Rob Marris: I do not want to labour the point, but is the hon. Gentleman suggesting that people—for example, those who live overseas—who use these saving instruments could have chosen pensions policies instead? As I understand it, life policies mature when the person is of pensionable age; we would not be discussing them otherwise. Therefore, those people who took financial advice appear to have been mis-advised, and they should seek redress elsewhere.
I am grateful that the hon. Gentleman now accepts that Governments should look after pensioners with modest incomes, because the previous Conservative Government never did that. That is what the pension credit is about.
Mr. Flight: First, the hon. Gentleman will be aware that I fought for many years for groups who work overseas, but the Treasury, under the present Government and the previous Conservative Government, resisted. There is absolutely no tax logic in not allowing people who work overseas to belong to a UK pension scheme. The answer to his first question is that they cannot save though a pension scheme because there are no schemes that are appropriate for expatriates. Typically, they saved for their old age through life policies. Again, such savings
Column Number: 369may be out of date, but if one went back a hundred years they would find that the situation was the same then. I am trying to remember the hon. Gentleman's second point.
Ruth Kelly: The pension credit.
Mr. Flight: Yes, the pension credit. The hon. Gentleman's logic seems extraordinary: he says that those who have made an effort to save, which is what the Government want because they want to shift the balance from 40:60 to 60:40, should be punished, and that those who have not saved should be given taxpayers' money through a generous pension. He raises the basic issue related to pensions and the minimum income guarantee, which is that if there is a much more generous state earnings-related pension at the expense of other taxpayers, it makes little sense for people to save for their old age at all.
We are talking about people who have, in one way or another, saved for their old age. Typically, the lump of saved capital is small—perhaps £20,000—but when that is finally cashed in to spend in retirement, people will find that, oops, they have lost their old-age allowance. I suggest that the cost of the amendment would not be great and that, from a social justice point of view, the academic approach of saying that savings will be regarded as income for the purposes of general taxation and that they relate directly to someone's personal allowance in old age is an example of bureaucratic, middle-class establishment thinking. Ordinary people do not see it that way, but in the way in which I have described.
There is an academic argument for the Government's case, which is why it has remained for so long. However, where it bites the category of people to which it applies, morally there is a case for people paying tax on what gain there is but not allowing that to affect tax allowances in old age.
Rob Marris: I am sure that Committee members are as anxious as I not to open up the debate to discuss the Government's pensions policy—I am sure that you would not allow it, Mr. Benton. However, the purpose of the amendment is to add to the tax advantages already enjoyed by those on modest incomes who will gain considerably under the pension credit. The Government are already assisting those people, and rightly so.
Ruth Kelly: I thank my hon. Friend for that helpful contribution.
The hon. Member for Arundel and South Downs suggests that his proposal would be of no significant cost to the Exchequer, and that the Government are being prejudiced against holders of life insurance policies by not accepting his amendment. I hotly dispute that. His amendment would cost about £5 million every year. If his intention is to target pensioner poverty, there are more appropriate and focused methods of achieving it.
I accept in good faith, however, the hon. Gentleman's comment that we should make the navigation of the tax system as simple and easy as possible for people so that they understand what tax
Column Number: 370rates and systems apply to them, and that we should make it easy for them to save and protect themselves for the future. That is precisely what we are doing by commissioning the reviews—of savings policies by Sandler in the Treasury, and of taxation policies by the Inland Revenue.
I ask the Committee not to accept the hon. Gentleman's amendment, which would not make a substantial difference to the real issues to be addressed.
Mr. Flight: I thank the Financial Secretary for her comments. I remain of the view—as, I believe, does the hon. Member for Kingston and Surbiton—that the Government continue to consider the perspective of the individuals involved through rosy spectacles. The cost of £5 million is not considerable, and I am grateful to the hon. Lady for quoting it.
Kevin Brennan (Cardiff, West): Does the hon. Gentleman understand that the Government's response must not only consider the £5 million that his amendment would cost, but all the other spending commitments that he has suggested during the Bill's consideration? The other day, he referred to £1 billion in extra subsidy for the oil industry. He cannot announce £5 million here and £2 million there on different occasions; when all his spending commitments are totted up, the Tories will have promised to spend a considerable amount.
Mr. Flight: The hon. Gentleman is indulging in age-old political games. On oil revenues, he missed our point that the net revenue gained from the tax would be exceedingly modest as a result of losing £10 billion of investment and 50,000 jobs. If he thinks that the Government will get £1 billion a year out of the tax, he has got another thought coming. As I have gone through the Bill, I have been fairly careful in keeping a little tot-up of what hon. Members might come back and say, and the total is not that significant. It is perfectly valid to say that if the cost were £100 million it would be a significant amount, but £5 million is not significant.
On the minimum income guarantee and pension credit, it is strange to argue that it is better for the Government to pay out with one hand with MIG while taking back with the other hand. With respect, that sounds like buying votes, which is of course what lies behind much of the thinking on tax credits. The issue concerns what people who are not well off perceive to be fair. They have accumulated modest sums for their old age by saving through insurance, which they know will be taxed through income tax. They do not know, however, that they will experience the knock-on effect of losing their age allowance, which is extremely unjust. Given that the cost of correcting that would be modest, the Government should get on and do it. We therefore want to put the amendment to a vote.
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Question put, That the amendment be made:—
Division No. 6]
Clause 86 ordered to stand part of the Bill.
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