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Richard Ottaway (Croydon, South): Is not the problem the fact that the Budget Book states that the Government are engaged in discussion and in reviews and analysis of the situation, yet Ministers make it clear that they have no intention of making any progress? We have one half of Government disagreeing with the other half.

Mr. Willetts: My hon. Friend is right. The Government have set out an objective for more funded pension provision, an objective which I wholeheartedly endorse. One of the Secretary of State's own documents states:

What does "over time" mean? How long will we have to wait to achieve that? Is the right hon. Gentleman taking any steps towards the achievement of that objective? The danger is that we are going in the opposite direction. The danger is that in Britain, after years of success in building up funded pensions, we may now be going backwards.

The gentleman who has just become the chairman of the National Association of Pension Funds says that stakeholders may force pension take-up down. He says that pension provision may fall with the introduction of stakeholders, if one of the effects of stakeholders is that people can move into inferior pension provision compared with what they currently have.

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Marks and Spencer Financial Services has warned of this in its "Stakeholder Barometer", which states:

That is hard evidence which I hope the Secretary of State will take into account.

The danger is not only that are we failing to make any progress towards the objective shared in all parts of the House of more funded pension provision relative to state provision; the danger is that we may be going backwards.

Paul Flynn (Newport, West): One policy project is to change a decision made by the Government that the hon. Gentleman supported on annuities at the age of 75. What will be his Government's policy, if they are elected at some future date? Will they abolish the stakeholder pension, or will they reform it? If they reform it, how will they do so?

Mr. Willetts: We are in favour of encouraging more funded pension provision. The purpose of the debate tonight is to establish what the Government are doing to meet their objectives for funded pension provision. I observe around the world a fascinating debate on how to encourage more funded pension provision. Our last manifesto contained proposals on that to encourage people to build up a funded alternative to the basic state pension, and on annuities. I support the initiative to simplify the regime for the regulation of pensions. I do not want to embarrass the right hon. Member for Birkenhead (Mr. Field), but his ideas for encouraging more funded pension provision are the sort of thing that we should be considering. Why are the Government doing nothing whatever to encourage more funded pension provision?

In an attempt to persuade the Minister for Pensions in particular of the power of our arguments, I refer the right hon. Gentleman to the notification that came across my desk of a conference which took place last week entitled "China's Pension System: Crisis and Challenge", on how China should move towards more funded pensions—[Interruption.] No, I am afraid I did not go.

For the Minister's benefit in particular I quote a resolution of the third plenary session of the 14th central committee of the Communist party of China calling for more funded pensions. It calls for the integration of

for funded pensions. We have now reached the stage where throughout the world there is a more radical debate about moving to more funded pensions than the Government are willing to tolerate in Britain.

Roger Casale (Wimbledon): Will the hon. Gentleman give way?

Mr. Willetts: No, I want to come rapidly to a conclusion because many other hon. Members wish to speak.

Throughout the world there is a debate about how to encourage more funded pension provision, an objective to which the Government have signed up. Why are they completely failing to meet their objectives?

Lynne Jones (Birmingham, Selly Oak): If the hon. Gentleman wants to encourage more people in the target

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earning group of £10,000 to £20,000 a year to take out funded pension schemes, what policies would he introduce to ensure that they are not caught in the means-tested trap which would make them little better off?

Mr. Willetts: One of the policies that we proposed at the last election was to enable people to build up bigger pension pots by making it possible to opt out from the basic state pension, which would increase their chance to build up a fund that would be worth so much that they would be floated off means-tested benefits.

I want to quote three organisations that have put clearly the points that we have tried to make this evening. First, Age Concern says that the crucial question is:

Does the Secretary of State disagree with Age Concern? Nick Timmins, writing in the Financial Times, said:

From the Secretary of State's own side comes the friendly fire of the Institute for Public Policy Research, which says:

It refers to

suggesting the need for a reassessment.

Tonight we ask the Secretary of State to come clean with the House about the take-up of stakeholder pensions and the reasons why they are manifestly failing to reach the target group who he has repeatedly assured the House are the people he expects to take out stakeholder pensions. In addition, we ask him to reflect on the fact that one of our nation's achievements was to build up more funded pensions as a proportion of our national income than just about any other advanced western country. That great achievement is now being frittered away, and stakeholder pensions are the latest example of that failure.

7.44 pm

The Secretary of State for Work and Pensions (Mr. Alistair Darling): I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

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I listened to the hon. Member for Havant (Mr. Willetts) make his second speech in the House since the general election. It is the second speech in which he has spoken at some length without at any point saying what his alternative approach might be, in this case on pension reform. I take with a pinch of salt his criticism of our policies. He is in the unusual position of having, in the previous Parliament, been responsible for not just one but two failed pension policies.

In May 2000, the Conservative party announced that it would get rid of the winter fuel payment and the free television licence, referring to them as gimmicks. In September 2000, the Conservatives said that they would consolidate the Government's "gimmicks" and redirect their savings into the basic state pension.

That is interesting because, when it comes to consistency, which is important in pension planning, I see from the Conservative party's website that its policy is to keep the winter fuel allowance and other special payments. It says:

Having moved from scrapping those gimmicks, they will now pay winter fuel payments to pensioners who live abroad and give free television licences to pensioners without televisions. That appears to be the sum total of the Conservatives' present policy.

The hon. Gentleman also referred to his second policy—it too encountered some difficulty during the election campaign—to scrap the basic state pension and encourage young people to opt out of it into a funded pension—[Interruption.] Conservative Members should be aware of the policies on which they fought the last election.

The difficulty is that the pension policy on which the hon. Gentleman fought the last election would have resulted in a young man having to save £10 a week from the age of 16 just to buy back the basic state pension that the Conservatives had taken away. The other difficulty, which is where the Conservatives got into real trouble at the election, is that the policy of moving everybody into a funded pension would have given rise to a black hole of some £6 billion. During the election campaign, they could not say where they could find that money, which is why, I think in week two, they stopped talking about their pension policy altogether.

The only thing that seems to have survived—at the moment anyway—is their savings policy, referred to in the motion, where 85 per cent. of the gain goes to the richest 20 per cent. of Conservatives. That should not be a surprise; nothing much has changed there.

I intend to deal with all the points that the hon. Gentleman made, but when we talk about the pension reforms that we put in place we have to bear in mind the problems that we encountered when we took office.

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