Occupational Pensions

Business of the House – in the House of Commons at 12:12 pm on 22nd February 2007.

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Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions 12:12 pm, 22nd February 2007

With permission, Mr. Speaker, I want to make a statement on yesterday's judgment on the Government's response to the ombudsman's report concerning the security of final salary occupational pension schemes. Given the importance of the issue to many right hon. and hon. Members, I want to inform the House of the position that we have reached both in the light of that particular ruling and the decision last month of the European Court of Justice on the implementation of the insolvency directive.

The High Court yesterday made five rulings in its judgment. I want to take each in turn. Its first ruling was that the ombudsman was entitled, on the evidence available to her, to reach the conclusion that official information published on the minimum funding requirement for pension schemes was inaccurate and potentially misleading, and therefore amounted to maladministration. The Court particularly criticised the then Government's guide to the Pensions Act 1995, which was published in 1996. This, it concluded, gave the clear impression that following enactment of the new law, scheme members could be reassured that their pensions were safe whatever happened.

The Government had, in good faith and acting on proper advice, taken a different view from that of the ombudsman, on the basis that the leaflets concerned were not a full statement of the law and were for general guidance only. However, we clearly now need to study the Court's ruling very carefully. In particular, we need to consider the possible implications across government of the Court's significant proposition, on which this ruling was based, that findings of fact made by the ombudsman are binding, unless they are flawed, irrational or peripheral, or unless there is fresh evidence.

The Court's second ruling related to the important issue of causation. The ombudsman had found that maladministration was a significant contributory factor in the creation of the financial losses suffered by individuals. She went on to argue that everyone who between 1997 and 2004 suffered losses on the winding up of their pension scheme was the victim of injustice because of maladministration. The Government had argued that that was not well founded. The Court found in favour of the Government on this point, describing that aspect of the ombudsman's report as "logically flawed and unreasonable."

The Court's third ruling rejected the ombudsman's finding that the Government were guilty of maladministration when they made changes to the pension scheme funding rules in 2002. It decided that the ombudsman's finding was not logically sound. In its fourth ruling, the Court also dismissed the claim that the Government's refusal fully to restore the pension entitlements of all affected scheme members was in breach of the European convention on human rights. The Court's fifth and final ruling concluded that I should reconsider the ombudsman's recommendation that the Government should consider making arrangements to restore fully the pension losses of the people concerned when their employers became insolvent.

In a clear sign of both the complexity and, yes, the importance of these matters, both sides have sought and been granted permission to appeal. We have not yet decided the precise grounds for such an appeal, but it is absolutely right and proper that we take time to study the judgment and consider its implications in detail.

The judgment of the European Court of Justice in January on the implementation of the insolvency directive has an important bearing on the issue of financial redress for those who have lost some or all of their pension entitlement. The decision of the European Court of Justice effectively requires the Government to reconsider whether the present arrangements offer sufficient protection for people's pensions when their employer becomes insolvent. The European Court of Justice has ruled that the system of protection that was in place before 2004 did not comply with the terms of the directive, even taking account of the subsequent introduction of the financial assistance scheme, albeit before its 2006 extension. We are already reviewing the financial assistance scheme with that finding in mind. It is now for the High Court to be asked to decide whether damages for breach of the directive should be paid, taking account of the steer apparently given by the European Court of Justice that damages may not be payable.

The Government have already acted to provide substantial financial assistance to people who lost pension rights when their employers became insolvent. The financial assistance scheme, supported by £2.3 billion of public money, has been set up precisely for that purpose. Throughout, we have always sought to ensure that those who have suffered the most should receive financial assistance to mitigate their loss. At the same time, we have sought to strike a balance with the interests of taxpayers, who cannot be asked to accept responsibility for effectively underwriting the total value of pension savings.

In considering the right way forward, we are always prepared to consider practical proposals from both sides of the House. I can confirm also that, so as not to add to their financial difficulty, we will meet the costs of the applicants in this case so far, together with the costs associated with our appeal.

People who have lost their pension rights in these circumstances have suffered a great deal. My aim will be to return to the House with our conclusions and our proposals for how we should proceed, and to do that before the conclusion of proceedings on the Pensions Bill.

Photo of Philip Hammond Philip Hammond Shadow Secretary of State for Work and Pensions

We welcome the tone at least of the last part of the Secretary of State's statement. We welcome in particular his announcement on costs. That was a great burden lifted from the shoulders of the claimants in this case and it reflects the public importance of it.

We accept that important issues of principle are involved where an ombudsman's findings are binding, and that they have implications across government that the Government will want to consider. However, my reading of the situation is that the clear view of the House is that the ombudsman is an Officer of Parliament and that her office is of no functional value if the Government can simply dismiss her findings when they do not like them.

The Government have been criticised for their handling of the crisis by four separate bodies—the ombudsman, the Select Committee, the European Court of Justice and the High Court. From the tone of the Secretary of State's final remarks, it seems that he might be getting the message at last.

The facts of the case are that 125,000 people who paid into occupational pensions, many of them because they were required to do so by law when they joined, have, following the failure of the schemes, lost their pensions in whole or in part, and that the schemes were not as safe and secure as Governments of both political parties suggested they would be. Therefore, people approaching retirement and, in some cases, people who retired early have found that their retirement plans are in ruins. They have been left high and dry.

The Secretary of State has said that the state cannot guarantee private pensions and he is right about that, but because of the creation of the Pension Protection Fund, the state does not have to. This situation cannot arise in future. It is a finite problem affecting a defined group of people. There is a palpable sense of an injustice being done. That sense is shared, I believe, on both sides of the House, in large sections of the media and in the country at large. The Government simply cannot ignore the view of the House of Commons and the sentiment of public opinion. I hope that I was correct in reading into the Secretary of State's final few paragraphs the indication that he is no longer intending to do that, because we as a society have to find a way forward to solve the problem. It has always been my view that the solution will not come through the courts. It has to be a political decision, based on cross-party consensus, with the Government taking a leadership role in building that consensus.

Let me make it clear that no one is suggesting that the Government should simply write a blank cheque with taxpayers' money. There are many other possibilities to be explored. My right hon. Friend Mr. Cameron invited the Prime Minister yesterday to set aside party politics and to seek to work together on the matter. I was pleased to hear what the Secretary of State said, and we are certainly ready to join him and all others in the House in trying to find a sustainable solution, based on the commitment of public money that has already been made through the financial assistance scheme, but also looking at whether better use may be made of the residual assets within the failed schemes, and whether we can make use of unclaimed assets within the financial sector to support a solution.

Is the Secretary of State prepared to commit his Department to doing some serious analysis of the real net costs of different levels of support to this group of victims, taking into account benefit savings and taxation, so that our debate will be properly informed?

The Government have now been told not once but four times that their response to the crisis is inadequate. There is a clear moral case for accepting a share of responsibility for the problem and for showing the leadership to broker a fair and affordable solution, but there is also a practical case. Pension saving is down and millions of people are making inadequate preparation for retirement. The Government rightly are determined to do something about that, but unless this issue is resolved, confidence in the pension system will not be restored.

We could seek to make political capital by promising that the next Conservative Government will sort the mess out, and we will do so if we have to, but many of the victims cannot afford to wait another two or three years for a change of Government, so if the Secretary of State is telling us today that he is prepared to work with us and others to find a solution that is affordable and sustainable, I welcome that and I assure him that he will find us ready, willing and able to participate in those discussions.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

May I give a general welcome to what the hon. Gentleman said in response to my statement? I think that it is worth pointing out one or two things to him and to his hon. Friends.

It is true that previous Governments have rejected previous findings of ombudsmen's reports. Anyone listening to the hon. Gentleman would probably conclude that this was the first time it had ever happened, and of course that is not true. Nor is it true to say that people have been left high and dry, which was the term that he used. I think that £2.3 billion of public investment in a financial assistance scheme certainly does not mean leaving people high and dry. We always made it clear that we were not in a position to compensate fully all the losses that people had sustained, and that remains our position.

In relation to how many people have received help, it is worth bearing in mind one important fact. We think that the financial assistance scheme will cover about 40,000 of those who have suffered a loss. Obviously, not all of them have reached retirement age yet, so it is ludicrous and fatuous to say that, because only about 1,000 people have received payment, the whole scheme is failing. That is not an accurate or fair interpretation of events.

On the hon. Gentleman's wider points about the financial assistance scheme, let me remind him of what I said in my statement about the European Court of Justice ruling. We are already looking at the adequacy or otherwise of the financial assistance scheme as part of our consideration of the implications of that judgment. He repeated the comments of the Leader of the Opposition yesterday. I made it clear in my statement that we are prepared, of course, to discuss these issues with the other political parties in the House. That is the right and sensible way to proceed.

On the hon. Gentleman's points about unclaimed assets, it is worth all of us keeping our feet firmly on the ground. Initial records searches by banks and building societies suggest that several hundred millions of pounds may currently lie unclaimed. There might be an annual income flow of about £10 million or £20 million, but that is not going to be an income stream on which we can rely to make the pensions commitments that he wants to make. As he must know, there is not a parallel between unclaimed pension assets and unclaimed assets in bank accounts. He must be aware of that.

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The £2.3bn is not the true figure, it is government spin. This is the cash figure over something like 60 years. The true cost of what has been provided in Net Present Value (todays money) is about £700m

The Ombudsman's recommendtions would cost around £3bn in todays money. This would cost about £70m per year and the net cost to the taxpayer would be lower because of tax that would be paid and benefits that would not be claimed. In any case the Ombudsman did not say tax payer's money has to b used, there are other alternatives (e.g. unclaimed assets, trust funds)

Submitted by Andrew Parr

Photo of Derek Wyatt Derek Wyatt Labour, Sittingbourne and Sheppey

Nearly five years ago I came to the House to talk about Andrew Parr, who was one of the people in court yesterday for ASW Sheerness. Hon. Members on both sides of the House have tried to have a debate about the matter. I am grateful for the statement. I think that we have accepted the moral argument, but we need to extend the money that matches the moral argument. That is what we are talking about now. Will the Secretary of State reflect on the unclaimed assets? When Ireland had the same problem, it proposed legislation to the Dail. The banks and building societies said that they had only £300 million, but I think £2 billion was found. We must have primary legislation. We will not find £300 million: I guess we will find between £5 billion and £8 billion of unclaimed assets. With the interest on that alone, we can deal with the issue. If there is to be an all-party group or some consensus, I would love to contribute creative ideas on how we can find that money.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

Obviously, we will look carefully at all those issues, and we have done so already. That was acknowledged yesterday by the judge in his ruling, but it is important that we all keep our feet on the ground. I know I have made that point, and I do not want to sound like a boring broken record, but I do not believe that there is a pot of gold that we can find to solve these problems. We should bear it in mind that these unclaimed assets belong to other people and the banks and building societies are trying to match the unclaimed assets with their rightful owners. We have to tread very carefully in going down that path. We are prepared, of course—we always have been—to look at those issues, but we need to maintain a common-sense view.

Photo of David Laws David Laws Shadow Secretary of State for Work and Pensions

I hope that the Secretary of State would acknowledge that refusing to accept the judgments of umpires is not a very attractive characteristic for sportsmen or for Ministers. Although I have never thought of him as a John McEnroe figure, he is showing a similar determination to ignore the successive decisions of the umpires in relation to pensions matters.

May I ask the Secretary of State about four issues in particular? First, I think that the position that he set out in the statement is that the Government, despite the strength of yesterday's ruling, have decided to appeal, even though they do not yet know the basis on which that appeal will be made. Is he really telling us that, despite the fact that the judge has decided that the Government acted unlawfully, and that the judge said in his ruling that no reasonable Secretary of State could rationally disagree with the view of the ombudsman on the leaflets that were issued before the Government came to power, he is proposing to appeal against that clear decision? That will distress the many people who thought that they had a clear judgment yesterday that the Government would accept.

Secondly, does the Secretary of State accept that, although he is correct to say that the judge indicated that one could not prove that every person who had lost a pension had read the forms that were referred to, we do not know the opposite? The risk is that, if we do not accept the general conclusions of the ombudsman, we will end up with each of the 100,000 individuals having to fight cases, which could take many years. Is that not totally unsatisfactory?

Thirdly, does the Secretary of State agree with the judge's ruling that the figures that the Government have given for the cost of compensation are not particularly accurate or helpful because they do not include the benefit and tax offsets? Is he willing to ask his colleagues in the Treasury to come up with a reliable estimate of the cost of extending the PPF level of benefits to those individuals? Does he agree that that is what they want, rather than more tinkering with the financial assistance scheme?

Fourthly, the Secretary of State said that his aim—I think he said "aim"—was to return to the House with his proposals before the conclusion of proceedings on the Pensions Bill. Does he accept that what Members want is for him to return with his proposals before Report stage of the Pensions Bill in this House, so that his hon. Friends and Opposition Members have a chance to decide whether the Government have come forward with an adequate response, and if this House is not happy with the Government's decision it will be possible to propose amendments?

Finally, does the Secretary of State agree that delivering justice sometimes has a price, and is it not high time the Government were prepared to pay that price?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I think that the hon. Gentleman prepared those comments before he had the opportunity to read my statement. I have made it clear today that we are carefully considering all aspects of the ruling in the High Court case. We have been given leave to appeal, but I have made it clear that we have not yet come to a decision on what the grounds for that appeal will be. That is in accordance with perfectly normal legal process in such cases, so the hon. Gentleman should not read anything into that. I am not in a position to give any further details today about what the grounds for the appeal might be, because they are still the subject of consultation between Ministers, and between the parties to the case.

On a more general level, we are considering every aspect of the ruling, but I get the strong sense from the hon. Gentleman that he wishes to pick and choose which aspects of the judgment he wants us to endorse, and which not. We are not in a position to do that.

I cannot promise the hon. Gentleman that I will be able to return to the House with proposals in the time scale that he mentioned. I will do my very best, but there are wider implications that I have to take into account, not least the current and ongoing litigation in relation to the European Court of Justice case.

We have been frank and open about costs. That was recognised by the judge in the Court yesterday—

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

It certainly was. The judge made it clear that the issue was presentational, not substantive, and that it did not affect the substance of the matter in any way, shape or form.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

If the hon. Gentleman is shaking his head, he needs to go away and look at the judgment, where those points are made in terms, as I have outlined to the House today.

Photo of Terry Rooney Terry Rooney Labour, Bradford North

I thank my right hon. Friend for his statement, and particularly for his comments on legal costs; that has all been very helpful. However, will he confirm the following two points: that the insolvency directive came from the Commission in 1980, and also that the European Court of Justice judgment relates to the first financial assistance scheme and the £400 million, not the revised scheme?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I am grateful to my hon. Friend for his initial comments, and I can confirm that he is right in respect of the ECJ case.

Photo of Mike Penning Mike Penning Conservative, Hemel Hempstead

I thank the Secretary of State for his statement, and for the Government's considerations on the money, which will help in respect of the compensation and the court costs. However, in my constituency there are almost 700 Dexion workers—as the Secretary of State knows because he has met a delegation of them—and they will be deeply disappointed that there is to be more delay. They thought that after the Court ruling yesterday the matter would have been settled—that the judgment would be simple and the money would come forward. Will the Secretary of State expedite as fast as possible his thought processes and the conclusions he reaches, because those people are dying, and there are fewer of them now than there were a year ago? It is shameful that they have been left in their current position?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I agree with a great deal of what the hon. Gentleman has said. I can assure him and the House that we will certainly not kick this issue into the long grass, and that I will come back to the House with proposals as soon as is practically possible.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

I welcome my right hon. Friend's statement and the approach that the Opposition spokesman has now adopted. It is very important that we take a long-term view that creates cross-party consensus on this matter. I was one of those who argued in the 1980s that the Lawson Budget, capping surpluses, would create long-term damage, and I was right. Such matters must be looked at in the round. It is great that the courts have dealt with some of the issues as they have, but Members have got to find a long-term solution that avoids our making the same kind of mistakes in the future as Nigel Lawson made in 1986.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I am grateful to my hon. Friend for what he has said, and for his support. I just want to repeat to him and all other Members that we are doing our very best to find a sensible way forward in relation to these issues.

Photo of George Young George Young Chair, Standards and Privileges Committee, Chair, Standards and Privileges Committee

I welcome the tone of the Secretary of State's statement, but does he agree that there is still a risk that this issue will escalate from a dispute between his Department and the occupational pensions authority into a dispute between Parliament and the Executive, because he has so far refused to accept the recommendations of the ombudsman and those of a Select Committee of this House? In order to avoid such a confrontation, will he give an undertaking that he will put whatever proposals he comes up with before the House for approval?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

It is certainly likely that if, and when, proposals are brought forward, there will be an opportunity for the House to vote on them. [Interruption.] The question of when that will happen has been asked from a sedentary position. I understand that amendments to the Pensions Bill dealing with the issues that we are discussing today have already been tabled, so I am confident that the House will have an opportunity to vote on them.

Photo of David Winnick David Winnick Labour, Walsall North

I recognise the difficulties and concerns that the Government must have in respect of how public money is spent, but can I explain to my right hon. Friend one case involving a constituent of mine—although I know that there must be many such cases? My constituent was told in 2001 by the Armstrong Group pension scheme that when he retired he would receive a pension of £10,380. He is due to retire next month, and he is now due to receive just £2,529 a year. I ask my right hon. Friend to imagine what he and his wife must be feeling about having to live in poverty, as opposed to receiving the more substantial amount that they had hoped for. Let us imagine that we, as Ministers and Members of Parliament, were faced with the sort of acute problem that my constituent and many others involved in the failed Armstrong Group pension scheme are facing? How would we feel? I hope that it will be possible for the Government to look very sympathetically on such cases.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

We shall certainly try to do so. I do not think that the issue is whether compensation or financial assistance should or should not be paid. We have already put in place a financial assistance scheme. Eventually, the issue that the House will have to consider is whether the scheme needs to be expanded in any way. That will be the focus of our proposals, when we bring them forward. However, the situation is as my hon. Friend has outlined: there are cases of genuine hardship and we have always tried to make sure that those in greatest need got the greatest help.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Does the Secretary of State not agree that the delay that we are now experiencing is as painful as any failure to get matters right in the beginning? Does he not also agree that the signal he is sending—for example, to those waiting for the outcome of the ombudsman's Equitable Life inquiry—will lead to people thinking that that might be overturned too, which would mean further inordinate delay, even after the many years that they have been waiting? Does the Secretary of State not realise that it is crucial that we now have closure on this issue, on an equitable basis and as fast as we can get it?

Photo of Tony Wright Tony Wright Labour, Cannock Chase

I welcome very much what my right hon. Friend has said today, and the way in which he has said it. However, does he not agree that there can no longer be any question but that the ombudsman was right to say that the information that Governments of both parties had produced was misleading, and that that was maladministration? Can we clear that question out of the way now? Secondly, my right hon. Friend said that there had sometimes been disagreements between Governments and the ombudsman in the past, and that is true. However, in every past case this House has insisted that there should be a satisfactory resolution of the difficulty. Is it not unfortunate that it has taken a judge to ensure that that will happen in this case?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I thank my hon. Friend for what he said at the beginning of his question. As I have said, because we are still considering the grounds of appeal, I am simply not in a position today to give him the clarity that he seeks on his first point—nor will I be able to do that if anyone else asks me the same question through another route. The wider issue of compensation will now be the focus in our full and proper consideration of the implications of this judgment. It is clear, however, that this case has generated issues of great legal complexity and, yes, of constitutional significance. It is right and proper in those circumstances, and given that I have been able to share the terms of the judgment with Ministers only since yesterday morning, that they collectively take a proper view of where we should take this case in future.

Photo of John Redwood John Redwood Conservative, Wokingham

When I was a Department of Trade and Industry Minister, I had an adverse finding of maladministration regarding Barlow Clowes regulation, and I had no hesitation in paying compensation. How much have this Government so far spent on advice, civil service time and legal fees, how much more are they going to spend on legal fees, and should not that money go to the people who are suffering?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

It might be important for the record to say that the right hon. Gentleman actually rejected the ombudsman's findings in relation to Barlow Clowes.

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Yes, they did, but they paid the recommended compensation to Barlow Clowes investors "out of...

Submitted by Andrew Parr Continue reading

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe

I welcome my right hon. Friend's commitment to reconsidering the position of those who have lost pensions because the firm that they worked for has gone into liquidation, but will he also consider a related group of people? I and representatives of the Tinsley Bridge pension scheme recently met the Minister for Pensions Reform. That pension scheme was wound up to avoid forcing the firm into liquidation, but people lost their pensions as a result. The scheme therefore cannot join the Pension Protection Fund, but because the firm is not in liquidation as a result of the action taken by the pension trustees, those potential pensioners are not eligible for help from the financial assistance scheme. However, because of the improved conditions of that scheme, the pension trustees might be under a perverse legal obligation to put the firm into liquidation, thereby causing the loss of hundreds of jobs, in order to get that assistance. Will my right hon. Friend look at that issue when he considers those who have lost their pensions because their firm has gone into liquidation?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I am grateful to my hon. Friend for raising that issue, which has been raised by a number of Members in all parts of the House. These are matters of real complexity and we are trying to find a sensible way forward. The Minister for Pensions Reform, whom my hon. Friend recently met, will write to him shortly in dealing with some of the issues that he has raised.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

One problem that we all face is the huge gulf in the figures quoted. Campaigners say that the cost of reimbursement is £4 billion over 60 years, peaking at £100 million a year, but the Government say that the cost is £15 billion. Has the Secretary of State considered the possibility of an independent assessment of the true cost, so that Members can at least know what they are talking about in this regard? Does he not also agree with Joe Harris of the National Pensioners Convention, who said:

"The real issue arising from this case now is the need for a bigger basic state pension to be paid to all in retirement that is guaranteed and secure."?

Is it not time to think about a citizen's pension?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

No, it is certainly not time to look at a citizen's pension, because the costs would be completely unsustainable. They would certainly be unsustainable if the hon. Gentleman got his way and imposed such a profligate policy on the poor innocent taxpayers of Scotland, so I would not recommend going down that route. On the figures quoted, I agree that it is important to have a common language in dealing with this issue, and we have tried to present our findings and our view of the cost of the financial assistance scheme in real and genuine terms, and on the same basis as the Government produce their financial accounts generally. It is therefore not true to say that there has been any sleight of hand. The judge makes clear the difference between the £3 billion and £15 billion figures. One figure is net present value and the other is cash—it is all cash—and that is how the Government produce their accounts. The difference is important as a matter of presentation, but it is

"not, in truth, a difference of substance".

Photo of Julie Morgan Julie Morgan Labour, Cardiff North

I welcome my right hon. Friend's statement, particularly his concluding remarks, and I hope that there will soon be an end to the misery that so many of our constituents have experienced. I am thinking in particular of the 800 Allied Steel and Wire workers from Cardiff who lost their jobs, some of whom also lost all their pension. I hope that they can sleep soundly in their beds, confident that the Government are going to come up with something good for them. Is my right hon. Friend aware, however, that there are people in my constituency who have worked for 30 years and paid in dutifully for 30 years, as the Government advised, but who have ended up with absolutely nothing under the present financial assistance scheme arrangements? Will he take them into account when he makes his statement to the House during the passage of the Pensions Bill?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

We are looking at all these issues in the context not only of yesterday's High Court ruling but, most importantly, of last month's ruling of the European Court of Justice.

Photo of Julie Kirkbride Julie Kirkbride Conservative, Bromsgrove

I was pleased to hear the Secretary of State recognise earlier that some of these people now face severe financial hardship as a result of the loss of their pension savings. Sadly, a number of my own constituents lost their pension savings in the Kalamazoo and United Engineering Forgings schemes. They will of course be disappointed that today is not the end of the road, but they will be a little relieved to hear that they will not be picking up any further costs. Will the Secretary of State reflect, however, on what my hon. Friend Mr. Hammond said earlier? While the high-profile issue of people having lost their private pension savings remains in the public eye, it sends a terrible signal to the many millions of our fellow citizens who are wondering whether the same thing might happen to them.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I agree that that is not good, but the hon. Lady needs to reflect a little more on, for example, the Pension Protection Fund offers for cases going forward. We have taken the right course of action in setting up the PPF, which offers a very high and proper level of protection, so people can have confidence in their pension savings going forward.

Photo of Richard Burden Richard Burden Labour, Birmingham, Northfield

I welcome my right hon. Friend's announcement, particularly what he said about costs, which, as he knows, is an issue that I have raised on a number of occasions; it is very good news that the Government will pay the costs. I am one of those who think that the Government had a genuine motive in introducing the financial assistance scheme to try to ameliorate the losses. However, the problem has been not just one of resourcing, because the scheme does not address the fundamental issues that have been obvious to MPs, that are dealt with in the ombudsman's report and that underlie the logic of the Pension Protection Fund. Will my right hon. Friend introduce, with some dispatch, proposals that resolve this issue and do not create further uncertainty down the line, so that my constituents who worked for Kalamazoo and others do not have to experience hardship for much longer?

Photo of Desmond Swayne Desmond Swayne Parliamentary Private Secretary To the Leader of the Opposition

The Secretary of State has rejected criticism of the FAS on the basis that a mere 900 payments have been made so far, saying that such criticism rests on unwarranted assumptions. Can he therefore put in the public domain the figures telling us exactly how many of the sample who are eligible for assistance from the FAS have reached retirement age and secured payments?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

We have already done that in answer to a question from the hon. Gentleman's boss, Mr. Cameron.

Photo of Andy Reed Andy Reed PPS (Rt Hon Dawn Primarolo, Paymaster General), HM Treasury

I thank my right hon. Friend for his statement today, and particularly for its tone. Opposition Members seem to have shifted their tone as we try to find a workable solution for people such as those suffering after the collapse of the British United Shoe Machinery scheme, who are not eligible for the FAS as it stands. Will my right hon. Friend introduce his proposals in such a way that we can get a consensus on cost? That outstanding problem is preventing us from making progress, in that we seem to be unable to guarantee an annual figure. Will he also ensure that the scheme is extended to cover those who are not currently covered? They feel betrayed, in that others are being compensated while they are not. Will he also examine every possibility of generating such income from other sources, not just from the taxpayer?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

We will try to do all the things that my hon. Friend has suggested. We will certainly continue to look at other sources of funding, but as I said in my statement and in response to other questions, my own view is that we will find it very difficult to find substantial sums from sources other than general taxation. That discipline should apply to all parts of the House as we—I hope—reach a conclusion on these matters.

Photo of Bill Cash Bill Cash Conservative, Stone

May I congratulate my constituent, Richard Nicholl, and other brave members of the Pensions Action Group? Some 5,000 people are members of some 20 schemes run by solvent companies, and that is the difference. As I understand it, from 28 February those people will not be entitled to compensation even if the companies in question become insolvent after that date. Subject to what the Secretary of State has to say, I would have thought that that was grossly unfair to my constituents and to others. In the light of the Court judgment, what will the Government do about that? In any event, I am glad to say that the Minister for Pensions Reform was good enough to see Mr. Nicholl and me recently about the issue.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

The hon. Gentleman has raised an important and serious issue about the deadline for FAS applications by the end of this month. We are looking again at that in the light of recent decisions by the Court. We hope to be able to be clear to hon. Members about future arrangements.

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

I welcome the fact that the Secretary of State appears to have shifted his attitude and policy on this issue. Is he aware that I represent many of the Albert Fisher pensioners? Most of them are in their late 50s and have lost on average 25 years' worth of occupational pension benefits. When they eventually reach retirement age, the FAS will give them less than 50 per cent. of their expected pension, so obviously they are still very angry. Further to the question asked by Mr. Weir about the overall cost, will the Secretary of State elaborate on his answer? Surely from the £15 billion must be deducted the cost of benefits to constituents such as mine, and, indeed, the tax that they would pay if they received a bigger pension.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

It is very difficult to quantify the figures with the degree of precision for which the hon. Gentleman and others have asked. That has been true from the beginning, and we have not tried to hide the fact that these are estimated figures. It is also worth remembering that the judge said that on any view these are large sums of money. We will not find a sensible way forward on this if people keep bandying sums of money around and claiming that they are affordable. We have to find the money, and the only sensible place to find it from is general taxation. That is a very significant issue, which we must all consider as we think about the right way forward.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

Like many Members, I welcome the Secretary of State's tone, but the issue is more one of trust than tone. Our constituents must be wondering if the Government will ever admit that they are wrong. The Secretary of State has said that he has not yet decided on whether to appeal, but the precise wording of his pre-prepared statement reads, "We have not yet decided the precise grounds for such an appeal." That is the complete sentence, and it suggests to me that despite his contrite tone today, the Government are set on carrying on the misery and suffering of so many people who have simply paid into a pension for security in old age.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I am sorry that the hon. Gentleman has come to that conclusion, because it is a million miles away from the truth. We have sought and been granted leave to appeal, as have the other side, and to take the case to the Appeal Court. What we have not done yet—I hope that I have been clear on this point today—is decided the grounds of that appeal. These issues have to be resolved and we have to take a sensible view, given the complexities involved. It is clear from the hon. Gentleman's remarks that he does not really understand the complexities of the issues.

Photo of Justine Greening Justine Greening Vice-Chair (Youth), Conservative Party

Many young people, some of whom will be in the Public Gallery now, will be listening to this exchange and wondering what is the point of starting a pension. Does the Secretary of State agree that the longer-term cost to the economy of young people not setting up pensions will be far greater than the cost of damaging trust by not compensating people who have saved and then lost everything?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

Again, it is not true that no financial assistance has been made available to people who have lost out in those circumstances. The hon. Lady is a member of the Work and Pensions Committee and she should know that. Such comments are unlikely to boost confidence for savers in the future. She too has a responsibility in these matters, and I am afraid that today she has failed to discharge it.

Photo of David Burrowes David Burrowes Conservative, Enfield, Southgate

Would it not be exceptional for the Government not only to reject the findings of the ombudsman and the Public Administration Committee, but to appeal and reject the findings of irrationality concerning the first recommendation of maladministration by the ombudsman? As welcome as the Court judgment is, is it not a sad day for Parliament that the Government may well be obliged to accept the Court's judgment of maladministration, rather than having properly respected the role of the ombudsman, and indeed of Parliament?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

It is precisely the complexity and constitutional dimensions to the case that have now to be resolved, because it is in a judicial setting. As a lawyer, the hon. Gentleman should know that. There is no easy or fast-track way through this. Nor is it true to say that it is not right and proper for a Government to consider exercising a right of appeal. The hon. Gentleman is a lawyer and he may have acted for Government Departments in the past. He must understand that it is entirely proper for the Government, in some cases, to exercise their right to appeal to a higher court for a ruling.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

I welcome the fact that the Secretary of State is looking to review the financial assistance scheme. Some of the most difficult cases include some of my constituents who were involved in the APW scheme. Those under the age of 50, but close to it at the key point, some of whom had transferred substantial sums from other pension schemes into that scheme, are still facing losses of more than 80 per cent. of their previous pension entitlement. Can he assure the House that such cases will be taken into account in the review?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I can give the hon. Gentleman that assurance, because we will consider all aspects of the financial assistance scheme in the light of the recent ruling by the European Court of Justice.