New Clause 38 — Financial assistance scheme: increased levels of payments
Orders of the Day
1:11 pm

'(1) Section 286 of the Pensions Act 2004 (c. 35) (financial assistance scheme for members of certain pension schemes) is amended as follows.

(2) After subsection (1) insert—

"(1A) The Secretary of State must, in particular, make provision for securing that (subject to any relevant restriction) the aggregate amount of—

(a) any annual payment payable to a qualifying member of such a scheme, and

(b) the member's actual pension (if any),

is not less than 80% of the member's expected pension, irrespective of the date of his attaining normal retirement age (or the date when he would have attained that age if he dies before attaining it).

(1B) A "relevant restriction" means any provision of the regulations which—

(a) operates to restrict the amount of an annual payment by means of a cap on the product of the calculation of a specified fraction of the member's expected pension, or

(b) provides for an annual payment not to be payable where the member's actual pension exceeds any specified amount."

(3) In subsection (2), before the definition of "qualifying member" insert—

""actual pension" and "expected pension", in relation to a qualifying member of a qualifying pension scheme, mean the amounts which, in accordance with regulations under subsection (1), are to be taken into account as the member's actual pension and expected pension, respectively, in determining the amount of any annual payment payable to the member;

"annual payment" has the meaning given by regulations under subsection (1);"."

(4) Subsections (5) and (6) below apply where the scheme manager has determined that an initial payment may be made under the FAS regulations to or in respect of a qualifying member of a qualifying pension scheme, and they so apply whether the determination—

(a) has been made, or

(b) relates to a period beginning,

before or after the passing of this Act.

(5) Subject to any relevant restriction, the amount of any such initial payment payable to the member is to be—

(a) the amount of the member's expected pension multiplied by 0.8, less

(b) the amount of the member's interim pension (if any),

irrespective of the date of the member attaining normal retirement age (or the date when he would have attained that age if he dies before attaining it).

(6) The amount of any such initial payment payable to the survivor of the member is to be—

(a) whichever is the smaller of—

(i) one-half of the product of the calculation in subsection (5)(a), or

(ii) one-half of the product of that calculation as reduced by virtue of any relevant restriction,

less

(b) the amount of the interim pension payable to the survivor (if any),

irrespective of the date of the member attaining normal retirement age (or the date when he would have attained that age if he dies before attaining it).

(7) In subsections (5) and (6) "relevant restriction" means any provision of the FAS regulations which—

(a) operates to restrict the amount of an initial payment by means of a cap on the product of the calculation of a specified fraction of the member's expected pension, or

(b) provides for an initial payment not to be payable where the member's interim pension exceeds any specified amount;

but for the purposes of those subsections any such specified fraction is to be taken to be 0.8.

(8) Any provision of the FAS regulations which is inconsistent with subsection (5) or (6) is of no effect to the extent of the inconsistency.

(9) The Secretary of State may by regulations—

(a) amend subsection (5) so as to substitute for the fraction for the time being specified there such fraction as is specified in the regulations, and

(b) make a corresponding amendment in subsection (7).

(10) No regulations may be made under subsection (9) unless a draft of the regulations has been laid before and approved by a resolution of each House of Parliament.

(11) In this section—

"expected pension" and "interim pension", in relation to a qualifying member of a qualifying pension scheme, mean the amounts which, in accordance with the FAS regulations, are to be taken into account as the member's expected pension and interim pension, respectively, in determining the amount of any initial payment payable to, or in respect of, the member;

"the FAS regulations" means regulations under section 286(1) of the Pensions Act 2004 (c. 35);

"initial payment" has the meaning given by the FAS regulations;

"interim pension", in relation to the survivor of a qualifying member of a qualifying pension scheme, means the amount which, in accordance with the FAS regulations, is to be taken into account as the interim pension payable to the survivor in determining the amount of any initial payment payable to the survivor;

"qualifying member", "qualifying pension scheme" and "scheme manager" have the same meaning as in section 286 of the Pensions Act 2004 (c. 35);

"survivor" has the meaning given by the FAS regulations.'.— [James Purnell.]

Brought up, and read the First time.

1:22 pm
Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I beg to move, That the clause be read a Second time.

Photo of Michael Martin

Michael Martin (Speaker)

With this it will be convenient to discuss the following:

Amendment (a), in line 9, leave out from 'than' to end of line 11 and insert

'the amount that would be paid in the same circumstances in payments made in accordance with the pension compensation provisions set out in Schedule 7, save that references to "the Board" shall be read as references to the Scheme Manager defined in subsection (3).'.

New clause 11— Financial Assistance Scheme

'(1) The Secretary of State shall commission an independent review of the Financial Assistance Scheme having regard (among other things) to—

(a) the efficiency and cost effectiveness of its administration;

(b) whether it could be more effective if administered by the staff of the Pension Protection Fund;

(c) whether it is adequately financed;

(d) what other sources of finance could be made available, including but not limited to unclaimed assets;

(e) whether it should be engaged in the purchase of bulk annuities.

(2) The Secretary of State shall publish the findings of such review within six months of this Act coming into force.'.

New clause 24— Financial Assistance Scheme (No. 2)—

'(1) The Pensions Act 2004 (c. 35) is amended as follows.

(2) In section 286 (financial assistance for members etc.) insert after subsection (3)—

"(3A) Regulations under subsection (1) must provide that the payments to be made to or in respect of qualifying members shall be of the same amount, and shall be paid in the same circumstances, as payments made in accordance with the pension compensation provisions set out in Schedule 7, save that references to "the Board" shall be read as references to the scheme manager defined in subsection (3).".'.

New clause 25— Financial Assistance Scheme: eligibility where employers remain solvent—

'(1) The Pensions Act 2004 (c. 35) is amended as follows.

(2) 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.".'.

New clause 26— Financial Assistance Scheme (No. 3)—

'(1) Section 286 (financial assistance for members etc.) of the Pensions Act 2004 (c. 35) is amended as follows.

(2) After subsection (1) insert—

"(1A) The regulations must provide, save for any necessary changes, that each person who would have had an entitlement to payment as compensation under Schedule 7 (Pension Protection Provisions), if each qualifying pension scheme had been an eligible scheme for which the Board had assumed responsibility as specified in paragraph 1 of that Schedule, is given an equivalent entitlement to payment."

(3) Omit subsections (6) and (7).'.

New clause 27— Financial Assistance Scheme (No. 4)—

'(1) Section 286 (financial assistance for members etc.) of the Pensions Act 2004 (c.35) is amended as follows.

(2) After subsection (4) there is inserted—

"(4A) The regulations must provide (subject to any changes which the Secretary of State may consider necessary) that each person who would have been entitled to compensation under Schedule 7 (pension compensation provisions) is given an equivalent entitlement to such compensation, whether or not each qualifying pension scheme has been an eligible scheme for which the Board had assumed responsibility as specified in paragraph 1 of that Schedule.".'.

New clause 39— Amendments to Financial Assistance Scheme Regulations 2005 (No. 1)—

'(1) The Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986) are amended as follows.

(2) In regulation 5(1) for "Secretary of State" substitute "Board of the Pension Protection Fund ("the Board")".

(3) In regulation 5(2)(a) leave out from "Secretary of State" to end of sub-paragraph and insert "the Board".

(4) In regulation 5, sub-paragraph 2(b) is omitted.'.

New clause 40— Amendment to the Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986) (No. 2)—

'(1) The Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986) are amended as follows.

(2) In regulation 9, paragraph (c) is omitted.

(3) Regulations 11 to 13 are omitted.'.

New clause 41— Pensions Protection Lifeboat Fund—

'(1) There shall be established as soon as reasonably practicable a Pension Protection Lifeboat Fund ("the Lifeboat Fund") which shall be administered by the Board of the Pension Protection Fund ("the Board").

(2) The purpose of the Lifeboat Fund shall be to make supplementary payments to persons who are qualifying members of qualifying schemes as defined by the Financial Assistance Scheme Regulations 2005 (S.I. 2006/1986) (or who would be qualifying members if the qualifying age for the Financial Assistance Scheme were set at the level of the qualifying scheme retirement age), in addition to the sums payable in any event under those regulations.

(3) The supplementary payments made to any person in accordance with subsection (2) shall equal the amount that, taken together with any amounts payable to that person under the Financial Assistance Scheme and amounts payable to that person as scheme benefits under the qualifying pension scheme in respect of which he is a qualifying member of the Financial Assistance Scheme (or would be a qualifying member if the qualifying age for the Financial Assistance Scheme were set at the level of the qualifying scheme retirement age), is the amount that would be payable to that person if that qualifying pension scheme was accepted into the Pension Protection Fund.

(4) The Secretary of State shall make such loans to the Lifeboat Fund as are necessary to allow the discharge of its functions and in particular its obligation to make supplementary payments under subsection (2).

(5) The Secretary of State shall make such loans from time to time having regard to—

(a) requests for such loans received from the Board;

(b) the amount of assets transferred or to be transferred to the Lifeboat Fund under the Scheme (as defined in section [Transfer of unclaimed assets] ("the Scheme"));

(c) the level of any claims on the Lifeboat Fund in respect of assets transferred to it under the Scheme.

(6) Loans made in accordance with this section must be repaid to the Secretary of State as soon as, in the reasonable opinion of the Board, it is prudent to do so having regard to—

(a) the obligations of the Lifeboat Fund;

(b) the amount of assets transferred or to be transferred to the Lifeboat Fund under the Scheme; and

(c) the level of claims on the Lifeboat Fund in respect of assets transferred to it under the Scheme.

(7) Loans made under this section shall be interest free.

(8) The assets of the Lifeboat Fund shall be held separately from the assets of any other fund under the control of the Board.

(9) The Secretary of State may by regulations make further provision in connection with the Lifeboat Fund.

(10) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament.'.

New clause 42— Pensions Unclaimed Assets Recovery Agency—

'(1) There shall be a body called the Pensions Unclaimed Assets Recovery Agency ("the Agency").

(2) The Agency must be established no later than three months after the passing of this Act.

(3) The Agency shall consist of not fewer than six nor more than twelve members to be appointed by the Secretary of State, and the Secretary of State shall appoint one member to be the chairman, and another member to be a deputy chairman, of the Agency.

(4) In appointing a person to be a member of the Agency, the Secretary of State shall have regard to the desirability of appointing persons who have knowledge of, or experience relating to, matters relevant to the functions of the Agency.

(5) A member of the Agency may hold office for such a period as the Secretary of State may determine, but not exceeding—

(a) six years, in the case of the chairman, and

(b) four years, in the case of other members.

(6) The Secretary of State may make payments to the members of the Agency by way of remuneration and make payments to them in respect of expenses incurred by them in the performance of their duties.

(7) The Secretary of State may also defray any other expenses of the Agency.'.

New clause 43— Functions of the Pensions Unclaimed Assets Recovery Agency—

The functions of the Agency are—

(a) to obtain such information about such classes of unclaimed assets as may be prescribed by the Secretary of State by regulations;

(b) to provide the Secretary of State with that information and any other related information held by the Agency which the Secretary of State may from time to time require;

(c) to administer the scheme to be established by virtue of section [Transfer of unclaimed assets].'.

New clause 44— Pensions Unclaimed Assets Recovery Agency: provision of information—

'(1) Subject to subsection (2) below, the Agency may, by notice, require any person to supply it, within a specified period or at a specified time or times, such specified information as the Agency considers it needs for the purposes of carrying out its functions under section [Function of the Pensions Unclaimed Assets Recovery Agency].

(2) This section does not authorise any requirement in relation to information to be imposed on any person unless that person carries on a business in the United Kingdom; but a requirement may be imposed under this section on a person in relation to information in the possession or control of a connected person or undertaking outside the United Kingdom.

(3) Any person who, when required to do so under this section, fails without reasonable excuse to supply any information, shall be liable on summary conviction—

(a) to a fine not exceeding level 5 on the standard scale; and

(b) in the case of a continuing offence, to an additional fine not exceeding 200 for every day during which the offence continues.

(4) Any person who knowingly or recklessly supplies any information which is false or misleading shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both; and

(b) on summary conviction, to a fine not exceeding the statutory maximum.'.

New clause 45— Transfer of unclaimed assets—

'(1) The Secretary of State shall by regulations, not later than twelve months after the passing of this Act, establish a scheme ("the Scheme") for the transfer of such unclaimed assets as the regulations shall prescribe to the Lifeboat Fund.

(2) Regulations made under this subsection shall provide for—

(a) a definition of those unclaimed assets to which the Scheme applies, including the extent to which the Scheme is applicable to assets whose ownership is known, or can be determined;

(b) the transfer to the Lifeboat Fund of a prescribed proportion of such unclaimed assets as the regulations shall prescribe, and the manner and timing of such transfers;

(c) the transfer to the Lifeboat Fund of liability for any claim in respect of assets transferred under the Scheme to the Lifeboat Fund;

(d) penalties to be imposed on any person holding assets prescribed under subsections (1) or (2)(b) who fails to transfer them or such proportion of them as is prescribed in accordance with the Scheme.

(3) The power to make regulations under this section is exercisable by statutory instrument.

(4) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament.'.

New clause 46— Purchase of annuities—

'The Secretary of State shall, as soon as is reasonably practicable, by regulations require the trustees of qualifying schemes as defined by the Financial Assistance Scheme Regulations 2005 which have not yet completed winding-up to desist from purchasing (except where, on or before 18th April 2007, they have entered into a binding contractual commitment so to do) or making binding commitments to purchase, annuities on behalf of scheme members, for a period of nine months from 18th April 2007.'.

New clause 47— Duty to make on-account payments—

'(1) Pursuant to his powers under section 286(3)(d) of the Pensions Act 2004, the Secretary of State shall as soon as is reasonably practicable make regulations requiring trustees of qualifying pension schemes to make on-account payments to qualifying members, or persons who would be qualifying members if the qualifying age for the Financial Assistance Scheme were set at the level of the qualifying scheme retirement age.

(2) The Secretary of State may make such loans to trustees of qualifying schemes as appear to him to be expedient to enable them to make such on-account payments where adequate scheme assets appear to him not to be available to them and regulations may prescribe for the recovery of such loans upon completion of wind-up of a qualifying scheme.

(3) Regulations made under subsection (1) above shall provide that on-account payments shall equal the amounts that would be payable if the qualifying scheme was accepted into the Pension Protection Fund.

(4) The regulations shall provide for payment to trustees of a qualifying pension scheme of payments due to a qualifying member of that pension scheme (or a person who would be a qualifying member if the qualifying age for the Financial Assistance Scheme were set at the level of the qualifying scheme retirement age) by the Financial Assistance Scheme or by the Lifeboat Fund (as defined in section [Transfer of unclaimed assets]) in respect of periods for which on-account payments to that member have been made in accordance with subsection (1).'.

Government amendments Nos. 19, 20 and 21.

Amendment No. 14, in schedule 7, page 69, line 38, at end add—

'Part 7

FINANCIAL ASSISTANCE SCHEME

Citation Extent of repeal
Pensions Act 2004 (c. 35) Section 286(6) and (7)

Amendment No. 17, in title, line 4, after 'Authority;', insert

'to establish the Pension Protection Lifeboat Fund;'.

Amendment No. 18, in title, line 4, after 'Authority;', insert

'to make provision for the transfer of a proportion of unclaimed assets to the Pension Protection Lifeboat Fund;'.

Amendment No. 22, in title, line 4, after 'Authority;', insert

'to make provision about the establishment and functions of, and to confer powers on, the Pensions Unclaimed Assets Recovery Agency;'.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

New clause 38 deals with the important issue of failed company pensions and the financial assistance scheme. In my speech, I want to set out three things: first, how the scheme will now guarantee 80 per cent. of expected core pensions to all 125,000 people affected, in contrast to the Opposition, who said that they would not put any more taxpayers' money into the scheme; secondly, how a review, led by industry experts, will look at topping up that 80 per cent., looking in particular at pooling assets; but thirdly, how we should wait for the outcome of that review, rather than voting for the Conservative amendments, which have already been condemned by the Association of British Insurers.

Many Members in the Chamber today have constituents who lost their pensions because their companies went into insolvency with the scheme underfunded. I have met dozens of people who have been affected. I think of Willie Riggins, Bill Adams and Bob Duncan—people who worked all their lives and whose pension was taken away through no fault of their own. Members on both sides of the House have experience of that and have great sympathy for people in that situation. That is exactly why, in the Pensions Act 2004, we introduced the financial assistance scheme, and why we put in place the Pension Protection Fund, to ensure that today's workers do not face the same threat again.

Photo of Michael Weir

Michael Weir (Spokesperson (Energy; Work and Pensions; Trade & Industry); Angus, Scottish National Party)

Will the Secretary of State give way?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I am not the Secretary of State, but I am happy to give way.

Photo of Michael Weir

Michael Weir (Spokesperson (Energy; Work and Pensions; Trade & Industry); Angus, Scottish National Party)

Apologies—I am getting ahead of myself. The Minister talks about the financial assistance scheme. Changes are welcome, but many people's schemes have been wound up when the company is not insolvent, and the scheme does nothing to help them. Has he given any consideration to what help, if any, can be given to those people?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I am just getting into my stride, but I will come to that at the end. The issue throughout has been whether we could make a clear difference between companies that were affected before the financial assistance scheme came into place and companies that are still trading today. We would not want to open up a loophole—I am sure that the hon. Gentleman would not want to do so—whereby perfectly healthy companies could dump their scheme on the taxpayer, but I will come to that issue later.

Given that sympathy, the Government have always sought a satisfactory solution for those who have suffered, but there has always been a debate about the level of that assistance. As the ombudsman herself made clear,

"it was the sole responsibility of Government or that the taxpayer should pick up the tab was not what I said... I did not say, 'Write a blank cheque', but organise a remedy".

The Government have organised a remedy, but let us be clear about why have we had to do so. As the European Court of Justice found during our proceedings in Committee, the then Tory Government failed to implement the 1980 insolvency directive and to protect people's pensions. As the judicial review found, the 1996 leaflet published by the then Tory Government was misleading and maladministrative. In 1995, when the Labour party in opposition proposed creating a pensions lifeboat, the now shadow Foreign Secretary, then the Pensions Minister, opposed it, and this Labour Government had to introduce the PPF.

Mr. Hammond said during his winding-up speech yesterday that there was no need to introduce a pension lifeboat in 1995. If he and the Conservative party had taken our advice, there would be no need to introduce one now, and we needed to wait for a Labour Government to do so. The Government had previously defended that Tory record, but those court cases have made it clear that those actions were wrong, and we have therefore reconsidered the level of the financial assistance scheme.

By contrast, the Conservative Front Benchers have always resisted putting more taxpayers' money into FAS. Mr. Waterson said in the House that

"at no stage have the official Opposition ever committed taxpayers' money to this issue above and beyond what the Government have already committed."—[ Hansard, 27 June 2006; Vol. 448, c. 175.]

We look forward to finding out whether they will support the money that we are putting in, but there is a very clear difference for people between the Conservative amendments, which would try to find money by taking it from one set of pensioners and giving it to another, and our amendments, which will guarantee money from the taxpayer to get to at least 80 per cent. of people.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

Perhaps I should just make it clear to the House that Conservative Members will support new clause 38, and that our amendments are not an alternative to that new clause; they assume the acceptance of new clause 38, which will essentially implement the commitments that the Chancellor and the Secretary of State for Work and Pensions made at Budget time and build upon them.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

We will be grateful for that support, but the House will notice a pattern in Conservative policy making: not to make any policy, and when we come up with a policy, to back it. The Conservatives said that they would not put in any more taxpayers' money; now that we have done so, they are saying that they want to. The problem with the hon. Gentleman's policy is that, even before it has been debated in the House, the Association of British Insurers has been condemning it as another raid on pension funds. So the Tory party was yesterday complaining about a raid on pension funds, and today it is having a row with the ABI about one that it is proposing. The Conservatives need to decide which way they are facing.

Photo of David Laws

David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)

Is there not a pattern in Government policy making as well: three times, the Government have been dragged perhaps not kicking and scheming, but kicking and screaming into providing some pension compensation, first with the financial assistance scheme and then with two increases in its size? Given the amount that is now being put in and the feeling of concern and injustice, why on earth cannot the Government go the final step today to deliver what most hon. Members on both sides of the House want: fair compensation at PPF level, with the other changes that are in the cross-party amendments?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

Again, I will turn to that in my speech slightly later on, but I want to contest what the hon. Gentleman has just said. We could have just looked at the outcome of those court cases and continued to defend them. That would have benefited only a very small number of people. The ECJ made it very clear that it thought that damages would not be payable, so the case would have affected only people who went into insolvency after the case. Similarly, the judicial review only asked us to reconsider the decision. Given that the courts had made it clear that the Conservative Government's decisions that we have defended had been wrong, we decided that it was time to come up with a scheme that would provide at least 80 per cent. and to listen to the suggestions that the hon. Gentleman, other Opposition Front Benchers, the ombudsman and my honourable colleagues have been making and set up a review. That is the right way to proceed, but I will turn to his precise point later in my speech.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

The Minister again mentions the review. It is important that we clarify the situation because hon. Members will have heard the Prime Minister talking about the review. The Minister has carefully talked about the review considering pooling assets, but the Prime Minister said that it will consider the use of unclaimed assets. Will the Minister confirm that the Prime Minister made a mistake?

1:30 pm
Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

No, the Prime Minister did not make a mistake. The hon. Gentleman knows very well the terms of reference, which say that we will consider all suggestions that people put forward—we look forward to his submission. All that we are saying is that this needs to be based on proper work by experts, rather than amendments that, with great respect, the hon. Gentleman does not know are workable.

Photo of Frank Field

Frank Field (Birkenhead, Labour)

May I take the Minister back to what the ABI said? If it was saying that Members on either side of the House wanted to transfer the unclaimed assets of pensioners, they could not have misunderstood the position more severely. We have been saying that we should use the unclaimed assets of banks and building societies, which are separate from any unclaimed assets of pensioners and from unclaimed moneys that insurance companies hold that have clear owners—either policyholders or shareholders.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

We will be happy to read any submission that my right hon. Friend makes to the review. However, this debate shows exactly the need for that review. Rather than accepting amendments that people do not know are workable, it is right to hold a review involving experts, such as lawyers, people from the insurance industry and scheme administrators, who can come forward with proposals that will be workable and properly thought through.

Photo of Mark Pritchard

Mark Pritchard (The Wrekin, Conservative)

Given that Conservative Members are happy to support Government new clause 38, are there any Conservative new clauses before the House today that Labour Members would accept equally graciously?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

The right thing to do is to look at the outcome of the review.

Photo of Mark Pritchard

Mark Pritchard (The Wrekin, Conservative)

The logic of what the Minister says is that he is happy to accept only Government new clauses ahead of the review and that any new clauses that we have tabled cannot be accepted until after the review.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

The problem with the Conservative amendments is that they could expose the Government to compensation if annuity rates were to fall. They could expose the Government to moral hazard if people started to manipulate the rules. They could also expose the Government to legal challenge, including in the European Court of Justice. The last thing that the House should do is to raise pensioners' expectations on the basis of amendments that have been hastily drawn up for this debate. Instead, we should have a proper review.

Photo of Clive Betts

Clive Betts (Sheffield, Attercliffe, Labour)

I want to return to an issue that was raised before. I know that the Minister said that he would address it later in his speech, but I hope that this is the right time to make this point. I have visited him with pensioners from my constituency who worked for the firm Tinsley Bridge, which is still in existence. Given that the firm is not in liquidation, its workers cannot at present be covered by the financial assistance scheme. However, the firm is not in liquidation only because the pension scheme decided not to pursue from the company the full amount due to it. The pension scheme has thus been wound up, so the workers in the scheme cannot join the PPF. The company's pensioners and future pensioners are thus caught in a situation in which they cannot be part of the PPF or receive any help from the FAS. About 8,000 people in the country are affected in such a way. Can my hon. Friend give us any assurance that those workers will now be included in the FAS?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I was going to come on to this point later, but I will deal with it now because I have been asked about it twice. My hon. Friend has campaigned on the matter long and persuasively and brought a delegation to see me. The Public Administration Committee has raised the matter, too. We have always been clear that we wanted to ensure that we did not create a loophole, as I said to Mr. Weir.

I am delighted to be able to tell my hon. Friend Mr. Betts that we can announce today that we will further extend the FAS to cover members of schemes that began winding up between 1 January 1997 and 5 April 2005—I believe that that covers the Tinsley Bridge scheme—when a compromise agreement is in place and when enforcing the debt against the employer would have forced the employer into insolvency. We estimate that that will benefit an additional 8,000 members of some 15 schemes.

Photo of Clive Betts

Clive Betts (Sheffield, Attercliffe, Labour)

May I put on record my thanks and those of my constituents, the workers at Tinsley Bridge and those at all the other firms? A lot of people woke up this morning worrying about their future because they thought that their pensions would be either non-existent, or greatly reduced. My hon. Friend's statement has certainly given those people a lot of cause for cheer.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I thank my hon. Friend for his comments. I hope that hon. Members will thus think that it would be inappropriate to press new clauses 25 and 40 to a Division. Those measures would bring into the FAS any failed scheme, regardless of the solvency position of the employer.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

Does Mr. Cash wish to intervene on this point?

Photo of Michael Lord

Michael Lord (Deputy Speaker)

Order. We cannot have the Minister partially giving way. I think that he has allowed Mr. Cash to intervene.

Photo of William Cash

William Cash (Stone, Conservative)

The Minister was good enough to meet Mr. Richard Nicholl and me to discuss amendments that are adequately covered by the excellent new clause 25, which was tabled by Dr. Wright, who also wishes to intervene at this stage. Would the Minister be good enough to confirm that the arrangements proposed in new clause 25 would come into effect under the proposals that he has announced in response to the questions raised by Mr. Betts?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I will have to write to the hon. Gentleman to set out the situation for the precise scheme to which he refers. We are trying to create a separation between schemes that decided to put in place a compromise agreement before the introduction of the FAS and schemes that did not do so. The danger of creating a procedure as set out in new clause 25 is that perfectly viable companies could dump their pension commitments on the taxpayer, which would not be right.

Photo of Tony Wright

Tony Wright (Cannock Chase, Labour)

I am pleased by what my hon. Friend has said, but I do not understand the basis on which he argues that he therefore could not accept new clause 25. The new clause refers explicitly to schemes that are eligible for assistance under section 286 of the Pensions Act 2004. That measure specifies that its provisions apply only to schemes that were in the process of winding up before the specified date on which schemes became eligible for the PPF. His argument that the new clause would open the door to problems thus simply cannot be true.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I am advised that new clause 25 would open the door to a wider range of schemes. When people talk about solvent employers, I believe that they are talking about the category that we have identified today. We have no intention of doing anything other than delivering for those schemes. I hope that my hon. Friend will be reassured by what I have said. If he makes a speech, I will try to intervene on him to confirm the exact situation.

Several hon. Members:

rose —

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I think that I should make some progress because we have been debating the group for 15 minutes.

I am delighted that the Government have committed more money, as the Chancellor announced in the Budget on 21 March. The scheme was going to benefit 45,000 people; now it will benefit all 125,000 affected, in addition to members of the solvent schemes that I have just mentioned. The scheme was going to benefit people up to 12,000 per year, but it will now benefit people up to 26,000 a year. It was going to taper down to 50 per cent. and then to nothing for people who were not covered. Now it will be at 80 per cent. for everyone, and an extra 100,000 people will get more benefit. In all, we are allocating a further 5.6 billion in cash terms. The original amount committed to the FAS in 2004 was 400 million in cash. We then extended that figure to 2.3 billion. With this further extension, we have reached 8 billion in cash, or 1.9 billon in net present value. That represents a significant commitment to helping the people whom we are aiming to address through our measure, which I hope that the House will welcome.

Photo of Alan Simpson

Alan Simpson (Nottingham South, Labour)

I appreciate the Minister's clarification about the increase in overall funds. However, the last figures on payouts from the FAS that I received suggested that the amounts were not in the region of billions. So far, 12 million has been allocated to 1,000 of the 10,000 eligible pensioners. Of that 12 million, 4 million has gone to the pensioners, while 8 million has been spent on administration. Can the Minister give us any indication of how we can address this incredible delay during which the vast majority of pensioners have received nothing?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I am afraid that there is a misunderstanding about the task that the financial assistance scheme has had to undertake, which the PPF or whoever else was tasked with running it would have had to undertake. The FAS has had to go through hundreds of schemes to see whether they are eligible; it has had to set up a new IT system; and it has had to get data from the trustees about exactly what people are entitled to and compare that with FAS. That is why there has been a significant up-front cost. That work is now largely complete, and we are paying everybody whom we are in a position to pay. Everybody who has asked for initial payments is being paid. There is no delay in FAS; the delay is in requests for initial payments. We need schemes to come forward and ask for those. I will return to that matter later in my speech.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

Because people outside may not understand what the Minister has just said, will he clarify that he is talking about the trustees having asked for payments to be made? This is not a question of individual potential recipients having failed to ask for payments.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

That is absolutely right; it is the trustees who we are encouraging to ask for payments. I have written to a number of them, which has helped in certain cases. I encourage all Members of the House who are aware of schemes in which there are delays to contact the trustees. Some are very good and some have been too slow. The right way to seek to get more money for people is to encourage the trustees to apply for initial payments.

I want to pay tribute to Community and Amicus for their tireless work at the forefront of the campaign on this issue. They have been joined in that by many Members in the House, including my hon. Friends the Members for Aberdeen, South (Miss Begg), for Ayr, Carrick and Cumnock (Sandra Osborne), for Jarrow (Mr. Hepburn), for Cardiff, North (Julie Morgan), for Sittingbourne and Sheppey (Derek Wyatt), for Aberavon (Dr. Francis), for St. Helens, North (Mr. Watts) and for Vale of Glamorgan (John Smith), and my right hon. Friends the Members for Cardiff, South and Penarth (Alun Michael) and for Islwyn (Mr. Touhig). That list shows the strength of feeling in the House about this policy. We believe that 80 per cent. of the funding is the right amount for the public purse to bear.

New clauses 24, 26 and 27 all call for the taxpayer to fund FAS assistance at the same level as the pension protection fund, which would essentially be 90 per cent. with some limited indexation. What is the Tory position on the new clauses? We look forward to finding out later. We have a clue, however. The hon. Member for Runnymede and Weybridge has obviously been pestering the shadow Chancellor for more money. We had evidence of that in yesterday's debate, when it emerged that the shadow Chancellor had said that

"there are lots of Conservatives who come up to me and say we've really got to put more money into pensions".

Presumably, he was referring to his Front-Bench colleagues. Unfortunately, the hon. Member for Runnymede and Weybridge has been slightly disappointed because the shadow Chancellor is obviously feeling under such pressure that he had to say publicly, at the Conservative party conference, that

"part of the test of whether we are ready for government is whether we can resist those additional draws on public expenditure."

If the Conservatives vote for these new clauses, they will be failing that test. They will be making an unfunded commitment to an additional 2.7 billion. If they vote for the new clauses, they will be tearing another hole in their already tattered reputation for fiscal discipline.

Let me be clear: the Conservatives' proposal for a lifeboat fund is just another uncosted policy. They propose to make a loan from the Treasury. What is a loan from the Treasury other than public expenditure? It is a bit like going to a bank and saying, "Give me a mortgage. I am going to find someone round the corner to pay it back." It is a public spending commitment, and if the Conservatives vote for it that is exactly what they will be making. [Interruption.] Oh, it is a costed public spending commitment—costed, but not funded. That is the problem with the Conservatives' policy. They make commitments, but they have absolutely no idea of how to fund them.

Photo of Henry Bellingham

Henry Bellingham (Shadow Minister, Constitutional Affairs; North West Norfolk, Conservative)

I thank the Minister, who is obviously in a combative mood, for giving way. He implied that our new clauses and amendments were put together on the back of a fag packet over the weekend. Is he not aware that Ros Altmann, the pensions expert who has advised the Government, supports them? She has made it clear that she believes that they are workable and affordable, and that the Government should accept them.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I have great respect for Ros Altmann, but as far as I know she never worked as an adviser to No. 10 or No. 11, as is often said. We are happy to look at her suggestions as well as others made by Conservative Front Benchers. My point is that the Conservatives are starting to emulate Mr. Laws in making policy proposals that they have no idea how to fund. No wonder they are reputedly trying to lure him to their Front Bench; they are obviously learning from his example. We believe that there is a better approach.

1:45 pm
Photo of David Laws

David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)

We are very entertained by these parts of the Minister's speech, but before he wraps up his comments—we never know when he is going to sit down—will he explain the point that he left unresolved earlier? What is the difference between the proposal that he makes today, for the first time, to Mr. Betts and that in new clauses 25 and 40? What would be the problem with accepting those new clauses? How many people who would be included in that proposal are left out of the one that he is making? Surely we need to know that before we vote.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

Healthy, solvent employers may have wound up their scheme when employer debt was set at the minimum funding requirement. Such employers should have made good their pensions promise—they were funded at the MFR—so new clause 25, which would allow those schemes in, is inappropriately wide. That is a consequence of the drafting of the new clause rather than any difference of policy. People were asking for the scheme to cover 6,000 pensioners in solvent companies; we are actually covering 8,000. The House is getting slightly over-excited about a point on which there is not a difference.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

The Minister has given a very technical answer to the question asked by Mr. Laws. How many additional scheme members would get through the gateway if new clause 25, rather than the Minister's proposals, were accepted?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

The whole point is that people do not know—[Hon. Members: "Ah!"] We can quantify the people who have compromise agreements because we know exactly who they are. They are people for whom the ombudsman and Members of the House have been campaigning. We have done exactly what people have asked us to.

Photo of Tony Wright

Tony Wright (Cannock Chase, Labour)

This is important so we must be clear about it. Is the Minister saying that he accepts the substance of new clause 25, reflecting the announcement that he has made this afternoon, but he thinks that it is technically deficient—although I am advised that that is not the case—so he will incorporate it in the Bill at a later stage, to remedy its technical deficiency?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I am saying that we have the same intention and that we will make proposals to make sure that what we have said is exactly what happens. I am happy to meet my hon. Friend to discuss the matter, but I am pretty sure that he will be happy with what we have done because our intention is the same.

We believe that 80 per cent. is the right amount from the taxpayer, but we are not saying that that is all that should be considered. The taxpayer should fund up to 80 per cent. but there should then be a review of alternative sources of funding that have been suggested. The taxpayer does not fund the 90 per cent. level provided by the PPF. There is no taxpayer money at all in the PPF. There will now be nearly 2 billion of taxpayers' money in net present value terms in FAS. In contrast, the PPF is funded entirely by the levy payments of member companies, which are paying to insure themselves against future possible insolvency. We therefore think that the balance that we are striking of nearly 2 billion of public money in FAS and no public money in the PPF, with a review to look at what more could be done, is the right one for the taxpayer and for the people involved.

Photo of David Laws

David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)

Can the Minister tell the House what would be the additional net present value cost of granting the PPF level of benefits after the offsets for tax and lower means-tested benefit payments?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

Yes, if the hon. Gentleman can tell me what tax and benefit policy will be for the next 50 years. So far there is very little interaction between FAS payments and pension credits. Very few of the current recipients get pension credits, so that will not reduce the cost significantly. The difference for the payments that I set out earlier is the additional 2.7 billion, which in net present value terms is about 600 million, or an increase of a third in the current scheme.

Photo of Frank Field

Frank Field (Birkenhead, Labour)

The Minister has talked about an additional 2 billion going into the fund. Where is that money? I cannot find it anywhere in the Department's accounts. Has anyone received it? Is it a fund with pension trustees who are accountable for its expenditure or is it something that maybe, at some stage, a Government will pay?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

That is a very good point. There is a misunderstanding about this. People think that the sum is a pot of money that has been put into the scheme; it is not. It is a guarantee from the Government to pay at least 80 per cent. We have estimates of how much that will cost, but it could cost more than 8 billion—for example, if people in the schemes live longer. However, the Government are giving that guarantee, which is not available elsewhere, so it is significantly worth while to the people involved.

The right thing to do is to carry out a further review. We are doing precisely what is suggested in new clause 11 and holding a review, which will be led by Andrew Young, directing actuary at the Government Actuary's Department, who helped to set up the PPF and who therefore has real expertise in this area. He will be advised by a panel of leading external experts. The review will provide an initial view in the summer and will then report by the end of the year. I can make it clear today that any extra funding that the review identifies will be put into topping up the financial assistance scheme beyond 80 per cent.

The review will be able to consider the suggestions made by the Opposition today. However, I say with all due respect that the Opposition have no idea whether the amendments that they have tabled would work. As I said before, if we compelled people to stop annuitising and they lost out, we could be open to compensation claims, and if annuity rates fell, we could be open to compensation claims. The Opposition have no idea whether their amendments would override scheme rules. The amendments cannot be guaranteed to work, so it would not be appropriate to move forward without the proper review.

Counter-intuitively, the Tories like picking rows with business these days, but in a pretty spectacular example, the Association of British Insurers has come out—even before the amendments are debated—and described the Opposition proposals as

"robbing Peter to pay Paul"

and another raid on pension funds.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

rose—

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I see that the hon. Gentleman wants to continue his row with the ABI and get himself into even deeper trouble.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

I have had a discussion with the ABI this morning to find out what its concern is, and I have been able to allay that concern, which was about trust-based defined benefit schemes. We recognise that there are no unclaimed assets available in such schemes.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

The hon. Gentleman has just shown again why we cannot accept the amendments. He has no idea what they are about and people outside are confused. Every time he intervenes, the policy changes. That is precisely why we need to have a proper review by experts before deciding what to do.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

If the Minister wants to talk about the new clauses, he should read them. They give the Secretary of State the power to specify the classes of unclaimed assets; they say nothing about the specific classes involved. The hon. Gentleman simply cannot say that we do not know what we are talking about.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

The hon. Gentleman has contradicted the answer that he just gave. He said that the amendments were about only one class of assets, but now says that they can be about any class of assets. Today, he has shown why what we should be doing is waiting for pensions experts to complete their review, rather than accepting his amendments.

Our key concern should be getting as much money as possible to people. In Prime Minister's questions, the Leader of the Opposition said that we should be doing more for people who are retired today, and we agree entirely. That is why the Government amendment will increase the amount that people get in initial payments from 60 per cent. to 80 per cent. That means more money for more people immediately.

That brings me to new clause 47, whose purposes appear to be twofold: first, to transfer the delivery of the financial assistance scheme to pension schemes; and, secondly, to provide that funds for those payments should be provided by FAS or by the lifeboat, whether by loan or by retrospective repayment. The problem with the new clause is that scheme administrators, who are expert in what they do, would have to learn a new set of skills that FAS is currently delivering. We would be ignoring the expertise that exists in FAS—a single centralised unit, which has assessed hundreds of schemes—and instead asking hundreds of scheme administrators to learn those skills. Those scheme administrators would then come to us saying that they should be paid for having done so.

Instead of increasing the cost to pension schemes, thus depleting the amount available to members, and slowing the process of making payments to people, we should be working with scheme administrators so that they provide the information that we need to make initial payments to people which, as I have just announced, will increase from 60 per cent. to 80 per cent. Government new clause 38 is the only amendment that will enable us to give more people more money immediately, and I urge hon. Members to support it.

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

The Minister is being extremely generous in giving way. If scheme administrators are happy to take on the role—they cannot do worse than the FAS, which has spent 9 million administering 3 million paid to pensioners—it is logical to let them get on with it. If they want it, let them do it; they cannot do worse than the existing scheme.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

They do not want it. I have spoken to them and they do not want it. They are already incredibly busy winding up schemes. If the Opposition's new clause was accepted, they would have to learn a new set of skills. The priority is to get them to apply for initial payments and to wind up their schemes as quickly as possible. Loading the operation of a Government scheme on them would risk delaying the payments and increasing the costs.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

It would cause further delay. The expertise exists and the schemes have been assessed. The skills necessary to assess how much people should get from FAS would have to be learned by scheme administrators.

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

Is the Minister honestly telling the House and all those pensioners here today for the debate that spending 9 million to give 3 million to pensioners is a great success?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

The hon. Gentleman obviously did not listen to my speech. At the start of the PPF process, the scheme and what is owed has to be assessed; thereafter, the process of paying people is quite easy. FAS has made good progress in doing that and we are now in a position to pay people when they apply for initial payments. That is what needs to happen.

The Government amendment will guarantee that FAS members will get at least 80 per cent. of their core pension, but through the review we are making a firm commitment to consider other sources of funding. We understand the aspiration of Community and Amicus to achieve PPF-level pensions for their members, but there is still no certainty about the funds available in the failed pension schemes, and until the review is completed it is not possible to give a guarantee, which is what the Tory Front Bench team is trying to do. However, we will consult Community and Amicus throughout the process to ensure that the funds that are available are applied to supplementing FAS to get nearer to 90 per cent. The review will report publicly the initial recommendations by the summer and a series of consultations with Community and Amicus and related organisations will begin immediately.

Photo of David Laws

David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)

The Minister mentions the unions' aspiration, but is he saying that although the Government's aspiration is to deliver PPF levels of benefit, the Government's position is that pensioners who have lost their pension should take the risk in the mean time that the Government are not successful in delivering the necessary money?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I am saying that it would be deeply irresponsible to do as the Opposition are doing, which is promising to deliver more money on the basis of a scheme that they do not know will work and without a proper review. The right thing to do is for the Government to pay at least 80 per cent. and we have now provided 8 billion. The Conservatives said that they would never put in more taxpayers' money, but we have now done so. I urge my colleagues to support the Government amendments.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

The background to this matter is well known and well rehearsed. We are dealing with a finite group—future pension scheme failures will not increase its size—comprising 125,000 people, some of whom are terminally ill and some of whom have had to come out of retirement and start work again. There are some heartbreaking stories, and I am sure that hon. Members on both sides of the House will relate some of those stories during the debate. Fairness demands that the people in that group are treated similarly to those whose schemes failed after April 2005, whether their employers were solvent or not. Fairness is not alone: the ombudsman, the Public Administration Committee, the European Court of Justice and the High Court have all expressed the same sentiment.

It is fair to say that a consensus has emerged both within the House and among the pressure groups outside that a settlement around PPF levels of benefits, although it is less than some people hoped for, would be a fair and reasonable outcome. However, the Government are still appealing the ombudsman report and resisting the finding of maladministration. I repeat what I have said several times before: there will not be a legal solution to the problem; there will have to be a political solution. There is a huge amount of good will on both sides of the House when it comes to trying to solve the problem.

As the Minister said, the Government have promised a review to consider the use of scheme assets, and we welcome that, but the review must not stand in the way of the search for an immediate solution. Our proposal will provide that immediate solution, while accommodating the review that the Government have announced, and the additional assets that may come out of that review. I pay tribute to the Select Committee on Public Administration and Dr. Wright for their work, which has been instrumental in trying to craft a consensual solution that would command support and respect in all parts of the House. There are a lot of people watching us today; Parliament is on trial, and people want and expect us to work together to find a compromise solution that will deliver a fair, sustainable and effective outcome, and to set aside party political considerations.

2:00 pm
Photo of James Plaskitt

James Plaskitt (Parliamentary Under-Secretary, Department for Work and Pensions; Warwick and Leamington, Labour)

That's what you were doing yesterday, was it?

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

I am glad that the Under-Secretary of State mentioned yesterday, because, to turn to Government new clause 38, I have to say that I am a little disappointed by the speech that the Minister for Pensions Reform just made; he seemed to think that he was arguing in yesterday's debate. The tone today is not partisan. Today, I hope, is about the search for consensus on a solution. As the Minister said, new clause 38 responds to the Budget announcements that the Chancellor and the Secretary of State for Work and Pensions made. It improves the scheme significantly for younger members who would otherwise have been excluded, but it does not address the real issues to do with speed of payment, the effectiveness of the financial assistance scheme, and the benefit payable. The increase in the cap will benefit some higher-paid scheme members, but that does not address the issues affecting the desperate people whom the Members most interested in the subject meet repeatedly. We will not oppose new clause 38, because it is a significant improvement and a helpful step forward, but it does not address the real issues before the House today.

Amendment (a), which Julie Morgan tabled, would amend Government new clause 38 by increasing the benefits provided in the new clause to Pension Protection Fund levels. It is similar in its effect to new clause 24. We have two concerns with amendment (a). First, because of the reference to qualifying members, it appears to include only those members who are over 65, rather than those who are over scheme retirement age, as the PPF does, yet that group includes some of the people in greatest hardship. Secondly, we believe that, contrary to what the Minister said, it is necessary to balance the moral case for helping that group of people with the obligation on us all to protect the taxpayer. I shall outline how we think that our proposals to use unclaimed assets, backed up by a Government loan, get that balance right.

The amendment tabled by the hon. Lady and new clause 24 simply transfer the problem to the taxpayer. We accept that, as the Minister pointed out, if a loan is made, a residual contingent liability is taken on, but if we are to reach a solution to the problems, we have to recognise that we are all in this together. There has to be a sharing of the pain. The pensioners concerned have to accept that they will receive only 90 per cent. of the benefits that they would have got, the industry has to accept that it will have to yield up the unclaimed assets, and the Government have to extend the loan to bridge the gap, so that relief can be provided right now, while the unclaimed assets are being collected. I have set out the two reasons why we cannot support amendment (a), tabled by the hon. Lady; we urge her to consider supporting new clauses 41 to 45 instead, which have the same objective and would deliver the same outcome for pensioners, but which take a different route.

Photo of Adrian Bailey

Adrian Bailey (PPS (Rt Hon Adam Ingram, Minister of State), Ministry of Defence; West Bromwich West, Labour)

I have listened to the hon. Gentleman's arguments carefully, and to his declared intention of trying to develop a consensual approach. Given the amendments and the solution that he has put forward, would it not be more appropriate to wait until after the review, proposed by the Government, has taken place, so that we can see whether that solution is the most appropriate, and whether the Government address the issues that he says need to be addressed?

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

This is the day when Parliament has the opportunity to demonstrate that it is committed to solving the problem, not committed to another review of the problem. I say to the hon. Gentleman that the scheme that we have set out, involving a lifeboat fund, in no way precludes using the assets that the Minister hopes to find in his review, including, possibly, the residual assets in the schemes; those could go into the lifeboat fund. The difference between the Government's approach and the approach that we are setting out in this group of amendments is that we are proposing to create that structure immediately, and by the means of a modest loan, we would be able to start delivering immediately to a group of people who need help now, not at some point in the future.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

In yesterday's debate, Mr. Osborne—he is sitting right next to Mr. Hammond, so he can consult the shadow Chancellor right now—said that the test of the Conservatives' credibility was whether they could resist making such pledges on pensions. The hon. Member for Runnymede and Weybridge is pledging to increase public borrowing by 600 million to fund his proposal, but he has no idea how to fund that. Will he tell us what else he is cutting, given that the Conservatives' third fiscal rule means reducing the proportion of public spending in gross domestic product? How will he fund the proposal?

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

The Minister is absolutely wrong. He knows as well as everyone else in the House that unclaimed assets are available. The Government used to claim that unclaimed assets did not exist, but they have now discovered them, and the Chancellor has started looking at them for various purposes. What we have said is that the Government should make a loan available to the lifeboat fund to enable it to start paying out immediately. The process of collecting unclaimed assets, which would enable that loan to be repaid, would then begin. It is ridiculous for the Minister to suggest that the loan would need to be 600 million; he has just explained, in the context of the financial assistance scheme, that the scheme would not have to be pre-funded. It can be a pay-as-you-go scheme.

Photo of Frank Field

Frank Field (Birkenhead, Labour)

Would the Opposition spokesman like to remind the House that as part of the recovery plan for the pensioners who had their pensions stolen by Maxwell, the Government offered a loan to the funds? That loan is still being repaid, and some of us are under pressure from pensioners who believe that the repayment should not continue, but that the moneys should be paid into their funds instead, so that they can enhance their pensions. The money was a loan; the House agreed it as a loan, and repayments have been made and continue to be made.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

As the right hon. Gentleman says, and as my right hon. Friend the Leader of the Opposition said at Prime Minister's questions today, the Maxwell loan is the model on which we based our proposal.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

No one is disagreeing that it would be possible for the Treasury to make a loan. All that we are saying is that the Opposition have no idea where the money will come from. They have just proposed, yet again, an unfunded Government policy. They are proposing to increase the public sector borrowing requirement, and the hon. Gentleman's only answer to my question is, "We'd get the money from unclaimed pension assets." If he is to increase public borrowing, he has to tell us what else he would cut, but I bet the House that he will refuse to do so.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

The amount of money that we are talking about is around 30 million a year in the early years, and I hope that the Minister agrees with those approximate figures. He talks about unfunded commitments, but he has just made an increase in the commitment to the financial assistance scheme from 2.4 billion to 8 billion. That money will be spread over 50 or 60 years, and the money needed for the lifeboat fund will also be spread over 50 to 60 years. The initial cost will be approximately 30 million in the first year, and that will be funded by a Treasury loan of 30 million, which is way below the rounding error in any of the accounts that his Department produces.

Photo of Henry Bellingham

Henry Bellingham (Shadow Minister, Constitutional Affairs; North West Norfolk, Conservative)

My hon. Friend has a point about the 30 million. A few weeks ago, he went on the green to meet some former Albert Fisher employees, who lost a huge amount, and he was very sympathetic to their plight. They want the speed of payment and the level of benefits to be looked at, and they cannot wait for another review. We have an opportunity this afternoon to solve their problems, so it is incumbent on all Members to support the amendments that would allow that to happen.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

My hon. Friend has got it exactly right. The Government have announced a review in an attempt to head off a Labour Back-Bench rebellion. What the public expect from us today is a solution to the problem, not a further review.

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

My hon. Friend is very generous in giving way. The reason that this is so urgent—the Minister will remember that he met the widows of members of the Dexion scheme and other pension schemes who lost their husbands since the schemes collapsed—is that those people are in the lobbies today. They need help today, not after a review, and they should not be fobbed off yet again.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

My hon. Friend is absolutely right. I repeat that there is nothing incompatible between our proposal and what the Minister hopes to be able to do in future. The only difference is that we believe that the House has a moral obligation to act now. If that requires a Treasury loan, we are prepared to make that commitment. That is the minimum that people listening to the debate would expect a responsible and moral Government or Opposition to be prepared to do.

Photo of Julie Kirkbride

Julie Kirkbride (Bromsgrove, Conservative)

It strikes me that the Government Benches are grasping at straws to try to claim the credit for a policy that they will announce in the summer but which is ours today. Representing many of the people affected by the collapse of schemes, I find that disappointing. In trying to denigrate our claims of financial prudence, the Minister said that he does not know whether his 8 billion forecast is accurate. Would it not be fair to say that if there were more unclaimed assets than he expects, we could save the taxpayer money so we might not have to finance 80 per cent. of the FAS commitment? There might be more money in unclaimed assets, thus saving the Treasury money for my hon. Friend Mr. Osborne.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

My hon. Friend makes a very good point, but she should be careful. Her criticism should not be aimed at the Government Benches, where there are plenty of Members who have entered into this discussion in a spirit of good will and are trying to find a solution. Those on the Government Front Bench should bear the brunt of her comments.

Several hon. Members:

rose —

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

May I make some progress and turn to new clause 25 and the Minister's welcome announcement that he is willing to yield on the issue of solvent schemes? There appears to be a technical issue concerning the extent of his commitment. Yesterday, the Chancellor displayed alarming unawareness of the problem of solvent schemes, and told the House that the problem for those pensioners was that their employers had gone bust. Hon. Members who take an interest in these things know that in some cases that is not so. The problem is that the schemes are underfunded, not that the employer has gone bust.

That is an issue that Dr. Wright must address in his contribution. He must decide whether his new clause 25 needs to be pressed further, notwithstanding the commitment that the Minister made today. I came to the Chamber ready to commit the Opposition to supporting the hon. Gentleman and his new clause, which extends the scheme to solvent employers. [ Interruption. ] The Minister is asking where the money will come from. It will now come from the Government's pot, because he has made a commitment. The hon. Member for Cannock Chase will make a judgment as to whether to proceed with new clause 25. He has taken a great deal of care and consulted experts on the issue, and I certainly await what he says with great interest.

Photo of William Cash

William Cash (Stone, Conservative)

I am encouraged by what my hon. Friend has said. I was encouraged, too, by what the Minister said when, in reply to Dr. Wright, and with reference to my constituent Mr. Nicholl and others, he said that the hon. Gentleman would be very happy with the outcome. That is highly significant. Although we will vote on the issue today, there is still an opportunity to get the wording into the exact shape needed to satisfy all parties in the House of Lords. There is therefore plenty of room and time to get this right while taking the consensual approach that my hon. Friend has quite rightly emphasised.

2:15 pm
Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

I am grateful to my hon. Friend for his intervention. The Minister, in a rather niggardly way, criticised the drafting of the amendments at the Dispatch Box. We all recognise, whether we are Opposition spokesmen or Back-Bench Members, that when we table amendments and new clauses we are asking the Government to look at their spirit. I am sure that no one who tabled a new clause today would fail to hesitate to press it if the Minister made a commitment to deal with the substantive issues that they raise when the Bill proceeds to the House of Lords.

Our new clause 40 approaches the problem from a slightly different angle from new clause 25. On reflection, we have decided that new clause 25 provides the better approach so, if the hon. Member for Cannock Chase chooses to proceed with it, we will support it. New clause 26, which was tabled by the hon. Gentleman and members of Select Committee on Public Administration, does not suffer from the defects of new clause 24, as it clearly includes people under 65 who are none the less over scheme age. It still makes a public spending commitment. I should have made it clear earlier that one of our concerns about amendment (a) to Government new clause 38 is that it appears to exclude members who are under 65 but above scheme age.

In new clause 26, however, there is a further problem that I wish to draw to the attention of the House. Subsection (3) requires the omission of the provisions of section 286 of the Pensions Act 2004 that prevent the means-testing of FAS benefits. If the new clause were accepted, it would allow the Secretary of State to impose means-testing on FAS benefits. By seeking specifically to omit the provisions that prevent means-testing, the implication is clearly that FAS benefits should be means-tested. I do not believe that that is the consensual view in the House, and for that reason, and because of the public spending commitment that it implies, we do not support it. New clause 27, which was tabled by Mr. Laws, excludes the means-testing problems, but it still makes a direct public spending commitment.

Since the new clauses were tabled, there have been intense discussions in all parts of the House, co-ordinated by the pensions action group, which represents the people who are outside the House today. There is genuine good will to try to seek a solution. I do not think that anyone, except for the Minister, is trying to score political points. We seek a way forward that is fair and deliverable. I pay tribute to Members from all parts of the House, to the pensions action group, and to the tireless Ros Altmann—her mobile phone bill, I am sure that many hon. Members agree, must be horrendous—who have done so much to bring the issue to the attention of the House and to focus our attention on the way forward. As a result of that process, a series of new clauses has been agreed by the pensions action group and by Members from all parts of the House as the best way forward, and I thank all hon. Members who have been involved. The amendments belong to the whole House.

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

Will my hon. Friend pay tribute, too, to my constituent, Mr. Peter Humphreys, a leading member of the pensions action group who is critically ill in intensive care? When I spoke to him yesterday, all that he wanted was for the consensus to move on so that he can stop worrying about it and get on with getting better.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

Of course, I join my hon. Friend in those sentiments, and I know that everybody in the House would send Mr. Humphreys their best wishes.

The new clauses have been tabled in the name of my right hon. Friend the Leader of the Opposition, who has taken a particular interest in this, not least because he has a special constituency interest in a particularly heartbreaking case. They are supported by the leader of the Liberal Democrat party, by Mr. Field, and by other Labour Members who have seen the need for a cross-party solution. I hope that that cross-party approach sends a message to the Government about the strength of feeling and sense of moral obligation across the House. This is one of those occasions when we as parliamentarians have to stand up and be counted and be seen to be doing the right thing.

Before I go through the new clauses, there is a procedural issue that I should like to explain to hon. Members. I understand that for reasons of time it is unlikely that it will be possible to vote on more than one new clause in the group. I should like to indicate to you now, Mr. Deputy Speaker, that I will, if possible, seek a Division on new clause 41. It is our understanding, on advice, that new clauses 42, 43, 44, 45 and 47 are essentially consequential, and if the House agreed to new clause 41 there would then be an opportunity to consider the other new clauses. That leaves out new clauses 39 and 46, which are not consequential but would do slightly different things. I will deal with those separately.

I hope that the Government will accept that this is a package and look constructively at its proposals, including the proposal for a moratorium on annuitisation, which, despite the Minister's being so critical, was intended to be helpful and supportive of the review process. There is no point in reviewing the possible use of residual scheme assets if by the time that the review has completed its course and the Minister has considered it the residual scheme assets have all been given to the Pru and Legal and General. That is why we need a moratorium.

New clause 39 would provide that the PPF board should take over from the Secretary of State the role of scheme manager, for two reasons: on the merits of the case for the PPF board, which has demonstrated its competence by winding up the MG Rover scheme and taking it into the PPF in less than two years; and secondly, as part of a wider architecture in this group of new clauses, which would put the PPF board in overall control board of pension compensation—separate funds, for very good reasons, but under a single administration with single payment structures and, it is to be hoped, administrative savings to be made and efficiencies to be gained. The new clause would achieve its objective simply by substituting the PPF board for the Secretary of State in the 2005 regulations.

The substantive new clause is new clause 41, which would create the lifeboat fund, also to be placed under PPF management. We need a separate fund, as opposed to one merely incorporated into the FAS. The source of funds for the lifeboat fund would be different from that of the FAS. The FAS is a body publicly funded with taxpayers' money; the lifeboat fund is intended to be funded with unclaimed assets, perhaps with residual scheme assets or some part of them, if they become available, and in the interim to be allowed to go about its work with the benefit of a Treasury loan. The lifeboat fund would be mandated to pay top-up benefits so that people who are being paid under the FAS would be topped up to PPF levels, and people who are below the FAS qualifying age but above the scheme retirement age would be paid from the lifeboat fund. Crucially, it would provide for loans from the Secretary of State to allow immediate operations. Later new clauses would provide for the collection of assets.

I have acknowledged, and will do so again, that in granting a loan there is a residual risk of a liability to the public purse. However, having considered it carefully and looked at the moral obligation that falls upon us, we think that it is a tiny risk that it is right and reasonable to ask the taxpayer to bear. The costs would be slightly more than the 2 billion in cash over 50 or 60 years, or 600 million net present value, that the parliamentary Labour party briefing document set out, because it appears that the Secretary of State's briefing to the PLP did not factor in the cost of including those who were under 65.

We estimate that the initial cost of the lifeboat fund—its initial cash flow need—would be about 30 million a year, rising to 100 million in 2033 and then tailing off to zero. Today, the Prime Minister quoted a figure of 2.48 billion in cash, or about 750 million NPV, as the total cost of the package of proposals that stand in the name of the Leader of the Opposition. That estimate does not look unreasonable, although we all recognise that in calculating such figures there is a fairly wide degree of error. I should emphasise, however, that the figure would not have to be found immediately but over a period of 50 or 60 years—exactly the same as the 8 billion that the Secretary of State has committed to the FAS.

The lifeboat fund would receive unclaimed assets and residual scheme assets if those become available. New clauses 42 to 45 would create the rather inelegantly named pensions unclaimed assets recovery agency. I pay tribute to the right hon. Member for Birkenhead, who will have recognised in the new clauses a large chunk of his private Member's Bill, the Pensions (Unclaimed Assets) Bill. I am grateful to him for doing a large amount of the drafting work. The agency would be charged with first identifying these assets, then collecting and supplying information to the Secretary of State, and then collecting the assets in. The new clause would provide that the Secretary of State specified the classes of unclaimed assets to be collected by the agency. Our focus is on unclaimed pension assets, including the possibility of residual scheme assets. We think that there is an elegance and a justice in using unclaimed pension assets to deal with a pensions problem. However, the House should be aware that the new clause would enable the Secretary of State, over time, should he wish, to widen or change the scope of the classes of unclaimed assets that could be included.

The Unclaimed Assets Register says that there is about 3 billion in pension sector unclaimed assets. We are rather more cautious. On the basis of private discussions with companies, we think that there may be 600 million to 800 million of readily accessible pension unclaimed assets and a modest flow thereafter. However, Members who have looked into this will be aware of the Irish experience whereby the initial estimates, based largely on information volunteered by the companies holding these assets, turned out to be understated by a factor of 10 or 15-fold.

Together, the new clauses would create a framework for a fair settlement at PPF levels, with a single payment mechanism based on putting the PPF board in control of the FAS and the lifeboat fund. Although there would be two streams of funding, there would be a single payment mechanism delivering efficiency and seamlessness for recipients. The system would minimise the risk to the public purse, while a loan would allow for an immediate start to payments to those most in need. It would be flexible as to the classes of asset that could be used, so that the Secretary of State would have wide discretion in managing the process in future. It would deliver the objectives of new clauses 26 and 27 and amendment (a) to new clause 38. As far as beneficiaries are concerned, its effect would be no different, but it would be achieved without placing the burden on to the taxpayer.

New clause 46 proposes a moratorium on annuities. As I have already said, its intention is to support the review that the Government are undertaking. We acknowledge that there are problems with the use of residual scheme assets but our discussions suggest that there is between 1 billion and 2 billion in the schemes that is not already committed to the purchase of annuities, as well as a further sum, which may be subject to some penalty costs when annuity option arrangements have been entered into. That is a sizeable sum. If just part of it could be released to support the lifeboat fund, it would be a useful additional source. That is worth pursuing and we would be happy to engage in the review that the Secretary of State has set up and examine with him some of the problems, which we acknowledge must be overcome to make the proposal work.

New clause 47 deals with schemes that are still being wound up and places on the trustees a duty to make interim payments. They already have the power to make interim payments if they choose, but trustees, by their nature, tend to be conservative people. Their inclination to ask for interim payments has been disappointing, as the Minister acknowledged. He has written letters to encourage them to do so. We believe that it would be right to impose a duty on them to make such payments, the cost of which they would recover from the FAS and the lifeboat fund in due course when the scheme was wound up. The new clause also provides for the unlikely position whereby a scheme does not have the liquid resources to make payments and Treasury loans might be made to trustees to bridge the gap while they get their assets into liquid form.

There is a consensus across the House and with outside bodies that represent the victims of the crisis that new clauses 25—which incorporates what the Minister told us about solvent schemes—and 41 are the way forward. The House today has it in its power to resolve the problem and bring to an end a blot on the reputation not only of Governments but of Parliament. We could deal with the issue now. The overwhelming majority of the victims will accept PPF level benefits as a fair compromise. Parliament, as well as the Government, has been damaged by the continuing disaster. Parliament at least now has the opportunity to set party politics aside and do the right thing. I urge hon. Members of all parties to support new clauses 25 and 41.

2:30 pm
Photo of Julie Morgan

Julie Morgan (Cardiff North, Labour)

I thank you, Mr. Deputy Speaker, for calling me to speak about amendment (a) to new clause 38, and new clause 24. I am also a signatory to new clauses 25 and 26.

The debate is important to the 125,000 people who have been affected by the collapse of their pension schemes. The experience of my constituents who are former employees of Allied Steel and Wire is much in my mind as we debate the subject today. I, along with other hon. Members, have been campaigning for a long time to get justice for the Allied Steel and Wire workers and others throughout the country.

In Cardiff, 893 employees from Allied Steel and Wire lost their pensions when the private company went bankrupt. All hon. Members have had experience of the utter misery that that caused and its awful effect on families. Many people have come to my surgery and spoken about the personal devastation that was brought upon them. Losing their jobs was one thing and losing their pensions came right on top of it. That was a devastating blow. Many had worked in the steel industry all their lives—and we all know that working in that industry is hard.

Some people have never talked about the trauma of what happened to them. A woman came to my constituency office last week and said that her husband lost his job and his pension and had never spoken of it. The overwhelming horror of what happened to him has meant that he has never been able to talk about it. We are talking about those people's lives today.

It is important to acknowledge what the Government have done to respond to that devastation in people's lives. The former employees, the unions, especially Community and Amicus, with which I have worked closely, and Members of Parliament, especially, at the beginning, my hon. Friend Kevin Brennan, led a campaign that resulted in setting up the Pension Protection Fund, which will protect pensions in that position from now on. That was a big step forward. I also applaud the Government's establishment of the financial assistance scheme and their work to improve it. When it was originally set up, it applied only to members who had reached retirement age or were within three years of doing so. It was woefully inadequate to address the needs of all the pensioners.

The pensions White Paper of 2006 extended the scheme to those within 15 years of retirement, with total funding of 2.3 billion, which the new clause increases to 80 per cent. of core benefits. The FAS has been gradually extended, but the process has been long and tortuous. It has taken five years and it has felt as though the campaigning of Members of Parliament, the unions and others forced the Government to improve the provision in the FAS. Nevertheless, they have done that. Many hon. Members, the Community and Amicus unions and I welcome the major step forward that the Government have taken in recognising that the FAS was not adequate to provide a decent income in retirement for the estimated 125,000 people who lost their pensions through no fault of their own.

The new clause means that all those people will get some help. Some were previously excluded. In my constituency, there are people who had worked for 30 years but, until the new clause is enacted, are eligible for nothing because they started work at an early age—some at 14—in the steelworks in Cardiff and were only 54 when they lost their jobs. They were thus not eligible for any of the benefits. Now all of them will get something. That is a big step forward, but we need to go further.

Amendment (a) has the support of the Community and Amicus unions and I pay tribute to their work. They took the case to the European Court of Justice and have worked tirelessly on the issue. The new clause would ensure that those who lost their pensions before the establishment of the PPF receive the same support as those who benefit it from it in future. Amendment (a) does not prescribe where the funding for the PPF level of benefit should come from. Much discussion has taken place about how the 8 billion over 50 years will work out—how much it will cost and whether it will stretch further than we think. I do not know the answer, but there have been queries about how far the money will go.

Photo of Mark Pritchard

Mark Pritchard (The Wrekin, Conservative)

Does the hon. Lady share my concern that the review will not report until later this year? There is no immediacy in tackling some of the problems that hon. Members of all parties face in their constituency surgeries week in, week out. Does she also share my concern that there is no obvious legislative time slot to include any outcomes of the review in primary legislation? We could sort the matter out today.

Photo of Julie Morgan

Julie Morgan (Cardiff North, Labour)

I thank the hon. Gentleman for that intervention. I understand from what the Minister said earlier that the initial recommendations will be made by the summer. We certainly want them to be made as soon as possible. We did get a commitment to a time scale from the Minister today, and I welcome that fact that it is to happen by the summer.

The combination of the extra funds already committed by the Government and the review of how best to use the assets of the schemes in wind-up might be enough to fund an increase up to the PPF level. The Government have not given a commitment to do that, but there is a possibility that it will happen.

Photo of David Winnick

David Winnick (Walsall North, Labour)

I am obviously sympathetic to what my hon. Friend and other colleagues are saying. A constituent of mine who is due to retire shortly came to see me in my surgery. He told me that the Armstrong Pension Group, which was connected with Corus, had collapsed, and that he was going to receive only about 2,500 a year instead of the 10,000 he had expected. He was shattered by that. I took up his case and I am glad to say that he is going to receive more money, through the Pension Protection Fund. I am told that it will be about 80 per cent. of what he was expecting to get. I am very sympathetic to the arguments being put about certain other cases, but we should also pay tribute to the way in which the Pension Protection Fund is helping so many people who would otherwise be living in acute poverty. I also raised this case on the Floor of the House before I received that recent information.

Photo of Julie Morgan

Julie Morgan (Cardiff North, Labour)

I thank my hon. Friend for that contribution.

I welcome the review announced by the Government today, and I hope that it will produce the results that we need. My concern, however, is that it will not give any certainty. Amendment (a) would ensure that those who currently receive the reduced FAS level would receive 90 per cent. of their expected pension, capped at about 26,000, rather than 80 per cent. Since 1997, pensions have been index-linked, either to the retail prices index or to 2.5 per cent., whichever is the lower, rather than being index-linked only until people draw them at 65 years of age. According to what the unions have told me, they would then decline by more than a third in the first 10 years, and by more than 50 per cent. should the pensioner live to over 85 years old. Immediate benefits could be gained if we were to adopt the PPF proposals.

Photo of Jennifer Willott

Jennifer Willott (Deputy Whip, Young People, Cross-Portfolio and Non-Portfolio Responsibilities; Cardiff Central, Liberal Democrat)

Does the hon. Lady share my concern that the proposal to provide 80 per cent. of the expected pension relates only to the core pension benefits? For many of the people getting this support, that would equate to only about 60 per cent. of the amount that they had planned for, which represents a significant drop in their expected retirement income.

2:45 pm
Photo of Julie Morgan

Julie Morgan (Cardiff North, Labour)

Yes, that is a matter of concern. Another issue is that there is a provision under the Pension Protection Fund for the payment of a lump sum, which many people were relying on to pay off their mortgages but which they cannot do under the FAS provisions. There would therefore be many advantages to bringing the FAS provisions up to the PPF levels.

We have come a long way, but we need to do just a little more to sort this out in a way that is satisfactory to me and other hon. Members whose constituents have suffered as a result of these problems, and to bring the unions in to support what the Government are doing. If the problem is not sorted out now, there is always a possibility that the Government could be forced, either by the UK High Court or by the European Commission, to introduce PPF-equivalent benefits for those who currently qualify for the FAS. This issue has been a running sore. It has been going on for five years and caused huge anxiety to many people. It would be very good if we could now settle the matter and put it behind us.

Community and Amicus took their cases to the European Court of Justice, and might be intending to go the High Court here. However, they have not started any such court action yet, because they are waiting to see whether we can sort the matter out politically. They were confident that a Labour Government would be able to sort out the different levels of the benefits.

The High Court ruled in February this year that the Government should not have rejected the report by the parliamentary ombudsman, Ann Abraham, on pension schemes that had collapsed. The Government were asked to reconsider; they have now done so and come back with their proposals in new clause 38. The High Court decision did not mean that the Government had to compensate workers for their losses, but the ruling by Mr. Justice Bean meant that they had to rethink the issue of compensation. That has been done, and we have made huge progress, but I would like to see this go one step further so that full justice can be done. The injustice suffered by Allied Steel and Wire workers in my constituency has made me see at first hand how awful this situation has been. Thank goodness it is unlikely to happen again, now that we have the Pension Protection Fund in place, but there is still a defined group of pensioners whom we need to help.

I am considering what the Minister has said today at the Dispatch Box. I was pleased that he guaranteed that Community and Amicus would become involved in the review process and that they would be consulted about it. I am also glad that there was a definite commitment to ensuring that the available funds would be applied to supplementing the FAS provision, to get it nearer to 90 per cent. I realise, however, that that was not a guarantee, and that some uncertainty therefore remains. I was pleased that the Minister said that the review would make its initial recommendations by the summer, and that it would report publicly. That also represents a big move forward. I know that Community and Amicus now want to work with the Government to ensure that the 80 per cent. figure moves closer to 90 per cent., which is what most hon. Members want.

The past five years have been a sorry time for those pensioners. We have had a lot of improvements from the Government, but I want things to go a step further. However, I am considering what the Minister has said today at the Dispatch Box.

Photo of David Laws

David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)

This is an extremely important debate. We have heard two excellent speeches, from Julie Morgan and Mr. Hammond. We have also heard some useful points from the Minister, albeit in a slightly more partisan tone than we are used to from him. In his opening speech, he commented on what he claimed was a pattern of behaviour by the Conservatives on this issue. As that is not the major issue that we are debating today, I shall comment not on that but on the pattern of behaviour over the past three years or more by the Government. That behaviour pattern was illustrated extremely well by the hon. Member for Cardiff, North, when she described the process undertaken over the past three years as "tortuous". That is precisely what it has been.

We know that we ended up with the financial assistance scheme in the first place only because of the determination of Labour Members and others in the House to insist on it when the Pensions Bill went through in 2004. We were then told by the Government that that was the only concession that they could make. Further improvements were then made to the financial assistance scheme and, earlier this year, it was announced that the level of compensation would be increased yet again.

Instead of bringing the matter to a conclusion once and for all, in the interests of those individuals who have lost their pensions, the Government have embarked on the tortuous process described by the hon. Lady. It has not satisfied the pensioners who have lost their pensions, it has not brought the matter to a conclusion, and it has led to a series of very critical reports on the Government—first from the parliamentary ombudsman, then from the cross-party Public Administration Committee, then from the European Court of Justice and then from the judicial review group. Sadly, it is only through that process of criticism of the Government that we have managed to proceed to a settlement considerably better than that first envisaged in 2004-05.

I do not really know why we in the Opposition are so intent on helping the Government out of their position. Let me say in the most partisan possible terms that what the Government have succeeded in doing over the past three years almost constitutes a master class in how to extract the least possible credit from the largest possible number of concessions.

I spoke earlier about the implementation of the financial assistance scheme and the two substantial increases that we have seen. Another concession has been made today—a helpful concession, I think, although we do not yet understand all the parameters—in new clause 25, which allows the inclusion of solvent schemes. But does any Member, including the Minister, seriously believe that we have seen all the concessions that we will see from the Government? As the hon. Member for Cardiff, North suggested, they may be forced to make more concessions through the legal process; moreover, those in another place will have to scrutinise the Bill, and given the cross-party nature of what we are debating today, I strongly suspect that they will insist on changes.

The Government have spoken of the unions' aspiration in relation to the Pension Protection Fund. It is unclear whether they share that aspiration, but amendments tabled by the Leader of the Conservative party, the leader of the Liberal Democrats, Mr. Field and others contain many proposals that the Government say they are considering in any case. It seems pretty plain that—either through the Government's being forced to make more concessions, or as a result of policies that they have already put on record—we will end up more or less where those amendments would take us.

Why, for goodness' sake, do the Minister and the Government not do what now seems inevitable? Why do they not deliver for the pensioners—many, as we have heard, in a very vulnerable position—who are waiting for the compensation that is due to them? Having initially been told by the Government that no compensation was possible, over the past three years they have witnessed the tortuous process of the Government's conceding more and more without bringing the matter to a conclusion. Labour Members and others in the House would do a service to the Government as well as to pensioners if they were to bring it to a conclusion today, and not allow it to be dragged out any longer.

Photo of Mark Pritchard

Mark Pritchard (The Wrekin, Conservative)

The hon. Gentleman is right. The Government mean well; it is just a matter of how we achieve what we all want. A second Pensions Bill is likely to be presented next year, and it is possible that there will be a review whose recommendations could be included in it. It might be even later than this summer before anything is done for those who face immediate hardship.

Photo of David Laws

David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)

That is true. Many of us fear that people will have to wait even longer for a solution the shape of which looks obvious to most of us, and which we feel we might as well get on with delivering rather than putting those people through more pain. Moreover, many Members in all parts of the House fear that if we miss this opportunity, we may not have another opportunity to impose a sensible solution on the Government through the will of the House of Commons and, perhaps, that of another place.

What, after all, concerns the Government? As the Minister said, it is not the substance of the amendments, but the issue of finance. The Government have already moved enormously to deliver a substantial part—now the majority—of the compensation for which we are asking. They say that they want to consider the process of annuitisation and that of securing unclaimed assets. The Minister has acknowledged that the costing figures that he has given today for delivery of the extra element of compensation do not include offsets from tax revenue from means-tested benefits. What does it all come down to, provided that the Government can secure some unclaimed assets? It seems to come down to the determination of the Government, or perhaps the Chancellor of the Exchequer, not to concede what in public expenditure terms is a minuscule amount of money.

The Government's determination on principle not to do anything about that amount of money would be rather more convincing if they had not been dragged through the tortuous process of the past three years, providing first 400 million, then 2 billion and then 8 billion. They are now virtually where they will end up anyway. The Minister's arguments are very unconvincing. Given the closeness of his aspirations to those shared by almost every other Member, he would do a service to all of us—but mostly to the pensioners who are waiting for a settlement—if he were to get on with delivering it. It is fairly obvious that we will end up with a package of a certain shape in one way or another; the question is whether that happens quickly or slowly.

The hon. Member for Runnymede and Weybridge commented on all the new clauses and amendments, and the hon. Member for Cardiff, North gave us an insight into her thinking on a couple of them. All of them improve the present arrangements. That includes new clause 38, which we have no intention of opposing, as it constitutes a further concession to raise the level of financial compensation.

The hon. Gentleman said that he welcomed new clause 25, tabled by Dr. Wright, which allows the inclusion of solvent schemes. We welcome it as well. The hon. Gentleman said he preferred it to his own new clause 40, which was helpful. There was some uncertainty in his exchange with the Minister about precisely who would be excluded from the measure that he now envisages in place of new clause 25. I hope that light will be shed on that later in the debate. If there is indeed an element of uncertainty, we too would be happy to leave it to the hon. Member for Cannock Chase to determine the extent of the exclusion, knowing that we have the backstop of another place and the possibility of further amendments if they are considered to be strictly necessary.

The critical aspects of new clause 38 relate to the other new clauses and amendments. We welcome new clause 24 and amendment (a) to new clause 38, tabled by the hon. Member for Cardiff, North, which improve the position by delivering the PPF level of benefits. We will support them if they are put to a vote, but, like the hon. Member for Runnymede and Weybridge, we hope that they will not be the focus of debate and of any vote that takes place. New clauses 40 to 47 also make important changes and additions to the package, which not only make it more financially robust but deliver the immediacy that many of the pensioners seek.

The hon. Member for Runnymede and Weybridge was kind enough to pay tribute to Ros Altmann and the other pension campaigners who have done so much to shift what appeared to be the immovable object of the Government over the last couple of years and to move the debate forward. The hon. Member for Cardiff, North and many other Labour Members will know of the anxieties that still exist among pensioner groups. Even if her amendments were accepted, substantive points would remain uncovered by them that are covered by the cross-party new clauses 40 to 47, as was explained by the hon. Member for Runnymede and Weybridge. The partial inflation-linking issue is dealt with by those new clauses, but not by new clauses 24 and amendment (a) to new clause 38.

There are other issues. There is the issue of ensuring that people receive their money, that the payment starts immediately at scheme pension age and that there is no further delay, with trustees able to pay the allowance from the scheme assets immediately. There is the issue of annuitisation, which is dealt with explicitly in the cross-party amendments. There is the issue of solvent employer schemes, which we hope will be dealt with by new clause 25 or a decent concession from the Government. There is also the issue of mitigation of the cost to the taxpayer. We understand that the Government are intent on taking action to deal with that anyway.

Although we welcome the amendments of the hon. Member for Cardiff, North, we hope that as she agreed earlier that this has been a tortuous process she will want us to find a solution today that deals with all the major concerns. She probably knows that the position of the pension campaigners is that new clauses 40 to 47 are to be preferred, as they deliver additional benefits compared with the measures that she has tabled—and, indeed, our new clause 27. We hope that new clause 41 will be the focus of the debate. We will enthusiastically support it, and we hope that Members of all parties will also do so if, sadly, the debate ends in a Division.

The entire process of the past three years has been tortuous, but progressively the minority in this House, and certainly in the Labour party, has been converting the majority of Ministers, with some assistance from outside. There is not much further to go in that process. It is clear to me that through legal routes, steps in another place and concessions from the Government we will reach the point proposed by the new clauses under debate, so let us get on and do it today, and not waste any more time.

3:00 pm
Photo of Tony Wright

Tony Wright (Cannock Chase, Labour)

The Bill is in many respects a reckoning with the future of pensions, but it contains within it the reckoning with the past. We all wish that it did not do so because it would be nice simply to move on to the sunnier uplands of pensions policy to come. However, as several Members have said, the fact is that many people are not able to move on as they have lost their pension. They look to this House to do something about that—legitimately because an Officer of this House, the ombudsman, has conducted an exhaustive inquiry to establish exactly what happened and whether there was any Government role.

I must confess that when I started to think about this matter—before I had read the ombudsman report, and before the Public Administration Committee started taking evidence on it and talking to some of the people involved—I took a different view from that which I now hold. I thought, "Well, the world's an uncertain place and risky things can happen; pensions are fragile objects and we have to live with such events." However, the more I examined the subject the less I could sustain that position. After 1994—after Maxwell—we believed that we had put in place a framework of protection that would prevent such things from happening again. The ombudsman was able to show in detail that in terms of what had been said about that framework of protection—the descriptions of the amount of safety that there was in the schemes—there had been maladministration. That is not simply a proposition of mine; it has now been demonstrated. It has been upheld in the High Court, so we know it to be the case. Therefore, we have moved on from that argument.

That is not to say that the Government—any Government—are entirely liable for what has happened. That is not true. There is some liability, but the major point is that the only body or person who can organise a remedy and sort out this situation are the Government. The Government have been trying to do so, and we must welcome the fact that we have made huge progress. This is a bit like building a house. Originally, when we began with the financial assistance scheme, the Government erected one wall and said, "There's some shelter" and we said, "But one wall isn't good enough." So they added another wall and said, "There we are; that's better shelter" and it was better, but we again said, "It's not good enough." After that, in the Budget they added two more walls. We have the surrounding structure of a house now. That is vastly better, but we then said, "But we still haven't got the roof on." The Government have responded by saying, "No, we haven't got the roof on, but we know a man who can find the wherewithal to put the roof on." The Opposition have said in return, "We can do better than that: we have got a man who can loan us the money to find the man who will put the roof on." Frankly, I do not care where the roof comes from. Most Members accept that we need the roof on—that we need to reach Pension Protection Fund levels. As has been said, that is a responsibility of the House—of all Members.

Let us consider the history of this matter. It started with the last Government. Some of the most offending literature in maladministration terms occurred under the last Government. However, the point about ombudsman investigations and all that flows from them is that responsibility is handed back to the House. When the ombudsman system was put in place exactly 40 years ago, the House sensibly decided not to give the ombudsman the ability to impose remedies. She would have the ability to investigate without any hindrance and operate completely independently and then to report to the House. She can suggest lines of remedy, but not impose them. The responsibility for that comes back to Members. We must decide what is the right thing to do. That is what we are faced with in this context. We did not think that the Government had done enough when they produced one wall, or two walls, or now when they have produced four walls. We still want to talk about putting the roof on.

I know that the Opposition and the Government are terrified of public spending, but there are times when we have to say, "We have an obligation to spend the money to do the right thing—we would like not to spend it, but we have an obligation to do the right thing." I say to both the Government and the official Opposition that I wish that they were both saying that, because the official Opposition are going to some lengths not to say that—but instead to say that they are not prepared to sign up to propositions that commit them to moving to PPF levels. It would be easier for the House if we could test the proposition of whether we wanted to do that, and then worry about the mechanisms for doing it. The incentive to find mechanisms that work would be greater if we had committed ourselves to the objective. That might be the effect of new clause 41 and associated measures, and that is why I shall support them. Even funny money is better than no money at all, and I am prepared to accept it on that basis—although the Government are entitled to say to the Opposition that it is funny money and that they must answer for that.

On the new clause 25 issue—the solvent schemes issue—we know that there is an anomaly. The compensation available applies only in cases where there has been an insolvency event. That has left high and dry about 8,000 people who have been in solvent employer schemes. We all recognise that they are in exactly the same position in terms of the loss of their pension as everybody else and that there are no grounds on which we could possibly want to exclude them. New clause 25 brings their schemes—we seem to agree on the numbers—into the package that is being developed. The Minister is entitled to say that the amendments under discussion were devised over the weekend in a great hurry, but I can assure him that this one was not. A good deal of time and authority has been invested in it in this House. It comes with some good authority behind it. When the Minister says to me that it is technically deficient, my response is that I do not think that it is, because it covers exactly the same kind of schemes that are eligible under section 286 of the Pensions Act 2004. It does not in effect say, "Let's open the door to any scheme that might want to fold to get some protection." It is explicitly contained within those parameters.

I would be delighted to withdraw the new clause. All I require the Minister to say is that he accepts the spirit of the new clause and, if he thinks that it is technically deficient, he will remedy that down the road. I do not want to be left still not knowing which schemes will be covered and which will not, because that would be profoundly unsatisfactory.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I am happy to give my hon. Friend that assurance. We are looking at the same number of people—some 8,000. I did not intend to criticise his drafting, but I have been advised that the new clause would let in an extra category. The intention is to include all schemes that were wound up unfunded, preventing an employer insolvency. New clause 25 would include schemes in which debt and winding up could not have forced an employer insolvency and, therefore, the employer was healthy enough to fund more of their pension liabilities. I am happy to discuss the issue with my hon. Friend, but I hope that I have given him the guarantee that he wants. We are trying to achieve the same aims and we are happy to return to the issue in the other place if necessary.

Photo of Tony Wright

Tony Wright (Cannock Chase, Labour)

I hope that I will be satisfied with that answer. The Minister will have to come up with a form of words, because at present new clause 38—the package that he has offered us today—does not have any provision for those solvent schemes. I have to be sure that the assurance he has given me will cover all the schemes that we think it will cover, under all the parameters that I have described.

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

I have listened carefully to what the Minister said and I still have a concern. He appears to be acknowledging that there is a group of people without pensions who will remain without pensions or assistance because of something that their employer has or has not done. The essential fairness in this is that it is not the problem of the pensioner or the would-be pensioner if his employer has behaved badly or correctly. We are seeking a solution that deals with the problem from the pensioners' perspective. It needs to be clear whether some people who see themselves as victims of this problem will still not be covered by what the Minister is offering.

Photo of Tony Wright

Tony Wright (Cannock Chase, Labour)

That is the point on which I need to reflect to see whether we can pin down what has been said. I take the point that we will have another opportunity to consider the issue, but I am determined to ensure that we cover all the schemes that should be covered. I do not accept, on technical grounds, the Minister's point that we would be opening the door. It would be more straightforward if the Minister accepted the new clause and, if it turned out that it needed more work, that could be done. That would be the easiest way to proceed.

As people have said, this has been a long journey and we are not at the end of it—

Photo of Philip Hammond

Philip Hammond (Shadow Secretary of State for Work & Pensions, Work & Pensions; Runnymede and Weybridge, Conservative)

It is not really my place to say this, but I remind the hon. Gentleman that if one seeks a Division on a specific new clause in a group, one normally indicates as much to the Chair before ending one's speech.

Photo of Tony Wright

Tony Wright (Cannock Chase, Labour)

I do not wish to do things wrongly, but I shall reflect on the exchange that I have just had with the Minister. That seems a reasonable proposition, but I shall apprise the House of the fruits of my deliberations at the earliest possible moment. I had better stop now.

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

As a very humble, new Back Bencher, may I say what a pleasure it is to follow Dr. Wright? The work that Members from all parties have done on this issue since I came here on 5 May 2005 has impressed me enormously. I personally praise the work of Mr. Field throughout the campaign.

The issue was brought to my attention when I was a parliamentary candidate in Hemel Hempstead some six years ago. Just after I was selected, the former Dexion workers committee came to see me. They asked me to read their file—it was about 6 in deep—and give them my opinion on whether they had been treated fairly and with dignity, whether natural justice had been done and whether trust in Parliament and pension schemes could ever be restored.

I read every word, and when I went back to the committee I was tested. They did not trust me: they did not trust any politician. I do not think that they do today. They wanted to know whether I had read and understood the file, and whether I agreed with them that no matter who was in power, or who had made the mistakes, they had been treated appallingly. At the time, there were just over 700 of them, mostly men, but some ladies, who had paid into a scheme, at one stage, compulsorily. Following legislation, membership of the scheme was voluntary, but nobody left it because it was very good. Some people had paid in for 35 years and more.

The campaigners had huge dignity, but they had already been around the country taking their clothes off in public. They were middle-aged men and women who had worked all their lives, done the decent thing and did not want to scrounge off the state. They did not want means-tested benefits. They wanted to work until their time for retirement came and to pay in a fair amount of money to be kept safe for them, and for their loved ones when their time came to pass on.

I told the campaigners that they desperately needed to put their case before the parliamentary ombudsman—the place for justice in the mother of all Parliaments. I fought hard—and it is hard for a parliamentary candidate—to get the ombudsman to listen to their case. I went to Front-Bench colleagues and asked them to read the file, but they said that they had seen the same thing happen to other schemes and that it should go to the ombudsman.

The ombudsman decided that the pensioners had been misled under both this Government and the previous Conservative Government, and maladministration had taken place. Like many hon. Members, I was over the moon at that decision. I cracked a bottle of John Smith's with the Dexion pensioners—I am not a champagne man—and we celebrated. That did not last long. They thought that the ombudsman had ruled and that the Government would adhere to the ruling. As the hon. Member for Cannock Chase said, it is not for the ombudsman to decide what should actually happen, especially in a scheme set up 40 years ago, but it is for her to have unrestricted access to the facts and to come to a decision as to whether our constituents had been let down by the system, Parliament and the Government of the day.

I have just met some of the campaigners, and I apologise for not being present for the whole debate. They still do not understand why the Government did not accept the ombudsman's decision. They have come so far. It is as though a velvet revolution has taken place. The hon. Gentleman said that when he first looked at the issue, he thought that such things happen in a market system, but a groundswell of opinion, led by many Labour Members and others—I have pushed it hard myself since coming here—has convinced my Front-Bench colleagues, the Liberal Democrat Front Bench and Ministers. People who told me 18 months ago that they would never support a scheme under which the Government would compensate those who lost out, because it was not the Government's fault, have now decided—rightly, in my opinion—that they do need help.

This is not about party politics, as the Minister has joined me in meeting delegations of widows. I shall say more about the widows in a moment, but the Secretary of State, only days after taking up his post, also met a delegation that I brought to him. I passionately believe that the Department for Work and Pensions wants to settle this matter once and for all. None of us has any doubt about that, so why on earth can it not be resolved today?

The Minister has made another move in our direction, and the Treasury seems to have come up with some extra money so that he can compensate the 8,000 people who are not covered by present schemes. We may not know where the money has come from, but we know that it is available. In the greater scheme of things, the sum involved is, frankly, peanuts. I am proud to be a member of the Health Select Committee, and we know that Government spending on the NHS now totals 100 billion. Where it goes is another question, but that is a huge amount. In contrast, we are talking about only 30 million a year to compensate the people who have lost out. That sum is expected to rise to around 100 million, and then fall again.

I share the concerns expressed by the hon. Member for Cannock Chase. I do not understand why my party's Front-Bench spokesmen do not agree with the proposal. I have said that to them in private, and now I do so in public. We are talking about only 30 million quid, so we should make it available today. The lifeboat scheme that we have come up with has been prepared with the help of hon. Members of all parties. I hope that we will be able to vote on it later, because it will provide immediate help for the people who need it. They need that help today, not in six months or a year. Those who are in trouble cannot wait until the next Pension Bill, about which my hon. Friend Mark Pritchard spoke earlier, because many of them are dying.

Of course, some are dying of old age or illness, but most are not the sort that we would expect to die early. The fact is that stress-related problems are leading to many deaths among those who need help. I am sure that hon. Members of all parties are aware of the disproportionate number of strokes and heart attacks suffered by the people who need our help. They are stressed out beyond belief, and that is because they are honourable people whose personal dignity means that they do not want to rely on means-tested benefits or charitable hand-outs. They worked all their lives and paid for their pensions, and they want to retire with dignity. Even so, many of them have taken up jobs that most hon. Members would refuse.

3:15 pm
Photo of Henry Bellingham

Henry Bellingham (Shadow Minister, Constitutional Affairs; North West Norfolk, Conservative)

My hon. Friend is expressing the problem in a very moving way. A number of my constituents are having to work extremely hard at a time when they should be enjoying long and happy retirements. For example, I know one person who is doing night driving for a courier company. He is working himself into the ground because he has no proper pension, and there are many others in the same difficulty. Because those proud people do not want to rely on state benefits or move into council housing they are having to work as hard as they can to pull their lives together. This debate provides an opportunity for us to save their lives.

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

All hon. Members involved in this campaign have heard about personal tragedies such as the one so eloquently described by my hon. Friend.

Photo of Adrian Bailey

Adrian Bailey (PPS (Rt Hon Adam Ingram, Minister of State), Ministry of Defence; West Bromwich West, Labour)

Will the hon. Gentleman give way?

Photo of Frank Field

Frank Field (Birkenhead, Labour)

My hon. Friend Mr. Bailey should let the hon. Gentleman finish, as many others want to get in.

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

The right hon. Member for Birkenhead is much more knowledgeable than I am, so I shall try to be as brief as possible.

I shall give the House an example of personal dignity. I want to talk about a man who used to be a middle manager, earning between 30,000 and 35,000 a year before his company became insolvent three years before he was due to retire. I shall not name him, and I hope that he will not mind me talking about him, but he is now picking up litter in a public park because he does not want to rely on means-tested benefits. Why on earth has this Parliament allowed such a thing to happen?

At the risk of sounding like an alcoholic, I shall mention beer again. I am very proud to have bought the last pint enjoyed by a gentleman called David Cheshire. He had worked for the Dexion group for many years and, just after the company announced that it was insolvent and that his pension would be lost, he was diagnosed with untreatable, terminal cancer. A week before he died, and even though he was in great pain, David Cheshire joined one of the many pensioner rallies that have been held at this House. A large group of campaigners came to the Marquis of Granby pub just behind the Home Office, and I bought a round of drinks. David Cheshire told me, "I never thought I'd be here having this pint, as I didn't expect to live this long." He died a week later, just after his wife Marlene told him that everything was okay and that the pension money had come through. It was a lie, because she wanted David to go to his grave peaceful in his mind that she would be looked after.

I give way to Mr. Bailey.

Photo of Adrian Bailey

Adrian Bailey (PPS (Rt Hon Adam Ingram, Minister of State), Ministry of Defence; West Bromwich West, Labour)

I thank the hon. Gentleman for giving way. I fully understand and sympathise with the emotions and intentions that he outlined, but there is something that puzzles me. Those emotions and intentions would be relevant if the people involved were getting no pension at all, yet we are really talking about the 10 per cent. difference between what the Government are promising and the proposal that he is making—

Hon. Members:

No!

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

I shall be generous to the hon. Gentleman and suggest that he take a quick look at the amount of money that some of these people need. The Minister has met Marlene Cheshire, as she was one of the group of widows to whom I referred earlier. At that time, she was getting 20 a week, but she should have been getting 200. If we cannot talk about something like that in the House of Commons, I am in the wrong place. I do not want to criticise the hon. Gentleman, but there are pensioners in the Lobby today and he can go and talk to them. They will tell him that they are not getting the money that is due to them. However, I should add that I took the lady about whom I have told the House to see the Minister, and the shortfall in her income has since been addressed.

The maths of the FAS scheme is pretty simple: 3 million to be shared between 125,000 people. They are not getting anything like enough, and we need to talk about how we can help them today. We should not wait for a summer review: natural justice and the needs of personal dignity mean that we should do the right thing by them this afternoon.

Photo of Frank Field

Frank Field (Birkenhead, Labour)

I shall speak for only two minutes, as I know that other hon. Members with constituency interests also want to contribute to the debate. However, I shall begin by congratulating my hon. Friend the Minister on his statement today and on the extension of the FAS scheme.

The House has it in its power to decide to extend the number of people covered by the scheme from the 8,000 announced by the Minister today to include all those who have saved yet been cheated of their pensions. Because the Minister is so talented I plead with my hon. Friends not to be beguiled by his abilities if he assures us that we should put things off to another day because there will be another inquiry.

My two minutes are to remind the House that in 2002, when the stories began to surface, I introduced a private Member's Bill. The Government said, "We must not rush things; we must think about them and hold inquiries, so we must block your Bill". The Bill provided that we should use unclaimed assets, so they began by saying, "We don't know how much there is". They continued with, "There is not much", followed by, "Perhaps there is a bit more, but we don't own it". They then said, "Perhaps we will bring in a levy but we'll put it into another scheme—a foundation".

The message that I want to give to my hon. Friends is crucial, and was set out by my hon. Friend Dr. Wright earlier: we have it in our power today to make a decision to put an end to the gross injustice that decent people, who have saved and done everything required of them, have been cheated of their inheritance. We should make that decision for justice's sake, but we should also make it for the Government's sake, because they still seem unable to realise that as long as that sore continues to fester, they will find it impossible to kick-start the savings habit in our community. Why should one save when one knows that all too many people who did precisely that at the Government's behest now feel themselves cheated? Today, we can stop that cheating by supporting new clause 41 and I hope we shall do so.

3:30 pm
Photo of Michael Weir

Michael Weir (Spokesperson (Energy; Work and Pensions; Trade & Industry); Angus, Scottish National Party)

I, too, will be brief. I want to support new clause 25 tabled by Dr. Wright.

I very much welcome what the Minister said about assistance schemes this afternoon, although it is a pity that we do not have the provisions before us so that we can see exactly what he is proposing. I know that the provisions of new clause 25 would deal with my concerns about a pension scheme in my constituency, but I am not sure whether the Minister's proposals would cover that scheme.

The problems with schemes for solvent employers have poisoned the well of pension reform for far too long. They have been left out of the financial assistance scheme, although there is little to choose between what has happened to them and to insolvent employers. I cite the case of a scheme in the small burgh of Kirriemuir in my constituency. The company remains in being—indeed, it provides valuable jobs in the community—yet workers nearing retirement find that their pensions provide nothing like the sums they expected. The scheme is being wound up and the value of each pensioner's pot is to be paid into a private pension scheme. An employee described for me the situation when they were told that the scheme was being wound up: they were told, in effect, "It's your pension or your job". It is difficult for people in small communities to come to terms with that.

I am told that the company would have gone into insolvency had the scheme not been wound up. The wind-up started in June 2004 and has not yet completely finished, so I want to be sure that people such as my constituents would be covered by the new aspects of the financial assistance scheme that the Minister announced today. I am sure that new clause 25 would cover their situation, but it is a great pity that we do not have the Minister's proposals. What tests will he apply in relation to insolvency? What evidence will a company have to produce before it can be covered by the new scheme? In the case I described, the employees were told that the company would go into insolvency unless the scheme was wound up.

What made things worse for many employees in that case was that the pension scheme was put under a trustee company, which was also undertaking the winding-up process, and workers found it difficult to obtain information. They were told that the cost of answering their questions about the wind-up of the scheme would be set against its assets, thus further reducing the amount available to pensioners. A circular from the trustee company states:

"Please remember that there is a cost to answering questions from members, meaning that the funds in the scheme will be further depleted."

Not unnaturally, members wondered what to do. Should they pursue their interests, or would that mean that they were throwing away even more of their money? They were in an impossible situation.

If the scheme that the Minister has announced covers such people, it is very welcome indeed, but as has been said by other Members we need clarity today; this poisoned situation must not drag on. We cannot move on with pension reform, in particular the personal accounts that the Government propose, unless we deal with the problems now.

I intend to support the cross-party amendments on the lifeboat fund, but new clause 25, or a similar provision, must be passed in conjunction with them if we are to bring justice to all the pensioners who have suffered in this disaster.

Photo of Alan Simpson

Alan Simpson (Nottingham South, Labour)

I realise that for many Members the whole question of the administration of pension funds is extremely complex and detailed. I find it useful to refer back to the time when I started as a county councillor in Nottinghamshire. We had just appointed a chief executive—a person who, at that time, called himself Mick Lyons. He has been elevated somewhat since then. He invited us to identify problems in the administration of local government within the county. A number of us identified that schools were having serious problems in accessing the resources that they needed. He got a number of councillors and a number of the officers in different departments together and he asked people to explain what the problem was and what was causing the gap between the time when the schools sought to requisition pencils and paper and the time when anything arrived. The delay was often six weeks, two months or two and a half months. He listened patiently to the explanations from officials in different departments for about 20 to 25 minutes. Then suddenly he banged his hand on the table and said, "Right. I've got a plan." Everyone shut up and listened to him. He said, "Send the bloody pencils and the paperwork can follow. I don't care about the paperwork that follows. It's not that it's not important, but schools are about learning. It is about delivering the resources for learning. If schools haven't got pencils and paper, we are undermining their primary function. So send the bloody pencils."

If we were having that same debate among ourselves today, the central issue would be, "Send the bloody pensions." It is not about the technicalities. The reason why I support new clause 41, which is a cross-party new clause, is that it says precisely that. We have a moral duty to pay people's pensions today and to use the lifeboat fund to work out among ourselves how best to reclaim the resources that we have at our fingertips in order to do that. My only quibble in political terms is that I wish that new clause 41 had been tabled principally in the name of my right hon. Friend Mr. Field, because, as been acknowledged, the origin of almost everything in that new clause was rightly encapsulated in the private Member's Bill that he presented to the House in 2002. It would be helpful for our own Members to be able to recognise and claim the integrity of that as a starting point. But I no longer care who claims the credit. What I am concerned about is that we are dealing with people who have never asked for a penny of a handout in their lives. They are people who have done what successive Governments have asked them to do: take money out of their weekly and monthly earnings and put it into pension funds in order to provide for their old age. We will not be able to convince successive generations who follow that that is a sensible step if their parents or grandparents say to them: "We were mugs. We put the money aside and people stole it."

The great attraction of what is incorporated in new clause 41 is that it allows us to draw a simple line under a debate that will not go away if as a House we fail to take this decision today. New clause 41 brings everyone under the cover of the Pension Protection Fund. It does not say that there is going to be a huge delay. It says that we will pay out today and that we will work out how we will reclaim and repay the assets afterwards. It does not presume that there are billions of pounds to be found. However, the volume of unclaimed assets in this country is about 15 billion—3 billion in unclaimed pension funds, 5 billion in terms of banks and building societies, 3 billion in national savings, and another 1 billion to 2 billion in residual assets in the existing schemes. So we would not be short of possible sources. Nor is it true to say that all that money would have to be found now. My understanding is that the 600 million that would need to be put aside works out, on the Government's own figures, at about 20 million a year. Just to provide a reference point, we should understand that the error factor in the Department for Work and Pensions budget for the administration of benefits last year was not 20 million, but 700 million.

It is not beyond the Government's and the House's capacity to incorporate everyone affected into a scheme that would achieve what we promised at the end of the Maxwell fiasco. We promised people then that it would never happen again. Yet we now find ourselves in a position, five years after an event, in which many people who saved throughout their lives are living—and, in some cases, dying—in abject poverty. That is morally outrageous and morally indefensible.

I would like to end on a non-technical and non-political point with the line of a song by Tracy Chapman [Interruption.] I will spare the House by not singing it! In that song, she said:

"A love declared for days to come is as good as none".

The same could be said about a pension, so I hope that the House has the decency to do the morally right and the politically and financially accessible thing by drawing the line today and supporting new clause 41.

Photo of Henry Bellingham

Henry Bellingham (Shadow Minister, Constitutional Affairs; North West Norfolk, Conservative)

It is a pleasure to follow Alan Simpson, who spoke very eloquently; and I support my hon. Friend Mike Penning, who spoke with great passion and huge knowledge.

I represent a significant number of former employees of the Albert Fisher group, who have lost the bulk of their pensions. Like my hon. Friend the Member for Hemel Hempstead, I have had numerous meetings with that group, as a result of which I have also met many other people involved in different pension action groups. One thing that struck me is that those people trusted the advice that they were given and invested their money—their own wages—in what they believed were safe products, only to have the rug pulled from under them.

I would like to pick up on one point that the Chancellor made yesterday. When he was justifying the changes to dividend tax credits in the 1998 Budget, he said that they were more than compensated for by cuts in corporation tax. However, dozens of companies did not benefit from those cuts because they were either breaking even or making a loss. In the case of the Albert Fisher group, part of the food processing sector, particularly the frozen food sector, was struggling and under very substantial pressure. That company was not making a profit, so the concessions on corporation tax were of absolutely no benefit whatever—and the same applies to dozens of other companies as well. What the Chancellor said yesterday was irrelevant to those companies, which got no benefit from corporation tax changes, so the hit to them in respect of pension funds was direct and immediate. There was immediate pain and the result was that many of the pension schemes went bust with people suffering as a consequence.

I intervened earlier on the Minister, who was very critical of the Opposition amendments, but those amendments had been carefully thought through. They were not worked out on the back of a cigarette packet over the weekend. A number of experts gave us advice. As to Ros Altmann, she has a huge amount of experience and commands phenomenal respect. To be fair, until quite recently, Ros Altmann was saying that what we were doing with our draft amendments was not good enough. She said that the amendments did not go far enough, were not properly drafted and were technically incorrect, so Opposition Front Benchers put a great deal of effort and work into drawing up a package of measures—the amendments and new clauses—that would go as far as possible and, above all, give these people some immediate respite.

On the point about a review, we have had endless reviews. Time and again, the Government have introduced changes and initiatives, and every time, they creep a little bit further towards the full measures that those people want and deserve. What we want now—what is on offer with these amendments and new clauses—is immediate relief. What those people want is immediate relief. As my hon. Friend the Member for Hemel Hempstead said a moment ago, a lot of those people are suffering as we speak. Many of them are ill.

Lots of very proud people were looking forward to a long and happy retirement, but they have had that retirement totally undermined and destroyed. Those people deserve immediate action. They want immediate action. We have a huge opportunity this afternoon to give them that action, and there is a very strong moral case for doing so. I appeal to Labour Members to support these amendments, because a lot of people are watching them very carefully. If they support us, those people will have the relief that they deserve.

3:45 pm
Photo of Sandra Osborne

Sandra Osborne (Ayr, Carrick and Cumnock, Labour)

I thank Mr. Bellingham for curtailing his comments, and I shall try to curtail mine.

On 22 January 2002, I was fortunate enough to secure a debate in Westminster Hall that allowed me to raise the plight of more than 1,000 former workers of United Engineering Forgings in the United Kingdom who had lost most of their expected pensions when the company went into administration. Since then, as we have heard, along with my colleagues on the Labour Benches, I have tabled early-day motions, tabled amendments, met Ministers and generally campaigned with the trade unions for a solution to what I still see as a major injustice.

The Government recognised that injustice and the fact that hard-working people had been affected, but they did not recognise that compensation was required. However, as other hon. Members have said in the debate today, we achieved incremental success in securing help for those who lost out and, crucially, legislation has been passed to ensure that never again will people be deprived of the pensions that they have paid into all their working lives.

The Government have said at every stage of the debate so far that they have gone as far as they can go, and subsequently, they have gone further. So I am very interested to hear what the Minister said about the fact that they are prepared to go further again. There is no question but that a substantial amount of public money has been allocated to the financial assistance scheme—something that has not been adequately recognised in the debate or in general over the past five years.

The Conservative party said before the last election that it would not commit any further public money than had been committed already to the financial assistance scheme. I wonder whether I can take it from that that the Conservatives would not have come up with the 8 billion that is now in the pension pot?

Photo of Michael Penning

Michael Penning (Hemel Hempstead, Conservative)

I stood on a manifesto, defending the Dexion workers, in which we said that we would compensate them from the unclaimed assets. That was in our manifesto, and that is what we stood on.

Photo of Sandra Osborne

Sandra Osborne (Ayr, Carrick and Cumnock, Labour)

I can remember Tory Front Benchers telling me on the Floor of the House that they would not commit any further public money, and that was the position that they took.

Those who lost their pensions, whether before or after 5 April 2005, are all innocent victims, and they all deserve to be treated equally. I have always thought it quite ironic that those who campaigned for justice in this matter will receive less as things stand at the moment than the beneficiaries of their campaign in the form of the Pension Protection Fund. Therefore, I believe that there should be equity. According to the trade unions, they have evidence that the 8 billion may in any case be enough to settle that issue. I do not know whether that is the case, but, obviously, it would be welcome. The Government have set up a review and said that they are open to suggestions. In my Westminster Hall debate more than five years ago, I made both these suggestions: pooling the assets of pension funds and holding the private sector to account.

I will conclude by referring to the private sector. Prudential's venture capital company was the majority shareholder in UEF. I have met the chief executive on several occasions to call for the company's help, but that has not been forthcoming. I wish the Government all the luck in the world in trying to get the private sector to contribute towards the financial assistance scheme.

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

This has been a good debate. Everyone in the House has sympathy for the people who have been affected. The Government are saying that we will put in taxpayers' money so that people are paid out with at least 80 per cent. We are setting up a review to examine what more can be done and to consider the Opposition's suggestions and all the points made by hon. Members in the debate.

It would be wrong to give people false hope, but I am afraid that the Tory amendments would create exactly that risk. They have unravelled even during the debate. Mr. Hammond said that there would be an increase in public spending, but that directly contradicted the comments of the shadow Chancellor this morning on Sky News, when he said that there would not be an additional burden on public spending. It would be better for the House to wait for the review than to accept the amendments.

Photo of Tony Wright

Tony Wright (Cannock Chase, Labour)

On the basis of what I think that the Minister has told me, even though there is still some uncertainty, I will not press new clause 25 to a Division. Will he assure me, the Opposition and other hon. Members that the words that will be presented to the House of Lords will reflect what he said today?

Photo of James Purnell

James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

I assure my hon. Friend that the wording will do exactly that.

We have a basis on which we can move forward on both that point and on the issue of 80 per cent. for the people affected. The review will examine moving beyond that, and that is the exact basis on which we should move forward.

It being two and a half hours after the commencement of proceedings on the motion, Mr. Deputy Speaker put forthwith the Questio n already proposed from the chair, pursuant to Order [this day].

Question agreed to.

Clause read a Second time, and added to the Bill.

Mr. Deputy Speaker then proceeded to put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.