Pensions Bill

Part of the debate – in the House of Commons at 4:35 pm on 2 March 2004.

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Photo of Adam Price Adam Price Spokesperson (Economy and Taxation; Education & Skills; Miner's Compensation; Regeneration; Trade & Industry) 4:35, 2 March 2004

I was not aware of that point—it is certainly interesting to consider pooling funds within the overall umbrella of support.

If the guarantee corporation is to be the model, there are clearly lessons to be learned from its current position. The situation in the United States is not dissimilar to that here. We have experienced what is called in the US a perfect storm—a fall in interest rates at the same time as a fall in equity markets and, on top of that, an economic downturn in certain mature sectors: in our case, manufacturing; in its case, airlines and steel. The doomsday scenario that is being mooted in the US is highly relevant to the pension protection fund. There is a danger that a run on major defaults will put pressure on the fund, which means that levies have to be raised. That in turn creates further pressure that is analogous to a run on a bank. I have been reliably informed that at least one major company with thousands of employees has a £1 billion deficit in its pension fund and is trying to hold off until April 2005 in order to fall within the terms of the provision.

If true, that is worrying. It raises the question whether there should be some form of support for the pension protection fund. Government-backed annuities would be an option, but there are problems with the annuity market, which has only two providers, one of whom is withdrawing from the market. Bond rates are currently unsustainable. Perhaps we should consider employing special Government-backed bonds at a rate of around 9 per cent. to create a sustainable future for the PPF; otherwise, we might find ourselves having the same debate some years down the line following the collapse of the PPF and similar suffering by many people.