This is an innocuous-looking pair of amendments. Amendment No. 272 would remove two words from the clause and replace them with one word. I am sure that the Minister will congratulate my hon. Friend the Member for Ayr (Sandra Osborne) and me on its simplicity and elegance, and accept it. The Committee must consider it in conjunction with other amendments that we shall discuss later, when we reach clause 98.
The aim of the amendment is to achieve justice for people who have lost the final salary pension schemes that they were promised. Although it is small, I intend to discuss the issue in some depth as we debate it. That is appropriate now, Mr. Cran, because the amendment would allow the Government to pay money into the pension protection fund to assist people who have lost their final salary occupational pension schemes. The Bill is designed to assist such people in future, but the amendments would make it possible to provide compensation for those who were affected before the introduction of the Bill.
It is probably best to explain what the amendments would achieve technically. Clause 90 allows the Secretary of State to pay grants to the board of the pension protection fund. However, those grants may not cover the cost of providing benefits out of the PPF or the fraud compensation fund. Those benefits must be paid for from the levy introduced under the Bill. The clause is authorised by the money resolution, and in particular by the Ways and Means resolution, which has been interpreted as permitting the raising of money for the purposes of the pension protection fund only, but not for the purpose of any additional fund created especially to deal with prior claims.
The amendment would allow the Secretary of State to pay grants to the board of the pension protection fund to meet claims for compensation. Taken in conjunction with other amendments, it would restore benefits for members of schemes that are in wind-up on the appointed day, or have already been wound up. The costs involved for schemes that go into wind-up after the appointed day would be met out of the levy as
contemplated under the Bill, which is what later amendments would achieve. If accepted, my rather innocuous-looking amendment would therefore have massive ramifications affecting the pension protection fund.
I make no apology for dealing in some depth with the issue, which is one of the key issues in the Bill, nor for repeating the story of hard-working honest citizens, who made the fateful and unforgiving error of trusting their employers, and the state, with their final salary occupational pension schemes. They put their money in on the basis that those schemes were guaranteed—a word that appeared throughout the literature that they were given about the schemes. That word was used legally by employers and by Governments and their agencies in that literature.
I will not repeat the examples that I gave on Second Reading from the leaflets that people might have consulted to discover whether their final salary occupational pension schemes were safe. Those leaflets contained assurances from employers, Government agencies, the equivalent of the Department for Work and Pensions, and so on.
My interest in the matter has been triggered by the now well known case of Allied Steel and Wire, which affected my constituency. I will not repeat any of the stories of personal hardship that have arisen from the insolvency of the company and the winding up of its final salary pension scheme. The workers, who in many cases had worked for the company for decades, found that their final salary pension schemes and comfortable, reasonably secure retirements were snatched away from them. That happened for a number of reasons, one of which was the flawed nature of the Pensions Act 1995.
It is wrong to blame the people involved for trusting their employers and the state, because many of my constituents had little choice. Governments of all political strands permitted compulsion by the employer; they allowed employers to force workers to join final salary pension schemes as a condition of employment, and did not permit them to join any alternative scheme. In 1988, that requirement was finally relaxed. However, many of those most severely affected joined their final salary pension schemes well before that date, and had often been subject to that compulsion.
How is it that 60,000 people can find themselves with a so-called guaranteed pension that is not worth the paper it is written on? The amendments are needed to put that right. If we look back at the Standing Committee debates on the 1995 Act, we see how the situation came about.
That Act had its genesis in the Maxwell scandal. It appears that nobody at that time envisaged that a situation could arise in which these amendments would be needed to allow the state to compensate people. As far as I can ascertain, no one fully envisaged the possibility of this crisis emerging. It is true that some organisations, including the TUC, lobbied for a pension protection fund exactly like the one that this Bill would introduce. However, it is clear
that no one then envisaged the scale of the losses faced by workers today.
When the possibility of schemes winding up without being able to meet their liabilities was discussed, it was generally assumed that that would be very rare, and that the minimum funding requirement, which we discussed earlier, would limit those losses to a relatively small amount. In Committee on 13 June 1995, my right hon. Friend the Member for Southampton, Itchen (Mr. Denham) said:
''There is an important point of principle, with which I am sure all members of the Committee would agree; in the event of a shortfall in a pension fund, when it will be difficult to meet pension obligations, whatever the cause of the shortfall, the members are innocent parties, although it is they who will suffer.''—[Official Report, Standing Committee D, 13 June 1995; c. 526.]
The point is that the members are innocent victims. It should not be possible for workers to become innocent victims of a flawed legislative framework and the other circumstances that have arisen.
The problem is that the 1995 legislation made the situation worse for those workers—although that was not the intention—by devising an inadequate minimum funding requirement and by putting the rights to deferred pensions at the bottom of the order of priority. The 1995 Act made no distinction between people who were on the point of retirement and people who had just started with the company.
I am following what the hon. Gentleman says closely. Does he not agree that the priority order could have been tackled months ago on a cross-party basis? Does he agree that the cliff-edge point between those who have just retired and those who are about to retire should have been dealt with already?
I do not know the technical reason why that has not been possible. I know that the Government announced their intention to deal with the situation. It is well understood that it is not acceptable that somebody who is 30 minutes away from retirement should be treated the same as someone who is 30 years away from retirement, and it is important that that matter be dealt with.
It is important to dispose of the ACT argument—the argument that the shortfall has been caused by the removal of advance corporation tax. I shall kill that stone dead once and for all by quoting Dr. Ros Altmann, who is a well known authority on this subject; we have all got to know her name in this Committee. In a letter, she said:
''the removal of ACT relief is just a very tiny part of the problem. If there are, indeed, 60,000 members affected . . . and if we say that there are 10 million members of occupational pension schemes in the UK, that means only one sixth of 1 per cent. of members have been affected by this.''
''The £5 billion relates to all pension schemes. Furthermore, the removal of ACT relief affected only 20 per cent. of the dividend income of the portfolios of these funds. If we assume that the dividend income was 4.5 per cent. of each of the pension funds affected, that means that the dividend income was reduced by just 0.9 per cent. of the fund at the most.''
There is good reason to believe that the figure is even less than that, because we are talking about UK equities only.
Dr. Altmann goes on:
''So the removal of ACT relief simply reduced income by 0.9 per cent. at worst. Yet schemes require far more than 0.9 per cent. extra to have enough to meet their liabilities . . . these schemes are underfunded by 30 per cent., 50 per cent. or more on a buyout basis and, therefore, the ACT argument is simply trying to make a political point but is of negligible size in this debate in practice. Even if they still had the ACT relief, there would not have been enough in the funds to pay the pensions. I certainly do not want to be associated with any argument that says this problem was caused by the removal of ACT relief.''
I do not for a moment accept Dr. Altmann's analysis; she is straying away from her undoubted expertise into the realm of politics. She and the hon. Gentleman fail to make the distinction between schemes that have gone bust because their sponsoring employers have gone bust, and the many schemes, which are often big and well run, that have substantial deficits but are still going concerns. Does he not accept that, at least for them, ACT must have made a significant difference?
Dr. Altmann used her expertise to point out in a technical way—it was not done in a political way, because to the best of my knowledge she has no political allegiances or associations with any party—that it is unlikely that the exposure of any scheme as a result of that would amount to more than 0.9 per cent. of the value of the whole scheme.
On that basis, it is clear that any argument that ACT caused the problem, as was said on Second Reading, is a politically motivated one, rather than one that seeks the true causes. Those are the flawed nature of the 1995 Act, the fall in the value of equities and the failure of a number of companies in the engineering and manufacturing sector, where such schemes tend to predominate.
The Opposition always fail to mention that at the same time as ACT relief was stopped, the rate of corporation tax was reduced by 2 per cent. That was thought to represent a bounty of £6 billion to the companies involved. At that time, the measure was supported by the CBI. In addition, Norman Lamont, a preceding Chancellor of the Exchequer, had already cut ACT tax dividend relief twice—in 1993 and 1994. It was completely illogical tax-relief.
My hon. and learned Friend is right, of course. That means that there is no reason why companies should not have been able to assist their pension funds out of the benefits that they gained from those changes.
The hon. Gentleman mentioned the underperformance of the UK stock market as one of his three reasons. To my mind, with the exception of single companies that have gone bust or have been particularly badly managed, that underperformance is the overall reason why most of the people concerned are in a difficult situation. We have now underperformed on all the other major indices for more than five years.
Does the hon. Gentleman draw no correlation at all between the underperformance of the British stock market over that period and the changes that this Government have made in both ACT and the regulatory regime for business, and the long-term impact on the competitiveness of British business?
There is no inference at all to be drawn from that. There would be, if the UK stock exchange were the only one in the world that had suffered any difficulties in the past few years, but in fact, it has done better than many others. Of course, what the hon. Gentleman says is one reason, but it is ridiculous to try to associate it all with the changes to ACT and the balancing changes in corporation tax.
I shall return to the essence of the amendments. They are intended to put this matter right for those who have suffered, as well as complementing the Bill, which will put it right for those who could suffer in the future. As I have said, what is so welcome about the Bill is the fact that it is a brave measure. However, it would be even braver, and the right thing to do, to assist the people who have already lost out.
I shall also return to how the issue was examined during the Committee stages of the 1995 Act. My right hon. Friend the Member for Southampton, Itchen raised the case of Swan Hunter, which was having similar sorts of difficulties. He talked about the fact that although the scheme would have met the minimum funding requirement being introduced by the Bill at the time, its members were facing cuts of up to 40 per cent. in their expected pensions. That is a significant loss.
In response to those observations, the Minister who then had responsibility for pensions, the right hon. Member for Richmond, Yorks (Mr. Hague), said that the minimum funding requirement would ensure that
''We are not talking about loss on the scale mentioned by the hon. Member for Itchen.''—[Official Report, Standing Committee D, 13 June 1995; c. 533.]
If only that were so, and that the worst case meant people losing up to 39 per cent. of the value of their pension. My constituents in Cardiff are not facing a loss of just 40 per cent. of the expected value of their pensions; if that was all their loss was, they would bite our hands off to get as much as 60 per cent.—although they deserve more. The best estimates that we can get—as we know, it costs money to get information out of independent trustees—is that my constituents can expect a total of 14 per cent. of the expected value of their pensions. That is an 86 per cent. loss—and it might be even worse; we just do not know what the final figures will be.
I submit, as I have done all along, that there is a duty of care. There are moral, legal and public interest arguments to be made. I have tried to make the moral argument, which is that successive Governments have inadvertently participated in mis-selling the nature of the schemes. What rational economic agent would have bet their pension on the share value of one company—their employer? If people had been given fair warning that that was what they were doing, they would not have done it. I assure hon. Members that my constituents are not stupid enough to bet their
pensions on the price of steel, and that is effectively what they were required to do.
There is a legal side to the issue. As we know, a case is to be heard under the European insolvency directive, although we cannot go into the details of that now. I believe that ultimately, the directive will result in the state having to pay out significantly more than it would if it settled on a reasonable amount of compensation now.
There is also a public interest argument. The Bill is intended to restore confidence in occupational pensions, and to make a pensions promise. That promise has to be real. If 40,000 or 60,000 people were going round the country saying, ''Don't believe in pension protection or what they tell you about it; it doesn't exist. We were told that our pensions were secure, and look what happened to us,'' that would drown out the excellent measure being introduced in the Bill, and undermine the confidence in occupational pensions that the Bill should bring into being. For that reason alone, it would be worth it for the state to do what I ask in the amendments and provide funds for compensation.
The words ''taxpayers' money'' have not yet fallen from the hon. Gentleman's lips. I appreciate that he is working under the same constraints associated with the money resolution as Opposition Members are, but I assume that he intends the compensation to which he refers to come from taxpayers' funds, as the Bill is not retrospective.
I think that I said before to the hon. Gentleman that I really do not mind where the money comes from, but that I believe the state has an obligation. That is perhaps why I have gone further than he has; he is not prepared to say that the Conservative party would accept an obligation on the part of the state. He would like to pass on the cost, and pay the compensation for free by using unclaimed or orphan assets.
I do not know whether that scheme would work. If it works technically, those resources could be used, but so could the resources of the state. Even if those unclaimed assets are available for use by the state, there is no particular reason why they should be used for this purpose, and I accept that argument. Nevertheless, if the scheme is a painless way of solving the problem, fine—let us do it that way. The state itself may have unclaimed assets in national savings—money that people have lent the Government over many years—and that could be available for use; I do not know. I understand that some of my hon. Friends might table a parliamentary question to ascertain exactly how much the state holds in unclaimed national savings assets. In any case, there is a powerful public interest argument, together with a moral and legal argument, for dealing with the matter under the Bill.
I know that Ministers have heard the arguments on the subject ad infinitum, and that, for understandable reasons, we have heard the Minister's holding response to them ad infinitum, too—[Hon. Members: ''Not quite.''] Yes, perhaps we will hear it again shortly; there is an old political principle that we could add to
the other three arguments—a majority is its own repartee. I hope that things do not come down to that.
It is probably appropriate to draw the attention of my hon. Friends to the fact that early-day motion 200, in my name—which calls for something similar to what I am trying to do with the amendments—currently has 283 signatures, 195 of which are those of Labour Back-Bench MPs. That is a lot of MPs. They all feel strongly about this issue and feel that there has been an injustice, which is a powerful indication to the Government of a desire among Labour Members for something to be done. I know that my hon. Friends in the Committee, many of whom are here this morning, also agree that something ought to be done during the Bill's passage.
We are all eager to hear what the Government will do. I hope that my colleagues will confirm that they agree with me on that, so that the Government can see the strength of feeling about this issue on the Labour Back Benches. I understand the problems. The Government cannot afford to open a Pandora's box; they must do something legal and watertight, which cannot be confused with utterly different issues where there was no compulsion, and no warnings were ever given, involving private mutuals such as Equitable Life. This is a completely different issue. However, I understand that the Government have to pay attention to such issues.
I understand why the Government have to be assured about the costs. I know that the Department for Work and Pensions has been considering the scale of the problem recently and that that others are helping to ascertain the scale of the costs. We are close to the point at which the jigsaw puzzle, if not finally completed, at least displays a picture that is sufficiently clear for us to be able to get some sort of grip on the ball-park costs of doing something about this matter.
The time is approaching when we will need an answer from the Government one way or the other. Are we really going to leave all those people high and dry? I hope that the answer to our question is no. The intention behind the amendment is to secure an acknowledgement of that.
Before we proceed, Mr. Khabra, I have to say that I tried to get one of your colleagues gently to remind you that coffee is not permitted in the Committee. I remind the Committee that that is a rule of this House, and I ask you to take your coffee outside into the Corridor.
I congratulate the hon. Member for Cardiff, West (Mr. Brennan) on the way in which he presented his amendment. I am sure that his constituents will be fully appreciative. He put his case in a measured, sensible, and in some ways irresistible way, as befits a former president of the Oxford Union. I hope that Ministers are listening. He should not think of apologising for ''banging on'', if I may use that phrase, because we will be doing the same, and so will people like Dr. Ros Altmann and others, until Ministers come up with an answer.
Slowly but almost imperceptibly, the glacier of Government decision making is beginning to move, under pressure from all quarters. Who knows whether the Minister will have something to share with us today? The Prime Minister has taken a personal interest—and so has the Deputy Prime Minister, so we know that at least some of the acronyms will be mangled, if nothing else.
The hon. Gentleman raised a number of issues. I make no apology—there has been a lot of non-apologising this morning—for picking up some of those issues in detail, because this subject is a central theme of this part of the Bill. He was right to make his point with some force on Second Reading. There is a public interest argument for doing as he suggests: it should be done to restore confidence. If the Bill is to have any purpose at all—if all these weeks of human endeavour in Committee are to be of any benefit to the common good—it should try to restore some confidence in the pensions system.
On Second Reading it was painfully apparent to those on our Front Bench—and, I am sure, to those on the Government Front Bench—that the majority of Government Back-Benchers who contributed were relentlessly making the point that what is, in some ways, an admirable piece of legislation is wholly overshadowed by the 60,000 ghosts at the feast—the people who will not receive a penny piece in compensation for having lost all or most of their pension rights.
I should try to rein in the hon. Gentleman's enthusiasm for this measure. Overselling the legislation is the last thing that we should do if we want to help improve confidence in pensions. This is not a pension promise; it is not a 100 per cent. guarantee, for a variety of reasons. That was explained, more learnedly than I could, by the actuaries in their open letter to the Secretary of State. There is a 90 per cent. figure for people who have not retired. There is a cap—a low cap, on one view, compared with some of the figures that have been bandied around. There is a problem to do with indexation, which we shall address in more detail.
The Government are also taking powers to be able to reduce the benefits payable. Some of the more sensible, informed and independent observers can envisage a situation, certainly in the early years, when that might have to be an option if the fund is not to collapse. We should not let people run away with the idea that this is a total safety net. There are also philosophical arguments that we shall come to later, made by organisations such as the CBI, that that should not be the case anyway—that there should always be an element of self-insurance, as it were.
The more we debate how to deal with the 60,000 people, the more we get stuck in the fog created by the fact that we do not know the figures involved. I think that there is now a consensus—certainly the Secretary of State has finally signed up to it—that the estimate of 60,000 individuals is about right; it is a suspiciously round figure, but it is a figure to work with. However, we still lack reliable figures for the amount of money
involved. I have made the point more than once that the official Opposition—the Government in waiting—are not prepared to sign a blank cheque without knowing how much money is involved; I am not remotely embarrassed or abashed about that. I have already paid tribute to the sterling work of Dr. Ros Altmann, and I am sure that all Committee members will do so again many more times, because at present she is the only game in town on this issue.
We believe that the Government are beavering away on the problem in the bowels of the Treasury or the DWP, because that idea has been pulled out of Ministers gradually, both at Question Time and in debates—particularly in one debate in Opposition time. Presumably, some very clever people are sitting in darkened rooms thinking about all this. However, the Government have rejected calls from the hon. Member for Sittingbourne and Sheppey (Mr. Wyatt) and others for an independent inquiry. The Opposition do not have the resources to do the work, Short money notwithstanding. The Government have the resources—and it seems that they are doing it, but on the quiet. We hope that sooner or later something will emerge.
I followed what the hon. Member for Cardiff, West said, and I intervened on him during the argument about ACT. Conservative Members have never said that that was the sole—or even the most important—contributory factor, but taking out of pension funds a cumulative sum of £35 billion has certainly not helped. We have continually referred, as the Americans do, to the perfect storm: there is a series of factors, some outside the Government's control but others, such as this one, within their control. What happened with ACT was a clever wheeze when Labour came to power, because it seemed to be a painless way of raising money; following the golden years of Conservative management of the economy, pension funds were doing well, and nobody noticed.
If one is trying to get a handle on what the Government need, it is interesting to sit down and analyse the time scale with some of the protest groups, and people such as Dr. Altmann. I do not argue against the idea that they need a boundary to be drawn, inside which they can say they will compensate, and explain how they will do that.
Most of the schemes that have gone bust have done so in a fairly short time—from 2000 to 2002 onwards. This is a recent phenomenon, although no less important for that reason. Understandably, the hon. Member for Cardiff, West offered his ritual blaming of the 1995 Act. I will offer my ritual defence of it. In the circumstances, it seems to me that it was a major step forward.
Every time the House visits or revisits pensions legislation, at the back of its mind it probably has the feeling that the next political generation will have to revisit it again. This Bill will not be the end of the story, by any stretch of the imagination. However, I realise why the hon. Gentleman has to nod in the direction of the alleged failings of the Conservative Government.
I shall briefly repeat what I have said before in this Committee. The way in which the minimum funding requirement was constructed—for an average person aged, say, 40—and the two dilutions of the MFR by this Government, meant that we could have been changing the proportion from about 80 per cent. to about 20 per cent.
As I understand it, we are all constrained by the boundaries of the Bill, particularly in terms of the money resolution. The hon. Gentleman is suggesting that taxpayers' money be used to compensate the 60,000 people—although he was good enough to say that he did not really care where it came from, which is refreshing. I think that it was Thomas Jefferson who said that a Government big enough to give you everything you want is strong enough to take everything you have. I am, therefore, a little bit dubious about such a broad-brush approach.
We have consistently taken a rather different view, although the original idea was not ours. We have adopted and developed the ideas of the right hon. Member for Birkenhead (Mr. Field), who was memorably asked by the Prime Minister to think the unthinkable, but when he did so, was promptly sacked. We have followed the model of trying to set up a parallel fund—an interim pension protection fund—which will not only be endowed with the remaining assets of the companies that were already in wind-up prior to this Bill, but with so-called unclaimed assets. Until recently, I was beginning to get a bit dubious about whether we would make any progress with that idea. Nevertheless, that is the direction in which our amendments were directed. Sadly, they seem to fall outside the terms of the money resolution—although the Government could put that right at the stroke of a pen.
There have been some major developments in the past week or two, associated with the Budget. Before the Budget the mantra had always been, as the Under-Secretary of State for Work and Pensions, the hon. Member for Liverpool, Garston (Maria Eagle) said:
'''Unclaimed' does not necessarily mean that the assets do not belong to someone . . . but we are willing to consider any suggestions that he or anyone else may have.''—[Official Report, 9 June 2003; Vol. 406, c. 391.]
That mantra, which has clearly been the ''line to take'', was also trotted out by the Secretary of State as recently as June last year—as well as more recently—when he followed up what his junior Minister had said by saying:
''just because those assets are unclaimed does not mean that they do not belong to anyone. She also said, however, that she and I stand ready to meet people and to engage constructively with any sensible proposals on the subject.''—[Official Report, 11 June 2003; Vol. 406, c. 690.]
It is fair to say that until just before the Budget the constant refrain of Ministers has been that the unclaimed assets, which we understand could total £15 billion, cannot be touched. We have expressed in the past our suspicion that the Government were not being wholly straightforward, and that the Chancellor might have other plans for those funds.
In parenthesis, I must say that we need to be careful that we do not talk about unclaimed or ''orphan''
assets too blithely. I have met representatives of the Building Societies Association, which is concerned about its position for two reasons. First, it feels that the sums that may be in building society accounts are much smaller than the figures that are sometimes bandied around. Secondly, it has a concept of mutuality, which means that technically, in the case of the typical building society, those assets are not those of an individual, but belong to the mutual society.
Beyond that, the hon. Gentleman talked about national savings—and then there are the banks, the insurance companies and any number of pots of money lying around in our economy that nobody has claimed for some time and may never be claimed. The right hon. Member for Birkenhead, during one of our recent debates on the subject, ran into heavy flak from Ministers who said that that money belonged to somebody. He asked why we could not start with assets that were 200 years old, on the basis that the people who owned them were probably dead, and work forwards. That seems to be one sensible way of approaching the problem.
However, with a stroke, as if by magic, all such problems have now gone away. I am sure that you are an avid reader of the Red Book, Mr. Cran, and in paragraph 5.72 and those following, the Government have come up with a wheeze for using unclaimed assets. Paragraph 5.73 says:
''The Government welcomes the creation of the Balance Charitable Foundation for unclaimed assets, and the commitment made by two major investment banks to pass over some of their unclaimed assets to the Foundation. The proceeds of such transfers should be distributed fairly across the charitable and voluntary sector.''
It goes on about consultation and so on, and then paragraph 5.74 says:
''The Government looks to the industry to build on current momentum, and expand the scope of voluntary action beyond investment banking into retail banking and the wider financial sector.''
We are promised an assessment and a report on progress by the time of the 2004 pre-Budget report.
I do not know whether all that was decided at the Treasury, with Department for Work and Pensions Ministers blissfully unaware of that policy developed in isolation. However, it does make complete nonsense of the Government's only line of defence against the unclaimed assets proposal.
The hon. Member for Cardiff, West says that he does not care where the money comes from. On Tuesday he said that he had no theoretical problem with unclaimed assets—and now it appears that the Government have disingenuously been working out their own plan for using unclaimed assets, while saying in public, including in the House of Commons, that that cannot be done.
I think that the last road block to our proposals has been removed—removed by the Government; let us give them credit for that. The Chancellor and his officials have found a solution. If it works for the
Balance Charitable Foundation, it will work for the 60,000 workers.
We are not allowed to move the amendments that we tabled; they are out of order because of the money resolution. However, given that there can now be no sensible or practical argument against our proposal, I urge the Minister to say that he will consider amending the terms of the money resolution and accepting our amendments in principle; the Government are very welcome to play around with them, redraft them and improve on them if they wish.
I am sure that that would satisfy the hon. Member for Cardiff, West; it would certainly satisfy Opposition Members. Most importantly, it would provide a just and durable solution to the problems of the 60,000 people and of anybody else who falls into this nightmare scenario between now and when the legislation comes into force.
I congratulate the Government on what we have before us today. However, there is an omission in the Bill, and the amendments moved by my hon. Friend the Member for Cardiff, West would go some way towards resolving it.
In the past few years there has been a tremendous campaign on behalf of the 60,000 people—normally long-standing employees of manufacturing firms—who find that they have lost their pension schemes. They had reason to believe that the Government would make their pensions secure, and now their age and their skills background give them no opportunity to correct their position and build up a pension for the future.
The changes made over the years, including allowing pension surpluses to be raided and contribution holidays to take place, weakened the pension scheme funding that would have resolved the problems of those 60,000 people today—and I think that we are continuing to go along the same line. I believe that schemes being wound up should continue to pay all the benefits due, and that the winding-up process should be frozen. One of the major problems is that we are forcing schemes that wind up to go for annuities, and thus losing the value of those schemes. The Government have an opportunity to examine that problem closely, and decide to freeze assets and ensure that schemes continue to pay out.
Many people have referred to Ros Altmann. She claims that £100 million would solve the problem of the people who have lost their pensions—but the Government have never considered the £100 million. It is essential that they consider Ros Altmann's solution to the problem.
On annuities, I can tell the hon. Gentleman that we have tabled an amendment to at least temporarily postpone the purchase of annuities. As he and Dr. Altmann rightly say, that is eating up a lot of the remaining assets of the schemes that are in wind-up, and that is expensive.
I thank the hon. Gentleman for that intervention. I appreciate that he has tabled an
amendment. If we are to protect people, we must consider such amendments. That is the message to the Government. We should seriously consider the £100 million that Ros Altmann has suggested would or could solve the problem of the 60,000 people.
There is a moral argument, which is that the central Government fund would be topped up with moneys classed as unclaimed assets. I am not convinced by that. We need to consider those assets carefully and, as has been mentioned, we could consider periods of 200, 100 or 50 years. However, I believe that the Government have an obligation to ensure that we act seriously in respect of the 60,000 people.
The Government know about many people who have lost their pension schemes. Unlike in the case of the hon. Member for Cardiff, West, only five members of schemes have contacted me. In one scheme, people believed that they would have a basic pension of £17,000 when they retired, but they have now been told that they might have absolutely nothing. The horror that those individuals feel must be brought home to the Government.
I understand the Government's difficulties. If the problem had an easy solution, it would have been solved before now. The Government have offered sympathy, and we have been told constantly not to raise false hopes. However, the longer we take to identify the number of people affected—it is important to identify the real numbers involved in the pension scheme deficits—the longer we shall be building up hopes while people are left in limbo.
I ask the Government to consider three issues. We must define carefully the number of people involved because 60,000 is only a ballpark figure. Each individual has suffered, and they are waiting anxiously for something to be done by the Government to resolve their position. We should also consider the figure of £100 million that Ros Altmann says it would cost to solve the problem. We must seriously examine the winding up of schemes and the buying of annuities where a fund has failed. While making sympathetic noises, it is essential that we decide to move on.
Like my hon. Friend the Member for Cardiff, West, I believe that if we had a vote on the amendment it might be tight. Before Report, we should have a definition of the number of people involved, examine seriously the funding required, and consider the points that have been made in debate. On that basis, we should decide to do something. If the will exists, I believe that we can deliver for the people who are losing their pension schemes.
The Bill is delivering for future pensioners. That is why I congratulated the Government. However, we must rectify the current problems, which became serious only in the past few years. If the Government do not do so they will have misunderstood things, and they will have failed to make an impact for the people who require help. When the Ministers respond, I do not want them merely to make pathetic noises. I want them to say, ''Yes, we are looking at this seriously; we believe that we can take swift action to deliver for the
people who have lost out in their pension schemes through no fault of their own.''
I wholeheartedly support the principles and intentions that prompted the amendments of the hon. Member for Cardiff, West. Like him, I will not discuss things in as much detail as he and I went into on Second Reading. However, I want to offer a brief résumé. In my constituency, workers for three firms in particular have lost all or most of their pension funds, often after saving for 40 years; I have gone into the details of those cases.
There are two key issues. The first is to do with the compensation for the approximately 60,000 people who have lost out in the gap between 1997 and the introduction in 2005 of the pension protection fund. On Second Reading, I read out in detail statements made by Ministers in the House and the other place during the passage of the 1995 Act, which seemed to make it crystal clear that the intention of that Act was to give a cast-iron guarantee that occupational funds would be safe. I also read out extracts from earlier guidance issued by the Occupational Pensions Regulatory Authority to trustees of pension funds, which seemed to make it clear that such funds were totally protected and safe as a result of the provisions of the 1995 Act. Therefore, it appears that a case can be made that the Government must ensure that the 60,000 people who have lost out are compensated.
One Minister drew an analogy with buying car insurance; if someone bought insurance for a car next week they would not expect to receive compensation for an accident that happened last week. The people who have lost out in their funds, such as the workers at Chesterfield Cylinders, Dema Glass and Coalite in the Chesterfield area, were not buying their insurance at some point in the future to cover them for something that happened at some point in the past; they were paying into their pension fund with deferred wages under what they thought was a commitment from the Government of the day and then from the new Government in 1997 that they were saving for their future in a guaranteed way. We should honour that commitment.
The intention behind the amendments is important in another respect. As the hon. Member for Cardiff, West mentioned, there is the principle of the work of the PPF in the future. The PPF is intended to cover one of the big gaps that have emerged in the 1995 legislation. It is intended to give the message to people who are saving for their future, and to the young people whom the Government are desperately keen to encourage to save for the future, that giving up 10, 20, 30 or 40 years of income for a future pension will not be a waste of time. It is intended to assure them that that will not be a wild gamble because they will not find that after a lifetime of savings they have lost out completely and it is too late to do anything about it. For the PPF to work in that regard, the Government must be the guarantor of last resort. I made that point on Second Reading.
I thank the hon. Gentleman for his helpful intervention. We have made it clear repeatedly that we are talking about compensation for 60,000 people. As was said on Second Reading and earlier today, in one sense we do not care where the money comes from, as long as it comes from somewhere. We have discussed in detail possible sources of the money. It is estimated that the compensation money would be in the region of £100 million to £150 million. The Department for Work and Pensions has a future yearly estimated underspend of up to £200 million. The compensation sum was described on Second Reading as small change in the pockets of the Government.
I want to make the position clear so that the Committee is not misled. Does the hon. Gentleman agree that the estimate, which is high and based on full compensation and all sorts of assumptions, would be £100 million a year, although it would not be payable for some years if the annuities were not purchased? It would be an ongoing cost that would eventually disappear in time as members of the pension fund departed this mortal coil.
Indeed, the cost is projected for some 30 to 40 years in the future. It has three possible sources, one of which is the small change of the DWP's annual projected underspend which we have discussed in detail many times. Another source that has been discussed today is the assets of the underfunded schemes. If they were used not to purchase annuities, but to pay for the ongoing costs of the pensions within those schemes, there would be a 10-year gap before a single penny of taxpayers' money would have to be used. That would give ample time to the Department and its billions of pounds of expenditure.
I come now to the third angle. It deals not so much with compensation as with the future pension protection fund. There is an understandable nervousness on the part of all parties to commit the taxpayer in the future to undefined amounts of expenditure. It is unthinkable that the pension protection fund would be allowed to go bankrupt in the future; that would negate its whole point. Let us consider the American Pension Benefit Guaranty Corporation, set up in 1973 to restore confidence in the market after a huge industrial failure. It worked perfectly for 30 years, and only within the past two years as a result of the huge decline in the stock market has it hit problems, having traded well with profitable balances for a long time and having no problem with its assets in meeting its commitments. It is unthinkable that the American Government would allow that scheme to go under and negate the whole point of setting it up, which was to give confidence to people to save for the future and to give confidence back to industry at the same time.
As I said on Second Reading, the same must apply to the Government when setting up the pension protection fund. I cited an example of a constituent
aged 26 about three years ago who was just about to start saving in the pension fund of the major, world-famous international retailing company for which she worked. She thought about what happened to her mother who worked for Chesterfield Cylinders and whose pension was wiped out overnight and said to me, ''What's the point? Why should I start saving at the age of 26 for my pension in 35 or 40 years' time with a company that seems rock solid, but might be worthless in the future? I might as well spend the money on other things.'' If the Government, with an inadequate state pension, say that people must save for their retirement, people must believe that those savings are safe and that they are not taking a wild gamble.
I wish to make a slightly friendlier intervention. I am following what the hon. Gentleman says closely. I do not know whether he was here on Tuesday, when the Minister, having being pressed on the open letter from the actuaries, said that the PPF was neither a pension fund nor an insurance scheme. That rather leaves open the question of what it is. It is probably a political construct enabling the Government to say that they have tackled a particular problem. There is nothing wrong with that, but does that not add force to the hon. Gentleman's argument that it is difficult for the Government to distance themselves—
I was getting to the point of my peroration, Mr. Cran. I wanted to ask the hon. Member for Chesterfield whether he thought that what I said added force to his argument. The Government cannot have it both ways by claiming that the fund has nothing to do with them once they have launched it into the world.
I agree. I was not here on Tuesday; I was away on Select Committee business that had been arranged many months before the dates for this Committee's sittings were set. However, I returned late last night and read the verbatim account of Tuesday's business this morning.
There are a number of flaws in the pension protection fund—we will discuss some of those in later sittings—not least of which is the fact that the fund is not a 100 per cent. guarantee, in terms of the amount of cash. We need to consider those flaws. As I said, I agree with the hon. Gentleman's general argument. If the point of the pension protection fund and the purpose of the Bill is to restore confidence in
the pensions system—at least as of 2005—the fund must have a guarantee behind it that it will deliver what it seems to promise. Some of the small print says that there are weaknesses in that respect.
Someone who has saved for their pension for 20, 30 or 40 years and has also paid for insurance on that pension must not feel that, in the future, the Government might turn around and say, ''Sorry, you have lost not only your pension savings—your life savings—but the insurance that you paid for.'' We are back to the car analogy that was, unfortunately, used on Second Reading: someone who takes out car insurance against accident and injury does not expect to be told, when they have an accident, that the insurance company just will not pay out.
Tourist companies operate travel insurance schemes and pay into those schemes so that, if a particular company goes bust and someone is stranded on the other side of the world, the scheme can get them back. Having paid extra money for the insurance, one does not want to be told, ''Sorry, we're negating our agreement; we're scrapping that, and it doesn't apply.''
If we are to restore confidence in the system, we must give people confidence that the scheme and the insurance that they pay for will pay out. That is particularly true in the case of younger people who have not even started saving. We are increasingly told by the Government that we must save because we cannot rely on the state for a pension in future. At some point, whether it be in 10, 20 or 30 years—it took 30 years for the American scheme to hit one major problem—the Government will have to act as a guarantor for the scheme. It is simply unthinkable, in the American and the UK case, for the Government simply to wash their hands of the matter and say, ''The whole thing's a failure, and you're not going to get your pension and insurance; it just will not be there''.
We can argue about the details of where the money comes from, but the Government must act as a guarantor for the schemes in the long run. The Liberal Democrats and I wholeheartedly support the principle of, and the intentions behind, the amendments.
I do not intend to take too much time. I am speaking in support of my hon. Friend the Member for Cardiff, West, to emphasise to the Minister the strength of feeling on the Labour Back Benches. That can be seen from the turnout at these Committee sittings. Perhaps we can tell the strength of feeling among the other parties by the number of people on their side of the Room. It would seem that the nationalists have not even bothered to turn up, but then again there is nothing new in that.
The Bill, in its entirety, is good, and there is no way that the Government can take any blame for what has happened to the 60,000 people who have often been mentioned. It was not the Government's fault that those people lost their money, but neither was it the fault of the 60,000 people, who contributed to pension schemes, and whose lifetime ambition was to have a long and happy retirement. Unfortunately, in many cases that has proven not to be the case. The fact that
they do not receive the money to which they had been looking forward has caused a lot of anguish and, probably, ill health.
Those of us who have been active in the trade union movement understand members' needs and the need for people such as myself to fight for the individual's rights and for people's contributions to be looked after. However, when it comes to a pension that is wound up, who fights for those people's rights? Who fights for the people who have been left—the 60,000 people who have in effect been left with no money? I believe that the Government have a moral responsibility to ensure that those people's hard earned savings have not been for nought. The Government should consider some form of retrospective payment to them. It was not their fault or that of the Government.
At the end of the day, who protects such people if it is not the Government? It is the Government that we would look to for help and for money when all else has failed, and I think that we have reached the stage where those 60,000 people deserve some kind of contribution. I look to this Government, who on many occasions have proven to be protective of those that have the least, to examine the issue. I ask the Minister to consider the Back Benchers who have spoken—and those who will speak—to note the strength of feeling among Labour Members, and to take that on board when he replies.
In speaking in support of the amendments tabled by my hon. Friend the Member for Cardiff, West, I will make a digression at the outset from the topic that we are discussing.
Clause 90 allows the Secretary of State to pay money for the board's expenses. I want to make a powerful point: the Government would make fewer and smaller grants to support that board's expenses if it were located, consistent with the Lyons inquiry, outside London and the south-east. I hope that in due course the Minister will guarantee that, as would be consistent with the announcements in the Budget, the new semi-Government agency will be located elsewhere.
Of course, the purpose of the amendment is to allow grants from the Government, which are public funds, to go into the pension protection fund to cover not merely its expenses, but its expenditure. That allows for past wind-ups to be paid for on the same basis as future ones. It is an important point that the pension protection fund board is the right vehicle for paying out on those past losses. It is not appropriate that, whether the money is paid out of unclaimed assets or in some other way that is yet to be devised, it should be paid out in any other way than one that is totally consistently with the terms, conditions and systems that will be set up for all future payments out of the pension protection fund.
I am also conscious that the nature of the amendments is such that there is no limit on how far back payments out for funds that are already wound up could go. They might go back as far as the pensions of the soldiers who fought in 1066, but that is not the point. The point is that we are making a clear principle
known to the Front Bench. As many hon. Members have said, the strength, depth and breadth of the feeling can be seen by our contributions today and by the very different kinds of Back Bencher who have spoken. One can see the depth, breadth and nature of the support on the Labour Back Benches for some help to be given to those 60,000 people.
No one can be anything other than full of pity and sadness for the people who have suffered. One can see straight away that it is unfair that they are in such a position and one can see that they have, in their own eyes and even objectively, been cheated and betrayed. They were encouraged to be in these funds, and some of them paid under legal compulsion, on the understanding that they would have an excellent pension at the end of the day. The fact that they had to pay as a condition of their employment, and are now getting nothing back, means that they have paid an extra levy for the privilege of working in a firm that has failed to honour its obligations. In that sense, as well as in the ordinary sense, those people are excessively out of pocket.
The Government have some responsibility. I am sure that successive Governments did not expect this to happen. As the hon. Member for Eastbourne (Mr. Waterson) said, this is a new phenomenon that has happened only in the past few years. The reassurances that were given in the first instance to people to invest in their pensions were no doubt given many years earlier, and I suppose that people were left with little choice but to carry on even when doubt entered into the game. Although Government responsibility—certainly this Government's responsibility—is limited because everyone must look after their own interests by hedging their bets as best they can, the great mass of people have lived their lives satisfied that if they paid into a pension fund, they would get a payout. Those people feel a strong sense of betrayal. It is obvious who the culprits are, and they are not the Government. There is an obvious breach of contract, but the people who should be the butt of our comments are simply not available; they are people of straw.
A little while ago I heard the Government make an argument about the extent to which it was their responsibility to cover every vacillation of the stock exchange that caused somebody a serious loss. I can see how that argument might prevail. However, the Government have moved on from that position, and do now accept some responsibility. If they have any doubts about their responsibility, the extent and depth of the loss, the great sense of betrayal and the huge damage to future public confidence in pension funds must make them appreciate the need for action. Voices will not be quieted until these people are given some kind of satisfaction to assuage their hurt and penury. The confidence that the Government intend the Bill's provisions to inject into the pension system will not be restored until those voices are quieted. From a politically pragmatic point of view therefore, it is imperative that help is given to people—although there is a far higher moral reason for helping them.
It is sensible to examine closely the issue of unclaimed assets. I admire the perception of my right hon. Friend the Member for Birkenhead in thinking of the idea. His work has been taken on, and his idea is good. The same idea is now emerging from deep in the bowels of the Treasury. As the hon. Member for Eastbourne said, there was an announcement only last week in the Budget that use could be made of those assets. The Government have started to realise that they might be able to clear away the problems that they once perceived might prevent them from doing anything.
I am much more worried about the proposal by Dr. Altmann that annuities should not be paid and that pensions should be paid from the fund itself. It is hard to evaluate whether that is a sensible way to proceed because on one day at some point in the future there will suddenly be no fund left, and the Government will have to pick up an unspecified figure. It is hard to say whether that is more sensible than proceeding in another way earlier. The purchase of annuities at least guarantees the security of some pensioners, and we can then look for a solution for others.
Many young people are involved in the various pension schemes that we are talking about—they do not usually get much airtime in these debates. It is very much to be hoped that the Government have assisted all those that they can in getting into a secure pension scheme since their scheme has fallen aside. I hope that they have been given priority in terms of Government advice and support, although the real sufferers are, of course, the older people who have no opportunity to make up any of the deficit.
I want to express, as others have done, the powerful sense on the Government Benches of a moral imperative on the Government to do something to help these poor suffering people. I note in passing that when it was set up in 1974 the US Pension Benefit Guaranty Corporation did take retrospective claims and deal with them—although in a minor way. I see my hon. Friend the Minister frowning, but I saw that on the website last night, unless I completely misread it. There is a precedent for the US doing that and for us to do it too, one way or another. This is a model on which the Government rely heavily.
The figures that have been quoted—around £100 million a year—are far too high. However, even if they are correct, they pale into insignificance next to the £14 billion tax relief on private pension contributions that the Government give, by and large, to the better-off. I urge the Government, as my colleagues have done, to start to think much more quickly. I hope that they are able to come up with a solution, at least by Report.
I support my hon. Friend the Member for Cardiff, West and other hon. Members who have spoken. I think that the sentiment shared by everyone on these Benches is that while the Government are clearly not to blame for the situation in which approximately 60,000 people find themselves, neither are those people who have paid into a pension scheme all their lives. What differentiates their
position from that of others is that they were forced to pay. If hon. Members had paid in only to find that we would not get anything back, most of us would find that difficult to accept. I am sure that those 60,000 people feel that they have been cheated for all their working lives after paying in their money.
I urge Ministers to think carefully about how the Government can meet their moral obligation to those 60,000 people, so that the fear, disappointment and sadness can be removed from their lives. It is also important that we send young people the message that paying into a pension scheme is a good idea. I urge my hon. Friends to do everything possible and to look at the unclaimed assets. That is probably one of the best uses to which they could be put.
We have heard some articulate and powerful, albeit short, speeches this morning on an issue that all Committee members would consider to be one of the most important that we are dealing with.
I pay a particular tribute to my hon. Friend the Member for Cardiff, West for the way in which he set out the argument on behalf of those in ASW, and others, who have lost not only their jobs, but their pensions and their security in retirement. He began by suggesting that I might wish to congratulate him and my hon. Friend the Member for Ayr on what he described as the elegance and simplicity of their wording, and that I might go on to accept them in principle. I am happy to go halfway with him: I congratulate him on the elegance and simplicity of the wording of the amendments.
I should like to reaffirm the effect of the amendments, which is twofold. Amendment No. 272 would provide that the board could, under clause 90, receive grants from the Secretary of State that could be used to pay compensation from the pension protection fund or the fraud compensation fund. Amendment No. 275 to clause 135 would include as one element of the funding of the pension protection fund
''amounts of a prescribed description''
''amounts paid, directly or indirectly, to the Board by the Crown.''
As all Committee members are aware, these amendments would mean that taxpayers' money could be used to pay compensation to members of defined benefit schemes, or defined benefit elements of hybrid schemes.
The first difficulty is that that would be entirely contradictory to the overriding principle of the pension protection fund: that it should operate at arm's length of Government and that it should be funded by those schemes whose members could receive compensation, not by the general taxpayer. The amendments could also be targeted at members who had already lost out due to the insolvency of their employer and their scheme's winding up underfunded.
We have heard some powerful speeches on this issue. Committee members and those whom they represent would feel that it would add insult to injury for me to run through yet again the
arguments as to why we are not able at the moment to offer the relief that they seek. However, we are working very hard.
My hon. Friend the Member for Hamilton, South (Mr. Tynan) wanted an assurance that we offer not only words of sympathy. I willingly offer those, but I also assure him that we are seriously considering what we can possibly do to assist. As he suggested, we are looking at the number of people who might be affected. The figure of 60,000 may be right, but there is no certainty about it; we must be absolutely sure. We are considering the costs and all the possible mechanisms proposed to try to help those people. If Committee members wish, we shall return to this matter when we reach clause 98.
As Committee members have recognised, we must be very careful not to open a Pandora's box, to act within the law and to act fairly towards existing scheme members, members who have lost out and taxpayers generally.
The Under-Secretary mentioned the taxpayer. Does he accept that in light of the Budget there are significant unclaimed assets that are now being made available for charities that could be made available for this purpose?
The Under-Secretary says that the Government are trying to assess how many people are involved and what solutions there may be. Will he give us a more definite timetable? When will the Government come to a conclusion about whether they can help? Will that happen while the Bill is debated in Committee, in the House of Commons or the House of Lords, or will it not happen while the Bill is before Parliament?
The Under-Secretary says what the Secretary of State has said for a number of months, but will he give a more definite timetable on when the Government will come to their decision, and say either yes or no?
The only assurance that I can give the hon. Gentleman is that we will come to a resolution as soon as we can. I do not think that he or other Committee members would want me to say, ''We will give you an answer by Report'', if that was the wrong answer for Committee members and those who have lost so much.
We need to ensure that we do this properly. We have two parallel debates: one about the pension protection fund, which is about protecting people for the future, and the other about how we assist those who have lost so much in the past. We must be careful not to make an assumption that those two debates can be merged together. They must be treated separately.
Again on the time frame, are the Government taking their time because they have to
make a lot of technical assessments about cost and practicality? Or does there ultimately have to be a political judgment about whether to help? Is the delay—I do not use that word in the pejorative sense—due to the Government's having to come to a political decision, or to the work that needs to be done in the Department?
No. I say to the hon. Gentleman and my hon. Friends that the matter is not about politics and I hope that no member of the Committee plays party politics with such an issue. The Government have a commitment to try to find means of assisting such a group of people. My hon. Friend the Minister, the Secretary of State, parliamentary colleagues and I have said before that those people have been through so much that it would be wrong of anyone to put them through still more heartache and anxiety by suggesting that we can find a solution if we cannot be certain that we can deliver it. That is why we have given a commitment to do everything that we possibly can, but we shall not give a commitment that we can necessarily find a solution to the problem.
The Under-Secretary is being very generous. A moment ago, I had the slight impression that he suggested that there was a conceptual difference between the 60,000 people and those who will be protected under the Bill when the PPF is set up. That cannot be right, because surely the only difference in principle is a matter of timing and the Bill is designed to protect people in a different time scale.
Yes. That is a helpful intervention, if the way in which I presented matters was confusing. I was saying that the PPF was not the vehicle for assisting people who had lost in the past. Its purpose is to ensure that such problems never happen in future.
The hon. Gentleman and my hon. Friends referred to the so-called orphan assets. My hon. Friend the Minister and I worked with my right hon. Friend the Member for Birkenhead for many years and we know the imagination that he can bring to finding solutions to such matters. We welcome the work that the British Bankers Association and Building Societies Association are doing to reunite the assets with the people who own them. That is a fundamental first approach. Some have suggested that perhaps we should work only on those assets that have been disunited from their owners for 200 years, on the assumption that, as the hon. Member for Eastbourne suggested, they are probably now dead. I must say to him that, with our investment in the health service nowadays, we can no longer make such assumptions.
It is fair to say that the proceeds of such transfers of assets that are unallocated at present have to be distributed fairly throughout the charitable and voluntary sector. Distribution organisations for such money should be run in an open and consultative manner in accordance with the Government's best practice and with the involvement of the financial services industry in the voluntary and community sectors. We have been considering whether or not that offers a solution. My hon. Friend the Member for
Cardiff, West suggested that it might be a solution, but there is no reason why we should think that, if the assets were available for use, they should be used for such a purpose. We need to hold a further debate on such matters.
Until relatively recently, the Government's position was that the so-called unclaimed assets were not available for any purpose. Suddenly, we seem to have moved on two steps, so that they are now available only for another purpose—charities. There is something Orwellian about that. How has the Under-Secretary missed out the middle part of the process, which will be to see whether the unclaimed assets could be used for the purpose that we are discussing today?
The fact is that there are real difficulties in spotting that pot of gold and deciding that we shall use it for any purpose. We have been openly looking at it since the proposal was made by my right hon. Friend the Member for Birkenhead. If there is a possibility of using any of those assets, we must be very careful about how we allocate them and we must ensure that that is open, transparent and legal. Plenty of difficulties are involved in that.
Several hon. Members have said that there is a moral obligation on the Government to do something on behalf of those who lost in the past because they were required to take out membership of an occupational pension scheme as a condition of employment. Since the Social Security Act 1986, membership of occupational schemes has not been a condition of employment; also, whether such membership should be a condition of employment was decided by employers—it was not a statutory requirement.
My hon. Friend will acknowledge that that came into effect in 1988 rather than in 1986, and that what in fact happened was that the state permitted the employer to compel, and it did not allow the employee to take out any other form of pension if that occurred. Many of the people affected by those schemes—which were joint schemes when compulsion was permitted—are the very people we are trying to assist because they will have been in the scheme for more than 16 years.
I take on board the point about innocence, which was suggested by my hon. Friend the Member for Glasgow, Anniesland (John Robertson). The people who have suffered are very much the innocent victims; no blame can be attached to them. The question is whether the blame can be attached to a Government. I am arguing that it cannot; it was not the Government who made those requirements.
I have heard my hon. Friend make that point before. It is not the strongest point that he has at his disposal, because it is clear that the state permitted compulsion. If the state does that, it cannot wash its hands of the consequences of compulsion.
As my hon. Friend says, we have talked around this subject a number of times. He may think
that it is not my strongest argument—and I may agree that it is not the strongest argument that we have—but it is an argument. If we were to ask taxpayers as a whole to make a contribution to the costs of that section of the community that has had access to occupational pension schemes when the majority of taxpayers have not had access to those schemes, there would be an issue about whether the Government acting on behalf of the taxpayer should make that requirement.
We asked the taxpayer to pay £14 billion a year in tax relief to subsidise people in private pension schemes, which are the very schemes that those individuals were not allowed to access because they were compelled to join final salary occupational pension schemes. [Interruption.]
Thank you, Mr. Cran.
These debates could last for most of today, but they would not take us much further forward. The argument that I now want to develop will be relevant.
Without repeating the debate that we have just had, I endorse the comments of the hon. Member for Cardiff, West.
The Under-Secretary washes his hands of some things by saying, ''If employers compel people to pay into pension funds, that is their issue.'' However, for some employees, such as those who worked for firms in the steel industry such as Chesterfield Cylinders or ASW, the employer was initially the state because certain industries were nationalised. Are the Government not responsible in such cases?
I am not seeking to wash my hands of responsibility on this. We are looking at all these issues very seriously. I am merely saying that I do not think that we can find an automatic justification for agreeing to the amendments before us on the basis of Government responsibility.
Does my hon. Friend agree that one of the difficulties is that the general taxpayer is being asked to underwrite the risks of what is essentially a private financial arrangement? My constituents might feel that that is a bridge too far, in terms of what they are prepared to underwrite themselves.
I thank my hon. Friend for that point; I wanted to come to that issue. It concerns the nature of the pension protection fund, which we are seeking to establish as an independent non-departmental public body, operating at arm's length from Government and responsible for its own financial management. The proceeds that it distributes are to be funded by the levies on schemes, not by the taxpayer. The issue that my hon. Friend raises about the Government standing behind the pension protection fund is important. It is a fundamental principle, which is relevant to our discussions about the protection or the compensation that we might be able to consider for those who have lost everything. I say ''might be able to consider''; again, I am not raising any false hopes.
To ensure that the organisation has the practical means to fulfil its independent role, we have given it every reasonable possibility of acting in a flexible manner so as to deal with potential financial difficulties, although we have, of course, included some reasonable checks and balances. Those possibilities include the options to invest, to increase the levy—subject to a cap—and to borrow commercially to cover a short-term cash-flow problem.
We discussed the US experience. The Government have drawn from the experience of the US Pension Benefit Guaranty Corporation. We have taken the best aspects of it, and learned lessons on how we could improve on it, particularly in terms of the emphasis on risk-based levies. We have built a protection fund that we hope can meet any eventuality, based on very prudent assumptions and funded through the levy. People can have confidence in the guarantee that it offers.
I am sorry to say that the hon. Member for Eastbourne seemed to be trying to undermine confidence in the PPF even before it was established. He suggested that it was a political construct—that was the term that he used. It is not a political construct; it is a protection fund to provide protection for more than 10 million scheme members. Despite all our discussions this morning, we must not lose sight of the fact that what we are seeking to do through the Bill, for example in clause 98, is to establish the sort of protection that will ensure that no one in this Room will ever again have to make the sort of speeches that they have had to make today—which, incidentally, they made very effectively—about those who have lost out.
We do hope that the way in which we established the PPF, the risk-based approach to funding, and the powerful regulator giving protection to existing schemes will provide confidence in pensions in future.
On the point about confidence in the system, the Minister has distanced the Government from the issue of compensation, saying that that was an issue between employers and members who had paid into an employer's scheme. He is distancing the Government again from the PPF in future. He is saying that it is an independent organisation that independently administers the fund. Is he clearly saying—so that we do not have to repeat this process in 10, 20 or 30 years—that if the PPF ran into a deep, short-term problem, as the American scheme has done in just two years out of 31, the Government would in no circumstances act as a guarantor or a lender of last resort in order to overcome those temporary problems?
Yes. I am saying that that will not be necessary. The hon. Gentleman should remember the way in which we set up the scheme; the safeguards that we built into it; our prudent assumptions about the scale of demand that the protection fund could cope with; the flexibility built into it—the ability to vary the levy, subject to the cap—and the power of the board to borrow in order to cope with those short-term fluctuations. We are establishing the fund precisely so that it does not have to call on the back-stop of a Government guarantee. That is a basic principle, for
which we are not making any apologies. That is the way that we are designing it and it is important that we do so, because we must ensure that we do not have a situation where people will say, ''Well, okay, this is the cushion before we get to the real guarantee, which is the Government and the taxpayer.'' As my hon. Friend the Member for Northampton, North said, such a situation would not be generally acceptable to the public and the taxpayers, many of whom will not benefit from that protection.
I shall address the specific point raised by my hon. and learned Friend the Member for Redcar (Vera Baird) about the protection fund's location.
There has been a bid for it to be located in Eastbourne. I can tell my hon. and learned Friend the Member for Redcar that the decision has been made to rule out Croydon, North. I am sorry to say that Gravesend has also been ruled out as a possibility in the short term. However, I cannot promise her that Redcar will be the location. It is a decision that is still to be made, but we have listened to the points that she has raised on the matter.
Finally, we have had a serious discussion, which goes to heart of much of the debate that we have had on pensions generally, about the compensation for those who have lost out. I would say, to hon. Friends in particular, that I understand and share the strength of feeling on the issue. I can give them a reassurance that we are examining seriously what can be done to assist those who have lost so much.
However, I am asking my hon. Friend the Member for Cardiff, West to withdraw the amendment, not as an indication that we, or our hon. Friends, are abandoning those people, but in recognition of the fact that the pension protection fund is not the vehicle for seeking to provide them with compensation. The amendment tries to use the fund as that vehicle and therefore undermines the fund's basic principle that it is an independent organisation at arm's length from Government. That could make it more difficult for us to ensure—both this morning and throughout the process of the Bill—that we are establishing the protection that should mean that in future people never face the sort of tragedy that many of our constituents have faced. That is not to say that we have given up on finding a solution to the plight of those who have suffered so much. I am saying to my hon. Friends, and to other Committee members, that the pension protection fund and this amendment are not suitable vehicles for doing that. Indeed, it could make it more difficult for us to find a long-term solution.
I said at the outset that this is an amendment that removes two words from of the Bill and inserts one. Nevertheless, we have managed to debate it for nearly two and three quarter hours. No, I have got that wrong. It was about one and three quarter hours; it was not for as long as I said.
It may have seemed that long, even though the amendment removes one word net from the Bill.
I would like to thank hon. Members on both sides, including the hon. Members for Eastbourne and for Chesterfield (Paul Holmes), who contributed to the debate on the amendments that I tabled. In particular, I thank my hon. Friends the Members for Hamilton, South, for Glasgow, Anniesland and for Burton (Mrs. Dean), and my hon. and learned Friend the Member for Redcar. All conveyed the fact that this is an issue about which there is strong feeling on the Labour Back Benches. I mentioned that almost 200 Labour Back Benchers have supported the call for compensation for the workers who have been affected. I know that there is sympathy among other Committee members who were not able to be present this morning.
I understand the points that my hon. Friend the Under-Secretary made about the fund. As he knows, the Ways and Means resolution is not the vehicle that I would have used to establish the principle that the Government should assist in some way. The jigsaw puzzle is nearly complete and the picture of what we are talking about is emerging. As my hon. Friend the Member for Hamilton, South said, it is important that the Government reach a conclusion during the next month or six weeks before the Bill is debated on Report.
I accept that the Under-Secretary was unable to make such a commitment earlier, but it is important that we receive a clear picture of what is emerging from the Government's work. I can confirm from my knowledge of matters, such as it is, that evidence shows throughout the country that they are working hard and examining the scale of the problem—and rightly, too—to find out what, if anything, they can do. It is right that the Government are taking such action. We are now almost two years into the discussion about the emerging problem and, now that the Bill has been drafted, we must bring it to a proper conclusion.
I certainly have no desire to play political games, nor does any other member of the Committee. Intelligent and sensible contributions have been made to the debate, which should be cogitated on, and the Government should consider them further. This morning's debate confirms the importance of the issue and of making the Bill the success that we all want. We want to make it a Bill that members of the Committee are proud of, not a Bill that will come back in nine years' time, as the Pensions Act 1995 has done, so that any mess that is left can be put right. That is why we scrutinise the Bill properly in Committee and want to draw the right conclusions.
I do not want to put into the Bill a measure that is flawed or unworkable, but I say to the Under-Secretary that it is vital that the matter is drawn to a proper conclusion and—as my hon. Friend the Member for Hamilton, South said—brings justice to the workers who are involved. I reserve the right to return to such matters later in our proceedings, and I beg to ask leave to withdraw the amendment.
The hon. Gentleman knows perfectly well that he can use the rules of the House to raise any question he wishes. He can have that question tested on Report.
Clause 90 ordered to stand part of the Bill.