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Lord Hunt of Kings Heath: My Lords, surely my noble friend is right. It cannot be right that losses from the schemes which have collapsed should be met by the taxpayer without establishing a causal connection between the actions criticised in the ombudsman's report and the losses people have incurred. I have yet to hear any noble Lord try to attempt to make that causal connection. I do not believe that you can make that causal connection. My noble friend is right concerning the much loved and much missed Lord Mackay. However, I would refer noble Lords to page 53 of the ombudsman's report which deals in considerable detail with the statement made by Lord Mackay on the very issue she raises. It is very clear there.
Lord Fowler: My Lords, the noble Baroness was a pensions Minister between 1997 and 2005, so we are not entirely surprised by her response. It is all very well for the Government to say that they do not believe that they have done wrong, but surely the Parliamentary Commissioner was set up to give independent judgment on whether governments did wrong. Surely that was the whole point of the Parliamentary Commissioner. Is it not a fact that the Parliamentary Commissioner made not one but three findings of maladministration against the department? In those circumstances, many people will feel it is the Government's duty to put right the injustice that has been caused.
On a practical point, and I take up the point of the noble Lord, Lord Oakeshott, surely it can be put right not by one capital payment but year by year as pension payments fall due on a pay-as-you-go basis. I remind the noble Lord that that is what we eventually did in the British Rail case. There was a hole in that pension fund. A Conservative government and a Labour government combined to put that right and that is exactly what should be done in this case.
Lord Hunt of Kings Heath: My Lords, I have already made it clear that, as my right honourable friend the Prime Minister said yesterday, there will be a review of the Financial Assistance Scheme. We will try to do that as quickly as we possibly can. Obviously we will take into consideration the point that noble Lords have raised here today and honourable friends have raised in another place. I accept that not to accept the ombudsman's recommendation is not a matter that any government could take lightly. It is not taken lightly. Ultimately, however, and at the risk of repeating myself, we do not accept the arguments and recommendations that she has made. We do not believe that any causal relationship has been established between the matters she investigated and the actual losses suffered. On that basis, it would be highly irresponsible for a government to come here and say we will do what the ombudsman requires.
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I very much doubt whether the party opposite, were it in government, would do anything different from what I am doing today.
Lord Crickhowell: My Lords, this is the most damning report of government action that I have read apart from the Auditor-General's recent report on the Home Office finances. The ombudsman, perfectly reasonably, refers to the Prime Minister's foreword to the ministerial code and his belief that,
"citizens should be entitled to expect that the publications of official bodies—which create, oversee, administer and enforce the legal frameworks which they are told are there to protect their interests—do not mislead them".
The Minister responded in great detail, point by point, trying to make out that no causal connection had been established. The interesting thing about his point-by-point response is that it had been made previously by Permanent Secretaries and other officials to the ombudsman in advance of the publication. The ombudsman, having considered those responses, continued to take the view that she did—that there had been maladministration and that it did cause the damage that she identified. I take one specific example, the point about health warnings. She said:
"I do not think that such a 'health warning' can excuse the omission of perhaps the most significant factor in any reasonable answer to that question—that a pension was only as secure as the employer standing behind it".
So the ombudsman has considered the matter point by point, and has still submitted the report which the Government so casually regard.
Lord Hunt of Kings Heath: My Lords, the Government have a responsibility to take their decisions in what they believe to be the public interest. We have had an opportunity to respond to the ombudsman's report, and we do not believe that the case has been proven. That said, it would be wholly irresponsible of me to say to the House today that we will be prepared to implement those recommendations and commit that amount of public money. Let me repeat: we do not accept that the department's leaflets were inaccurate, incomplete, inconsistent or misleading. Some of them were very general, but they were designed for very different audiences. They all gave specific statements. They were not a full explanation of the law, but were for general guidance only. I do not believe that the Government can be criticised for that. I should point out that some of the documentation we are talking about was produced by the party opposite when it was in government.
Lord Howarth of Newport: My Lords, I thank my noble friend and the Secretary of State for injecting a very badly needed and overdue dose of realism into the public discussion on occupational pensions. It does not belittle the very real anxieties and difficulties experienced by members of pension funds that have been found to be in deficit to say that no one who thought seriously and responsibly about occupational pensions could ever suppose that the Government would underwrite whatever pension promises the
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private sector might make. If that were the case, why would the private sector ever bother to offer pensions? It is clearly a fatuous proposition.
Is it not one of the unfortunate effects of the ombudsman's report that it will tend to exacerbate the climate of unrealism? Do we not suffer from excessive expectations on the part of people who somehow suppose that they will not need to save significantly more or work significantly longer to enjoy very prosperous standards of living in a lengthening old age? Equally, do we not suffer from exaggerated fears? Would it not be helpful if the regulators could also become more realistic? FRS17, by exposing hypothetical pension deficits in the future, seems to me to be causing catastrophic effects. It is driving businesses to put vast sums of money into what is in essence a bucket with a hole in it. The more they buy gilts, the more the yield on gilts falls and the more their prospective hypothetical deficits increase. The likely catastrophic consequences of this are that we will fail to invest in the future of our businesses and in the productivity and the competitiveness that we need if we are to generate jobs, to enjoy prosperity and to be able to pay out pensions. Would the Minister agree that a lot more realism is needed?
Lord Hunt of Kings Heath: My Lords, I certainly agree with the general thrust of my noble friend's argument that realism, stability and a cooling of some of some of the hysteria that one has heard on general pension matters would be very important.
On bonds, my noble friend may like to know that the Economic Secretary to the Treasury recently met gilt market participants, as part of the Treasury's regular preparation of the DMO remit for next year, to canvas their views on the shape of next year's remit, including gilt-issue plans for next year. He might like to know that these matters are being discussed. The general point is this; in the actions that the Government have taken, it has been very important to try to ensure as much as possible that current schemes are viable and that what has happened to so many thousands of unfortunate people will not happen again. That is why we have appointed the pension regulator, why the legislation has been passed, and why we have the pension protection fund.
As regards the future, I believe that following the Turner commission is the way forward. The work around the commission and the public debate have enabled a much greater degree of public understanding of some of the critical issues that we face. One must remember that the Pension Commissioner's assessment is that the pension crisis is not one of today. The issues that he and his fellow commissioners tackle are for the medium and the long term. I believe that we will regain confidence if we can achieve a consensus on a way forward that will give the people of this country a sense that pensions policy will remain stable, not only in the short term but over 10, 20 or 30 years. Confidence is clearly very important for the future.
Lord Northbrook: My Lords, does the Minister agree that the main causes of the occupational pension
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funds crisis is a result of the changes to the ACT rules and the relaxation of the MFR requirements? If he does not agree, will he say what he thinks the causes are?
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