Lord Freud
That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.
“( ) Regulations may provide for circumstances in which a person may opt to have a year treated as a qualifying year if by aggregating income from two or more jobs, that person’s earnings are equal to or greater than the lower earnings level for that year.”
Commons Disagreement and Reason
The Commons disagree to Lords Amendment No. 1 for the following Reason—
1A: Because it would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, this amendment is the one outstanding issue of a Pensions Bill that will radically reform the state pension system, providing a clear, simple platform on which to save for retirement. This Government want people to build up a full entitlement to this new pension, to give them this platform and then to take them above the level of the basic means test. This is why we have a comprehensive and recently reformed crediting system, which covers those looking after children or elderly relatives and people claiming JSA and ESA. Those in universal credit households will also get credits so that, in time, at least a further 800,000 people will gain a qualifying year. It is why during this Parliament we have introduced a credit for adult carers of children, commonly known as the “grandparents’ credit” and, with thanks to Members of this House, we will now be extending credits for partners of members of the Armed Forces on overseas postings to have retrospective effect.
On Report, we had a good debate about whether the national insurance system is failing those who have more than one job and are earning enough to pay national insurance or be credited into the system but do not reach the required thresholds in any one of their employments. This is an area that the noble Baroness, Lady Hollis, has been campaigning on for some time and I pay tribute to her tenacity. It is clear to us that people are in that situation. Our own evidence suggests that around 50,000 people in 2012-13 had more than one job with combined earnings above the lower earnings limit and yet did not get a qualifying year for the purposes of the state pension. What is less clear is whether that will affect their state pension. The system allows people to have gaps in their records over their working lives. For those with a typical working life, they might be able to have gaps for 10 or 15 years and still get the 35 qualifying years that they need for a full single-tier state pension. For those in this situation for a short period of time, there is no reason to expect an impact on their pension.
What we heard from the noble Baroness on Report was that having more than one job was not a temporary situation for some people and that there is evidence to suggest that this is a growing phenomenon. While the current evidence that we have does not suggest a growing problem, the Minister for Pensions and I would like to acquire a greater understanding of the scale of the issue, who is being affected and at what point in their lifetime. For this reason, as the Minister for Pensions announced last month, the department will be updating and doing more detailed analysis and will be working with stakeholders to build its evidence base in this area. As the noble Baroness, Lady Hollis, herself said, the implications for individuals’ state pension entitlement have perhaps been neglected in recent debates about the labour market, so I am pleased that we now have the opportunity to shine some light on this area.
The department will update its analysis based on the latest data and will look to identify the characteristics of those affected. We are keen to bring other interested parties on board. As well collating the relevant findings from think tanks and research organisations, we will be convening a forum to discuss this evidence base before the Summer Recess. We are hoping that, among others, the Pensions Policy Institute, the Chartered Institute of Personnel and Development, the Resolution Foundation and, of course, the noble Baroness, will attend this forum. I am pleased to say that the Institute for Fiscal Studies has agreed in principle to chair it. This event will allow the department and interested parties to consider the available evidence in order to answer three main questions. First, what is the current evidence base? Secondly, is the number of individuals in this situation likely to change? Thirdly, what is the impact on their state pension outcomes? I believe that this work will get us to a place where we will understand whether there is a problem and, if there is an issue, will provide some pointers as to how it might be addressed.
I turn briefly to why this Government do not believe that we should insert a power in the Bill ahead of the conclusion of this work. Put simply, we already have the powers we need. The Social Security Contributions and Benefits Act contains broad powers to create new national insurance credits and to adjust the way voluntary national insurance contributions work—two possible options suggested by the noble Baroness on Report. There could, of course, be other options that we do not have the powers for, but I am sure noble Lords will understand that we cannot simply give ourselves a sweeping power to make regulations both to introduce any possible solution and to amend existing primary legislation where necessary.
I hope that I have made my position clear. I again thank the noble Baroness for her work on this issue. She has highlighted the need for us to dig deeper and that is what we shall do. Building the evidence base will give us a clearer sense of whether people working in multiple jobs are at risk of losing out on state pension and who these people are. I look forward to reporting back to the House on the results of this work and, in the mean time, I beg to move.
Lord Freud
My Lords, again, I record my thanks to those who have contributed to the discussions on this issue, in particular, of course, the noble Baroness, Lady Hollis, who has shone a spotlight on this group of people.
I will pick up a few of the points that have been made today. The first was raised by my noble friend Lord German and the noble Baroness, Lady Sherlock, and concerned zero hours. There has been quite a lot of conflation between this issue and zero hours, which is probably, on balance, unhelpful, because people on zero-hours contracts do not necessarily have more than one job. Indeed, they can be working quite a large number of hours. I think the title “zero-hour contracts” does not do justice to what should perhaps be called “flexible-hour contracts”. The mean in the Labour Force Survey of people on these contracts is 21 hours and the median—I know that people like both—is 18. When you look at the average usual hours, it is a higher figure: 25 mean and 23 median. There is quite high satisfaction with that.
On the point about the labour market, the percentage of women in two or more jobs has hardly changed in the past 10 years. It is approximately 10%. The number of women who work part-time because they cannot find a full-time job is currently standing at 13.3%.
The noble Baroness, Lady Hollis, asked about the forum. We do not want to prejudge the outcome of the forum. I am sorry; the question was about the commitment to further research, if necessary. We will consider further research if it can fill the gaps in the evidence and we need it to aid our policy. If we need to take more evidence, we will need to take the time to do it properly. The rough timing is that from the initiation of qualitative research to carry out and publish takes roughly six months.
My noble friend Lord Forsyth asked about timing. We will hold the forum in July, we hope. Our analysis of existing data should be published roughly at that time, before the break. My noble friend also asked what the criteria are. The criteria are that we want to ensure that people with multiple short-hour jobs are not disadvantaged, and we would need to consider the most appropriate and proportionate means to ensure this. We need to ensure that any remedy does not place an undue burden on the business.
Perhaps I may correct something I said earlier. When I said “10% of women in two jobs”, I should have said “5%”. I apologise for that.
On the criteria and on the question of whether we would have the answers this side of Christmas—the noble Baroness, Lady Dean, was rather rude in referring to “long grass”—we are taking this issue seriously. We are making an enormous number of changes in this department. We are rebuilding the welfare system and the pensions system. We want to make sure that we incentivise flexible work. I do not think that your Lordships see before you a Minister or a department shy of taking action where it is required. I think that that is the best assurance about lawnmowers that I can give.
Lord Forsyth of Drumlean
I shall read my noble friend’s words carefully in Hansard, but they sounded to me like a commitment that he would address this problem one way or the other. Is that what he was saying?
Lord Freud
I was saying that we now have a base on which to look at this problem, see what it is and, on that basis, decide how to deal with it.
Lord Forsyth of Drumlean
When my noble friend has decided how to deal with it, will he then deal with it?
Lord Freud
I would be pretty surprised if, when one had reached a decision on how to deal with something, one did not get on with trying to deal with it.
On the timetable, we have the power to introduce credits anyway—that is a point that I have already made—but it would take time, working with HMRC, to get it right. We need to work through the impacts to ensure that there are not any significant burdens on business. However, I give the assurance that this is not a numbers game and we will look at the most appropriate action.
I think that I have dealt with most of the issues raised. I am glad that we can conclude the scrutiny of this important Bill with another example of how, through well informed discussions, this House can move a debate forward, in this case by ensuring that we have a robust evidence base on which to consider the issue of multi-jobs. On that basis, I ask that the House do not insist on Amendment 1.