October 28, 2005
Nick Hurd makes a major speech on the Rights of Saver Bill and addresses the “collapse of the culture of savings”.
Mr. Nick Hurd (Ruislip-Northwood) (Con): Several Labour Members have spoken with great passion on behalf of those members of society who do not have the resources to save, and that is entirely respectable. However, in their passion, they have been deaf to the purpose of the Bill, which is to address the important issue of how to arrest the collapse of the culture of savings.
I congratulate my right hon. and learned Friend the Member for Kensington and Chelsea (Sir Malcolm Rifkind) on introducing a set of proposals that will address some of the structural barriers to saving, including the complexity and rigidity of pension products, and the inflexibility and poor value of annuities. I also congratulate him on recognising that the savings industry and the Government have to move with the times, and to respond to a new generation of workers who have much greater job mobility and who ask different things of their savings across their life cycle. I represent a London constituency in which the first rung of the housing ladder is looking increasingly out of reach for first-time buyers. To my eyes, the proposals benefit from drawing on the experience of what appears to work in other countries, notably Canada. They are underpinned by a set of principles that I understand, namely choice, flexibility, a desire for simplicity, and a desire to give people more control over their lives rather than increasing their dependency on the state. In doing that, the proposals go with the grain of human nature and aspiration.
The proposals are a persuasive response to a problem, the scale of which is astonishing. The Pensions Commission has warned us that 12 million people are drifting towards inadequate retirement income. In its own words:
“Britain’s funded private pensions system is in serious decline”.
The Government’s own statistics tell us that only 44 per cent. of 16 to 65-year-olds have a private pension. That is 300,000 fewer people than only four years ago. The hon. Member for Denton and Reddish (Andrew Gwynne) echoed the astonishing remarks of the Chief Secretary to the Treasury at Treasury questions last year, when he seemed to suggest that a collapse in the savings ratio was a symptom of economic success. There is no room for complacency when the Association of British Insurers’ report on the state of the nation’s savings tells us, as I said earlier, that half the population feel that they do not understand pensions, and that only 12 per cent. think that the Government are doing enough to encourage them to start saving or to save more in a pension.
All this is hugely important for public finances, because if this trend continues, the taxpayer will have to spend more on means-tested benefits or on raising the state pension. It is also important for our sense of social justice, because we are heading in the direction of much greater inequalities in retirement provision. It is also hugely important for the competitiveness of our economy and for our quality of life. When we consider what the country is going to have to spend on upgrading its transport and energy infrastructures, and when we consider the implications of longer life expectancy and medical advances on our expenditure on health provision, it is increasingly obvious that this country will need to look to private capital and private savings to bridge the investment gap. However, the trend is going in completely the wrong direction.
These proposals chime with my own sense of priority, my own personal experiences, and the voices that I hear in my constituency. I particularly welcome the proposals to allow employers’ pension contributions to be paid directly into a pension scheme of the employee’s choice.
Like my hon. Friend the Member for Weston-super-Mare (John Penrose), I can confess that I, too, am guilty of high proliferation and low persistence. At the tender age of 43, I have four of those very modest pots, so I welcome the prospect of people being able to keep all their accumulated pension funds in one simple, accessible vehicle, particularly with the introduction of a flexible pension-regulated product such as SaRA, whose very name should at least endear itself to the Chancellor.
I also welcome what appears to be fresh thinking on the old chestnut of annuities. I, too, hear persistent messages from my constituency. The first is, what is the point of saving when the person who does not save receives the same amount from the taxpayer via means-tested credits? The second is resentment at having to buy a life annuity by the age of 75.
That resentment involves not having freedom of choice and it is fuelled by the fact that people consider annuities a bad deal-illiquid and inflexible, they provide a low return and are undermined by the inability to pass on a pension pot if the person dies after what looks like an arbitrary cut-off age of 75. I therefore recognise the retirement income fund-RIF-as a product that moves the debate on in the face of a long-term problem. I sincerely believe that only a bipartisan approach will solve it.
I hope that the Government are big enough to recognise that these proposals add enormous value to the debate.
October 12, 2005
Nick Hurd focusses on the limitations of the Kyoto treaty and suggests it could be improved with incentives for new low-carbon technology
Mr. Nick Hurd (Ruislip-Northwood) (Con): It is a pleasure to follow the hon. Member for Nottingham, South (Alan Simpson), who showed where we can go with a bit of energy, imagination and political leadership in terms of driving forward the sustainable energy agenda. I enjoyed his speech.
I want to focus my remarks on the international effort and strategy on this global issue. The question seems to be: where do we invest the finite source of political energy available to tackle this most complex issue, riddled as it is with uncertainties? I detect a change in the wind. I detect it in the remarks of the Prime Minister, and in the initiatives taken by countries in Asia Pacific, Australia and America after the Gleneagles summit. This change reflects a growing realisation that we are on the wrong course-a course to failure.
The fruit of the past 15 years of political endeavour has been the Kyoto treaty. My hon. Friend the Member for East Surrey (Mr. Ainsworth) has said that it is an important milestone, but the closer we look at it, the more limited it appears. It will make a marginal impact on carbon concentration, and its value lies only in demonstrating international co-operation. It was holed below the waterline by the absence of the United States and the emerging giants. It creates no serious incentives for new technology. In the process of negotiation and implementation, the political machine has failed to carry the public with it. Under those circumstances, in the short term, focusing the political machine on trying to follow up that agreement with a new universal agreement on a bigger scale but on the same premise for a greener set of absolute CO2 reductions seems highly questionable. It looks very hard to achieve-I do not know what other colleagues felt, but the remarks of the Secretary of State left me with no confidence that an international agreement would be in place by 2012. Were we to pursue that course for another agreement to negotiate absolute CO2 reductions, it would be of limited value. Those targets will necessarily be arbitrary, as there is still too much scientific uncertainty as to what a safe level of carbon concentration is, and if they are negotiated on the same basis as Kyoto 1, the targets would be effectively unenforceable.
Those who push for this course argue in the cause of taking out an insurance policy against catastrophic risk. It is an attractive theory, but ultimately, who buys an insurance policy that will not give certainty of covering the risk? That uncertainty is undermining the effectiveness of the political process. In terms of international strategy, I would prefer the political machine to focus on creating the conditions that will make universal agreement much more plausible. The priority must be to generate the momentum that has been lacking over the past 15 years in making a difference to the scenario of emissions, which are growing. The requirement to reduce the uncertainty of the science and economics of climate change has been absent from this debate. A huge amount has been done in the past 15 years, but ultimately what comes through to the layman is how little we know. Greater certainty is therefore an absolute priority.
The second priority must be to accelerate the deployment and development of low-carbon technology. The good news is that the technology exists that can make a difference, but it is too expensive today. Not only is it right to focus political energy on making this technology cheaper, but it is clearly in the interests of many countries, particularly Britain. As we become an energy importer, energy security becomes increasingly important to this country. A superb and massive commercial opportunity also exists for those countries, and companies in those countries, who can see the potential in renewable technology. President Clinton’s comments in the much-discussed summit in New York were bang-on the money: we will only make a difference when people smell a buck. Those conditions are not sufficiently in place at the moment. The acceleration of low-carbon technology is clearly a win-win for Britain and must be at the heart of any new international initiative.
Talking of win-wins, surely it is time for Governments across the world to start picking the low-hanging fruit of energy efficiency. It has been sitting on the branches for 20 years and every Government during that period have talked about it, yet none have delivered on it. The hon. Member for Nottingham, South mentioned the example of Woking’s Conservative-led council becoming self-sufficient in energy. I encourage the Government to look at what is happening in Braintree, where another Conservative-led council has negotiated an agreement with British Gas, whereby it will offer council tax payers real money for taking on board an energy efficiency package. The early data suggest that the public are responding, and there are signs of a real breakthrough. Consumer apathy towards such a proposition is breaking down, and I hope that the Government will look closely at that example.
As my hon. Friend the Member for East Surrey pointed out, the short-term priority is the industrialisation of China, Brazil and India. The carbon intensity of that process must be minimised. Doing so is in our interests not least because of the need to deal with carbon concentrations and to reduce CO2 emissions. However, there is also a superb commercial opportunity for those companies that can seize that initiative in all our interests.
European Governments in particular should seize the opportunity to develop the emissions trading mechanism by giving it serious teeth. In looking at the first round of negotiations, most commentators see all the mechanism’s failings. It is diluted and weak, has no teeth, does not deal with aviation and operates within very restricted sectors. There is an opportunity in Europe to develop an emissions trading scheme with teeth that can be pointed to as a global template. That is where political energy should be focused.
Mark Lazarowicz: I am grateful to the hon. Gentleman for giving way during what is a very interesting and constructive speech. Does he agree that the European Union has a good record, in that it is among the leaders in trying to address climate change through specific, Europe-wide policies? Does he further agree that there is a lot of merit in the proposed mandatory Europe-wide renewable energy targets, which would encourage the Europe-wide growth of renewable energy?
Mr. Hurd: I thank the hon. Gentleman for that intervention and it is undoubtedly true that Europe’s achievements in progressing environmental regulation are impressive. In fact, the linchpin for Europe in terms the challenge and the opportunity that it faces in redefining its relevance to the new generation-the generation who must pay for such things-is greater co-operation on environmental policy. I also agree with the hon. Gentleman’s comment about the need for greater co-operation in developing renewable energy policy across Europe. I have mentioned the need to accelerate technology, and Governments can help in that regard by increasing the size of the markets available to those developing such technology.
On the question of where political energy should be focused in the short term, there is an urgent need for one country to stand up, to promote itself as a role model and to show that emissions can be significantly reduced at an acceptable cost. Britain had that opportunity, and I say “had” because I believe that it is in danger of losing it. We can argue in an utterly useless way about the motivation behind the “dash for gas”, but the reality is that it created the platform for a developed economy that is capable of reducing emissions at a very low economic cost. My charge against the Government is that they are in danger of failing that test. That is why I support the proposition of my right hon. Friend the Member for West Dorset (Mr. Letwin) that at the heart of such failure is a lack of accountability and the distant nature of the targets. I therefore wholly endorse the introduction of an independent voice into this process, so that teeth can be given to such accountability.
Finally, I am conscious in focusing the political machine away from Kyoto 2 that it would be better if all such activity took place within the framework of a set of targets. The imperative here is for Governments to send long-term signals to the market, but we have to face the fact that pushing this global meeting towards agreement on absolute CO2 reductions will be extremely hard. As an alternative to “contract and converge” and the various other scenarios that, in essence, still push the debate down that channel, I suggest that we investigate the feasibility and attractiveness of viewing carbon intensity as a proportion of GDP. That might be a more acceptable benchmark for the United States and the emerging giants. Many who are pressing for absolute CO2 reductions will view that as a cop-out, but I would argue that the priority is to get some momentum behind the process of lowering the carbon intensity of economic development. In that context, focusing all our energy on pressing for absolute CO2 reductions and for replications of Kyoto seem to me to carry huge opportunity costs.
October 7, 2005
During the last General election, I was pursued down a street in Ruislip by a young man in a dressing gown.
During the last General election, I was pursued down a street in Ruislip by a young man in a dressing gown. He wanted to tell me that his decision to marry his girlfriend would cost him £400 in lost benefit. He was going to do it anyway, because he thought that it was the right thing to do-but he thought it was wrong for the Government to be sending that signal to young people. Of course he is right . The Government are in denial on this issue and need to take a fresh look.
The issue goes to the heart of a growing concern in my constituency about the breakdown in values that once bound the community together-respect for the law, respect for property and respect for each other. The finger is increasingly pointed at the way children are being brought up today. It is not just the voice of ’ Smug Marrieds’ (to quote Bridget Jones) or those expressing nostalgia for a golden age of parenthood that probably never existed. Senior London policemen point out that 40 per cent. of street crime in London is committed by 10 to 16-year-olds playing truant. Headmasters of secondary schools confide that all too often it is parents who obstruct rather than support their efforts to instil more discipline in their schools. A growing voice makes the link with clear evidence of family breakdown in Britain and its harmful impact on children.
It is striking how out on a limb we are. Britain is the divorce capital of Europe, with 25 per cent of children living in lone-parent households. That is twice the European average, as measured by EUROSTAT, and the trend shows no sign of slowing. The Government’s approach has been to respect personal freedom and to focus on helping those facing the real challenge of bringing up children on their own, in conditions of poverty. Those good intentions are to be supported but I would argue that they have unintended but damaging consequences.
The tax and benefits system now discourages low-earning parents from forming two-parent families. That message comes through strongly in research from a wide range of organisations, including Civitas, Care, the Institute for Fiscal Studies, the Joseph Rowntree Foundation and the Centre for Policy Studies. It is the inevitable outcome of a system in which income tax is based on individual assessment, with no allowances for marriage, and benefits are based on a joint assessment. Arguably, penalties for marriage are built in to the system.
If that is true, Government policy may be helping to increase the number of children being raised without a father in the home, despite increasingly clear evidence that there is a link between marriage or stable cohabitation and a better outcome for children in terms of health, performance at school , and crime. That being so, is it not time to confront the awkward truth that children growing up outside the family unit may not have equality of opportunity? Is it not time to re-examine where the interests of children lie and ask whether it can be in their interests to penalise couples? Faced with the growing tension between the need to respect personal freedom and the desire to give children the best possible chance, I argue that the Government should at least be neutral in the signals that they send via the tax and benefits system."