Queen's Speech — Debate (3rd Day)

Part of the debate – in the House of Lords at 7:00 pm on 8th December 2008.

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Photo of Lord Patten Lord Patten Conservative 7:00 pm, 8th December 2008

My Lords, I shall continue, albeit I suspect not seamlessly, the exact theme of the noble Baroness, Lady Hollis of Heigham, as though it had been choreographed by the Whips' Office, which decides who should follow whom. My words are to deal with those who are on the other side of the picture—savers—from those on whom she quite properly concentrated; that is, some who are in difficulty and the position of women in particular. I do so declaring my financial and business interests as listed in the Register and noting the forthcoming banking Bill, due for Second Reading soon in your Lordships' House.

I shall discuss only savers and the plight of some of them in relation to our present economic affairs. In doing so, I should inform the House that I have never had, nor do I intend to have, any active role professionally in fund management provision, from the pitch of which the noble Lord, Lord Myners, had the great good sense to walk away some years back in rosier times. I particularly welcome his presence in the Government—I say that in a bipartisan way—as someone who understands these matters. We should all listen with care to what he says. That is enough compliments.

The deserving saver, rather like the deserving poor in Victorian England, faces a terrible prospect as we move from what the profession of economists—for once ungloomy, momentarily cheering up—taught us to think of as the great moderation or the age of Goldilocks economics. Beware, my Lords, of cheerful economists. It seemed then that people could save their bowl of porridge and eat it as well. Spending did not have to be sacrificed to build up savings as the seemingly unending spiral of house and other asset prices underpinning it created a cosy sense that most people were saving enough.

Today, the picture is suddenly very different. Savers, in particular older pensioners, face a nuclear winter of declining returns as interest rates race to the bottom. That is a fact of life for older pensioners in this country. As one of pensionable age murmured in my hearing the other day, "Look, my taxes are now being used to bail out the high-street banks at a cost that my children and grandchildren will have to pay off"—a situation going on as those interest rates race to the bottom. "Now I also face the prospect, like the Japanese did a few years back, of maybe having to pay a fee to the same banks for simply parking my cash in their safes as well".

For anyone who has been a hard working saver, determined to stay solvent rather than following the "spend now and pay much later than you thought was necessary" policy that, alas, has been new Labour's drumbeat since 1997, the price of personal prudence has been terrible. However, with the United Kingdom generally in such a terrible mess, we have to try, where and when we can, to pull together to get us out of it in a bipartisan way if at all possible.

In that spirit, I have three short-term suggestions for the Minister for what could reasonably be done by the Government, as they struggle to deal with a liquidity crisis that could easily turn into a solvency bombshell for our banks if property defaults take hold this year and next in the way in which some fear they might—that is coming down the track.

The first is to recognise the urgency of the need, while present market conditions continue, to suspend the rule that those with pension funds must buy an annuity by the age of 75, for just as the funds of an individual or couple who have pursued the most risk-averse investment strategies available have lost a huge amount of their value—30 per cent, 40 per cent, 50 per cent or more—so will their pension prospects take a commensurate hit under the present annuity regime. That is a cruel demographic penalty imposed on those who happen to have been born in the early 1930s. It is hardly fair, and fairness is one of those matters which the right honourable gentleman the Prime Minister said he wished to make central to his legislative programme this year.

Secondly, I hope that the Government, supported by all opposition parties including my own, will regularly reassure those who are carrying on saving for their pensions that the tax treatment of those pensions will not change; in other words, that they will carry on encouraging people to continue saving in difficult, adverse and challenging conditions. Such reassurance matters. The Minister may wish to recognise that the general public sometimes believe what politicians say, particularly when politicians of all parties say it more or less at the same time in the same way. That is a commitment that I look forward to from both him and my noble friend Lord De Mauley in his speech.

Thirdly, when money put into gilts, cash or money-market funds yields such pitiful returns at the same time as good companies need that cash, we need to encourage people to think about investing more in shares and corporate bonds, having assessed the risk not just of doing it but of not doing it. My noble friend Lord Tugendhat, who is momentarily not in his place in front of me, said more than I need to say about the pressing need to raise the cap on ISAs. It has been stuck at £7,200 for too long; £10,000 would be a good starting place, just to give that signal to people that we collectively in the political community wish them collectively in the savings community to continue saving.

I think that there would be bipartisan support for those three modest measures, but it is a bipartisan approach that should be encouraged by political realism—the fact that there are more savers than borrowers in this country. It is the savers who tend to belong to those age groups from which the voting classes come and turn out on polling day to vote. Anyone who ignores savers in the run-up to the next general election will reap their own electoral whirlwind.