New review should bring more money for ASW pensioners

We had the debate on Report stage of the Pensions Bill yesterday. This was an opportunity for the Government to move further on money for the Financial Assistance Scheme, which is designed to help people such as the Allied, Steel and Wire workers here in Cardiff who lost their occupational pensions when ASW shut down in 2002.

It has taken a long time to extend the Scheme, but we are making progress. In this year's Budget, Gordon Brown announced that the Scheme's funds would increase to £8 billion, which should mean that every one of the 125,000 workers should receive some help. But I felt that the Government could go still further, so I tabled an amendment to the Bill to bring the Scheme's coverage up to 90% of the value of the lost pensions. Here's the speech I made:

Julie Morgan (Cardiff, North) (Lab): I thank you, Mr. Deputy Speaker, for calling me to speak about amendment (a) to new clause 38, and new clause 24. I am also a signatory to new clauses 25 and 26.

The debate is important to the 125,000 people who have been affected by the collapse of their pension schemes. The experience of my constituents who are former employees of Allied Steel and Wire is much in my mind as we debate the subject today. I, along with other hon. Members, have been campaigning for a long time to get justice for the Allied Steel and Wire workers and others throughout the country.

In Cardiff, 893 employees from Allied Steel and Wire lost their pensions when the private company went bankrupt. All hon. Members have had experience of the utter misery that that caused and its awful effect on families. Many people have come to my surgery and spoken about the personal devastation that was brought upon them. Losing their jobs was one thing and losing their pensions came right on top of it. That was a devastating blow. Many had worked in the steel industry all their lives—and we all know that working in that industry is hard.

Some people have never talked about the trauma of what happened to them. A woman came to my constituency office last week and said that her husband lost his job and his pension and had never spoken of it. The overwhelming horror of what happened to him has meant that he has never been able to talk about it. We are talking about those people’s lives today.

It is important to acknowledge what the Government have done to respond to that devastation in people’s lives. The former employees, the unions, especially Community and Amicus, with which I have worked closely, and Members of Parliament, especially, at the beginning, my hon. Friend the Member for Cardiff, West (Kevin Brennan), led a campaign that resulted in setting up the Pension Protection Fund, which will protect pensions in that position from now on. That was a big step forward. I also applaud the Government’s establishment of the financial assistance scheme and their work to improve it. When it was originally set up, it applied only to members who had reached retirement age or were within three years of doing so. It was woefully inadequate to address the needs of all the pensioners.

The pensions White Paper of 2006 extended the scheme to those within 15 years of retirement, with total funding of £2.3 billion, which the new clause increases to 80 per cent. of core benefits. The FAS has been gradually extended, but the process has been long and tortuous. It has taken five years and it has felt as though the campaigning of Members of Parliament, the unions and others forced the Government to improve the provision in the FAS. Nevertheless, they have done that. Many hon. Members, the Community and Amicus unions and I welcome the major step forward that the Government have taken in recognising that the FAS was not adequate to provide a decent income in retirement for the estimated 125,000 people who lost their pensions through no fault of their own.

The new clause means that all those people will get some help. Some were previously excluded. In my constituency, there are people who had worked for 30 years but, until the new clause is enacted, are eligible for nothing because they started work at an early age—some at 14—in the steelworks in Cardiff and were only 54 when they lost their jobs. They were thus not eligible for any of the benefits. Now all of them will get something. That is a big step forward, but we need to go further.

Amendment (a) has the support of the Community and Amicus unions and I pay tribute to their work. They took the case to the European Court of Justice and have worked tirelessly on the issue. The new clause would ensure that those who lost their pensions before the establishment of the PPF receive the same support as those who benefit it from it in future. Amendment (a) does not prescribe where the funding for the PPF level of benefit should come from. Much discussion has taken place about how the £8 billion over 50 years will work out—how much it will cost and whether it will stretch further than we think. I do not know the answer, but there have been queries about how far the money will go.

Mark Pritchard (The Wrekin) (Con): Does the hon. Lady share my concern that the review will not report until later this year? There is no immediacy in tackling some of the problems that hon. Members of all parties face in their constituency surgeries week in, week out. Does she also share my concern that there is no obvious legislative time slot to include any outcomes of the review in primary legislation? We could sort the matter out today.

Julie Morgan: I thank the hon. Gentleman for that intervention. I understand from what the Minister said earlier that the initial recommendations will be made by the summer. We certainly want them to be made as soon as possible. We did get a commitment to a time scale from the Minister today, and I welcome that fact that it is to happen by the summer.

The combination of the extra funds already committed by the Government and the review of how best to use the assets of the schemes in wind-up might be enough to fund an increase up to the PPF level. The Government have not given a commitment to do that, but there is a possibility that it will happen.

Mr. David Winnick (Walsall, North) (Lab): I am obviously sympathetic to what my hon. Friend and other colleagues are saying. A constituent of mine who is due to retire shortly came to see me in my surgery. He told me that the Armstrong Pension Group, which was connected with Corus, had collapsed, and that he was going to receive only about £2,500 a year instead of the £10,000 he had expected. He was shattered by that. I took up his case and I am glad to say that he is going to receive more money, through the Pension Protection Fund. I am told that it will be about 80 per cent. of what he was expecting to get. I am very sympathetic to the arguments being put about certain other cases, but we should also pay tribute to the way in which the Pension Protection Fund is helping so many people who would otherwise be living in acute poverty. I also raised this case on the Floor of the House before I received that recent information.

Julie Morgan: I thank my hon. Friend for that contribution.

I welcome the review announced by the Government today, and I hope that it will produce the results that we need. My concern, however, is that it will not give any certainty. Amendment (a) would ensure that those who currently receive the reduced FAS level would receive 90 per cent. of their expected pension, capped at about £26,000, rather than 80 per cent. Since 1997, pensions have been index-linked, either to the retail prices index or to 2.5 per cent., whichever is the lower, rather than being index-linked only until people draw them at 65 years of age. According to what the unions have told me, they would then decline by more than a third in the first 10 years, and by more than 50 per cent. should the pensioner live to over 85 years old. Immediate benefits could be gained if we were to adopt the PPF proposals.

Jenny Willott (Cardiff, Central) (LD): Does the hon. Lady share my concern that the proposal to provide 80 per cent. of the expected pension relates only to the core pension benefits? For many of the people getting this support, that would equate to only about 60 per cent. of the amount that they had planned for, which represents a significant drop in their expected retirement income.

Julie Morgan: Yes, that is a matter of concern. Another issue is that there is a provision under the Pension Protection Fund for the payment of a lump sum, which many people were relying on to pay off their mortgages but which they cannot do under the FAS provisions. There would therefore be many advantages to bringing the FAS provisions up to the PPF levels.

We have come a long way, but we need to do just a little more to sort this out in a way that is satisfactory to me and other hon. Members whose constituents have suffered as a result of these problems, and to bring the unions in to support what the Government are doing. If the problem is not sorted out now, there is always a possibility that the Government could be forced, either by the UK High Court or by the European Commission, to introduce PPF-equivalent benefits for those who currently qualify for the FAS. This issue has been a running sore. It has been going on for five years and caused huge anxiety to many people. It would be very good if we could now settle the matter and put it behind us.

Community and Amicus took their cases to the European Court of Justice, and might be intending to go the High Court here. However, they have not started any such court action yet, because they are waiting to see whether we can sort the matter out politically. They were confident that a Labour Government would be able to sort out the different levels of the benefits.

The High Court ruled in February this year that the Government should not have rejected the report by the parliamentary ombudsman, Ann Abraham, on pension schemes that had collapsed. The Government were asked to reconsider; they have now done so and come back with their proposals in new clause 38. The High Court decision did not mean that the Government had to compensate workers for their losses, but the ruling by Mr. Justice Bean meant that they had to rethink the issue of compensation. That has been done, and we have made huge progress, but I would like to see this go one step further so that full justice can be done. The injustice suffered by Allied Steel and Wire workers in my constituency has made me see at first hand how awful this situation has been. Thank goodness it is unlikely to happen again, now that we have the Pension Protection Fund in place, but there is still a defined group of pensioners whom we need to help.

I am considering what the Minister has said today at the Dispatch Box. I was pleased that he guaranteed that Community and Amicus would become involved in the review process and that they would be consulted about it. I am also glad that there was a definite commitment to ensuring that the available funds would be applied to supplementing the FAS provision, to get it nearer to 90 per cent. I realise, however, that that was not a guarantee, and that some uncertainty therefore remains. I was pleased that the Minister said that the review would make its initial recommendations by the summer, and that it would report publicly. That also represents a big move forward. I know that Community and Amicus now want to work with the Government to ensure that the 80 per cent. figure moves closer to 90 per cent., which is what most hon. Members want.

The past five years have been a sorry time for those pensioners. We have had a lot of improvements from the Government, but I want things to go a step further. However, I am considering what the Minister has said today at the Dispatch Box.

In the end I did not press my amendment to a vote, as we have a guarantee that we will have the review and that it is likely that more money will be found. We now await the report of the review in the summer — and I will pushing hard for that money to be made available to those who have suffered through the loss of their pensions.

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[Felicity]

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