91Èȱ¬

The crisis in public finances and particularly the black hole in pensions funding could lead to "riots", former minister Frank Field MP tells 91Èȱ¬ One's Panorama: Who Will Save The Savers?

Field was Minister for Welfare Reform in Tony Blair's first cabinet and a member of the Public Accounts Committee between 2002 and 2005.

He tells Panorama: "The pension crisis is part of a bigger crisis of public finance and I'm saying that we can either try and get in first by leading the way about getting our accounts into order – or we'll be forced to do so by unrest." Asked if that means public disorder he says: "Yeah, well I mean you've got riots."

Field says: "Getting back into order now involves such change of such magnitude that, for the first time for generations, issues of public order will be a key part of the political process. People are waking up to the fact that, over the last 25 years, governments have actually – in a very ruthless way – shifted the risk of providing for our income in old age from the state and from companies onto individuals."

He goes on: "I'm appalled by it – but I'm on the side of the majority here who are increasingly angry at what has actually happened – with them being treated as infantiles, never having a proper grown-up discussion, never presenting the options, always operating the politics of deceit."

And he argues that record low interest rates have created a situation where savers are being wrongly punished, saying: "You've gotta be off your rocker to be a saver in Britain." Frank Field's position is that the Government should make sure that everyone who works should get a guaranteed minimum pension, funded through a combination of state pension and compulsory savings. Means-testing should be scrapped.

Field also recalls the day in 1997 when Gordon Brown abolished tax credits paid to pension funds and companies – taking an estimated £5billion a year out of the pensions' system: " I went to see Tony Blair after that budget was announced when the raid occurred on pension pots and I explained to him what had happened and he said in a rather charming fashion, 'Gordon didn't explain it that way to me'."

And new research conducted for Panorama by the Pensions Policy Institute indicates the true size of the UK's pensions' "black hole". By 2037, it estimates that the UK will collectively have to spend an extra £34bn a year just to maintain the relative value of our pensions.

Despite the serious long-term impact of the credit crunch, the Government still says it is sticking to the pledge it made three years' ago to restore the state pension-earnings link which was removed 30 years ago by Sir Geoffrey Howe.

Pensions Minister Rosie Winterton MP told Panorama: "We've said that we'll either do it by 2012 or by the end of the next Parliament."

Asked if this was guaranteed irrespective of the state of public finances, Winterton replies: "Guaranteed by the end of the next parliament, yes."

The Pension Protection Fund was introduced by the Government in 2005 to provide compensation if an employer's pension scheme can no longer afford to pay the promised pension.

Winterton continues: "I can understand how people feel worried but what I would say is, you know, please let me reassure people that because of the action that we've taken with regard to preventing the collapse of the banks in the first place, because of the protection we put round the pension system by the pension protection fund – so people who feel 'is my pension fund going to go under am I going to lose it?', we now have protection in there so that that will not happen to people."

Panorama: Who Will Save The Savers?, Monday 23 March 2009, 8.30pm, 91Èȱ¬ One.

PR