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Volume 205: debated on Monday 9 March 1992

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Postponed proceeding resumed.

7.55 pm

As I was saying before seven o'clock, our aim is to maintain the momentum of our personal pensions policy and we expect to see a continuing take-up among young people. However, it is important that the structure of the rebate should not act as a disincentive to those who wish to retain their personal pension throughout their working life. Perhaps it is worth pointing out that if the Labour party were ever in a position to do so, and were able to carry out its oft-stated threat that it would abolish the incentives for personal pensions, some 4·7 million putative pensioners, most of them of modest salaries up to about £9,700, and their families would undoubtedly find their pensions much reduced. That should be clearly understood.

We have announced that we would be consulting the pensions industry and other interested parties on the implications of equal treatment for the current arrangements for contracting out following the Barber judgment. Hon. and right hon. Members will recall that this judgment was given by the European Court of Justice in May 1990. The judgment held that occupational pensions are pay. In consequence, benefits from occupational schemes have to be equal as between men and women.

Consultations are under way, and it is clear that changes will be needed to the basis on which pension schemes can be contracted out of SERPS. In considering what those changes should be, we intend now to give particular consideration to the scope for moving from flat-rate rebates to rebates related to age, at least for personal pensions and possibly also for other contracted-out schemes. Decisions on how to achieve equality in state pension age, on which we issued a discussion paper in December, will also have an important bearing on the many complex and detailed issues which will need to be resolved.

The new age-related addition of 1 per cent. that will be payable from April 1993 will mean that the vast majority of current personal pension holders are likely to find that it is in their interests to maintain their personal pensions. We intend to bring forward the necessary legislation in the new Parliament.

I hope that I have demonstrated to the House how we have continued to safeguard the interests of those people who are contracted out through the rebate and the buy-back terms. Hon. Members will see, I think, not only how complex is this subject, but how these two statutory instruments fit in to the Government's overall pension policy, and I commend them to the House.

7.58 pm

I apologise to the Minister for my delayed appearance.

The business took me by surprise. I thought that the debate would resume at 10 o'clock. It has, of course, started rather earlier.

It is appropriate that Conservative control of social security is ending as it began, with a small, sly and squalid act of redistribution from the have nots to the haves. Over the past 13 years we have experienced one of the most massive redistribution exercises undertaken by any Government. I am sad to say that redistribution has all been in the wrong direction—to those who have relatively high incomes and, often, away from those who have quite small incomes.

The average family now has a higher tax burden than it had in 1979. Somebody earning £70,000 per year is now benefiting from income tax cuts to the tune of about £700 a week. Those on the highest incomes are enjoying enormous benefits.

We are dealing with a transparent and perhaps pitiful little bribe. From those who quibble about the little extra money that is required to assist the disabled, the unemployed, the poverty-stricken and the state pensioner, we see their final act of hypocrisy: the Government are using £175 million to sweeten personal pension holders.

The hon. Gentleman is talking about personal pension holders in the same breath as he talks about the haves. Will he confirm that most personal pension holders are on modest incomes of, on average, about £9,700?

I am sure that that is so. I shall have to ask the Department's private office to write to the hon. Lady in four of five weeks time to confirm that.

The bribe will not work because many of those who were lured into private pension schemes are now faced with the other fruits of the economic miracle, which was trumpeted so loudly only a few weeks ago. Many of these people are now behind with their mortgage repayments. They face the possibility of their homes being repossessed. These people live perhaps in daily fear that their job may not continue to be available to them. The insecurity that is brought about by the possibility of redundancy looms over many. Perhaps they work in recession-hit businesses that stare closure in the face.

Such people may have learnt the bitter lesson of experience. There was no such thing as a free lunch and there was and is no such thing as a freebie pension. Somebody somewhere has to pay the price for these give-aways. No one on the Opposition Benches and no one in the next Labour Government is or will be opposed to private pensions. Those who wish to take out a private pension will always be free to do so. Our objection is that the state pensioner and the ordinary taxpayer subsidise private pensions from their and our pension funds. They are standing on our two feet and not their own. This measure is another straightforward transfusion from our national insurance fund to the private pension companies.

Pensioners of the future are being bled of their funds, often without their knowledge. This is largely because pensions, pension funds and the national insurance fund are extremely technical and people do not realise what will happen to their pension until the time comes when they wish to claim it.

We have heard much today elsewhere in this place about occupational pension funds and the need to close loopholes so that we can prevent another Maxwell. Compared with the £6 billion rip-off of our state pension funds by the Conservatives, Robert Maxwell was a poor, dabbling amateur. I advise the Secretary of State for Social Security not to take too many boat trips in the near future. Were he to have neglected his fiduciary duty as a councillor in this way, he would be looking at the world now from behind bars. Looser rules apply to central Government than to local government. There can be fewer clearer cases of Conservative double standards. At the same time as that £600 million is being put into private pensions, the ordinary single state pensioner finds that his or her pension is worth £17 a week less because Conservatives decided to break the link between pensions and the rise in earnings. The pension of a married couple is worth £28 a week less.

It is sad that the Minister says that from a sedentary position. She suggests that there is no great connection. It is clear from my examples that the hon. Lady and her fading Government support certain features of the pension industry but disregard the increases that state pensioners would have enjoyed had there been a Labour Government for the past 13 years instead of a Conservative Administration. As I have said, the married pensioner couple are £28 a week worse off while the loss to the single pensioner is £17 a week.

The hon. Gentleman appears to be misleading the House. He is saying that there is a direct link between the level of the state pension and the rebate that we are giving on personal pensions. Will he confirm that the £6 billion which he quotes includes the ordinary contracted-out rebate for occupational schemes, which I take it the Labour party is not opposed to and has no plans to repeal? Does he understand that there will be a saving for the national insurance fund of about £0·2 billion a year as a result of our measures to encourage people into taking up personal pensions? If that is so and there is a saving to the fund, how can there be a direct link between the rebate and the level of the state pension?

As the hon. Gentleman is talking about levels of state pensions—this appears not to have been ruled out of order —surely the overall level of pensioners' incomes is what really matters. Those incomes have increased by 33 per cent. under this Conservative Government while under the Labour Government they increased by a miserable 3 per cent.

I am pleased that the Minister is paying due credit to the state earnings-related pension scheme, which was introduced by the Labour Government and which has done so much for pensioners' incomes. It would have done so much more had it not been tampered with by the Government. The concept of incomes for pensioners has been undermined by the way in which the Government have abused SERPS. At the same time £6 billion has been found to assist private pensions. As a member of the Public Accounts Committee, I am well aware that the National Audit Office produced a superb report that outlined the way in which the fund had been abused. The Minister will know all too well that the saving that has resulted from the failure to link pensions to the rise in earnings is now £21 billion. It is—

Order. I have allowed the hon. Gentleman a lot of leeway, but he has gone too far now. We must return to the question of rebates.

I apologise, Mr. Deputy Speaker. I was merely seeking to answer the Minister's questions as posed. They were, as you say, a little wide of the mark.

Pensioners have been sacrificed on the altar of the free market. The free pensions market is incapable of competing with the public sector without the prop or crutch of massive subsidies. Pension holders would have deserted private pensions in droves and returned to SERPS had the Conservatives not offered this pathetic bribe. It would have been a humiliation for the Government, they having already spent billions on trying falsely to inflate the private pension sector.

In a few weeks, the dirty, derelict, partial and unequal mess which masquerades as the Conservatives' pension policy will have to be hosed down. Then we can set about rebuilding SERPS, strengthening the state pensioners' basic income, protecting occupational pensioners and ensuring a bracing draught of equal treatment for private pensions. In each area of reform the pensioner and the prospective pensioner will be the beneficiary. That is what we shall do in four or five weeks' time.

8.9 pm

With the leave of the House, Mr. Deputy Speaker, perhaps I could reply to one or two points that have been spuriously raised by the hon. Member for Nottingham, North (Mr. Allen). I should like to start with a challenge, as challenges are all the fashion. Will the hon. Gentleman make it clear whether the Labour party is saying that, in the unlikely event that it forms the next Government, it will remove the 2 per cent. incentive? If so, does he accept that there is no way that it can do that other than retrospectively over the course of the year? Is he saying that it will retrospectively remove the 2 per cent. incentive? Is he also saying that it will not implement the 1 per cent. incentive? That information is very necessary so that we know exactly what to tell the 4·7 million people in those schemes whose pensions, and the size of them, will depend on these policies.

The 1 per cent. proposal is not even before the House tonight, so we can only suspect that until the primary legislation is brought in all this is merely electioneering. It is hard to abolish something that is just a pre-election promise. If there is another Conservative Government, we shall see what they introduce. On the queston of the 2 per cent., I am pleased to refer the hon. Lady to what the future Secretary of State for Social Security, my hon. Friend the Member for Oldham, West (Mr. Meacher), said in the debate two weeks ago.

We can take that as confirmation that the Labour party would abolish the 2 per cent. retrospectively and not implement the 1 per cent. That message should go out to 4·7 million putative pensioners on modest incomes and to their families. We shall see exactly what credence the Labour party's pensions policy has with those who matter.

Question put and agreed to.


That the draft Social Security (Class 1 Contributions—Contracted-out Percentages) Order 1992, which was laid before this House on 27th February, be approved.


That the draft State Scheme Premiums (Actuarial Tables) Regulations 1992, which were laid before this House on 27th February, be approved.—[Mr. Kirkhope.]