................................................................................ ON THE RECORD ALISTAIR DARLING INTERVIEW RECORDED FROM TRANSMISSION: BBC ONE DATE: 13.12.98
................................................................................ JOHN HUMPHRYS: Alistair Darling, what we've got then is a situation where we all know that we're not - at least we ought to know - that we're not going to be able to live on our basic state pension, with any degree of comfort in our old age. So that you are now saying: you've got to have a second pension and you've got to pay for it yourselves, effectively that's what it's about. ALISTAIR DARLING MP: I'm convinced that everybody who can save has a responsibility to save for their retirement. The state in turn clearly has an obligation to help those who can't save. Now your film was quite right, we face a situation where on present policies about a third of people now working face retirement on Income Support. Now, that's clearly a situation that we're not prepared to tolerate and next week I shall be setting out proposals to show how we can lift people above that level, in partnership with the private sector, or the state and private sector working together because what we want to do is to ensure that as many people as possible have a decent income and retirement so that they don't have to rely on Social Security Benefits. HUMPHRYS: You say you're not prepared to tolerate it. That means therefore that there will be some compulsion. DARLING: No, you'll see when I set out the proposals later on, how the government proposes to meet this challenge. But I just would like to say one word or two about compulsion. Compulsion clearly is an issue and clearly the government has considered it. But you have a situation where if you have a low income, we could compel you to save every penny you have but you still wouldn't have enough to live with a decent income in retirement. And at the other end of the income scale, people on high incomes, there's no point in compelling people to save who are already saving quite substantially above the minimum that you are now required to save if you are employed at the moment. HUMPHRYS: But I am puzzled by your use of the expression 'not prepared to tolerate' in that case. If there is no compulsion how can you say we are not prepared to tolerate it. DARLING: I'm sorry John I missed that question, there's some technical problems. HUMPHRYS: Yes, you've got a problem with your ear piece, I think haven't you, yes, let me tell you again. I'm still puzzled by your expression 'we are not prepared to tolerate this situation'. If you are not prepared to tolerate it you are going to make sure it no longer applies. That's quite clear, otherwise you wouldn't use lanaguage like that would you. But then you go on to say no compulsion. DARLING: What I am saying is I am not prepared to tolerate a situation where on present policies if we do nothing nearly a third of people now working will retire on Income Support by the year 2050. Now the policies that I set out, when I make my statement in the coming week, will show how the government is addressing that problem. What I went on to say is that at the moment if you work and you earn more than sixty-four pounds a week you are already compelled to save and the idea of compulsion is not new. The crucial question of course is how much you actually save through a combination of means. I then went on to emphasise the point that if you are on low income then, you know we could compel you to save every last penny you'd got and it still wouldn't give you a decent income. So that for those on the lower incomes and the opposite end of the scale, those on the higher end of the income scale, frankly compulsion isn't the issue at all. HUMPHRYS: Why shouldn't it be though, since it is our responsibility, as you've acknowledged, you said they have a responsibility to do it, we have a responsibility to do it. If that is the case why should you not say: and therefore we will make sure that you discharge that responsibility. DARLING: Everybody who can save has a clear responsibility to do so and we will be providing them with opportunities and the means to do that. HUMPHRYS: They exist already. DARLING: No, they don't. You know one of the things which your film brought out quite clearly is that although many people do have access to an occuptational pension scheme, a funded pension scheme where clearly that is very advantageous to most people who are members, that increasingly and you'll see this as we see the structural changes in the labour market take place, increasingly that option won't be available to the large numbers it was available to in the past. Now, the alternative at the moment are private pensions, these are not - well they are very good value for people on higher incomes and they can be appropriate for people you know perhaps moving around a lot.. HUMPHRYS: Because they get the tax relief and all that. DARLING: They have also got very high administrative charges so that for someone on a low income they are not a particularly good deal and indeed this is where the mis-selling problem has arisen where people were on lower incomes were convinced that they ought to go into private pensions and they weren't the best option. Now, the stake-holder scheme which you know we announced in the Queen's Speech we would be legislating for, will provide a low-cost option to millions of people who have never had that option in the past. Now, I will be announcing the tax treatment and so on of the stake-holder pensions this week but it is providing an option for people who have never had an option before because I strongly believe that if you can save, then you ought to add to what the state will provide by making provision yourself during your working life. HUMPHRYS: Just to pick up your thoughts on the occupational scheme. It used to be the case that an employer like the BBC or whoever used to be able to say to its employees: you will join our occupational pension scheme and then I think it was in 1988, the government said, the then government said: that no longer applies. Do you think that they were mistaken to change that? - to stop making it compulsory in some cases where the employer wanted it to be. DARLING: What I think is a mistake is for somebody to say: I'm not paying into my employer's occupational scheme and I'll go and spend the money on going on a holiday or you know going out for a drink every night or something like that, that I think is a mistake. What has happened of course in you know the last ten years or so, is that there are many people who may work for say the BBC and they know they are only going to be there for a couple of years and then they are going to move on to something else. For them to join an occupational scheme for just two years, then to move to something else, isn't perhaps quite a good idea. Now, I will have specific proposals to make to address both these problems in the coming week and you'll just have to bear with me. But what I am determined to do is to ensure through a combination of measures which I will be setting out, that those people who can save, do actually save and they have the opportunity to do that. HUMPHRYS: But you're not prepared even to consider restoring that power to companies.... DARLING: Well you'll find out when I make my statement John. You'll appreciate I'm anxious to be as helpful as I can but I can't actually make my pensions statement here no matter what the temptation. What I can say is that quite clearly for someone to opt out and do nothing is quite clearly irresponsible. What I want to do is to insure that people do have the opportunity and where there are good reasons for not joining an occupational scheme, that there is some other provision. HUMPHRYS: And when you talk about opportunities and encouragements and all the rest of it, I hope you can hear me all right... DARLING: Yes, I can... HUMPHRYS: Good, are you considering..... I know you don't want to give me the details of what's in your statement much as I would like to have them but nonetheless, the only alternative to compulsion is some sort of incentive isn't it? You would acknowledge that. There must be some incentive to us because we know what the options are at the moment and many of us chose not to take them. So what you're talking about it seems to me is that you're going to offer incentives particularly to those of us who have these choices? DARLING: What I want to do through a variety of means is firstly, offer the opportunities to save where there aren't any for some five million people at the present time and stakeholder pensions are one way of doing that. There are other measures which I'll set out in the coming week that I think will assist that process along. But I just repeat the point: The key objective the government has got is to insure that people who can save - do save - whilst at the same time, remembering we've got a clear obligation to those who can't save. HUMPHRYS: And those other measures go along the incentive route. You'll make it worth our while to do so? DARLING: Well there are a number of measures which I believe will result in people saving more that they're doing at the present time. You know there are many people in the middle band of income who are not saving as much as they ought to be saving and you'll see when I make my statement, if you look at the measures that I announce in the round, taken together, I think they will provide a very good platform for the future to insure that we get these people to save and as I say avoid the situation that we have at the present time where nearly a third of existing... people currently working are going to end up on benefit. HUMPHRYS: And as you say there are eight million people without any sort of second pension at all. So any help to them, any incentive to them could turn out to be terribly expensive couldn't it? I mean it might be very sensible in the long run but in the short run it would be expensive. I think the figure of three hundred million pounds cropped up in the Observer this morning. DARLING: Well what I can tell you is that our whole pension reform is affordable. I was absolutely clear that one of the things we must avoid is the sort of proposals that the Conservatives came up with just before the last election which frankly would have collapsed under their own weight they were so expensive. My proposals are affordable. What they will do is result in more people making their own provision to compliment that which they can expect from the state. I want us as a society to spend more on pensions but what I want to be very clear about is that it's up to us as individuals who can save to make a far greater contribution than many are at the present time. HUMPHRYS: But if incentives are going to work, we've seen the lethargy that a lot of people have towards pensions, if they're going to work they're going to be expensive aren't they? That's inevitable. DARLING: Well you will see when I make my statement that my proposals are affordable and indeed the amount that the state will spend over the next fifty years will actually decline somewhat but the amount we spend on pensions as a whole will increase because what I want to do is to insure that people who currently aren't making enough provision, who could do more for themselevs in their retirement actually do so. HUMPHRYS: But why should they unless you're making it worth their while, unless you're offering some substantial incentive which would not be inexpensive? DARLING: Well what I.... I think most people when they actually face up to, in many cases, how little they're going to retire on will get a rude shock. Now I believe that there are many people now if you told them how much they're actually going to get, even people who are saving a bit at the moment, they would say, 'Well if I knew that I would put in extra money aside because I don't want to live on benefit in my retirement.' Now as I say, again, sorry about this, you will have to be patient, but when I set out my proposals you will see when you look at them together I believe that what we will have is the most radical reform that the pensions structure has seen for a quarter of a century and it will set us in good stead for the next fifty years because what we will do is to provide security for those on low incomes and at the same time insure that people who can save both have the opportunity to do so and do actually increase the amount they're saving. HUMPHRYS: But you're not saying that you can achieve that merely through education, making us all clear what we're in for if we don't. I mean it's got to be more than that hasn't it? DARLING: No, more than education is required. You know I'm quite clear about that. But I think the combination measures that the government is bringing forward will make it abundantly clear to people that those who can save, those on moderate and higher earnings really ought to be in funded pensions. We're absolutely clear about that, if they're in funded pensions then they are always going to get substantially more than otherwise and as I say we can do that whilst at the same time doing more to avoid the situation that we presently have and the real scandal if you like, and the present pensioner situation is that there are far too many people retiring now and they need Income Support to bring them up to a decent level. Now we have got to avoid that, no responsible government can tolerate a situation where it knows that at least a third of the present population are going to need benefit on retirement. HUMPHRYS: You can obviously apply that to that young lady in our report there from Paul Wilenius. I mean she has a bit of money, at least she appears to have a bit of money and maybe having talked to a financial adviser she'll put a bit into a pension fund. But there are an awful lot of people, husbands, young families with children - you're struggling with your earpiece there aren't you. DARLING: I'm sorry, we're having terrible trouble here, I'm picking up bits of what you're saying - clearly some more investment is required. HUMPHRYS: More investment is required. We'll get you to invest in what we call a moulded earpiece. It will cost you about three quid that's all, you can afford that. People like we saw in the film, Amanda I think her name was, she can afford a bit extra for her pension, clearly she isn't very keen on paying it. But there are lots of people who can't, you know. A young father with a few kids and wife doesn't work maybe and they're struggling at the moment. Now they can't actually afford to put anymore into their pension. And then there are very poorest again, who certainly can't afford it. DARLING: Well you're right and you know as I said to you, people earning under about nine thousand pounds a year would not, even if they saved every free penny they had, get the sort of pension that would lift them to the levels that we would like to and we will be making proposals to remedy that. You're further right in saying that there are people just above that level on lower incomes, people starting out in life, or people who are on lower incomes throughout most of their lives, who there is a limit to how much you can say they can save which is where I, you know, part company with those who say it's easy - just compel everybody to save. If you've got somebody, perhaps with young children, perhaps on a low income, with a mortgage and so on, you..any government has got to take a commonsense view as to how much these people can reasonably pay. But what we can do is to help them in ways that I shall set out in the coming week and at the same time ensure that when their situation improves, when they've got more money they've got the opportunity to contribute so that they do have a decent income in their retirement. HUMPHRYS: And before that opportunity arises for them, if we have a genuine stake-holder pension, then the government who have to make their contribution, should make their contributions for them, shouldn't it. DARLING: Again, I'll be setting out proposals and you'll see them later this week but the government's determination is to ensure that we do everything we possibly can to get people, on moderate and high incomes, those who ought to be in funded pensions, to be in funded pensions and to ensure that they see the benefit as a result of making that investment. At the same time we will be providing that security that people on low incomes need and quite frankly are entitled to. HUMPHRYS: And if, as you've said earlier, this whatever you are going to do, is going to be affordable, one's tempted to think that the way you make it affordable is by taking away some of the enormous tax benefits that higher rate taxpayers get, people who are on forty per cent tax and they get the whole forty per cent set against their pension contributions, taking that from them and redistributing it. I don't know whether you like the word redistribution, but that would be a way of doing it, wouldn't it. DARLING: Well I think you will find there are other ways of achieving the end that I want. HUMPHRYS: You'll ruling that out then? DARLING: What, on Tuesday you will get a comprehensive statement from me, you're not going to get it on a Sunday lunchtime. But sofar as redistribution is concerned, you know I firmly believe that the present basic state pension for example, the state does have a role in redistribution. It can do that, the private sector can't do that. It's not the private sector's job. But I repeat the point, my objective and you'll see in the coming week how we are going to achieve this, my objective is to ensure that those on low incomes, are looked after because there are people on low incomes who are entitled to a decent income in retirement, we are going to help them do that and at the same time, remember there are people who are on low incomes at some point in their life and then their situation improves. We want to ensure that everyone who can, those moderate and high earners, do make provision because it's in their own interests and indeed they've got a responsibility to do that. HUMPHRYS: A lot of people regard what you're going to say on Tuesday as possibly the most important announcement in this area that has been made for many a long year. You're obviously aware of that and you're obviously aware too that unless you do enough here, unless you are radical enough, unless there is compulsion many people would say, then an awful lot of people, millions of people are going to retire into poverty in years to come. You are aware of that are you? DARLING: Yes, this is the most radical reform of pensions for quarter of a century. HUMPHRYS: Yours is. DARLING: And we're charting the course of pension provision for the next fifty years and remember pension provision is a longterm business. People want to know now what the contract is between the government and individual and we will be setting out that new contract between the government and the individual to enable people to plan for the future. On the issue of compulsion, as I've said before, if you've got people who are poor then you know they can contribute everything they've got and it still won't actually achieve the high pension that people believe would otherwise be the case. People on the top end, earning over say twenty thousand pounds a year, most of them are probably saving enough anyway. I don't believe compulsion is the key issue. It is for Frank Field's scheme but then that's completely different. You know he's using essentially the private sector to redistribute wealth and that's why it's got to be compulsory because otherwise people wouldn't do it. But, I believe that when you see the proposals that I set out in the coming week you will see that they are radical, they are affordable, they are fair and above all they provide security and a decent level of income for people who work throughout their lives. HUMPHRYS: Alistair Darling, thanks very much indeed. I'm sorry about the problems with your earpiece there. ...oooOooo...