Integrity Of Financial Services Industry
June 11, 2002
I congratulate the hon. Member for Newport, West (Paul Flynn) on securing the debate, which I greatly welcome. I suspect that it will be the first of many on the subject. I also take the opportunity in this post-Thatcherite and pre-Ferengi world to congratulate the Chief Secretary to the Treasury on his promotion. He always wears a better suit than I do, so I have little chance of cheating him – but we shall see.
As hon. Members know, I am fortunate enough to represent the City of London, home for much of the financial services industry in this country. Rest assured, however, that I am here neither to praise nor to bury that industry. The hon. Gentleman raised issues that will be debated for a long time to come. However, it is important to differentiate, which the hon. Gentleman failed to do, between imprudent conduct and recklessness or fraud. We should not imply criminal intent to all aspects of failure. It is important also to instil and reinforce a culture whereby transparency, integrity and good business practice are the norm. I accept that that has not always applied to all aspects of the financial services industry. The Financial Services Authority has a tight, perhaps worryingly over-tight, regulatory regime and it is important to ensure the right balance.
A decade or so ago, the subject of pensions aroused little passion. The young did not consider it; single women ignored it; and the main pensions planners were couples over 40. That may be a generalisation, but the public’s lack of detailed interest and knowledge left this country’s financial services industry in a mess.
I recently listened to an executive from a major pensions company who exhorted that everyone should consider taking out a pension now – not entirely a hard sell, but largely along the lines that the hon. Gentleman suggested. We had to start planning earlier and invest 15 per cent. of our current salaries from our mid-20s onwards towards a retirement pension. No doubt it is something of a farce. The industry has proved itself incompetent to handle the public’s money and the mis-selling scandals, including the ongoing disaster of Equitable Life and the mess of annuities, have virtually wrecked public confidence in pension savings. That has rightly been viewed as a potential horror story, and we should devote our collective energies to regaining the public’s trust.
The more I speak to younger constituents, the more I realise that they are guided to buy property as the only safe haven for their money in the longer term. If that continues, it has all the hallmarks of a long-term disaster for this country.
I recently sought reactions and advice on the current pension needs from some of my constituents. They comprised what might be called a focus group, although not the most obvious one as they were in Knightsbridge. They made some interesting points. My wife and I worked in the City until I was elected last year, and it is clear that many of us relatively educated folk have little idea of how the pensions industry works. We simply put aside many hundreds of pounds every month, paying little thought as to what would arise from it. As someone who has always strongly believed in the idea of business probity and the importance of that within the financial services sector, I was saddened by the individual experiences described by many of my constituents.
It is clear that we have allowed ourselves to be lulled into a false sense of security by the enthusiasm of pension providers and politicians’ attempts to ensure that everyone has a good life style in the longer term. The adverse publicity and the reduction in so many of the fund payouts has left the young, and especially people in the lower income brackets, with little confidence in such late life provision. By the same token, more and more employees have little expectation of a job for life and do not expect to have a long-term pension commitment from their employers. In exhorting everyone to try to save properly for their old age, it is up to us as politicians to ensure that as far as possible those savings stay safe and that no one who has saved responsibly should be left impoverished by the failure of the pensions industry.
My namesake, the right hon. Member for Birkenhead (Mr. Field), and the hon. Member for Newport, West spoke persuasively about compulsion. However, only if the pensions industry is made far safer can we possibly contemplate compelling people to put their trust in it. If a law effectively forces us to hand over an unspent surplus of our hard-earned cash to those who are either unqualified or incompetent, there is little incentive for any of us to save. That will lead to another long-term problem.
I appreciate that the proposals to force us to put money away are not yet Government proposals, although many items have been flagged up in the financial press in recent months. Behind them lies an instinctive bossiness and intolerance, as well as a lack of appreciation why so many people fail to make provision for their future. In reality, and again this goes back to the point made by the hon. Gentleman, no amount of new legislation will overcome the fact that many of our fellow countrymen are simply too poor to save adequately for their long-term future.
Mr. Love : In 1988, the Conservative Government took away the right of an employer to make joining a pension scheme a condition of employment. Would the hon. Gentleman like to see that facet of pensions legislation changed?
Mr. Field : It is a valid point. To be fair, I have not conclusively determined where I stand on that. Clearly 14 years ago choice was seen to offer a great advantage. That choice has been something of a two-edged sword at the very best. We must therefore be open-minded about the proposals that are being put forward and are likely to be come into force following the Pickering report.
I have spoken for quite some time. I should like to say more, but other hon. Members want to contribute. I shall be interested to hear what the Chief Secretary has to say. I hope to take part in debates on these matters in the months and years ahead.