Taxation of Pensions Bill

Debate between Toby Perkins and Geoffrey Robinson

Wednesday 3rd December 2014 Commons Chamber

[Mr Robinson]

I am pleased to take part in the Report stage of a Bill that we discussed at some length in Committee, as my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) will know. She has led for us throughout with such conscientiousness and command of detail that we probably do not need to labour further the points that we have pressed on the Minister. I am pleased that the hon. Member for Arfon (Hywel Williams) has added to our thinking on new clause 2 by suggesting that the effect on the housing market, in particular, should be kept under strict review.

I fear that the Minister is not going to accept either new clause, so I ask him to make a clear statement on the areas where the Bill is likely to have an impact, with potentially severe economic consequences. In the light of the Chancellor’s autumn statement earlier today, we see just how severe the problems on the deficit and Government borrowing are. If the Bill is going to have a further major impact in terms of tax receipts—which are already disappointingly low, as the Minister himself must recognise, being very well acquainted with that area of the Treasury’s affairs—it needs to be regularly reviewed.

In pushing for the changes we propose, we are merely doing what any responsible Opposition may do. I am surprised that the Minister is so reticent about sharing these important matters with the House. As the hon. Member for Arfon said, the consequences in the housing market could be quite severe, particularly in the buy-to-rent sector. In Committee, I mentioned to him anecdotal information that I had received from the housing market in strongly Conservative areas such as Buckinghamshire. House prices are already rising, and this aspect needs to be reviewed.

The point that we made very strongly throughout the Committee stage is that this is an unknown area where there is a fear of scams and abuses emerging—mis-selling and such things that have characterised so much of the industry in the past. Even now, we are still clearing up some of the mess from those previous schemes that went so horribly wrong. Not only that, but looking at this from the point of view of economic management, big sums are involved. I have talked to pension fund and investment fund managers, and they are looking forward to it.

As my hon. Friend the Member for Kilmarnock and Loudoun has made clear, we welcome the Bill. We are not opposed to it in principle, but we want to make sure that it has the effects that are foreseen as regards flexibility and making greater independence available to very many people throughout the country. It is in the spirit of not just avoiding abuses, but ensuring that the Bill does not become counter-productive or have exactly the detrimental consequences that other Bills of this kind have had that we urge the Minister to accept, even at this late stage, both new clause 1 and new clause 2. I am grateful to have had the opportunity to repeat that point on Report.

[Toby Perkins]

I do not intend to detain the House unduly, but I want to speak briefly in support of new clause 1, tabled by my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson). I also do not intend to give too much advance notice of my Adjournment debate, which I will have the pleasure of holding later and to which I know that the House is looking forward with considerable interest.

My hon. Friend made an important point about the haste with which some of the changes have been introduced and the impact that that can have. The Government may be entirely well meaning, but such changes can have unintended consequences, and I shall refer to some of them in more detail later.

If I had been contacted by my constituents and had a response from the Minister a few weeks or months earlier, there might have been an appropriate opportunity to propose that the issue was looked into in relation to the Bill, but perhaps there will be an opportunity to consider such issues in the other place.

It is a great pleasure to follow my hon. Friend the Member for Coventry North West (Mr Robinson), who speaks with tremendous knowledge on these issues. He was absolutely right to focus on the way in which some industries operated in the past, and the extent to which the financial services industry had some very negative selling practices back in the deregulatory period of the 1980s. I am pleased that the industry, with Government assistance, has very much got its house in order.

We would be well advised to think about the impact of the changes on the professionalism of very important industries such as financial services. If decisions are not taken in professional enough a way, they can have massive effects on people at the time in their life when they take their pension. Back in the 1980s, there was a huge explosion of private pensions, with people—mineworkers or teachers—advised to give up their pensions. They were told, “No, if you give up your pension, you can opt in to one of these private schemes, with 15% growth every year.” There was a huge mis-selling scandal.

I previously worked—briefly, and largely unheralded—in the financial services industry. I was not necessarily particularly suited for the job, which highlights a point about people being invited into the industry. They were dragged into it on the basis of knowing friends that they could go and sell pensions to. People with very little knowledge came into the industry. Their business plan was based on phoning all their friends and relatives to encourage them to give up their pensions in reliable public sector or other schemes and to go in to private schemes. There was of course a huge explosion, and many of the people in the schemes were seen to have been given very poor advice.

We recognise what the Government are attempting to achieve, and we support their aims of having greater flexibility for the industry, allowing people to be put back in charge of their investment and ensuring that they have the freedom to decide what to do with the money that they have saved. However, we are also aware of why the annuities method of accessing pensions that people had invested in was introduced. We as a society decided that, in an age when people were living longer and longer, we wanted people to make provision for themselves and, having done so, to buy something that provided a regular income that they could rely on.

If we have a scheme in which people decide what to invest their pension funds in, but, with the best of intentions, those investments go wrong, the people who we thought had provided for themselves in later life will come back to the state and say, “Unfortunately, the investments that I made with my pension pot have gone wrong and I have run out of money.” That will have an impact on the Government. We recognise what the Government are attempting to achieve, but it would be sensible to have a review of how it is working, the impact of the changes on the behaviour of investors, the impact on Government revenues, the impact on the broader economy, and what behaviours are being encouraged and introduced by the changes.