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Pensioners...will not lose out over this.
Ten years on, he is still peddling that ridiculous line. Tell it to the single parent, working part-time, contributing about £100 a month, who has to increase her annual contributions by £850 to make up the damage caused by the Chancellors decision, or the young professional [ Interruption. ] I know Labour Members do not like to hear about those people. Perhaps they are not Labour people any more. A young professional who started her pension plan four years ago and contributes £400 a month will have to work 21 months longer, or increase her contributions by almost £1,000 a year, thanks to the Chancellor.
Rather than acknowledging responsibility, all we have heard from the Chancellor and his cronies is an increasingly desperate string of excuses. They were trotted out by the Economic Secretary on the Today programme a fortnight ago. It was a vintage performance. I know that the Chancellor is thinking about who might take his job when he moves next door, as he hopes. The Leader of the House of Commons has his hopes, as does the Secretary of State for Trade and Industry, but I think I speak on behalf of the whole Conservative party when I ask: please may we have the Economic Secretary? We think he is a real vote winner.
In the Today programme interviewthe hon. Gentlemans first big test as a Ministerhe made a number of extraordinary claims. The first was that the pension funds had been long-term gainers from the new pensions tax.
Mr. Osborne: The hon. Gentleman nods to repeat that claim. Indeed, the Chancellor repeated the claim a week later. Taking £100 billion from pension funds and telling them they were gainers has to take the prize for the most unbelievable political statement of the year. Richard Lambert does not believe it; the Economic Secretary should listen to him because he gave the hon. Gentleman his first job. Richard Lambert said that the tax raid made
a significant contribution to the weakening of the countrys occupational pensions platform.
The Chancellor will go down in history as the one who destroyed our pensions system.
This was the biggest attack on pensions in living memory. Even Robert Maxwell only took £450 million.
Mr. Graham Stuart (Beverley and Holderness) (Con): Is my hon. Friend aware that the Institute of Actuaries said that £150 billion may yet be a conservative estimate of the cost to the funds? Will he press the Chancellor to tell us today how much the tax has cost pension funds? Have the Government made estimates and what are they?
Mr. Osborne: I agree with my hon. Friend. When the Chancellor speaks, he would do well to tell us what the Treasurys estimate is of the damage done to British pensions by the money taken out of pension funds, but perhaps we shall have to wait a couple of years for the next freedom of information request.
Mr. Osborne: I want to carry on talking about the comments made by the Economic Secretary on the radio. He said, Dont blame us. It was all the idea of the CBI. They were demanding that we abolish dividend tax credit.
Mr. Osborne: It is no good the hon. Gentleman shaking his headthat is what he said. How did the CBI respond to his claim? The then director general, Adair Turner, went on the radio to say that it was completely untrue and that
at no time whatsoever did the CBI support the policy...when the change was introduced...I wrote to the Chancellor expressing our disagreement.
If the hon. Gentleman disagrees with that comment, perhaps he would like to intervene. [Hon. Members: Come on.] It is the hon. Gentlemans big moment in front of the Chancellorhe might get the job he is looking for.
Of course, it is not just the Economic Secretary who has made that claim. The Chancellor himself made it at the CBI conference in 2004. In answer to a question from the audience, he said that the case for abolishing dividend tax credits
was made originally by the CBI
a claim that we now know from Lord Turner is completely untrue. Since the Chancellor has discovered the art of the intervention, perhaps he will intervene now to disagree with me. No, he does not want to.
The third claim of the Chancellor is that the tax change was done to encourage long-term investment in the economy. He may well say that in his speech today, but the fact is that documents released by the Treasury show that the Chancellor had known all along that that was not the case. The advice he received from the Inland Revenue on 22 May that year clearly says that
the view of the economists is that overall the reform will be broadly neutral in terms of the amount of investment.
Mr. Bailey: Will the hon. Gentleman explain why, if the abolition of the tax credit was so devastating to pension funds, those funds assets rose by more than £150 billion in the three years after that?
Mr. Osborne: I have just read quotes from the CBI and the National Association of Pension Funds that show that there has been a devastating blow to pension funds and that more than £100 billion has been taken out of pensions. That is the case and peoples retirements have been raided. That was, indeed, predicted.
reduce funds available for reinvestment
significantly jaundice... the attitudes of investors in UK projects.
If officials were saying that there would be no overall effect on investment and Ministers were warning of a negative impact, why were the public told that investment would go up? Why? [Interruption.] The Economic Secretary is peddling another claim that is simply not the case. Business investment as a proportion of GDP has been at a record low.
Now, Mr. Speaker, we hear a lot of excuses from the Chancellor about his pensions tax. What we never hear is any expression of sympathy for the millions who have had their retirement funds raided. [Interruption.] Off go the boot boys. As I say, we never hear any expression of sympathy. In Budget after Budget, we hear nothing from the Chancellor about what we can do to restore confidence in pensions and nothing about how to help those who do the right thing.
Unlike the Chancellor, we are listening to the pensions industry and we are working with British businesses on the tax and regulatory changes that are needed. However, there is something that we can do right now for the 125,000 people who have lost some or all of their pensions because their company went bust. I imagine
that every MP has met some of those people in their constituency surgeries: their stories are heartbreaking, their dreams shattered with a lifetime of hard work and saving lostand all through no fault of their own.
We know that some of the fault lies with the Government. The parliamentary ombudsman made that clear in talking about maladministration. The Labour chair of the Public Administration Committee agrees with that verdict. He says that the Government should stop quibbling over this and act to find an acceptable solution for the thousands affected. That is the opinion of the chair of the Public Administration Committee and I agree with him. I believe that all of us, Government and Opposition alike, have a duty to help those people.
So far, frankly, the help has been inadequate. The Governments financial assistance scheme has cost £9 million to administer, but has paid out just £3 million to date. Even by this Chancellors standards, that is pretty poor value for money. We need a new approach, an approach that meets our moral obligations to those victims [Interruption.] Yes, the moral obligation that we all owe to those people. It is an approach that we need to adopt without placing a long-term additional burden on the public exchequer.
My hon. Friend the shadow pensions Minister has, along with Government Members, tabled amendments to the Pensions Bill, which reports to the House tomorrow. The effect of those amendments would be to create a lifeboat fund for the 125,000 people under the management of the Pension Protection Fund. The lifeboat fund would start making payments immediately to top up pensions to PPF levels90 per cent. of the total expected pension package. It would include the 6,000 people whose employers remain solvent, but whose pension scheme has gone bust. I agree with the hon. Member for Cardiff, North (Julie Morgan), who may be in the Chamber, although I cannot see her, that it is unjust to leave those unfortunate people facing financial ruin.
How much would all this cost? According to the e-mail that the Secretary of State for Work and Pensions sent to the parliamentary Labour party and which we have a copy of, the net present value cost is £600 million. The annual cash requirement begins at around £30 million, rises to a peak of perhaps three times that in 20 years time and then falls to zero. To get the money flowing now, the Treasury should make a loan to the lifeboat fund. That is the precedent of what the Government did with Robert Maxwell. The Treasury should then recover the money, on behalf of the fund, from the hundreds of millions of pounds of unclaimed pension assets that the industry itself confirms exist.
The amendments tomorrow command cross-party support and we will discover today whether they have the support of the Chancellor of the Exchequer. Perhaps he can tell us now. It is time for him to start making amends for the damage that he has done. The Chancellor has made many mistakes in his long time at the Treasurymistakes that are now coming home to roost. But surely the Chancellors biggest mistake was his first: his £100 billion raid on the nations pensions. Why did he do it? As one of my hon. Friends says, we are told that the millions who work hard and save hard for their pension are not his kind of people. In his eyes, their greatest sin is that they want to be independent of the state. In our eyes, that is one of their greatest virtues.
For 10 years, the Chancellor has twisted and turned and done everything possible to duck his responsibility and conceal the truth, but the great British pension theft was his crime. The Chancellor has raided the retirement hopes of millions and wrought desolation on the British pension system. We have no confidence in his management of pensions. We have no confidence that he has the answers for the future. Now it is time for him to stand up, face the music, and tell us all that he is sorry.
notes and welcomes the acts of this Chancellor and Government to tackle the legacy of pensions mis-selling, support occupational pensions through a Pension Protection Fund set up for the first time and anew Pensions Regulator, further support 125,000 people through the Financial Assistance Scheme whose occupational pensions were affected by employer insolvency, set out the long-term framework for pensions through the new Pensions Bill, including re-linking the uprating of the basic State Pension to average earnings, introduce a new scheme of low cost personal accounts and stakeholder pensions of which over three million have been created, remove the dividend tax credit, make reductions in corporation tax which have contributed to the 50 per cent. rise in business investment and helped the UK economy to grow in each of the last 39 quarters and introduce the winter fuel allowance, free television licences and the Pension Credit to provide an additional framework of support for todays pensioners..
I relish this debate. I will answer every question put to me. But as this is a debate about occupational pensions, why did the shadow Chancellor not mention first of all that we are the first Government in history to ensure protection for pensioners when their company goes bust? That was not done by the Conservatives; it was done by Labournot sympathy, but action. Why did not the shadow Chancellor start by also recognising that, retrospectively, we are helping those employees whose companies have gone bust? That is the means by which we are helping the 125,000 who suffered not because of a dividend tax credit, but because their company went bust. We are alsothe shadow Chancellor does not recognise thisthe first Government to address seriously the mis-selling of pensions that we inherited from the Conservatives. When we took office in 1997, 2 per cent. of the mis-selling had been dealt with. Within two years, the figure was 98 per cent. That was not done by the Conservatives; it was action by a Labour Government.
Mr. Brown: Will the shadow Chancellor not also acknowledge that we are the first Government to create an auto-enrolment pension scheme that will mean that all [ Interruption. ] I will give way to all the hon. Members who want to intervene once I have set out my argument and shown that the shadow Chancellor has made a series of mistakes.
We are the first Government to create an auto-enrolment pension scheme that will mean that all taxpayers have a pension from work. That was never done by the Conservatives; it has been implemented by Labour. We are the first Government to make it a priority to tackle pensioner poverty. That is why we have introduced the pension credit, the winter allowance, and the free TV licence for the over-75sopposed by the Conservative
party in the 2001 election. We will be the first Government in 30 years to restore the link between pensions and earnings when we introduce our long-term changes as a result of the Pensions Bill.
In 1996, the assets of pension funds were £549 billion. By 1999, they were £820 billion. By 2006, even after the stock market crash, the assets of pension funds were more than a trillion pounds. In other words, the assets of pension funds have doubled during the period of this Labour Government.
Let me also tell the shadow Chancellor that in 1996, the total income of pension funds was £34.4 billion. By 1999, it was £39.6 billion. By 2006, the figure was twice as much as it was in 1996: £71.3 billion.
If anyone expects the Conservative party to be more helpful to pensioners than we have been, let me read what the shadow Chancellor said at a meeting organised by The Independent at the Conservative party conference:
There are lots of Conservatives who come up to me and say weve really got to put more money into the pensions ... the test of whether we are ready for government is whether we can resist those additional
The strength of our argument is not just the points that I have made. It is based on the rock of the economy and making the right long-term decisions for the country. It is on the rock of the economy that occupational pensions and any other services in our country depend. I tell the House that I do not apologise for the three long-term decisions that I took in 1997 in the interest of stability and growth in this country: first, to make the Bank of England independent, which was opposed by the Conservatives; secondly, to build a fiscal framework for this country that allowed us to double public investment, which was opposed by the Conservatives; and, thirdly, to remove the bias against long-term investment in our economy. That bias was recognised by the previous Chancellor, and, to achieve that, we cut corporation tax by 2p in the pound.
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