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9.45 pm

The Secretary of State for Work and Pensions (Mr. John Hutton): First, I congratulate all my hon. Friends, who made excellent speeches in the debate. I will come to their speeches in a second. We heard two interesting things from the Opposition Front-Bench spokesmen today. [Interruption.] No, they were interesting. I was here for all of the debate, and I counted two interesting things. The first was that, according to the hon. Member for Runnymede and Weybridge (Mr. Hammond), the Conservatives did not cut the dividend tax credit; they simply adjusted it. I think that we will keep a close eye on that type of rhetoric, and perhaps we will find that it applies more widely when we come to consider their record in government.

The more substantive point that the Conservatives made, which we Labour Members completely and totally reject, concerned the idea that my right hon. Friend, who has done a superb job as the Chancellor of the Exchequer, was, in any way, shape or form, not straight or honest about the changes that he made in the Budget in 1997. That is a charge that we completely and totally refute.

Mr. Lilley: Will the right hon. Gentleman give way?

Mr. Hutton: I will give way in a minute; I will refer to the right hon. Gentleman’s contribution soon.

We heard excellent speeches from my right hon. Friend the Member for West Dunbartonshire (John McFall) and my hon. Friends the Members for Coventry, North-West (Mr. Robinson), for Birmingham, Erdington (Mr. Simon), for Caerphilly (Mr. David), for Amber Valley (Judy Mallaber), for Stourbridge (Lynda Waltho), for Wirral, West (Stephen Hesford) and for Hartlepool (Mr. Wright). My right hon. Friend the Member for West Dunbartonshire referred to the hypocrisy and hullabaloo around the issue, and in particular to the way in which the shadow Chancellor presented his so-called argument. He made the important point that in the Chamber, personal abuse and personal attacks are not really a substitute for a sound argument. There was no substance whatever to the remarks that the hon. Member for Tatton (Mr. Osborne) made today; that is absolutely clear.

My hon. Friends the Members for Birmingham, Erdington, for Caerphilly, for Amber Valley, for Stourbridge and for Wirral, West all argued in principle in favour of the changes that we made in the Budget of 1997. They did so with conviction, and their remarks were in contrast
17 Apr 2007 : Column 261
to those made by Opposition Members. My hon. Friend the Member for Hartlepool made an excellent speech. I think that I am right in saying that he was the only accountant to speak today. [Interruption.] Well, there may have been other accountants, but my hon. Friend has my business any time that he wants to take it on.

The hon. Member for Twickenham (Dr. Cable), who spoke for the Liberal Democrats, suggested that the attacks made on the Chancellor by the Opposition were unfair, but said that he would vote with the Opposition anyway. That summarises in a nutshell the position that the Liberal Democrats usually end up taking. Of the speeches made by Conservative Members, I shall refer briefly to those made by the former Chancellor of the Exchequer, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who I see is in the Chamber; the right hon. Member for Charnwood (Mr. Dorrell), who served with the former Chancellor in the Treasury; and the right hon. Member for Hitchin and Harpenden, who also has an interesting track record on the matters that we are discussing. He served in the Treasury at the time of cuts—I am sorry, adjustments—to the dividend tax credits. In addition—and this is probably a unique achievement—he was a Minister during the pensions mis-selling crisis. Not only that, he was the author of the disastrous reforms that the Conservative Government proposed to make to the basic state pension, which, we should remember, would have abolished personal tax relief for pensions. He asked me earlier to give way, and I am happy to do so now.

Mr. Lilley: The right hon. Gentleman said that he entirely repudiated any suggestion that the Chancellor had been less than forthcoming about his announcement when he made the Budget statement. Can he tell us where in the Budget statement the Chancellor indicated that the measure would take £5 billion out of pension funds, or even a penny?

Mr. Hutton: I will furnish the right hon. Gentleman with the details, but I think that he will find that figure in the Red Book. He should remember that that is part of the Budget process.

I always carefully follow the remarks of the right hon. Member for Charnwood because I have a lot of respect for him both as a Member and as a former Minister. However, I must correct one claim that he made, because it was not correct. He said that the dividend tax credit changes that my right hon. Friend the Chancellor introduced in 1997 broke the principle that pension contributions are exempt on investment and taxed on receipt. I remind him that my right hon. Friend’s changes did not change any of the fundamental principles of the taxation of pensions. Contributions to pensions remain exempt from tax and, indeed, my right hon. Friend has introduced important simplifications to the tax regime for pensions. Investment returns in pension schemes remain exempt from taxation.

Mr. Dorrell: That is simply not right. Payments by companies of dividends come out of taxed income. Dividends received by pension funds are therefore taxed income. It was to avoid that double taxation of income received as dividends being taxed again when distributed as pensions that the original imputation system of corporation tax was established. It was precisely to avoid the double taxation that the Secretary of State says does not exist.

17 Apr 2007 : Column 262

Mr. Hutton: No, I think that the right hon. Gentleman has conflated a number of different arguments. That was, however, a useful clarification of his speech— [ Interruption. ] It was, because it contradicted what he said in his speech, in which he made it clear that we had broken the principle of investments being exempt from taxation. [ Interruption. ]

Mr. Speaker: Order. Hon. Members must let the Secretary of State speak.

Hon. Members: We want the Chancellor to speak.

Mr. Speaker: Order. The Chancellor spoke earlier. It is important that hon. Members allow the Secretary of State to speak.

Mr. Hutton: I am grateful, Mr. Speaker. The problem—and it is a problem not just for the right hon. Member for Charnwood but for all the Opposition Members who spoke in the debate—is that the logic of his speech is that he would reverse the changes to dividend tax credit. That is the one policy that we all waited to hear about today, but we did not hear it. It was conspicuous that in the speeches of Opposition Members— [ Interruption. ] There is no point in their trying to barrack me and make their speeches again, as they had an opportunity, which they completely fluffed. It is evident to everyone watching the debate that the Tories have no policy to address the problem that they have spent the past six and a half hours describing in detail to the House.

Opposition Members have had plenty of time to make their position clear. We made those changes to the tax regime 10 years ago, and there have been two general elections in the intervening period. Just to remind them, we won those general elections because of the stewardship of my right hon. Friend the Chancellor and because of the way in which we have governed the country. After two general elections and 10 years of waiting, there is still no hint of a Tory policy and no commitment to reverse the changes about which they have complained. This has been one of the worst performances by the Opposition that I have witnessed in my time in this House.

According to Conservative Members—we heard this throughout their speeches—this Government supposedly inherited one of the best pension environments in the world in 1997, which explicitly underpinned most of what the right hon. and learned Member for Rushcliffe said in his speech. The only problem with that argument is that the facts tell a different story. In 1997, nearly 3 million pensioners were living in poverty. Many women were denied the opportunity to secure a full basic state pension in their own right, and carers were similarly mistreated by the system. It was no golden age of private pension schemes, either. The mis-selling of private pensions, which was overseen by the previous Government, many of whose members are still here today, was a national disgrace. Millions of workers had no access to occupational pensions. That was no utopia.

We need to be clear about one more thing, too. As my right hon. Friend the Chancellor has said, the shift from defined benefit schemes towards defined contribution schemes is not a UK phenomenon brought about by changes to corporation tax. Far from it—as the Chancellor and many Labour Members have made clear, the effects of demographic change have impacted on pension schemes and systems right across the globe. My argument today
17 Apr 2007 : Column 263
is that this Government have acted properly and responsibly in meeting the challenges that our pension system has faced since 1997.

Mr. Kenneth Clarke: I do not understand the point that the Secretary of State has just made about the situation in 1997, when, of course, everything was not perfect in the occupational pensions world. Does he accept that it was precisely because the three new Labour leaders believed that pension funds were in an impregnable financial position that they thought that the pension funds could stand a £5 billion a year loss without anybody having anything to worry about? There has been a move away from direct benefit pensions elsewhere, because other problems have occurred for pensions everywhere. In this country, the avalanche out of defined benefit schemes into other types of schemes, or none at all, grotesquely exceeds anything in any other jurisdiction.

Mr. Hutton: I am sorry, but I cannot remember what the right hon. and learned Gentleman was saying at the beginning of his intervention. The changes were part of a series of reforms to corporation tax that were designed to address what many people, including the Conservative party when it was in government, had identified as a distortion in the tax system. The Conservative Government made their five separate adjustments to dividend tax credits, but the point of my right hon. Friend’s reforms was to make sure that we could then go further and cut corporation tax. They cut the dividend tax credit, but they never cut the main rate of corporation tax, which is the problem that the right hon. and learned Gentleman must address.

I have only two minutes left, and everyone will be glad to know that the remaining 12 pages of my speech will probably never be heard in this House. [ Interruption. ] Having read them, that is probably a good idea. In conclusion, the Opposition have made a lot of the process and also the policy behind the changes made by my right hon. Friend, but we have still not heard the Conservative response to any of those changes, and I have a very strong sense that we will never hear it.

Mr. Patrick McLoughlin (West Derbyshire) (Con) rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 233, Noes 298.
Division No. 089]
[9.59 pm


Afriyie, Adam
Ainsworth, Mr. Peter
Alexander, Danny
Amess, Mr. David
Atkinson, Mr. Peter
Bacon, Mr. Richard
Barker, Gregory
Baron, Mr. John
Barrett, John
Beith, rh Mr. Alan
Bellingham, Mr. Henry
Benyon, Mr. Richard
Bercow, John
Beresford, Sir Paul
Binley, Mr. Brian
Blunt, Mr. Crispin
Bone, Mr. Peter
Bottomley, Peter
Brady, Mr. Graham
Brake, Tom
Brazier, Mr. Julian
Breed, Mr. Colin
Brokenshire, James
Browne, Mr. Jeremy
Browning, Angela
Bruce, rh Malcolm

Burns, Mr. Simon
Burrowes, Mr. David
Burstow, Mr. Paul
Burt, Alistair
Burt, Lorely
Cable, Dr. Vincent
Cameron, rh Mr. David
Campbell, rh Sir Menzies
Carmichael, Mr. Alistair
Carswell, Mr. Douglas
Cash, Mr. William
Clark, Greg
Clarke, rh Mr. Kenneth
Clifton-Brown, Mr. Geoffrey
Conway, Derek
Cormack, Sir Patrick
Cox, Mr. Geoffrey
Crabb, Mr. Stephen
Curry, rh Mr. David
Davey, Mr. Edward
Davies, David T.C. (Monmouth)
Davies, Philip
Davies, Mr. Quentin
Davis, rh David (Haltemprice and Howden)
Djanogly, Mr. Jonathan
Donaldson, Mr. Jeffrey M.
Dorrell, rh Mr. Stephen
Dorries, Mrs. Nadine
Duddridge, James
Duncan Smith, rh Mr. Iain
Dunne, Mr. Philip
Ellwood, Mr. Tobias
Fabricant, Michael
Fallon, Mr. Michael
Featherstone, Lynne
Field, Mr. Mark
Foster, Mr. Don
Fox, Dr. Liam
Francois, Mr. Mark
Fraser, Mr. Christopher
Gale, Mr. Roger
Garnier, Mr. Edward
Gauke, Mr. David
George, Andrew
Gibb, Mr. Nick
Gidley, Sandra
Gillan, Mrs. Cheryl
Goldsworthy, Julia
Goodman, Mr. Paul
Goodwill, Mr. Robert
Gove, Michael
Grayling, Chris
Green, Damian
Greening, Justine
Grieve, Mr. Dominic
Gummer, rh Mr. John
Hague, rh Mr. William
Hammond, Mr. Philip
Hammond, Stephen
Hands, Mr. Greg
Harper, Mr. Mark
Harris, Dr. Evan
Harvey, Nick
Hayes, Mr. John
Heald, Mr. Oliver
Heath, Mr. David
Heathcoat-Amory, rh Mr. David
Hemming, John
Hendry, Charles
Herbert, Nick
Hermon, Lady
Hoban, Mr. Mark
Hogg, rh Mr. Douglas
Hollobone, Mr. Philip
Holmes, Paul
Horam, Mr. John
Howard, rh Mr. Michael
Howarth, David
Howarth, Mr. Gerald
Hughes, Simon
Huhne, Chris
Hunt, Mr. Jeremy
Hunter, Mark
Hurd, Mr. Nick
Jack, rh Mr. Michael
Jackson, Mr. Stewart
Johnson, Mr. Boris
Jones, Mr. David
Kawczynski, Daniel
Keetch, Mr. Paul
Key, Robert
Kirkbride, Miss Julie
Knight, rh Mr. Greg
Kramer, Susan
Laing, Mrs. Eleanor
Lait, Mrs. Jacqui
Lamb, Norman
Lansley, Mr. Andrew
Laws, Mr. David
Leigh, Mr. Edward
Letwin, rh Mr. Oliver
Liddell-Grainger, Mr. Ian
Lidington, Mr. David
Lilley, rh Mr. Peter
Llwyd, Mr. Elfyn
Loughton, Tim
Luff, Peter
Mackay, rh Mr. Andrew
Maclean, rh David
Main, Anne
Maples, Mr. John
Mates, rh Mr. Michael
Maude, rh Mr. Francis
May, rh Mrs. Theresa
McIntosh, Miss Anne
McLoughlin, rh Mr. Patrick
Mercer, Patrick
Miller, Mrs. Maria
Milton, Anne
Mitchell, Mr. Andrew
Moore, Mr. Michael
Moss, Mr. Malcolm
Mulholland, Greg
Mundell, David
Murrison, Dr. Andrew
Neill, Robert
Newmark, Mr. Brooks
O'Brien, Mr. Stephen
Öpik, Lembit
Osborne, Mr. George
Ottaway, Richard
Paice, Mr. James
Paterson, Mr. Owen
Pelling, Mr. Andrew
Penning, Mike
Penrose, John
Pickles, Mr. Eric
Prisk, Mr. Mark
Pritchard, Mark
Pugh, Dr. John
Randall, Mr. John

Redwood, rh Mr. John
Rifkind, rh Sir Malcolm
Robathan, Mr. Andrew
Robertson, Hugh
Robertson, Mr. Laurence
Rogerson, Mr. Dan
Rosindell, Andrew
Ruffley, Mr. David
Russell, Bob
Sanders, Mr. Adrian
Scott, Mr. Lee
Selous, Andrew
Shapps, Grant
Shepherd, Mr. Richard
Simmonds, Mark
Simpson, Mr. Keith
Smith, Sir Robert
Spelman, Mrs. Caroline
Spicer, Sir Michael
Spink, Bob
Spring, Mr. Richard
Stanley, rh Sir John
Steen, Mr. Anthony
Streeter, Mr. Gary
Stuart, Mr. Graham
Stunell, Andrew
Swayne, Mr. Desmond
Swinson, Jo
Swire, Mr. Hugo
Syms, Mr. Robert
Tapsell, Sir Peter
Taylor, Mr. Ian
Taylor, Matthew
Teather, Sarah
Thurso, John
Tredinnick, David
Tyrie, Mr. Andrew
Vaizey, Mr. Edward
Vara, Mr. Shailesh
Viggers, Peter
Villiers, Mrs. Theresa
Walker, Mr. Charles
Wallace, Mr. Ben
Waterson, Mr. Nigel
Watkinson, Angela
Webb, Steve
Weir, Mr. Mike
Whittingdale, Mr. John
Widdecombe, rh Miss Ann
Wiggin, Bill
Willetts, Mr. David
Williams, Hywel
Williams, Mark
Williams, Mr. Roger
Williams, Stephen
Willis, Mr. Phil
Willott, Jenny
Wilson, Mr. Rob
Wilson, Sammy
Winterton, Ann
Winterton, Sir Nicholas
Wishart, Pete
Wright, Jeremy
Yeo, Mr. Tim
Young, rh Sir George
Younger-Ross, Richard
Tellers for the Ayes:

Mr. David Evennett and
Mr. Mark Lancaster

Abbott, Ms Diane
Ainger, Nick
Ainsworth, rh Mr. Bob
Allen, Mr. Graham
Anderson, Mr. David
Anderson, Janet
Armstrong, rh Hilary
Atkins, Charlotte
Austin, Mr. Ian
Bailey, Mr. Adrian
Baird, Vera
Balls, Ed
Banks, Gordon
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Bayley, Hugh
Begg, Miss Anne
Bell, Sir Stuart
Benn, rh Hilary
Benton, Mr. Joe
Betts, Mr. Clive
Blackman-Woods, Dr. Roberta
Blears, rh Hazel
Blizzard, Mr. Bob
Blunkett, rh Mr. David
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, rh Mr. Gordon
Brown, Lyn
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Des
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, Andy
Butler, Ms Dawn
Byers, rh Mr. Stephen
Cairns, David
Campbell, Mr. Alan
Campbell, Mr. Ronnie
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clapham, Mr. Michael
Clark, Ms Katy
Clarke, rh Mr. Charles
Clarke, rh Mr. Tom
Clelland, Mr. David
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cook, Frank
Cooper, Rosie
Corbyn, Jeremy
Creagh, Mary
Cryer, Mrs. Ann
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
Darling, rh Mr. Alistair
David, Mr. Wayne

Davidson, Mr. Ian
Davies, Mr. Dai
Dean, Mrs. Janet
Denham, rh Mr. John
Devine, Mr. Jim
Dhanda, Mr. Parmjit
Dismore, Mr. Andrew
Dobbin, Jim
Dobson, rh Frank
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Drew, Mr. David
Dunwoody, Mrs. Gwyneth
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Ennis, Jeff
Farrelly, Paul
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Flint, Caroline
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gapes, Mike
Gardiner, Barry
Gerrard, Mr. Neil
Gibson, Dr. Ian
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hain, rh Mr. Peter
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. Fabian
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harris, Mr. Tom
Healey, John
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Heppell, Mr. John
Hesford, Stephen
Hewitt, rh Ms Patricia
Hill, rh Keith
Hillier, Meg
Hodge, rh Margaret
Hodgson, Mrs. Sharon
Hood, Mr. Jimmy
Hoon, rh Mr. Geoffrey
Hopkins, Kelvin
Howarth, rh Mr. George
Howells, Dr. Kim
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Hutton, rh Mr. John
Iddon, Dr. Brian
Ingram, rh Mr. Adam
Irranca-Davies, Huw
Jackson, Glenda
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Johnson, Ms Diana R.
Jones, Helen
Jones, Lynne
Jowell, rh Tessa
Joyce, Mr. Eric
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Keen, Alan
Keen, Ann
Kelly, rh Ruth
Kemp, Mr. Fraser
Kennedy, rh Jane
Khan, Mr. Sadiq
Kidney, Mr. David
Kilfoyle, Mr. Peter
Knight, Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Lammy, Mr. David
Lazarowicz, Mark
Lepper, David
Levitt, Tom
Lewis, Mr. Ivan
Linton, Martin
Love, Mr. Andrew
Lucas, Ian
Mackinlay, Andrew
Mactaggart, Fiona
Mahmood, Mr. Khalid
Malik, Mr. Shahid
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Martlew, Mr. Eric
McAvoy, rh Mr. Thomas
McCabe, Steve
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonagh, Siobhain
McDonnell, Dr. Alasdair
McDonnell, John
McFadden, Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGuire, Mrs. Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
McNulty, Mr. Tony
Meacher, rh Mr. Michael
Merron, Gillian
Michael, rh Alun
Milburn, rh Mr. Alan
Miliband, rh David
Miliband, Edward
Mitchell, Mr. Austin
Moffat, Anne
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Morden, Jessica
Morgan, Julie
Morley, rh Mr. Elliot
Mountford, Kali
Mudie, Mr. George
Munn, Meg
Murphy, Mr. Denis
Murphy, Mr. Jim

Murphy, rh Mr. Paul
Naysmith, Dr. Doug
Norris, Dan
O'Brien, Mr. Mike
Olner, Mr. Bill
Osborne, Sandra
Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pope, Mr. Greg
Pound, Stephen
Prentice, Mr. Gordon
Prescott, rh Mr. John
Primarolo, rh Dawn
Prosser, Gwyn
Purchase, Mr. Ken
Purnell, James
Rammell, Bill
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Reid, rh John
Riordan, Mrs. Linda
Robertson, John
Robinson, Mr. Geoffrey
Rooney, Mr. Terry
Ruane, Chris
Ruddock, Joan
Ryan, Joan
Salter, Martin
Seabeck, Alison
Shaw, Jonathan
Sheerman, Mr. Barry
Sheridan, Jim
Simon, Mr. Siôn
Simpson, Alan
Singh, Mr. Marsha
Skinner, Mr. Dennis
Slaughter, Mr. Andy
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, rh Jacqui
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stewart, Ian
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Straw, rh Mr. Jack
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr. Gerry
Tami, Mark
Taylor, Ms Dari
Taylor, David
Thomas, Mr. Gareth
Timms, rh Mr. Stephen
Tipping, Paddy
Todd, Mr. Mark
Touhig, rh Mr. Don
Trickett, Jon
Turner, Dr. Desmond
Turner, Mr. Neil
Twigg, Derek
Ussher, Kitty
Walley, Joan
Waltho, Lynda
Ward, Claire
Wareing, Mr. Robert N.
Watson, Mr. Tom
Watts, Mr. Dave
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, rh Mr. Alan
Wills, Mr. Michael
Winnick, Mr. David
Winterton, rh Ms Rosie
Wood, Mike
Woodward, Mr. Shaun
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, David
Wright, Mr. Iain
Wright, Dr. Tony
Wyatt, Derek
Tellers for the Noes:

Mr. Frank Roy and
Liz Blackman
Question accordingly negatived.
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