Pensions Policy

Part of Opposition Day — [15th Allotted Day] – in the House of Commons at 7:47 pm on 3 July 2007.

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Photo of Chris Grayling Chris Grayling Shadow Secretary of State for Work and Pensions, Shadow Secretary of State for Transport 7:47, 3 July 2007

Let me make some progress and then I will give way.

We should not forget that before the Prime Minister took office, as Chancellor he promised:

"I can give this pledge—fairness to the pensioners under Labour".

The very next year he imposed the ultimate stealth tax on pension funds, abolishing the tax credits on dividends, costing occupational pension schemes billions of pounds—an estimated £5 billion a year. Cumulatively, about £120 billion was wiped off the capital value of today's funds.

Then we had the unedifying sight of the Prime Minister, who has come to office claiming that he believes in transparency and openness—what a laugh that is—spending two years trying to prevent The Times from gaining access to the documents that proved that he knew all along about the damage that his policies would do. We know from the documents—I have copies here tonight—that Treasury officials advised the Chancellor that the tax change would cause a massive shortfall in pension funds. The advisers concluded:

"We agree that abolishing pension tax credits would make a big hole in pension scheme finances...the loss of tax credits would cost pension providers about £4 billion a year, growing over time with future dividends".

They also concluded that poorer pensioners would be hit hardest:

"The change would therefore lead to a reduction in pension benefits to the lower paid...Quite clearly any loss of pension could be difficult for someone with a small income to cope with."

The Prime Minister seems to have it in for the low- paid at the moment, because it is they who will end up paying the price for the decisions taken in this year's Budget—the tax increases that fall disproportionately on the low-paid. I will give way to Tom Levitt if he will tell me whether he supports the policy of targeting the low-paid.