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Let me make it clear that we welcome the report, just as we welcomed Alan Pickering's review when it was established. I join the Secretary of State in expressing our respect for the expertise and wisdom that Alan Pickering brought to the exercise. He has produced a valuable report.
Conservative Members respond to the Secretary of State's comments by saying that we understand that the regulatory regime for pensions must be stable to ensure long-term planning, and we will contribute constructively to the debate about the best ways of cutting the burden of regulations on pension funds. That is an obligation on all hon. Members on both sides of the House.
The starting point of the debate has to be a frank recognition of the scale of the problem that faces funded pensions. For years, Ministers have been shockingly complacent, saying that everything was all right when it clearly was not, and citing statistics that they have since admitted were seriously misleading. The Secretary of State should accept the stark warning in Alan Pickering's report that
We shall obviously want to study the proposals in the Pickering report very carefully, but I can tell the Secretary of State that we welcome the themes that are expounded in it. For example, we support the call for a proportionate regulatory environment, and we welcome Alan Pickering's vivid expression that a pension is a pension is a pension. There are too many different forms of pension, and it is right to try to simplify them. It is also true that too much pension provision has become a form of archaeology, with pension providers delving deep into the past to identify the date on which a pension was first set up in order to understand the tax and regulatory regime around it. That needs to be tackled.
If we do not get legislation until 2004, as has been suggested, the changes will not be implemented until 2005 at the earliest. Yet, if pension scheme closures carry on at their current rate, there will not be any pension schemes open to new members by the time that the Government finally get round to implementing the proposals in Alan Pickering's report. Will the Secretary of State take this opportunity to inform the House of the likely timetable of any legislation to implement proposals for reform?
May I also press the Secretary of State for more information about the burden of regulation, which is still increasing? Since the Pickering review was established in September 2001, we have had 251 pages of new regulations. We are still waiting for the final results of the Myners review. It is good to see a Treasury Minister on the Front Bench because the Treasury, in its commitment to implementing Myners, has been threatening pension schemes with yet more regulation. There is a useful warning in Mr. Pickering's report: he hopes that the people taking forward Mynershe might be thinking of the Financial Secretarywill
The terms of reference for Alan Pickering's report were very narrow and excluded some of the main factors that have been driving the crisis in funded pension provision. Why was Alan Pickering unable to comment on the structure of state pensions, including the state second pension, which left-wing think tanks such as the IPPR are now saying should be abolished before it has even begun?
What about the burden of ever more means-testing of pensioners? Why could not Pickering comment on the spread of means-testing, which will soon result in more than 50 per cent. of all pensioners finding themselves on a means test? If so many pensioners are to face means tests, which will mean that they are not fully rewarded for their saving, does the Secretary of State recognise the serious danger that the main beneficiaries of the review could be the richer half of the population? They will not be trapped by the means test that he is imposing on the less affluent 50 per cent. of pensioners.
What about the financial burdens that the Government have placed on pension funds which are their direct responsibility? What about the £5 billion a year tax on pension funds, and the £1.5 billion a year cost of the insufficient value for the contracted-out rebate? Does the Secretary of State recognise that that adds up to £6.5 billion a year being taken from our pension funds? That is the real reason why our pension funds are closing, and nothing that he said today showed any willingness to recognise the scale of that problem and what needs to be done to tackle it.
Mr. Smith: I thank the hon. Gentleman for his comments. He was considerably more constructive at the beginning than at the end. Indeed, his tone at the beginning is the one more likely to lead to a productive outcome for this House, the country and pensioners at large. I appreciate his welcome for the report and echo his praise for Alan Pickering's expertise and everything that he and his team have brought to the recommendations.
I welcome the hon. Gentleman's commitment to constructive engagement on these matters because pension policy is by definition for the long term. As Alan Pickering points out in his report, it does not coincide with the electoral cycle. All of us in this House have an interest in doingindeed we have a duty to doour very best to pull together to lay some foundations for occupational and private pensions that can stand the test of time. Therefore, as far as possible, constructive all-party engagement on these issues is very much to be welcomed.
The hon. Gentleman raised the issue of complacency. We are certainly not complacent on these matters. Indeed, the very reason that my predecessor, my right hon. Friend the Member for Edinburgh, Central (Mr. Darling), and the Chancellor commissioned not only the Pickering report but the Sandler review as well as the Inland Revenue tax simplification report before the recent events that have caused additional concern is that we were seized of the importance of getting the framework for occupational and personal pensions right.
There is a tendency for the debate to oscillate between hysteria at one extreme and complacency at the other. As a recent Financial Times editorial pointed out, the right thing to do is to take a hard-headed, realistic look at the challenge that we facethe challenge is certainly there, which is why we are producing a Green Paperand not to be distracted from the seriousness of that purpose.
On the timetable, of course we want to move as quickly as is sensible on a matter such as this, but, to get a considered reaction to these complex and, in some areas, contentious, proposals, it would not be right to proceed without hearing what the public, the other parties in the House, and the providersthe essential partners to successful future pension provisionhave to say about them. We also have to await the tax simplification review, and any tax implications from these proposals would, in any event, be considered on a Budget timetable.
The hon. Gentleman referred to the burden of regulations, which we are countering here. As I said in my statement, we are tackling regulations that have been put in place by successive Governments. I do not want to turn this into a partisan ding-dong
Mr. Smith: Tempting though my hon. Friend's suggestion is, the truth is that we have only to read the Pickering report to see the number of measures that he suggests need to be tackled that were actually the product of legislation passed by the previous Conservative Administration, albeit often with the best of intentions. One of our problems is that layer upon layer of complexity and regulation has been built up in response to short-term events, and that has left us all with a huge long-term problem.
On Myners, I am sure that we and the Treasury will bear in mind the need for simplification that Alan Pickering points to. On the hon. Gentleman's reference to means-testing, I have to say that the Conservatives seem deliberately and consistently to overlook the enormous benefit that the pension credit brings. It cannot be stated too often that, for those saving above the basic pension, the pension credit will, for the first time, reward that saving rather than penalising it as the Conservatives did.