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Mr. Gerry Sutcliffe (Bradford, South): I do not want to stop the hon. Gentleman's flow, but he mentioned what
Labour had inherited and the background to today's debate. Will he stick to the narrow subject of pensions, or will he widen the debate to cover the other ways in which the previous Government affected pensioners' incomes, such as putting value added tax on fuel?
Mr. Duncan Smith: The hon. Gentleman will have every opportunity to discuss the Government amendment, which intriguingly avoids the main purpose of the debate, which is to discuss what the Government have done to improve pensioner incomes through pension reform. That is the critical issue. The reality is that, as we have seen in the media and through hon. Members in the House, pensioners will on balance be worse off, not better off, as a result of all those changes. The key point is whether pensioners will be better off as a result of the changes made to pensions provision--that is what we are debating.
Let us return to the withdrawal of ACT dividend tax credit. In doing that, the Government struck a huge blow to pension funds and future pensioners; it is almost impossible to over-emphasise what a blow that was. After that, any pensioner would have been stunned by the blithe statement made by the then Financial Secretary to the Treasury, now the Paymaster General:
At a stroke, the new tax rise rendered final salary schemes far more expensive to maintain and thus less viable. I have spoken to one or two funds and it was interesting to discover the extent to which they have been hit. The Post Office pension fund finds itself down by £15 million a year, the Sainsbury pension scheme is less viable by £10 million a year and the railways pension fund is less viable by £30 million a year, all as a result of the Government's actions.
Ms Gisela Stuart (Birmingham, Edgbaston):
As the hon. Gentleman is clearly concerned about the well-being of those in work who provide for their old age, will he comment on what the previous Government did to the state earnings-related pension scheme and on how, over 18 years, they totally undermined its value?
Mr. Duncan Smith:
I am intrigued that the hon. Lady is speaking from her brief from the Whips Office, which tells her to ask that question. What she says is utter rubbish: the reality is that the previous Government have a lot to be proud of in terms of pensions reform and this country's pensions provision is the envy of most of Europe and perhaps of the western world.
Mr. Michael Jack (Fylde):
May I add to my hon. Friend's list of pension funds that will lose money as a result of the changes the Church of England pension fund, which will lose some £12 million? Is he aware that other
Mr. Duncan Smith:
My right hon. Friend is right--I shall with alacrity add the Church of England to my list. I omitted to mention many names on the list, because to read them all out would have taken at least 10 minutes. Even local government now faces huge difficulties because of what the Government did. It cannot be understated how hard the changes have hit many pension funds.
Mr. Dale Campbell-Savours (Workington):
Will the hon. Gentleman give way?
Dr. George Turner (North-West Norfolk):
Will the hon. Gentleman give way?
Mr. Duncan Smith:
No, I shall not give way. Labour Members do not like what I am saying--as in "Dads' Army", "They don't like it up 'em," but the facts are that the Government's actions really hurt pensioners and that the Labour party did not tell pensioners the truth at the time of the election.
The Government Actuary had to be brought in to carry out an out-of-sequence review, such was the mess wrought by the new tax. The review resulted in a prescription designed to restore some balance to the position on contracting out from SERPS, but the Government then proceeded to make matters worse, which shows how mean-minded and spiteful they are. They chose to freeze the salary-related schemes rebate and to reduce the contracted-out money purchase schemes rebate, which meant that they destroyed one viable option for people and made salary-related schemes even less viable than before. Not content with hurting pensioners through the ACT tax dividend credit withdrawal, the Government went and squeezed them further when the Government Actuary gave them an opportunity to do so.
The Government's first decision on taking power has created chaos and hurt many people. It is important to note that their actions have struck a blow at occupational pension schemes--the very schemes that they said they thought were rather good, which makes their actions not only ironic, but rather stupid.
Mrs. Angela Browning (Tiverton and Honiton):
My hon. Friend mentioned the public sector, but is he aware that the chief constable of Devon and Cornwall police, who received an appalling local government settlement this year, has to make grave choices because of the need to find additional funds to prop up the shortfall caused by the Government's action on ACT?
Mr. Duncan Smith:
I agree with my hon. Friend. Like my right hon. Friend the Member for Fylde (Mr. Jack), she has added to the list of examples of the problems and hurt being inflicted on pensioners as a direct result of the Government's actions.
Mr. Nick Hawkins (Surrey Heath):
I, too, should like to add to that list. Small borough councils have also been hit hard, and the hardest hit are those in the shire areas.
Mr. Duncan Smith:
I thank my hon. Friend. That is yet another example for the list. However, I urge my right hon. and hon. Friends to restrain themselves slightly on this matter, as otherwise we shall never move on. The point has been made absolutely clearly: pension funds and future pensioners across the country will suffer as a direct result of the mean-mindedness of a Government who never revealed what they intended to do.
Mr. Campbell-Savours:
The hon. Gentleman has made his case powerfully, and it is clear that he feels very strongly about the matter. According to the Opposition motion, we are talking about £5 billion. Does he intend to reverse the change in the law at the next general election? Will he go into that election with such a proposal?
Mr. Duncan Smith:
The hon. Gentleman has been here long enough--
Mr. Tony McNulty (Harrow, East):
Yes or no?
Mr. Duncan Smith:
I shall answer that question because I am intrigued by Labour Members. The Government have been in power for two years, but already they are trying to decide whether to vote Conservative at the next election. It is absolutely amazing. The hon. Member for Workington (Mr. Campbell- Savours) still does not know how he will vote, yet he is clearly en route to a decision. The hon. Gentleman knows as well as I do that, when we get back into power, we shall take whatever decisions are needed to rectify the problems facing pensioners. He must wait patiently, for we will make our proposals in time for him to make his decision about how to vote at the next election.
Throughout their first 18 months in power, the Government have meandered through their pensions review. Month after month, they have promised a Green Paper. They have even put on road shows, which were supposed to be shows on the road to Damascus--although some of them seem to have got lost somewhere on a wet night in Dudley. However, those shows never got anywhere. Despite their great promises, it has become clear that members of the Labour party had done no thinking about pensions reform in opposition and that they are trying to find a solution now that they are in office.
"People should understand that our reforms will benefit pension funds."--[Official Report, 3 July 1997; Vol. 297, c. 507.]
The Government's own actuaries do not agree with that statement. The Government Actuary's report states:
"This reduces the amount of dividend income from UK equities by just under 20 per cent. relative to the previous tax position."
That is a huge blow to anyone whose future retirement income depends on that investment. Even if the Paymaster General cannot add up, she should not assume that others have the same failing.
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