House of Commons
Tuesday 27 June 2006
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
Foreign and Commonwealth Affairs
The Secretary of State was asked—
With permission, on behalf of Her Majesty’s Government I wish first to extend our condolences to the families and friends of the two members of Britain’s armed forces who, it was confirmed this morning, were killed in action in an incident in north Helmand province in Afghanistan. Our thoughts and sympathies are with those close to them at this very difficult time.
Combined Foreign and Commonwealth Office, Department for International Development, Ministry of Defence and Afghanistan drugs inter-departmental unit spending on Afghanistan for the financial year 2005-06 was more than £379 million. Those funds were used to support the British effort to assist the Government of Afghanistan across a number of areas including security, reconstruction, election support, counter-narcotics and institutional capacity building.
I join the tribute paid to our soldiers who were recently killed.
I want to focus on what is happening under the umbrella of security that our soldiers are working so hard to create. I have just returned from Afghanistan, and I was shocked to see how bad co-ordination is on the international development and reconstruction front. There is a conflict of interests between United Nations and European Union agencies, as well as the myriad of non-governmental organisations that answer to no one. A fundamental lack of leadership is leading to the pursuing of separate agendas and to the wasting of money as projects overlap. Does the Minister agree that the long-term success of Afghanistan hinges not only on the military capability that we are working so hard to achieve, but on what is happening under that security umbrella? We could be doing so much more with the money to which the Minister referred.
I congratulate the hon. Gentleman on going to Afghanistan. It is not an easy journey, as I have found on many occasions. I am sorry that he found such a lack of co-ordination there.
As for Britain’s effort, in conjunction with our close allies, the establishment of the provincial reconstruction teams and their recent extension to the south were part of a deliberate policy—beginning in the north, then extending to the west and now to the south—linking military forces in a determined effort to establish security and combining them with officials from a number of Departments, including the Department for International Development and the Foreign Office, to achieve that security and also progress towards democracy and effective administration. That has been successful in the north and west, and it will be successful in the south.
Is my right hon. Friend aware that the crop substitution programme that we are helping to fund in Helmand province is not going very well? Several hundred Afghan farmers who were persuaded to destroy their crops in 2004 are clutching cheques that have not been honoured. Understandably, they are rather angry about it, and we are bearing some of the brunt of their anger. Does my right hon. Friend agree that there is a danger that, if we are not careful, we will turn from liberators into oppressors? Has the time not come for a bit of blue skies thinking when it comes to dealing with the drug problem?
My hon. Friend is right to raise some of the difficulties with the anti-narcotics programme in south Afghanistan in particular. I am sure that he will be the first to acknowledge that there was a 21 per cent. reduction in opium cultivation last year, although there have been some difficulties in the south.
I accept that there is a disturbing relationship between those who are using some pretty appalling means of attacking British soldiers and British forces and those who are responsible for the distribution of drugs out of Afghanistan. It is that connection that we are determined to disrupt. It involves risks as, sadly, we have seen, but at the same time it is part of our effort to secure the long-term reconstruction of the country.
Are Foreign Office Ministers being kept informed of the increasingly unsatisfactory performance of President Karzai’s Government? Is that not cause for concern, especially given that successive Defence Ministers have told me, and the House, that a prime justification for our military intervention in southern Afghanistan was support for President Karzai and his Government?
I suspect that I was one of those Ministers, and that remains the position of the British Government.
Actually, there has been remarkable progress in Afghanistan since 2001. There have been presidential elections, parliamentary elections and the establishment of a Government who are now increasingly able to extend their authority throughout the country. That is a success to celebrate. It does not mean that difficulties do not occur from time to time, but it is something on which I think we should all congratulate President Karzai and his Government. They are increasingly in control of their own country, as should be the case.
At a time when the Taliban has launched its most serious offensive in the south in the past four years, will the British Government resist strenuously Donald Rumsfeld’s stated intention to reduce the number of American troops in Afghanistan, and to justify that on the ground of NATO’s presence in the south? Will the Government accept that the timing could not be worse for any reduction in American troops at this moment?
I am sure that the right hon. and learned Gentleman, with his comprehensive knowledge of international affairs, did not intend to suggest that the present attacks are somehow part of a comprehensive offensive by the Taliban. Certainly the Taliban is attacking the coalition forces and does so from time to time in conjunction with the range of criminals, gangs and terrorists that operate in that part of the world. But those organisations are not capable of defeating Britain’s forces in a conventional attack: they are simply part of an effort to destabilise the authority in that part of Afghanistan, mostly for criminal purposes. We must resist that by deploying the appropriate number of forces, which will be adjusted from time to time in both number and nationality. That is an inevitable part of that kind of multinational operation.
May I join the Minister in expressing great sorrow at the news of the deaths of two British soldiers? Is he satisfied with the current pace and co-ordination of reconstruction efforts in Afghanistan? They are obviously crucial if the insurgency is to be defeated and the narcotics trade reduced, yet my hon. Friend the Member for Bournemouth, East (Mr. Ellwood) and others bring back reports of poor co-ordination and corruption, as well as deteriorating security. How would the Government react to the idea that some people have suggested of a UN-mandated special representative to oversee construction efforts and to work with the Afghan authorities to ensure that the work is not derailed by waste, corruption or duplication?
I have conceded that the reports are disturbing and we will look at them carefully. We can be proud of the record of success of the PRTs in the north and west, which has assisted the Government in Kabul to extend their authority. We always knew that the extension of PRTs into the south, and an inherently more unstable situation, was likely to be difficult, not least because—as I have indicated—of the conjunction of the Taliban and some of the various criminal gangs that are heavily engaged in the smuggling of opium. It is that connection that we need to disrupt. The right hon. Gentleman has made a sensible suggestion about the need for more effective co-ordination and we will consider that carefully.
I discuss Iran frequently with Dr. Rice. When we met in Vienna on 1 June, we agreed an imaginative set of proposals with our French, German, Russian and Chinese counterparts and Javier Solana. These offer Iran a way forward to resolve international concerns over its nuclear activities while enabling it, if it chooses, to develop a modern civil nuclear power programme. In making those proposals, we have again shown flexibility and commitment to a diplomatic solution.
Iran faces a clear choice. I hope that it will take the positive path being extended, and I look forward to an early response.
I notice that the Foreign Secretary did not touch on the question of external resistance to the Iranian regime. Some time ago, the Americans gave protected persons status to the Mujaheddin of Iran in Camp Ashraf. Later, the German courts reconfirmed the rights of political asylum for Iranian refugees, whose status had previously been suspended. Only 11 days ago, the French lifted all restrictions on the National Council of Resistance of Iran. Is it not now time to urge the Home Office to take positive steps to improve relations with the Iranian resistance movement, both for their sake and in our national interest?
I am confident that the Home Office keeps those issues under review. I will, of course, draw the hon. Gentleman’s observations to its attention. Our chief concern at present is with the present Government of Iran and the considerable desire of the international community to introduce successful negotiations with them to restore confidence in their intentions.
What assessment has the Foreign Secretary made of the level of support in Iran for nuclear power or nuclear weapons? What sympathy is given to public opinion in Iran, the articulation of which seems to provide the President with his mandate?
It is a little hard to analyse that from outside Iran. There appears to be a good measure of popular support for the Iranian Government’s assertions about their rights, which are understood. Obviously, there is a desire in Iran for access to civil nuclear power, and those of us dealing with the issue internationally believe very strongly that that is a clear possibility if the country abides by the proposals that we have set out. We hope that that will convince the Iranian Government that entering negotiations is in their interest as well the wider international community’s.
The rather uncomfortable implication of the Foreign Secretary’s words is that Iran faces a fundamental choice between peace and conflict. Will the right hon. Lady make it clear that the situation is not as stark as that, and that a policy of diplomatic engagement will continue to be followed by the UK and the powers referred to in her answer to the original question?
It would be understandable if the hon. Gentleman had not had an opportunity to study the exact words that we used in Vienna. The statement then was made on a united basis, by all participants. Our clear offer to Iran was that we were prepared to resume negotiations if it resumed the suspension of enrichment. However, if Iran does not feel able to do that, the action being considered in the Security Council is something that we would have to consider resuming.
I was part of the recent Inter-Parliamentary Union delegation to Iran. Everybody whom we met made it very clear that the MEK, to which the hon. Member for Northampton, South (Mr. Binley) referred, is widely regarded as a terrorist group that was funded by Iraq during the Iran-Iraq war. They said that, if we wanted a productive dialogue with Iran about its nuclear policy, the last thing that we, the Americans or any other EU member state should do is suggest that the terrorists in the MEK should be rehabilitated.
My hon. Friend makes a very interesting point, based on her recent experience in Iran. As I told the hon. Member for Northampton, South (Mr. Binley), the international community’s overriding priority is with the present Government of Iran. We believe that our proposals are very fair and very much to the advantage of Iran’s Government and people. We hope that the proposals will be considered speedily and fully.
Does the Foreign Secretary agree that the UN announcement of 6 June was remarkable for its unanimity, especially given that it included China and Russia? Has she had any indication, either from her colleagues in the US Administration or from Tehran, that the proposals are receiving positive approval? They are comprehensive and complex, so should we not give Iran time to respond? If it makes a concrete response, would not that be a positive sign that we could move away from confrontation? That would benefit the whole world, but especially the people of Iran.
The hon. Gentleman is right that the proposals are both comprehensive and complex, but that is why we are suggesting negotiation. Concern would arise if it appeared that we were entering into a period of negotiation about negotiations. I am sure that he will know that the indications made to us, publicly as well as privately, by the Iranian Government are that they see ambiguities in the proposals. We are keen to ensure that any ambiguities are resolved. We continue to press the Iranian Government for a further meeting between Javier Solana and colleagues, and Larijani. I hope that such a meeting will take place in the near future.
The Darfur peace agreement was signed on 5 May. Implementation has been slow. Although there has been less fighting between the two parties to the agreement, the Sudanese Government and the main rebel faction, overall levels of violence in Darfur remain high. We are providing practical support on implementation to the African Union and the parties. We are encouraging those who have not yet signed the agreement to support it.
I thank the Minister for his answer. Given the scale of killings, rape, lootings and starvation in Darfur, does he anticipate that there will be prosecutions for war crimes, whether of members of the Khartoum Government, their allies or indeed the rebels? What assistance is being given to the chief prosecutor of the International Criminal Court to gather evidence to bring such prosecutions?
Grave abuses of human rights in Darfur are still occurring. There must be no impunity for those who have committed such crimes and those responsible must be brought to justice. We strongly support the International Criminal Court, which is conducting a formal investigation into the situation in Darfur and we will keep the House abreast of developments in that regard.
The Minister will acknowledge that the position in Darfur remains deeply disturbing. The violence continues; the implementation of the welcome peace agreement has faltered and there are appalling reports of brutality and ethnic cleansing spilling over the Sudan-Chad border. Is it not deeply regrettable that the Sudanese Government have so far set their face against a United Nations force in Darfur, and what steps will the Government take to establish a clear and strong mandate for a United Nations peacekeeping mission to help the parties implement the peace agreement and provide security for so many internally displaced people in Darfur?
The right hon. Gentleman is absolutely right. The African Union force in Darfur needs to be replaced by a United Nations peacekeeping force, but the Sudanese Government have not yet agreed to that. Kofi Annan has said that he hopes to see a UN force in Darfur. The Security Council has taken a strong line on that and the African Union wants such a force, as do many leading African countries. We will continue to press the Government of Sudan to accept one and will call on others to do the same. This week, my noble Friend Lord Triesman is attending the African Union summit where we shall raise the issue again.
We have regular discussions with the United States Government about security and human rights issues. We deplore all violence and call for a halt to killings, whether by abuse of state power, or by criminals and terrorists who use such violence for their own ends.
Following the terrible events of 11 September 2001, there were reports in the Washington Post and The Guardian, subsequently confirmed by the White House, that President Bush had overturned a 25-year ban on the CIA carrying out clandestine missions abroad expressly aimed at killing specified individuals. Can the Secretary of State tell the House how many such operations her Department is aware of, whether the UK has been complicit in any such operations and what UK policy is on so-called targeted killings?
With regard to the recent reports of killings of innocent Iraqi civilians by American personnel, my understanding is that those cases may come before the fledgling Iraqi courts. That being so, will Her Majesty’s Government ensure that should the Iraqis need judicial assistance and/or investigative assistance, it will be available from the UK?
I am not entirely sure whether the hon. Gentleman’s supposition is correct, but I can certainly tell him that we are providing the kind of help and support that he suggests, in terms of police and investigative training, support to the judicial authorities and so on, and we shall continue to do so, because we recognise the importance of having good and sound justice in Iraq.
In the right hon. Lady’s discussions with her counterparts it would be helpful if she could impress on the American Government the importance of acting at all times within the rule of law. That applies in particular to cases of extraordinary rendition. What is wrong about extraordinary rendition is that people are being conveyed from one place to another and interrogated outside the ordinary protection afforded by the courts of the United States and other countries.
I can only say that, of course, these issues have been given much publicity, but the right hon. and learned Gentleman will know of the statements made by the United States Secretary of State insisting that America remains within international and US law.
The Government regularly raise human rights issues with the Chinese Government. The death penalty and the use of organs from executed prisoners were discussed at the last round of the European Union-China human rights dialogue in May. The then Minister for Trade, my hon. Friend the Member for Dudley, South (Ian Pearson), also raised the issue of the use of organs from executed prisoners with the Chinese Government on 7 April this year.
There are no figures for the number of prisoners executed annually in China, but Amnesty International puts the figures at at least 3,400—that is more than the rest of the world combined. There is evidence that organs, skin and tissue from executed prisoners are being harvested for transplants and collagen. Will the Minister make it clear that using executed prisoners as an industry is both immoral and unacceptable, and will he insist that the highest standards are applied to China in that regard?
I will be going to China soon and I will be discussing some of these issues. I will do so in my usual forceful way—[Interruption.] I am a diplomat now, so it will be my diplomatic forceful way. The point has been well made on both sides of the House on this and other issues. The thing is to have regular dialogue and to offer support in terms of changing the whole nature of what my hon. Friend describes and encouraging China to make changes in its legal system in relation to the issues that he and others have raised. I give him and the House the assurance that I will regularly raise those issues, among others, while I am doing this job.
Is the Minister aware that there has been some suggestion that bodies and body parts of executed Chinese prisoners form at least part of some of the exhibitions that we see in London? Will he take up the suggestion that has been made in the press with his colleagues at the Department for Culture, Media and Sport and assure the House that there is no way that the personal effects or bodies of executed prisoners will be used for exhibitions in London or anywhere else in the United Kingdom?
Given that the British Transplantation Society insists that the harvesting of organs of executed prisoners is taking place, but that, in written answers on 12 May, the House was told that the Government were not yet persuaded of the fact, will the right hon. Gentleman undertake to communicate with the British Transplantation Society, which contends that the weight of accumulated evidence is now such that the position is incontrovertible? The harvesting of organs is taking place. Denials by the Chinese Government are untrue and they must be held to account without delay.
As late as 10 April this year, the Chinese authorities again strenuously denied what the hon. Gentleman is saying. Again, I can only reassure the House that I am having wide-ranging discussions on the issue with the Chinese. Points have been meticulously made by Members, parliamentary groups and Select Committees, and by non-governmental organisations and organisations with an interest in China that operate outside the House. Before I go to China, I will meet the non-governmental organisations to talk through the issues that they would like me to raise as a priority. When I come back, I will report back to the NGOs. I gave a commitment in the Foreign Affairs Committee debate to report back to the Committee as well. I am happy, not about the issues, but to raise those issues systematically with our colleagues. It is important for the good relationship that we have with them to make progress on some of the issues that have been raised in the House.
The Iraqi Government of national unity are now firmly in place and the business of government has begun in earnest. Prime Minister Maliki and his team are committed to working to a national unity agenda. They have announced a national reconciliation plan and set clear priorities—primarily security, electricity supply, economic reform and building democratic structures. The hon. Gentleman may know that the Prime Minister announced on 19 June the imminent transfer of security responsibility in Muthanna province, to be followed by other provinces. Iraq will continue to need our support and that of the international community as it works on those priorities.
I was fortunate to visit Iraq recently with the Defence Committee. The Secretary of State is right that it appears that two or perhaps even three of the provinces that are under British supervision may well soon be handed back to Iraqi control, but the fourth—Basra—will not. Although the Prime Minister’s reconciliation plan is welcome, does the Secretary of State agree that the biggest problem in Basra appears to be a governor whose only interest is self-interest?
We are anxious to ensure that the security plan that has been devised by the Prime Minister—he has already done a good deal to promote it—is followed through effectively and that there is a clear structure of control and command in the hands of the commander of the armed forces in the area. The Prime Minister is well aware of concerns about security in that area and is determined to address them.
Is not one of the best indications of the improving political situation in Iraq the fact that eight newly-elected Iraqi MPs are visiting the House of Commons today? They have met my right hon. Friend the Secretary of State and you, Mr. Speaker. Clearly, we hope that the MPs will enjoy themselves during their week. They will be following individual Members to find out how we do things and see whether they can translate any of their experiences into their important work in Iraq.
My right hon. Friend is entirely right. I was grateful to her for giving me the opportunity earlier today to meet those new MPs, who, incidentally, are a very impressive bunch. I am also grateful for the work that she is doing to show them various parts of the country and aspects of our parliamentary experience. I hope that you will be pleased to know, Mr. Speaker, that I strongly urged them to learn from the many good things about our Parliament, but not necessarily to follow some of our examples of behaviour.
The Iraqi Prime Minister’s announcement on Sunday was indeed welcome. Yesterday, the White House confirmed that it was considering a steep reduction in the number of US troops in Iraq. To what extent have British Ministers been involved in those discussions? Does the fact that Italian and Japanese withdrawals are going ahead mean that we can finally expect a statement on a comprehensive strategy to prepare the way for the withdrawal of British forces?
I am always a little nervous when people leap from one important and worthwhile step forward to a whole group of assumptions that are set some time ahead. An unfortunate feature of the discussions is the fact that the media tend to harden up anything said—however tentatively—into some kind of detailed commitment. It is of course the case that the Prime Minister has announced the beginning of a process that is based on the circumstances on the ground and the reality in different areas. We all hope that progress can be made, but the hon. Gentleman will know that there is sometimes a better option of redeployment. In any event, the Iraqi Government will wish—we will want to work with them—to support the handover in al-Muthanna and any other province that is considered for some time. The important process offers considerable hope for the future, but no one should second-guess it at this stage.
It is well known that the reconciliation plan to which the Foreign Secretary referred arose from informal dialogue that took place over a long time with representatives of the Sunni insurgents. Representatives of the American Government, apparently including the ambassador, were involved in that dialogue. Were representatives of the British Government also involved in the dialogue?
With respect to the right hon. and learned Gentleman, he has moved on a little from discussions about changes in the provinces. I simply say that of course we are closely involved in all discussions that take place about how circumstances in Iraq can be improved.
The Foreign Secretary has touched on the proposed national reconciliation plan, as have other Members. She will be aware that one of the proposals is for a form of amnesty—it is an ambiguous proposal—for some of those who have been involved in the insurgency. Does she think that, at this stage, it is acceptable for a British Government to sign up to such an amnesty if it is with people whom the Government know have been responsible for the deaths of British military personnel in Iraq?
With respect to the hon. Gentleman, I was not talking about the national reconciliation plan; the hon. Member for North-East Milton Keynes (Mr. Lancaster) was. However, I will simply say that the Iraqi Prime Minister’s statement was, of course, very carefully worded. He spoke about wanting to draw people into the political process, but he also spoke about people who had not committed crimes. I think that, yet again, people are leaping forward—I do not recall that the word amnesty was used. Although there is clearly a wish to draw people who have been involved in the insurgency into the political process if that is possible and practical, the Iraqi Government are approaching this matter in a very careful way. They have chosen with care the words that they have used, so it would be a mistake for us to be any less cautious in our phraseology.
The then Conservative Government were aware of the existence of legitimate South African chemical and biological defence programmes from the 1980s. Initial reports indicating offensive chemical and biological weapons activities, later known as Project Coast, were not received until 1993, but they were inconclusive. There were also unsubstantiated claims of chemical weapon use by South African forces in Angola, Mozambique and Zimbabwe in the 1980s and 1990s. More detailed evidence of previous offensive activities was received in the years leading up to the truth and reconciliation commission hearings in 1998, when further details of the offensive activities emerged. In 1994, we understood that the South African Government had terminated offensive chemical and biological weapons activities.
Has the Minister ever had the feeling that officials have been less than candid with him? Can I draw to his attention that, following the submission of a series of parliamentary questions from me on this matter, there was convened in the Foreign and Commonwealth Office on 13 January a strategy handling meeting to deal with “Mackinlay’s questions”, which was attended by 13 officials from the FCO, the Ministry of Defence and the security and intelligence services? Why was that necessary to deal with my questions, if they are not hiding more information on this subject? Is it not a fact that unauthorised—[Interruption.]—The Minister may laugh, but this is a serious matter. There was greater involvement between Porton Down and the South Africans’ chemical and biological weapons regime than they now wish to disclose.
In eight years in Government, I think that I can say with some certainty that no one has pulled the wool over my eyes yet—but one never knows. That meeting was not to handle my hon. Friend, but to handle his questions. He raised 22 questions with specific concerns and allegations, and I am happy to try to answer them, in conjunction with other relevant Departments—although we have already answered 20 of the 22.
The meeting was held to discuss the draft answers to my hon. Friend’s parliamentary questions. Representatives of various Departments and agencies attended, including the Foreign and Commonwealth Office, the MOD and the Health Protection Agency.
The issue raised is not current. The United Kingdom investigation took place in the late 1990s and the early 2000s. Officials from the relevant Departments have changed, and Departments want to ensure that we are working with the same information. The allegations made by my hon. Friend have also been made in various books and elsewhere, including on the internet. There is absolutely no evidence of the conspiracy that my hon. Friend suggests.
There is no consensus among member states on how to proceed with the constitutional treaty. The European Council agreed a twin-track approach based on delivering concrete results under the current treaties and on further consultations between member states. Decisions on how to continue the reform process will be taken by the end of 2008, but with no presumption about the outcome or end date of the process.
The hon. Gentleman will be well aware that we were part of the negotiations that agreed those proposals, but he is equally well aware that the circumstances surrounding the constitutional treaty changed when the French and the Dutch had their referendums and the answer was no. The Government were part of the negotiations and we accepted the treaty, but at the moment there seems little likelihood of it going forward in its present form.
Sir Digby Jones, the retiring director general of the CBI, in his valedictory interviews to the media this week, has said both that he supports our membership of the European Union and that he is very strongly in favour of radical reform of its institutions and procedures because such reform is in Britain’s economic self-interest. Does my right hon. Friend agree that urgent reform is needed, and that those who oppose our membership of the EU and such reform are not acting in the best interests of this country?
I am afraid that I have not had the opportunity to study what Digby Jones said and the precise reforms that he was suggesting, so I am a little wary of appearing to endorse them. However, I wholeheartedly share my hon. Friend’s view that it is very much in our interests to make a success of our continuing membership of the European Union, with our EU partners, and that there may come a time when some changes will need to be made to help to ensure that continued success.
As the Foreign Secretary’s colleagues indicated earlier today that the Government are not in favour of exhuming corpses, would not the best thing to do with this one be to leave it under the concrete to which she referred?
As my hon. Friend the Member for Stafford (Mr. Kidney) pointed out earlier, it is in the UK’s interest to make sure that the European Union works efficiently and effectively, so may I urge my right hon. Friend to consider introducing, with the other member states, those elements of the treaty that would lead to more efficient and transparent work by the EU? Only those who are against our membership of the EU would be against such proposals.
As my hon. Friend may know, there is an agreement that we should continue with a greater degree of transparency in the European Union’s work, but the precise proposals put forward at the last European Council will of course be reviewed to see their practical effect. However, he is absolutely right to say that we need constructive and good ways of working with our EU partners. I am not quite sure what process my hon. Friend was urging on me, but discussions are indeed beginning on, and some consideration is being given to, whether ideas that were in the constitutional treaty that do not require a new treaty base—such as direct transmission of information to national Parliaments—are steps that could be considered. But equally, and as he knows, no such decisions have yet been taken.
Given that the Government had conceded that there should be a referendum if the constitution were implemented in this country, and given that elements of it are being brought forward—such as the proposal to remove the veto over police and home affairs—can the Foreign Secretary give a clear statement to the House on the circumstances in which she believes that a referendum would still be necessary if parts of the constitution were brought forward?
I repeat what I just said: there is no suggestion that we should try to bring forward something that would require a new treaty base. The hon. Gentleman will, I am sure, recall that a variety of measures were rolled into the constitutional treaty—if I may put it like that—some of which would not require a new treaty base, such as direct transmission of information to national Parliaments. However, although the ideas that he referred to concerning the police and justice system have been raised by various individuals and commentators, there are no proposals to that effect. [Interruption.] There are no proposals to that effect before us at the present time, and I do not intend to commit us to a referendum on proposals that have not even been put forward.
The new Government of Nepal face major challenges in securing a fully functioning democracy and a permanent ceasefire, in which the Maoists abandon violence and rejoin the democratic mainstream. I met Nepal's Foreign Minister and Deputy Prime Minister in Geneva last week. I am encouraged by the bold steps that have already been taken towards peace and reconciliation, and said so in my speech to the opening high-level session of the first week of the United Nations Human Rights Council in Geneva on 20 June. The United Kingdom stands ready to assist in any appropriate way to bring about democratic and peaceful reform in Nepal.
I thank my right hon. Friend for that reply. After the riots and mass demonstrations, there is now a multi-party Government in Nepal, but there is no democracy and they will need help and support from our Government. What support are we giving to the political parties and other organisations so that Nepal can have a democratically elected Government, inclusive of ethnic minorities, Dalits and women?
I discussed three key matters with the Nepalese Government last week. The first was securing a continuation of the United Nations Human Rights Council interest in Nepal, and the Nepalese have agreed to that. The second was ensuring that we could get discussions going on United Nations involvement in decommissioning arms from the Maoists and keeping the peace process going—they have agreed to that, too. Thirdly, we discussed what my right hon. Friend the Secretary of State for International Development is considering with other donors, namely, how best to respond to the new situation. We have been giving financial and technical support to the peace process through the global conflict prevention pool. It is too soon to make any formal commitments. In 2006-07, we gave only about £30 million through bilateral assistance, but we will have further talks with our colleagues in Nepal.
The Nepalese Minister was pleased with our discussions and I am pleased about their positive nature. What needs to happen now is the second stage of talks with the Maoists, for which the Nepalese are preparing, on how to progress out of conflict and on to the long road back to democracy.
In the light of China’s intervention in Tibet, what assurance does the Minister have that China is not looking with anxious eyes at events in Nepal, and what representations have we made to China that any intervention by the Chinese in Nepal would be totally unacceptable?
All the Governments in the region—the Governments of India, China and other countries—want progress in Nepal. It is in nobody’s interest that Nepal remains in an unstable state. During the general discussions in Geneva last week, the representatives of every country to whom I spoke all expressed a general acceptance of the need to move forward and to give support where possible. That is precisely what will happen. That is why the involvement of the United Nations is so important.
One of the factors driving the demand for political change in Nepal is the widespread existence in the country of casteism—discrimination based on work or descent. What recent representations has my right hon. Friend made to the Government of Nepal on the abolition of that pernicious and unacceptable form of discrimination?
I have not been involved in any detailed discussion of that subject, but it is an issue of human rights and their abuse that has to be dealt with, not only in Nepal but in other countries. It will probably form part of the work programme that we will agree over the next two meetings of the UN Human Rights Council in Geneva. It is one of the matters about which serious reservations have been expressed not only here and in Nepal, but in other countries. I assure my hon. Friend that the matter is one that the Foreign Office raises from time to time and that we will be involved with the international community in efforts to deal with it.
Ever since the peace talks began, hundreds of women have been demonstrating outside Parliament because not a single woman is included in the draft constitution committee. Will my right hon. Friend use his best offices, in line with Security Council resolution 1325, to ensure that there is proper representation of women in the talks? Will he ask his officials in Kathmandu to meet with Lily Thapa, who leads a 14,000-strong organisation of widows, to see what assistance can be given to those women, who are traditionally shunned in Nepal and who are, after all, probably the most potent symbols of the conflict?
I will write to my hon. Friend and will take up the issue that she raised. Over the past 10 years, more than 14,000 lives have been lost in the conflict. It is to be hoped that the long-term success of the peace agreement will reduce lives lost to nil. We have made it clear to the Nepalese Government, in a proactive and positive way, that their engagement in the new UN Human Rights Council, in which they want to participate, should be effective. I received a clear indication from them that there is nothing that they will not discuss with us. I offer my hon. Friend a meeting at the Foreign Office before I next have discussions with the Nepalese Government so that we can go through these matters to ensure that we get proper representation.
I refer the hon. Gentleman to the answer that my right hon. Friend the Foreign Secretary gave a few moments ago.
The UK presidency helped to set Europe’s future direction at the Hampton Court summit. We have made it clear that an effective EU means focusing on the issues that matter to Europe’s citizens, such as creating jobs, tackling terrorism and protecting our environment. I therefore welcome the conclusions of the recent European Council, which state that Europe should now focus on the delivery of practical results and the implementation of specific projects.
I listened to the answers given by the Foreign Secretary and by the Minister. Do the Government not realise how unwanted and how detested the European constitution is, not only among British people but throughout Europe? When will the Government do the right thing and concentrate on delivering an open, competitive and transparent Europe that is fully accountable to the nation states?
That, of course, is precisely part of the Government’s objective. To do that, it is also necessary to have effective contacts, discussions and relations with other Governments in other countries, not least those on the centre right. Of course, the hon. Gentleman’s party boycotts such contacts and refuses to participate in important meetings that take place, for example, with the leadership of centre right Governments in both France and Germany.
My right hon. Friend [Interruption.] Mr. Deputy Speaker—[Interruption.] I am sorry, Mr. Speaker; I am out of practice. Is the best way to secure a good outcome for Britain out of the discussions on the constitution to engage positively with our partners in Europe? Will my right hon. Friend say what role political parties in the House could play to ensure that Britain’s voice is heard?
I am grateful to my right hon. Friend. She has made a serious point, and one that has been made to me repeatedly by Conservative Members of the European Parliament, namely, that Britain’s interests are diminished and that their party’s interests are diminished if the misguided view of the leader of the Conservative party that they should withdraw from the European People’s party is pursued.
Will the Minister for Europe within the Foreign and Commonwealth Office agree that it is important that any Government should be honest, open and honourable? Will the Minister therefore indicate why the current constitution is not dead, bearing in mind that if one country rejects it in a referendum, the particular treaty relating to the constitution is dead and buried? Will he admit that the constitution, as it stands, is dead and buried and that there should be no reflection, just an answer yes or no?
My right hon. Friend the Foreign Secretary has already dealt with that question, but I am happy to repeat the point that she made. The reality is that this constitution cannot come into force without the unanimous ratification of all member states. With two founding members of the EU—France and the Netherlands—having rejected the situation by way of referendums, it is clearly important that we take account of the views that they have set out.
My right hon. Friend will know that the fact remains that next year, when Romania and Bulgaria join the European Union, it will be a Union of 27 members governed by rules for the Six. Is it not right that we should pursue the reform agenda to make some serious structural reforms to the way in which the EU operates, and that we should also pursue the economic reform agenda? At the same time, if there are issues on which we can move forward with our EU partners that are outside the scope of the constitution, should we not pursue them given that that would be in the best interests of Britain and Europe?
Of course, there are still some issues that must be resolved before Romania and Bulgaria can join the European Union but, like my right hon. Friend, I anticipate that they will be determined, allowing those two countries to join an enlarged European Union. It is often overlooked by Opposition Members, but there has been a series of changes to the way in which the European Union makes decisions—most of them enthusiastically supported by Conservative Governments and Members of Parliament. The reality is that there has been an evolution in decision making to reflect the welcome enlargement of the European Union, and I am confident that that process will continue.
We all live in hope.
Afghanistan has made significant political progress since 2001. Parliamentary and provincial elections were successfully held in September 2005, and Parliament went into session in December. Most Cabinet Ministers have been approved and the budget endorsed. Afghan Government influence is increasing throughout the country with assistance from the international security assistance force and the United Nations. As part of our efforts in southern Afghanistan, we are working to support Afghan-led reconstruction.
I thank the Minister for his answer. Given that the two soldiers who were tragically killed today were, according to the Secretary of State for Defence, taking part in Operation Enduring Freedom, is the Minister confident that our efforts to achieve reconstruction, opium eradication and the elimination of the Taliban are adequately co-ordinated? Is not the proposal made by my right hon. Friend the shadow Foreign Secretary worthy not just of consideration, but of urgent consideration?
The right hon. Member for Richmond, Yorks (Mr. Hague) made a slightly different point about the need to co-ordinate the reconstruction and rebuilding effort, but I made it clear that it was worthy of consideration. The hon. Gentleman, however, is making a different argument about military co-ordination, and I am absolutely confident that there is effective co-ordination of the different kinds of military activity that take place in Afghanistan.
I have made it clear that a determined effort is being made both to disrupt the activities of the criminal organisations that engage in the production and the smuggling of opium and to eliminate their sources of support. That work combines with an effort, primarily by officials from the Department for International Development, to offer alternative livelihoods and encourage the development of substitute crops. As my hon. Friend said, we accept that that should be central to our policy in Afghanistan, and we continue to pursue it vigorously.
The proliferation of nuclear weapons is a serious threat to international peace and security wherever it may occur in the world. Last year, the United Kingdom, alongside our European Union partners, recognised the non-proliferation treaty as a unique and irreplaceable instrument for retaining and reinforcing international security. We agreed to work towards universal accession to the treaty, and we called on all states not party to it to make a commitment to non-proliferation and disarmament.
I thank the Minister for his answer. I am sure that he shares my concern about the prospective launch by North Korea of the Taepo-Dong II missile, which could carry a nuclear warhead as far as Alaska or Japan. Exactly a week ago, the US Secretary of State said that she would consult with allies about the situation. What suggestions has he made to her to resolve that potential crisis?
The international community, including the UK, has been proactive in speaking to North Korea and others to make sure that everyone is aware of the serious consequences if the North Koreans went ahead with that missile test launch. In our discussion upstairs the other day, in which the hon. Gentleman played a prominent part, we made it clear that the six-party talks represent the best mechanism for progress towards the denuclearisation of the Korean peninsula. That remains the case, and we still believe that the North Koreans should rejoin the six-party talks. The message to the North Koreans is, “Rejoin the six-party talks, because you gave a commitment to those talks. Fulfil your commitment.” Through those talks, we can start to denuclearise the region and, hopefully, put off any attempt whatsoever by the Koreans to launch a test missile.
Does my right hon. Friend share my concern that the negotiations last year on the non-proliferation treaty, to which he has just referred, did not have a very successful outcome? Is not a big question mark now placed over the future of the non-proliferation regime, due not just to North Korea, but to the fact that there is significant disagreement internationally about the way forward? Can he give us an undertaking that the British Government will do all that they can to reinforce, maintain and strengthen the non-proliferation treaty?
I give my hon. Friend that absolute assurance. Signing the treaty was the easy part—the second part is to get others to come forward to sign it and to deal with the nitty-gritty around the politics. I can give an absolute assurance that we will do exactly what my hon. Friend asks. No doubt from time to time his Committee will have me and other responsible Ministers before it to review progress.
Point of Order
On a point of order, Mr. Speaker. Today the Attorney-General has made an oral statement to the House of Lords concerning the collapse of the Jubilee line trial. You will recall that that was a matter on which there was a written ministerial statement to this House on 22 March 2005. The report that has been published is critical of the Crown Prosecution Service’s handling of the case, points out that the use of the offence of conspiracy to defraud is greatly muddled and added length to the proceedings, which is a topical matter for this House, and stressed that the fact that a jury was present at the trial was irrelevant to its collapse, with which the Attorney-General only a few moments ago stated that he disagreed, despite the fact that he commissioned that report. In those circumstances, is it appropriate that a statement of this kind should be made only in the other place and that the House should not have the benefit of the presence of the Solicitor-General to make a similar statement?
The hon. Gentleman has said that the Attorney-General made the statement in the other place not so long ago, so let me have a look at what the Attorney-General said. I urge the hon. Gentleman to look at that statement also and to work through the usual channels to see whether similar action can be taken in this House. I will get back to the hon. Gentleman.
Sexually Explicit Material (Regulation of Sale and Display)
I beg to move,
That leave be given to bring in a Bill to establish an Office for the Regulation of the Sale and Display of Sexually Explicit Material; to require the Office to regulate the sale and display of such material; and for connected purposes.
My Bill seeks to allow the appropriate regulation of sexually explicit material such as that in lads mags and the Daily Sport and the Sunday Sport.
Before I begin, I must tell the House that much of the material from those publications that I would have liked to have quoted has, after long consultation with your office, Mr. Speaker, been deemed to be too obscene to be spoken in this Chamber. I ask Members present to reflect on the fact that while they may never have seen such material and are today unable to hear it read out loud in detail, those publications are available for purchase by children in nearly every newsagent in Britain.
My first example of such material is provided by the Daily Sport and the Sunday Sport. Inside such so-called newspapers, the overwhelming majority of the content comprises adverts for hard-core pornography, sex chat lines, national directories of sex shops and every other form of adult entertainment. There are quite literally thousands of adverts per issue—often page after page. One page alone may have up to 700 one-line ads for masseurs/escorts, accompanied by graphic images.
Another shocking example of such disgraceful content is provided by the issue that covered Jane Longhurst’s murder by a necrophile addict. In the Daily Sport the sex life of her murderer was described as being a series of “adventurous romps”. Jane’s murder was not presented as a tragedy, but instead was degraded to what can only be described as a deviant narrative designed to appeal to the most depraved members of our society.
The problem is compounded by banners across the top of the Daily Sport that advertise hard-core sex websites. Those are simply a portal to hard-core porn sites, which advertise the Daily Sport, while hard-core porn mail-out catalogues in turn advertise the same paper.
In a similar manner, lad mags—or so-called men’s lifestyle magazines—provide another clear example of the total failure of current media regulation. Publications such as FHM, Zoo, Nuts and the like are sexually explicit and highly sexually denigrating. The question hon. Members must ask themselves is why such publications are not on the top shelves, given that their content is barely indistinguishable from recognisable top-shelf pornography.
In those publications, women are shown only as cheap and contemptible sexual commodities, fit only to be subjected to a range of exploitative, violent and degrading activities. An example of the content is a recent issue of Zoo magazine, which features images of girl-on-girl action and jokes about women enjoying being urinated on and having sex with animals. Its “tit op comp” invites men to win breast enlargements for their girlfriends, with the declared purpose of transforming them
“into a happier, more generous, intelligent and interesting version of the slightly second rate person they are today.”
This is a magazine being sold or provided to young boys under the age of 16. What impressions are they gaining about the importance of a woman in our society and what messages are we sending to young girls? It is that we condone their use and misuse in any way that makes the editors, producers and distributors of this so-called literature a profit. Is this type of sexual activity and literature so normal that it can be displayed next to The Beano and The Dandy? Something must be done.
I believe that it is strongly in our interests as a society to restrict the availability of this material. While those publications are clearly sexually explicit, exploitative and denigrating, there is currently no meaningful regulation in place to ensure that they are sold as age-restricted and on the top shelf. Throughout its history, the British media has achieved a balance between decency and freedom of expression. For centuries, our country has led the world in its ability to combine a freedom of choice for society while at the same time protecting its most vulnerable members. The availability and impact of publications such as Zoo, Nuts and the Daily Sport are undermining that reputation.
Regulation has worked well for other industries. The British Board of Film Classification has allowed the film industry to go from strength to strength, while at the same time protecting the development of our nation’s youth. A 9 pm television watershed and internet controls have given parents a choice over what their children watch or where they surf. Considering the success of such measures, why is there no regulatory mechanism in the print media that affords women and children a similar protection? If it is right to have measures in place to protect children within the film, TV and internet industries, why are they not in place for the explicit sex magazines and so-called newspapers that feature so freely on our nation’s shelves? If that were the case, all the publications that I am concerned about would be rated 18-plus and would have to carry explicit warnings about their content.
Currently, the Obscene Publications Act 1959 and the Indecent Displays (Control) Act 1981 are entirely inadequate for the regulation of today’s media. Those Acts are applied by the courts only to the most extreme forms of pornography and at present the law is simply not equipped to deal with the sort of material found in lad mags or the Daily Sport. Tellingly, there are no legal definitions of pornography in existence—not even of the word “indecent”.
Although the publishers of newspapers and magazines are currently regulated by the Press Complaints Commission, that body has no codes regarding sexual explicitness and it has refused to consider introducing guidelines even over the explicitness of the covers of newspapers and magazines. In a similar manner, while the sale of newspapers and magazines are monitored by a retail regulator, the National Federation of Retail Newsagents, it issues purely voluntary codes to retailers and has no powers to impose fines. Retailers are under no obligation whatsoever to abide by its recommendations.
I have previously contacted WH Smith to discuss this issue, but the chairman refused to speak to me, presumably because he is very happy with the profits he is earning as a result of his role in promoting and distributing that literature. WH Smith is the largest distributor for such publications and, despite hearing my arguments, it continues to make those publications available to children.
Today we have an opportunity to force an industry to uphold those principles that we value in everyday life. The Bill proposes the establishment of a new, independent, non-partisan regulator for the sale and display of sexually explicit material, with binding codes and transparent, well publicised guidelines—a regulator that is socially responsible and not motivated by profit and could take the onus off commercially motivated retailers and publishers to act as regulators.
I want our children and the women who have been the subject of sexual abuse and misuse to be properly protected from what is now freely displayed to them, and normalises and glamorises degrading and often violent activity. I believe that my measure will do something towards that surely admirable end. I commend it to the House.
The Bill is clearly well intentioned in trying to protect minors from exposure to thoroughly unpleasant publications. There cannot be an hon. Member in the House who disagrees about the fact that minors deserve that protection and that their parents would expect the law to achieve that aim.
I wish to oppose the Bill, however, because I believe that it is wrong in two respects: first, in its proposal that a Government office should be set up to regulate the sale and display of such material; and secondly, in its failure to take proper account of the co-operation of the women portrayed.
I became interested in the subject some months ago when I received a copy of the Daily Sport in my postbag. I was surprised at how many large advertisements it contained for hard-core pornography, together with pictures of women wearing nothing more than a lascivious expression. I was even more surprised to find that that was eligible material for display alongside newspapers, where such publications are readily accessible to children.
A range of lifestyle magazines is aimed at the teenage girl market, but there are no comparable publications, as far as I am aware, for teenage boys. Perhaps that gap in the market could be filled by a responsible publisher. If a lifestyle magazine could be produced that was attractive to teenage boys and acceptable to their parents, it might help reduce any curiosity that they might have in the grossly unsuitable publications that the Bill covers.
The Bill includes no reference to the complicity of the women pictured in the publications. They are not victims. Women who take part willingly in that sort of photographic or film session, and are paid for their services, must surely take responsibility for their involvement. Portraying women as objects of disrespect at best, and deserving of degradation, violence and utter contempt at worst, does a great disservice to other women who may suffer at the hands of husbands or partners who have been influenced by what they have seen in those publications.
A clear definition of what constitutes pornography is needed to encompass that type of publication and those that the hon. Lady described, which I have not seen, in the Obscene Publications Act 1959, so that they are consigned to the top shelf, away from the reach and eyes of children. We do not need yet another Government office—we have far too many already.
The Bill is trying to do the right thing in the wrong way and I therefore oppose it.
Question put, pursuant to Standing Order No. 23 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business), and agreed to.
Bill ordered to be brought in by Mrs. Claire Curtis-Thomas, Annette Brooke, Dr. Evan Harris, Lynda Waltho, Andrew Selous, Helen Goodman, Mr. Barry Sheerman, Peter Bottomley, Stephen Hammond, Mrs. Siân C. James, Ms Diane Abbott and Rosie Cooper.
Sexually Explicit Material (Regulation of Sale and Display)
Mrs. Claire Curtis-Thomas accordingly presented a Bill to establish an Office for the Regulation of the Sale and Display of Sexually Explicit Material; to require the Office to regulate the sale and display of such material; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 20 October, and to be printed [Bill 200].
[Relevant Document: Fifth Report from the Treasury Committee, Session 2005–06, HC 1074, on the design of a National Pension Savings Scheme and the role of financial services regulation.]
I beg to move,
That this House welcomes the White Paper ‘Security in retirement: towards a new pensions system’ [Cm 6841] as the basis for a consensus on the future of pensions policy.
Last month’s White Paper set out the changes that we intend to make to our pensions system in the UK over the next few years. The reforms are radical and far-reaching, which they need to be if they are to succeed in addressing the fundamental demographic, social and economic challenges that we face. They take forward the main recommendations of the Pensions Commission, offering the prospect of a wide national consensus in the years ahead. That will be an essential ingredient if the reforms are to produce the effect for which they have been designed—allowing future generations to work and save for a long and healthy retirement.
The measures set out in the White Paper will make it easier for more people to save more for their retirement, which must be our fundamental objective. In return, the state pension will become more generous, simpler and fairer to women and carers, and there will be less means-testing. Because of our decisions about the state pension age, the state second pension and the future of the defined contribution rebate, the reforms are affordable in both the short term and the long term, which is an essential component of any sustainable reform package.
The reforms necessarily involve new and different responsibilities for taxpayers, employers, the pensions industry and individuals. Thanks to the work of the Pensions Commission and the national pensions debate, there is a large measure of support for the general principles behind the reforms.
I am grateful to the Secretary of State for giving way so early in his speech. Why are the reforms not affordable in 2010? And why should we believe that they will suddenly become affordable in 2012? The current Chancellor does not think that they are affordable in his foreseeable lifetime in either of the two top jobs.
I shall address that point in a second, but that is not the view of my right hon. Friend the Chancellor.
Our task is to forge a real and lasting consensus, both in the Chamber—I hope that it will include the right hon. Member for Wokingham (Mr. Redwood)—and across the country. We all know the importance of pensions to our constituents, and it is our responsibility to try to reach agreement on the pensions system to enable the people whom we represent to make future savings decisions with the confidence that those reforms will last between the generations.
It is right that the debate about pensions should continue—indeed, the White Paper encourages that process—and I look forward to the contributions from hon. Members on both sides of the House to today’s debate.
The Secretary of State has indicated that he wants to establish a consensus on the matter and hold discussions with the Opposition parties, but he has been quoted as saying that this is not a pick-and-choose package. Will he clarify which issues in the White Paper are open to amendment and discussion?
I shall come on to that in a moment. The White Paper acknowledges that there are some issues, particularly to do with the introduction of personal accounts and the national pension savings scheme, on which some work remains to be done. If the hon. Gentleman is still attached to the citizens pension, perhaps he will explain where the billions of pounds of additional public expenditure will come from without the need for tax rises. Before he intervened, I was about to say that I want to make one thing absolutely clear: this is not a pick-and-choose menu, so we do not, by definition, have the luxury of cherry-picking.
The reforms are designed to lock together a framework that provides a sustainable, affordable solution and provides real benefits to all those who are saving for their retirement. Those such as the right hon. Member for Wokingham and the hon. Member for Yeovil (Mr. Laws), who propose different solutions, need to explain to the public how they are going to be financed, what different outcomes they will produce and on what basis they will provide a better prospect for the consensus that we all desire than the proposals by Lord Turner and the Pensions Commission, which we are now taking forward.
In terms of cost, does my right hon. Friend propose to redistribute the money that is spent on tax relief so that more of that funding goes to people on lower incomes? At present, 50 per cent. of that tax relief goes to those earning more than £50,000.
No, I do not propose to bring such a proposal before the House, because, as my hon. Friend knows, I am not the Chancellor of the Exchequer, and those are matters entirely for him.
I shall give way to the hon. Gentleman, who has a special expertise in this subject.
On tax relief, will the right hon. Gentleman clarify the answer to the question that I asked him when he last made a statement? He said that the Government provide 1 per cent., the scheme member provides 4 per cent., and the employer provides 3 per cent. He may be understating the Government’s contribution, because presumably, in addition to the tax relief given to the saver, tax relief will be given to the employer who is contributing the 3 per cent., which is tax deductible. However, that is not clear from what the Government have said previously.
I do not think that we are proposing any additional tax relief for employers. The hon. Gentleman gave me plenty of notice of that question, but I still may not have the answer that he is looking for. I will ensure that he gets it during the course of the debate.
I will give way once more, but then I want to make progress because there is a time limit on Back-Bench contributions.
The right hon. Gentleman says that tax relief is a matter for the Chancellor, but surely it is fundamental in considering all the options open to us in dealing with pensions. If he is ruling out any change in tax relief, he is tying our hands behind our backs before we even start to discuss the pension problem.
As the hon. Gentleman knows, the Chancellor keeps all taxation issues under regular review. When this matter was considered in the course of the Pensions Commission’s work, it decided not to make any recommendations, at least in part because of the complexity of the system. However, those are matters for my right hon. Friend the Chancellor. Taken as a whole, the measures that we propose in the White Paper are affordable and sustainable over the long term because we have not been prepared to avoid making those difficult decisions.
No, because I have given way to my hon. Friend already.
Has my right hon. Friend received recommendations from the National Pensioners Convention and others about the fact that while the change of direction is welcome, it is very much jam tomorrow, while nothing is done for today’s pensioners, many of whom still live on very low incomes?
I do not accept that, because the White Paper confirmed that we would continue to uprate the pension credit in line with earnings beyond 2008. That has been a welcome decision. As I shall point out again later, that decision alone will ensure that up to 500,000 pensioners will not end up falling into poverty. It is not true to say that there is nothing for today’s pensioners. These matters are addressed by my right hon. Friend the Chancellor during the course of his annual review of public spending in the Budget. In the remaining years of this Parliament, there will be plenty of opportunity for the Government to ensure that we do not forget the needs of today’s pensioners, but the White Paper was very much about the future and long-term reform.
It is not acceptable for us to duck the long-term challenge of reform, and we have tried to avoid doing so. When we came into office, we could have restored the link between the state pension and earnings, as many people were urging us to do, but if that had been our policy, 1.5 million more pensioners would be below the poverty line today. Instead, since 1997, we have spent three times as much on pensioners as it would have cost to restore the earnings link. We have targeted the bulk of that extra investment on the poorest pensioners, which was entirely right. Compared with 1997, we are now spending more than £10 billion extra each year on British pensioners. Almost half the spending is going to the poorest third. Two million pensioners have been lifted above the poverty line and, for the first time in a generation, pensioners are less likely to be poor than any other group. It is simply not true, as some have said, that progress is not being made in tackling poverty among the retired.
In our second phase of reform, we tried to address the loss of confidence in the private pensions market, to which the Conservative amendment correctly refers. That included dealing with the pensions mis-selling scandal and the impact of the falling stock market on occupational pension schemes. In 1997, fewer than 2 per cent. of pension mis-selling cases had been satisfactorily resolved. By the end of 2002, more than 99 per cent. of consumers with mis-selling claims had been compensated, with total compensation reaching £11 billion. The Pension Protection Fund and the pensions regulator are today helping to respond to the problems experienced by those in defined benefit occupational schemes and acting to boost security for scheme members. The significantly expanded financial assistance scheme, which we announced last month, offers a new prospect of help for those who have lost the most when the pension schemes of insolvent employers have been wound up.
Will my right hon. Friend remind the House by how much that financial assistance scheme has been expanded? Does he share my disappointment that the spokesmen for those who have been affected, with whom everyone has sympathy, sometimes fail to acknowledge some of the changes that we have made on their behalf?
I am grateful to my hon. Friend for that intervention. We originally set aside £400 million for the financial assistance scheme. We have now set aside a further £1.9 billion to address the problem more satisfactorily. That is a generous and proper response to the plight in which many people have found themselves, with which Members on both sides of the House have great sympathy.
It would be helpful if the Secretary of State were to clarify the liabilities in relation to those who might be eligible for the financial assistance scheme but who fail to be so at present because of the restrictions placed on the scheme by the Government. When he and the Prime Minister originally made an announcement about it to the House, we were told that £15 billion would have to be set aside to meet the liabilities of those people who had lost their pensions. As I understand it, the Government have re-examined the figures, and the true amount is nearer £3 billion. Can he clarify how much it would cost to pay out to those people their rightful due?
The cash valuation is £15 billion. That is what I said in my statement, and that is still my view of the cash required to meet the liability. The net present value is around £3 billion. However, such commitments are not funded through the Government making dowries, as it were, at the beginning of the period and using that as a basis on which income can be generated to meet expenditure commitments. It is therefore important to keep in mind the cash figure, as there are many Members present who are experienced in dealing with these issues. Cash is cash, and it is always important, when presenting public spending figures, that we do not forget that.
It is not true, as the hon. Lady has implied, that we have somehow changed our assessment of the valuation. She is not comparing like with like. [Interruption.] Obviously, she does not like my answer, as I can hear her chuntering. I have done my best to try to educate her, however, and to correct the mistake in her question.
With great respect to hon. Members on both sides of the House, I intend to make a little progress with my speech and then give way later. I know that there is a lot of interest in the issue of the financial assistance scheme, and I am sure that my hon. Friend the Minister for Pensions Reform will deal with some of the points that arise when he winds up.
I want to turn briefly to the recent report of the parliamentary commissioner on pensions. While I have repeatedly made it clear that we disagree with the ombudsman’s finding of maladministration by my Department, and have therefore not been able to accept her recommendations calling for compensation along the lines that she proposed, we obviously have the greatest sympathy with those who have lost some or all of their pensions. I have met people who have been affected and am acutely aware of the difficulties that they undoubtedly face. They believe that they have been robbed of their pensions, and I entirely understand that feeling of injustice.
At the time of the ombudsman’s report, we had already committed ourselves to a review of the financial assistance scheme. In March, the Prime Minister announced that we had expedited the review, and last month I announced that we had decided to extend the scheme to cover eligible people who were within 15 years of their scheme’s normal retirement age on 14 May 2004.
Will my right hon. Friend give way?
I will do so a bit later, if my hon. Friend will bear with me.
In extending the financial assistance available in that way, we took proper account of the issues raised in the ombudsman’s report. The scheme will now cover some 40,000 people and—as I said in response to my hon. Friend the Member for Sunderland, South (Mr. Mullin)—it represents a substantial additional investment, taking the total cash funding from £400 million to more than £2 billion.
In making its recommendations, the Pensions Commission acknowledged the progress that we had made since 1997. Its report was designed to build on that progress. The commission made it clear that there was no immediate pensions crisis, but said that there would certainly be one if we did not act soon. It identified four principal challenges. First, there was the problem of undersaving, affecting perhaps as many as 12 million people. Secondly, by 2050 there would be 50 per cent. more pensioners than there are today. Over the same period, the ratio of people in work to those in retirement would halve. In fact, the latest research has revealed that during the past 20 years, life expectancy at the age of 65 has grown at the rate of about 15 minutes per hour.
It might feel much longer.
I am only on page 6, so the hon. Gentleman had better make himself comfortable.
I will not give way. I want to give the House some good news. Our life expectancy will have increased by about an hour and a half during the debate. Debate is a very healthy thing, after all.
Thirdly, as a result of developments spanning many decades, the current state pension system has become very complex. It delivers unfair outcomes, especially for women and carers. Finally, if we maintained the current indexation arrangements, the basic state pension might be worth only £35 a week by 2050 in today’s earnings terms, and more than 70 per cent. of pensioner households could be eligible for pension credit. That, of course, was never the Government’s intention.
I believe that the proposals in the White Paper address the challenges identified by the Pensions Commission. Crucially, they do so in a way that promotes personal responsibility and achieves outcomes that are fairer, simpler, affordable and sustainable. The introduction of personal accounts combined with compulsory minimum employer contributions and automatic enrolment will help to embed a new pensions savings culture in which future generations can take increasing responsibility for building their retirement savings.
In the light of his comments about longevity, will the Secretary of State now extend his speech? I think we should look again at the statistic involving 15 minutes per hour.
As the Secretary of State will know, the Treasury Committee published a report on the national pensions saving scheme. We recommended two things: simplicity and minimum regulation. If we secure those, we can achieve what the Pensions Commission said would be 30 basis points for management charges. Can the Secretary of State assure us that the Government are considering that figure rather than, say, 0.6 per cent. or 1 per cent.? It is important, for the sake of the pot at the end of the day, that the minimum is charged.
I congratulate my right hon. Friend on the Treasury Committee’s excellent report, which has helped our thinking greatly. He is right to say that at the heart of making personal accounts a success will be our ability to keep the costs and charges associated with them as low as possible. I recently returned from a trip to Washington, where a similar scheme has been in operation for about 20 years for federal employees. It operates not at 30 basis points, not at 20, but at five. I am not saying that we can get down to five as a starting point for personal accounts, but I think that the scale of the potential investment in personal accounts, along with automatic enrolment, present a prospect of considerable advances in scheme administration costs.
The proposals in the White Paper will address the principal challenges identified by the Pensions Commission, and that is particularly true in relation to personal accounts. As a result of the changes we propose, up to 10 million people could be saving in a new low-cost personal account. By retirement, their pension funds could be worth up to around 25 per cent. more because of the lower charges, to which my right hon. Friend alluded. It is estimated that personal accounts will generate an additional £4 billion to £5 billion of saving every year, equivalent to around 0.5 per cent. of gross domestic product.
We are consulting on the best administration model for the accounts, and particularly on whether there is value in offering consumers a choice of branded provider. It is perfectly proper for the Opposition motion to refer to that ongoing work and we will host a stakeholder summit as part of the consultation later in July, to which the main Opposition parties have been invited. We will publish a further document later this year setting out the detail of the approach that we intend to take. I hope that that approach will have the support of the spokesmen for both main Opposition parties.
Personal accounts are the key to empowering personal responsibility. We estimate that by 2050 a regular saver, who saved from age 25 into a personal account with total contributions of 8 per cent. and on median earnings, could be up to £50 a week better off than if the system continues as it is today. That is, in part, the power of compound interest. So while there will always be specific individual circumstances, such as debt or stock market performance, that will affect people’s savings, fundamentally the package of reforms in the White Paper will mean that people should be better off in retirement from having saved themselves.
However, to achieve that result and enable people to save in personal accounts with confidence, it will also be necessary to make reforms to the state pension. Our reforms to modernise the contributory principle and enable more women and carers to qualify for the state pension will deliver much fairer outcomes. And by restoring the earnings link and simplifying the state second pension so that it gradually becomes a flat-rate weekly top-up to the basic state pension—an already existing trend and a change recommended by the Pensions Commission—we will make the state pension simpler and more generous, while reducing the spread of means-testing and providing a solid foundation on which to build a sustained expansion of private savings.
A person retiring in around 2050 who has been in employment or caring throughout their working life could receive a contributory state pension worth £135 a week in today’s earnings terms, which is £20 a week above the guaranteed income level. Without those reforms, people retiring in 2050 would receive a total contributory state pension—including the basic state pension and the state second pension—worth between £90 and £100 a week, well below the current means-tested threshold. That would not be an acceptable outcome.
The White Paper announced our commitment to continue to uprate pension credit in line with earnings, locking in our progress on pensioner poverty and preventing half a million pensioners from falling into poverty between now and 2012. But we will also be able to limit the spread of means-testing. We will make an immediate start on that by modifying the calculation of the savings credit from 2008. That gives a clear indication from the outset of our determination to make clear people’s incentives to save. As a result of that change and our restoration of the earnings link, by 2050 only about a third of pensioners, or fewer, will be eligible for pension credit, instead of some 70 per cent. if current uprating policies continued.
I wish to make one very important point. Of the third of pensioners who will continue to be eligible for pension credit, only about 6 per cent. will receive the guarantee credit alone, which means that in the vast majority of cases, those receiving pension credit will be rewarded because they have saved for their retirement, and that has got to be the right policy. So when people criticise the level of means-testing in our proposals, they need to reflect on that very important feature.
What does the Secretary of State intend to do for the many widows who, on the death of their husbands, receive only half the value of their pensions? Those women often have to scrimp and save to keep a roof over their head. What will the Government do to alleviate their difficulties?
To some extent, pension credit will cover women in those circumstances. I am sure that my hon. Friend the Minister for Pensions Reform will explain that in more detail later, but it is through pension credit that we will target additional financial help for people in those circumstances.
I hope that my right hon. Friend will ask the Minister for Pensions Reform to deal with this question too when he winds up the debate. My right hon. Friend said that he expects the full implementation of the White Paper to reduce means-testing to about one third, the level that the Turner commission suggested would be reached under its proposed reforms. I believe that he was right a moment ago to say that the Government were not going down the citizenship pension route because of the great cost, but that means that many people will not gain a full state pension who otherwise would if we had a citizenship pension. If national insurance rights are not to be extended to that group, how is he able to say that there will be the same number of people on means-tested assistance as would be the case under the Liberal Democrat policy proposed by the Turner commission?
Turner proposed not a citizens pension but a universal pension for those over 75. We have taken on board a number of proposals, such as the change to the savings credit fix, that will produce the result that I have suggested. I shall return in a moment to the reforms to the contributory principle, but they were not supported by Lord Turner who, as my right hon. Friend will know, favoured the introduction of a residency test that would take time to have the desired effect. Our proposals mean that women will have a fairer pensions deal by 2010 and that, in combination with our other proposals, is how we arrive at the figures that I have set out.
By saying that we will aim to restore the earnings link in 2012, subject to affordability and the fiscal position, we have made it clear that we will not risk jeopardising the public finances. We have also ensured both affordability and sustainability over the long term.
Over the period to 2020, our proposals will keep spending on pensioners as a proportion of national income broadly constant at today’s levels. They take advantage of the savings realised by the decade of state pension age equalisation and will help pensioners to share in rising national prosperity. In addition, of course, the rise in the state pension age over the long term will match increases in life expectancy. That, and the other changes that we are making, will also help to secure the financial stability and sustainability of the state pension system.
Therefore, the four main elements of the White Paper form an integrated package. They introduce auto-enrolment into a low-cost scheme of personal accounts, and provide a firm foundation for private saving by linking the state pension to earnings in the next Parliament. Moreover, we will modernise the contributory principle the better to provide for women and carers, and gradually raise the state pension age to ensure sustainability.
As I said earlier—and I intend to labour this point today—we cannot pick and choose from within the package to avoid the tough choices that we have to make. Those who want to change some elements of the proposals need to explain how they could do so without jeopardising the key outcomes of fairness, simplicity and affordability.
For example, there are those who favour a residency base for future accruals, as proposed by the Pensions Commission. However, that would offer no immediate help to the key group of women aged 45 and over who have poor contribution records and clearly no time to put that right. Changing the current rules from 2010 to reduce the number of years needed to qualify for the basic state pension to 30, and improving the system of credits the better to reflect the different ways that people contribute to society, will result in an immediate and very significant increase in the proportion of women reaching state pension age with a full basic state pension.
The residency approach, like the current system, means that only 50 per cent. of women would get a full basic state pension in 2010, whereas our changes will immediately increase that figure to 70 per cent. By 2020, up to 270,000 more women every year will receive a full basic state pension—approximately three times the number that would be achieved under a residency-based approach.
Of course, those who argue for a residency-based citizens pension—which I believe remains the policy favoured by the Liberal Democrats and the nationalist parties in this House—also have to contend with issues of simplicity and affordability. As the Pensions Commission highlighted, it depends on the model chosen: there would either be an immediate and unaffordable increase in costs, peaking at £60 billion around 2040, or—if a transitory approach were adopted—a smaller increase in costs would be coupled with a dramatic and unacceptable increase in complexity during what would have to be a lengthy transition period. Hardly surprising, therefore, that the Pensions Commission rejected the notion of a citizens pension.
Some argue that we should introduce the earnings link sooner or delay the implementation of increases to the state pension age until 2030. In doing so, they, too, need to set out clearly what the public expenditure implications would be and how that affects the current crucial question of affordability. For example, under the White Paper, increases to the state pension age will eventually reduce the cost of the package by £30 billion a year, but delaying the timetable for the implementation of each increase in the state pension age by five years would by 2050 increase the cost of the reform package by £5 billion every year. Those who argue for such changes must first argue for how they would find the additional money that would make them affordable and still maintain our progress in tackling poverty and delivering fairer, simpler outcomes.
Some Opposition Members have expressed concern about the plans to accelerate the flat-rating of the state second pension and, in particular, the impact on middle-income earners of the withdrawal of earnings relation. The Pensions Commission explicitly recommended that the earnings-related element should be withdrawn. We accept that recommendation, but the savings will be reinvested in the basic state pension, ensuring that no one loses out, so it is nonsense to talk of hidden tax increases. There are none. Indeed, the effect of flat-rating for even the highest earners is more than made up by the earnings uprating of the basic state pension. For example, a high earner who worked from age 25 would get £102 basic state pension and state second pension under the current scheme in 2053, in earnings terms. Under our reforms they will get £140. A median earner would get £100 under the current system and £139 with our reforms. Yes, they lose £1 of state second pension because of flat-rating, but they gain £40 of additional basic state pension. Most people would not describe that as a bad deal at all.
I am grateful to my right hon. Friend for his explanations of the various schemes and the balance between them. I am sure he agrees, however, that fairness must include what happens to carers, so can he describe how he intends to help them, to ensure that the contributions they lose while they are caring are added to their pension when they retire?
I will describe the changes briefly. As my hon. Friend knows, we shall consult on the detail, but in broad terms we intend to introduce a new credit in the state pension system for those who have caring responsibilities of more than 20 hours of week. At present, credits can be accrued only if a person is in receipt of carer’s allowance, which involves a minimum caring responsibility of 35 hours a week, so tens of thousands of carers will acquire new credits in relation to the state pension as a result of the changes that we propose to introduce through the White Paper and on which we hope to legislate in the next Session of Parliament. That is a significant reform, which many carers’ organisations have been pressing on the Government for some time.
I want to try to conclude my remarks as quickly as I can. I have probably detained the House long enough—[Hon. Members: “No, no.”] None the less, I think I shall stick to my speech.
Taken as a package, the reforms can provide a framework for pensions that can last for generations to come—a future in which we give people the tools to take personal responsibility for building their retirement savings with confidence; and in which we deliver a system that is affordable and sustainable for the long term. That is the opportunity before the House today. In supporting our motion, the House can signal its support for the direction of travel set out in the White Paper, as I very much hope that it will. In doing so, it will help us all take a significant step towards a lasting pensions settlement, with a sustainable, affordable and trusted system that will meet the needs of those in retirement both now and well into the future.
I beg to move, at the end of the Question, to add:
“, recognises the importance of consensus in ensuring long-term, affordable and sustainable pension reform; and therefore welcomes the commitment of all major parties in the House to engage in the process of consensus building, while acknowledging that a number of concerns remain to be addressed in the course of that process, including the impact of the projected future level of means-testing on savings behaviour, the design of an auto-enrolled savings scheme, the need to strengthen existing occupational pension provision to reduce the risk of ‘levelling down’ on the introduction of personal accounts and the need to restore public confidence in the fairness and security of the pensions system.”
I welcome the opportunity to hold this debate today. The amendment seeks to reinforce the message of support for the key principles and to underline our commitment to the consensus-building process, but also, as the Secretary of State has acknowledged, to place on the record that there are a number of key issues that need to be addressed if a sustainable, affordable and lasting pension reform is to be introduced. We are clear that such a reform requires cross-party political consensus. The underlying purpose of the reforms is to create a stable platform of state provision upon which people can plan their own private saving. It is clear to us that that places a heavy burden on the Opposition in rising to the challenge of forming a genuine cross-party consensus. However, it also places a heavy burden on the Government, because a lasting consensus is one built around a sustainable proposition. It has to be a hard-edged consensus, not a woolly one. The Secretary of State will know that the history of recent pensions policy warns us of the fragility of any consensus built around a flawed proposition.
In reaching for that consensus, it is essential that we analyse the details of the White Paper rigorously, and that we are prepared to challenge, without fear of ridicule by the Secretary of State, the areas where it is as yet unclear whether the proposals before us will deliver the objectives that we all share. There must also be a clear understanding that consensus is a two-way street. There is an obligation on the Government to listen to the concerns of the Opposition and others outside the House and to engage constructively in addressing them, working with us to explore alternative solutions where problems are identified.
I will be frank with the Secretary of State: we were disappointed by the level of engagement between the Opposition and the Government before the publication of the White Paper. It was effectively a fait accompli. However, we are pleased by the clear signals that the Secretary of State has sent that he is now ready to engage. We are certainly ready to do so. We hope that the willingness for dialogue will extend to dialogue about the drafting of the Bill. Our clear preference is to spend the summer talking about the drafting of the more contentious areas of the Bill, rather than to spend the autumn tabling amendments to what the Government have presented.
Our starting point for this exercise is a bout of realism—a recognition of the looming crisis in pensions provision. Increased longevity, lower investment returns and changing demographics have all created a situation that has to be addressed, but so too has the Chancellor’s annual tax raid on pension funds, which was most recently estimated to cost about £7 billion a year—equivalent to about £175 billion wiped off capital value. Nine million people are not saving enough for an adequate retirement income. Half of all pensioners are eligible for means-tested benefits, and that figure is projected to grow to at least 75 per cent. by 2050. Some 1.6 million of those pensioners—800,000 of them among the poorest pensioners—are failing to claim what are supposed to be very well-targeted benefits. To cap that, 60,000 pension schemes, with 1 million members, have started wind-up since 1997.
As a response to that catalogue, the key elements of the White Paper, all of which we can enthusiastically support, include, as the Secretary of State said, the restoration of the earnings link, the raising of the basic state pension age over time, changes to the contribution regime to address the particular problems of poverty among women pensioners, and further encouragement of workplace saving. That has to mean workplace saving in existing occupational pension schemes, as well as through the tailoring of new arrangements specifically targeted at median and below median earners.
If we are to build a robust consensus around those key principles, it must be based on knowledge and understanding, not on ignorance. The Secretary of State is right to say that the package has to be affordable. That means that the consensus that we build, both here and among the wider public, has to be based on parts of the package that deliver savings, as well as parts of the package that increase expenditure. A real consensus must be based around tough decisions as well as easy ones. The financing of the package must be transparent and openly debated.
My hon. Friend makes the extremely important point that whatever people today think about consensus—we would all like to find a consensus—any variant of the scheme will work only if it proves to be affordable in the medium term. Is not the worrying thing about the scheme the fact that it is sketchy about how affordable it will be in the next decade, when compound arithmetic starts to work against both the Government and the taxpayer, as well as the people who are asked to contribute?
My right hon. Friend takes me almost exactly on to my next point: there is no transparency in the financial data that support the White Paper. The key table on page 24 of the executive summary counts as a cost of reform the continued indexing of guaranteed credit to earnings, even though the Pensions Commission and everyone else who has examined the matter has always assumed that in their baseline case, because to do otherwise would, by definition, increase the percentage of pensioners in poverty. The £4 billion that the Government will save from 2010 by abolishing contracted-out rebates is not included in the table, although the costs associated with ending contracting out are.
The headlines about the White Paper painted a rather simple proposition: work longer for an earnings-linked basic state pension. There has been virtually no public debate about changes to the state second pension and the savings credit, and the withdrawal of adult dependency increases. Together, those changes will save tens of billions of pounds for the Treasury. That does not mean that they are wrong, but if public support for the package is to be durable, people must understand how all its aspects will affect them. Our message to the Government is clear: if we are to build a consensus, it must be a sustainable national consensus, not one formed behind closed doors at Westminster. It falls to the Opposition, in our role of holding the Executive to account, to ensure that all consequences of the package are understood by those who will be affected by them. I will make no apology for drawing public attention to aspects of the White Paper that will deliver savings for the Exchequer, but about which there has so far been little public debate.
I genuinely did not intend to interrupt the hon. Gentleman’s speech, but let me point out two things to him. On the state second pension, the argument in favour of moving to flat rating is clearly set out in the Turner report—we have accepted those recommendations—so nothing is being done in a hidden or covert way. The argument is clear and profound.
Let me ensure that the hon. Gentleman understands the situation regarding ADIs. The proposal represents a way of funding what is effectively a redistribution in the state pension system and tackling the problem to which the hon. Member for Strangford (Mrs. Robinson) referred, thus ensuring that more women have a direct entitlement to a full basic state pension. The money is being not withdrawn from the pension system, but used in a more intelligent way that reflects modern family relationships and modern life. I hope that the hon. Gentleman will be able to support the proposal. We are not doing anything secretly or covertly, because everything is out in the open. If I had the reference for the pages of the White Paper that explain all that, he could find the detail there.
The Secretary of State is right to say that everything is set out, say on page 299 of the Turner report, or in annexe 6 of the regulatory impact assessment. However, if he asks people on any high street in Britain what they understand about the Government’s White Paper on pensions reform, they will tell him—if they understand it at all—that it is about reintroducing the earnings link in exchange for raising the basic state pension age. I am saying that a sustainable consensus must be based on the dissemination of information, so I make no apology for trying to get the debate going in the public sphere. That means not that the changes that the Secretary of State wants to make are wrong, but that they must be debated and understood.
The hon. Gentleman makes a welcome commitment to trying to reach consensus on the way forward. We all accept that it is perfectly valid for him to wish to question aspects of the Government’s proposals. However, if he decides to reject certain proposals at the end of the day, will he come up with viable alternatives that also promote affordability, with which he says he agrees?
Mr. Hammond: I am grateful to the hon. Lady for her intervention, and the Secretary of State is absolutely right, in that it is not open to anybody to reject all the elements of the package that save money for the Exchequer and then say that they would like to have all the elements that cost money. This has got to be affordable; we are fully signed up to that. The issue is about transparency and getting the debate going.
I reiterate to the Secretary of State the point that the hon. Member for Yeovil (Mr. Laws) made. If we are to have a consensus-building process, it must involve our being able to ask questions to probe the detailed arrangements being put forward as part of this package. The Secretary of State cannot say to us that no cherry-picking means no right to question the route that has been chosen to deliver the objectives. We must be able to look in a grown-up way at how the arrangements work.
My first point, then, is that transparency and openness in respect of the assumptions that lie behind the package and its financing are prerequisites for a durable consensus. But the other key concerns that need to be addressed, and on which I shall focus, are the impact of means-testing, the design of a workplace saving scheme and its interaction with existing occupational pension schemes, the certainty of the timetable for implementation, and pubic perceptions of the fairness and security of the pension system.
The key purpose of the package is the promotion of saving among not just the 5.2 million people who are not saving at all, but the rest of the population, many of whom are not saving sufficiently for a decent income in retirement. The pension credit has created an expectation of growing levels of means-testing, with consequent effects on savings behaviour that we now collectively need to assess and address. We welcome the Secretary of State’s confirmation that it was never intended that means-testing should reach the 75 or 80 per cent. level predicted by Turner for 2050, but there remain major concerns about its impact on the proposed package.
The Government themselves say that there will be about 30 per cent. means-testing in the system by 2050. Other experts—notably the Pensions Policy Institute—disagree with the baseline assessment and therefore arrive at a higher level; they suggest that as much as 45 per cent. of the pensioner population could be means-tested by 2050. Whether the proportion is 30 or 45 per cent., a serious question is being asked by expert observers: will means-testing at these levels, institutionalised as a permanent feature of the system, undermine the package’s key savings-promoting objective? We must look at what impact this level of means-testing will have on the savings behaviour of—typically, but not always—people on the lowest incomes. They are most likely to have interrupted work patterns throughout their lives, and are thus most likely to be entitled to means-tested benefits in retirement.
The fact is that we simply do not know what the answer is—we are in what I suggest is uncharted territory. This is probably the first time that we have had to consider behavioural responses to a long-term stable environment of moderately generous means-tested benefits. Historically, such benefits have been used as a safety net to catch a small number of people who have fallen through the system. Now, we are looking at a system that could be extensive enough to impact on people’s lifetime savings patterns. The irony is that we are having to grapple with the behavioural consequences of the very consensus that we are trying to build, which will give people the certainty that they can plan on the basis of those means-tested benefits being available to them in retirement.
This will be a key area of the debate, and the Government can help us in several ways: by giving a commitment to publishing the full range of outcomes of their modelling of the extent of future pension credit eligibility; by commissioning more work on the impact on savings behaviour of different levels of means-tested benefit eligibility; and by extrapolating beyond 2050 the projected outcomes for paid individuals.
The Secretary of State said that 2050 was about the limit of his predictive power, but I put the following point to him. In the case of the low-paid earner used in the regulatory impact assessment, the assumption is that someone will have contributed for 52 years of continuous work. A person who is 16 in 2012, when the scheme starts, and who contributes for 52 years will be looking for an outcome in 2064. It is therefore essential that we project further forward so that people in that position can understand the likely scenario facing them. We also need to see a range of real world outcomes. The truth is that most people will not work for 52 years in unbroken employment. Many people who will be on the margins of the savings decisions will have broken work records, and will need to know whether saving will pay for them.
It is legitimate to rely on auto-enrolment only if we are sure that we are auto-enrolling people into a scheme that leaves them better off by saving. The Conservatives would have serious misgivings about an auto-enrolment scheme that brought people into a savings system that would leave them less well off, or no better off, than they would have been had they not saved. We need to be confident that it is safe to recommend saving for the overwhelming majority of people, including those whose employment record is discontinuous. More will have to be done to demonstrate that that will be the case.
Much of the public comment on the White Paper has focused on the changes to the state pension arrangements and the introduction of the auto-enrolled workplace savings scheme, but until very recently Britain had a first-class workplace pensions savings system. Changes in the environment, which I have already described, have greatly reduced that provision, and most commentators now accept that defined benefit schemes in the private sector are on the way to extinction; however, high-quality defined contribution schemes remain, with employer contributions well in excess of the 3 per cent. compulsory level proposed for the national pensions savings scheme. As the Secretary of State knows, there is a real risk that the introduction of the NPSS, or a similar scheme, will act as a catalyst not only of the final demise of defined benefit schemes, but of a downgrading of employer contributions to existing defined contribution schemes.
The White Paper contains welcome provisions for a review of the regulatory environment surrounding occupational pension schemes. It is vital that that work be done soon and that the outputs from it are implemented well in advance of the introduction of an auto-enrolled scheme, because history will judge our putative consensus harshly if what we deliver is a pyrrhic victory, with a national pensions savings scheme that results in the downgrading of many people’s employer pension contributions from higher levels to 3 per cent.
The hon. Gentleman raises a serious point. Given his party’s general support in principle for the NPSS and for personal accounts, what policy solutions does he envisage that might deal with the problem of employer contributions to occupational pensions being downgraded to a very low level?
The policy solution is to create a more attractive regime for occupational pension schemes so that employers can see that such a scheme is to their benefit—that a more generous occupational pension arrangement works for them as a recruitment and retention tool. It would be helpful if, when he winds up, the Minister of State made clear the scope of the review of the regulatory environment. Some of his recent statements on the record have been slightly ambiguous, and it would be helpful to know how wide he expects the review to go.
The Government have, rightly, signalled that the workplace savings scheme that they are introducing will be targeted primarily on median and lower earnings. We look forward to engaging with the Government in a debate over the summer on the potential benefits of such a scheme and the risks of an auto-enrolment model. The extent to which the Government should become involved in the delivery of a workplace savings scheme is not clear. The key debate—on the personal account system—is likely to revolve around the degree of state involvement, and thus the degree of personal responsibility and choice.
The danger, which Lord Turner has spelled out recently, is that a high degree of Government involvement in the delivery system will be interpreted by users of the system as a Government guarantee of investment outcomes. I am sure that the Secretary of State would be as keen as we are to ensure that that does not happen.
It would be useful if the Government could say what level of saving in the workplace saving scheme they would regard as a success. The White Paper implies an expected opt-out rate of about 38 per cent. The New Zealand Government are warning, in relation to the proposed Kiwi savers scheme, that opt-out rates could be as high as 75 per cent. The success of the auto-enrolled scheme will be a key measure of the success of the entire package. We must have a clear measure of what will count as success and what level of opt-out will trigger a review of the arrangements.
No part of this reform package will work unless we restore trust in the pension system and public confidence in its fairness. Two broad issues must be addressed if public confidence is to be restored. The first is the Government’s response to the ombudsman’s report. Acceptance of the ombudsman’s finding of maladministration would cost the Government nothing. The ombudsman is an officer of Parliament. She was put in place to adjudicate on claims of maladministration. It is unacceptable for the Govt to reject the finding that she has made. To do so is to challenge the right of Parliament to scrutinise the Executive and deliver judgment upon its activities.
In response to the ombudsman’s recommendations the Government have announced, as the Secretary of State said, an increase in the funds available for the financial assistance scheme. However, he knows very well that the benefits available under the scheme still fall far short of the demands of the pensions action group and of the recommendations of the ombudsman.
Does the hon. Gentleman agree that there is a startling resemblance between the current occupational pensions saga with the ombudsman and the previous case about the state earnings-related pension scheme—SERPS—when the previous Administration were criticised by the ombudsman, also for maladministration and giving incomplete information? Does the hon. Gentleman agree that the only major difference is that with the previous case, the Labour Government accepted the previous Conservative Government’s maladministration, whereas in this instance they are refusing to accept anything at all?
The hon. Lady makes a good point.
The issue is not just about the supremacy of Parliament over the Executive. Similarly, it is not just about the justice of individual cases of people who have lost their pensions. It is about restoring confidence in the pension system. As I am sure the Secretary of State will understand, those people will not go away. They are determined to pursue their case. I suggest that as long as the newspapers are carrying stories about failed pension schemes, and about people living in poverty because of what has happened to the pensions that they worked for and saved for throughout their working lives, it will be difficult to re-establish confidence and get people saving again in a national pension savings scheme.
Those people will not go away, including those in the BUSM scheme in Leicester, some of whom live in and near North-West Leicestershire. Does the hon. Gentleman agree that it is important to reach an agreement about what the costs of responding to the ombudsman’s report would be? A figure of £15 billion cash has been suggested, with net present value down to between £2.9 billion and £3.7 billion—but even that does not take into account the fact that compensation would be taxable, which would take a good number of people out of means-tested benefits. Let us reach agreement about the costs before we start to dismiss some of the solutions that might be available. Does the hon. Gentleman agree with that?
I agree with the hon. Gentleman’s plea for transparency. First, we need information. I also agree with the hon. Gentleman that the initial figures—the £15 billion to which reference has been made—were bogus figures, and designed to be misleading.
We need to understand what the costs would be. We have asked the Government to consider seriously the possibility of using unclaimed assets as a way of supporting the group of people concerned. So far I have not seen any response to that suggestion. The Secretary of State, for reasons of high moral principle and a pragmatic need to achieve delivery and acceptance of his White Paper package, must look at the issue again. I believe that I speak on behalf of Members from all parts of the House in saying that if he decided to revise his position and take a more generous approach he would not be criticised in any quarter of the House.
May I once again put on the record my strong view that the figures are not bogus? The £15 billion was assembled in exactly the same way as we produced the costings for the financial assistance scheme in the first place. They are proper, actuarially based figures, and I dispute the hon. Gentleman’s allegation that they are bogus, because that is fundamentally not the case. May I press him on something at which he has hinted, but not said? Is he saying from the Dispatch Box that he would compensate all those pensioners in full? He has criticised the Government for not making compensation available, but is it his policy to compensate them in full if he had the opportunity to do so in government—yes or no?
If, when we are in government in three years’ time or later, the Secretary of State has not resolved the issue satisfactorily, we will make a decision on the issue, as he would expect. However, this is his watch, so he must address the issue that has been raised and deal with the questions that have been presented.
On the issue of fairness, I should like to say something about the ongoing debate about public sector occupational pensions. Like the state pension, unfunded public sector occupational pensions are paid for by the general taxpayer, who will not take seriously the Government’s strictures about the need to work to the age of 68 to address the challenges of increased longevity while they cave in to pressure from public sector trade union paymasters to continue to allow pensionable retirement at 60. The then Trade and Industry Secretary was right last year when he said of the plans to raise the public sector pension age to 65:
“That argument is irrefutable. For us to say to the private sector you have to work longer and save more money, and to the public sector you stick with your retirement age is impossible”.
Those words were spoken by a senior member of the Government, so the craven surrender to the vested interests of the Labour party’s paymasters in negotiations ranks as one of the Government’s low points.
Let me make it clear: our public servants perform a vital task and are entitled to be treated fairly, just like their private sector counterparts. However, public servants, too, will benefit from greater life expectancy, so they must participate in the necessary adjustment of pension expectations to reflect that increased longevity. Anything less fundamentally undermines the credibility of the Government’s overall package. In the interests not only of protecting the interests of the taxpayer but of restoring the confidence of the man in the street in the fairness of the overall pensions system, it is essential that the Government revisit their wrong and unfair decision to allow retirement at 60 in the public sector for the next 40 years.
I welcome the opportunity to place on the record our support for the “direction of travel”—to use the Secretary of State’s words—of the White Paper. I welcome, too, the opportunity to set out the big issues that must be addressed to build the durable consensus which, I believe, all parties in the House seek. The system itself, however, must be demonstrably robust before the consensus built on it can be so. We must test the package of proposals that the Government have presented, and engage with them constructively—if the Government are willing to engage with us—to address what we perceive as potential areas of weakness. We remain optimistic, despite some unhelpful noises off, that a lasting consensus can be forged, and that on the back of it, a lasting solution to the looming pensions crisis can be built.
In recent weeks, the Work and Pensions Committee has taken evidence on the Pensions Commission report and the White Paper. I have attended far too many breakfasts, lunches and evening events. I have stopped eating, but the phrases keep going round in my head. We seemed to hear the same arguments time and again. Nevertheless, we were very grateful for the enormous number of submissions that we received. Not surprisingly, there were some very, very vested interests. Generally speaking, the employers’ side was anti-compulsion and the TUC was anti any increase in the retirement age. One can understand the position that they are coming from, but the Secretary of State has made the case positively that this is a package of measures, and if we start to unpick one bit, everything else unravels, and we need to be resilient in our arguments for the total package.
I want to concentrate for a minute on the issue of the state retirement age, because at the moment, once one goes beyond 55, the economic activity rate plummets. It has been increasing in the last couple of years, which is partly down to the new deal for the over-50s, but at age 60, about 50 per cent. of the population are in economic activity. There must be a strengthening of training provision for the over-55s and of healthy workplace initiatives, and careers advice must be available. The general architecture must change—we need to start doing that now in preparation, because there is already a problem—to ensure that not only is the retirement age 68, but that people can work to that age and beyond if they wish. We need to ensure that they are physically capable and trained to take those employment opportunities. That participation rate must be a key indicator of the progress that we are making.
Among all the submissions, most gratifying was the general agreement on the principles in the Pensions Commission report. The argument is around the architecture and the implementation. There was fairly unanimous support for the proposals around the state scheme, and I do not propose to dwell on them. The difficulties are around whether we call it a national pension savings scheme or personal account. This is a classic case—I am not looking for work—for a draft Bill. There are many areas of debate and discussion to be had on that, and that would help the case.
The overwhelming message that comes through from all organisations is that there has to be simplicity and transparency in the scheme—primarily simplicity to reduce the cost. We had lots of argument over whether there should be 30 basis points or 50 basis points. We would settle for five. But if it is 50 basis points, as against 1.25 per cent. for stakeholders, that increases a person’s pension pot by 20 per cent. That is what we should be looking at—the individual’s pension pot at the end of the day. That should be the driving factor, not any submissions from vested interests. That is a key indicator that we should be looking at.
In this initial round we must also consider key groups such as the low paid, those in multiple jobs— each of which may be paying less than £5,000, which would exclude them from the NPSS, but which cumulatively takes them over—and those with continuing health problems. There is a laudable target to get 1 million people who are currently receiving incapacity benefit into work, but how will their broken work records affect contributions into the scheme?
There is also a huge issue, which I do not think the White Paper addresses, around the self-employed. I am not blaming anybody, but they seem to have been left out of the debate by both sides of the House and by outside organisations. Around 7 million people are self-employed. They are probably the most under-pensioned group of all and I dare to suggest that they are probably a group with greater means for pensions than others, but I take it no further than that.
My hon. Friend is right to focus on the two categories of fragmented employment and self-employment, but does he acknowledge that there is also a problem with fragmented, short-lived and disorganised employers and that when there are large numbers of them on the scene, it places difficulties in the way of many people who are trying to accumulate a pensions pot from them?
My hon. Friend is right, and as he speaks with the voice of the accountancy profession I would expect nothing less. I will come on to the issue of manipulation by employers in few moments, if he will bear with me.
The low paid, people with health problems and those with multiple employers all desperately need generic financial advice—not investment advice, but generic financial advice, particularly relating to their current debts and how best to manage them. It cannot be left to the bandit advertisements on television, which encourage people to roll up all their debts into one as a means of sorting out their problems and having money to spare. By and large, those are not good deals. Sadly, decisions have been taken recently about the funding of advice from citizens advice bureaux and similar organisations, which mean that it is no longer available. I suggest that that is not a good deal. We really need a network of generic financial advice made available to the low paid and underpaid to allow them to make wise choices. As I said, I do not mean investment advice, but generic financial advice.
For the same reason and in line with keeping costs low, there needs to be a strong default option on the national pension savings scheme. As far as possible, we need to take the choice out of the equation. The greater the choice, the greater the need for advice, the greater the opportunity for mis-selling, the greater the complexity and the more costs increase. We also need to keep the scheme simple for employers. I have spoken to hundreds of employers over the last three or four months and they want no role at all in making any choices about the scheme for their employees. They want a simple scheme that allows them to deduct a certain amount of money every month, to send it off somewhere and to forget about it. Simplicity is important both for employer and employee.
There are dangers with this sort of enrolment scheme and we need to be honest about them. Certain less-than-honest employers will seek to induce people not to take part in the scheme. I do not want to traduce anyone, but by and large, the smaller the employer, the greater the likelihood of that happening. There is no better policed system than the national minimum wage, but there are still issues about it. There are still far too many employers who do not pay the national minimum wage. If they are not willing to pay a wage of £5.05 an hour, it is likely to be a problem for them to contribute to the national pension savings scheme. We really need a strong regulatory role—[Interruption.] The hon. Member for Runnymede and Weybridge (Mr. Hammond) is turning up his nose, but I wonder whether he will turn up his nose in 30 or 40 years’ time when people who have spent a lifetime working for an employer find themselves in poverty because they were forced out of the scheme.
I am wary of creating new regulators and having more regulation, but I entirely recognise the hon. Gentleman’s point. Surely the answer lies in the design of the scheme and the design of the opting-out system. That should help to deal with the few rogue and unscrupulous employers who encourage people not to participate in the scheme.
Without naming names, when a multinational company is willing to break the law on trade union recognition, a small employer will be more than happy to break the law to deny people their rights under the scheme. We need to be mindful and wary of that. I would be delighted if there were no need for regulation and every employer played ball, but, frankly, that is cloud cuckoo land. We need to ensure, in the early days, that anyone who plays that game gets hammered hard, thus serving as a warning to everyone else. The regulatory programme could then hopefully be disbanded. However, experience tells us otherwise.
There is also a problem about the stage at which someone enters into a savings scheme. Some organisations say after six months, whereas others say after one month. Nowadays, the standard is that someone starts a job on three months’ trial. The end of that trial period is the logical time for someone to join the scheme. However, there is a difficulty.
There is a connected problem. If individuals choose to opt out of the national pension savings scheme, they should receive standard generic advice on the consequences. Perhaps there should even be a cooling-off period for people to revise their decisions. The advantage of auto-enrolment is that it makes a decision for people. If they then exercise a different choice, it is fair and proper for the Government or somebody to point out the consequences and costs of their decision.
We are considering a period of further consultation, especially on personal accounts. We are therefore in danger of individuals facing six years of inertia. It is possible to consult to death. It is interesting that, in Sweden, where a similar scheme was set up, the contributions were collected for four years before it was established. That made sure of identification and allocation. We need to be wary. Another six years of people avoiding decisions that they did not want to make in the first place is quite a slice of someone’s working life, and of investment activity that is not happening.
One of the commission’s proposals, which the Government rightly rejected, was for an ongoing commission. I do not see the need for a continuing, fairly expensive quango that would have little to do for the next few years. It would be good if the Minister for Pensions Reform set out the review mechanisms that the Government anticipate in 10 or 15 years. I do not accept the need for a standing commission, but establishing the architecture of the review process would be helpful.
The Liberal Democrats also welcome the opportunity to debate the detail of the White Paper. As the Secretary of State and his colleagues know, we made it clear when he made his statement to the House a month or so ago that we support the direction of travel of pensions policy.
There is a remarkable consensus about the broad thrust of pensions policy in that all the major parties have agreed that there should be a firmer foundation for the state pension and an end to the increase in means-testing. All parties, if not all hon. Members, have agreed that the state should get out of second pension provision in favour of some sort of personal accounts that are not controlled by the state. All have also accepted what seemed unlikely to gain consensus only a year ago—namely, the need for an increase in the state pension age. The Secretary of State and his colleagues deserve some credit for moving the debate in that way and gathering consensus, as do Lord Turner and his colleagues.
Our concerns are about the detail of the reforms. The greatest threat is not disagreement between the parties on the philosophy of pension reform, or even that the existing agreement will not be sustained in future. There is broad philosophical agreement, not just agreement about detailed aspects of pension reform, between the parties. Our biggest concern is whether the pensions reforms will deliver the outcomes to which the Secretary of State and others aspire. The biggest risk is that when we review the proposals in 10, 20 or 30 years—given the Secretary of State’s earlier predictions about longevity, we will all be alive then—we may find that the most important part of the Secretary of State’s reforms, the personal savings accounts and the national pension savings scheme, have not delivered the intended results.
In his valuable contribution, the hon. Member for Bradford, North (Mr. Rooney), who is Chairman of the Work and Pensions Select Committee, identified a number of areas in which the personal savings accounts and the NPSS may fall down. As was the case with stakeholder pensions and other accounts, the fear is that we will not get the additional degree of individual commitment to pensions, which we have not had in recent years, and that we will still be building on a basic state pension system that even Lord Turner has described as mean by international standards.
We hope that there will be a further consensus-building process over the next few months. We know that the Secretary of State has had to forge his own consensus with the Chancellor and other Ministers on pensions reform, and we hope that in doing so he is not borrowing from the Chancellor’s traditional view of consensus building and consultation. In my experience, consultation à la Brown consists of an announcement by the Chancellor of a new policy and the simultaneous announcement of a great national debate and consultation, which is followed by a decision to rule out all the alternatives on the basis that they are ludicrous or unaffordable. Although the Secretary of State and the Minister for Pensions Reform are more constructive and more approachable than the Chancellor, an element of that Brownite approach is apparent. In his press release earlier today, the Secretary of State made it clear that one cannot pick and choose from within the package and avoid the tough choices.
When I asked the Secretary of State which provisions he is prepared to amend, the answer was the personal pension, the only part of the package about which he has not made up his mind. In other words, the Government are unwilling to discuss with the Opposition parties those aspects of the package on which the Secretary of State has already made up his mind, but where they do not have a clue about the detail they will look elsewhere for good ideas. I welcome the fact that the Government have not set in stone their views about personal pensions and the NPSS, which involve some extremely complex issues that, as the Select Committee Chairman has said, would benefit from extensive debate.
The Liberal Democrats do not have fixed views about all the aspects of personal pensions, and I hope that we can debate and consult on those issues. I hope that the Secretary of State understands the angle from which we are coming. Although there is agreement about the direction of travel, we want to test whether his proposals are likely to deliver the outcomes to which he aspires.
Before I discuss the aspects of the pensions debate mentioned by the right hon. Gentleman in his contribution, he and the Minister for Pensions Reform have said that the Opposition parties have been avoiding tough choices. If the Government are looking for sources of additional finance to help to improve the pensions package over the next few decades, perhaps they will return to the one tough choice on pensions policy that they have failed to take, which, as the Conservative spokesman, the hon. Member for Runnymede and Weybridge (Mr. Hammond), has said, is the reform of public sector pensions.
Despite the proposals agreed by the previous Secretary of State for Trade and Industry at the end of last year, expenditure on the state pensions system will be broadly static for the next 15 years at a time when expenditure on public sector pensions will increase by 50 per cent. as a share of GDP. We still have the rather ludicrous deal that the previous Secretary of State for Trade and Industry struck with a number of unions, under which people who have not even joined the public sector yet will be able to retire at 60, while the Secretary of State for Work and Pensions is trying to raise the state pension age to 68. We still have the injustice for many women who begin employment in the public sector and work for a similar period to their male colleagues, but find that because they have to give up employment for child care responsibilities they lose the entitlement to the grandfathering of their pension age and may end up retiring five years later than people with a very similar work history.
I wonder whether the Government are dealing with different public sector employees in a fair and rational way. One of the most affordable and rational public sector pension schemes is the local government employees scheme—a funded scheme in which the level of employer contribution is relatively low compared with other public sector schemes, including our own. Yet the Government’s proposals on that scheme are considerably tougher than some of those that apply to other public sector schemes.
The hon. Gentleman paints a picture of local government pension schemes. I remind him that some of the lowest paid workers work in local government. He should not try to portray a situation whereby everyone is on magnificent salaries, which is clearly not the case.
I thank the hon. Gentleman, but perhaps he misunderstood my argument. I am arguing that the way in which the Government are approaching public sector reform is incoherent and that some public sector schemes, such as the local government scheme, are being treated completely differently from others. The hon. Gentleman says that many local government employees are on low incomes, and he may well be right. Nevertheless, the Government can find the money to increase the share of GDP in public sector pensions by 50 per cent. but cannot find the money to increase the share of GDP in the state pension, which is relied on not only by people in the public sector, but by people on low incomes throughout the entire economy.
The hon. Gentleman points to the apparent disparity between different people in similar-seeming jobs getting different pensions. As an ex-civil servant, I know that the issue of pensions is a key part of the national pay negotiations for civil servants. The unions would rightly demand on behalf of their pensioners, who have foregone wages for all those years to have a pension, the wages that they would have had.
The hon. Lady is right to say that all aspects of remuneration are considered together, but wrong to say that there is clear evidence that better pensions for public sector workers are a compensation for lower pay. In many parts of the country, that is not the case at all.
The Chairman of the Select Committee makes a technically accurate point, but one that ignores the fact that the Department for Communities and Local Government not only helps to fund that scheme, but may be pulling many of the strings.
Our exchanges highlight the fact that there are very different views about public sector pensions and about what needs to happen in future to make them sustainable. Surely the lesson is that the Secretary of State and the Government should borrow from the model that has served them so well in relation to the rest of pension reform, whereby they established an independent body chaired by somebody who is highly respected—[Interruption.] I am most grateful to the Pensions Reform Minister, but I am not offering myself, or any other Liberal Democrat Member, for the job, as I am sure that somebody of even greater independence would be needed.
The Government have a perfect model for flushing out the substance of the debate and securing a consensus. They should learn from the experience of Turner and consider establishing an independent commission to look into public sector pensions to give us a shared understanding of the economics of those schemes, which often rely on employer contributions—that basically means taxpayer contributions—and which are way in excess of anything in the private sector. Were the Government to establish such a commission, we could understand, on the basis of evidence—not prejudice from either the left or the right of the political spectrum—whether such pension schemes are sustainable. We could then bring forward proposals for rational reform. If we do not reform public sector pensions in that way, I fear that some future Government, of some party, will, in a very short period, have to make the reforms that should have been made with the sort of long lead times that the Secretary of State has provided today in respect of the change in the state pension age. If he is looking for a typically new Labour tough choice, establishing an independent commission to consider public sector pensions is precisely what he ought to do.
To return to some of the other detail dealt with by the Secretary of State today, another issue about which people were concerned when he made his previous statement, and one that is a big concern among constituents throughout the country, is the amount of time that we will have to wait for the earnings link to be restored to the basic state pension. The initial Turner proposal was for 2010, and the Secretary of State has not only moved back the earnings link and moved forward the increase in the state pension age, but he and the Chancellor have added another element of uncertainty about when the earnings link will be restored. It is unclear why that element of uncertainty has been added.
It is important to correct what the hon. Gentleman has said about us not accepting Turner’s recommendations on increasing the state pension age—[Interruption.] No, we have not brought it forward. If he reads the report carefully, he will see that Lord Turner mentions 2030 for modelling purposes. He did not recommend that the state pension age should rise in 2030. The hon. Gentleman is therefore wrong to say that we have brought that forward by five years. He needs to read the report more carefully.
I note the Secretary of State’s comments and the difference between modelling assumptions and recommendations. All that I say is that, compared with the modelling assumptions or recommendations in the Turner report, he happens to have moved back the good news and moved forward the bad news.
The hon. Gentleman is right that there is huge concern in our constituencies about when the earnings link will be restored. Is he aware that the National Pensioners Convention has worked out that even if the link were to be restored by 2012, that would merely mean an extra £1.40 compared with the current provision? Should we not unite in the House to do something to help current pensioners who cannot afford to wait until 2012 or 2015?
The hon. Lady is right. She will have found, as many Members will have done, that although there was broad consensus in the House about pensions reform on the day of the Secretary of State’s statement, pensioners throughout the country were much less enthusiastic when they heard about the proposals because many of them, longevity notwithstanding, may be gone by the time that some of the benefits of the proposals accrue.
The Government maintained in the White Paper, on page 110, that the increase in the state pension age and the earnings link should be “inextricably linked”, and yet it seems that we will legislate for higher state pension ages even without a firm date for the restoration of the earnings link. To many people, the reason for the uncertainty about the earnings link is unclear. The Chancellor and the Secretary of State have said that it is a fiscal and affordability issue. However, the point about the earnings link, which has been a matter of political debate for years in this country, is its cost in the future—in five, 10, 15 or 20 years.
The Minister for Pensions Reform, who is in the Chamber today, was kind enough to answer a parliamentary question on the cost of restoring the link a few days ago. He indicated that that cost was £0.4 billion in the first year and £0.7 billion in the second year, so the amount of money that we will save through a delay in the pension age of one or two years is, in the context of the national accounts, peanuts. That is the amount of money that the Chancellor uses, in one of his great wheezes, in every Budget and pre-Budget report. If this is supposed to be a great reform, why is £0.4 billion or £0.7 billion now so vital? Why does that make it affordable or unaffordable? It makes no sense to us.
What about the significance of the earnings link—and not just for the pensioners who are waiting for it be restored? When the Secretary of State responded to the hon. Member for Newcastle upon Tyne, Central (Jim Cousins) in the House on the day of the statement, he seemed to me to be saying that the earnings link and the new personal pension accounts, along with the national pensions saving scheme, would be contingent: that they would be introduced at the same time. That is confirmed in the House of Commons briefing paper, so if it is wrong, perhaps the Secretary of State will correct it. The clear implication was that if the earnings link were delayed, the NPSS could be delayed as well. As the Select Committee Chairman pointed out, we must wait six years in any event. I hope that if I am wrong the Secretary of State and the Minister for Pensions Reform will feel free to intervene. Otherwise, however, the delay has a double significance.
I am fascinated to hear that. If the Minister looks at the Hansard report, he will see that a clear commitment was given to the hon. Member for Newcastle upon Tyne, Central that the NPSS would not be introduced until the earnings link was restored. I hope that we have been given some reassurance today, although I fear that the hon. Member for Newcastle upon Tyne, Central will not be very pleased to hear what has been said. The Government have not made the case for a delay in the earnings link and I hope that we shall return to that when we consider the legislation. As the Minister can read in Hansard, the hon. Member for Newcastle upon Tyne, Central said on the day of the statement
“I hope there will be no attempt to cherry-pick Turner so that the personal savings scheme starts in 2012 and the earnings link does not. Will my right hon. Friend assure us that the two dates will be coupled… ?”—[Official Report, 25 May 2006; Vol. 446, c. 1659-60.]
The Secretary of State’s answer was simply “Yes.”
Will the Minister clarify another issue relating to the earnings link? Although it may seem to affect only a small number of pensioners, it is hugely important to a growing proportion of the pensioner population. As the Minister will know, about 1 million pensioners out of a total of about 11 million live abroad. At present, the pensions of half of those people are linked to prices, while half receive no uplift each year even in relation to prices. Does the Minister intend to uprate in relation to earnings the pensions of those who currently receive the prices uplift? If so, the current unjust difference between the pensions of those living in different countries will widen significantly in the future. If the Minister already has a clear view, we should be grateful to hear it.
In his helpful speech, the hon. Member for Bradford, North identified many concerns about the NPSS and the personal accounts. I have already said that I hope that there will be close co-operation between all the parties in the framing of the scheme. There are numerous risks. There is, indeed, a risk the people will perceive the risk itself as Government-backed, and against the thrust of the proposal for personal pensions that do not rely on the Government.
There is also the fundamental issue—mentioned by the hon. Member for Runnymede and Weybridge—of means-testing. On page 105 of the White Paper, the Government say:
“Problems with incentives could… develop if a pensions system evolved in which a significant majority of pensioners were entitled to Pension Credit in the long term.”
We know that that was very carefully written, and we know that the Government now aspire to cap the extent of means-testing at 50 per cent. at the highest, and think that they can push that down to below 30 per cent. However, there is also much doubt about the nature of those figures, notwithstanding the changes that have been made to savings credit.
I repeat the request by the Conservative spokesman that the Government should look closely at the modelling on the number of pensioners in means-testing and that if people come up with other, perhaps more realistic assumptions, the Government will run them through their model. Surely the point is that even if the Minister is successful in reducing the number being means-tested to below 50 or 40 per cent., many of those individuals are those least likely to save. In other words, the 30 or 40 per cent. of people we are talking about will be those who will have to make difficult decisions about whether to save. We do not care about the top 10, 20 or 30 per cent. because we know that they will save anyway and, indeed—as several hon. Members have pointed out—there are already generous incentives for them to do so.
The 30 or 40 per cent. we are talking about will have to make a difficult choice, but they are the very people who are already struggling financially, as Labour Members well know. Those people may be borrowing money at very high rates of interest from mortgage companies or on credit cards in the struggle to purchase a home. They have many other things to do with their scarce earnings. Some will not receive any employer contributions, as the Select Committee Chairman mentioned. Others will see all the employer contributions wiped out by means-testing. I seriously doubt whether many of those people will choose to save in a scheme of this type, especially as I do not think that they will easily understand the risks. Therefore, the auto-enrolment aspect—also mentioned by the Chairman of the Select Committee, in what was a very interesting contribution—is crucial to ensuring that huge numbers do not simply opt out.
The issue of means-testing is not just how high we can get the basic state pension, or its affordability or its simplicity—it is also fundamental to the whole thrust of what the Government are trying to achieve.
I am slightly confused by something that the hon. Gentleman has just said. He expressed the concern that high levels of means-testing would make it inappropriate for some people to save and then he said that auto-enrolment would be very important. Does he share my concern that if we are to have a system of auto-enrolment, we must be highly confident that saving will be in the best interest of the overwhelming majority of people?
I entirely agree. The point that I was seeking to make was that if we have a significant element of means-testing, those people who are means-tested may see any employer contribution wiped out as a result. If we are talking about people saving only their own money, when they could be using it to pay off debt or save through some other instrument, it is unlikely that they would choose this particular instrument unless the effect of the auto-enrolment inertia is so great as to keep them in the scheme. However, as the hon. Gentleman suggests, we would not want to keep them in the scheme if they were effectively being mis-sold these pensions, and that is a critical point.
One point has been implicit throughout our debate and was touched on by the Chairman of the Select Committee; however, it is worth spelling out in a little more detail. The proposals entail an enormous transfer of risk away from the state in relation to second-tier pension provision, and away from employers, who have not been able easily to manage the risks in recent years. Employers will welcome that and, as a politician, I welcome the move away from political involvement in second pensions, but we must consider whether individuals are ready for the risk to be transferred to them. I fear that the level of financial illiteracy is very high, so the Government will need to address the challenge of trying to ensure that we have some prospect of people understanding the risks that they will take before the NPSS starts.
Secondly, I agree with what the Conservative spokesman said earlier about the ombudsman’s report. The Government’s response has been extremely disappointing. Even if the potential liabilities fall due a long time in the future, they are just the sort of unexpected contingency that ought to be met out of the contingency reserve. What is that reserve for, if not for dealing with precisely such matters? It has been possible to find the money needed for Iraq in the contingency reserve, so it must be possible—over 30, 40 or 50 years, and with the co-operation of the Chancellor of the Exchequer—to find in that reserve the money necessary to offer some justice for those who have lost their pensions.
The Secretary of State also referred to the financial assistance scheme. I hope that the Minister for Pensions Reform will be more successful than his predecessor in getting the scheme’s administration to work effectively so that, over the next six months, people will not have to wait as long for the pay-outs as they have in the past year.
We welcome the debate for which the Government have given us scope today. I regret that it has been necessary to table some amendments to the Government’s motion, but it had the flavour that the Government expect us to sign up to their proposals in an unthinking way. We agree with the direction of travel and we concur most strongly with the philosophy behind the White Paper, but over the next couple of years the House of Commons must ensure that there is consensus about the proposals and that they will deliver in the future.
I want to thank my right hon. Friend the Secretary of State on two counts. First, our life expectancy has risen by 30 minutes or more since the debate started. If his calculation is correct, it enables us to understand why there is such a crisis facing pensions funding.
Secondly, I thank my right hon. Friend for reminding the House of the success of the pension credit scheme. This Government have redistributed more resources to the poorest pensioners than any Government since 1948, and the only sadness is that he has had to remind some Labour Members of the Government’s success in that regard. However, we know that the pension credit scheme, as currently constituted, cannot last in the longer term. That is why we need to debate the proposed reforms, and I want to raise three matters that will break up the consensus that has held sway since my life expectancy was extended by 30 minutes a short time ago.
My first point has to do with the Government’s approach to consensus. A sort of Judy Garland approach has taken over the contributions to the debate so far. The feeling appears to be that, if we just hold hands, we can tiptoe more quickly to the end of the rainbow and the great prize that is a political consensus.
I do not want to knock the importance of the House of Commons, but we do not play much of a part in the formation of consensus. That is formed by the people of this country—our voters. The last time that we thought we were so clever as to create a consensus was in respect of SERPS. It lasted all of five years, and I wonder whether the Government’s tax-financed pension proposals, as opposed to an investment-led approach, will last even that long.
The choice being given to the electorate is to support the Government issuing some more IOUs for pension reform. They will not be paid now, but are to be redeemed by taxpayers in the future. However, Governments have issued such IOUs in the past, and we all know that they have not been so redeemed. The only consensus in this country since 1948 has been in favour of a modest basic state pension. In the early days, it was not linked to anything, although the subsequent link to prices has remained in place. So there is a sombre note for us. It is fine for us to talk in wonderful glowing terms about what we shall create and the consensus that will enforce it, but if we rely on a tax-financed model that consensus will not last long.
My first disappointment in the Government is that given the success of pension credit, and that for the first time they have managed to buy time when they have not also had to deal with reforms to help today’s poor pensioners, we chose the old tax-financed approach instead of building up rafts of investments. If we had adopted the investment-led approach, no politician would advocate changing the consensus. If one of us did, our colleagues would quickly drag us to the political knacker’s yard where we could safely be put out of our misery and our constituents’ pension investments would be left intact. That is my first note of caution.
Secondly, although the phrase “auto-enrolment” flows easily off the tongue, the Government are really introducing a toxic element in our occupational pension provision. There are already major changes because employers want to cut the costs of their pension commitments, and in the auto-enrolment proposals the Government’s natural wish to establish a floor will quickly become the ceiling. Employers who are paying between 15 and 40 per cent. of wages costs to occupational pension schemes could quickly decide to embrace the Government’s approach to auto-enrolment to reduce significantly their contributions to such schemes.
As the hon. Gentleman knows, I favour a single scheme for everybody, whereby we continue the basic state pension, building up investment funds alongside it, and deliver a pension that takes people off means-testing. Beyond that, it is not the duty of the House to interfere with how people save; they have a very good idea about how to save and we should not try to bribe them one way or the other.
The third aspect on which I want to suggest caution is the establishment of the national pension savings scheme. The Government will call it by a different name—I do not blame them—but there are real dangers. The Government have had to listen to Front and Back Benchers remind them about the ombudsman’s report on Government liability for giving wrong advice about the safety of occupational pension schemes. I am amazed by the toughness of the ombudsman’s report about the issuing of a form that most of us never saw—I certainly did not see it and I take a particular interest in pensions. If the House establishes, and encourages people to join, a national pension savings scheme that has different funds with different rates of return, we can imagine the outcry when considerable numbers of our constituents express disquiet that they joined the wrong fund. Imagine the liability for future taxpayers if we go down that path.
If the private sector wants to establish such a scheme, I am all in favour of letting it do so, but it is not the role of the Government to decide to set up that sort of framework, by whatever name. It is not right to expose future taxpayers to the mis-selling and disappointment that will inevitably arise from such a scheme. However, I welcome those in the private sector who wish to prove me wrong and think that they would be able to do a job along the lines that the Chairman of the Treasury Committee spoke about earlier.
I am interested in what my right hon. Friend has to say and I will certainly reflect on it. I am sure that he recognises that many people currently do not have any occupational scheme whatsoever or any personal savings scheme. What is his solution to that?
It is the solution that I mentioned a moment ago. We should have a simple scheme, whereby we continue the basic state pension and have an investment-led scheme that builds alongside it, so that at the end of the day it delivers a pension that takes us all off means-testing. It would be compulsory and simple. There would be one scheme and no mis-selling. If other people wish to save on top of that, fine. It is not our job to try to persuade them to do so and we should not use huge sums of taxpayers’ money to try to bribe them to save beyond that. However, it is the House’s duty to deliver a scheme that, at end of the day, takes all our constituents off means-tested benefits. That will not be offered by those on the Labour Benches or on the Conservative Benches.
I am sorry that I am rather like Job this afternoon and am introducing a note of cynicism into the mood of self-congratulation that was embracing us all up until the point at which I spoke. Consensus is not made in this House; it is made outside by our voters, who will discipline us for destroying a scheme that they wish to keep. At the end of the day, they will not support the reforms that the Government are bringing forward. I end on a note of sadness. We have a Secretary of State of real quality who is selling proposals that will not last. Imagine what the enthusiasm in the country would be if we had managed to match the Secretary of State with a scheme that worked with the grain of human nature, rather than against it.
I do not often disagree fundamentally with the right hon. Member for Birkenhead (Mr. Field), but I do on this issue, because I think that the Government are fundamentally right in what they are putting forward in response to Turner. Although it has lots of things that need tidying up and clarifying, the proposed scheme will be for the benefit of the nation as a whole. However, he was right to point out the damage that has been done by the Government’s refusal to acknowledge the findings of the ombudsman’s report, which is sad. Perhaps that is one of the reasons why Scottish Widows announced today that voluntary pension saving for personal pensions has fallen in the past 12 months by no less than 10 per cent. That flags up the urgency of doing something about the issue. It also emphasises that the Government cannot have it both ways: they cannot appoint an ombudsman and then completely disregard the ombudsman’s recommendations.
There are ways in which the Government’s proposals can be improved. What the Government propose— particularly delaying the link with earnings until 2012—is pretty unsatisfactory. At the moment, we have a group of people in this country who are the main recipients of pension credit. I am talking about the very elderly—the people born before 1930, who are already in their late 70s and will be in their late 80s by the time the Government’s proposals come into effect. They represent—probably predominately—the very poorest in our society. Not all of them are very poor, but I am talking about the majority. We should do something now for those people. We should say that those born before 1930 should have a higher pension than the rest of us, although that should not roll on to people born before 1931 and people born before 1932. We should recognise that that generation grew up in a war period or an immediate post-war austerity period and were not able to make the same pension savings that most of us have been able to make. By recognising those people’s needs with a special pension, we could reduce considerably the bill for pension credit and help the whole process to go forward.
Equally, we could introduce measures that would enable us to reintroduce the earnings link sooner than the Government propose. The Government were right to go a little further than Turner and bring forward the age extension that he proposed, so I congratulate them. The scale of change to the pension age that was suggested by Lord Turner was rather conservative, although he was largely motivated by the need to integrate the retirement ages of men and women. However, there is scope to make the change more rapidly still. We will wait too long if everything is ultimately left until 2050, so we could compress the process further and thus bring in more money to allow the earlier establishment of the earnings link.
We must also persuade the rest of the public sector to follow the example of the House. On 3 November 2004, the House voted to end Members’ right to retire at 60 without any reduction in pension. That will apply from 2009, rather than 2013, which is the date proposed for the rest of the public sector. I know that such a change will be painful, but the House has already voted for it. We thought that by setting an example, we might strengthen the Government’s hand when trying to convince the remainder of the public sector that such a change was necessary. It would not mean that people would have to work much longer. However, if people choose to retire earlier, there is inevitably a cost. If people live longer, the cost to taxpayers is much higher.
Such measures would enable us to do more—and do so earlier—for those who are most needy. They would create a greater prospect of not needing to move endlessly towards putting more and more people on means-tested benefits. As the right hon. Member for Birkenhead said, that has to end eventually because we cannot continue on that road indefinitely.
I agreed with some of what the right hon. Gentleman said about the scheme that the Government are proposing. If we have a complex scheme with many investment choices, there might be a danger of mis-selling. The scheme is aimed predominantly at those who are not very high earners. Those high earners can afford to take the gamble of going for risky investments because if everything falls down, they will still have enough to live on. However, ordinary working people do not have that luxury, so they need a guarantee that they will be saving in a safe vehicle. I thus respectfully suggest to the Government that there should be a single investment pot from which everyone in the national pension savings scheme would draw their pension.
We could have a large number of investment advisers. The Government should use expertise in the private sector and encourage bids for the right to be an investment adviser. Such a process would be competitive. It would keep people on their toes, and those who did not perform well would get the sack, which might allow others to get a job. That would maximise the return to the NPSS and its beneficiaries.
I do not think that the Government have quite decided whether there will be a single scheme or multiple schemes. I hope that they do not envisage having multiple schemes because the examples from countries that have done so are not especially edifying. Anyone who worries about such matters should consider the experience in Australia, where there was massive mis-selling and an awful lot of suspect activity. No one wants that, so we should have a single provider with multiple advisers.
The resources of the private sector could be used in the administration of the scheme. There is massive expertise in the pensions and insurance sector, and that sector also has existing computer systems that work. No one wants the Government to set up yet another major public sector computer scheme because they have not yet found one system that works properly. One only has to look at the Child Support Agency to find real evidence of what can happen.
We would be mad to try to set up a new scheme when there is plenty of expertise outside the public sector, but given what can be done, there is a genuine prospect of us being able to create something very worth while. However, I reiterate that, as the right hon. Member for Birkenhead said, there is a danger that the floor will also become the ceiling. We therefore need to encourage the private sector to continue to offer pension saving for its employees. The only way we can do that is by giving it some incentive, and I hope that the Government will see that to do so would be an act of enlightened self-interest.
In view of the number of Members who wish to speak, I will be as brief as possible. I wish to comment on the proposals as they affect women, and to inform the House of a number of matters that were raised with me and with my hon. Friend the Member for Central Ayrshire (Mr. Donohoe) in a consultation that we held with the five seniors forums in South Ayrshire. A number of strong views were expressed, which I shall put forward on behalf of those who aired them. Finally, I shall refer to the situation of people who have lost their pensions; I have been involved in that issue for a considerable time.
There is a great deal of public interest in the whole issue of pensions, and strong views are held. Contrary to what my right hon. Friend the Member for Birkenhead (Mr. Field) said, we have a once in a lifetime opportunity to reach a consensus that can take us forward. But, unlike what happened in the past, that consensus should not be built on the back of women’s unpaid work, nor on their assumed dependence and reliance on men regardless of what their personal circumstances happen to be. That has not served women well in the past, and as we know from all the statistics, it is totally irrelevant in the modern age and for the future.
Women are individuals in their own right, and they should be regarded as such in the pension system. The fact that they still bear the brunt of the nation’s caring responsibilities means that they should be rewarded, not penalised as they are at present. I greatly welcome the fact that that will be addressed as part of the reform process. Younger women will now be able to qualify for a full basic state pension and will have more income in retirement, as well as benefiting from other measures in the reforms, which will help them to plan ahead for their future—which many of them will spend on their own.
There is a general welcome for the core principles of the White Paper; we have heard that from Opposition Members today. However, there is also a need for much more discussion on the detail. Although the proposals will provide a better platform for pension provision in the future, there is a concern, which many Members have expressed in the debate, that the recommendations contain no immediate benefits for today’s pensioners. However, I have been impressed by the uptake of pension credit benefits among my constituents; it has greatly improved many lives, and many pensioners have told me that they have never been better off.
However, my right hon. Friend the Member for Birkenhead is right to say that we need a consensus on the current proposals. Older women—certainly the pensioners that my hon. Friend the Member for Central Ayrshire and I consulted—are concerned about how long it will take to implement some of these measures. They are impatient about the long time scale; they believe that the link with earnings should be restored more quickly, and that that needs to be done sooner rather than later. They cite the fact, as they have often done in my many discussions and consultations with them, that there is a substantial surplus in the national insurance fund that could be used for that purpose. I have never been able to substantiate that in any detail, and I shall be grateful if the Minister for Pensions Reform can make some comments on that this evening, which I can take back to my constituents. There is a frustration about the time scales, and there is a feeling on their part that they are being forgotten in the whole scheme of things.
My constituents recognise that there is a long time scale for raising the retirement age, but they are concerned that as people get older work opportunities become difficult to come by, and health could be affected, depending on the nature of the work involved. They also strongly feel that the rich will be able to retire early because they will have sufficient income, while the poor will be forced to continue working because they will not have sufficient income to retire early. They are also concerned about the current level of pensioner incomes and benefits, particularly as the costs of fuel and council tax are rising. They feel that that is the case now, and that it needs to be addressed now.
The group of pensioners whom we consulted were very pleased with the measures on women and the national pension savings scheme; those were given a warm welcome. But it was thought important that the scheme should be administered at the national level, as employers’ and pension companies’ records in administering pensions are not good; in fact, they are thought to be “terrible”. That is a direct quote; I am putting forward that opinion on behalf of my constituents—although I am not saying that I particularly disagree with it. They feel that the industry and employers have a terrible record in administering pensions, and that that should be done at the national level, with Government involvement.
That brings me to my final and very important point: the position of those who have lost their pensions. In the case of the people whom I represent, that is substantially due to lack of efficiency on the part of the people administering their occupational pensions. As the Minister knows, I have campaigned with my constituents whose pension funds collapsed—and those former United Engineering Forgings workers have been at the forefront of the campaign on this issue, along with trade unions.
As a result, the Government brought in the financial assistance scheme and the Pension Protection Fund in the Pensions Act 2004. Then, on 25 May, they announced in the White Paper that we are debating today that they will extend the FAS to those who were within 15 years of retirement on 14 May 2004. That will bring the actual pension paid to 80 per cent. for those who were up to seven years from retirement, 65 per cent. for those between seven and 11 years from retirement, and 50 per cent. for those between 11 and 15 years away. To achieve that, the Government are increasing the FAS funding from £400 million over 20 years to £2.3 billion. There is dispute about the actual percentages involved; I have quoted the Government figures. As my hon. Friend the Member for Sunderland, South (Mr. Mullin) said, one of the problems with this whole issue is that different figures are being bandied about by different parties. Some are disputing the Government figures, and we are not getting substantiation, which is leading to those involved becoming further disillusioned.
Does the hon. Lady agree that one of the problems is that the Government talk about percentages of what they call the core pension of those individuals—that is a new concept in the pensions world, so far as I am aware—and that in most cases the core pension in no way represents the pensions they could and would have expected if their schemes had not got into difficulties?