House of Commons
Monday 10 February 2003
The House met at half-past Two o'clock
PRAYERS
[Mr. Speaker in the Chair]
Oral Answers to Questions
WORK AND PENSIONS
The Secretary of State was asked—
Retirement (Savings)
1. Mr. John Redwood (Wokingham): If he will make a statement on his policy towards saving for retirement. [96319]
The Secretary of State for Work and Pensions (Mr. Andrew Smith): The Green Paper sets out our proposals for helping people to choose how they plan for retirement, how much they save and for how long they keep working. Effective partnership—with Government, employees, employers and pension providers all playing their part—is clearly crucial.
Mr. Redwood : Now that we know that it costs £2 million to provide a pension fit for a Lord Chancellor, what have the Government to say to constituents of mine who struggle to save one tenth of that amount, only to discover that large sums have been stolen by the Chancellor's taxes and further big sums removed through the collapse in the stock market, in part brought on by the Chancellor's boom and bust policies? Will my constituents have to work for longer?
Mr. Smith: As the right hon. Gentleman well knows, the pension arrangements for the Lord Chancellor are set down in statute. The right hon. Gentleman might do well to reflect that the relevant legislation—the Lord Chancellor's Pension Act 1832 and the Parliamentary and Other Pensions Act 1972, as amended by the Ministerial and Other Pensions and Salaries Act 1991—were all passed by Liberal or Tory Administrations. As for the abolition of the tax dividend credit, we would pay more attention to the crocodile tears from the right hon. Gentleman and his colleagues if they proposed to reinstate the credit and to confirm whether they would at the same time put up corporation tax, because when we abolished the credit it was as part of a package that cut corporate taxes to incentivise investment.
John Cryer (Hornchurch): I ask my right hon. Friend not to take any notice of the gurus of casino economics among the Opposition. If he wishes to restore the level of saving for retirement, will he consider the following
options? First, will he consider forcing employers to contribute to pension schemes and also make it more difficult—if not impossible—to close down final salary schemes? Secondly, will he consider relinking the state pension to earnings—a link that was abolished by the Tories in 1981? I recognise the above-inflation increases of the past two years, but to institutionalise those increases we need the link reinstated. Finally, will he consider increasing the over-80s allowance, which has been left at the level at which it was set when it was introduced in 1981?
Mr. Smith: On the closure of schemes, my hon. Friend will know that our Green Paper sets out options to increase protection for those facing scheme closure, including investigating whether a central discontinuance fund—long campaigned for by the TUC—could be set up. The link to earnings would do nothing for the poorest pensioners, who have been the principal beneficiaries of the huge increases in the minimum income guarantee that we have introduced. That will be amplified by the pension credit, which will benefit half of pensioner households by an average of £400. As for compulsion, it falls within the terms of reference for the Pension Commission that the Government have established.
Mr. David Willetts (Havant): At least, unlike the Secretary of State, the Lord Chancellor has a clear policy on saving for retirement and appreciates the importance of having a large pension. I hope that the Secretary of State will confirm two points about his decision. Does the Lord Chancellor's decision not to take his full salary increase mean that he will also not take the higher pension, worth more than £250,000, that would accompany that higher salary? Will the Secretary of State also confirm that the total value of the Lord Chancellor's fund has already exceeded £1.4 million? That question relates directly to the Secretary of State's statement in December when he set an Inland Revenue limit of £1.4 million as the maximum value for any pension fund. If £1.4 million is enough for even the most senior manager in British industry, why is it not enough for the Lord Chancellor?
Mr. Smith: I dare say that the hon. Gentleman has a big pension, compared with most of our constituents. He would do well not to adopt the simple, cheap, populist gibing of having a go at the Lord Chancellor, whose pension—as I have explained—is set down by statute, in laws passed by the Tories. I take it that the hon. Gentleman would be in no more of a position to abrogate those laws than I am.
Mr. Willetts: I asked the Secretary of State specific questions about the value of the extra pension that goes with the Lord Chancellor's salary and the £1.4 million limit announced in the House in December. The right hon. Gentleman has refused to answer those questions. The enormous gap is between what the Lord Chancellor will get and the evidence published today in the report by PricewaterhouseCoopers that the average value of people's state and funded pensions is set to fall by 25 per cent. over the next decades. We see millions of people facing the fear of pensions that are losing value and a
member of the Government with a pension that is shooting up in value. Does the Secretary of State understand the outrage that the contrast causes?
Mr. Smith: I understand the public reaction and so, indeed, does the Lord Chancellor, which is why he had already put in hand a review of his salary arrangements and why he is taking only the same 2.5 per cent. that applies to members of the Government and Members of the House. As for the hon. Gentleman's other points, we shall take no lectures on pensioner security from those who were responsible for pension mis-selling, who plunged millions of pensioners into poverty and who, even now, would privatise the state pension.
Mr. Frank Field (Birkenhead): As we have recently learned that in a growing number of major companies the pension deficit is more than half the capital value of the firm, does my right hon. Friend expect that, over the next few years, there will be a significant increase in the number of companies that are winding up their pension schemes completely—not just for new members? If he thinks that is likely to happen, should not we legislate this year on the winding-up procedures?
Mr. Smith: As I have already said, improved protection for members facing the possible winding up of their schemes is an important part of the Green Paper. We shall complete consultation by next month and where it is a matter of secondary legislation it would be possible to move quickly to take further action. I hope that we shall have the support of both sides of the House in so doing.
Mr. Peter Lilley (Hitchin and Harpenden): The Secretary of State's predecessor acknowledged that he had inherited from the Conservatives the strongest system of occupational and private pensions in Europe. How is it that the Secretary of State has reduced the system to its biggest ever crisis? Is it because he has imposed a £5 billion a year tax on pensioners? There is now a 40 per cent. penalty for the majority of pensioners who save extra for their pension and the reward for encouraging people to save more has disappeared because of the 1 per cent. cap on stakeholders.
Mr. Smith: This country has a strong position on occupational and private provision; it had that historically and it still does, with the largest private pension savings in Europe. The right hon. Gentleman knows very well why pension funds are under pressure: greater longevity and the fall in the stock market. He can see that the measures set out in the Green Paper will build confidence by renewing partnership through the right Government framework and commitment by employers and employees; by greatly simplifying the tax treatment of pensions—something that I should have thought that the right hon. Gentleman would welcome; and by making it easier for people to move more flexibly, and at their choice, towards retirement. I have yet to hear any alternatives from the Opposition Front Bench. Indeed, although the Conservatives bleat about the tax
dividend credit, they never give a commitment to reinstate it. We shall take them seriously when they make some serious proposals.
Andrew Mackinlay (Thurrock): Does the Secretary of State accept that people in my constituency, in the M25 ring and in other conurbations who are saving for retirement are frustrated about the disparity in the services that they receive? That is especially the case for my constituents in comparison with the London boroughs, where there is a concessionary fare pass scheme. It is unfair that in England we tolerate the fact that some people have generous—[Interruption.] I deliberately said England because I am politically correct. There is disparity because people in inner-conurbation areas enjoy much more generous concessions than those in neighbouring areas, which means that they have more disposable income in real terms because they are not spending it on transport—
Mr. Speaker: Order. The question was about saving for retirement.
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