CPI/RPI Pensions Uprating

Debate between Jeremy Corbyn and Harriett Baldwin

Thursday 1st March 2012 Commons Chamber

[Harriett Baldwin (West Worcestershire) (Con)]

Thank you for allowing me to speak in this important debate, Madam Deputy Speaker. I congratulate the hon. Member for Hayes and Harlington (John McDonnell) and the Backbench Business Committee on organising the provision of parliamentary time for discussion of this topic. Having been a professional pension fund manager myself, I leapt at the opportunity to speak today. It is not often that, on a Thursday afternoon, we experience the excitement of discussing the difference between the geometric and the arithmetic mean in indexing. I thought I would put in a few words, as I also represent a constituency that is inhabited by a higher than average number of pensioners.

As a former pension fund manager, I recall the days when Britain had a pension fund system that was the envy of the world. We had a terrific private sector-led system, and workers in the public sector were also in very good schemes. I believe that Britain’s leadership in that regard began to unravel in the first Labour Budget after the general election in 1997, when the then Chancellor imposed a tax on pension schemes. It was pretty apparent at the time that that would undermine a private sector pension system which, as I have said, used to be the envy of the world.

[Jeremy Corbyn]

I think the hon. Lady is in danger of misreading history. The Social Security Act 1986 promoted the destruction of occupational pension schemes, promoted personal private pension schemes, and eventually led to a gross mis-selling of pensions which had to be corrected by the incoming Government in 1997. I think the hon. Lady needs to take her historical narrative a little further back.

[Harriett Baldwin]

The hon. Gentleman has clearly forgotten the imposition of a tax on private pension schemes in that first Labour Budget of 1997, which I think many people realised at the time would be a recurrent year-on-year tax that would lead to the erosion of private pension funding over time. Private companies then acted very rationally. Many of them ceased to offer defined benefit pension schemes.

Let me give some figures which I take to be rough estimates. There are approximately 29 million people in Britain’s work force today, 23 million of whom are employed in the private sector. I was shocked to learn that only 3.2 million of those 23 million were currently active members of a pension scheme in which the employer makes any contribution. That contrasts with the position in the public sector, in which about 5.5 million of the 6 million employees are members of pension schemes. That is the proportion that we should aspire to in terms of pension provision throughout the work force. I know that our pensions Minister aspires very much towards movement in that direction.