Finance Bill

That was a simplistic question. People oppose measures for many and varied reasons. If the hon. Gentleman survives into Opposition, perhaps he will understand the way in which such decisions are made. I am not sure whether I hope that he experiences that, but he might. My final quote from the Red Book demonstrates the hubris of a Government who are 10 years into their life. It states:"““The Government recognises the importance of a stable environment that allows the pensions industry to plan ahead and minimise disruption to the regimes already in place that are working well.””" That comes from a Government who have already made three main U-turns on their post A-day reforms. How many more are consistent with maintaining"““a stable environment that allows the pensions industry to plan ahead””?" When the Economic Secretary read that bit and let it go through, he must have smiled at the irony of those remarks, and at how many people in the industry would not recognise the Government’s principle in relation to the reforms of the pensions system. Another principle is that the cost of pensions tax incentives must be affordable and fall within current fiscal projections. I am sorry that I forgot to mention that earlier, because it is relevant here. This raises a doubt in my mind, and in the minds of those in the industry, about what other changes might be planned if the cost of these reforms continues to mount. Will the Economic Secretary unpick other measures in next year’s Finance Bill? Will the Government take fright at the levels of the lump sum contributions that many people are putting into their pension schemes this year? I recognise the importance of the argument about affordability, but this leaves the door open to further U-turns in the future. Where does this leave the consumer and the industry? Let us consider the industry first. It estimates that it has invested some £35 million in new systems and processes to introduce the type of policy that the Government have created, and that sum will have to be written off. This sudden withdrawal without consultation has left an estimated 50,000 policy holders in the pipeline. Insurers could not deal with inquiries promptly because there was so little information available from the Treasury when the announcement was made. The final details of the transitional arrangements were announced only on 13 April, a few days after the previous deadline had expired. That is not an orderly way in which to conduct business. I know that the industry is pleased that those transitional changes have been made, and we should welcome them on that basis, but this is not the way to make policy. All sorts of changes had to be made by the industry: automated advice systems had to be amended to redirect customers to alternative products, for example, and the industry now has sub-scale portfolios of business to administer for the next 25 years or so. The Minister and I agree on the importance of maintaining London as a global financial services centre, and we recognise that insurance, along with other financial services, covers a global market. Companies seeking to expand their businesses need to think carefully about how and where they use their capital. It will not help the UK market if there is a perception that we have an unstable, unpredictable pensions tax regime. It is also worth pointing out that the industry has sought to reach a compromise with the Treasury on this issue. It has come forward with a series of proposals to facilitate the continuation of this type of business, as it recognises the importance of the protection market. It is also thinking of ways of avoiding writing off such a large investment in the new systems. It has proposed that all pension term assurance offers would contain clear information about the pension to which they were linked, including details of the provider and a policy number, reinforcing the link that the Government think is so important between the term assurance and the pension. That would produce an integrated policy that provided a pension and a lump sum death benefit. The industry put that proposal forward so that contributions could continue, but the Treasury rejected it. In effect, it rejected that position before A-day. The lack of clarity in the Government’s position on integrated products is such that in one of today’s amendments to schedule 18 we see explicit recognition of that type of policy and of the new transitional arrangements involved. The industry also suggested, as an alternative, that it would cap the amount of the lifetime allowance that could be utilised by taking out term assurance. A third of the allowance, about £500,000, was suggested, but again the Treasury rejected this attempt by the industry to reach a workable compromise. Many consumers have therefore been left with a protection gap. Those who are outside an occupational pension scheme will have to pay more for the coverage that all Members of the House take for granted. There is an uneven playing field, which favours those who are lucky enough to be in jobs that have a death-in-service benefit as part of the package, and disadvantages those who are self-employed or contractors. Perhaps more sole traders will be encouraged to incorporate, despite the Government’s best efforts yesterday, to access the tax relief that comes from being an employee. Another important issue is that consumers and industry cannot assume that just because something is a Government policy one month, it will be a policy next month, next year or the year after. That undermines consumer confidence in saving for the long term. In a subtle but important way, it undermines the Government’s long-term goal for more people to take responsibility for their financial affairs. That has a destructive effect on the industry and on consumers’ willingness to plan for the long term. Every Member of the House recognises the importance of that, and we have had many debates about the Pensions Bill, which is an attempt to encourage more people to save for the long term. One message seems to be coming out from the Department for Work and Pensions, and a different one from the Treasury and the Economic Secretary. Two quotes highlight the combined impact of the change in policy. First, Vanessa Owen of Liverpool Victoria—perhaps I should start to pay her royalties, given the number of times that I have quoted her—said:"““Our members and customers who do not have access to life assurance through their employer are now at a greater disadvantage because the option of tax relieved life protection has been removed.””" Secondly, according to AEGON,"““Not to mention a complete waste of millions of pounds in making pension term assurance available in the first place, following extensive consultation with the Treasury.””" Finance Bill by Finance Bill, the Economic Secretary unpicks the work of the former Financial Secretary, the right hon. Member for Bolton, West. Instead of the clear, simple scheme that she advocated, we have an increasingly complex and restrictive scheme. It is surprising that the pitfalls were not seen, and warnings not given, when the legislation was introduced in 2004. The Bill is destructive—it undermines the confidence of consumers in the stability of the Government’s pensions policy, inhibits both innovation and the sector’s willingness to respond to Government initiatives, and is destructive of the Treasury’s ability to make policy in an area in which long-term stability is fundamental if we are to promote long-term savings.