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Finance (No. 2) Bill

I want to make a brief contribution. These days, I follow health matters, but when I saw that annuities were to be debated today I could not resist one last bash. I am sure that our new Economic Secretary, who studied philosophy, politics and economics at Oxford, will be familiar with the concept of a Pareto improvement—that it is possible to act in such a way that no one is worse off, but someone is better off. In economics, of course, that is highly desirable. The reform of annuity law is a Pareto improvement—what these days we would call a win-win situation. No one loses if we can reform annuities in a way that gives people choices, at no cost to the taxpayer. As has been noted, the implications for means-tested benefit expenditure and the possible loss of tax revenue are the two areas of worry in terms of cost to the taxpayer. New clause 3 is rather excessive in its attempts to deal with the risk falling on means-tested benefits. It is too prescriptive because, as I said in an earlier intervention, some people might be able to draw down their entire pension pot and still not run any risk of falling within the realm of means-tested benefits. However, new clause 3 would oblige them to buy an index-linked annuity of a certain value. The official Opposition do not know how much that would be, even though they want us to support the new clause, but that proposal is unnecessary and unduly restrictive. We understand that there has to be a fail-safe—and I believe that it should be individual-specific—to ensure that a person’s pension pot is not raided to such an extent that he or she falls at the mercy of means-tested benefits. However, I have always believed that the Treasury always gets its tax money anyway. For example, tax is paid when a pension pot is drawn down, and also when people leave money when they die. The Treasury’s ideological line is to convince us that tax relief is some sort of incentive. By and large, with the exception of what happens with the lump sum, tax relief is about taxing things once rather than twice. Our tax regime gives tax exemption on the way in and levies tax on the way out, but that is no reason to say that any change would undermine the incentive purpose of tax relief. Pension tax relief is about avoiding double taxation, not about incentives. As long as the tax is paid at the end in some way, why should the Treasury care how it is paid? It could be paid as a charge on the un-annuitised fund at death, or on the pension that is eventually drawn at the end. It could be also be paid on the money drawn out while a person remains alive, but the Treasury will always get its tax, so who loses? New clause 3 is unduly cautious, although the hon. Member for Fareham (Mr. Hoban) noted that the Government have given ground in response to the concerns expressed by the Plymouth Brethren. However, society always benefits when people in their old age are given new choices about their income. It is true that we are talking here about those who are better off, but that is no problem for the new Liberal Democrat party. Giving people choices is all part of our new approach. We approve of new freedoms for people on higher incomes to make choices. The new clause would give a limited number of people new choices, at no cost to the Exchequer. I cannot see why a reasonable man such as the Economic Secretary would not be persuaded by that argument.