8 September 2004

Malcolm Wicks MP, Minister of State for Pensions

Opposition Day Debate

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First of all, Mr Speaker, I would like to take this opportunity to pay tribute to the important work of our former Secretary of State, the MP for Oxford East.

He has served this Government well –- as champion of disability rights, as a creator of the New Deal and most recently in driving through the ground-breaking Pension Protection Fund.

While I shall miss him as a friend and colleague in Government, I hope Honourable members will join me in thanking him for all his hard work and in wishing him well for the future.

I would to start, Mr Speaker, by asking the honourable members of this House to sit back for a moment and imagine.

Imagine a Britain:

Mr Speaker, we’ve all lived in a Britain like this – we’ve all got constituents who have suffered in a Britain like this. What (new) Government could possibly fail to act?

This was the Britain that this Government inherited in 1997 and this Labour Government could not sit back and preside over such a mess.

We are proud that we have cut absolute pensioner poverty by 2/3 – lifting 1.8 million pensioners out of poverty.

We are proud that about 20 million people have gained from the introduction of State Second Pension in April 2002 – including 5 million carers and long-term disabled people.

And we are proud that Pension Credit is rewarding those who have saved something for their retirement but who in the past have missed out as the system knocked it straight off their benefits.

But, Mr Speaker, I don’t re-emphasise the legacy we inherited simply to make comparisons with the previous Government.

While it’s important to remember the context in which this Government has acted, 1997 is very much history and Britain has thankfully moved on.

The Honourable Members Opposite, however, don’t always appear to have moved on to the same extent and that is why I feel the need to begin my remarks with the 1997 legacy.

As this Government has acted, Honourable Members Opposite have fought to oppose. The Honourable Member for Havant once called the Winter Fuel Payment “a gimmick” which they were going to abolish. (HoC 8 June 2000)

Well Mr Speaker, some gimmick. In the last financial year, Winter Fuel Payments have helped 11.5 million pensioners in around 8 million households.

With Pension Credit, at first Honourable Members Opposite said they would scrap it, then they said they would “re-consider it”, then they said they would keep it. But they continue to carp away at what they describe as an extension of means-testing and still pay no attention to the importance of helping the poorest pensioners.

Indeed last year the then Shadow Chancellor, and now Leader of the Opposition, conceded that under the Tory plan, “Those who are entitled to the pension credit and do claim…will not be better off”.
[Howard: Dimbleby Programme – 5 October 2003]

Next month sees the first anniversary of Pension Credit payments and there are now over 3 million people in Great Britain receiving it. What’s more, Mr Speaker, over 1.9 million households receive more money than before because of the introduction of Pension Credit.

Mr Speaker, in today’s complex 21st century society, the role of Government in pensions has evolved considerably since Parliament first legislated to introduce the State Pension.

To meet the demographic challenges of an ageing population, Government policy needs to be affordable, sustainable and fair.

Mr Speaker, this Government’s approach has rightly targeted extra state support at those who need it most and encouraged private funded provision for those who can afford to save.

This has enabled us to strike a fair balance:

By contrast, the policies of the Honourable Members Opposite are unaffordable, unsustainable and unfair.

Unaffordable as even on the Conservative Party’s own figures there is a £500 million a year black hole by the end of a Tory Parliament.

Actually, Mr Speaker, does anyone really know where their money would come from? Last year at the Conservative Party Conference, the Honourable Member for Havant said he would abolish the “useless schemes and wasted money” of the New Deal.

Nearly 1 million people have found work through the New Deals the Honourable Members Opposite would scrap.

Their policies are unsustainable because the earnings link costs £12 billion by 2020, rising to £69 billion by 2050. No tax-cutting party could ever deliver these funds.

And their policies are unfair as it is an in-built feature that within around 20 years incomes for the poorest drop from 21% to 16% of average earnings.

This Labour Government and indeed only a Labour Government has proved able to tackle pensioner poverty whilst ensuring that its policies are affordable, sustainable and fair.

Mr Speaker, tackling pensioner poverty is, however, only part of the story.

Again I would like to ask members of the House to sit back for a moment and imagine.

Imagine a Britain this time where people lose their pensions when their company goes bust and leaves the pension scheme under-funded; a Britain where people are not saving enough for their retirement and where individuals have lost confidence in the security of their pensions.

This is a Britain that we have seen all too recently. The challenges facing funded pension provision in this country are very real. But this Government and only a Labour Government has acted to meet these challenges.

I have met many of those who have lost some or all of their pensions when their employer became insolvent. I have seen what it has done to their lives – their shattered security, sometimes their health gives deteriorating from the stress, always lives changed forever.

But, Mr Speaker, I have also met people who do not face this risk.

Honourable Members may remember Mr Johnson. I first mentioned Mr Johnson at the Second Reading of the Pensions Bill. He is 58, has been working for the same employer for 30 years and has been contributing to his occupational pension throughout this time.

When his employer went bust, Mr Johnson knew that his pension was safe – because Mr Johnson is an American and the US Pension Benefit Guaranty Corporation meant that his pension savings had been protected for decades.

Again what Government, Mr Speaker, could sit back and watch while hardworking Britains lost their pensions?

Not this Government. While Honourable Members Opposite were busy opposing the Second Reading of the Pensions Bill, this Government took pride in the fact that through the Pensions Bill we are making the Pension Protection Fund a reality – bringing real security and peace of mind to over 10 million defined benefit pension scheme members.

This Government and only this Government is building confidence that a pension promise made will be a pension promise honoured.

I’m afraid there’s more in this sorry tale of woeful resistance from the Honourable Members opposite. Because, Mr Speaker, some of those who had seen their accrued rights cut were employees working for solvent employers.

When these employers wound up their defined benefit scheme under funded, non-pensioner members could receive Cash Equivalent Transfer Values which were too low to provide them with the pension they were expecting at retirement.

Again, Mr Speaker, this Government has acted. We have introduced the full buy-out regulations so that trustees can require a solvent employer who wants to wind up their pension scheme to buy out members’ rights in full.

But as recently as July this year, the Leader of the Opposition, prayed against these regulations. Mr Speaker, this Labour Government and only this Labour Government is building confidence that a pension promise made will be a pension promise honoured.

At the last Opposition Day Debate in February this year, Honourable Members opposite attacked this Government again – this time for not promising assistance to those for whom the Pension Protection Fund was going to be too late.

My Honourable Friend, the Member for Cardiff West along with other Parliamentary colleagues admirably led calls to act. (I notice my Honourable Friend the member for Sittingbourne and Sheppey sitting behind me.)

This Government found £400 million without breaking any of its other spending commitments. When I presented this to the House during the Report stage of the Bill, I set out a clear set of steps and a timetable for action.

Earlier this summer I spoke at the Consultation Event and we are still very much on course with this timetable. I’m proud that this Government is introducing the Financial Assistance Scheme. As for the Honourable Member for Havant – warm words but not so much as a signature on my Honourable Friend’s Early Day Motion.

Mr Speaker, the pensions challenges facing Government – indeed facing Governments across the developed world are very real and I make no attempt to hide this.

But what is important is that people know that they have a Government that is committed to embracing those challenges, able to learn lessons from our own past and from other countries experiences.

Through the Pensions Bill, we have taken great strides in bolstering security and confidence in funded pensions. Alongside the Pension Protection Fund, the new flexible and pro-active Pensions Regulator will further bolster security by tackling the risks to members’ benefits while enabling well-administered and secure schemes to continue without unnecessary regulatory burden.

And the new Pensions Regulator will be able to issue improvement notices. For the first time, the Regulator will be able to prescribe to offending parties how to put things right instead of just levelling civil penalties against them – working with them and monitoring their progress on the implementation of the improvement notice.

But while the Pensions Bill is a cornerstone of this Government’s reforms, it is only one step on the road to our goal of enabling people to save adequately and confidently for their retirement.

Our programme of informed choice measures will empower individuals to take greater control of their retirement planning. And our age discrimination legislation – as well as the improved options for state pension deferral in the Pensions Bill – will open doors to greater opportunity for working longer, breaking the cliff-edge between work and retirement.

Mr Speaker, I’ve spoken about the past – in particular, the legacy that this Government has inherited on coming into office in 1997. And I’ve spoken about the present and the action this Government has taken, despite opposition along the way, to tackle the injustice of pensioner poverty and bolster security and confidence in funded pensions.

But what of the future? Firstly, this Government has had the courage and vision to see the value of independent expertise and we look forward to the first report of the Independent Pensions Commission sometime next month – and a report from the Employer Task Force by the end of the year.

These findings of these reports will be of immense value in informing the way our policies develop to meet the challenges that lie ahead.

Finally, Mr Speaker, I would like to Honourable Members to imagine once more.

Imagine a Britain where pensioner poverty is nothing more than an unpleasant chapter of history; where women no longer face disadvantage in the workplace or in saving for retirement; where the Pension Protection Fund has been set-up and is enabling people to save for the future with confidence; and where individuals are empowered to take control of their retirement planning – able to take informed decisions about how and when to save and work. And where everyone - employers, trade unions, Government, and individuals are working together to make the British pensions partnership the envy of the world.

This is our vision. This Government is acting and will continue to act to make this vision a reality.

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