Queen’s Speech

Lord German Excerpts

Tuesday 10th June 2014 Lords Chamber

[Lord German (LD)]

My Lords, before I turn to the centrepiece of the gracious Speech’s measures, I would like to say a few words about the plastic bag tax. I had the privilege of chairing the committee of inquiry in the National Assembly for Wales which looked at this issue prior to the legislation being introduced in 2011. My message to noble Lords is: do not panic. It will all work out. It will all be very successful and it will have two very valuable outcomes.

First, the plastic bag tax will change people’s behaviour. It will make people behave differently. You are just as likely now in Wales to see someone with a Tesco bag for life shopping in Waitrose with it and a person with an Asda bag for life shopping in Sainsbury’s. The fact of the matter is that people now carry their bags with them and very few people resort to buying a plastic bag.

The policy will also produce a hardened attitude towards protecting the environment so that it becomes important to people. It is a bit of a culture shock for me to come to London, where people continuously want to thrust plastic bags at me. I usually try to refuse but on occasions I am in a queue and I get a plastic bag, but I refuse to throw them away, because that is what we do not do now in Wales—you do not have them to throw away. So I now have a boxful of plastic bags that I do not quite know what to do with, so if anybody needs a bag for life I have some that I can give them for nothing. I will bring one of my biodegradable plastic bags for the noble Baroness, Lady Sherlock, next week, which of course are a prerequisite if you are going to dispose of food waste, which is primarily what they are used for.

I was looking for an analogy from the natural world, the environment, which fits the changes that this Government are making and have made in the area of pensions. The segue between the two is a bit tricky. After all, we have just had the announcement of two Bills this Session, following on from the new single-tier state pension and auto-enrolment the year before. It is a pretty seismic shift in the crucial and previously much underplayed sector of pensions.

My analogy from the natural world is about the experience I had with forestry in Wales. Some 12 years ago, I was the member of the Welsh Government with responsibility for forests. I introduced a major change in tree planting. I discovered that previously taxpayers in Wales had been heavily subsidising the growth of cash-crop conifers, reflecting a bygone age when pit props were needed in great numbers. But in effect the Government and taxpayers were subsidising timber for garden sheds, fencing, DIY products and the like. The change made was a presumption in favour of planting broad-leaf trees and providing natural growth so that our forests would become varied and contrasting places for recreation and leisure. Now, some 12 years later, the true value of cash-crop timber is slowly becoming apparent and conversely more forests are being opened up for public enjoyment, tourism and leisure. That was a change which had profound and significant outcomes for generations to come. That is my segue: it is the same with the pensions revolution that we are seeing.

Actions taken by this Government in their five-year term will lead to profound and significant changes that will benefit many generations to come, fulfilling an ambition for what people want from their pension: a reasonable idea of the level of pension they will eventually get; a pension that gives them best value for the contributions they have made over the years; and a pension which is as straightforward and understandable as possible. I took to heart the speech of the noble Lord, Lord Holmes of Richmond. It hurts your head, he said, and it can hurt your head. Anything that we can do to make it straightforward and understandable and get people engaged with it is very important.

I pay tribute to my honourable friend Steve Webb for delivering those changes, which, taken as a whole, see more people saving for their retirement and a better provision of choice and control for the pension saver. I know that my honourable friend did not know the price of a Lamborghini before he made that statement, but he certainly did afterwards. Many people have commented on that matter today. I will certainly transmit the message to him that there are very fine motor vehicles produced within the United Kingdom which compare very favourably indeed.

In that list is a better state pension—last year’s measure—locked against the vagaries of inflation, price rises and government action, the extension of the range of pension products available and more certainty of a pension outcome. That is the benefit in just a few years. We now have more than 3 million new pension savers in this country, but there are many millions yet to join the pension-saving population. Getting the changes right is critical for all those saving for a pension. The two Bills outlined in the gracious Speech indicated by the Government as the centrepiece of the programme are part of the building blocks for the pension ambition, the ambition of which I spoke about earlier. They will need close scrutiny to ensure that, in their detail, they play a full part in meeting this ambition.

In respect of the private pensions Bill for a defined ambition pension, I welcome the Pensions Minister’s statement that the Government will not be taking an off-the-shelf product which replicates the system in the Netherlands, Denmark or even Canada, but that we will have a product which suits the United Kingdom market and the needs of United Kingdom pension savers. However, there are already some emerging and important questions to be asked. Perhaps I can tempt my noble friend to address some of them in his winding-up speech.

For example, on the Treasury’s pension tax Bill, giving people choice on the use of their pension pot raises a critical issue for the success of that new freedom: the guidance that pension holders will receive. As many noble Lords have said today, the Government’s consultation does not end until tomorrow, but there is huge time pressure to get it right. The big question is: what will be the nature of the Government’s guarantee of free, impartial and face-to-face guidance to DC pension holders, as announced by the Chancellor? What will be the degree of independence in the provision of guidance? I am sure that this House will want clarity on how the Government’s guarantee will work, how it will be funded, how it will be triggered and how savers will be dealt with both before and after the guidance has been received. The new pension products that we are talking about in the second Bill—the target pension—will help share the risk, provide stability and, crucially, more certainty, for pension savers but, once again, there are questions to be asked.

The pensions landscape will have changed with profound and significant effects for future generations after all those measures have been passed in this Parliament. I pay tribute to the Government for putting this centre stage, but we need more engagement with pension savers. Then we should get greater understanding, which is crucial. A good start would be—I believe that this is possible—a new political consensus in this Parliament to provide long-term continuity towards that goal and ambition which I believe we all share. As I said, the pursuit of greater understanding is critical. After all, the money is the savers’ money and managing their savings plays an enormous part in people’s well-being in later life.

My plea for political consensus means that we have to have all the key information and analysis available for our consideration. My noble friend has a track record of providing information in abundance, so I very much hope that he will be consistent and live up to his magnificent record of delivering papers to us in such numbers that we will have no complaints from any part of this House about not understanding the Government’s intentions or their analysis of the problems which we face.

I believe that what we see before us is a seismic shift in our pension system, which will have a profound effect for many generations to come.