David Willetts – 2002 Speech on the Pickering Review

The speech made by David Willetts, the then Shadow Secretary of State for Work and Pensions, in the House of Commons on 4 July 2002.

I declare my interests that appear in the Register of Members’ Interests and thank the Secretary of State for an advance copy of this very important report.

Let me make it clear that we welcome the report, just as we welcomed Alan Pickering’s review when it was established. I join the Secretary of State in expressing our respect for the expertise and wisdom that Alan Pickering brought to the exercise. He has produced a valuable report.
Conservative Members respond to the Secretary of State’s comments by saying that we understand that the regulatory regime for pensions must be stable to ensure long-term planning, and we will contribute constructively to the debate about the best ways of cutting the burden of regulations on pension funds. That is an obligation on all hon. Members on both sides of the House.

The starting point of the debate has to be a frank recognition of the scale of the problem that faces funded pensions. For years, Ministers have been shockingly complacent, saying that everything was all right when it clearly was not, and citing statistics that they have since admitted were seriously misleading. The Secretary of State should accept the stark warning in Alan Pickering’s report that

“without change, the current trajectory suggests less private pension provision in the future.”

That warning lies at the heart of his report.

We shall obviously want to study the proposals in the Pickering report very carefully, but I can tell the Secretary of State that we welcome the themes that are expounded in it. For example, we support the call for a proportionate regulatory environment, and we welcome Alan Pickering’s vivid expression that a pension is a pension is a pension. There are too many different forms of pension, and it is right to try to simplify them. It is also true that too much pension provision has become a form of archaeology, with pension providers delving deep into the past to identify the date on which a pension was first set up in order to understand the tax and regulatory regime around it. That needs to be tackled

Can I press the Secretary of State for more information about the timetable to which he is working? The recommendations will be pointless unless the Government act quickly. As Alan Pickering said in his report

“Time is not on our side.”

Yet the Secretary of State offered us a second Green Paper on pensions. I have here the Government’s previous pensions Green Paper, which was published nearly four years ago. That contained the Prime Minister’s promise that his Government would increase the proportion of pensioners’ incomes that comes from private savings from 40 to 60 per cent. Since then, the Government have made no progress whatsoever towards achieving that objective. Instead, they introduced stakeholder pensions that were supposed to go to the 5 million people in their target group, although they reached only about 100,000, and scheme after scheme has closed. Why should the second Green Paper make any progress, given the comprehensive failure of the first?

If we do not get legislation until 2004, as has been suggested, the changes will not be implemented until 2005 at the earliest. Yet, if pension scheme closures carry on at their current rate, there will not be any pension schemes open to new members by the time that the Government finally get round to implementing the proposals in Alan Pickering’s report. Will the Secretary of State take this opportunity to inform the House of the likely timetable of any legislation to implement proposals for reform?

May I also press the Secretary of State for more information about the burden of regulation, which is still increasing? Since the Pickering review was established in September 2001, we have had 251 pages of new regulations. We are still waiting for the final results of the Myners review. It is good to see a Treasury Minister on the Front Bench because the Treasury, in its commitment to implementing Myners, has been threatening pension schemes with yet more regulation. There is a useful warning in Mr. Pickering’s report: he hopes that the people taking forward Myners—he might be thinking of the Financial Secretary—will

“keep in mind our arguments for simplification.”

Can we have an assurance from the Secretary of State, as the minimum to show his good will on this exercise, that more regulation will not be imposed on pension schemes while we wait for his supposedly deregulatory legislation? Without such an assurance, it will be difficult to take the Government’s commitment to deregulation seriously.

The terms of reference for Alan Pickering’s report were very narrow and excluded some of the main factors that have been driving the crisis in funded pension provision. Why was Alan Pickering unable to comment on the structure of state pensions, including the state second pension, which left-wing think tanks such as the IPPR are now saying should be abolished before it has even begun?

What about the burden of ever more means-testing of pensioners? Why could not Pickering comment on the spread of means-testing, which will soon result in more than 50 per cent. of all pensioners finding themselves on a means test? If so many pensioners are to face means tests, which will mean that they are not fully rewarded for their saving, does the Secretary of State recognise the serious danger that the main beneficiaries of the review could be the richer half of the population? They will not be trapped by the means test that he is imposing on the less affluent 50 per cent. of pensioners.

What about the financial burdens that the Government have placed on pension funds which are their direct responsibility? What about the £5 billion a year tax on pension funds, and the £1.5 billion a year cost of the insufficient value for the contracted-out rebate? Does the Secretary of State recognise that that adds up to £6.5 billion a year being taken from our pension funds? That is the real reason why our pension funds are closing, and nothing that he said today showed any willingness to recognise the scale of that problem and what needs to be done to tackle it.