Treasury and Work and Pensions

One of the features of this episode is that we are dealing with people who have tried to do everything right. They have tried not to run up debts, including credit card debt, and have sought to save in the safest way possible. One lady said to me, ““You may think it silly that I did not just put the money into the bank and get some interest on it, but I know that had I done so I would have taken that money during the year.”” These are the people with whom we are dealing, and they are asking how companies, banks and administrators can behave in this way. Such people then ask Government what they are going to do about it, both in a rescue sense and, more broadly, in a compensatory and a regulatory sense. This is one of the occasions when the rhetorical demand for less regulation suddenly meets the fact that a group of people has been the victim of the lack of regulation in an area and wants that area remedied. That is one group of people who would have expected more from today’s exchanges. A second such group is made up of all those people, possibly numbering up to 120,000, who lost some or all of their occupational pension scheme when schemes wound up between 1997 and 2004. This case has now been exhaustively analysed by the parliamentary ombudsman, so we have no excuse for not knowing the facts. An inadequate regulatory framework enabled events to happen. People thought that the final salary pension schemes were safe, as they had been told endlessly. Indeed, the previous Conservative Government took action after the Maxwell case, which affected some 30,000 people. At that time, we put together a compensation package that provided almost total compensation within weeks. After that case, the Pensions Act 1995 was enacted, setting in place a regulatory structure with minimal funding requirements and so on, which effectively told people, ““Your final salary pension scheme is safe””. As the parliamentary ombudsman has shown us, official literature told people that that was the case. In fact, they were not safe, and thousands of people who did nothing wrong but believe the assurances they were given have lost the whole of their lifetime pension savings. Of course they ask, like the Farepak customers, ““How could this have happened? We did everything right—we did everything that we were told to do. We were prudent. We saved—we invested in our pensions—and this has happened.”” Of course they ask the Government to put together a compensation package, as happened in the case of Maxwell, and then want them to take steps, as they already have, to ensure that this does not happen again. As I understand it, the Government have a twofold response on why they cannot do what is sought. First, they say, ““It’s not entirely our responsibility.”” The answer to that is that no one has said that it is entirely the responsibility of the Government—by that I mean the previous Government and this one—but the fact is that they put in place the regulatory framework within which such schemes operate, they said what would happen when they were wound up and what the order of priority was, they put in a minimum funding requirement, and they put out leaflets telling people that the schemes were safe, guaranteed and protected by law. It is therefore not surprising that people now say: ““You have an obligation to do something about the collapse of these schemes and the collapse of our entire pension savings.”” The second argument that the Government use is that it would be extraordinarily expensive to provide a compensation package for those affected. I understand why they should say that—there is an argument about what the figure really is—but I do not want to be detained by that point. My point is that it is a curious argument that says that if the figure were less and fewer people were affected, it would not be so difficult to remedy the injustice, which the ombudsman found be at least partly a consequence of official maladministration. It is a curious argument that says that because the problem is serious and significantly affects large numbers of people it cannot be remedied, whereas if it were a smaller problem it could be remedied. That cannot be a tenable position to hold. I hope that the Government are still in discussions about this and that they will seek to build on the financial assistance scheme that they have already introduced in order to provide more effective assistance for these people, because whoever is culpable for what has happened, they certainly are not. My constituents and others listening to the debate might feel more cheered by the way in which the Government are beginning seriously to engage with some of the long-term issues that transcend day-to-day knockabout party politics. That is particularly true of pensions policy, which has been dogged for decades by our inability to think other than in the short term or to think outside the box of normal tribal, adversarial party politics. That is why we have a pensions system of such complexity, with bits added on but no fundamental reform. There was a nice moment in the 1950s when the Labour party had proposed a comprehensive pensions scheme called the national superannuation scheme, causing the Macmillan Government to reflect on what to do in response. Macmillan wrote to his Ministers:"““In the long run we shall all be dead…So do not let us bother too much as long as we do not spend too much for the next two or three years.””" That is an entirely characteristic statement of what one might called the ““nimto”” tendency in British politics. We know about nimby, but this is ““nimto””, or ““not in my term of office””. However, some issues cannot be dealt with in that way, of which pensions are the key issue. One history of the politics of post-war pension policy, by Hugh Pemberton, says that"““the short-term horizons and adversarial nature of British politics are profoundly unsuited to crafting pensions policy.””" That has been the case, and the history of pensions in this country shows it. Now, not only on the pensions front, but on many others—climate change is the other obvious example—we politicians are being asked to get outside the box of short-termism and adverserialism, and try to reach long-term agreement that will stick across generations. It goes against the grain and cuts against the culture, but it is something that we must do. I give the Government credit for establishing the Pensions Commission and the other reviews to try to enable us to deal with such issues in a rather more sensible and long-term way than we have done before. If we do that, we bring credit to ourselves and give this and future generations the kind of security that people look to us to provide.