I certainly do not think that the Government can be trusted but, more importantly, do the industry, consumers and the wider financial community trust them to get their ducks in a row and recover the £3.6 billion? Much was made of the Chancellor saying, "We've got to get all this money and get the deficit down, otherwise we might be re-rated," but suddenly we do not know where a key component of that-£3.6 billion-is coming from.
I mentioned that there will be a discussion group of stakeholders in the summer. The previous Labour Government considered reducing the annual allowance and all the other options. It is on the record in Hansard that the annual allowance proposal was rejected partly because it was less well targeted-as has been said, we wanted to focus on those who are able to pay most easily and without great pain rather than make the weakest pay more-and partly because of its complexity.
Another key point I wanted to make-I do not think it has been made clearly enough-is that primary legislation is necessary to reduce the annual allowance. The proposal in the Bill is half-baked. It gets rid of a system of gathering £3.6 billion and the Government are incapable of replacing it with an alternative. I object to the clause not just because of the discussion with stakeholders and the uncertainty, but specifically because section 282(2) of the Finance Act 2004 states that the annual allowance set by Treasury order must not be less than the preceding year. Given that the allowance is £255,000, it cannot suddenly become £30,000 to £45,000 without changing that legislation. Such a measure is not included in the Bill, which is another indication of how half-cocked the proposals are. We are discussing a Finance Bill now, but we would need another one before April 2011 to change that allowance. The proposal is incomplete and will mean uncertainty; it demonstrates ineptitude and incompetence; and it undermines confidence among industry providers and consumers. After all, we want more people to save with certainty, so that they have comfort rather than hardship in what we hope will be their long and happy retirements. This will undermine those prospects. People will be less likely to subscribe to sensible, robust pension schemes for the future.
The Government are giving themselves the power to repeal primary legislation by order without knowing exactly what will be put in its place. That is a half-baked approach. Amendment No. 60 calls for an analysis of "the likely impact". I tabled an amendment that was not selected, but it simply suggested that this clause should be scrapped. We have looked at the issue, and we know what the distributional impact will be, albeit not in detail. We know that the rich will be let off the hook, and more widely it will cause massive uncertainty about the future. There may also be a question mark over whether we can fulfil our financial obligations as set out in the Budget.
Towers Watson, which is a leading consultant on pensions, says that lowering the annual allowance to £30,000 would lead to tax charges for long-serving final salary scheme members. That means that employers would pull the plug on such schemes. That is not my claim, but that of industry experts. We have already seen across British industry the loss of reliable and robust final salary schemes. Towers Watson says that the changes will undermine final salary schemes because they will not be as useful in retaining staff if they have a tax bill attached. The Minister has not thought this through. If big employers have these final salary schemes, their staff stay with the company because they know that each year they gain a little more benefit, instead of going to a predatory competitor company.
Towers Watson argues that the Government can either introduce a simple system or a fair system, but not both. A rough and ready approach was fine when a few were worried about the annual allowance, but the Government's proposals would have an impact on hundreds of thousands of people. All the stakeholders will be running around wondering what the changes will mean for them and providers will wonder whether they should provide a different scheme. I mentioned KPMG before, and I will not go through all the consultants in terms of their support for my position, but KPMG says that the number of pension savers affected has widened from 2% to 10%. PricewaterhouseCoopers says that the level will need to be £30,000-as opposed to £30,000 to £45,000-to raise the £3.6 billion needed. The movement from £255,000 to £30,000 is a radical change and we are still consulting on it.
"Employers need certainty over the regulatory framework for pensions if they are to be remotivated to provide quality workplace pensions."
The Government's proposals are unfair, unclear, half-baked, fast and loose and a massive new multi-million pound bankers' bonus to pay back many of the people who put us in this mess in the first place. They are disgraceful and should be withdrawn.
Copy and paste this code on your website