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JOHN HUMPHRYS: Good afternoon. There
is a growing crisis in this country over pensions. I'll be talking to the
Pensions Secretary Alistair Darling: what's the Government going to do
to about all those people who will be so much poorer in their retirement
than they'd been led to believe? And why Protestants in Northern Ireland
are losing their faith in the peace process. I'll be talking to the Northern
Ireland Secretary John Reid. That's after the news read by Darren Jordan.
HUMPHRYS: Thanks Darren. If you're
in work and maybe facing retirement how confident are you that you'll have
a big enough pension to live reasonably comfortably on? A year or two
ago you might have said: pretty confident. I've been tucking away a decent
chunk of my income and I've been promised that it'll provide me with a
good return. But now, well now things are different. In a remarkably
short space of time the whole pensions scene seems to have changed. One
company after another has been shutting down its "final salary" pension
schemes and the amount that's needed now to fund a decent pension has soared.
We're now being told that we'll have to work into our seventies if we
want a comfortable old age, emphasis on the word comfortable. The Government
had also been trying to get more people to save for their retirement in
so-called "stakeholder" pension schemes, but it seems they're having very
little success with that. Whose fault is all this? I'll be putting that
question to Alistair Darling, Secretary of State for work and pensions,
after this report from David Grossman.
DAVID GROSSMAN: Poole Harbour where the boats cost
more than a house and the houses cost the earth. This is pretty much as
good as it gets for British pensioners. No talk of autumn years here -
this is very definitely the high life.
If life were really like
a pensions advert we'd all spend our retirements like this. The cares of
working for a living banished in favour of far gentler worries, like whether
to cruise to St Tropez for the season or Monte Carlo for the Grand Prix
- ah decisions, decisions!.
Not many of us can expect
our pension to run to a two million pound gin palace like this, but we
do all at least hope that our retirement will be a comfortable ride and
for many the means of achieving that has been the final salary pension
scheme run by an employer. But British companies are closing such schemes
to new members at unprecedented rates and the government's accused of hastening
that trend by loading extra regulation and taxes onto pension funds and
worse, critics say the government's whole pensions policy is a hopeless
FRANK FIELD MP: There's absolute chaos
awaiting us even on this level as the years go by on pension provision
and at some stage the government's got to go back to the drawing board.
GROSSMAN: Amid all the confusing
detail, there are basically only two main types of pension. Arguably the
best is a final salary scheme run by an employer. It's like, well, a great
big bucket. While we are working, we throw in a bit, our employer puts
in a bit and when it's time to stop work, we draw a pension that's a proportion
of our final salary determined by how many years we've been contributing
to the scheme. But crucially it's up to the employer to make sure there's
enough in the pension fund to pay for everyone.
The other main type of
pension is a money purchase scheme. It's like a little individual bucket.
While we're working we put in what we can, our employer may or may not
contribute and when it's time to retire, whatever we've managed to collect,
well, that has to provide our pension and with stock markets on the slide,
that can be a bit disappointing.
ROGER LYONS: If nothing's done about this
situation, then there will be millions of people who thought they were
looking forward to a comfortable old age, on an occupational pension scheme,
based on final salary, who now find that with a much lower contribution
from their employer, they are facing pensioner poverty.
PROFESSOR STEVE WEBB MP: If you look at pensioners in retirement
today who have a good standard of living, the vast majority of them are
building that on a final salary pension. They're getting a pension that
relates to what they were earning just before they retired and it allows
them to carry on the sort of standard of living they had when they were
working into retirement. That's what pensions are for and a good final
salary scheme is the gold standard of pension provision.
GROSSMAN: Most of these pensioners
in Bournemouth have already struck gold, their generous final salary schemes
mean that instead of worrying about the future they can instead concentrate
on trying to hit the little yellow jack. But such schemes are closing to
new members in record numbers. In fact, the National Association of Pension
Funds found that ten per cent of final salary schemes they surveyed, closed
to new members last year alone.
Many of these companies
are huge high street names with tens of thousands of people in their pension
funds so why are they doing it? Well we tried to get them to talk to us.
Abbey National are closing their final salary pension scheme to new members
next month, so would they like to give us an interview to explain why?
Well, no, they wouldn't. Marks and Spencer are closing their scheme in
April, so would M&S say yes...no. Neither would Barclays provide us with
an interview. And when we called BT to asked them for an explanation they
decided it wasn't all that good to talk. In fact, we tried Sainsburys,
Lloyds TSB, Legal and General and Iceland and every time got the cold shoulder.
PETER THOMPSON: Companies are facing a lot of pressures
on final pay schemes and they have been doing in recent years. A lot of
these are to do with increasing cost. Increasing cost has arisen from
a number of directions, for example people are living longer on average.
Investment returns have been negative for the last two years. Long term
interest rates have fallen a long a way. In addition to that there's the
huge burden of regulation, which means that lot of companies are finding
final pay schemes too expensive and too complicated to continue operating.
GROSSMAN: As well as government
regulation, the accountancy rules of the pensions game have also changed.
A new regulation going by the innocent, if rather dull sounding name
of FRS 17, forces companies to put details of their pension funds in their
annual accounts in such a way as to frighten the life out of shareholders.
FIELD: The accountancy profession has ruled
that company pension schemes liabilities, should be presented into company
account in a particular way, over a short period of time, at the worst
possible time of the economic cycle, those debts should actually be put
on the books and increasingly firms are saying, we're not prepared to take
this risk anymore, we're minimising those risks and once some firms start
doing it, there's rather like a sheep effect, everybody starts to follow.
GROSSMAN: Pensions have also been
targeted by the Chancellor as a source of revenue. In 1997 Gordon Brown
changed the tax rules so that an extra five billion pounds a year goes
to the Treasury from company funds. On top of extra regulation and falling
investment returns, many firms feel this tax means they can no longer afford
to play the final salary game.
FIELD: Board members have said,
there are many and easier cheaper ways to run pension schemes and if the
government is going to take this sort of money each year out of pension
savings, we will adjust and we will adjust by cutting the level of pensions
which are being paid and that is now actually happening. To adapt a famous
phrase, there's no such thing as a free tax. You levy it by government
and then other people will seek ways of making sure the tax is passed on
and this tax has been passed on to cuts in pensions.
GROSSMAN: Having a few pounds left
at the end of the week for a game of bingo is all many pensioners can hope
for. Pensions though shouldn't be a gamble. The evidence suggests that
the move away from final salary schemes will leave more and more people
with less and less money to spend in retirement. The accountants KPMG
calculate that on average money purchase pensions are a second rate option
and will pay out 30% less than final salary schemes and that will make
a huge difference to retirement in the future.
LYONS: In practical terms it means
that instead of looking forward to a holiday, foreign holiday each year
as a pensioner, they'll be lucky if they get a coach trip one day away
from home, and that kind of change means that instead of looking after
their family as pensioners, perhaps providing some goodies for their grandchildren,
they'll be hoping their grandchildren can look after them.
THOMPSON: One thing that a lot
of companies do when they move away from final pay schemes towards money
purchase schemes is to actually contribute less, sometimes a lot less,
to the money purchase scheme than they were contributing to the final pay
GROSSMAN: Not only is the government
accused of not doing enough to prevent the disappearance of final salary
schemes that would have made many future pensioners comfortably well off.
It's also argued that the government's plans to help the low paid have
a decent retirement are also seriously flawed.
To try to make more people
into pensions winners the government introduced the stakeholder pension.
Where before picking the right scheme was complex, stakeholder was designed
to be pensions made easy and at a very low administrative cost. They were
brought in last year and targeted at the three million people who have
no other form of pension available to them - critics though say they've
fallen well short.
LYONS: The whole statutory framework
for stakeholder pensions was based on a very good idea, however the government
I think got cold feet over the whole stakeholder approach and they didn't
really want to force employers to pay a minimum satisfactory contribution.
THOMPSON: What evidence there is
so far seems to suggest that employers are not actually contributing very
much to stakeholder pensions in most companies. In a lot of companies,
they're simply offering them as a vehicle for employees to make contributions,
without the employer offering anything, but a lot of those stakeholder
pensions are simply in practice are empty shells with nobody actually contributing.
GROSSMAN: Justin Urquart-Stewart
makes a living trying to predict the future. He's an independent financial
advisor who visits the pensionless in order to shore up their finances
for retirement. More and more he's finding people are totally unprepared.
Today he's visiting thirty-two year old Phillip O'Gorman.
Philip works for an events
management company in London. The consultation starts with an all too
JUSTIN URQUART STEWART: So what kind of pension scheme
do you have at the moment?
PHILIP O'GORMAN: Well actually I don't have one.
URQUART-STEWART: Whoops, nothing at all?
URQUART-STEWART: Oh dear, but I mean your employer
must have offered you something surely.
O'GORMAN: Yes. We've been offered
URQUART-STEWART: Right, has anybody taken it up?
O'GORMAN: Not that I'm aware of.
GROSSMAN: So Phillip's not tempted
by a stakeholder pension and nor it seems are the government's target group.
Most stakeholders say critics have actually been taken out by wealthier
people looking to minimise their tax bill
URQUART-STEWART: They've really actually been of
most benefit to high net worth grannies because what they've done is actually
been able to use the scheme to be able to pass money down from them to
their grandchildren tax free.
DAVID WILLETTS: Well they've sold maybe
five hundred thousand plus stakeholder pensions but by the time you remove
the people who've taken...who've moved in to stakeholders from other pension
arrangements, the well advised who've taken out stakeholders for their
non working wives or for their grandchildren, you get a tiny proportion
of people in the government's target group, taking out a stakeholder pension.
In fact I think that they may have sold fewer stakeholder pensions to their
target group than they've created life peers.
GROSSMAN: So, if we can't rely
on the state or our employers to keep us afloat in retirement, barring
a lucky lottery win that pretty much leaves self reliance as the only option.
But knowing that we have to save and actually putting the money aside
month after month are two very different things and as a nation we're not
terribly good at planning for the future.
According to research
from the Association of British Insurers the savings gap is huge. It's
estimated that we're saving twenty-seven billion pounds a year less than
we need to and to close this gap we need to increase the amount we save
by fifty-four per cent.
WILLETTS: Probably the most worrying
single statistic about the British economy at the moment, is the amount
that we as a nation are saving. Households are saving at historically
low levels, and that means that when people retire, they simply won't have
the incomes that they expect to enjoy, and that's a very serious long term
THOMPSON: The government may have
to move towards compulsion at some point in the next few years. The difficulty
then will be to strike the level at which compulsion is fixed, whether
it's a low level in which case it may not make much difference to people's
retirement income or whether it's at a higher level, which might produce
problems for some companies or employees in affording that amount.
O'GORMAN: So how much money would
I need to invest in a pension in order to have a salary of forty-five/fifty
thousand pounds when I retire?
GROSSMAN: The young often have
high expectations of where they'll be in retirement, without a final salary
pension scheme to guarantee the future it's actually very hard to collect
the huge sums needed on our own and the sums are quite shocking.
URQUART-STEWART: Then you'd actually need to amass
at the moment the sum of five-hundred and twenty thousand pounds, ie over
half a million pounds to buy thirty thousand pounds worth of income each
year and bear in mind you've got to pay tax on that as well.
O'GORMAN: Okay, I didn't know that.
GROSSMAN: So we can forget the
jet set fantasy and it may be that without urgent action on pensions, even
a modest lifestyle in retirement will be beyond the means of tomorrow's
pensioners. Future pensions have never really been a priority of any government,
because the politicians know they'll be long gone and out of sight by the
time their policies are ever properly tested.
HUMPHRYS: David Grossman reporting
JOHN HUMPHRYS: Alistair Darling, putting
aside the details for a moment, bearing in mind that we are talking about
the future and people having a reasonable income in their old age, are
you worried about the way that things have changed over the last year or
ALISTAIR DARLING MP: I think for a long, long time,
most people probably ought to be saving a lot more than they actually do.
One of the reasons that we are introducing annual pension forecasts for
people is that within about five or six years' time people will receive
an annual statement which will tell them precisely how much or how little
they will get in retirement. But, in respect of most of your report, if
you look at the final salary schemes, they have been in decline actually
since the 1960s. It is true that that decline has accelerated slightly
in the last year or so, but what we want to do as a government is to make
sure that whether people have their money in a final salary scheme, or
whether it's the money purchase scheme that was illustrated on the programme,
we want to make sure that we get more people saving more than they are
doing at present.
HUMPHRYS: You say that this trend
has been with us for some time, as far as the final salary scheme is concerned,
but if you look at the figures, two million fewer people in final salary
schemes now than there were ten years ago. It's accelerating very rapidly
indeed. I mean ten per cent have closed down effectively, shut their doors
to new members at any rate, in the last year alone, that's a very rapid
acceleration isn't it.
DARLING: There are about twelve
thousand final salary schemes in this country of which about four per cent
HUMPHRYS: ...ten per cent in the
DARLING: What has been happening
over the last year or so, is that many companies, seeing what has been
quite a substantial fall in the Stock Exchange and seeing that their contribution
holidays, that is the time that they don't have to put money into their
pension fund has come to an end, a lot of employers have said, hold on
we don't want to continue with this. Now, we could see this trend happening,
that's why last year I asked Alan Pickering, formerly of the National Association
of Pension Funds, and Gordon Brown and I asked Ron Sandler, to conduct..to
look into these matters and to make recommendations to us with a view to
improving the situation so that we can encourage more people to save. Now,
we will have Pickering's recommendations in June, at about the same time
Sandler will also report to Gordon and myself. Thereafter, the government
will publish proposals on which we will consult and our objective will
be, firstly, to see how we can reduce the amount of regulation to simplify
matters, to get rid of some of the complexities which undoubtedly add to
the cost of pension schemes. Secondly, to see how we, with companies, can
do more to encourage employees to save towards their retirements and thirdly
to make sure that we have the right incentives and they are operating in
the right way, to encourage people to save for their retirement. So we
will be publishing those proposals later this year. But this is something
that has been building up for some time. I believe that the basic pension
structure that we have in this country, the partnership between what the
public sector does and what the funded schemes have done is absolutely
right. But I do think and certainly in the simplification of regulation,
getting rid of some of that red tape, these are things that we need to
do a lot more and we will be publishing our proposals later this year.
HUMPHRYS: And do a lot more pretty
quickly too, because according to the Association of Consulting Actuaries
and actuaries by and large aren't people who make wild statements, but
they use the rather colourful description of what's happening, they say
they are very concerned that the drift away from good occupational arrangements
is accelerating towards a trot if not a gallop. Well, coming from people
like the actuaries, that's a pretty serious comment.
DARLING: Remember of course that
in this country, final salary schemes tended to be provided by large companies.
Now, as these large companies are less and less in number and you know
with the change in the public sector, more of it being moved into the private
sector over the last twenty years ago, the proportion of the population
who could get access to final salary schemes, has been declining anyway.
That's why, we introduced the stakeholder pensions which are designed
for about, you know five million people or so, who will never have access
to company pension schemes, because they don't exist for them and remember,
as more and more people move jobs, that sort of person who may have several
jobs between starting out and retirement, the final salary schemes are
not particularly appropriate for them. So you do need both money purchase,
stakeholder schemes as well as the final salary schemes.
HUMPHRYS: But there are many people
who do rely and are now relying on final salary schemes, thinking that
they are going to have decent incomes when they finally retire and what
people like KPMG are now telling us and they've done the sums for themselves,
they will get thirty per cent less in money purchase schemes, than they
would in final salary schemes. You don't seem as if you are terribly worried
DARLING: The KPMG study was curious
in the sense that most people's income actually comes from the State, rather
than even when they do have occupational schemes. You know that's always
been the case. I want to make sure that we do everything we possibly can
to encourage employers who have occupational schemes, to continue with
them. To make sure that as much money as possible that people save, actually
goes into their pension and not into red tape. That's why I've said on
a number of occasions, I think we've reached the stage in this country,
where we do need to reduce the amount of regulation, it's been put on for
the best of reasons by successive governments, but we've got a situation
for example, if you look at stakeholder pensions, where you have a tightly
regulated product, sold on a tightly regulated market, the result of which
means that it can sometimes be difficult to sell pensions to the very people
that you actually want to sell them. Despite that though, I am pleased
that some, tomorrow the ABI will publish figures showing that nearly seven
hundred thousand stakeholder pensions have been sold in the first nine
months. That's encouraging and remember, that represents a billion pounds
worth of new pension business. So, whilst people are quite right to say,
look the government ought to be doing more on final salary schemes, and
we are, you do need to get this into perspective. Last year, saw a fifty
per cent increase in pension sales last year, so it isn't all the case
that there's less money being saved, some people are saving a lot more
and that's something to be encouraged.
HUMPHRYS: And I want to come back
to stakeholder pensions in a moment, but let's just deal with the final
salary schemes and the effect of various things that have been happening
that we heard about in David Grossman's film. FRS 17, on the face of it,
immensely complicated, actually not all that complicated when you come
to look at it in some detail. Do you share the concern about the consequences
of this new rule.
DARLING: Well, at the risk of getting
rid of your viewers let me explain very briefly...
HUMPHRYS: Very, very briefly.
DARLING: What FRS 17 does. It's
a new accounting standard, a UK accounting standard that's designed to
make company accounts more transparent. It is fixed by the Accounting
Standards Board which, of course, quite rightly is independent of government.
What it has done though is to bring into very sharp focus the costs associated
with pension funds. Now I have the ....
HUMPHRYS: And therefore cause an
awful lot of people to say we don't want anything to do with it.
DARLING: It is one of a number
HUMPHRYS: Indeed......no, no, there
are other facts, I freely admit that, but if we deal just with FRS 17 for
DARLING: If we look at that last
week I had the Accounting Standards Board in to see me and I made the point
that the standard we have in UK is different from the international accounting
board standard which allows you with pension funds to allow for a bit more
smoothing effect, so that you avoid a situation where on any one day if
the Stock Market has fallen the pension fund looks terrible, whereas the
next day it might actually look okay. Now they're thinking about that
because as I say they're independent of government and that last thing
on earth I think you'd want is a government to start saying, you know,
that accounts shouldn't be transparent. Accounts should be transparent
and they are talking to their international counterparts, but I do say
this to you John, that it is - I think it is quite wrong for people to
HUMPHRYS: No, no.
DARLING: ...of accounts of what
is happening now. You made the point there are other problems that I think
do need to be addressed.
HUMPHRYS: Indeed. You made that
point, but as far as FRS 17 is concerned you've said to the accountancy
people: Look, we are concerned about it. Is there a better way of doing
it maybe using the international rule instead, so that's what we may have,
we may see a change. Is that right.?
DARLING: It is up to the board
HUMPHRYS: Of course.
DARLING: ... of government. But
I think there is a recognition, it's not just us saying, that when you
look at pension funds you must look at them in the round, just as when
you look at company accounts you should never ever just take a snapshot
on one particular day and say the company is good or bad. But I repeat
the point that if you are looking at how to get more people to save, which
is actually the thing that ought to concern governments, the whole point
of us setting up the Pickering and Sandler reviews that I referred to are
because I think we can do more to ensure that more of the money saved goes
into a pension, that's why we need to reduce the regulatory burden, reduce
some of the complexity. I do think to make sure we are doing the right
things we've got the right to balance the right drivers to make sure that
more people can save, so as I say we will be making those recommendations
later in this year and that will build on all the reforms we've made since
HUMPHRYS Right, so as far
as FRS 17 is concerned you've made your position clear and it's your understanding
that the board is looking at it and we may see some changes there.
DARLING: They are but I think they
will be keen and you know common sense tells you this must be right, to
make sure that our standards are the same as the international standards,
because we live in an economy, we're a very international open economy.
HUMPHRYS: Right. Let us - as you
say there an awful lot of factors involved in this, but another big factor
and it's a five-billion pounds a year factor, therefore cannot be ignored
is ACT the changes again, technical complicated changes that the Chancellor
made a while back, but the effect of them is to take five billion pounds
a year out of pension funds. That is a great deal of money and it is
having an effect isn't it?
DARLING: If that was right you'd
HUMPHRYS: Well everybody says it
DARLING: With respect they're not.
In view of an excellent leader in the FT last week which drew attention
to the fact that it was probably the very large fall on the Stock Market,
some four-hundred-and-fifty billion pounds because of events that we know
HUMPHRYS: Oh, that as well of course.
Yes, yes, I'm not disputing that. This is five billion pounds of
real money coming out of pension funds.
DARLING: That is big money. If
the ACT changes had been the main driver you'd have expected all this to
have happened four years ago. I would also just make the point......
HUMPHRYS: But the markets were
booming four years ago. That's why it didn't happen four years ago.
DARLING: What is driving companies
at the moment is the falling Stock Market, the fact that people are living
longer, all sorts of factors but remember also when we made those changes
we cut corporation tax by three pence which has hugely affected companies
profitability and therefore the amount of money available to its shareholders,
most of which are pension funds. I don't buy that argument at all. What
I do accept which is why we set these reviews up last year, is that we
do need to do more on the regulation front, we do need to make sure that
HUMPHRYS: You make that point very
clearly, but as far as this ACT change and this five billion pounds - as
Frank Field says, you saw him on the film - you'll not have been surprised
to see him there - he often talks about this particular subject, he knows
a lot about it. What he says is there is no such thing as a free tax,
and we'd have to agree with that, and when you look at the effect on specific
organisations, take Tesco, it had a very big pension fund, it had to put
another fifteen per cent a year in, I'll just finish this point if I may
- it had to put another fifteen per cent a year in to cope with the effect
of ACT changes. Now it's decided to close its fund altogether, so you
can't say that there's no effect from this.
DARLING: No, the major influence
of what is happening just now, is as I said to you is the fact that the
Stock Market has fallen, for reasons that we all know.
HUMPHRYS: I don't dispute that.
That is the big factor, but there are all these other things as well.
DARLING: Finance directors of companies
are also aware of the fact that they are paying less corporation tax.
Now quite deliberately when we made those changes, and incidentally nobody
- maybe Frank has, but nobody else - is arguing we go back to the very
complex corporation tax system we used to have with ACT. Nobody's arguing
that at all. What they said at the time was it was a very sensible reform,
it meant that companies could decide on investment decisions.......
HUMPHRYS: A lot of people were
very very upset about it at the time. The pension funds hated it.
DARLING: Nobody is arguing that
we should dismantle the present corporation tax system and go back to the
old one, but the main thing John, the main thing that is affecting companies'
considerations at the moment is the fact their contribution holidays are
coming to an end and you know, their faced with having to put more money
in. I may say though, we will bring forward proposals that I hope will
help companies as well as the government encouraging people to save, but
I do think some companies ought to start thinking, you know, a little bit
more long term at a time when some of them find great difficulty in attracting
and retaining staff. A pension fund - available access to a pension fund
ought to be seen as a major part of the remuneration package. Now as I
say, whether it's final salary which is fine for people who stay with companies
their whole working life and tends to benefit the higher earners, or whether
it is what we call defined benefit, that is the money purchase schemes,
that you put in so much and then you buy an annuity when you retire - the
crucial thing is how much money are people putting in. I do think companies
do need to take a longer view than they're taking at the moment. You know
I think some of them are citing all sorts of reasons that you know, perhaps
aren't altogether convincing as to why they're coming out.
HUMPHRYS: But they all add up,
don't they, and one of the things...
DARLING: ...which is precisely
why, as I say, later this year, when we've got the Sandler and Pickering
recommendations I want to publish specific proposals which I think will
go, you know, quite a substantial way to encouraging more people to save,
HUMPHRYS: ...what sort of thing
are you talking about?
DARLING: Well, I haven't had Sandler
or Pickering's recommendations yet...
HUMPHRYS: ...no, no, I understand
DARLING: ...but what I want to
look is, for example, you know, I've mentioned to you, you know, the regularity
burden, there's no doubt that the cost of selling pensions means that there
is less money available for saving. One of the reasons that I put a one
per cent cap on the charges that could be made for stakeholder pensions
is because I believe that we could drive down the costs and interestingly,
right across the pensions piece now, charges have fallen thanks to stakeholder
pensions. And as I say, you know, it hasn't affected sales, because sales
have gone up some fifty per cent in the last twelve months as well the
nearly seven-hundred-thousand stakeholder pensions themselves. But I think
we need to ask ourselves, have we got the right incentives there? Can we
do more to encourage more people to save? Are we doing the right things?
Are we doing it in the right sort of way? That is what the proposals will
HUMPHRYS: Just a very quick thought
about this story we see in the papers this morning, that some of the biggest
bosses are taking very, very large pensions for themselves indeed. Does
that concern you at all?
DARLING: Well the argument that
is used, I see, is that in an international world you have to attract you
HUMPHRYS: ...the usual calibre.
DARLING: I understand that argument
and you know, I can see. But I think also within this country, companies,
as I said just a few moments ago, need to do more to encourage to people
to remain in the workplace. I know in the United States for example, there
is one particular form of saving, what they call a Section 401K, it's like
our ISA's where, my understanding is that if you want to operate, get the
tax relief for operating that for a year and for the executives, you've
also got to operate it for your employees. I'm not going to anticipate
what we're going to ...
HUMPHRYS: ...but you might go down
that road, so in other words, the fat cats as it were, you wouldn't use
that expression I dare say, but the fat cats would have to make provision
for their workers as well for themselves.
DARLING: My interest, as a member
of the government, and frankly, the interest of all of us in this country,
whether we're a company director, or anybody else, is that we get more
people to save. Now, I'm not going to anticipate what our proposals are
going to contain...
HUMPHRYS: ...but you're looking
at that sort of area...
DARLING: ...what I can say is,
we will be publishing those proposals later this year, and that will, just
so no-one's in any doubt about this, it will build in the reforms we're
making, so we're keeping the state second pension, we're keeping the basic
state pension, we've got the pension credit legislation which will reward
savings in a way that doesn't happen at the present time because there's
all sorts of disincentives in the present system, we are going to build
on the structure we've got, I think the basic structure is sound, but I
do think we need to look further at those areas I've indicated.
HUMPHRYS: Some people looking at
the way things have changed over the last few months may say that's a slightly
complacent view, but then, and let's have a look at the stakeholder's pension
that you seem pretty pleased about, the figure tomorrow I gather will be
about six-hundred-and-ninety-thousand of them sold. The problem with that,
it sounds a lot, but if you look at your target group which is two-point-eight
million, these are not, by and large, members of that target group, there
we heard in the film there, they're often fairly well-to-do grannies who
are taking pensions for 'little Jimmy' or something. It isn't exactly what
you intended and, can I just finish this point because we've not unlimited
time unfortunately, the problem is that unless you go down the compulsion
route, which you were going to do in the early days as I understand it,
and you got cold feet about it, then things aren't going to change very
DARLING: Right, you make three
separate points. Let me try and deal with them. Firstly, pension planning
by its very nature is a long-term business and that's why no government
should, you know, chop and change its pension policy you know every time
there's a headline that you don't like. We've put in place since nineteen-ninety-eight
a structure that I believe is workable and it's affordable. It's the basic
state pension, the state second pension which helps particularly low and
moderate earners, we've introduced new options to enable people on moderate
and high earnings to save through a funded pension. That brings me to the
stakeholder pensions which is one of those new options. Now I've always
said that it would take time to build up. If everybody on the first day
that stakeholders went on the market rushed out and bought one, I would
be concerned, because buying a pension isn't something you rush into like
buying a television set or a CD or something like that. The fact though
that sales have steadily built up, and I notice that Willetts there on
the telly was telling you that 'oh, they've only sold five-hundred-thousand'
and you know, he's been, he told us we wouldn't sell any, he said no companies
would sell stakeholder pensions. Well he was wrong on both counts. What
you're seeing is a steady increase. Who's bought them? Well the truth is,
that until the Inland Revenue completes its analysis, because they actually
know who buys them, we won't know for a month or two yet, but I find it
hard to believe that you know, there are seven-hundred-thousand you know,
grandparents who bought their grandchildren pensions, so I am never, you
know, I've always said you have be cautious about this, so all these things
I think will help, but what I do say to you, I think we've got the structure
right, it's our job now to make sure that we can do more to help people
save in the future.
HUMPHRYS: Alright, in the midst
of all this, and a final thought, MPs I see, are going to get fatter pensions
in future while most people are having to slim down, they're going to do
rather better, another twenty per cent in their pension funds because of
course they'll enjoy the final salary scheme, or so it seems. Are you happy
with that? Doesn't it make you all look a bit greedy?
DARLING: Well, the House, if I
recall correctly, voted last year in principle to change the pension scheme.
I firmly believe that MPs should think very long and hard about doing things
themselves that others can't, you know, can't get. Now it's a free vote
on all those things, there's no, the government can't ...
HUMPHRYS: Did you vote against?
DARLING: Well I didn't vote for
it in the summer...
HUMPHRYS: ...but you would vote
DARLING: ...I think, frankly, we
as MPs ought to be concerned about the pensions of our fellow citizens,
that's first and foremost what we ought to be doing and certainly that's
what I intend to do.
HUMPHRYS: Alistair Darling, thank
you very much indeed.
DARLING: Thank you.
HUMPHRYS: In Northern Ireland the Ulster
Unionist Party is getting together next weekend for its annual general
meeting. And a sombre affair it will be. Its members are not happy because
Protestants believe they have been sold down the river by the so-called
peace process and the Catholics are benefiting at their expense. Many
feel that if something's not done soon it will bring the whole thing crashing
down - with potentially devastating consequences for all of us. The Northern
Ireland secretary John Reid is going to be with me and I'll be talking
to him after this report from Iain Watson.
IAIN WATSON: It's a measure of progress
that Belfast is open to satire, and not just strife.
UNNAMED MAN: "Oh I have warned the people
of Ulster about this so called peace process."
WATSON: This 'Tinderbox' theatre
company production is set against a backdrop of a referendum on a United
Ireland in 2005. That may make Unionists in the audience a little nervous,
as there's increasing sense that the Good Friday Agreement has delivered
more for the nationalist community than it has for them.
JEFFREY DONALDSON MP: There is a growing sense of alienation
within the Unionist community, at this time. many Unionists, even those
who voted for the agreement in 1998 now feel that the process has become
so one-sided, so unbalanced, that really something needs to be done.
MARTIN MCGUINNESS: The fact that Sinn Fein is the
largest political party in Belfast, the largest political party west of
the bann, with increasing numbers of people supporting our party, not just
in the north, but in the south as well, that this is a reality that Unionists
have to come to terms with now, they shouldn't fear that.
WATSON: Northern Ireland's first
minister David Trimble faces a potentially divisive debate next week when
the Ulster Unionists gather for their annual general meeting. He has to
report back to a sceptical audience on the progress - or lack of it -on
the decommissioning of terrorist weapons.
Last October, the IRA announced finally that they were beginning to put
arms beyond use. Now you might think that would be enough to rekindle waning
enthusiasm in the peace process amongst Unionists. But it appears to have
done no such thing, and on Saturday, David Trimble will once again come
under pressure from sections of his own party to take a harder line with
Sinn Fein. Now, disagreements within Unionism are almost as old the Union
itself, but some say this constant haranguing of David Trimble is a symptom
of wider discontent with the Good Friday Agreement.
Both communities are content to share a drink and a chat during the interval
of 'Caught Red Handed' - a pun on the emblem of Ulster. Exit polls suggested
between fifty-one and fifty-five per cent of Protestant voters backed the
Good Friday Agreement at the 1998 referendum, but a distinguished observer
of Unionist politics says support has been drifting away since.
DR SYDNEY ELLIOT: Looking at the votes for the
main parties at the general election last June, I would guess that somewhere
between thirty-five and possibly forty per cent of Unionists might now
support the position of the Belfast agreement, if there was a referendum
WATSON: Ulster marketing surveys
has brought together a group of Unionist voters to discuss their thoughts
on the Good Friday Agreement four years on. They are not a representative
sample of the entire Unionist population; all of them voted in favour of
the Agreement back in 1998 and most would still vote for it today - but,
more out of a sense of resignation than enthusiasm.
UNNAMED MAN: I did vote yes, on the back
of the promises made by Tony Blair when he came over on the day of the
actual referendum. and he wrote them down in black and white and just about
every one of them has been broken.
UNNAMED WOMAN: I voted for the Unionists, I also
voted for the assembly referendum and I don't think it's achieved anything
WATSON: This night of Ulster Scots'
music has been organised as part of Belfast's cross-community campaign
to become a future European Capital of Culture. But it's really a city
of two cultures, Nationalist and Unionist. In a reversal of traditional
roles, Unionists now feel that Nationalism is on the march. The Secretary
of State John Reid has warned that Northern Ireland mustn't become 'a cold
place for Protestants.' But underlying discontent could lead to future
disharmony - at the 2003 assembly elections.
ELLIOT: The possibility still exists
of Gerry Adams being Deputy First Minister and Ian Paisley First Minister,
in just over a years' time. and no one in Northern Ireland would regard
such a set of institutions as workable in those circumstances.
WATSON: This so-called 'peace
wall' was constructed in 1969 at the height of the troubles in Northern
Ireland to keep apart Unionist and nationalist communities here in North
Belfast. Four years on from the signing of the Good Friday Agreement you
might assume I've come here to watch it being dismantled. No such luck.
In fact, a new, higher peace wall is currently in the process of construction;
and there's something of a mini boom in the building of such barriers in
some parts of the city - rather robust reminders of the fragility of the
peace process. And even some Unionists who were enthusiastic supporters
of the Good Friday Agreement now feel a sense of disappointment. Unionist
voters are especially concerned there's been no further decommissioning
of weapons by the IRA.
UNNAMED MAN: You know there has been an
independent body which inspects, has inspected, a couple of IRA dumps,
however, you know that's simply not enough when they have had all their
UNNAMED WOMAN: Any from either side of the community,
any paramilitary weapons that were actually, you know, handed in, it was
just a token gesture, it was nothing worth talking about.
WATSON: Martin McGuinness, Sinn
Fein's chief negotiator, and Northern Ireland's education minister, isn't
holding out the prospect of further progress in the foreseeable future.
MCGUINNESS: Let's recognise that the
only group to have moved in a meaningful way to deal with this issue in
the course of the recent while, has been the Irish Republican Army. The
people who are squealing loudest about the need for the IRA to do that
again, really should contemplate whether or not it's sensible to deal only
with IRA guns, should they not face up to the reality that they have a
huge responsibility to bring some delivery from loyalist death squads.
WATSON: The anti-Agreement MP,
Jeffrey Donaldson, won't challenge David Trimble for the leadership of
the Ulster Unionists at next week's AGM, but he does want that meeting
to force his leader into taking a tougher stance with Sinn Fein - which
could culminate in the suspension of Northern Ireland' s power sharing
DONALDSON: I think we have got to make
it clear as a party, that this is either a process of decommissioning leading
to total disarmament or it isn't. And if it isn't, then we need to take
steps to apply sanctions to Sinn Fein IRA and I don't believe they should
continue to be part of an administration when, firstly they are refusing
the support the police, and secondly they are holding on to illegal weapons
and linked to a fully armed terrorist organisation. It's not on.
WATSON: Symbols of British identity
remain important to Unionists, as can be seen on some of the streets in
Belfast. The government made a concession last week over the retention
of British symbols in some of Northern Irelands' courtrooms, but Unionists
suspect this is a 'softening up' exercise before yielding to a key Sinn
Fein demand later this month - to grant IRA men on the run an amnesty.
MCGUINNESS: Given that prisoners have been
released in the north, in such large numbers, that the logical extension
then has to be to deal with a situation where there are some people who
may believe they are on the run, and some of them may not even be on the
run, who've been on the run for the last thirty years in the south, I mean,
surely it makes sense that those people can come home to their families.
WATSON: But even moderate Unionists
- close political colleagues of David Trimble's - are incensed at the prospect
of an amnesty for people they see as unconvicted terrorists; something
which is outside of the Good Friday Agreement.
LADY SYLVIA HERMON MP: They didn't vote for an amnesty
for on-the-run terrorists. It is hugely damaging actually to the agreement
to have these add-on extras and I have certain sympathy, I must say, for
the present Secretary of State, who was, I'm quite sure, not a party to
this at all - this was one of those unpleasant and nasty little side agreements
between the Prime Minister and Sinn Fein; it brings no credit on either
Sinn Fein, quite frankly, or the Prime Minister that they've come to this
sort of arrangement.
WATSON: But granting an amnesty
to terrorists isn't the only 'law and order' concern amongst Unionists.
Even those who support Chris Patten's reform of policing - transforming
the predominantly Protestant Royal Ulster Constabulary into the cross-community
Policing Service of Northern Ireland - are worried about police numbers.
HERMON: The idea was that, when
the Patten report came out on the ninth of September nineteen-ninety-nine,
that in ten years we would see the Force reduced to seven-thousand, five-hundred;
now two-and-a-half years after the Patten Report the number has fallen
to below seven-thousand, two-hundred, so numbers are dangerously low, I
mean there's no escaping that fact quite frankly.
WATSON: The feeling that the goalposts
are shifting since the signing of the Good Friday Agreement is testing
the resolve of those Unionist voters who back the peace process.
UNNAMED WOMAN: But it just seems to be that, for
the Unionist people seem to be getting isolated and separated, no backing
from Britain, no backing from their own government, no backing from America,
no backing from anybody. Just like nomads.
ACTUALITY "Hello and welcome to
WATSON: Some say it will take more
than kind words from the Secretary of State to stop disappointment descending
into political disaster.
ELLIOT: One of the criticisms of
him since his time, particularly during last year, was that he was the
Secretary of State for northern Catholics, northern Nationalists, and that
was giving vent to a Protestant feeling about how things were going. The
next year of his term in office here - if he's not moved away - could be
that he actually saves the institutions from destruction in a year's time,
or if he just doesn't do anything, in fact he could preside over a failure
of another attempt at devolution in Northern Ireland.
WATSON: The Good Friday Agreement,
much against the pessimists predictions, has survived for four years.
UNNAMED MAN: "There is another way for
us, there has to be, I don't know exactly what it is yet"
WATSON: But the government will
have to do more to address underlying Unionist doubts if they're to prevent
the anti-agreement politicians from picking up support.
HUMPHRYS: Iain Watson reporting
JOHN HUMPHRYS: John Reid, support for the
Good Friday Agreement does seem to be slipping all the time, does that
JOHN REID: I think the point that
was made there, is that there are a great deal of worries among Unionists.
I wouldn't stand against the thrust of what you've said. Indeed, about
six months' ago, having spoken to a lot of people and constantly being
told about this by David Trimble, I myself tried to highlight this issue
and I think there's a number of things we have to do. First of all, is
to recognise that there are concerns among Unionists and to get rid of
the idea that it is not possible for a majority to feel insecure, it is
and I think there is an insecurity there to reassure people that we have
no intention of expunging Britishness. Secondly, I think to let people
know that we value Northern Ireland being part of the United Kingdom. There's
no question about that, some years ago, we said and we meant it, that we
had no selfish strategic and economic interest in being in Northern Ireland
and holding onto Northern Ireland and it isn't for selfish reasons...
HUMPHRYS: It was taken to mean
that you'd be happy to see a republic at the time, are we now seeing a
change in emphasis here?
REID: Well, if people took
it to mean that, then it did not mean that we wanted to see Northern Ireland
leave the United Kingdom. We value the people of Northern Ireland being
part of the United Kingdom as we do in Scotland and Wales. But of course
that will be based on the free decision of free people with equal opportunities
and of course, as long as they remain in the United Kingdom, we want to
see that even those who feel of an Irish background or an Irish consciousness,
as well as those who feel more British, feel comfortable in the United
HUMPHRYS: And you want them to
stay in the United Kingdom - is this what you are saying?
REID: Well, I'm saying
we value them. The decision about whether Northern Ireland stays in the
United Kingdom, similarly with Scotland and Wales, is a matter for the
people of Northern Ireland. While they are in the United Kingdom, then
we will do everything in our power to make sure that everyone, irrespective
of background, has their rights protected, has equal opportunities. That
the future of Northern Ireland will be decided by the people of Northern
Ireland. Now, what that means is, that we have to try and balance the
decision of the majority as regards the constitutional status, which is
to be part of the United Kingdom and at the same time, to recognise the
diversity in Northern Ireland, that there are people who feel British and
people who feel Irish, people who are Protestant and Catholic, Unionist
and Nationalist and to try and make sure that there is a parity of esteem.
It isn't always an easy thing, John, to marry these two decisions, the
constitutional state and the recognition of diversity. But we are trying
in partnership and I believe that having recognised there is a problem
with Unionism, we are attempting to address that, to assure them that there
is no attempt about, I believe, the perception that there is an attempt
to expunge Britishness is wrong, we want it to be a modern Britishness,
which is inclusive, which is tolerant and finally, there is no inevitability
about a united Ireland, there is no inevitability about anything, it depends
on the people Northern Ireland themselves. But what is certainly true,
is that we value Northern Ireland as a part of the United Kingdom and we
want all of the people of Northern Ireland to feel comfortable in that
HUMPHRYS: And people who hear that
will say good, that's splendid, but let's judge by actions rather than
by words, which is what you would expect them to do and when they look
at the way the Good Friday Agreement has worked out, they say that isn't
borne out, what you've just said isn't not borne out. Sydney Elliot, you
saw him, you know him I'm sure...
REID: ...he's a very perceptive
HUMPHRYS: Indeed, "Unionists feel
you are the Secretary of State for Northern Catholics" is what he said.
REID: Well, I think that
if you start from the basis that everyone in Northern Ireland tends to
regard everything as a zero sum game, so that whatever is given to, even
to the benefit of everyone, if it's seen to be moving from the status quo,
it must be taken from those who previously benefited. That is one of the
problems of handling this peace problem. I have no problem in recognising
that. I, secondly, I am aware of the perception that on balance there has
been more taken away from Unionists and from those who feel British and
given to those who are of an Irish background.
HUMPHRYS: You acknowledge that,
REID: Well, wait a minute
John. I acknowledge that there is a perception among Unionists...
HUMPHRYS: Let's look at the reality.
REID: Well, I'm going to
look at the reality. If we look at the Belfast agreement for instance,
the principle of Unionism, which is that the majority decision on constitutional
status should be recognised by everyone on the basis of a democratic majority,
that is now incorporated, everyone accepts that...
HUMPHRYS: ...okay, I fully accept
REID: ...well, these are
HUMPHRYS: ...but I want to get
on to some very important things as well.
REID: Secondly, the Republic
of Ireland of course has taken away its territorial claim...
HUMPHRYS: ..I understand that..
REID: ...and even in the
last year, we have had not only power sharing in an assembly, but we have
had Nationalists now coming in to recognise and participate in policing.
We've had the Irish Republican Army, having its first .....
REID: ..so there have been
steps in the direction that others would say, well these are responses
to Unionism to given the reassurance.
HUMPHRYS: But let's look at the
sorts of things that are worrying the Unionists. Sylvia Hermon, somebody
else whom you greatly respect, Lady Hermon, talked about unpleasant and
nasty little side agreements, and the sort of thing she's talking about
is the amnesty for prisoners who are on the run. I mean there's some thoroughly
nasty people out there on the run. Are they going to be given amnesty?
These are people who are responsible for the most appalling murders. Now
how can you say to the Protestants, on the one hand we are sympathetic
to you, we're on your side as well as being on the other side, we're even-handed,
and yet allow these murderers to have a kind of amnesty. I mean, it just
doesn't seem natural justice, does it?
REID: Well, Sylvia Hermon
actually mentioned two things. One is policing, perhaps I can reply to
HUMPHRYS: ...indeed. And the........
on the amnesty.
REID: Let me deal with
the question of those who are on the run. As you said, the question of
releasing people who have been previously involved in some pretty awful
crimes, most of them for political purposes, is an extremely painful one.
It always has been John. When we released the prisoners...
HUMPHRYS: ...but this is a step
further, this is the point, this is a step further. These people have never
been to jail, some of them, they've paid no price at all for the terrible
crimes they committed.
REID: I'm taking you through
the logic of this John. It has always been an extremely painful one, and
I am the first to recognise that, and it was when we released the prisoners
after a much shorter period than they otherwise would have served. Arising
out of that there comes an anomaly, that there are people, some of whom
are apparently on the run, who actually have served...
HUMPHRYS: ...maybe sixty.
REID: ... some of whom
have actually served longer in prison than some of those who were released
for instance. There are also people who are outside the country against
whom there is not evidence of any particular crime. These are anomalies
arising out of it, anomalies we have said we want to resolve. Now is it
an easy one to resolve. No it is not. People bring up the...and quite seriously
in Parliament, have recently brought up the fact that there are others
on the run from the IRA. People say "well, how could you deal with one
side without dealing with the other side in this terrible war, security
forces, police and so on. Will it extend to them?" And it's precisely because
it is such a difficult issue that we've spent so much time thinking about
it. So we are resolved to try and get a resolution of this and to do it
in a way which recognises the pain and the sensitivity. But I say this
finally, we have tried to solve a problem that has lasted for eight decades
in Northern Ireland and eight centuries on the island of Ireland. It is
a huge, most painful and political problem, the biggest in British history
and there are times when we have to countenance distasteful things.
HUMPHRYS: Alright, let me put another
distasteful thing to you in the eyes of many people. That is decommissioning.
Nothing has happened effectively since last October and of course, we don't
know precisely how much was given over then and we never will now I dare
say. But you've sent the wrong signal here, I understand the difficulties
of getting more decommissioning, but you send the wrong signal do you not,
when you extend effectively, extend the deadline, the arms amnesty deadline,
as it were, for another five years, and that is again from the point of
view of the Protestants, it's a terrible thing to see happening.
REID: Well we didn't extend
any deadline. There wasn't a deadline. What there was was a piece of legislation
that made it lawful for people to deal with arms...
HUMPHRYS: ...Yes, indeed, absolutely...
REID: ...and it expired
at the end of February. No-one, no-one in Northern Ireland thought that
all weapons would have been decommissioned by the end of February, and
if we hadn't extended the legislation, it means anybody...
HUMPHRYS: ...five years is the
point I'm making...
REID: ...well John, it
would mean that if we, if I hadn't done that, and the IRA or the Loyalists,
and we want them both to decommission, put their weapons beyond use, if
any of them had turned round tomorrow and said "we want to do it" we'd
have had to said "no you can't do it because it's unlawful."
HUMPHRYS: Sorry to have to cut
you off, but in the last few seconds, do you believe you run the risk of
the Ulster Unionist Party losing even more support, and ultimately, instead
of having to deal with David Trimble, you might have to deal with Ian Paisley.
Is that a worry? Just in a few seconds, I'm sorry to rush you.
REID: All of the points
that have been made today have been made forcibly to me by David Trimble
who's by far the most articulate exponent of these views within Unionism.
It's precisely why I've said what I've said today, that we value the Unionists,
we have no intention any more than we want to isolate those from an Irish
or a Catholic background, we have no intention of allowing their culture
to be expunged or to be obliterated or to be pushed and there is no inevitability
that that will happen. It is a difficult historic compromise to make, but
we recognise the role of Unionism and the role of Northern Ireland in the
HUMPHRYS: John Reid, thank you
very much indeed for joining us today.
REID: Thank you John.
HUMPHRYS: And that's it for this week.
Don't forget about our web site if you're on the internet. Until the
same time next week... good afternoon.