I beg to move,
That, if proceedings on the Retirement Income Reform Bill are not completed at this day's sitting, the Committee do adjourn to a date and time to be fixed by the Chairman.
I have deliberately constructed the sittings motion in that way because it is my earnest hope that the Committee will complete its deliberations today. Unless someone particularly wants to prolong them, I trust that we shall be done and dusted later this afternoon.
Before I discuss the Bill and the amendments, I want to thank you, Mr. Atkinson, for taking the Chair. I trust that you will find our deliberations interesting and efficiently conducted. I also thank the Economic Secretary for taking the place of the Financial Secretary, who is, I believe, on maternity leave. Parts of the Bill deal with gender neutrality, and I look forward to hearing whether the Government are interested in gender equality in the provision of annuities. I am reasonably sure that the matter is of interest to all members of the Committee.
I thank members of the Labour party who are not members of the Government for taking part in our proceedings. People have become interested in pensions for many different reasons, although the Bill obviously deals with only a small part of the country's huge pensions crisis. None the less, all of us can, irrespective of our party political allegiances, share the aim of improving choice in pension provision. We can give those who are about to retire and those who will retire in the decades ahead greater independence in providing for their retirement, at a time when it is becoming increasingly difficult for people to be sure of their pensions.
I thank my hon. Friend the Member for Arundel and South Downs (Mr. Flight), who, with the Minister, has been battling through the Finance Bill for several weeks on the Floor of the House and in Committee. I am grateful to him for giving up the time to assist us with our deliberations. I also thank my other hon. Friends for their assistance today.
The Bill has all-party support and it achieved a majority of 101 in the Second Reading vote on 7 March. It therefore has the support of the House of Commons. The Government told us that the Hunting Bill had the support of the House and that it should not, therefore, be delayed on its way to the House of Lords. I ask the Committee to bear that in mind when we consider the Government's amendments.
As I said, the Bill has all-party support, and there are some long-standing friends of the pensions issue on the Labour Benches today. The right hon. Member for Birkenhead (Mr. Field) cannot be here, but his support is hugely welcome, as is that of other Labour Members
of the Committee. I thank the hon. Members for Twickenham (Dr. Cable) and for Sheffield, Hallam (Mr. Allan), who are Liberal Democrat party members, for being here today. Their presence demonstrates that the Bill has third-party support.
My hon. Friends and I have tabled only two amendments, which can be dealt with in a matter of minutes. I trust that we can discuss the Government amendments in a warm-hearted and constructive way, although it is my submission that they are designed to destroy the Bill by removing its building bricks. Were they all to be passed, the Bill would not exist as it did when the Commons considered it on Second Reading on 7 March. I therefore stress that to agree with the Government's amendments would be to disagree with the House of Commons on Second Reading—but of that, later.
I trust that the sittings motion is uncontroversial, and I repeat my thanks to all those who have come today.
This is an unanticipated role for me. It is therefore an unexpected pleasure to serve under your chairmanship, Mr. Atkinson—your reputation for firmness and fairness goes before you, so I look forward to the Committee's proceedings.
I offer my congratulations to the hon. and learned Member for Harborough (Mr. Garnier). Coming so high in the private Member's Bill ballot is both a singular stroke of luck and a singular responsibility, and in some ways presents a singularly difficult decision on what provisions to introduce. However, I gather that the Conservative party's view of the measure may have made that decision slightly easier.
As the hon. and learned Gentleman knows, the Government are concerned about both the principles and the technicalities of the Bill, some of which we shall deal with today. However, I accept that the hon. and learned Gentleman has chosen a Bill on an issue that is important to millions of people across Britain, so I pay tribute to him for that.
As my hon. Friend the Financial Secretary made clear on Second Reading on 7 March, before she took maternity leave, the Bill is in many ways an exact replica of the Bill that the right hon. Member for Skipton and Ripon (Mr. Curry) introduced last year. Many of the deficiencies that became apparent during the proceedings on that Bill have not yet been corrected in this Bill. My hon. Friend made it clear that the Government have serious concerns on five fronts: the cost to the Exchequer; the restriction of choice for the vast majority of pensioners, albeit with extra choice in certain directions for a rather privileged few; the impact on gilt markets; the compulsory introduction of unisex annuities, and the fact that the Bill's approach and principles conflict with the Government's desire to see a much more flexible approach to retirement in future. We shall deal with some of those problems today through the amendments, although some we shall need to tackle later.
The discussions that I have had with the hon. and learned Member for Harborough have been welcome
and I understand entirely and accept the reason for the sittings motion. I have made it clear to him that this afternoon that I shall seek to make only the points that are necessary for proper scrutiny and examination of the issues. I hope, given his plans, that adequate time will made available on Report—unhindered by discussion of other matters—for us to debate the Bill. On that basis, I am content with the sittings motion.
I confirm my support for the Bill, which is a successor to Bills that were introduced by the right hon. Member for Skipton and Ripon and the hon. Member for Bournemouth, West (Mr. Butterfill). The principles behind it are sound and enjoy wide support.
I wish to make a couple of topical points that underline why the matter is so important. I spent much of this morning reading the paper on age discrimination that has been produced by the Secretary of State for Trade and Industry. It is welcome, if a little late, and looks to a future in which people will be encouraged to work to 70 and beyond, with flexible retirement options, and arrangements that ensure that their pensions are not damaged. It recognises that we are an ageing population and that people can work longer, and introduces a greater flexibility that will, incidentally, bring a large windfall to the Treasury through extra tax income. If retirement arrangements can be flexible, the question posed by this Bill is why can we not have more flexibility in the age of annuitisation and the compulsion associated with it?
Does the hon. Gentleman accept that there is implicit in the Secretary of State's announcement that people might have to work until they are 70 an admission that the state will not be capable of providing people with pensions from 60 or 65, so they will be required to work for longer?
Yes. The hon. and learned Gentleman makes a valid point. I was not using the intervention to develop a critique of the paper, but to underline the fact that there is broad acceptance that we are moving into a world in which people work longer and pensions are taken on a more flexible basis. Therefore, we need to consider annuities afresh.
I have not studied the paper, but I am sure that the intention is to give people more freedom to work should they wish, rather than to compel them to work beyond the current retirement age of 65.
That is right, and I am sorry if I gave the wrong impression. It is a positive development. It should be about working voluntarily and flexibility in retirement. That is why we have to address one of the few areas of compulsion that remain—compulsory annuitisation with a rigid age limit. That strikes me as being the purpose of the Bill.
My second topical point is that yesterday some of us were caught up in the latest flurry of argument about Equitable Life. Among the many individual hardships that have been experienced, some of the most severe have been those of the annuitants. Unlike many of the investors, who have had a choice about
where to invest their money, they have been required by law to invest in a certain way; they have had no flexibility and no escape. The compulsion associated with those annuities has meant a particular degree of hardship for them. Those who are tempted to defend the system that makes annuities compulsory and to block any reform should remember the experience of those people. With those two comments, I add my support to the efforts of hon. Members to proceed with the Bill.
I hope that the Minister will have the good sense to make clear the logical framework of the Government's amendments. No doubt he realises that virtually half the population is waiting to know how the Government will address the many worsening problems in the pensions area. I echo what has been said by the hon. Member for Twickenham. People have been locked into Equitable annuities; for many practical reasons, they have not been able to move from one provider to another. Although the opposite should be the case, a large proportion of the population is reducing its private sector savings for pensions. Major reasons include people's fear of being locked into an annuity provider that might go bust, or of having to buy an annuity when they do not want to and, in the case of those who have chosen to be frugal, of not being able to pass on their pension savings to their children.
At the same time, however, a massively increased subsidy is going from the taxpayer to public sector pensions because the unfounded liabilities of public-sector employees have exploded. According to the lowest discount figure—the yield on index gilts—they are £250 billion; discounting at a yield equivalent to that used in the private sector, they are £500 billion. They have exploded. They are a liability on every taxpayer. In essence, the public sector—the taxpayer—is footing the bill for everything that has happened in the private sector. There is a major crisis, and as a result a major swing to money purchase pensions; and there, whamming one in the eye, is the annuity issue.
Two years ago, the Government produced a paper that included one or two minor but sensible proposals. The data on what one could buy for an annuity was cooked, because it assumed that, upon retirement, everything was in gilts, which of course is never the case with money purchase pensions. The latest data shows that what you can buy with an annuity has halved in real terms over the past five years.
A huge problem is waiting to be addressed; candidly, it is time that the Government got off the pot and addressed it. I very much hope that our deliberations today will not be simply playing silly games by trying to wreck a Bill; we all know that is not perfect, but it at least tries to make a start in addressing the problem.
Question put and agreed to.
That, if proceedings on the Retirement Income Reform Bill are not completed at this day's sitting, the Committee do adjourn to a date and a time to be fixed by the Chairman.