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Lynne Jones (Birmingham, Selly Oak): Did my right hon. Friend notice how the Opposition spokesperson regarded the loss on the stock market of £405 billion in less than two years as unimportant in relation to the problems with private pension schemes? Does that loss not show the importance of having a sure foundation of state provision, so that people are not subjected to the vagaries of the stock market that we have witnessed in recent years? In that regard, what is the Government's justification for the 60:40 split?

Mr. Smith: I hear what my hon. Friend says. She underlines the importance of partnership, of a balance between private and state provision, and of not privatising the basic state pension.

Mr. Mark Francois (Rayleigh) rose

Mr. Oliver Heald (North-East Hertfordshire) rose

Mr. Smith: We need to talk about the basic questions of pension policy and the pensions framework. First, should we believe in the basic state pension as the foundation for pension provision in retirement? We say yes, but what about the hon. Member for Havant and his colleagues? They say that they have a compelling vision of privatisation.

Mr. Heald rose

Mr. Smith: Secondly, should we believe in rewarding people with modest pensions and savings with a top-up—the pension credit—rather than the old means-testing of pound-for-pound deductions? We do, but what about Conservative Members?

Several hon. Members rose

Mr. Smith: Thirdly, should we believe in a guaranteed minimum income to continue to tackle pensioner poverty—a minimum that we have increased by 30 per cent. since 1997? We do, but what about them?

Mr. Michael Jack (Fylde) rose

Mr. Smith: Fourthly, should pensioners continue to receive the £200 winter fuel payments, and should those over 75 continue to receive free television licences? [Interruption.] A Conservative Member says "Come on!", but those provisions make a great deal of difference

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to many pensioners throughout the country. It ill behoves Opposition Members to dismiss them as gimmicks, as they have done in the past.

Mr. Jack: I am disappointed that the Secretary of State has so far been unwilling to accept any responsibility for the crisis in our pension schemes. In a letter to me, the Church Commissioners confirmed that the Chancellor's tax on pension funds was costing the Church of England some £7 million a year. Many less well-off vicars are about to retire, uncertain of their financial future. Given the difficulties that churches experience in raising money, could the Secretary of State explain how the Church of England is to make up for the deficit in its pension funding that was caused by his Government?

Mr. Smith: I would set more store by such comments—I accept that they are well intentioned—from the right hon. Gentleman and his colleagues about dividend tax credits and corporation tax credits if they said that they would reinstate them. However, when challenged time and again, they will not say that.

Yesterday the shadow Chancellor gave a major speech on these issues. We have scoured the reports for the commitment that surely would not have escaped the attention of journalists that he was pledging to reinstate the tax credits. So the Tories are crying crocodile tears. Their approach is to keep quiet, hoping that the voters will not notice that they are same old Tories, and more extreme than ever. The policy of not owning up to what they believe in will not work.

Mrs. Angela Browning (Tiverton and Honiton) rose

Mr. Smith: In the end, we will have an open debate about policies in the House and the Tories will have to come forward with their proposals.

Mrs. Browning: Will the Secretary of State give way?

Mr. Smith: Not at the moment.

We inherited a pension system in chaos, riddled with disincentives, which did nothing for the poorest pensioners and penalised those with modest occupational pensions and savings.

Andrew Selous (South-West Bedfordshire) rose

Mr. Smith: The Tories presided over a growing gap between rich and poor pensioners. They left millions in poverty. They did nothing to help the low paid, those in part-time work, carers and disabled people.

Mr. Archy Kirkwood (Roxburgh and Berwickshire): I understand that blame allocation is an important part of this process. However, may I go back to the important point made by the right hon. Member for Birkenhead (Mr. Field)? No one in the Chamber can be in any doubt that we are in the middle of a crisis of confidence regarding funded pension schemes. I think that there is a six-month window of opportunity, and the Government have put some useful reviews in place that might assist that process.

I do not think that people listening to the debate will be satisfied simply with blame allocation. The key question for me this afternoon is whether the Secretary of

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State will lead a debate on what will eventually have to be a complete reconstruction of a settlement for funded pensions in the future, because that is what the country is looking for a lead to achieve.

Mr. Smith: I respect the contribution of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), not least as the Chairman of the Select Committee on Work and Pensions. It is important to have a debate. That is one of the reasons why I was so disappointed that we heard so little by way of constructive proposals from the Opposition.

Mrs. Browning rose

Mr. Smith: We want to have that debate and establish a consensus.

Mr. Richard Bacon (South Norfolk): Why does the right hon. Gentleman not give way then?

Mr. Smith: I have given way on several occasions already.

We believe in building partnership for pensions in this country. As well as the steps that we have taken to help today's pensioners, we are putting in place steps to help tomorrow's pensioners, such as long-term reforms to prevent poverty in the future by encouraging people to save for their retirement.

Mrs. Browning: Will the right hon. Gentleman give way?

Mr. Smith: The hon. Lady is very persistent; I will give way to her.

Mrs. Browning: The right hon. Gentleman is too kind. He expresses his concern about future generations; the most important thing is that younger people have an incentive to recognise that they must put money away today for when they eventually retire. When the Conservatives left office, there was more in funded pension funds in this country than in the rest of Europe put together. We had savings vehicles such as personal equity plans and tax-exempt special savings accounts—which the Government scrapped—so that there was an incentive for people to put away money for a rainy day and for their retirement through taxation vehicles as well as through pensions.

What possible incentive is there in the Government's taxation policy, which sees tax as being used only as a penalty as far as pensions are concerned, and not as an incentive? Will the right hon. Gentleman give us one good reason why the younger generation should believe that his policies will deliver for them, because they do not?

Mr. Smith: The hon. Lady raises an important question about raising the level of savings among the young. The answer is the ISA, a more flexible vehicle which is attracting more savings, especially from younger people. [Interruption.] The hon. Lady specifically asked what we could offer to younger people to ensure that they were saving, and I quite reasonably pointed to ISAs, just as I can point to the reward that we have built into the pension credit system for the future to ensure that saving is

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rewarded and not penalised. However, we must also continue to increase incomes by building a stable economy, making work pay and helping people into jobs—something that the Conservatives were not so good at when they were in government.

All those measures build on the historical partnership that we have enjoyed in this country—[Interruption.]—between the state, individuals and employers, and between the funded and state sectors. In that partnership, the state provides a basic pension on which people should build. It also provides the state second pension, so that from this April, 18 million people will start to gain from the changes that we have made.

Mr. Jim Cunningham (Coventry, South): Has my right hon. Friend noticed that Opposition Members have not mentioned the mis-selling of pensions that took place during their tenure of office? Will he reiterate that it is the Government's intention to defend the state pension, while working for improvements towards a decent income for pensioners?

Mr. Smith: I did indeed note the omissions from the remarks of Opposition Members. As I have reached the passage of my speech where I look to the future and to the forging of partnerships and consensus, I shall not dwell on the first point raised by my hon. Friend. What went wrong under the previous Tory Administration, as well as their failure to apologise for it, is evident to the public.

It is clear that to enjoy a secure income in retirement people need to build up more savings. Over 1.5 million more people are in work than in 1997. Having more people in work means that more people have the opportunity to save for their future. For those of working age who have never had the opportunity to join a company scheme—about half the work force—we have introduced new options for saving for retirement.

People need to be able to make informed choices. At present, pension provision and planning is an incomprehensible maze for far too many people—something that is easier to put off until another day. That must change.

The Government have an obligation, working with providers, to help people to obtain the information that they need to make informed choices.

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