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Lord Haskel: I too admire my noble friend Lady Castle and cannot improve on the compliments paid to her by noble Lords opposite. However, I feel that she is wrong to say that there is no context in which these pension proposals are made. The context is modern working life.

In modern working life people are in and out of work much more frequently; they change their jobs more frequently; indeed, many people are self-employed. The Government tried to take care of that with the minimum wage and the working families' tax credit. In that way they seek to ensure that people receive a decent rate of pay. If people receive a decent rate of pay it gives them a chance to build up their own flexible pension which they can take with them from job to job. Indeed, if they are temporarily out of work or become carers, the Government have undertaken that the contributions will be paid.

That is the context within which stakeholder pensions are being proposed and it is a logical context in which they should be discussed and debated.

Baroness Crawley: My noble friend Lady Castle puts forward persuasive arguments, which is hardly

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surprising given her great expertise in these policy areas. I had the privilege of sitting with my noble friend for five years in the European Parliament and watched her forensically take apart good and bad arguments of parliamentarians from several member states of the European Union. No doubt, therefore, I shall be given a medal for foolhardiness for questioning her wisdom today.

I am not convinced that it is realistic to delay this part of the Bill on stakeholder pensions until all the Government's other pension proposals are debated and introduced. The new stakeholder pension, as I see it, should be introduced sooner rather than later; not least because as a new, flexible, low-cost pension it will allow up to 5 million people access to a value-for-money funded pension for the very first time. No one can say that the present system is working for the benefit of everyone in this country, and we know that, unless action is taken quickly to modernise the pension system, one in three pensioners--those are my figures; the noble Lord, Lord Higgins, may be right to say one in four, but it is certainly millions--will end up relying on means-tested benefits in retirement in the middle of the 21st century.

There is therefore more than an air of urgency about this debate. As noble Lords will know, the way in which pensions are provided for people continues to evolve. My noble friend Lord Haskel was right in saying that that evolution takes place in the context of rapidly changing markets, the increased supply of pensions to that rapidly changing market place and people's need for mobile pension schemes to suit their new working patterns. The delivery of pensions in the 1990s has become a partnership between the public and the private sector. The private sector delivers to those who can afford to save for their own retirement. The state should concentrate on what it does best; that is, alongside the basic pension, underpinning through the minimum income guarantee and the second state pension the incomes of those least well off.

We need to reflect on the fact that, because of this Labour Government's initiatives such as the minimum wage and the working families' tax credit which is to be introduced in November, 80 to 90 per cent of women earners, who are the traditional losers when it comes to the pay and pension stakes, will be taken above the lower earnings level. They will therefore be able to build up a contributory pension scheme. While that does not at a stroke solve the pensions consequences problem for low-paid women, it represents some progress and it should be seen as such.

Finally, I hope that we will not delay the establishment of a legal base for stakeholder pensions. They are an essential component of the whole reformed pensions package, not least because early legislation in this area gives time to potential providers to gear themselves up for the new schemes.

4.45 p.m.

Lord Peston: I intervene with some trepidation because, first, I do not agree with the amendment of

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my noble friends, Lady Castle and Lady Turner and, secondly, unlike everybody else who has spoken, I am a mere amateur. I am not an expert on pensions.

I should perhaps declare an interest which is the counterpart of that of the noble Lord, Lord Higgins; namely, I am an occupational pensioner. I have three pensions at least, all index-linked and I am a great believer in all these matters. I too am delighted the amendment was tabled because the topic is well worth exploring.

Perhaps I may start with one or two random remarks. I would love to believe that the Government have a master plan. If they do, no one has told me about it and perhaps my noble friend Lady Hollis will give me a copy of the master plan marked "Secret. Not for anybody else to see". I have read the published documents but my noble friend Lady Castle is talking about the master plan and not the published documents. If there is a master plan I should love to see it.

We must start from the position that the existing state of affairs with respect to income for the elderly is a complete mess. It is not something that any member of this party can support. It has gone from not very good to very bad indeed, especially for anybody who has to live on the state pension. I say to my noble friend Lady Castle that I too totally support the earnings-related update; I put my hand up to that. I have no doubt about that whatever. The problem is that the earnings-related update will be paid by the existing labour force. And how are we to persuade all those people who are currently in work to agree to what I would advocate; that is, a rise in taxation? I am still an old-fashioned person who strongly believes in progressive taxation and redistribution. The problem is persuading people to vote for it.

I have argued cynically for a great many years that I am astonished how, for 18 years, a lot of the relevant labour force voted for the party opposite, which abolished the earnings-related approach to this matter and, to a large extent, abolished progressive taxation. But when those same people, having voted for that, retired, they asked, "Where is our earnings-related pension?". It is a cynical view. When I address meetings and people question me about it, I respond by asking them, "What did you vote for all those years?"

If I had a vote, I would still vote for progressive taxation and uprating, but the problem is to persuade the workers in work to do so. I have to say that I am not convinced that they all will. So that is the nature of that problem. My noble friend Lady Castle ought to know that if she needs one supporter in favour of earnings related update, then I am it. Unfortunately, that does not help in a general election, particularly as I do not have a vote.

I turn now to the other problem that I have with this amendment. It is rather like the way that the Opposition have been approaching the House of Lords reform; in other words, it is based on the proposition that until you can do everything you should not do anything. I agree that this is only a first step. The way to judge it is to ask whether it is a first step that improves the current

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state of affairs. I have to say that I am persuaded that it will at least, within its limits, lead to an improved state of affairs in order to help, especially in the longer term.

I do not disagree with my noble friend Lady Castle. I think that my noble friend the Minister owes it to us to give us as much practical detail as possible. If she cannot do so now--and I doubt that she can--we would at some point like to see precisely how some of these measures will work. Both my noble friend Lady Castle and the noble Lord, Lord Higgins, said that they would really like to see step by step how it would work. I, too, should like to see more of that, but that does not mean that we should not proceed with the legislation as it is or try to move forward.

I have one further point to make about the question of what we can do. I actually believe that there is a broad sense in which the pension problem is insoluble. Indeed, it is fairly commonsensical; if it were an easy problem to crack, even noble Lords opposite would have cracked it. Certainly my noble friend Lady Hollis, who is brilliant at these things, would have got it sorted out by now. But we are discussing a number of rather conflicting difficulties. We have the problem of pensions for people who are in work, we have the problem of uncertainty with work and we have the problem that we do not have full employment. We also have all sorts of problems with the economy about which we do not even know.

Essentially, as the noble Lord, Lord Higgins, and others pointed out, we have the incentive problem. We certainly want to tell people that they will be safe in their old age. None of us has any doubts about that as a moral principle, but if we then say that we will guarantee it, you may ask, "Why should I guarantee it?" It is the classic problem and not one that is easily solved, although we all say that we favour solving it.

I have to tell my noble friend Lady Castle that I think she is being a little harsh in this respect. I stand second to no one in my willingness to attack my noble friends in government, especially as it turned out that I was not to be one of them. However, on this occasion my noble friend is being at least slightly unfair. The problem will not be easy to solve. But where people are in work and where the Government can deal with the mis-selling problem (which they can with appropriate controls), where they can say that, on average--not when you are poorer--if you can make provision for yourself within recognised schemes you should do so and where the Government then say that below that average they will use the tax system to try to help people, I think it is worth giving the kind of support that my noble friend would like to have on this occasion.

I conclude my remarks by saying that I am delighted that my noble friend Lady Castle has raised this matter. It has given me a chance to say a few words in support, as well as make other comments. I entirely agree with her that we want more detail, if we can have it. But I hope that she does not in any way force us to vote on

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the matter today and that she will content herself with at least hoping that my noble friend the Minister will give us some enlightenment and some answers.

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