Finance Bill

The Economic Secretary has nodded, and I am delighted that we will be furnished with that information. I want to refer to a broader point in that context. At one level, this Government, more than any other Government, understand the behavioural impact of changes to the tax regime; otherwise, the Chancellor would not meddle in the tax regime quite as frequently as he does. At the same time, there has been a fundamental failure properly to think through the behavioural impacts of those changes and the extent to which increasing reliefs, cutting rates or increasing allowances would change people’s behaviour. The Association of British Insurers indicated prior to A-day that those products would have a positive impact on the term assurance market with new policyholders taking advantage of the increased affordability of products. The Treasury does not seem to have responded. It does not seem to have thought through whether the situation would encourage new participants to enter the market and offer new policies to try to close the protection gap. One of the problems is that the Government have not properly thought through their A-day reforms; that is why this is the third U-turn on those reforms since they were legislated for in the Finance Act 2004. Slowly but surely, the Economic Secretary is unpicking the work that one of his predecessors, the right hon. Member for Bolton, West, did when, as Financial Secretary, she was responsible for the same areas that he is at the moment. I feel sorry for her at times. She must be wondering why on earth she spent so much time working on these reforms only for the Economic Secretary, who was at the Treasury at the time advising the Chancellor in some capacity, to conduct a series of U-turns once they were on the statute book. We can see how, and how quickly, the Treasury’s approach to pensions has unravelled over the course of the past couple of years in moving on from the intention that was set out in the then Financial Secretary’s speech in Standing Committee only three years ago. In the context of the Pensions Commission report, the 2006 Budget said that one of the five tests that the Chancellor set to see whether these reforms were acceptable to him was whether they would promote personal responsibility. Yet here we are with a product that would appear to promote personal responsibility and reduce dependency on the state but that the Government are seeking, through this clause, to abolish. In last year’s pre-Budget report there is a section headed ““Fairness for tomorrow’s pensioners””, where, at paragraph 5.77, the Government casually say that they have"““become aware that, at a result of the flexibilities that the new pensions tax regime has brought in, life insurance policies that provide lump sum death benefits alone are being offered as personal pension arrangements eligible for pensions tax relief.””" If the industry knew about it prior to 2004 and A-day, why did the Treasury just happen to become aware of it? Surely it should have played a much more active role in understanding what was happening in the market and what would be the impact of the legislative changes that suddenly crept into the Finance Act 2004. In this year’s Red Book, we have greater amplification of the Government’s approach to pensions tax relief so that no one could be in any doubt about what might happen in future. It sets out some key principles that have guided and continued to underpin the Government’s approach to pensions tax relief, one of which the Economic Secretary repeated in his brief opening remarks. It says that"““generous tax relief is provided for pension saving to produce an income in retirement. Pension saving is not, however, provided to support pre-retirement income, asset accumulation or inheritance””." Let us ponder for a moment the meaning of that principle. The death in service benefit that our widows and widowers receive on our death as Members can be used to be invested in an income in the same way as a widow’s pension. It can be used as an alternative to pay off the mortgage so that their existing income is protected. Yes, we are talking about a lump sum that is gained on death, but the purpose to which it is put can enhance the widow’s or widower’s pension by supplementing it through direct investment or by repaying the mortgage debt with which so many people are burdened.