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Occupational Pensions

I agree with the right hon. Member for West Dunbartonshire (John McFall) that we are making a great hullabaloo about the events of 10 years ago, but there are perfectly good reasons for doing so and for holding this debate. There is an obvious public interest because the Chancellor has delivered his last Budget and is about to become Prime Minister, so the release of the information excited legitimate public questions about his judgment, his style of taking decisions and the consequences of some of the judgments he has made, which may give some clues as to how he might act in future. The questions were provoked by the release of information on the decision of the Information Commissioner. The Chancellor says he welcomes the release of such information, although—like the right hon. Member for West Dunbartonshire—I am not sure that I do; I am not sure that we want the form of government in this country to be altered in quite that way. However, it is inevitable that we should have a debate. The debate is particularly relevant because the subject is even more important now than it was 10 years ago. We all accept that there is something of a pensions and savings crisis and we are all trying to produce long-term consensus on how to resolve it—not for the first time. I was involved in trying to reach consensus with Barbara Castle when she produced proposals that would have practically wiped out private occupational pensions if she had gone ahead. The undoubted fact is that if people carry on contributing as little to their savings and their future retirement as they do at present we shall face great problems. We have to form a judgment about recent events, which will include coming to the conclusion that more should be done to encourage people to make their own savings and their own provision and that more should be done to encourage employers to help by trying to rebuild the system and reverse the decline of the occupational pensions industry. That will require continued tax relief—perhaps additional tax relief when it is affordable and even forms of subsidy—so it is important that we consider what the culture should be now. Never again should pensions be regarded as the easy source of revenue that they were in 1997 by the incoming Chancellor. If we can get that point across, the future consensus will be improved. I turn to what is still relevant about what happened 10 years ago and will deal briefly with how the announcement was made. The decision was arrived at in great secrecy in opposition and there was no mention of it in the election campaign. It was produced in the Chancellor’s first Budget and he read it out in delphic terms; four sentences dismissed the heftiest part of a great increase in the burden of taxation in the 1997 Budget. We had been warned about the windfall tax—another disgraceful tax—but it did not raise enough for the Government, so out of the blue came those remarkable four sentences, ending with:"““The previous Government cut tax credits paid to funds and companies, so with immediate effect I propose to abolish tax credits paid to pension funds and companies.?—[Official Report, 2 July 1997; Vol. 297, c. 306.]" It is clear when we read it, but we all know how the Chancellor delivers such things, particularly the difficult bits of Budget speeches. That was the first time. The Chancellor’s announcement was misunderstood by less sophisticated members of his party. I do not say that critically; things such as tax credits on pension funds are subjects that usually only hold the complete attention of about 20 Members on either side of the House. The Chancellor’s statement produced cheers because some Labour Members thought he was announcing a tax reduction and he thought he had got away with it—or so he thought. However, by the next day—3 July, when I spoke in the debate—the Chancellor was angry because The Times had cottoned on to the full implications. History repeats itself. Only a week or two ago, he had a bad press on the morning following the Budget as people began to analyse what he had done. In 1997, the Chancellor announced the original stealth tax. He chose it as a source of revenue partially because he believed that 999 in 1,000 people would not understand the statement he was making, so the money would not appear to come from their pockets. However, by the next day, as the hon. Member for Twickenham (Dr. Cable) said, people were beginning to criticise it. I looked up what I said at the time. Even then, we were talking about the fact that we had been considering but rejecting the same proposal and I said that there would be a profound effect on pension funds, pensioners and employers as a result of that dramatic and unexpected change, for which we were unprepared and which had never been mentioned in the general election eight weeks before.