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Lord Skelmersdale: My Lords, the House will be grateful to the Minister for repeating the Statement made in another place a few minutes ago, but that, I am afraid, is as far as our gratefulness goes. The Statement contains no hint of apology to the thousands of people who have lost out because of the actions of government. Yes, I refer to government in general, because there is also muted criticism of the last Conservative government, to which the Minister referred in his Statement. But the fact of the matter is that the main criticisms are of things that this Government have done on their watch.
There is no doubt that yesterday the Parliamentary Ombudsman published a devastating report. It was entitled Trusting in the Pensions Promise but, when I scanned it last night, I discovered that it was about anything but. It might be more properly entitled Mistrusting the Government's Pensions Promise. The Parliamentary Ombudsman found:
"The maladministration my investigation has uncovered caused injustice to a large number of people who, as a result, lost the opportunity to make informed choices about their future",
because official leaflets encouraging people to join a final salary company pension were,
"sometimes inaccurate, often incomplete, largely inconsistent and therefore potentially misleading".
The Government's response to that, shown by the Statement, is that they were not—and they have given selective quotes to show that they were not. I welcome the fact that the Government are going to publish a proper written response to the ombudsman's report but, when they publish it, I request that they publish an annexe of the pensions leaflets in full, so that we can see whether the Government are right or whether the ombudsman is right.
The facts of the matter are these. My right honourable friend Peter Lilley realised that occupational pension schemes were vulnerable to the vagaries of the financial markets and introduced the minimum funding requirement for such schemes in the dying days of the last Conservative government. The incoming Government naturally took advice and, following that advice, decided that the MFR—as it has become known by acronym—was too strict, and relaxed it. The ombudsman found no fault with that decision. However, she castigates the Government for a further relaxation, in March 2002, against the advice of the actuarial profession in both November 1999 and May 2000. On the first occasion, the actuarial profession warned that the MFR was too low to protect members and, on the second, that scheme members had no idea of the risk to their pensions; yet still the MFR was relaxed.
I have long believed that governments are elected and ultimately lose elections, on the basis not of facts but of perceptions. The Government are suffering a bad week as far as electors' perceptions go. A tranche of their own Back-Benchers do not like what they perceive will follow from the Education and Inspections Bill; your Lordships do not like what you perceive the last Labour manifesto said about the relationship—the compulsive relationship, I might add—between ID cards and passports; and the ombudsman decries the perception in DWP leaflets that occupational pension schemes are a safe foundation for pensioners' incomes.
I shall go back to my history. At the same time, the DWP was still issuing leaflets extolling the virtues of opting out of SERPS—latterly the state second pension—and into an occupational scheme, without highlighting the potential risks to members' future pensions, whereas there is no risk to second state pensions although the payout would be much lower. The Government are shortly to publish their White Paper on the Turner report. One of the features of that report is a government-run pension scheme, of which the Government have signalled their approval. Why should any employee opt in to such a scheme after the revelations in this report?
The ombudsman also lays into the Chancellor for abolishing advance corporation tax, a matter that the noble Lord, Lord Oakeshott, and I have consistently raised with the Minister. The round figure we have given is £5 billion a year taken out of pension schemes' income. The Minister has said that it is nothing like this, and referred us to the work of the Pensions Policy Institute. Indeed, it was only last week that the Minister repeated that suggestion. The noble Lord, Lord Oakeshott, can speak for himself, but I have
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studied it in depth and discovered that the total figure is not £5 billion, but £5.7 billion. Not all this is attributable to the sorry state of pensions schemes. However, the PPI believes that that figure is anything between £2.5 billion and £3.5 billion a year, even at its lowest. This is a significant figure and there is no doubt that government intervention has had a serious effect not only on the finances of pension schemes, but on the Stock Exchange as well. It is money on which future pensioners should be able to rely, and much less than the £15 billion that the Government claim it would cost to correct what can only be described as government mis-selling. My honourable friend Mr Hammond calls this helping to precipitate the underfunding of pension schemes.
It is, of course, true that the Government have appreciated that pensions schemes should never again get into the mess that has been going on since the mid-1990s. They introduced a pensions insurance scheme, the Pension Protection Fund, in the 2005 Act. This is now up and running, and 40 schemes are being administered by the fund. However, during discussion of the then Bill in another place, Labour Back-Benchers threatened a revolt because between 85,000 and 120,000 pensioners would never be covered by the PPF as their employers had already ceased trading. The Government's reaction was to cobble together a small compensation fund—the Financial Assistance Scheme—which would cover only those schemes which commenced winding up between January 1997 and April 2005, if my memory serves me right. It is not only small but mean, at £20 million a year, which still does not cover the people covered by the ombudsman's report. Only 27,000 out of the 85,000 people who have lost out because of the Government's actions are in receipt of money from the FAS. I welcome the Government's decision to look again at the FAS. There must be a way of finding extra funding for it—the use of unclaimed assets, for example, which has been a suggestion of my party for some time.
Finally, the whole tenor of the Government's response is totally to ignore the ombudsman's findings. What is the point of having an ombudsman if all that the Government do is to ignore her findings—not once but twice during the current year?
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Lord Oakeshott of Seagrove Bay: My Lords, the Government should be ashamed of their response to this ombudsman's report. Whatever the substance of the findings, they should not be relying on what I can only call a Milosevic or, if you prefer it, a Saddam Hussein, defence—that whatever the court says, it has no jurisdiction over them. Should the Minister not accept that if the ombudsman makes very serious charges of this nature, in a very thorough, well argued and well researched report such as this, they should be taken seriously and not be swatted away like an irritating fly, which is what the Government have done? Frankly, I am appalled.
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My first reaction when I heard the Secretary of State yesterday morning was amazement that it has taken Mr Hutton so long to reach the Cabinet. He is a graduate with a starred double first in the academy of evasive new Labour lawyer-speak. We heard the reinterpretation of "voluntary" last night, in a way that did not impress your Lordships, but Mr Hutton saying that the Government were willing to have another look at the Financial Assistance Scheme as part of the current spending round really took the biscuit. If there is a review of the current spending round and there is some increase in funding from the Treasury, when will the first penny from that reach the poor people who are waiting for redress from the Financial Assistance Scheme? How many of the 85,000 people robbed of their pensions have now received payments from the scheme, and what is the total of payments made?
This scheme is an outrage. Twenty million pounds a year is grossly inadequate; it is not going too far to say that that is just the price of a few peerages from this sleazy Government. We have made it clear from these Benches—I did not hear it from the noble Lord, Lord Skelmersdale, but I would be interested to hear what the Official Opposition say—that we believe that the people who have lost their pensions under the Financial Assistance Scheme should be compensated at least up to the levels provided by the Pension Protection Fund. In contrast to the hysterical figures quoted by the Prime Minister yesterday, we have made it clear that we believe it would cost of the order of £100 million a year, which we believe to be fully affordable—and affordable from the contingency reserve—given the £4 billion spent on Iraq.
Today, I ask the Minister to justify the ridiculous figures of £15 billion to £17 billion that are being quoted, and to clarify what the figure would be on an annual basis. Why do the Government believe it necessary to insist on full annuity buy-out at very poor rates under the Financial Assistance Scheme? If the assets were pooled, we believe that £100 million a year would be sufficient to give a substantial increase in the benefits payable, and to ensure that all 85,000 people receive some benefit, rather than have a ridiculous cut-off period whereby only people within three years of retirement receive those benefits.
I also pay tribute to Ros Altman, the pensions advocate, as she was called in the ombudsman report. She has done a wonderful job in exposing this scandal. She single-handedly brought this to ministers' attention. Again, it is a scandal that her very carefully argued and well researched work has been swatted away like this. Ultimately it is an issue of how this country works and how our democracy works if a report of this kind can be ignored, laughed at and almost vilified, although "vilified" is perhaps too strong a word. The fact is that a very carefully argued and researched report has just been ignored. That is unacceptable in our democracy.
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