Oral Answers to Questions

Debate between Baroness Chapman of Darlington and Steve Webb

Monday 25th June 2012 Commons Chamber

[Steve Webb]

I am pleased to say that the early evidence from auto-enrolment—firms are already choosing schemes —is that average charge levels are coming down very dramatically, compared with the stakeholder charge caps that used to be in force, for example, with a norm of around 0.5% for last firms, which is radically below the levels we have seen in the market in the past. However, we need to keep this under review and have reserve powers to cap charges if we think they are becoming a problem as auto-enrolment is rolled out.

[Mrs Jenny Chapman (Darlington) (Lab)]

In their efforts to get people back into work, will Ministers please make more of an effort to work with colleagues in the Treasury on tax credits? Constituents of mine are taking three-month contracts, ringing up to get the forms, which then take six or seven weeks to arrive, and when they are returned they are being refused the tax credit because there is only four weeks of the employment left. This is putting people off taking temporary work and really is—I use the word again—a shambles.

Pensions Bill [Lords]

Debate between Baroness Chapman of Darlington and Steve Webb

Tuesday 18th October 2011 Commons Chamber

[Steve Webb]

The right hon. Gentleman is right that a draft report has been produced and reported in the press, but I can assure him that—as we once famously pointed out—2012 will definitely happen next year. In other words, we do not believe that this important programme should be delayed. Interestingly, the CBI does not believe in a delay, either. It recognises that the biggest firms, which will come in next year, are already planning. In many cases they have already chosen their providers. They are getting on with it, and the last thing we need is new uncertainty about the start of auto-enrolment. We will, therefore, be pressing ahead.

Waiting periods are clearly a trade-off, but today more than ever, we need to realise the impact of what we are doing on smaller firms and businesses more generally.

[Mrs Jenny Chapman (Darlington) (Lab)]

I understand the Minister’s point and the benefits to a payroll department in a small firm, but does he accept that people who change jobs frequently throughout their careers could be disadvantaged? If people change jobs 11 times, they could end up losing about three years’ worth of benefits.

[Steve Webb]

The hon. Lady raises an important issue. That is one of the arguments against a six-month waiting period, but those things are a matter of judgment. She used an interesting phrase when she mentioned the payroll departments of small firms, but of course a typical small firm does not have a payroll department, and will struggle with those provisions. We are trying to ensure that the scheme has flexibility, so that we take small firms with us rather than have them resenting the scheme. The waiting period is important in that respect.

Finally, on amendments 19 and 20 and the earnings trigger, which the hon. Member for Cardiff West (Kevin Brennan) mentioned, the Bill originally proposed that we auto-enrol at around about the national insurance floor, which is a bit more than £5,000, uprated in today’s prices. There were two problems with that. First, there was no de minimis provision, so employers would have auto-enrolled people for pennies a week. If the floor were £5,000 and a person earned £100 a week—£5,200 a year—they would be enrolled on the £200 above the £5,000. Under the legislation that we inherited, the contribution at the start would be 1%—£2 a year, or 4p a week. There might have been the odd adverse newspaper story had we required small firms to enrol people for 4p a week, so we took the view that we had to put the threshold up.

The obvious threshold to use—common thresholds are attractive to employers—is the PAYE threshold. Although we will look at the prevailing situation and make a judgment each year, the broad idea behind aligning with the PAYE threshold is that if businesses have to run PAYE for somebody, auto-enrolment will be a reasonable duty. Below that level, it is inappropriate.