Queen’s Speech

Baroness Hollis of Heigham Excerpts

Tuesday 10th June 2014 Lords Chamber

[Baroness Hollis of Heigham (Lab)]

My Lords, the Queen’s Speech promises Bills on pensions and on zero-hours contracts, or ZHCs. With regard to pensions, I favour a lifetime savings account, combining ISAs and pensions. Many people want and need some limited early access to their savings—a 25% slice perhaps, equivalent to the tax-free lump sum—for divorce, disability or debt. However, in my view, allowing full access at 55 is not about pensions but about easy wins for HMT. Why? As the noble Lord, Lord Holmes, said, proceeds are taxed as income. The standard rate taxpayer with an annuitised £100,000 pot may pay no tax in retirement, but cashing it in he donates £30,000 to HMT. That is justified as the right to do what you want with your own money—making a donation to the Treasury.

Yet we have just abolished the identical right of someone who deferred their state pension for two years to take it as a lump sum of £14,000. Now, they can take it only as an annuitised addition to their state pension, and that was justified because people could not be trusted with their own money. What is the real reason? HMT has paid out that £14,000 lump sum up front but it no longer has to.

With a private pension, you are trusted and HMT gets the extra income tax; with a state pension, you are not trusted and HMT keeps the extra money following the abolition of the up-front lump sum. I suggest that that has nothing to do with pensions policy but everything to do with short-term and, in my view, cynical gains for HMT.

More generally, however, the Queen’s Speech poses wider questions of how we harmonise a flexible labour market with an inflexible social security system. The daughter of a good friend works for McDonald’s. She does not know until the previous Friday what her hours on Monday may be. She cannot plan her life, budget or study, and she cannot in practice take a second job. She cannot rent a flat as she has no reliable income and she cannot plan childcare. She is on a zero-hours contract. A call centre worker told Unite that she has worked for a multinational firm for five years. Her hours range from 48 to 0. She worries,

“whether I will be able to pay the rent and put food on the table”.

She is paid nothing while she waits for the phone to ring. She is on a ZHC. A cinema attendant works 30 hours one week, 10 the next. She, too, is on a ZHC.

In a 24/7 economy, we need people working non-standard hours: shift work, agency jobs and part-time jobs. The flexibility suits both employer and employee. However, what are new and too often exploitative are zero-hours contracts—those ZHCs that guarantee no hours and no income. As my noble friend Lady Drake said, the ONS calculates that 1.4 million or even 2 million workers in cleaning, retail, fast food, hotel work, domiciliary care, construction, call centres and customer service are on ZHCs, often at or around the minimum wage. More than half earn less than £500 a month—below the NI level—with no right to a state pension, or their employer avoids paying his NI. These are not entry-level jobs—two-thirds of the people who hold them are over 25—and they do not lead to better jobs. Half stay for two years or more and more than a quarter stay for five years or more. They are low skilled, low paid and dead end, and 75% find that their hours vary every week. Two-fifths of ZHC staff—40%—are not allowed to work for anyone else. They are on call and unpaid until required at perhaps one hour’s notice. Labour—that is, people; my friend’s daughter—is hoarded, not used or employed, so not paid. A sort of just-in-time stock control is applied not only to tinned tomatoes but to staff as well.

Inevitably, debt smooths their income. The Resolution Foundation reports that 870,000 households are spending more than half of their disposable budgets on debt repayment. Three and a half million are spending more than a quarter of theirs. When interest rates rise those numbers will soar. Social security is 15 years behind the new labour market. It assumes you are in work or not—either/or.

The lone parent on a ZHC who works for Boots, Cineworld, Sports Direct or Burger King may in a month work for 20 hours in her first week, 15 in her second, 10 in her third and 22 in the final week. In weeks one and four she will get working tax credit—WTC—to top up her wages; in the middle weeks, working for fewer than 16 hours, she may get JSA. Each week she has different earnings to report to HMT for her WTC and to DWP for her JSA. Benefits are, of course, paid in arrears, so the money does not come when she actually needs it. Each month she has different earnings to report to her council for her housing benefit and for her council tax reduction. Those take weeks to process and payments are made in arrears. Her rent arrears grow and her fear of eviction deepens.

It gets worse. If she works for one of the 40% of exclusive employers who tie her into working only for them, she may that week get six hours pay from him, but cannot work in any other job and cannot get JSA either as she does not meet work conditionality. What does she live on? More debt. She is carrying all the risks of the flexible labour market without a social security system able to help her and to underpin it. It is a nail-biting struggle that we should not ask of her. Understandably many lone parents prefer the security of a low but reliable benefit income to the snakes and ladders—mainly snakes—of ZHCs.

In a 24/7 economy we need a flexible labour market, but fluctuating demand, according to the Pickavance report, can be largely predicted. Why does Lloyds apparently need ZHCs but not Barclays? Why Boots but not Marks & Spencer? Why Sports Direct but not Halfords? Why Cineworld, I am told, but not Center Parcs? Why McDonald’s and Burger King but not Pret a Manger?

Leaving aside the need for occasional cover, or in arts or education, permanent ZHCs are lazy management at best and exploitative management at worst. How then can an inflexible social security system support this flexible labour market? To put it another way, how can we use social security to de-risk the dangers and difficulties of this just-in-time labour market to suppress its snakes and strengthen its ladders? UC which integrates in and out-of-work benefit could and should help. It has real-time information and is owned by just one department. But it will not de-risk this labour market as it should unless it changes its processes. Why not? UC pays a month in arrears. The Minister says that is to prepare people for the real world of work—steady, monthly paid jobs. I wish. Twenty-seven per cent of the jobs advertised in Jobcentre Plus offices are for ZHCs.

UC must, on request, therefore pay fortnightly, otherwise she will always be needing loans to smooth her income in the middle of the month. Currently, if she refuses a ZHC she may be leaned on but not officially sanctioned. Under UC, she will be sanctioned if she refuses. Yet a ZHC with unpredictable hours cannot allow her to sustain childcare arrangements as the child carer, in turn, cannot afford unreliable income either. It is like dominoes tumbling. No sanctions should happen.

UC pays HB to the tenant. It must, on request, be paid direct to the landlord, otherwise delays caused by constant changing of claims lead her to arrears and risk of eviction. Council tax reductions must be brought into UC to reduce parallel means testing.

UC is digital. Many in your Lordships’ House do not even want that to pay utilities. Her entire income will depend on her not making any mistakes in assessments which vary in almost every respect every week. Forty per cent of tenants affected by welfare reform have no access to the internet. How can she be sure she gets it right? I know I could not. There has to be parallel paper systems until the computer is secure and digital is inclusive. DWP has ditched the Social Fund. It must expand to offer budgetary loans for safer credit.

The flexible labour market is here to stay and we, as customers and consumers, want it. However, none of us wants a low pay, low skills, low productivity economy—and yet that is what ZHCs’ fluctuating hours and earnings offer and what social security finds so difficult to support. Unless we eradicate the abuses of ZHCs and reform the processes of UC, unless we read across and work across the shared landscape of BIS and DWP, we will still be making the call centre worker, the McDonald’s cook, the domiciliary care worker carry all the risks of both the flexible labour market and an inflexible benefits system so that we can enjoy their services. BIS and DWP have to get their act together. They are not doing so and your Lordships must help to ensure that they do.

Her Majesty the Queen’s Diamond Jubilee: Commonwealth

Baroness Hollis of Heigham Excerpts

Tuesday 20th March 2012 Lords Chamber

[Lord Pearson of Rannoch]

My Lords—

[Baroness Hollis of Heigham]

My Lords—

[The Chancellor of the Duchy of Lancaster (Lord Strathclyde)]

My Lords, perhaps we can hear from the noble Baroness, Lady Hollis, and then perhaps from the noble Lord, Lord Pearson.

[Baroness Hollis of Heigham]

I am grateful, my Lords. Perhaps I may follow the question raised by my noble friend Lord Morgan. Would the noble Lord, Lord Howell—I am sure that he would—remind his colleagues in the Home Office that 60 per cent of those coming in under Immigration Rules are students, and that of those who enrol for bona fide three-year degree courses, 98 per cent return home on time and legally? That is to the mutual advantage of our universities, which receive their fees, and of the Commonwealth universities which acquire the expertise that we can offer them. Will he please remind his Home Office colleagues of the need to discriminate in favour of those who enrol for full-time, three-year degree courses?

[Lord Howell of Guildford]

The short answer is yes, I am very happy to remind the UKBA and any other authority of those kinds of figures. I am sure that the noble Baroness will not overlook the fact that despite questions having been raised about visas, which I fully admit, there are thousands and thousands of overseas students in this country—an enormous number from non-Commonwealth as well as Commonwealth countries. So our role and performance is not all bad—in fact it is extremely good—but there is always more that can be done. I am very happy to join with those who point out the enormous benefits of getting more and more genuine students to visit this country and to return and benefit our promotion and reputation in the future.