Lords amendments considered.
I draw the House’s attention to the fact that privilege is involved in Lords amendments Nos. 1, 12 to 14, 16 to 18, 23, 24 and 27. If the House agrees to any of these Lords amendments, I shall ensure that the appropriate entry is made in the Journal.
Lords amendment: No. 15, after clause 18, to insert the following new clause—Financial assistance scheme: scheme manager.
I beg to move, That this House disagrees with the Lords in the said amendment.
The Government have great sympathy for those who have lost pensions through no fault of their own. They saved in a pension scheme and deserve certainty in retirement. That is why the Government set up the Pension Protection Fund—to ensure that what happened to 125,000 people does not happen to others. That is also why we set up a more powerful pensions regulator, and it is why this Government—and this Government alone—thought it right to help people whose pension schemes failed in the past.
Many Members of both Houses believe that more help should be made available, even if it should come from the taxpayer. We have already significantly extended the financial assistance scheme, and we have amended the Bill to get more money to more people immediately after it is enacted—it increases the interim payments from 60 to 80 per cent. If the Bill’s progress is delayed, that will delay payments to pensioners. We also set up the review of scheme assets, led by Andrew Young, the senior Government Actuary; and last week the Prime Minister reaffirmed our desire to lift assistance levels closer to 90 per cent. Following the publication yesterday of interim findings, I am optimistic that the Young review will help us to do that.
If the hon. Gentleman allows me to say a little more and he wishes to intervene later, I will happily give way to him then.
The interim findings of the Young review strongly suggest that by making better use of assets within failed pension schemes we will be able to go beyond 80 per cent., and I am confident that we will be able to do so.
Our response to the interim findings constitutes part of our ongoing reconsideration of the ombudsman’s first recommendations. As part of that ongoing reconsideration, I am delighted to be able to announce that the interim findings have persuaded us that more money can be made available. The findings of the asset review do not show that some more money should not be made available.
The Government believe that the cost of extending the FAS towards the 90 per cent. mark can now be met by making better use of the assets remaining in pension schemes, matched by a further contribution from the Government. To achieve that, we will need the co-operation of every pension scheme. The commitment that we are announcing today is to match the extra funds that the review identifies with the goal of moving towards 90 per cent. of expected core pension for all recipients.
Those extra funds will be based on the amount of assets remaining in schemes. Trustees must continue to act in their members’ best interests, but we hope that they will now take the view that those interests might not be served by expending scheme assets on annuities. The Government will match the extra funds that the Young review identifies as and when they are released by trustees, and we expect that to be achieved as quickly as possible. We will write to trustees of the schemes concerned later this week to explain our proposals in more detail and to urge them to co-operate with us in getting a better outcome for all members.
I hope that that commitment will convince the House that the Government’s intentions are genuine and that this group of costly, complex and contradictory amendments should not be supported. They could involve significant undefined Government spending and damage our ability to help those who most need it.
Some pension schemes start at 60 or another defined retirement age, but we have made it clear that the financial assistance scheme will start at 65. There are some other aspects of particular schemes, including lump sums and so on, that might have been funded out of some of the schemes had they been properly funded. We know that they were not properly funded, but the Conservative party appears to suggest that the taxpayer should fund a lot more—
It appears that the hon. Gentleman is not proposing that the taxpayer should fund such things. He suggests that it should be done, but he is not prepared to will the means to do it—[Interruption.] He accepts that he is saying that things should be done, but he is not prepared to put in place the means to do them. Well, as the Government, we need to ensure that what we promise we can deliver. The Opposition have shown, by the way in which they pursue these issues, that they will make all sorts of commitments but do not have the capacity to deliver on most of them.
It is the case that the DWP has within its funds sufficient money to be able to match fund the amounts that may come forward. It is a matched funding commitment and we expect that the Young review will identify some extra funding that will enable us to increase the amount of funding available for the pensioners. We have said that we will look at that issue, and our view is that we will be in a position to match demand in the approaching comprehensive spending review period and deliver the increase from existing departmental assets.
In terms of the Conservatives’ approach, let us consider amendment No. 17, which would launch the Conservative lifeboat—it is in many ways an opportunistic attempt to generate party political controversy on this issue. The interim report of the Young review has, essentially, debunked the notion propagated by the Conservatives that there are large amounts of unallocated assets in pensions and insurance accounts waiting to be plundered. That means that the increased costs of the proposal—the Conservatives want to go right up to Pension Protection Fund levels—would inevitably fall on the taxpayer. That is a potential cost of almost £2.7 billion over the next 60 years or £640 million net present value. The Conservatives have made no real provision for that. They told us that it would cost the taxpayer nothing and could all be paid for by the supposed unclaimed assets.
It is worth reminding ourselves that the Conservatives were repeatedly warned by, for example, Lord Turnbull, who said that using unclaimed assets would represent
“a flagrant departure from the principle of evidence-based policy making.”—[Official Report, House of Lords, 6 June 2007; Vol. 692, c. 1168.]
We now have the evidence from the Young review that shows this to be an uncosted amendment.
The unclaimed assets in bank and building society accounts are not included in the review, but—my hon. Friend may have missed it—those funds have been allocated to young people. I hope that he or the Conservatives, given that their lifeboat has been sunk by the Young review, would not advocate that we should raid the boat of the young and take their assets. That money is spoken for and is going to young people. The Conservatives may be shifting their ground, but we must not rob our young people to pay the old.
I have two quick questions for the Minister. If his analysis is correct, why is the Young review continuing to look at the question of unclaimed assets? What is his assessment of the case study in appendix C of the review, which appears to set a clear precedent for recovering assets at a level more than sufficient to fund the lifeboat?
I notice that the Conservatives are apparently still claiming that there is funding in insurance and pension assets—or are they? It is not very clear what they are suggesting. The Young review said that it is very unlikely that those assets would lead to anything. Shall I read the foreword to the review? I do not want to risk embarrassing the hon. Gentleman.
I am being encouraged to embarrass the Opposition, but the Young review debunks the Conservative myth about pensions. Those involved in that review are continuing to look at the question of unclaimed assets, because that is what some people—including Opposition Members—have suggested. They do not think that that approach will lead anywhere, but they do believe that some of the assets in current pension funds should be aggregated. They believe that those assets could be sweated more efficiently, and combined so that annuities could be purchased in bulk, more money will be raised than was anticipated under the previous proposals.
The Young review has made it clear that neither the national insurance fund nor national savings are credible options. It makes it clear that defined benefit pensions and orphan assets will not provide the new source of funding that is needed. The Opposition should accept that their lifeboat amendment has been holed below the waterline: it is sinking fast and the time has come for them to abandon it. Our charge that the Opposition are guilty of fiscal irresponsibility is plain to everyone.
Additionally, the Opposition proposal adds complexity as pensioners could receive income from three different agencies—their pension scheme, the FAS, and the lifeboat top-up. That would make for a mangled bureaucratic nightmare, caused by the Opposition. They complained about the FAS, but now it seems that they want to duplicate it. The real question is whether the Government will do more for people, and what we have said today shows that we are prepared to look at ways of moving forward. In contrast, the Conservatives have merely brought forward uncosted proposals.
As a former trade unionist, I know a good deal when I see one. I think that what the Government propose is a good deal for people who have lost their pension funds. Will my hon. and learned Friend remind us how much taxpayers’ money is, quite rightly, being used to fund the Government’s scheme? Will he assure me that payments will be speeded up, so that people receive some income as soon as possible? Finally, does he agree that Opposition Members have displayed a touch of opportunism with their amendment?
I agree that Opposition Members have displayed a touch of opportunism. The Young review has ably demonstrated the vacuity of their lifeboat proposal, which is going nowhere else but down.
My hon. Friend the Member for Morecambe and Lunesdale (Geraldine Smith) is right that there is concern about the speed at which some of the payments are being made. I acknowledge that we have spoken to some of the trade union organisations that want the payments to be speeded up. I went to York recently to talk to the people running the FAS operational unit about why there were such delays. One of the major problems has been getting the required information from trustees, some of whom are good at providing it and others are a bit slower, but others have taken the view, for legitimate reasons, that this is not the right time to provide the information. They have taken legal advice, considered it and come to the view that they do not want to give the information at present. A variety of reasons are involved.
I have looked at how some of the payments are being made and we stand ready to make payments as soon as the trustees decide that information should be forthcoming. Many more people are now receiving payments and we stand ready to make further payments as soon as possible. The money is there. We are ready to make the payments and when we get the information we shall do so.
May I take my hon. and learned Friend back to his comments about the matched funding commitment? The message I seem to be getting from the review team’s interim report is that there could be more money than was initially thought, including well over £1 billion in the assets of failed schemes. When my hon. and learned Friend talks about matched funding up to the level of the core pension, does he realise that above what is designed as core pension there are things such as widows and dependants’ benefits? Can he assure me that he will not impose a limit by saying that those things will not be funded if it turns out that there is enough money from the other assets recommended by the review team and the matched funding commitment he made today?
My hon. Friend raises an important issue. We have to look at where we are going in terms of the Young review, which was asked to see how much we can sweat out of the assets. My hon. Friend is right to say that the amount in failed schemes is well in excess of £1 billion. That gives us a fair amount of resources and if we can aggregate them, bulk them up and bulk buy, we can certainly go beyond 80 per cent., as the Government have indicated. However, what I cannot tell my hon. Friend at present is how much will be available in terms of the Young review. The review needs to come to fruition and we need the report. It was scheduled for the end of the year, but I have asked for it to be brought forward to November so that we can see it earlier, because I am conscious that a large number of people are waiting on the outcome of the review.
The Minister places great store by the initial comments of the Young review, but is he aware that in a similar review of unclaimed, orphan assets in banks and building societies in Ireland, it was originally predicted that after the searches had been fully conducted no more than €3 million was likely to be found, but in the event €196 million was found—60 times more than claimed? At this stage, is not it a bit premature to make a presumption that would close the door on the possibility of finding funds in the UK that diverged on a similar scale? Why is the Minister so keen to block off that route, which could get a lot of us off the hook?
With respect, I think that my hon. Friend is over-optimistic as a result of what happened in Ireland. Andrew Young and his colleagues are looking at a number of schemes and we are aware, broadly, of the amount in them. The question is whether we can more easily access those resources, get the trustees, under their legal terms, to bring the resources together and bulk them up, and then whether we can use them better to purchase annuities. That is the approach Andrew Young suggested. He is not optimistic about the view that we can identify vast other sums that would be easily available, so although I appreciate the situation in Ireland, the Young review does not suggest that it is anything like that in the UK.
The Minister has talked about sweating assets and bulking up the pot in the first instance, but when the Department for Work and Pensions does the calculation for FAS liability at the moment, it takes the expected pension, multiplies it by 80 per cent.—for the time being—and then reduces it by the notional annuity already produced by transferred lump sums that may have gone to individual scheme members. In the calculations that I have seen—I have an example here from the DWP—the rate of return on that lump sum is quite extraordinary, unsurprisingly leading to a zero FAS liability. Even if the annuities or transferred sums were aggregated, I find it almost impossible to believe that that total capital asset could be sweated any more than it is being at the moment. My instinct is that the end result, in terms of FAS liability, would be the same and the pension going to any failed scheme member would be the same. How does the Minister think that the Government, or another body, could sweat more out of those assets than is currently being done?
I suggest that the hon. Gentleman read the report by Andrew Young. It bears reading through. It is complex, and involves a lot of issues, but the key point that it raises is that if one were able to bring together the assets in the various failed pension schemes, that would give one a greater purchasing power in the market. If one were able to put those assets into another annuity—a single annuity or a small number of annuities—that would increase the purchasing power of the amount of resources.
I am dealing with a report by the deputy Government Actuary, who knows his business. To some extent, we have to proceed on an evidence basis and the evidence that Andrew Young came up with, after talking to a large number of people in the industry, shows that it is possible to do more than we thought. I do not share the hon. Gentleman’s pessimism, but if he asking me whether I can guarantee that all this can be done, I have to say that all I am relying on at the moment is that the Young review has done a considerable amount of work—it seems a very good job to me—and I hope that we will be able to get a genuine response from that.
Has my hon. and learned Friend had time to assess whether, if it is possible to roll up those pension funds that have not yet annuitised, primary legislation will be required—particularly for those funds that are pretty close to annuitising—to prevent them from doing that at the moment, to provide a chance to see whether we can get a better deal for pensioners through the proposals in the Andrew Young report?
My hon. Friend raises an interesting and important point. As I have already indicated, we will suggest to the trustees of pension funds, who have their own legal obligation and will need to take their own legal advice, that they need to look carefully at this matter. If it is the case that bulking up the various funds would enable us better to bulk purchase annuities, that would on the face of it appear to be better for the members, and the trustees have to take that into consideration. In the end, we are going to have to rely on trustees to look at the facts, examine their fiduciary duty to their members and ensure that they make the right judgment. The important thing is that the Bill moves to Royal Assent, so that we can increase the level of initial payments, meaning that more people will benefit immediately. Those are tangible commitments by the taxpayer that will make a real difference to people’s lives.
Amendment No. 24 is about the FAS being at Pension Protection Fund levels. The amendment does not disguise extra public spending as a lifeboat fund or pretend that unclaimed assets could get close to covering the costs. I admire its honesty, while questioning its effect. We estimate that moving from 80 per cent. on the FAS to PPF levels just like that would cost the taxpayer £2.7 billion, or £640 million, net present value. The cost would be low at first, but then rise rapidly as more people retired.
Will the Minister give way?
I would like to make progress, because I have given way quite generously and I am conscious of the time. Other people want to speak and it is a time-limited debate, but I will give way to the hon. Gentleman before I draw my remarks to a close.
We believe that the current FAS benefits of 80 per cent. are helpful, but that does not mean that we think that 80 per cent. is the most that people should get. That is precisely why we asked the assets review how we could get closer to a figure of 90 per cent. through better use of the funds held by qualifying schemes. Amendment No. 24 fails to take account of an essential difference between FAS and PPF payments. If FAS payments had to be equal to PPF payments, without account being taken of the pensions paid by schemes—that is what would happen under the amendment—some members would receive considerably more than PPF levels of benefit, because a member would receive 90 per cent. of their benefit from the FAS in addition to the pension that their scheme was able to pay them. I do not think that that was the intention of those who drafted the amendment; it is just poorly drafted, and I invite the House not to support it.
Let me turn to amendments Nos. 18 to 21 on the proposal to set up a pensions unclaimed assets recovery agency. As I have already said, the assets review exposes the Tory myth that additional spending commitments can easily be funded through unclaimed assets. That is confirmation of the powerful arguments made by Lord Turnbull, the Association of British Insurers and my right hon. Friend the Member for Birkenhead (Mr. Field), who warned the Opposition repeatedly about their opportunism, and the lack of understanding unpinning the proposal. We are already exploring the potential of assets in failed pension schemes, and we have said that we will use them to supplement the FAS payments, if we can do so without incurring an unacceptable risk to the taxpayer.
The Opposition have raised false expectations about the assets that there might be, and setting up an agency of the kind proposed is likely to prove enormously expensive. The cost of setting it up could conceivably be more than the value of the assets; we just do not know. [Interruption.] Well, as far as I can see, it would probably cost more than the sum paid out, so we are probably looking at another £20 million or £10 million. The hon. Member for Epsom and Ewell (Chris Grayling) chunters away on the Front Bench, but I ask him: what will it cost to set up the agency?
May I ask the Minister whether he is proud of the fact that his Department has presided over the setting up of a FAS that costs more to administer than it has paid out in pension payments so far? Is that not an absolute scandal and a disgrace, and is it not a sign of the failings of the Government?
I notice that rather than answer my question, the hon. Gentleman tried to bluster and attack. He can make his points about the FAS, and I will happily deal with them, but he is making another uncosted spending commitment. He does not know the cost of what he wants to do. He is making all sorts of commitments in order to score points. The Conservative party is the sort of party that makes such commitments, but basically it does not know what it is doing. Setting up such an agency is likely to prove enormously expensive, and amendments Nos. 18 to 21 are redundant as a result of the Young review. It is not sensible to try to guess what level of support could be funded. If we can bulk up assets and bulk-buy annuities, we are likely to be able to provide more support; we do not need to go down the route of setting up the pensions unclaimed assets recovery agency, which would be a rather strange body.
The Minister is on the important subject of costs, and he makes the point that it would cost £640 million, net present value, to provide PPF-level benefits to people who have an entitlement under the FAS. According to written answers received by my noble Friend Lord Oakeshott in the House of Lords, that would amount to £25 million a year for the next 10 years. To the victims of the occupational pension schemes that collapsed in so awful a manner, that seems a relatively small amount of money to pay to ensure that they get a fair and just level of benefit.
Obviously, the payments will be made over 60 years, and there will be a sort of bell curve; the amount paid out will start off quite low, and then get pretty big. The hon. Gentleman should recognise that although there will be some smaller early payments, payments will increase as people start to retire. We will be a good way into those 60 years before we reach the point on that bell curve at which the payment levels come down. When he talks about £20 million a year over 10 years, he is being somewhat optimistic. We are looking at an amount just in excess of that over the next two or three years, but then the figure will start to rise.
My hon. Friend the Member for Cannock Chase (Dr. Wright) and others on the Public Administration Committee are concerned about the fact that schemes with solvent employers are excluded from the FAS. That is a complex subject, so we asked those carrying out the Young review to come to a considered view on whether some schemes of that type should be helped by the Government, rather than the employer who made the pension promise. When we developed the FAS, we tried to ensure that taxpayers’ money will not fund assistance where there is an employer who could or should take some responsibility, including in cases where there is a moral, if not a legal, obligation. However, we are aware that there may be some schemes that are currently not covered in which members face a comparable loss to others in similar circumstances.
I cannot provide an assurance that all schemes, irrespective of whether the employer is solvent, will qualify for the FAS. The review indicates that not enough information is available on the circumstances of schemes with solvent employers, and it has begun a data collection exercise that will inform its conclusions later this year. In the meantime, it would not be right to absolve employers or trustees from their responsibilities to members. Some of the schemes are still winding up, and scheme members are hoping to bring pressure to bear on employers, so that they make contributions to the fund. There would be little incentive for trustees rigorously to pursue such cases, or for employers to respond sympathetically, if the Government indicated that all the members were likely to be helped under the FAS.
In a number of cases involving FAS qualifying schemes, employers have gone beyond their legal obligations as a result of trustee persistence. Employers are extremely unlikely to be willing to reach into their pockets if the Government step into the breach in every case, regardless of the circumstances. I do not want to pre-empt the review and make any open-ended commitments involving taxpayers’ money. We provisionally estimate that the cost of including solvent employer schemes would be more than £400 million, but frankly, we do not really know. We are trying to get more information. I understand the concerns expressed by my hon. Friend the Member for Cannock Chase, but I will not sign a blank cheque for solvent employer schemes—as their number still needs to be established, we do not know the cost to the taxpayer, and there is still the possibility of employers being expected to make a contribution. That said, as he knows, a review is under way, and it will report later this year—in November, we hope. Also, there will be a further Bill on pensions, and that will enable such issues to be raised. Given the lack of information, given that we can gain further information by the end of this year, and given that there may be further opportunities to consider the matter later, I ask him to consider not pressing his amendment.
I shall move on as speedily as I can. We understand the thinking behind amendment No. 22, and that is why we commissioned the work of the assets review. In a statement this morning, I said that trustees should consider their approach to annuitisation, given the commitment that the Government have made, and at the start of my contribution I set out the further commitment that we made today. At this stage, it would not be desirable to compel trustees to a particular course of action, but they have heard what I said, and I ask them to take it into account. When they make annuitisation decisions, they will need to consider their legal advice, and how best they can serve their members.
Amendment No. 23 is on account payments. We may disagree about how to fund assistance, or about the level of assistance that should be paid, but we all agree that affected members should receive payments from the FAS as soon as possible. Amendment No. 23 would result in the opposite: it would threaten the timely delivery of assistance to qualifying members. That is my concern. To make the amendment work, hundreds of pension scheme administrators would have to administer what would, to them, be unfamiliar processes. They would expect to be paid for doing so, and that would further deplete the value of scheme assets available to members. That could lead to higher top-up payments, the cost of which would ultimately be borne by the taxpayer. Schemes that had already wound up and had no trustees would still have to rely on the FAS to make payments. To apply for loans, schemes must assess whether they could afford to make on-account payments, which would increase administrative costs and complicate administrative processes for them and for the FAS, further delaying payments and the completion of wind-ups. Ros Altmann herself has said that operating a scheme in line with the amendments would not be straightforward. On this occasion I am pleased to say that I wholeheartedly agree with Dr. Altmann’s prognosis.
The expertise for delivering FAS payments lies with the FAS operational unit. Where data are received from trustees, FAS payments are assessed within about a month. The amendment would mean even greater costs and fewer payments. Lords amendment No. 15 would transfer certain functions to the Pension Protection Fund. I have visited the FAS operational unit and discussed how payments are made. It told me that it is ready to make payments as soon as information is received. I accept the concerns that some hon. Members have expressed, but I am not in a position to make an announcement about the issue.
I hear what the hon. Gentleman says, but if he spoke to the PPF members he would find that they would want an awful lot of reassurance before that was done. The pensions industry, too, would require a great deal of reassurance. If the Lords amendment were accepted, it would create a lot of concern in the City. We can see how the Conservative party is operating in relation to the issue if it is prepared to make decisions without consultation or without ensuring that people who have to deal with those problems understand the full implications. If the measure were to be introduced, that would have to be done after appropriate consultation.
I have spoken at length, and this is a short debate, so I shall conclude. As all parties acknowledge, this is a difficult area and it is important we get it right, both for members who want certainty and security and for taxpayers, many of whom do not have defined benefit occupational pension schemes. The Young review remains our best option for reconciling the priorities of taxpayers and of members of those pension schemes. While a lifeboat fund is superficially attractive, it does not come with the necessary funding. Indeed, it is a sunken lifeboat after Andrew Young’s review. We need to see if we can find a better way of dealing with the issue, and the Andrew Young report shows that there are such ways. It would be irresponsible and cruel of any Government to make promises not knowing where the money will come from to pay for them, so I will not do so.
The interim findings of the Young review are an excellent start. The further commitment that the Government have made today provides additional support for pensioners and shows that we are doing practical things to help them. The Opposition are making wild gestures without looking properly at funding. The Bill must be enacted without the Lords amendments because it will enable us to pay more in initial payments to more people immediately. We have already pledged to raise assistance to 80 per cent., to raise the cap and to get rid of the de minimis requirement. Pensioners are waiting for the money, and we are prepared to pay it to them. We have made a further commitment today. I want our commitments to be delivered, and I want the Young report to be delivered in November so that we have a better opportunity to deliver for pensioners. The Government have ensured that they are addressing those issues seriously, in marked contrast to the way in which the Opposition have behaved throughout.
I welcome the Minister to our debates on the Bill. It might have helped if he had read the Young report and our amendments properly, but he is new to the job, so I shall try to help him. He spoke for nearly 40 minutes, and we have a total of only three hours to debate all the groups of amendments, so I shall try to do better than him. The next group of amendments is important to many people, including the Equal Opportunities Commission, and it would be a great shame if it was not possible to debate it, particularly as we have just heard a statement about priorities for women. It would show a very odd sense of priorities if the Government did not want to have time to debate the second group of amendments.
I take the Minister’s point, and he was characteristically generous in accepting interventions. Let us hope that his colleagues are sufficiently restrained so that we can get on to the rest of the business.
I should like to distance myself from Lords amendment No. 24, which was tabled by the Liberal Democrats in the other place. It is the only amendment that proposes to use extra taxpayers’ money for the problem. May I right the wrong in the Minister’s speech, as that is certainly not the intention in our package of amendments, which stand or fall together? It is an obvious analogy to make, but he said that the lifeboat was holed and was sinking. However, it is the pension victims who are already drowning—the Minister should remember that.
May I pay tribute to their Lordships for giving their support on a genuinely cross-party basis to the amendments, which collectively provide a lifeboat fund to help the victims? We will vote for them as a package. I am sure that I do not need to make the case for helping the 125,000 people who have lost their pensions, as the Minister conceded, through no fault of their own. They have made their own case through their courage, persistence and dignity. We have helped them to make that case in debate after debate and Question Time after Question Time.
In recent weeks, we have heard a great deal about the new Prime Minister’s “moral compass”. He has spoken endlessly of change, and promised an end to the culture of spin. Yet the reality has been more of the same. Over the past few days, the Government have been frantically spinning in the media that the amendments are flawed in some way, that the unclaimed assets do not exist and so on. The Prime Minister likes to claim, as the Minister did today, that as things stand under the FAS, the victims will receive 80 per cent. of their pensions. Indeed, he told GMTV recently:
“Every single one of the 125,000 will get back at least 80 per cent. of their pension.”
We all know that that is wholly inaccurate and misleading. The new Secretary of State is clearly a fast learner. In his first appearance at the Dispatch Box, he confused “expected pension” with the Government-created concept of “core pension”. He was at it again in The Independent today. He said:
“We believe we will be able to move the 80 per cent. guarantee”—
that is the word that he used—
“from the taxpayer further towards 90 per cent.”
The Minister himself talked about the expected core pension, which is a ludicrous concept that puts together the expected pension—what people expect to receive—and the core pension, which is a construct of the FAS.
Only the other day, in unveiling his “Not the Queen’s Speech”, the Prime Minister referred to an unclaimed assets Bill to be introduced later this year. He challenged us to support it, but failed to make any connection between the use of those assets and helping the pensions victims. It is as if he wished they would disappear. Sadly some of them have done so, and some of them will. That 80 or 90 per cent.—of what is it 80 or 90 per cent.? The truth is that the FAS was set up in a hurry as a political expedient and was inadequately funded from the outset. It had to be set up in a different location with different staff almost to underline the fact that it was always going to be the poor relation to the PPF. Then the Government had to invent the novel concept of the core pension to make it sound even remotely credible. What does that mean in practice?
The PPF includes some inflation linking; the FAS has none. The PPF pays from the scheme pension age, but the FAS only at 65. The FAS does not allow for tax-free lump sums, or ill health or early retirement benefits, except for the terminally ill. The FAS does nothing for dependent children and little for widows. So most victims subject to the FAS will be lucky to get half their expected pension, and many will receive far less.
If the era of spin is at an end, why will the Government or the Prime Minister not listen? They were found guilty of maladministration by the ombudsman. They decided to ignore constitutional law and practice by saying that it was Ministers’ job to second-guess the ombudsman on those findings. The Select Committee told the Government that they were wrong. They ignored it. The European Court said that the Government were wrong. They ignored it, too. The High Court told them, so they decided to appeal.
Now, in an almost unprecedented move, the Select Committee has issued a report aimed directly at today’s debate and giving guidance to hon. Members on how to vote. Reading between the lines, it is clear that when these matters were last debated in the Chamber, the able Chairman of the Select Committee felt that he was led up the garden path by the then Minister. The Select Committee supports the view that those who have lost pensions where a solvent employer has wound up the scheme should also be included. That is the purport of amendment (a). The Committee states that
“the losses suffered by scheme members are identical, whether or not an employer still exists.”
That is the nub of Lords amendment No. 16.
Does my hon. Friend agree that although the proposal announced by the Minister with regard to a review must be taken seriously, that is a step backward from what was said by the former Minister in the House, when far greater emphasis was given to the need to protect those who were affected by schemes that were solvent? We therefore want meetings with the Minister. My constituent, Richard Nichol, and the people who fought valiantly on the matter will look to our Front-Bench team to help them in that, as they have already done.
I am grateful to my hon. Friend for that intervention. Yes, there was some lack of clarity—that is the most charitable way of putting it—about what the then Minister said in response to the hon. Member for Cannock Chase (Dr. Wright), as a result of which his amendment then was withdrawn. The hon. Gentleman is back for another bite at the cherry and I wish him well with that.
The Select Committee has some harsh words for the Government’s current position on trying to force employers to do the decent thing. It says:
“the Government should not use the indigence and distress of those who have suffered considerable losses to try to blackmail them”.
On the pensions lifeboat, the Committee could not be clearer in it support. It states that it supports
“the general principle that FAS benefits should be aligned to those in the PPF”
and it urges the Government to find ways of speeding up payment by the FAS. Amen to that.
Most unusually, in my experience, the Select Committee urges hon. Members to think carefully about using the Bill to get help to those who need it. It says:
“the House should consider any government assurances extremely carefully before it gives up this weapon.”
Once bitten, twice shy.
For the sake of accuracy, and as he is quoting us liberally, I am sure the hon. Gentleman would want to record the fact that we say:
“Any assessment of the increase in benefit”—
that is, from the review—
“can only be speculative. We do not have the expertise to comment on whether the proposals for a review of unclaimed assets stand a realistic prospect of success.”
I am sure the hon. Gentleman meant to add that.
I am sure that is right. I appreciate that it is not for the hon. Gentleman’s Committee to make such judgments.
The centrepiece of the Minister’s speech tonight—the lifeboat towards which he has been swimming for most of the evening so far, but making little progress—has been the Young report. I agree that it is a useful document, as far as it goes. It is, of course, an interim report and seems to have been rushed out in an attempt by Ministers to bolster their position on the Bill. There is clearly more work to be done by Mr. Young and his colleagues, and I think he accepts that. My overall mark so far is six out of 10—must try harder.
We welcome parts of the report. It is correct to conclude that the funds available for the victims can be boosted by not purchasing bulk annuities. That is not rocket science. We have been saying that for quite a long time and campaigners such as Ros Altmann for even longer, yet Ministers have taken no notice at all. I am pleased to see that in their response to the Young report, Ministers have finally seen the light. But there is a massive danger that faces us this evening. The hon. Member for Aberdeen, South (Miss Begg) touched on it in her intervention. It explains why, forgetting all other arguments for and against, hon. Members in all parts of the House must support the amendments tonight.
As wind-ups of schemes proceed, many of the assets identified by Young could be dissipated by purchasing annuities in bulk before the review team produces its final report at year’s end. We must not allow that to happen, or much of this will become academic. That is the aim of amendment No. 22.
Is there not a further danger in relation to the purchase of annuities? Recently, compared with previous years, annuities have been performing pretty poorly. They have not been giving annuity holders the income that they might have given, say, 15 years ago. Is that not a further concern for those with broken pensions? Are they not also entitled to be concerned about what has happened to their additional voluntary contributions and about the sloth with which the Government have sought to mend the broken pensions? I am thinking particularly of my constituents who have seen their British United Shoe Machinery Ltd occupational pensions go down the Swanee, and have received little comfort from the present Prime Minister or the previous Chancellor of the Exchequer.
I am grateful to my hon. and learned Friend for that intervention. I know that he has been a doughty campaigner for the British United scheme members who lost many of their pension rights. He is right about the annuities market. An interesting and thoughtful document was produced by the Treasury a few months ago on the subject.
Almost by definition, if pension funds are to be wound up without sufficient assets and the money is to be used to purchase annuities in bulk, the money will not go as far as it might otherwise do. We entirely agree with Mr. Young about that. Belatedly, the Government also seem to agree, but all the Minister can say, rather wetly, if he will forgive me, is that the trustees must take their own advice. It is little more than a nod and a wink, whereas amendment No. 22 would make it crystal clear that they must stop purchasing annuities in bulk for the foreseeable future so that we can get the money going through the system to help the people who need it most.
The hon. Gentleman is making a critically important point. If what the Minister said is to be taken at face value, surely at the very least the Government should be advocating voting for amendment No. 22 to stop the assets being converted into annuities, or the money that he hopes will come in November when the Young review re-reports might be unavailable because by then it will have been annuitised.
I am grateful to the hon. Gentleman for that intervention. I repeat what I have already said. If hon. Members are oblivious to all the other arguments on the issue, this is the central argument that should make them vote for the amendments tonight, especially amendment No. 22.
It is good news, at least for the moment, that the report concludes that there are some £1.7 billion of uncommitted assets in FAS eligible schemes. We agree about making better use of those assets. And glory be! Young also concludes that there would be advantages in operating the FAS along the lines of the PPF. The Minister seemed a bit iffy about that, but I recall tabling amendments to the 2004 Bill, as it then was, proposing just that: a separate fund—it must be separate, for obvious reasons—for existing claimants, operated in parallel to the PPF and by the same people, using the same skills set. We have consistently argued more recently that the failing FAS should be scrapped as a separate entity and folded into the PPF administration, which has shown itself to be efficient and cost-effective under the leadership of Lawrence Churchill. However, one of the galling aspects of opposition is that being proved right all along is not good enough.
I really cannot allow the hon. Gentleman to get away with that. He has been saying all along that unclaimed personal pensions and life assurance policies would provide a lifeboat for the various pensioners. Will he now accept that Andrew Young’s report, published yesterday, makes it clear that unclaimed personal pensions and life assurance policies have a very uncertain outcome and although they might theoretically provide a source of funding, there would be substantial administrative, legal and other difficulties behind such a scheme? In other words, what he kept saying was going to provide the answer in fact provides no answer at all.
I can assure the Minister that I am not going to do what he did, which was just to pick out the bits of Young that helped his case and leave the rest. I will deal with that aspect in detail later, and if the Minister feels that I have fallen short he is welcome to intervene again.
It is a tragic lost opportunity that the Government have been so slow to consider unclaimed assets as a source for topping up assistance to the victims. We raised that during the passage of the Pensions Act 2004; the right hon. Member for Birkenhead (Mr. Field) had raised it much earlier. The mantra from the Treasury at that time was always the same: “Just because these assets are unclaimed does not mean that they do not belong to somebody.” Then suddenly the then Chancellor, now the Prime Minister, turned 180° and announced that he would be looking to use unclaimed assets, albeit for a different purpose.
The Government have made much mischief on this subject. They have sought to rely heavily on some comments—now overtaken by events—from their new best friends, the Association of British Insurers, attacking the possible use of trust-based pension assets. For the record, we accept what the ABI says on that specific category, but—this may be helpful to the Minister—nowhere in our amendments on the lifeboat fund do we seek to specify which unclaimed assets could be appropriate for this purpose. That would be left to regulation and to the Secretary of State, and, arguably, to the final Young report. No doubt that makes organisations such as the ABI somewhat uncomfortable. I can understand that, because its job is to look after the interests of the companies who are its members. However, that does not alter the fact that in different ways, and for varying purposes, both Government and Opposition are looking to turn unclaimed assets to the benefit of people in our community who need help. I suspect that now the ABI’s greater concern is the briefing from Government sources over the weekend suggesting that as part of the ongoing review they were going to look seriously into using the inherited estate of insurance companies—said to amount to some £20 billion.
The Young report avoids the issue of bank and building society assets because, it says, those are being considered by the Treasury, but we can safely assume, for these purposes, that significant amounts of money are available from those sources. Young goes on to deal with some ideas that have certainly not emanated from us, such as windfall taxes or additional levies on business. Perhaps they came from the Liberal Democrats. With wry amusement, I see that Young concludes that voluntary contributions from business are not
“a credible source of additional funding”.
We said that when it was mooted by the then Pensions Minister back in 2004. The report dismisses somewhat tersely the use of unclaimed assets held by National Savings and Investments, and we would wish to look at that again as part of the group’s ongoing work.
Can the hon. Gentleman distinguish between orphan assets, which have been much talked about in this Chamber for all kinds of pet projects over the years, including for youth provision, and what is commonly termed the inherited estate? I have a life assurance policy that will not pay out what it was expected to, yet the company has inherited estate assets which could be divided between shareholders and policyholders, such as myself and my wife. I do not want the hon. Gentleman coming along, as a result of these amendments or regulations consequent upon them, and nicking money that could come to me as a policyholder.
I am grateful for the hon. Gentleman’s intervention, which was as penetrating as ever. I think he should be more worried about what his own Front Benchers have in mind, given the briefing over the weekend. He is absolutely right. The insurance companies argue that those funds are available to improve the lot of policyholders such as himself and his good wife. At least one or two companies are considering court applications—it must ultimately come down to that—to divide the booty between policyholders and shareholders. [Interruption.] The hon. Member for Wolverhampton, South-West (Rob Marris) says from a sedentary position that I want to take it. He needs to read what has been said over the weekend, which suggests that his own Government are thinking of taking it.
Before the hon. Gentleman makes an allegation like that, he should remember that it is precisely these sorts of funds that he and his colleagues have been saying are unclaimed assets in insurance and pension funds. We have repeatedly warned him, and he has been warned by others, that they are not available, yet now he is trying to claim that the Government want to access them. The Government have never made any such claim—it has always been made by the Opposition.
I should like to make a little progress.
The report goes on to talk of the need for primary legislation to enable unclaimed assets to be utilised. We now know, fortuitously, that the Government intend to introduce an unclaimed assets Bill, for the Prime Minister has told us so. Should the amendments fail in due course, that would be a golden opportunity to remedy the situation. Perhaps the Minister could deal with that when he responds. We are heartened that the report concludes:
“there may be additional funds available in further types of unclaimed assets and the Review team will investigate these further before our final report is produced.”
The Minister is wrong to say that the interim report closes the door on the use of unclaimed assets. I note that the review team is intending to continue to investigate the legal and other issues surrounding unclaimed assets, although they reach some provisional conclusions on unclaimed defined benefit scheme assets and so-called orphan assets. Like the Government, we shall consider the implications of those provisional findings. For those who favour the use of unclaimed assets, there is real encouragement in the report—the Minister clearly did not get as far as annexe E—as regards the experience in the Republic of Ireland. A comparison with what it achieved scaled up for our larger population suggests that we might generate £234 million in the first year and £70 million a year thereafter. The report is a good start to the process, and we are told that the final version will appear before the end of this year.
In fact, however, this is all beside the point. I had harboured hopes, based on my respect for the new Secretary of State and the new Pensions Minister, that they would come to these issues with fresh minds. The history of the FAS since its birth in May 2004 has been a dismal disappointment. Things have merely gone from bad to worse. In its annual report, it revealed that it spent more on running itself than it got to the victims. The latest number receiving payments—about 1,300—is only a fraction of the 10,000 who have reached retirement age and need help now.
Let us consider the appalling case of Mr. John Brooks, a constituent of my right hon. Friend the Leader of the Opposition, who has been deeply involved in his case. Mr. Brooks is 68 and suffers from leukaemia. He worked for 38 years for Early’s blanket factory in Witney, but when the business collapsed in 2002 he was left without a company pension. He is one of about 50 people in the same situation. He was recently contacted by the FAS, which offered him 60 per cent. of his full pension in the form, at least initially, of a loan. He said that he would not accept it because he wanted to know if the other 49 people were being offered the same thing. He then got a phone call from someone at the FAS. What he said is quoted in the Oxford Mail:
“I asked him if anyone else from Early’s was being offered money and he said no, you are the squeaky wheel that we have got to grease.”
That sums up not only the gross incompetence of the FAS, but its lack of any kind of moral status in carrying out the proper compensation of these victims.
There are others, such as the Cheshires. Marlene Cheshire, the widow of David Cheshire, contributed to the Dexion scheme for 30 years. He died of cancer in 2005. He could have taken early retirement, instead of retiring at the normal age of 62. His widow will receive just £56.98 a week from the FAS, but he would have expected her to receive an estimated £113, including indexing. Mr. Andrew Parr, a member of the ASW Sheerness scheme, will receive 40 per cent. of his expected pension from the FAS. At the age of 62, he should have been getting £336.96 a week—he will now be getting just £134 a week, and he is still working despite having a heart problem.
It is not just a matter of statistics, but of real people facing real problems. When will Ministers understand that those people and their families need help now? The niceties and technicalities of sorting out underutilised remaining assets in the funds, non-purchase of annuities and unclaimed assets will take time; we accept that. However, if the Government had listened to us, that could all have been happening during the past two or three years. It is precisely because the process will take time, and because those families need help now, that along with other parties and some Labour Members, we are proposing not just a lifeboat fund but that initial funding should be provided through Treasury loans. Those would be repaid in due course and are based on the way in which the Maxwell victims were treated.
What these people have gone through is awful; we are all aware of that. In the figures that the hon. Gentleman has given, he says that individuals will receive 40 per cent. rather than 80 or 90 per cent. Is he committing his party to pay the full 100 per cent. of expected pensions, and if so, what would that cost the Government?
We are committed to find ways, as set out in the amendments, to ensure that people receive compensation at PPF levels, without incurring further taxpayers’ money, and we think that the Government should be doing that as well. That is why we have suggested that we all talk to each other on a consensual basis to try to reach a solution.
I mentioned the question of loans, the Treasury and the parallel with the Maxwell situation. The then Conservative Government got their priorities right. In due course, they sorted out pensions reform through what became the Pensions Act 1995, but their priority in the short term was to get help to those who needed it because they were facing destitution.
With the exception of the Minister, we have all dealt with these issues of improvement and changes to the FAS before, over and over again, and the Government have been dragged kicking and screaming each time to make further concessions. On past form, Ministers will relent and agree with us sooner or later. Why not sooner?
Mr. Deputy Speaker, may I ask you a rhetorical question? Are you, like me, visited by the odd nightmare? That nightmare is one in which one knows the right course of action, but is paralysed to take it. All of a sudden, one wakes up and finds oneself back in the real world. Listening to what was said from our Front Bench today, the comparison with being paralysed and unable to take the right action seemed to be there. The nightmare, however, is visited not on us, but on those of our constituents who have paid into an occupational pension for most, if not all, of their working lives, and have been robbed of that to some degree—sometimes to a great degree.
Let me remind the House of the background to this matter. In 2002, I introduced a Bill that had two parts. One was to establish an insurance scheme, and one was to deal with what we then thought were small numbers of people who could not be insured because their schemes had already gone bankrupt, or would do so before the insurance scheme came into existence. I proposed that taxpayers should not have to foot a penny of the bill of making good the pensions of those in the second group, and that we should draw upon the unclaimed assets of banks and building societies.
What was the Treasury’s response to that? It told us that, although these assets were unclaimed, it did not mean that they did not have owners. The Treasury was not minded to claim such assets, which sometimes were unclaimed for 100 years or more, to foot the pension bill of those who had so cruelly lost out. We now know that the Treasury says not only that the assets will be claimed by the Government, even though they are unclaimed and may have owners, but that pensioners will not have the first claim on them, as first mentioned in this House. Instead, the assets will be used for youth projects. It is not that anyone in the House is against financing youth projects, but we think—as Aneurin Bevan said—that politics is about priorities, and when it comes to priorities, pensioners should be at the top of the list.
The Minister for Pensions Reform is one of our most adroit performers at the Dispatch Box, but at the end of his contribution, I was left wondering what we were offering pensioners. All I knew was that we were not offering them the deal that we should be. Tonight, we should take the opportunity to put an end to the nightmare into which they have been plunged for many a long year. Those on the Treasury Bench know that we have by-elections coming up. Lots of Members on this side of the House, who agree with us in spirit, will not want to be with us in the Lobby because they know that some Opposition Members would exploit that in by-election campaigns.
I hope that Members of the House of Lords would not misread a vote as a lack of determination on this side of the House. When our deliberations return to them, I hope that they maintain their position, and keep sending the measure back to us until we reach the final tape. At that point, the Government will have to give way, if they have not already done so, and we will get justice, at long last, for those pensioners who have been so cruelly treated by the circumstances regarding their pensions funds. All of a sudden, the light of day will then be upon the Government, and they will realise that the funds can be found from somewhere. We might as well do that tonight rather than later on in the Session. We owe that to our constituents, and I hope that we shall vote accordingly tonight.
I was struck by the—probably uncharacteristic— partisan tone struck by the Minister in his opening remarks. There has been a lot of talk about building a pensions consensus during the debates on pensions that many of us have been involved in. During this debate, the House has to think about the cross-party interest of many hon. Members in ensuring that the 125,000 victims of the collapsed pensions, to which the right hon. Member for Birkenhead (Mr. Field) referred, have a fair and just settlement. We have an opportunity tonight to ensure that they do, and to ensure that the paralysis, quite rightly described by the right hon. Gentleman, stops and the nightmare for those 125,000 people is brought to an end. Let us ensure that those people are not presented with continuing injustice and a continuing struggle.
Let us not forget that what has brought the matter most vividly to the House’s attention for a period of years was vigorous campaigning. We saw it again today, as many of the victims of collapsed occupational pensions were present in Parliament square, to lobby Members of this House about the justness and fairness of their cause. Let us not say to those people, “You have to keep struggling on.” Let us back the amendments and make sure that those people have the fair and just settlement that they seek, and which they deserve. That settlement is embodied by the amendments, including amendment No. 24, which I shall come to shortly.
The background to the matter is well known. As the right hon. Gentleman said, many people have been affected during the period between the suggestion of such legislation and its coming into law. The Government’s role in the whole sorry scheme has been criticised by several independent bodies, such as the European Court of Justice, the High Court, the pensions ombudsman and the Select Committee on Public Accounts. If a footballer had been shown four red cards in succession, the police would be called to get him off the pitch. The Government need to respond with more alacrity to those findings than they have displayed so far.
Does my hon. Friend share my surprise that, although the Government finally appear to have accepted some guilt for maladministration after the attempts by the four different bodies that he mentioned, they are still not putting right the financial injustice?
I am grateful to my hon. Friend for her intervention and pay tribute to her work in campaigning for her many constituents who have been affected by the problems. I share her surprise that, although the Minister appeared to offer a further small concession, albeit with few numbers attached, he was not willing to go the whole hog. I share the view of the hon. Member for Eastbourne (Mr. Waterson) that the Government will eventually be forced to do that. They have not done so yet, and that is gravely disappointing.
Although I acknowledge that the Government have made progress in expanding the FAS from its original limited basis to a slightly less limited basis—and, potentially, an even less limited basis—they seem to have been dragged kicking and screaming to that point. Any resultant positive feeling among the victims of the scandal has been dissipated by the Government’s niggardly approach to making progress. There is genuine anger about that. I went to the demonstration in Parliament square today and saw many people wearing T-shirts, which claimed that the Chancellor of the Exchequer “stole my pension”. That shows the extent to which the issue arouses genuine and justifiable anger.
The anger derives from the big difference between the PPF and the FAS. The Minister used the phrase “core pension”. He has now invented a new phrase—“expected core pension”. Others have drawn attention to the fact that the term “core pension” is misleading and appears to have been defined uniquely for the purposes of the debate to make it sound as if more is being offered to the people who are affected. All hon. Members should bear that in mind when they cast their votes.
The hon. Gentleman will also realise that the suggestion that a loan somehow reflects what happened in the Maxwell case is factually inaccurate. There was initially a Government loan, but nearly all the assets were subsequently recovered or squeezed out of the banks that had lent against them, so there was not a huge debt to be repaid at the end of the day.
I am grateful to the hon. Gentleman for that intervention. The amendments’ point is to say, “Let’s get on with it. Let’s get the Government loan through the system to achieve the PPF level, not the more niggardly proposal.” We can then ascertain the resources that can be released through the Young review process and other processes, and calculate how much of that money the Government can get back.
The Minister is dithering about the financial outcome for the affected pensioners while saying, “We must wait and see.” There must be an end to the dithering. The House and the pensioners who suffered the injustice have waited a long time and consistently demanded PPF level benefits.
My party made it clear in our election manifesto that we believe that benefits should be paid at the PPF level. I previously referred to the figure that House of Lords written answers provided for the cost of that. At net present value, the cost would be £640 million in the first 10 years. That is £25 million a year and, as the Minister said, there is a curb. Perhaps I should not be, but I am prepared to take on trust the word of his colleague in the House of Lords for the correctness of those figures.
The difference between the PPF and the FAS is great. The 80 per cent. that is currently being offered amounts to only 60 per cent. when we consider expected pension, according to the pensions action group. That is because, unlike the PPF, the benefits paid out under the FAS have no index inflation linking. Other benefits, such as widows’ benefits, are more limited under the FAS than they are under the PPF. Other dependants’ benefits are non-existent. The FAS pays out at the age of 65, irrespective of the retirement age of the individual’s scheme.
Even if the Minister goes up to 90 per cent. of his “expected core pension”, it will amount to perhaps only 65 per cent. of actual expected pension—that is, two thirds of the sum to which people would have been entitled had their schemes not collapsed. Hon. Members should bear that in mind when they cast their votes this evening.
The core pension concept, which was invented for the purposes of the scheme, varies a great deal according to individual circumstances. I met one pensioner today who told me that his personal circumstances meant that his core pension amounted to 32 per cent. of his expected pension. There is a wide difference, which means that the Government’s talk of 80 or 90 per cent. is simply not in keeping with many affected pensioners’ individual circumstances.
The PPF method of delivering benefits gives a great deal more certainty and we should aim to achieve that.
Does my hon. Friend share my concern that my constituents who are affected are mainly people who worked in the former steelworks and were not on especially high incomes when they were employed? Their expected pension was not generous in the first place and getting two thirds of that can mean a small amount on which to live in retirement. That has implications for pensioner poverty.
I agree with my hon. Friend. Many of the 125,000 people whom we are discussing this evening are in the position that she describes. We are not considering pensioners who are expecting—as Cabinet Ministers might expect—large sums in retirement, but people who built up small amounts of pension. We should record our indebtedness to the pensions action group, and especially to Dr. Ros Altmann, for the way in which they assiduously brought such matters, including my hon. Friend’s point, to the House’s attention.
The Minister referred to the Young review. It is an interesting document, which rewards further detailed study—I am sure that all hon. Members have studied it. It includes much that should give aid and comfort to those who support the amendments. For example, it emphasises the importance of stopping the annuitisation of the assets that are left over in the collapsed pension schemes. That is precisely the outcome that amendment No. 22 would achieve. The Minister wants to wait until November, when I presume that we will have the next phase of the report. Who knows how much longer Government action will then take? It could be attached to another pensions Bill. The process could take some time. If, during that time, many of the assets are annuitised, the benefits that could accrue to the FAS will be lost. Even if the Minister rejects all the other amendments—I wish that he would not—amendment No. 22 is in his interests as much as those of everyone else who pursues the matter.
I fail to understand the basis of the Government’s opposition to the proposals. Although the amount of money required to increase benefits to PPF level— £640 million at net present value—is significant, it is not a great deal of money in overall annual public expenditure terms. I cannot understand why Ministers are so unwilling to do the right thing by a group of pensioners who have been treated so unjustly.
The hon. Gentleman is right. “Action this day” must govern us. It is not enough to delay a little more and simply take the Government’s word. The Select Committee gave cautious advice about the extent to which we should listen to the Government. We need to act now because, tomorrow, the amount that has been annuitised may be greater. The next day, it may be greater still. We need to act to ensure that that does not happen and that the maximum amount of resources is available to benefit those who have suffered so long because of the collapse of their occupational pension.
The Young review makes the point—perhaps it is a rebuttal to the Association of British Insurers, among others—that there are unclaimed assets potentially available in life insurance policies. However, the main point the review makes is that there is a need to create the lifeboat now. People need the guarantee of the benefits at PPF level. The Minister can have a review to ascertain the level of resources, but let us get the lifeboat going to give people outside the certainty that they require.
Amendment No. 24 is simple and makes it clear that PPF-level benefits should be delivered by regulation as a matter of right. The other amendments make it clear that the process of allocating resources should be gone through, but the uncertainty of the level of resources that might be delivered by the various programmes should not stop us voting for these amendments. There may be a small cost attached—the hon. Member for Wolverhampton, South-West (Rob Marris) has referred to it repeatedly, from a sedentary position and otherwise—but answers to parliamentary questions show that it is not great. Let us float that lifeboat now to give hope to all concerned.
The Minister presented his statement as an attempt to offer progress but it amounted to little more than more dithering and delay. Victims of this scandal cannot wait and, with the exception of those to whom the hon. Member for Eastbourne referred who have sadly passed away, they will not go away. They will knock at our door every day they can. That is another reason why the House should act today. The amendments establish the lifeboat and start the search for the resources to fund it. That is the right order in which to do it. Let us not spend weeks, months or years reviewing the assets that might be available before we decide to float the lifeboat and give the guarantee of the appropriate level of benefits. Let us vote for the amendments tonight.
The Prime Minister has made clear his wish to present an ethical dimension to his Government’s domestic policy. What better way to start than to ensure that the amendments are passed tonight and that the victims of collapsed occupational pensions in the FAS get the levels of benefits that they desire? The Prime Minister has also made it clear that he wishes to restore the role of Parliament. What better way could there be for the House to show that if the Government are not willing to provide that ethical dimension to their domestic policies, then it is? I hope that the House will support the amendments.
My right hon. Friend the Member for Birkenhead (Mr. Field) mentioned the word “justice”, which is the right word. Fundamentally, we all have to decide whether we want to do justice to a group of people who, through no fault of their own, lost their occupational pension scheme. Either we do, or we do not. The Government certainly want to help them and today’s announcement is welcome. I am not sure whether it is the fourth or fifth extension of the original FAS scheme; I do not disparage that, and it is welcome. We have travelled a long way, but we have not yet arrived at a position of justice. For all the reasons that we have rehearsed endlessly, there is still a big gap between what we think these people should get, as under the PPS, and what they will get, even under a more generous FAS. That is and always has been the fundamental point.
My hon. Friend the Member for Birmingham, Northfield (Richard Burden) asked the Minister a very good question: was the 90 per cent. core pension entitlement now seen as a ceiling, or as the review continued and assets were discovered would there perhaps not be a ceiling? Might we go as far as we could to get some sort of parity with the PPF? I was not sure what the answer was; perhaps the Minister was not sure. I hope that he will become more sure as it would be helpful to have the answer.
We have made awfully heavy weather of this matter. Many of us simply wanted to vote at some point for a proposition that said that some public money would have to be spent in order to do justice. The Government began by saying that it was not a question of money. As we have finished, we see that it is entirely a question of money. The official Opposition said that they wanted to see justice done, but did not want to spend any public money up front. It would have been better to say, “There is cost involved in doing justice, but it is justified.” This involves the whole House because both main parties are part of the story as to how we have got here and there is a collective responsibility on the House to put this right.
I support my hon. Friend. The amount of public money involved has been estimated at £20 million for the first year, although it might rise beyond that. The amount of money that we lose every year from tobacco smuggling alone is £2.5 billion, more than 100 times that amount. There is also VAT carousel fraud and mistakes in benefits. Hundreds of millions, if not billions, of pounds are lost or wasted every year—money that could easily pay these tiny amounts of money.
As ever, my hon. Friend and fellow Select Committee member makes telling points.
I would have preferred us to address this matter in a more direct up-front way. We did not, and we now have to do it through an indirect route of a loan and the expectation that assets will be recovered. If that is the way to get the commitment, let us have it by that route; it is better than no route at all.
The Select Committee has become preoccupied with the solvent employer schemes. We have had continuing dialogue with the Government on that and while it may seem arcane to some, people who have lost their pension in those schemes are in exactly the same position as those in all the other schemes. The Government have said that they are prepared to help members of schemes where trustees have agreed to a compromise agreement with employers because the alternative would have been to force the employer into insolvency, but they have not addressed the position, despite much prompting, of those whose schemes were closed before June 2003. That is an important date; it is when schemes could be closed without funding full buy-outs.
The Government, rightly, have repeatedly refined the rules governing the closure of pension schemes, and after 11 June 2003 employers were allowed to close their pension schemes only if they provided a full buy-out value for both those receiving pensions and scheme members who had not yet reached pensionable age. However, before that date employers were able to close company pension schemes provided that certain funding requirements were met. There was no question of trustees being able to prevent it.
We asked the Government directly whether it was correct that until 11 June 2003, it was legal for employers to close a pension scheme funded to the minimum funding requirement level even if the benefits promised could not be secured; and, if so, whether trustees or scheme members would have any legal means by which they might ensure full benefits were paid. The Government said:
“No legal recourse would be available in relation to the employer debt legislation for pre 11 June 2003 wind-ups, if solvent employers had met their legal obligation to pay the debt calculated in accordance with the legislation.”
We know now that the Government and the regulator are considering what more can be done to compel employers. However, it is okay for the Government to talk about the need to compel employers and to talk about their moral obligation, when they clearly do have a moral obligation. There has been deplorable behaviour, but the point is that what was done was legal. For the members of the schemes, the effect is just the same—they have lost their pensions. That is the point from which we should start.
Amendment (a), which reflects the continuing discussion that we have been having with the Government about the importance of the sequence of events and the dates, is intended to secure support for those who suffered because of the inadequate legal framework before June 2003. My amendment answers completely the Government’s worry that somehow the floodgates will be opened and they will not be able to exercise moral suasion on employers. There is none of that, because it simply establishes the legal position. After that date, the Government are right that there is a case for supporting only schemes where the trustees correctly decided that compromise was in the best interests of members. Before that date, compromise, as I understand it, was not a relevant consideration.
The question to be decided now is whether we simply trust to the process that is under way—I understand that the Government want that and have moved in that direction. They have said that we can always take care of such issues through secondary legislation. However, it is only now that we can ensure, through primary legislation, that the solvent employer schemes are brought within the FAS. I accept the Government’s worries about opening the floodgates; but in that case they should bite the hand off with amendment (a), which would give them a circumscribed statement of the kind of schemes that should be properly brought inside the FAS. It is on that basis that I shall be asking the House to support it.
I am particularly honoured to follow the hon. Member for Cannock Chase (Dr. Wright), who is Chairman of the Public Administration Committee. His argument about the moral imperative to do something for pensioners who have lost their pensions through no fault of their own is, along with his other arguments, absolutely right. I do not intend to take up too much of the House’s time, because as hon. Members will know there is other business in this group of amendments that is also important, particularly to women. It would therefore be helpful to conclude these arguments quickly.
However, I have a particularly good example from my constituency of the injustice of the current arrangements. I represent two groups of people who have lost their pensions: those scheme members who worked for United Engineering Forgings, the old steel company that collapsed before the Pension Protection Fund came into being, and who therefore have to rely on inadequate compensation from the financial assistance scheme; and the people who used to work for the old Rover car company. Although they lost their jobs in the collapse of that company, mercifully that happened days after the Pension Protection Fund came into being, so they were not in the appalling situation of losing both their jobs and the pension contributions that they had made over the years working for that company.
There are other companies that I might mention, such as Kalamazoo. It would be helpful to put on the record my appreciation for the efforts of Mr. Peter Wheeler from Kalamazoo, who has been one of the major campaigners in getting the Opposition and Government Members focused on the issue, as well as the Government. There is also Turner and Newall, which is another company in our region whose employees have included constituents of mine who have lost their pension provision.
The situation is simple. Those people did absolutely the right thing. They did what society asked of them, what their families asked of them and what the Government could ask of them. Those people sought to look after themselves by forgoing income that they could have spent today, in order to look after themselves and their families in the future. In that sense, the House surely owes it to them to put together a scheme that compensates them for doing what we could ask of them, but which many others do not do. We have a moral imperative to try to protect those people in their predicament, now that they have lost their pension savings.
That is particularly urgent, given that many of the people who have lost their pensions and who have looked to the financial assistance scheme have either died while waiting for the money to be forthcoming or become much more ill or retired, while remaining in a penurious position. It is simply not fair that that group of 125,000 people, whose numbers will not grow, because of the existence of the Pension Protection Fund, should find themselves in the particularly injurious position of not being properly compensated for the loss of pension savings that they made in the past.
The words of the right hon. Member for Birkenhead (Mr. Field) were particularly accurate. The Government could have done something about the problem years ago and saved people from that predicament because they had the assets of banks and building societies, which they could have plundered to protect those people and offer them compensation. However, the Government made a distinct decision to spend that money on something else. Although provision for young people in our communities is welcome, I agree with the right hon. Gentleman that the priority should have been those people who had done the right things by themselves and society. They deserved to be compensated.
It is not good enough for the Government to um and ah, and to keep giving the House a little bit more, in an attempt to buy off any opposition to their plans. They could have dealt with the situation some years ago, but they chose not to do so. However, the House will not let the issue go. I applaud the willingness of Labour Members to put the issue on the table and say that the Government must come forward with proper compensation that matches the protection offered by the Pension Protection Fund, because that is the right thing to do.
I agree with Opposition Members in general that the urgency of the current situation is paramount. We must prevent the £1.3 billion that has been itemised in the Government-commissioned report from being made into annuities, by passing a law in the House today. We must also force the Government’s hand into looking again at offering full compensation, whether through the lifeboat fund or through an alternative scheme that the Government have in mind. Frankly, it does not matter to my constituents; what matters to them is seeing justice done. The justice that is acceptable is to have parity with the Pension Protection Fund. I urge the Minister to listen to the pleas of the House and do just that.
I would like to address some of the misleading arguments that have been used to try to create a case for rejecting the Lords amendments.
I begin with the point that my right hon. Friend the Member for Birkenhead (Mr. Field) made. It is just not true that the Young review has sunk the lifeboat argument. His own experience, in floating the argument in the first place, was to be met by direct Treasury opposition, which sought to block a claim that unclaimed assets could be used to meet a public good. The situation now is that the Treasury has changed its position. It has decided not only that those funds can be used, but that it will decide—or has decided—what the public good should be in this case. Saying that someone has pinched the lifeboat is quite different from saying that someone has sunk it. If the lifeboat has been pinched, it is perfectly legitimate for the House to pinch it back and put it on a proper course again.
It would be terrible to suggest that the Young review was the basis on which the claims of the old were to be rejected. I suspect that, if we were to widen the remit of the Young review, that is not a claim that he would make either. The terms set for him specifically involved looking at pension scheme assets, not at those of banks and building societies. It is therefore implausible to say that, on the basis of an area that he has been precluded from considering, he has concluded that there is no case for supporting a lifeboat fund.
Let us think about that for a moment. The reality is probably that a significant proportion of funds accrued as banks’ and building societies’ unclaimed assets have come from people who have died without an estate to pass their savings on to. The majority of those people will be older, rather than younger. Let us try to project ourselves into the minds of such people and ask whether, on their death-bed, they would be more likely to have said, “Give it away to the kids” than “Give it away to my mates. Make sure that people of my generation don’t live in poverty as a result of my dying with an estate that isn’t able to make use of my savings.” It is morally implausible to claim that it is unacceptable for the House to decide that pensioners have a prior claim to those orphan assets.
I am not sure that it is reasonable to speculate on people’s dying wishes. Many elderly people are just as concerned about the needs of the young people in our society. The fact is, however, that the sums involved are relatively small, and if the Government wanted to deal with this matter, they could do so. The Prime Minister, when he was Chancellor, would often pull a rabbit out of the hat and spend lots of extra money, to cheers on the Labour Benches. Surely we ought to cheer if he were to find the £25 million or so a year to deal with this problem.
That is absolutely right. The sums involved are relatively small in the context of any of the major functions of the Government Departments. It cannot be beyond the wit or the financial reach of the House to say that we could provide those resources up front to ensure that the lifeboat floats, and that it sails in the right direction.
I want to make a brief point about the insurance companies. We have all received letters from the Pru, lobbying us and saying that such action would be robbing Peter to pay Paul. The hon. Member for Bromsgrove (Miss Kirkbride) mentioned a company scheme that had collapsed. The company was UEF. She could have gone on to say that UEF was owned by the Pru. The Pru has not paid out a penny to help the pensioners who lost their pensions in a scheme that it owned.
The insurance industry is terrified that the House could take a decision to hold a wide-ranging investigation into the scale of the assets that it is sitting on, and that we would find a legitimate case for saying that it should have been paying out from those assets. It is terrified that, were we to hold such an investigation, we would discover that it is sitting on shed loads of money that ought, quite properly, to be part of the subject of this House’s decision making. This is a fundamental decision about democracy. It is a question whether the House has the right and the courage to hold such an investigation, come back with conclusions and to make decisions on an informed basis. To rule out our right to hold such a wide-ranging investigation is an insult to ourselves as much as to the pensioners who are pleading for us to take action on their behalf.
Although I sort of welcome moves in the direction of the payments of 80 per cent. and 90 per cent. of core pensions, the reality is that the 90 per cent. will not turn out to be 90 per cent. any more than the 80 per cent. turned out to be 80 per cent. The idea of core pensions involves taking the member’s expected pension, deducting all the inflation linking, some of the revaluation, the tax-free lump sum, some widow’s benefits and the ill health benefits, and then calculating 80 per cent. of the resulting figure. A further 22 per cent. is then deducted as tax at source to get to the final figure. And this is calculated only from the age of 65, not from the scheme pension age.
That is why Members are correct in saying that many of the scheme-affected members who are included in the FAS will struggle to get 50 per cent. of their expected pension. Those pensioners assail us in Parliament square and on the streets of our constituencies with the absurdity of the claim that they will somehow get 90 per cent. of their core pension; they will get only a sliver of their real entitlement.
Can my hon. Friend imagine what the reaction in the House would be if our pension scheme went belly up and our expectations of a modest retirement were ripped away from us? Would the House be this empty, or would all the Benches be overflowing with anger?
I am a huge admirer of my right hon. Friend, but he sometimes steals my final lines. This is kind of difficult, because that was going to be my concluding point. Were Members of this House to be told that, despite our contributions to our final salary scheme pensions, we were not going to receive the full entitlement that existed on paper, and that we ourselves were to be “FAS-ed”, our response would be unprintable. We would struggle to find a place to sit in the Chamber for such a debate, the Division Lobby would be crowded and we would vote to ensure that what had been promised to us, and what we had paid into, would be delivered. This is the issue that we have to address for ourselves. If that kind of approach is good enough for us, it has to be good enough for the pensioners outside Parliament who have been lobbying us for goodness knows how many years. Throughout their entire working lives, they have been honest contributors to what they believed were honest schemes.
I will not give way; this is almost my final sentence.
We owe a debt of gratitude to the Lords for the amendments that they have passed, which get us all off the hook. Financially, it is a small hook, but morally and democratically, it is a huge hook. The best way in which we can thank the Lords is to vote to support their amendments when we have the chance to do so this evening.
First, may I put on record what a pleasure it is to follow the hon. Member for Nottingham, South (Alan Simpson)? Listening to someone speaking from the heart as he did on behalf of his constituents for the five or six minutes that I heard him was a pleasure. We could all learn a lesson from the speech that he has just made.
The last time that I stood here and spoke on this subject, my constituent Peter Humphreys was in intensive care in Hemel Hempstead hospital. His wife was by his bedside, and I stood here waiting for a text message to find out how he was. Today, in Parliament square, Peter demonstrated with the rest of the pensioner action group, and I am sure that he will be watching me from somewhere at this moment. He is well, and he is getting better. All that he and his family care about is the campaign for justice for the pensioners who have had their life savings, their future and their children’s future stolen from them.
My hon. Friend the Member for Eastbourne (Mr. Waterson) referred to a lady called Marlene Cheshire, and I am sure that she too is watching me from somewhere. Her husband, David, did not make it. He died while he was waiting for money to come through from the scheme. As I have said in the House before, Marlene told David on his death-bed that she would get the money, and she has now just about got some money through.
We have heard about the scale of the problem this evening. We are talking about 125,000 people, along with their loved ones and families, who have been affected by this terrible occurrence. These are not rich people and they are not asking the state for more because they have not contributed. These are ordinary working people, who did the honourable and right thing that they were told to do—they paid into a safe scheme, and they were told by the Government of the day that the scheme was safe. The Government of the day was my Conservative Government and promises were made subsequently by later Governments.
It is sad to see how Government Members have got into a party political spat. Frankly, that was not necessary. We all know what is right and wrong and accusing hon. Members of jumping on to bandwagons or trying to gain political profit from this affair is, quite frankly, sick. As I say, we all know what is right and wrong here. I was approached by my Dexion group long before I became MP for my area. I read its file—a deep and long one—and its members tested me out, as I have said before, as to whether I had or had not read it. Their case, like many others, was cut and dry. They had gone into a scheme in good faith and paid into it.
On four occasions, the Government have been found guilty in respect of those pensioners. There is no argument about that. That is what the parliamentary ombudsman is for. Frankly, if the parliamentary ombudsman is not willing to stand up to Government—any Government—we should not have one. What is the point of having a parliamentary ombudsman if we cannot take cases to him as MPs when we believe that something has gone wrong? If any Government of any description can turn around and say, “We do not like that; we are going to be judge and jury on the matter”, what would be the point of having a parliamentary ombudsman at all?
Here we are today, after the Government have been dragged through the courts, kicking and screaming about different schemes at different times. I suspect that it is all about trying to get a few more of their Back Benchers not to vote with the Opposition on the amendments. I hope and pray that many of their Back Benchers are tucked away somewhere where the Whips cannot get at them. I really hope so, because this great House must show that it cares about people’s lives and futures. It must know the moral position—what is right and wrong. If we do not follow the moral course, the House will be denigrated this evening. We must do what is right for our constituents.
As we have already heard, we are talking about only a tiny amount of money in the big scheme of things. I have people telling me at my surgeries every week that they have been paid thousands of pounds too much through child tax credit or working tax credit—or Uncle Tom Cobleigh’s credit, frankly. There is money flying about all over the show, particularly within this particular Department, which has a huge financial base. Money is being lost and costs cannot be agreed, but we are talking about people’s lives and only a small amount of money.
I say to hon. Members that tomorrow morning they will have to look in the mirror and stare at someone who voted in a certain way tonight. Can we in all conscience not support these people so that they get the help that they need today? Let us argue about where the money comes from and broaden Young’s remit to look into other sources such as banking assets. It is ludicrous to have such a narrow remit that focuses only on the insurance side of the problem. Let us put that to one side and give these people the help that they need today. If the amount of money that Young talks about is available, we may not need to use the guarantee of a loan from the Government—just as Maxwell pensioners did not have to. The money was there, should it have been needed. Let us stand up for people tonight in a moral and ethical way. I hope that all Members will believe that that is the right way to proceed and will support the Lords amendments. I congratulate their lordships on what they are doing.
I had hoped that the Government would bring this sad series of events to an end this evening by making a real commitment to the pensioners. I am disappointed that, so far, that has not happened. I accept that progress has been made and I welcome what my right hon. Friend said today. We are creeping nearer to the 90 per cent. figure, but as many hon. Members have said this evening, what does it actually mean? We have heard about other benefits related to the Pension Protection Fund. I cannot understand why the Government will not go that extra step and make a proper commitment.
It was five years ago that Allied Steel and Wire went into receivership in Cardiff, so this saga has been going on for five long years, during which time I and other hon. Members have had people coming back and forth to our constituency surgeries, saying time and again that they expected a Labour Government to sort the problem out. I feel that the Government have made some efforts and achieved some progress, but they have not gone as far as they should.
Many people have campaigned long and hard on this issue and I know that many will be disappointed that the Government will not finally settle it today. We must pay tribute to the pensioners themselves and to the unions, particularly to Community and Amicus, which took the case to the European Court of Justice in the interest of its members in January 2006. The ruling said that the pension rules were inadequate in protecting the expected pensions of members of occupational pension schemes in the event of their employers becoming insolvent. If those rules had been implemented adequately, none of this would have happened. I still hope that we can settle the issue, but time is certainly running out. It is time that we did the right thing by all those affected—and some of the Lords amendments would achieve that, though I did not wish to reach the position where I felt I would have to support some of their amendments against the Government.
What guides me at this particular moment is the experience of my constituents in Cardiff, North, particularly ex-employees of Allied Steel and Wire. What they have told me has driven me to campaign for justice for those workers. I have seen for myself just what hardship the loss of their pensions has caused. We have all heard first hand just how hard it was for people to learn that they were going to lose first their jobs and then their pensions, despite having paid into an occupational pension scheme—often for decades and on the advice of the Government.
Many of those people worked in the hard environment of the steel industry for all their lives and many have told me about the devastating impact of these events. One man put it very bluntly when he said, “I face a bleak retirement”, yet he had paid into a pension scheme for more than 20 years. Some people have never been able to talk about what happened to them. I have mentioned before that one man’s wife told me that since this happened, he had been unable to say a word about it because the trauma was so great. Some members have died not knowing how much loved ones will have to live on. I do not feel that that can be allowed to go on and on. The excruciatingly long time that it is taking to get justice for all those affected by the collapse of pension schemes has caused untold stress and strain and affected the physical, emotional and mental health of many pensioners and their families.
I welcome what the Minister has proposed tonight, but it still continues the uncertainty. We still do not know what extra percentage will result from the proposals in the Young review. We still do not know how much the final figure will be when the Government match that percentage. My constituents tell me that the stress and uncertainty have gone on far too long and they urge us to bring this sad, appalling and morally wrong situation to a satisfactory conclusion.
The Young report offers some hope, but I fear that we still do not know what it will mean for those pensioners. If the Government offer no certainty today, I feel that I must consider voting in favour of any amendments that will result in payments at PPF levels for my constituents who are currently in receipt of FAS. I support the intention behind amendment No. 24, which is a simple amendment that aims to bring pensions up to PPF levels. I hope that we will have a separate vote on that amendment.
I am reflecting on the other amendments and support my hon. Friend the Member for Cannock Chase (Dr. Wright), the esteemed Chair of the Public Administration Committee, when he said that it would have been preferable not to have gone down the route of loans and lifeboats. It would have been better to have had a straight commitment from the Government and then to have found as much as possible from the sources identified in the Young report. That might have reduced enormously how much public money had to be used. However, as my hon. Friend said, sometimes it is necessary to make a commitment to public money, and I believe that this is one of those occasions.
I very much regret that we, as a Government, have reached this stage today. This is a marvellous Bill, which promises pensioners a much better future and recognises the issue of women’s involvement in pensions in a way in which it has not been recognised before. I would support it wholeheartedly were it not for the problems that we are discussing, and I am very disappointed that the Government have not reached a firmer conclusion. Unless the Minister says anything more definite, however, I shall vote for certainty and a better deal for my constituents.
It is a delight to follow the hon. Member for Cardiff, North (Julie Morgan), who echoed what had been said by the right hon. Member for Birkenhead (Mr. Field). We are no clearer about what the Government are proposing; it seems to be a bit more smoke and mirrors and a bit more jam tomorrow.
There was some laughter earlier, but I do not think any of us can really imagine what it is like to lose a pension after 30 years of saving. Many of those involved in this scheme were ordinary hard-working people, who did not expect riches in later life but certainly expected to avoid the poverty trap into which many on state pensions had fallen. They are not feckless spendthrifts waiting to be bailed out. As the right hon. Member for Birkenhead said, many went without during their working lives for the sake of the contingency fund that they thought they were setting up, not just for themselves but for their wives and families.
It was Government advice that those people were following. It is not as if they suddenly decided that some snake oil salesman had come up with a good idea; they were persuaded by the argument that this was the right thing to do. At £87.30, the state pension is hardly a king’s ransom. It is no wonder that many of our hard-working constituents hoped to avoid the possibility of not being able to lead the life that they were expecting, with happiness and a degree of comfort in their old age.
My postbag, like that of others who are present, reflects the views of those who feel that they have been sadly deceived and face an impoverished old age. We must step in tonight, rather than delaying for the sake of the promise of some future benefit that is undefined. When my right hon. Friend the Member for Wokingham (Mr. Redwood) pressed the Minister for figures, he made some party political points that I think did a disservice to the House and to our current argument, but we were given no firm figures. We may not have a perfect system to propose, but at least we are offering a degree of security that was not forthcoming from the Government.
I believe that, as Members of Parliament, we are considered to be honourable, and that is a badge that we all like to wear. But my constituents who have been caught up in the Dexion pension crash may be watching the debate today, perhaps from somewhere closer than some of us may care to think, and they will draw their own conclusions if we do not seize the chance to right what Members on both sides of the House acknowledge to be a terrible wrong. This is not cheap party political posturing because some by-election is taking place somewhere; we are dealing with a long-standing complaint, recognised by Committees that were heavily Labour-dominated. I firmly reject the idea that what is being said tonight is intended merely to win a by-election.
As we have heard, the collapse of the Dexion pension scheme is not an isolated case, but it is a salutary tale which, like others, has prompted calls for action by Government. In 2006, a Select Committee said that the Government were focusing their energy on the findings of maladministration rather than considering the remedies. We have a remedy tonight.
The fact that the Government were not considering the remedies was seen to add to the distress of the people caught up in this mess—for it is a mess. A constituent of mine, Mr. Mike Chapman, is a former Dexion employee, and he and his family believe that the Government are dragging their heels. Although we have heard of similar cases tonight, Mike’s case typifies the enormity of the personal crisis that faces people. In May 2003, 180 Dexion staff were caught up in that crisis.
There should not have been a problem. Those people thought that they were in a secure pension scheme. In fact, their contract insisted that they join a pension scheme. Mike was in the scheme, and having paid the additional voluntary contributions for more than 20 years, he rightly expected a relatively comfortable old age for himself and his family. But, as we have heard, the Dexion pension fund, like others, did not have enough money in the pot to meet the obligations. What is more, work forces and their pension funds are near the bottom of the pecking order when a failed company’s creditors are ranked. A valuation of the Dexion pension fund showed a £20 million shortfall, which was disastrous for the employees.
At 64, my constituent Mike Chapman was within a fortnight of retirement. Can Members imagine that being snatched away from them within a fortnight of retirement? When Dexion—a firm that manufactured shelving—went into administration, it left a gaping hole in its pension scheme. Mike Chapman tells me that rather than gaining a pension of more than £1,200 a month, he and others like him will receive nothing. He is too young to qualify for the financial assistance scheme.
In the four years since Dexion’s collapse, Mike and his wife Valerie have lived on their savings. They had saved, fortunately: like many others involved in pension schemes, they are a prudent couple. They have had to try to make ends meet by working in odd jobs. They have even worked as medical research guinea pigs to generate some income. Earlier today we talked of equality for women, but I can tell Members that for an older person, seeking employment to supplement one’s income is not an easy option. It is not open to many people to seek gainful employment.
Being a sensible man, Mike had followed the Government’s advice to the letter, and he has paid the price for doing so. As we have heard today, people were positively encouraged to act as he did. Mike paid in thousands of pounds of his own money because the Government and his employers told him to do so. He was promised that he would be safe and would receive a generous settlement, but that did not happen.
Shockingly, Mike and others discovered the hard way that final salary schemes were not worth the paper they were written on; they were only as good as the employers running them. I want to quote Mike’s words, and those of others caught up in the scheme. I think that Labour Members who do not share our passionate feelings—[Interruption.] I refer to some Labour Members. Many have expressed the same wishes as us today, but unfortunately those on the Front Bench have not done the same. [Interruption.] I am sure that Labour Members want to hear Mike’s words rather than shouting them down. He said:
“We had saved to pay for the good things in retirement, expecting the pension to take care of the day to day expenses. But life after 60 has been very different to how we imagined it.
After four years of fighting, I won't believe anything until I see the money in my pocket. We're planning on the basis of assuming the worst because we cannot afford to be disappointed.”
The wife of a Dexion victim said:
“I would love to be able to ask Mr. Blair”
—this was before the arrival of our new Prime Minister—
“and those in Government what on earth they think we should do now”
—not next year, but now—
“but of course it is not possible to talk with such lofty folk, I can not even get him to read the letters I send.”
Tonight the Government have a chance to listen to that lady, and to other people such as Mike. Mike is a former marketing manager. He lives in St Albans. He does not expect a quick U-turn, but Members can support him tonight.
Following articles in the media about the plight of Mike and other Dexion workers, they posted their comments on a website. Many drew attention to the moral dimension of the Government’s apparent contempt for the public—that is how the Government are regarded: with contempt. They feel that they have been let down, and they speak eloquently of their experiences. I shall end by quoting comments that reflect the views of the many despairing victims from whom I am sure we have all heard at our constituency surgeries. This is what they tell us:
“Frankly the young might be better off spending their money having a good time while they are young rather than save for a Pension which might be taken away from them. At least they could have some happy memories while sitting huddled over a candle keeping warm”.
“The government do not care about those of us that stand to lose all or part of our pensions because of government mismanagement and misinformation. And this from a so-called Labour Government. But never mind, the MPs can all rest easy that their pensions are safe.”
—on the website, that is—
“have pointed out the moral dimension of the Government's contempt for the public, and failure to help people who are genuinely in need. The attitude of Blair and Brown, however, is rooted in mismanagement and incompetence.”
Those are not my words, but the words of people who have nothing as a result of the Government’s actions. They accuse all of us collectively—all hon. Members—of letting them down. Tonight we have a chance to show them that their comments may be misplaced, and that we can redress what has been done.
Some Members have seemed to wish to shout all that down, and not to wish to speak to the likes of Mike Chapman. I am the voice of those people tonight. I hope that other Members will join us in the Lobbies, and ensure that we provide at least a degree of financial security for an old age to which people thought they were entitled and to which I believe they have a right.
The debate has been long and passionate, and I shall reply briefly to it. There is clearly great sympathy in the House for the pensioners affected by companies having closed their pension schemes. No one wants to lose their pension, regardless of whether it is a private or a public sector pension. Concern has been expressed today by Members in all parts of the Chamber about those pensioners, and concern has been expressed in the other place that more money should be spent. There is disagreement about where that money will come from, but the Young interim report is positive about our being able to find more money for the pensioners. Today I have been pleased to announce that it is our intention to match any additional funds the review might bring forward with the goal of moving to the 90 per cent. mark. We also hope that the Young review will help to enable us to respond properly to the issue of solvent employers.
It is in pensioners’ interests that we get them more money as quickly as possible, so let us rapidly secure the Bill’s Royal Assent so that we can deliver immediate payments. We will not do justice to the pensioners by agreeing to the complex, costly and contradictory provisions before us. They will not deliver for the pensioners, which is the key objective. That is why I call on Members to support the motion to disagree.
Lords amendment disagreed to.
Lords amendment No. 16 disagreed to.
After Clause 18
Lords amendment: No. 16.
Amendment (a) proposed in lieu thereof:
Financial Assistance Scheme: eligibility where employers remain solvent
To move the following Clause:—
The Pensions Act 2004 (c. 35) is amended as follows.
In section 286 (financial assistance for members etc.) insert after subsection (2)—
“(2A) Conditions prescribed under paragraph (c) in the definition of “qualifying pension scheme” in subsection (2) shall not exclude schemes which have been wound up in the absence of an insolvency event as referred to in Part 2, provided that such wind-up began before 11th June 2003.”.’.—[Dr. Tony Wright.]
Question put, That the amendment be made:—
The House proceeded to a Division.
I ask the Serjeant at Arms to investigate the delay in the No Lobby.
Lords amendment: No. 17.
Motion made, and Question put, That this House disagrees with the Lords in the said amendment.—[Liz Blackman.]
Lords amendment disagreed to.
Lords amendments 18 to 24 disagreed to.
Lords amendment: No. 1.
Motion made, and Question proposed, That this House disagrees with the Lords in the said amendment.—[Mr. Mike O’Brien.]
The Minister has just moved the amendment formally and does not intend to speak at this time.
The Question is, That this House disagrees with the Lords in their amendment No. 1. As many as are of that opinion say Aye—[Interruption.] If Members want to contribute, they must stand to indicate their wish to do so.
I am sorry, but we have moved on. The Minister moved the motion formally, indicating that he did not want to contribute—
Order. If the hon. Member for Eastbourne (Mr. Waterson) now wishes to contribute to the debate, he may do so.
Order. Will Members who are not intending either to listen to the debate or take part in it please leave the Chamber quietly?
The amendment was proposed by Baroness Hollis in the other place and carried by quite a handsome majority with support from, I think, Members of all the different parties, including some of my Conservative colleagues. It is designed to help women with broken contribution records to be able to buy back previous years retrospectively—so there is an element of a contribution being made by the women—and to increase the limit to nine years, whether consecutive or not. As I understand it, the rules currently refer to six years and they have to be six consecutive years. There may well be women who get to the end of their working lives and find that they have any number of years still unpaid for. The amendment has the backing of Age Concern, Help the Aged and, above all, the Equal Opportunities Commission.
I have two issues to raise. I do not know whether the Minister will have a chance to reply. The Minister in the Lords said that the cost would be £260 million. Is that netted off against the means-tested benefits, such as pension credit, which the women might otherwise claim if they did not have this advantage? Would this really be an extra spending commitment if the Government, or any Opposition party, were to sign up to it? As I understand it, the proposal is not to change the rules on eligibility, but merely to increase take-up. All Governments, at different times, try to increase take-up by applying different methods to benefits and so on, but does that actually involve a commitment to greater Government spending?
My right hon. Friend Baroness Hollis proposed the amendment in the other place. We understand, and are very sympathetic to, the objectives of the amendment, and hope that we can deliver its aim of helping women in this country if at all possible. The Government have always been clear about their desire to provide fairer outcomes for women and the measures in the Bill demonstrate that commitment. We recognise the strength of feeling expressed in the other place and we are keen to find a solution that may bring more people into the contributory system for the first time. However, this is a complicated issue, and it is important to explore the complexities and possible implications of the range of options, including the proposal in my right hon. Friend’s amendment.
There are for example options in relation to the number of years that could be purchased, the rate at which additional contributions could be paid, the treatment of individuals overseas, and the interaction with the current system. These have varying administrative, legal, cost, distributional and policy implications, and we need to ensure that we get any targeted solution right. We want to find a way to overcome these problems. We are keen that any solution should deliver a fair outcome for individuals who have experienced complex and fragmented lives, but at the same time we need to be mindful of how any changes would impact on people living overseas.
With that in mind, the Government will commit themselves to looking at the range of options in the coming weeks, including the option to buy additional years as proposed in the amendment, and to provide an update in the pre-Budget report. In doing so, the Government will consider all the options in terms of the following principles: fairness—any solution must help those most in need; affordability—any solution must be affordable and sustainable; simplicity—any solution must be deliverable, simple to implement and understandable to those it would benefit. There is no difference between my right hon. Friend’s wish to help women in this country and our wish, but we need to deal with the practical problems. I cannot make a commitment that we will achieve that outcome today, but we will use our best endeavours to deliver the principles of her amendment. She has authorised me to tell the House that, on the basis of that statement, she is now content and believes that this is a useful basis on which to go forward. I therefore ask the House to reject the amendment from the other place.
I will speak very briefly, in the remaining minute of time. The Liberal Democrats believe that this very important amendment will tackle the great injustice faced by many women pensioners. In particular, it will provide more flexibility to those people, especially women, who currently lack the appropriate level of contributions to get a full pension, even under the new system. It will help those whose employment records are broken, for example. It will also help with the cliff edge that people will face when the new system is introduced from 2010. As my hon. Friend the Member for Northavon (Steve Webb) pointed out, currently that cliff edge could confront people whose pension date is just before the new system is brought in and could cost them about £28,500. That is why it is important that the House support the Lords amendment.
Question put, That this House disagrees with the Lords in the said amendment:—
Lords amendment disagreed to.
It being more than three hours after the commencement of proceedings, Mr. Deputy Speaker proceeded to put forthwith the Questions necessary for the disposal of the business to be concluded at that hour, pursuant to Order [this day].
Lords amendments Nos. 12 to 14 disagreed to.
Lords amendment No. 28 disagreed to.
Lords amendment No. 73 disagreed to.
Lords amendments Nos. 2, 3 to 11, 25 to 75, and 29 to 72 agreed to.
Committee appointed to draw up Reasons to be assigned to the Lords for disagreeing to certain of their amendments to the Bill: Danny Alexander, Mr. Wayne David, Natascha Engel, Mr. James Plaskitt and Mr. Nigel Waterson; Mr. James Plaskitt to be the Chairman of the Committee; Three to be the quorum of the Committee. —[Mr. Alan Campbell.]
To withdraw immediately.
Reasons for disagreeing to certain Lords amendments reported, and agreed to; to be communicated to the Lords.
On a point of order, Mr. Deputy Speaker. In view of the imminent deportation scheduled for 9.30 tomorrow evening of Samar Rashavi, a Christian lady against whom a death warrant has been issued by the Iranian Government, have you received a request from any Minister to come to the House to make a statement about any change of policy from the usual line, which is that we do not deport when somebody is in serious danger of the death penalty, particularly for a reason that we would not recognise in this country?
I am grateful to the right hon. Lady for giving me notice that she would raise a point of order. I have no knowledge of any intention of any statement being made to the House, but the right hon. Lady has used the device of a point of order to raise the matter, and I am sure that what she said will have been heard by those on the Treasury Bench. I cannot add substantively to that.