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Occupational Pensions

My hon. Friend makes a good point. This has been mentioned earlier in the debate as well. I was reading Lord Lamont’s memoirs in the Library this morning, and I was struck by the fact that, when the right hon. Member for Witney (Mr. Cameron) was employed as a special adviser, Lord Lamont described him as an old Etonian with a taste for the good life. I wonder what that means. It is true that the Chancellor in his 1997 Budget abolished tax relief on dividends, but that was accompanied by a range of other policies designed to move us away from short-termism towards stability and encouraging long-term investment. Corporation tax was cut to its lowest ever rate at that time in the UK. The small companies tax rate was cut by 2 per cent., to 21 per cent. There was a doubling—we have not heard about this today—of capital allowances on plant and machinery for small and medium-sized firms so that if companies invested in 1997-98, they could set off against tax a half of their total investment. In those decisions made in 1997, the Chancellor laid the foundation for sustained economic growth. That was the conclusion of the International Monetary Fund in the past few weeks in its article IV consultation with the UK, which stated:"““The Executive Directors welcomed the economy’s continued economic performance, which they attributed in part to policy frameworks that are responsive to the requirements for sustained strong growth, low inflation, a stable value for sterling and continuing growth of London as a global financial Centre with sound institutions.?" That is not indicative of an economy beset by weak infrastructure and short-term decisions, which is where we were 15 years ago. The blocks are in place for stability and long-term investment decisions. However, it is true that more needs to be done. Many of my constituents, who come from a traditional manufacturing area with good occupational pensions, have pension funds in schemes such as Roxby and Expamet. They have saved all their working lives and feel let down by changes and cuts to their planned provision. To tackle the plight of my constituents and others, a consensus is needed between the House, the Government, companies and individuals to ensure that those pensioners who have saved all their working lives in occupational schemes secure the benefits for which they planned. However, the comments and interventions by Conservative Members show that we are a long way from that consensus. A key reason for changes to pension provision has been the fluctuating performance of stock markets around the world over the past 15 years. That has been mentioned time and time again. High returns in the 1980s prompted complacency and the feeling that the sun would shine for ever. That obviously was not the case. Between 2000 and 2002, stock markets around the world experienced sharp falls—something like $8 trillion of assets were lost in the US alone in that period. The NASDAQ dropped to as low as 1,108.49, a 78.4 per cent. decline from its all-time high of March 2000, a result of the bursting of the dotcom bubble, and the Dow Jones lost 26 per cent. of its value between 1999 and 2002—you can tell that I am a chartered accountant, Mr. Deputy Speaker. Given the openness of the UK economy and the central position of London in the world’s finance markets, it is inevitable that this country would feel the brunt. Between 1999 and 2002, the FTSE 100 fell by 43 per cent., knocking some £250 billion off the value of pension fund assets. Yet pension fund deficits have reduced markedly over the past few years, reflecting the stock market improvement in recent months and years. Last month, Deloitte, a firm that I used to work for, forecast that the total deficit for the final salary pension schemes of the UK top 100 companies is currently £21 billion, with 25 per cent. of schemes now having a surplus. The first three months of 2007 have been a roller-coaster ride. In the last week of February, deficits rose by £20 billion in one week as world stock markets fell dramatically. However, a combination of a recovery in the stock markets and a fall in the price of bonds have reduced deficits to a five-year low, showing the close correlation between stock market performance and the health of pension funds. If the Conservative party were determined to secure a consensus on this subject, that close correlation would be recognised. I began by saying that providing for retirement is one of the biggest problems facing this country. Difficulties and challenges are being prompted by an ageing population, an end to paternalism, social changes, lower stock market performance and annual returns, and a wish for companies to transfer the risk of retirement away from themselves towards employees and the Government. There was an opportunity for Opposition Members to pledge consensus and seek to find appropriate ways of securing stability and reassurance for pensioners in the face of those massive global changes, but they failed to do that. The use of terms such as ““pension crisis? and the wording of today’s Opposition motion, however brief it is, further undermine confidence in a pensions system that is still trying to recover from the likes of Maxwell, mis-selling and Equitable Life. As was pointed out by the hon. Member for Putney (Justine Greening), who is no longer in the Chamber, that puts people off. People are reluctant to save for their retirement through pension contributions, believing that it is not worth doing. That will do nothing to help those with occupational pensions who find themselves unfairly caught up in major global forces. Today the Conservative party has ignored an opportunity to talk constructively about the long-term future of the country’s economy and provision in retirement. Instead, it has focused on distorting history for their own narrow, short-term political advantage. No change there, then!