the Bench opposite.
The noble Lord has invited me to make the Statement to Parliament which the Chancellor has promised to make when the House of Commons reconvenes. Irrespective of historical precedents, that is an extraordinary suggestion. The historical precedents are
rather clear. On Black Wednesday of September 1992 when we were forced out of the exchange rate mechanism--at a time when, if we are to believe Mr. Kenneth Clarke, he was a member of a government which had no economic policy at all--was Parliament recalled to debate that? No, it was not. On Black Monday of 1987 when the stock market fell--as it failed to fall this Monday--was Parliament recalled to debate that? No, it was not.
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