House of Lords
Thursday, 24th October 2002.
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Oxford): The CHAIRMAN OF COMMITTEES on the Woolsack.
The Earl of Courtown (Lord Saltersford)—Took the Oath.
Pension Contributions: Tax Relief
Lord Lea of Crondall asked Her Majesty's Government:
- What proportion of tax relief on pension contributions accrues to the top 10 per cent of earners and whether they propose to reduce it.
Lord McIntosh of Haringey: My Lords, estimates of the amount of relief accruing to the top 10 per cent of earners are not available. However, the Government estimate that more than half the tax relief given on pension contributions goes to higher rate taxpayers, who make up around 15 per cent of contributors.
Lord Lea of Crondall: My Lords, I thank my noble friend for that reply. He will be aware of the ballpark estimate, which is widely quoted, that some 50 per cent of the £16 billion of tax relief each year on pension contributions accrues to the top 10 per cent of earners and that 25 per cent goes to the top 2.5 per cent. Does he agree that there is something topsy-turvy about that? Does he further agree that the Inland Revenue's contribution to that inequality is becoming unsustainable, not least because whereas taxpayers at the top executive level are able to take full advantage of the whole of their tax allowance, those at the standard rate—given current incentives—are unable or unwilling to do so?
Lord McIntosh of Haringey: My Lords, I do not recognise my noble friend's figures. I gave the latest available figures to answer his Question. It is certainly true that fewer than one in 20 employees put in the full amount that they could under approved pension schemes. As for his second question, which was about money going to well-off people, he will be aware that since 1989 there has been a cap on income that is acceptable for approved pension schemes. That cap is now £97,200. The very large sums going to directors in pension payments—such stories appear in the press—are normally at the expense of shareholders rather than taxpayers.
Lord Marsh: My Lords, is the Minister aware that since 1997—these are the Inland Revenue's statistics—the tax paid by the top 10 per cent of taxpayers has risen from 48 per cent of the total tax take to 52 per cent of that total? Given that a major proportion of those people are employed in wealth creation, does he
believe that there is any point at which the process might prove to be counterproductive or even perhaps appear to be unfair?
Lord McIntosh of Haringey: My Lords, the Question is about pensions and the question of the noble Lord, Lord Marsh, is not about pensions. Yes, theoretically, if one projects any figures of that kind there will be an element of unfairness.
Lord Higgins: My Lords, I declare an interest as the chairman of a company pension fund. Is it still the Government's view—this arises from the earlier exchange—which was expressed in the 1998 Green Paper on partnership in pensions that the balance spent on pensions by the state and the private sectors will change from 60 per cent from the state sector and 40 per cent from the private sector to 40 per cent from the state sector and 60 per cent from the private sector; or is it now their view that the overall effect of their policy is to reverse that process, penalise people making private contributions of the kind mentioned by the noble Lord and move pensioners on to means-tested state benefits?
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Higgins, is fully entitled to remind us of the Green Paper of 1998. But as we have a pensions Green Paper coming out before the end of this year, which will cover exactly the points raised by the noble Lord, Lord Higgins, I think it would be unwise of me to anticipate it.
Baroness Turner of Camden: My Lords, does my noble friend agree that withdrawing tax relief from middle income ranges—that is, for people paying income tax on salaries of £33,000 and above—would be counterproductive because that would mean that such people would cease to have much incentive to save for retirement? That was hinted at in the press. It is the Government's policy that people should be encouraged to save for retirement with stakeholder pensions.
Lord McIntosh of Haringey: My Lords, I have seen the reports in the press. As the Secretary of State for Work and Pensions made clear, we have no such plans.
Lord Tebbit: My Lords, is it not remarkably natural that the people who pay most tax and the people who make the largest contributions to their future pensions will be those who get the most tax relief?
Lord McIntosh of Haringey: My Lords, that is one of the opinions that will undoubtedly be fed into the Green Paper. I am not going to anticipate it.
Lord Newby: My Lords, does the Minister agree that in relation to pensions the single biggest problem area involves people at the poorer end of the income scale? In relation to that area, the Government's stakeholder pension is their principal solution. Does he accept that many life assurance companies and other companies
no longer feel able to offer stakeholder pensions to poorer people because they would be no better off with a stakeholder pension than with the pension credit? Does he therefore accept that the Government's policies for poorer pensioners are a complete muddle?
Lord McIntosh of Haringey: My Lords, I simply do not accept what the noble Lord, Lord Newby, said about stakeholder pensions. It is not the case that stakeholder pensions are the only government policy. After all, the state second pension, which we introduced, covers 18 million people and by the end of June of this year, the stakeholder pension covered more than 1 million people. Those are successful and popular policies and they help the less-well-off people to whom the noble Lord referred.
Lord Brookman: My Lords, I am sure that my noble friend is aware of the plight of steel workers in Cardiff at the Allied Steel and Wire plant, which has gone into liquidation. Some of those employees, who paid contributions for 20 or 30 years, will not, as I read the situation, receive a pension at all. What is the Government's view of that predicament?
Lord McIntosh of Haringey: My Lords, I do not know the particular case to which my noble friend refers. If a company goes into liquidation, its pensioners are creditors and they have a right to expect some recompense. In any case, the pension fund is normally independent of the company's own balance sheet. I am surprised to hear what my noble friend said but I shall investigate and write to him about it.
Baroness Platt of Writtle: My Lords, will the Government remember, in the forthcoming Green Paper, that pension contributions are paid out of taxed income and that pensions are taxed as well?
Lord McIntosh of Haringey: Yes, my Lords, that is an element of inter-generational equity, which has been going for very many years. It was questioned only once, in a flurry of radicalism by Mr Peter Lilley before the 1997 election. That proposal did not receive much favour.
Specialist Schools
3.9 p.m.
Lord Dormand of Easington asked Her Majesty's Government:
- How many specialist schools there are and how many of those select their pupils wholly or partly on grounds of ability.
The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland): My Lords, out of a total of 992 specialist schools, 47 grammar schools have specialist status. The department does not collect figures on partial selection by ability. Secondary schools are
allowed to select up to 10 per cent of pupils by aptitude in a specialism, but we estimate that only 6 per cent of specialist schools use that right in whole or in part.
Lord Dormand of Easington: My Lords, I thank my noble friend for that reply. However, can she give an absolute assurance that no selection by ability takes place at any of the schools now designated as specialist schools, beacon schools, city academies or any other proposed newly-designated school? These days, there are so many types of school that we have to make a comprehensive statement on them. Can my noble friend say what the Prime Minister meant by his recent remark:
- "We are moving to the post-comprehensive era"?
My right honourable friend the Prime Minister was clear that we want to move into a world in which every child has the best possible education and that we should aim to achieve that in an equitable and fair way. Noble Lords will know that one way in which we seek to do so is by supporting our schools in recognising what unites them as well as what makes each of them special and different. We want to ensure that they have the opportunity to work with their young people in offering their specialism.
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