Occupational Pensions

Part of the debate – in the House of Commons at 7:10 pm on 20th January 2003.

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Photo of Julian Brazier Julian Brazier Shadow Minister (Work and Pensions) 7:10 pm, 20th January 2003

We have had a good debate, despite the fact that the time has been squeezed by two statements. I was particularly struck by the speech of my right hon. Friend Mr. Arbuthnot, who outlined very clearly just how serious is the crisis facing the pensions industry in this country. He did not seek to lay all the blame at the Government's door, but he made it clear how much worse they have made the situation.

In 1997, the Government inherited an economy in which private pension savings, across the different categories of schemes, were more than those in the rest of the EU put together. Since then, the proportion of people who reach retirement age with a second pension has fallen from 67 per cent. to 59 per cent. The rate of closure of pension funds to new members is accelerating, and 12 million workers have no pension arrangements at all. That is a shameful record.

We chose today to focus specifically on the wind-up of company pension schemes. Mr. Field made it clear that that is the most urgent aspect of the entire crisis. I realised how bad the situation was when a constituent of mine who worked for ASW, or Sheerness Steel as we used to call it, came to see me. He was just weeks from retirement, and he told me that after nearly 40 years with the company, he will not know for two or three years what his pension entitlement is, and he may receive less than half of the amount that he was expecting.

We have discussed a number of issues today. First, and central to the crisis and to our motion, is the issue of priority, and we made it clear in our motion how we see that. A number of Members, including my hon. Friend Andrew Selous and Mr. Rooney, mentioned the important issue of the role of the independent trustee. A survey by Higham Nobbs, which looked at many closures, showed that up to £800 million appears to have been wasted in excessive fees. The conclusion of those industry specialists—that the average wind-up takes far too long and is too expensive—should give us all pause for thought. Other issues mentioned include the priority that a debt to a pension fund should take and the question of insurance, compulsory or not.

Against that background it was very depressing to hear the Minister for Pensions take almost a quarter of the total time allocated for the debate to make a speech in which he largely attacked the Opposition on matters that have nothing to do with this. He can argue quite reasonably that when consultation is going on, he cannot give his views on the particular points in our motion. However, hon. Members on both sides of the House have pointed out that we are in the middle of the Department's 26th consultation on pensions, and many people want this narrow and desperately urgent issue unbundled from the rest.

I shall ask Ministers two questions, and the Under-Secretary may choose to answer them in her speech. First, are the Government willing to consider unbundling the issue of wind-ups from the rest of the package? Secondly, is the Minister for Pensions seriously saying that there can be no retrospection at all? I hope that I misheard him, because this matter may affect many thousands of people. Nobody, least of all Opposition Front Benchers, would argue that measures should apply retrospectively to the time before the Green Paper was published. However, many companies at the margins have read its small print very carefully and asked themselves whether, if they are going to bail out, they should not do so quickly before the provisions bail in. Why cannot the Under-Secretary say that measures will apply retrospectively from tonight, if not from the publication of the Green Paper? Otherwise, the Government are providing a huge incentive for the problem to get worse and for more companies to back out of their commitments before the rules change.

In a typically articulate speech, Adam Price made a powerful case for insurance and a central discontinuance fund. However, he did not fully explore the downside of that idea, which obviously lies in the likely costs that must fall ultimately on the taxpayer or on pension funds, many of which are already struggling. I listened with interest to Lynne Jones. I am not sure that I agree with her recipes, but she brought her extreme concern and interest and her knowledge of the subject to the House, as she always does.

I hope that the Under-Secretary will make it clear that the Government understand two points that go beyond the central crisis in the pensions industry and which they have refused to acknowledge—they simply go on and on consulting. First, they must accept that the crisis in winding up is the red-hot tip of the crisis as a whole. Secondly, if they announce possible action and give detailed options that put extra burdens on companies but do not make their measures retrospective to the date of the announcement, they will worsen the problem, and thousands of people will suffer.

Will the Government unbundle this urgent issue from the rest of the package? We have made it clear what we think, and we are willing help them to take legislation through the House, if it is even needed; the central issue of priorities could be handled by secondary legislation. Will the Under-Secretary also address the point about retrospection?

The Opposition take our responsibilities seriously. We have repeatedly drawn attention to this issue. We have set out our views in black and white in the motion about what should be done about the central issue of prioritisation. We have even offered the Government every possible co-operation in taking swift action in the House to tackle the problem. When are the Government going to take action?