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ON THE RECORD
ALISTAIR DARLING INTERVIEW
RECORDED FROM TRANSMISSION: BBC ONE DATE: 13.12.98
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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.
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