Kevin Brennan (Cardiff, West)

2.46 pm

need some measure of cross-party discussion of the matter and some measure of agreement across the House about how we fix the problem, which affects so many of our constituents.

My interest in this matter was triggered particularly by the case of Allied Steel and Wire, which affects many of my constituents. Speaking from personal experience, as the son of a steelworker who worked at Llanwern steelworks in the constituency of my right hon. Friend the Member for Newport, East (Alan Howarth), I would have been outraged had my father been subject to what has happened to many of our constituents—if, after working for 20 years in those steelworks, he had left only to be told that his pension was worthless. We would all be outraged if that happened to a member of our family, and we are similarly outraged when it happens to others, whether they are our constituents or those of other hon. Members.

The Bill is an excellent step forward. I particularly welcome the establishment of a pensions regulator with teeth, which is a part of the Bill that we do not talk about enough, but which is very important in making the pension protection fund work properly. We need to rid occupational pensions of their dodgy reputation and give them a reputation for being safe, sound places where people can put their savings for retirement.

There are three basic reasons for giving some sort of assistance to workers who have lost out as a result of their company becoming insolvent: the moral case, which hon. Members have outlined; the legal case, which we cannot talk much about in this place—I sometimes think that we have too many lawyers here when I read amendments that are framed in dry legalese instead of addressing real human concerns—and the public interest argument, which is ultimately unbeatable.

On the moral case, we have here, in effect, a case of breach of promise. One has to ask what steps any reasonable, rational human being would take if they were saving for a pension in their retirement, and what is the minimum protection that they would have the right to expect from the state in that regard. A worker from Allied Steel and Wire in Cardiff who joined its scheme 25 years ago would have been compelled to do so as a condition of employment. As the state permitted that compulsion, it bears some responsibility for the consequences. If the worker was of a sceptical nature, he might think, "Hang on a minute; I don't like buying a pig in a poke", and take a deeper look at what they were getting themselves into. A reasonable, rational human being might think that he should do a bit of research to see what, for example, the National Association of Pension Funds says about the subject. One of its recent leaflets says that defined benefit schemes make

If the person read on, they would be told:

I think that that would be enough to satisfy me, but if I was a doubting Thomas I might want to see more evidence about these so-called guaranteed pensions and go on to read a leaflet from the Financial Services Authority called, "FSA Guide to Pensions: Reasons for joining an occupational pension scheme if you can". It states:

That further reassurance might have satisfied me, but I might have gone on to look at what the Department for Work and Pensions had to say. I am not sure what it said in the distant past, when many people would have taken the trouble to find out, but it said recently:

Occupational pensions are usually a very good deal".

That might have satisfied me, because although I would not necessarily want a very good deal for my pension, a good deal or a reasonable deal might be sufficient. But that information nowhere states: "You should be very wary, because if you join a final salary occupational pension scheme you are betting your retirement on one share—namely, the share of your employer." That is what the current situation permits. People who were originally compelled to join a scheme could have read all that advice, but never have been given a health warning that they were effectively being asked to bet their retirement on one share.

If the worker was still sceptical, he might read his own company's documentation. The leaflet from Allied Steel and Wire in Sheerness, which is in the constituency of my hon. Friend the Member for Sittingbourne and Sheppey (Mr. Wyatt), says:

The benefits of the ASW Sheerness Steel Group Pension Fund are comprehensive:

A guaranteed pension on retirement, which increases each year to help protect it from inflation".

I defy anyone reading that body of evidence to point to the health warning. It represents a promise, implicit if not explicit—I think that it was explicit—from Government, from quangos, from the Financial Services Authority and from employers. Any reasonable, rational human being who looked at that evidence would anticipate that their pension benefits were guaranteed.

Leaving aside the moral question for a moment, I turn to the legal question. Workers' pensions are supposed to be protected under the European insolvency directive. I shall not go into detail on that because the case may well end up in the courts. I merely ask my hon. Friends this: why should we line the pockets of lawyers in taking this case on, whatever the legal advice turns out to be; pay double the financial penalty in having to do so; and ultimately face a political penalty for not having assisted when we had the opportunity?

The third reason for giving assistance is that it is in the public interest. I recognise the danger that this issue may drown out the good news about the measures in my right hon. Friend's Bill and undermine public confidence in occupational pensions at a time when he is trying hard to strengthen it. I do not want to do that. However, public confidence will not be restored if, after the passage of this Bill, 50,000 or 60,000 workers say to their colleagues of the pension protection fund: "Don't believe the promise that you will get a guaranteed pension if things go wrong—look what happened to me." That is what they will say if there is not some form of assistance and some acceptance of responsibility.

I believe that the Government accept, and have great sympathy for, many of the arguments. They have given tremendous attention to cases, met many affected workers and been genuinely moved by their stories. They have shown a willingness to help if possible. However, I understand the concerns that they have raised. Worries about cost and how one draws a line are not to be baulked.

Although it is easy to make the sums appear and sound large—huge amounts of money are involved—let us be clear: the state provides tax incentives to private pensions. We cannot pretend that the state has nothing to do with private pensions. It provides them with tax incentives of up to £14 billion a year. Half of that goes to the top 10 per cent. of taxpayers and a quarter to the top 2.5 per cent. We could reduce the costs if we stopped buying the annuities—Dr. Ros Altmann made that point well—and allow the pension funds to fulfil their current commitments, until the point when they need more funds. Some pension funds might recover in that

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period if, as expected, the stock market recovers. During that lull, the Treasury could set aside funds for an occupational pensions assistance board of some sort. I do not mind whether it is associated with the pension protection fund, as the hon. Member for Havant (Mr. Willetts) mentioned, or whether it should be insulated from that so as not to confuse matters.

Whatever the method, it should be possible to provide some sort of assistance board, for which we would not have to pay out for many years. I appreciate that the costs may, according to one estimate, eventually be about £100 million a year. Another estimate from a TUC pension adviser is that it is likely to be closer to £50 million a year. Although that is a large sum, it is a small proportion when compared with Government involvement in subsidising private pensions. We must bear it in mind that many workers will claim the pension credit if they do not receive some form of assistance. They do not want to do that when they believe that they have made all the necessary provision for their retirement and that they should be paid accordingly.

Let us consider the point about drawing a line. It would be helpful if we all acknowledged—I make a special plea to Conservative Members to do so—that we are not considering Equitable Life but a completely different issue. It is neither Equitable Life nor Maxwell. There are two main reasons for that: compulsion was involved for many of our constituents and there was a lack of a proper health warning. The problem has largely developed since the Pensions Act 1995, and all those who have been affected by a specific date should be permitted to apply to an occupational pensions prior claims assistance board.

We are not considering fat cats. A medal should be struck for Dr. Ros Altmann for all her work on the matter. She estimated that for the average worker—the active pensioner—we are talking about a pension of a maximum of only £8,500. We would not let that happen to our parents or to us, and Ministers would not let it happen to them. We should not let it happen to our constituents.