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James Purnell: The hon. Gentleman referred to hares being started; he can kill one off straight away. Can he guarantee that the state second pension and SERPS will remain part of his party's plans and that he will not allow it to be raided to pay for the priorities of the other spending Departments represented on his Front Bench?
Mr. Boswell: I have already dealt with the generality and made it clear that, on the specifics, we shall consider the best measure of approach. That is why we have been taking the advice of all parties that have a contribution to make. Sadly, I was not present to hear the hon. Gentleman's speech, but I am quite ready to read it in Hansard. Of course, we take advice from the TUC, just as we do from the CBI. Indeed, I shall refer to them later.
This debate is in ample measure directly about this Government's complacency and arrogance in the face of a "deepening crisis" on pensions. If Ministers object to our using that phrase, I hope that they will reflect that it is not ours, but that of the TUC. In the Government's first term, the only pensions crisis that they wanted to
I may say that responsibility for the matter is still being argued in the briefing battle between the Office for National Statistics and the Department. It is an internal matter for the Government, but it might never have come to light without the assiduity of my hon. Friend the Member for Havant (Mr. Willetts). At any rate, as this Secretary of State is new to his post, he has the chance to make a fresh start and leave his unfortunate legacy behind. The position on funded pensions, although it is indeed serious, as hon. Members in all parts of the House have acknowledged, is not irretrievably hopeless, provided that Ministers drop their complacency and take positive action now.
In a thoughtful article published this week, which has already been mentioned, Nicholas Timmins pointed out that many of those retiring today on occupational schemes may still be relatively well off. That colours our view of the situation, but I doubt whether the same could be said for those with final salary or personal pensions who are trying to secure an annuity at today's low rates with their pension pot, unless they were safeguarded by a timely switch to a bond-based fundalthough all pensions have sadly been battered by the slide in stock markets.
The real crisis, however, is not for today's pensioners, but for those of tomorrow. I gather that I am not the only member of my generationthose of a certain agewho remembers the famous Pearl Assurance advertisement concerning the desirability of having a pension. For the sake of greater accuracy, I have procured a copy. The advertisement gave five age-based viewpoints covering four decades, beginning with that of a sleek 25-year-old: "They tell me the job is not pensionable." And so it went onthe same person reporting every 10 years, with fewer hairs and more worry. At 45, he was saying, "How I wish I could look forward to a pension."
That advertisement appeared from my childhood until my early working years, from 1951 until it was last used in 1970. That is 32 years ago, I am ashamed to say, but I remember it vividly. It long pre-dated the introduction of personal pensions, and even the explosion of company schemes that took place in the 1950s; but if a warning bell was required then for entrants to the labour force who I hope now enjoy the fruits of their retirement, it is required no less now for the labour force entrants of the 2000s, who must also be looking forward at least 50 years.
The debate has already documented the decline in occupational pension schemes and in the overall savings ratio. So far, Ministers have gone around oozing complacency and even suggesting that such schemes have been on the slide since 1967, but it is clear that only now, after a long period of relative stability, are there real and evident signs of decline. The number of schemes being closed to new members, as reported to the NAPF, rocketed from 18 to 46 in one year. Other studies have shown that up to half the remaining companies are contemplating closure. The debate has revealed widespread concern about the implications of the new accounting standards for the viability of future schemesnot least for their acceptability to financially hard-pressed companies.
One aspect of the current situation that is often overlooked is the growing disparity in size and even interests between the existing labour force and former pensioned employees. That may be one reason why until recently the TUC and member unions did not engage as assiduously as did the hon. Member for Hamilton, South (Mr. Tynan)as was clear from his accountin negotiations on behalf of staff.
One well known company that briefed me for the debate has 900 employees contributing to its pension scheme; yet it has 2,000 members with deferred benefits, and 2,500 pensioners receiving payments. It described its action to repair an estimated £30 million deficiency in its scheme as a draconian recovery programme involving annual lump sum payments by shareholders, increased employee contributions and/or reduced benefits, and a shift in future investment policy away from the United Kingdom stock market to bonds, or even abroad. Some companies, of course, cannot do that.
Conservative Members do not mind the Prime Minister's reference to the stock market going up or down, but we do object to Ministers' using it as a yo-yo. One minute it is a justification for the tax raid on pension funds when markets were booming; the next minute they lapse into silence because, as has happened now, the markets have fallen below their original level.
The one clear discretionary policy intervention by Labour Ministers has been the withdrawal of advance corporation tax relief on pension funds. At the time, they thought that no one had noticed. Modestly, I have been re-reading some of the speeches that I made in the Standing Committee of that five-year-old Finance Bill, in 1997; in one of them, I said:
The Government are on their own in claiming that their flagship stakeholder scheme is a success. In fact, they have even overtaken their new Secretary of State on that matter. In an intervention today, he was asked what advice he could give to younger people. He did not say that he would tell them to take out a stakeholder pension; he said that he would tell them to take out a PEP or an ISA. Even now, six months after the legal requirement came into force, an estimated 10 per cent. of employers have not designated the scheme. With fewer than 1 million pensions sold in the first yearnot all, by any means, to new investorsthe Government are experiencing the same stock and flow problem in which they entrapped themselves over the overall pension savings figures: they are simply failing to hit the target.
This debate cannot be separated from that on the Government's own state pension provision. I would like to make it clear that I have given the Opposition's commitment to the principle of a public involvement in pension policy. It is amazing, however, that Ministers who came in with a pathological aversion to means-testing have ended up as its greatest advocates.