Economy: Sustainable Jobs
Lord German Excerpts(12 years ago)
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Lord German
My Lords, I apologise to the House for missing the first few moments of this important debate. I congratulate my noble friend Lady Brinton on bringing it to the House.
From a perspective looking at the figures behind what is happening in the field of employment and unemployment, there are of course some very welcome signs of improvement. It would be wise to note at the beginning that the direction of travel is correct. For example, unemployment in the UK over the past year has fallen faster than in Germany and the G7 as a whole.
Since the 2010 election, the number of people who claim the main out-of-work benefits has fallen by more than 300,000, while the youth claimant count—a very important figure—fell by 2,500 this month and is lower than it was at the May 2010 election. The other side of the coin is that private sector employment is up 46,000 on the latest quarter, which more than offsets the 22,000 jobs that were lost in the public sector. If you take that as a whole since May 2010, private sector employment is up by 1.3 million jobs, while of course public sector jobs have fallen by 423,000 over the same period.
The direction of travel is good and encouraging but there is no reason for complacency. It is important that we continue to tackle what is of fundamental importance for our people. For those of us who want a fairer society, ensuring that people can get into work will have dramatic effects on health and well-being and on future life chances, for them and for their families. For those who want to see a stronger economy—of course the subject of this debate covers both those topics—each new job adds an average of about £9,000 to the economy. For those who just want to reduce welfare spending, the best way to do that is to get people into sustainable, well-paid work, not to slash support for the vulnerable.
I will concentrate on the demand side. Today we have clearly had some important news. This morning we published the latest figures on the UK Government’s Work Programme, the Government’s main vehicle for getting long-term unemployed people into work. The key headline message that I take from today’s figures is that the Work Programme’s performance has significantly improved. It is designed to help people who are at risk of becoming long-term or very long-term unemployed. Many of those supported by the Work Programme are in receipt of benefit for nine or 12 months before joining and are then supported for a minimum period of two years. The Work Programme has not yet been running for two years, so today’s signs are very encouraging.
The Work Programme not only supports people into employment, but is also designed with the crucial aim of keeping them there. It encourages long-term private sector employment and is not just a short-term fix. Today’s figures show that 132,000 people have escaped long-term unemployment and got into lasting work, normally for at least six months. This is a large increase compared to the first year of the scheme. However, that is not the whole story. Far more people have started work but have not yet reached that target point of six months in work. Therefore, today’s figures from the Government are only for those who have been in work for six months or longer. However, figures from industry that were published last week showed that 321,000 people who were on the Work Programme have now started a job. The Work Programme is helping people who would otherwise have been consigned to the unemployment scrapheap.
There has been a significant and very welcome improvement from the providers. About half of the contract holders are now getting more jobseekers into lasting work than the level to which they were contracted by the Government. Last year not a single one managed that. We also know that, unlike the short-term job focus of previous schemes, which left many people on benefits after they had been completed, most people now stay in work well beyond three or six months.
The evidence of that improvement is clear. Figures this morning show that contractors are measured on how many participants they get into work each year, as a proportion of people who are referred to the scheme in that 12 months. As I just said, in year one of the scheme, not a single provider met its contractor level of getting 5.5% into work for that period. However, in the second year providers got an average of 31.9% of jobseeker’s allowance claimants below the age of 25 into sustained work. They were contracted to get 33%, so it is very close. For jobseekers aged 25 and over, the providers got an average of 27.3% into sustained work, against their contracted level of 27.5%—almost exactly bang on target.
More people are getting into work within a year of joining the Work Programme. The UK Statistics Authority has said that it was wrong to claim that only 3.5% of people got into work in the first year of the scheme. It says that the performance is best measured by counting how many people got into sustained work in their first year on the scheme. While on this measure just 8.5% of those who started the programme in June 2011 completed at least six months of work in their first year, this success rate dramatically increased to 13.4% for the more recent recruits who joined in March 2013.
This is a clear and demonstrable improvement. If you join the Work Programme now, you are more likely to get a lasting job. Of course, the Work Programme is also designed to give taxpayers a good deal. Providers are paid when they get jobseekers into work, rather than getting most money up front, regardless of success. Significantly, more people being helped by the Work Programme are moving off benefits and into work, and providers are keeping them in sustained employment. Most claimants have been on benefits continuously for nine or 12 months before even joining the Work Programme. Now providers are either exceeding or hitting the level set out in their contract for getting jobseekers into long-term work after substantial improvements in performance.
Last time it was too early to say whether the programme was working. Today’s figures reinforce the point that we now know where we stand. Unfortunately, the figures also reveal some weaker parts of our agenda, mainly related to the people who move into the Work Programme from employment and support allowance. The numbers of ESA claimants moving off benefit and gaining a job are lower than I would have hoped. Previous attempts to help these claimants into work were not successful. We still have a lot to learn about what works for ESA claimants. We have to work with those providers to improve performance for this group and build expertise in supporting those who are hard to help.
There is a ladder of helping people back into work. The rungs may be very short, and it may take a long time to get to the top of the ladder and into employment. First, people may have to be encouraged into self-belief. They have to have confidence in themselves and know their self-worth. We have to learn from those who have experience and expertise in that area. The term that is used for this in the Work Programme is the “black box”. I always thought this was rather a strange term to use when talking about a work programme. It gives me the impression that when you open the lid there is darkness inside and you do not know what is there.
What it really means—and the purpose of the black box approach—is that it allows providers helping people back into work to use whatever approaches they find work for those groups of claimants: localised results helping people individually. I hope that the Minister will tell us in his summing-up what approaches have been the best. Which are the ones we have to learn from, because these particular groups on employment support allowance are the most difficult to help? It is important that we learn lessons from the best providers and learn them rapidly.
The other area that is still of concern is youth unemployment. It is good to note that it has fallen, but it is still far too high. I know that we have to use the international comparators, which include all full-time equivalent students, so full-time students are included in the figures. However, if they are stripped out of the figures there are still 659,000 unemployed people in that youth category. I know that this is down 13,000 over the last quarter, but it is still a great problem because it has a scarring effect on young people. It is a distinctive scarring effect, because it is caused solely by the single experience of being unemployed. This brings a loss of personal esteem and of earning potential and can persist for decades. Youth unemployment, of course, can also lead to an increased crime rate.
This is not a new phenomenon. Over the years from 1993 to 2011, the figures show a substantial growth in the unemployment rate for 18 to 20 year-olds. Crucially, the bar of five GCSEs or more shows the level at which young people can escape from youth unemployment in a large way. One of the crucial things we have to do is ensure that people reach that standard of skills. That is why the apprenticeship programmes are also crucial to building up those skill levels. That five GCSE bar, the bar between level 1 and level 2, is the one that distinguishes between those who gain employment and those who do not.
There was some interesting analysis by the think tank CentreForum last year, which simplifies some of the issues. It stated:
“Academic research has been unable to find any robust evidence to substantiate the claims that rising levels of immigration or the introduction of the National Minimum Wage is responsible for the rising levels of youth unemployment”.
We should bear that in mind. This Government have focused their attention on universal credit and helping people back into work. It is work in progress and I hope that there is even better to come in the months ahead.
Welfare Benefits Up-rating Bill
Lord German Excerpts(12 years, 3 months ago)
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Lord German
My Lords, in his speech moving the amendment, the noble Lord, Lord McKenzie, made it perfectly clear that it would break the Government’s policy proposal. There was no indication given of how much the benefit bill should rise, though the noble Lord, Lord McKenzie, indicated his preference. However, that is not what is in front of the House. If the amendment were to be passed there would be no proposal as to how much it should rise: 0.5%, 1.5%, 2%, 3% or whatever. Neither does the amendment offer any solutions: it does not offer any ameliorations, it does not seek any exemptions. However, Her Majesty’s Opposition say no to a 1% cap on working-age benefits, yet support a 1% cap on public sector workers’ pay. It is quite strange. I sometimes wonder whether we are living in a parallel universe where the economy is healthy, where there have not been any fundamental economic shocks and where Cypriots can get all their money out of their banks.
However, it is not like that and the Bill is not set in the sort of financial vacuum that some Members seem to think it is. I accept that borrowing is higher than it ought to be, though I wish it were less. I know that we have had to borrow in order to maintain the essence of our welfare state and I agree that growth is critical. However, in these tough times the Government have to take difficult decisions. These decisions are, no doubt, uncomfortable but it could have been worse. As I said at Second Reading, there were lots of things on the table for discussion which could have made this a much tougher prospect for us. As it stands, this is our biggest budget—the budget where we spend £1 in every £4 of government money—and, despite all previous efforts, it is still growing as a proportion of total government spend. Therefore, no matter what we may think, this budget has to make its contribution to helping to put our finances back on a sound footing.
Yesterday, there was a debate in the Moses Room in which the Government proposed a £2.545 billion reduction in the overall welfare spend for 2013-14. Her Majesty’s Opposition rejected this as “vicious” and “contemptible”. Today, we have before us in this Bill a budget proposal of £3.7 billion for the two years following, and that is also rejected by Her Majesty’s Opposition. Therefore, £6.245 billion of savings have been rejected in two days. Yesterday—I have not heard it yet today—I heard a vague assertion about tax avoidance, but it is my understanding that this Government are spending far more on tax avoidance than the previous Government did and putting far more effort into it. When she replies, perhaps the Minister can tell us how much success the Government have had compared with the previous Government.
However, we are talking about £6.245 billion of savings and, in return, the Opposition are offering a tax rise. I refer to the issue of the 50% or 45% rate, which at Second Reading the Minister stated the OBR said would raise £100 million. If you slice that £100 million per annum off the total in cuts which have been rejected over the past two days, that means that there is still £6 billion to find, just to round up the figures. Therefore, we should reject these amendments because they offer no solutions beyond borrowing even more, raising taxes significantly or making deep cuts elsewhere in government expenditure, putting the burden of raising the money to repay it on my children and grandchildren.
This Bill would, in the end, save more than £3 billion a year. In their final year, the previous Government were spending £4 for every £3 they raised from the people of this country in tax. In comparison, this Bill saves £3 billion, but that should be compared with the last year of the Labour Government, when they were borrowing £3 billion a week. This is not a comfortable position in which we find ourselves and I would prefer it not to be happening. I share the aspiration for growth and I want to see our country back on track again. However, as the International Monetary Fund said in its World Economic Outlook last October, Governments need to create the right conditions for growth. It said:
“To anchor market expectations, policymakers need to specify adequately detailed medium-term plans for lowering debt ratios, which must be backed by binding legislation”.
That is what the Bill proposes today and that is what the amendment just does not do. As we cannot get an answer to whether higher taxes, lower spending or borrowing alternatives—or a combination of the three—is being proposed, I have no hesitation whatever in recommending to my noble friends on the Liberal Democrat Benches that these amendments, should the Opposition put them to a vote, should be rejected.
Lord Bates
My Lords, the noble Lord, Lord German, referred to the Opposition’s support for the cap on salary increases at 1%. I rise because I came across an interview that the shadow Chancellor, Ed Balls, gave when that policy was announced. This policy will impact on people with a salary above £21,000, below the benefit cap. When pressed on the “Today” programme about how he could justify limiting salary increases in the public sector to 1%, he said:
“And if people expect the Labour Party to say ‘We’ll just oppose’, we can’t do that. [It] would be irresponsible because the priority has got to be getting people into jobs rather than people being paid more”.
That is quite an interesting statement for the shadow Chancellor to make because, in my view, it very much reflects the purpose of this Bill and this amendment.
I do not think that my noble friends on the Front Bench have made life easy for themselves by making this a stand-alone Bill. It certainly should not be viewed that way. It needs to be viewed in the context of the introduction of universal credit, which will bring about benefits of £168 a month to 3 million families. That, because of the wage incentives and the attractiveness of work, will lead to an estimated 300,000 more people finding their way into employment. We need to be very clear that, in all of these measures, whether it be raising tax thresholds, universal credit or this Bill today, we are saying that the best route out of poverty is undoubtedly work.
The scale of the challenge we have in doing that is quite immense. Prior to the recession, unemployment in this country was around 1.62 million. It rose very sharply and when the party opposite left office the rate was 2.49 million. It continued on a trajectory up to 2.68 million. However, it has started to fall and has been coming down quite steadily for a few months and is now down to 2.5 million. The figures show that there are 1 million extra private sector jobs, and that is to be welcomed. Benefit changes that encourage growth and help people find their way into employment are surely things we ought to support.
It would also be nice to ask some of those who supported this amendment where they were last year when benefits were increased by 5.2% and salaries for the lowest paid went up by 1.7%. Where were their voices then? What is so compassionate about paying child benefit to people earning more than £50,000 or letting people earning up to £70,000 receive tax credits? We need to change the configuration so it is always in the interests of people to work and then we need to work to ensure that the jobs are there.
How do we create the jobs for that to happen? Clearly we need to get public spending under control so we can raise tax thresholds for individual workers and reduce corporation tax thresholds. We know that that creates employment the world over. That is why unemployment in this country is falling while in so many other countries it is rising. I understand the points that have been made quite seriously and the concerns that have been raised, but they are looking at this in isolation and, placed in context, this is undoubtedly a measure that in the years to come will reduce the levels of poverty in this country.
Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2013
Lord German Excerpts(12 years, 4 months ago)
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Lord Newby
My Lords, I am pleased to introduce this instrument which was laid before the House on 30 January. I am satisfied that it is compatible with the European Convention on Human Rights. The aim of automatic enrolment was to broaden access to workplace pensions and increase savings levels, often from a very low or zero start. Our job today is to consider the figures that will apply from April. This will be the second year of live running when companies employing between 10,000 and 250 people start to go live. The automatic enrolment earnings trigger determines who can save in a workplace pension. It sets the automatic entry point. The qualifying earnings band then determines how much people save and sets employer contribution levels.
This is a balancing act. Automatic enrolment is a tailored policy. It does not force pension saving on to everyone regardless of age, earnings or individual circumstances. In setting the figures in this instrument, our overall aim is to maximise the number of people saving who can afford it, while excluding those who cannot. To do this, we need to exclude those very low earners for whom saving on top of the pension they will get from the state may not make economic sense, especially while they have other family priorities.
We also need to provide low earners access to pension saving, with an employer contribution, if saving is the right decision for them. To meet all these aims, we need to bring in employers who have never provided a workers’ pension, or never paid into one, while being realistic about the costs that they will have to bear. We need to cap minimum employer contributions for higher- paid staff and let existing arrangements cater for this market. To deliver these several objectives, we need a system that makes sense for individual workers and their employers. The way that we set these figures can help to achieve this.
I think that we all accept the powerful arguments for income smoothing. We put money aside now while we have it and while we are earning so we have it in our retirement. But of course the very lowest earners may not have the cash now to sacrifice for retirement saving. That is why we believe that the automatic enrolment trigger should exclude those people who may not be well placed to make that sacrifice unless they themselves want to save.
Saving should be an individual decision for people whose earnings hover around the tax threshold. We believe the state’s role is to provide access to saving where automatic saving is not the right approach. That is why the right to opt in, with an employer contribution, is such an important feature of these reforms.
We fully recognise that any rise in the trigger disproportionately affects women. I want to be completely clear that we are not weighing equality against cost. Gender is not the issue. We think the outcome of this review is right for people on very low incomes, regardless of gender. In particular, we do not believe that it is right automatically to enrol people who do not earn enough to pay tax.
Nevertheless, as noble Lords will know, it is possible for non-taxpayers to get tax relief on pension saving depending on the scheme. This top-up may have an impact on pension savings. We are seeing evidence that schemes designed to cater for the under-pensioned market and those targeting low to moderate earners are using, or intend to use, the relief-at-source mechanism precisely because it helps low earners.
This illustrates the point that however carefully the policy targets the right groups, the enrolment process needs to work in practice. We know that people see their employer as the first port of call for anything connected with wages or their pay slip. Automatic enrolment will work best when it is simple for employers to understand, simple to administer and when pension contributions are simple to explain. We may not be quite there yet in all respects, despite some really clever and effective work from some of the lead companies to demystify pensions in the workplace. Aligning automatic enrolment thresholds with existing recognisable payroll figures can be of considerable assistance and this was strongly recognised in the response to the consultation. This will be the second year of live running and it is likely to be a challenging year, as activity starts to ramp up. The overall message we heard is that this is not the time to change course.
The automatic enrolment trigger does not exist in isolation. It is an entry point to saving that works hand in hand with the qualifying earnings band. The band sets a minimum definition of pensionable pay. In simple terms, if you earn £9,500-odd a year, you will pay pension contributions on anything over £5,500. This point about minimum savings is important. Some schemes will have their own definition of pensionable pay, perhaps more generous than the savings band we set today. We are setting a universal minimum quality standard for pension saving, rather than an aspirational target.
We have been debating how best to set the parameters for pensionable pay for automatic enrolment since the pensions commission reported in 2004. The commission originally recommended aligning private pension saving to the national insurance threshold for the state pension—at around £5,000. That was a starting point. It established a core principle: that private pension saving should build on the foundation of the state pension. The commissioners envisaged year-on-year rises, in line with average earnings.
Perhaps I may take your Lordships back to our target market of low-to-moderate earners. This is a group whose wages are less likely to increase by average earnings, so a qualifying earnings band that rises by average earnings will have a disproportionate impact on these people. We considered a variety of other approaches but perhaps I might deal here with the two distinct ones that came out of the consultation we undertook last autumn: abolishing the lower limit or freezing the band.
Abolition would mean putting contributions on earnings from pound one. This would add around £130 million to employer costs next year. It would also hit low earners very hard indeed, to the extent that pension saving could start to look like something to be avoided rather than embraced. As to freezing this year’s figures, we come back to the practical aspects of automatic enrolment. It should work in practice and it should be easy to explain and to understand. Thresholds that bear no relation to anything else on payslips would fail all those three tests.
As noble Lords will be aware, the national insurance contributions upper limit is going down. If we continue to align with national insurance, the upper limit of the qualifying earnings band would go down too. The upper limit serves two purposes. It caps mandatory employer contributions; it also distinguishes the target group of standard-rate taxpayers from earners in a higher tax band. Higher-rate taxpayers tend to have greater access to a pension scheme offering more that the minimum. The issue is whether a reduction in the top limit of the qualifying earnings band would have a disproportionate impact on the target group. The evidence suggests that it will not. Average earnings in the UK are around £26,500 a year. Average earners would not be affected by a change in a contributions rule that bites on people earning nearly £15,000 more than they do. The evidence suggests that the practical advantages of alignment outweigh a reduction in the nominal value of contributions for a subset of higher-rate taxpayers.
I said earlier that setting these thresholds is a balancing act. There is no perfect answer, either in theory or in practice. Nevertheless, we believe that we have used the evidence to consider how we can best achieve the policy intentions and have made reasonable judgments about the various trade-offs. We believe that these proposals continue to provide broad access to pension saving and maintain contributions for the target group. I commend this instrument to the Committee.
Lord German
My Lords, I have a single question on determining the balancing act which the Minister has just talked about. However, my question is in multiple parts. No one is more enthusiastic than I about the raising of the income tax threshold. I have used it in many speeches in your Lordships’ House to illustrate how we have taken many lower earning people out of the tax bracket altogether. However, this is an area where the balancing act does not necessarily work because of the use of the income tax threshold, which has risen well beyond the level of earnings increases and well beyond that of price increases. Here there is a negative aspect to that balance. The number of people who will now be excluded from the automatic element—the “automatic” in the title of the order—is about 420,000 individuals, of whom 320,000, or 76%, are women. The question that primarily worries me and should concern the Committee is whether these are people who should be saving for the future and will be able to maintain over a lifespan the appropriate level of saving for a worthwhile pension. This is where my question splits into several parts.
Of course, people who are excluded as a result of the above earnings increase in the income tax threshold can opt into the system. But there are ways of opting in that may not be as obvious as you might think to many people. I understand that employers are required to make the offer and provide information to their employees if they are below that threshold and within that bracket. Therefore, can the Minister tell me what is the actual requirement on employers to provide information? If it is a piece of paper stuck in an envelope along with the payslip, that may not be the most appropriate information source. This is a tricky area for people to understand and the information may not be being provided in a meaningful way. It should certainly be in clear language. There is probably a whole pension industry that has developed a language of its own in explaining what are essentially straightforward implications in a way that is often impenetrable to many people.
My second question relates to when people are excluded from the automatic element, the declared intention being that it may be inappropriate for some people to save for a pension. Will the Minister explain what “inappropriate” means to lower earners? In the Explanatory Memorandum it is quite clear that people may not need to save if the state will provide. But as noble Lords will know, the pension schemes that the state provides are not static. There is progress towards a single state pension, which may make a difference to the way in which people see their pensions over a longer period of time.
I understand that if people will be low earners for the whole of their working lives it may not be appropriate because they might find that they would get a better deal from just relying on the state. But you cannot determine what the state will provide in 30 or 40 years’ time when you are entering the jobs market at the beginning of your life span. I would be grateful for an explanation of what makes these pension contributions inappropriate for some people.
The third element to the same question is about the relief at source. The Minister has already spoken about that for people who are below the income tax threshold. They can still, using the RAS scheme, benefit from having the tax contribution taken off at source. Do the Government have any intention of promoting the relief at source in order to assist people when making a decision about whether they want to opt into the system? Do they have a view about whether that is something that should be promoted? It is another useful piece of information. If you were told that it would cost you less than if you were paying tax, you would naturally look differently on any contributions that you might have to make. With those few questions rounded into one major question with many parts, I am pleased to support the order.
Economy: Credit Rating
Lord German Excerpts(12 years, 4 months ago)
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Lord Deighton
The noble Lord exaggerates the confusion or nervousness of the markets. My interpretation of the markets is that there is very little volatility at the moment; the markets have taken this situation entirely in their stride. The market variable that has shifted the most is the exchange rate, where sterling has moved back to a range where it was trading before the eurozone crisis. The risk that has gone out of the eurozone sector has enabled the euro to strengthen; and the risk that was inherent in the US so-called “cliff” situation did not materialise, which has allowed the dollar to strengthen relative to sterling. I do not think that the markets are doing anything other than continuing to reward this Government’s focus on fiscal consolidation, which is why we are borrowing at these incredibly cheap rates.
Lord German
My Lords, perhaps I can pursue an issue which my noble friend talked about: policy weapons which can be used to promote growth in a sustainable way. The Government have acknowledged that infrastructure is one of those policy weapons and that moving decision-making locally is another. I wonder whether now is the time to remove some of the constraints which the Government—the Treasury—have put on tax increment financing for local government, so that it can use that challenge to increase growth locally. At the moment, the restrictions that have been put on TIF by the Government will have the effect that very few schemes will come forward.
Lord Deighton
I thank my noble friend for bringing a very constructive perspective on ways in which we can address some of our supply-side problems in the short term. Investing in infrastructure and devolving spend to the regions, where they have a clearer grip on the projects necessary for local growth, is one thing that we should be pursuing. I know that my right honourable friend the Chancellor will be making some announcements in the Budget with respect to following through the recommendations of my noble friend Lord Heseltine.
Child Benefit
Lord German Excerpts(12 years, 8 months ago)
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Lord Sassoon
My Lords, first, I am sorry that the noble Lord, Lord McKenzie of Luton, was not comforted in his terms by my answer. Does he disagree with the idea that the system should be fairer and more affordable? We know that the previous Government’s system was unaffordable, and we are putting that right. As to his question about some of the ideas that are being floated at the moment, it is simply not fair that it is possible for someone to be better off on benefits than they would be in work. How can we justify a system in which people in work have to make decisions about having a child or having another child based on what they can afford, whereas those out of work know that their benefits will just increase?
Lord German
My Lords, could the Minister help the House to understand the reasoning behind the statement by the Secretary of State for Work and Pensions, Mr Iain Duncan Smith, that the number of children in a family would be capped at two, which seems a strange way of doing family structure in this country? Was Mr Duncan Smith pitching for the 2015 general election manifesto or was he pitching for a change in expenditure of this current coalition’s policy? If it was the latter, what response did he get?
Social Security (Contributions) (Amendment No. 2) Regulations 2011
Lord German Excerpts(14 years, 4 months ago)
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Lord Davies of Oldham
My Lords, I am grateful to the Minister for the explicit way in which he outlined the contents of the regulations and the order. He will forgive me if I do not spend a great deal of time responding to them. First, it seems that the main principles adumbrated in his contribution were debated pretty thoroughly at the general election and largely resolved by crucial decisions then. Secondly, we have had the opportunity to debate national insurance contributions with some degree of intensity over the past few weeks. These issues have also already been considered by the other place. Therefore, the noble Lord will forgive me if I am not able to match the strength, force and length of his opening contribution. However, I have two specific questions to ask, to which I would like him to address his mind and respond.
The Government—or the more senior party of the coalition—made much of this in their rhetoric during the general election. Afterwards, there was in the coalition agreement this commitment—indeed, a pledge—to stop the rise in employer national insurance contributions from April 2011. However, there seems to be a difference between the expectations to which this might give rise and the reality that we see in the SI before us. What is given back to the employer through the threshold changes to class 1 secondary contributions? The threshold goes up from 12.8 to 13.8 per cent but this appears to be somewhat less than employers might have thought they were getting following the pledge to stop the rise entirely as far as employers are concerned. It looks as though the Government are giving back with a degree of generosity that does not quite fulfil their commitment. The noble Lord mentioned that he thought that as much as £3 billion was being returned. Can he confirm that figure and say whether it is consistent with employers’ expectations of what they would get back?
Secondly, I want to comment on what I am sure the noble Lord will indicate is a minor issue, although it is not minor to many of us. I refer to the contribution of married women and widows. I know that they form a limited group but I see that the increase in their contributions will be from 4.8 to 5.8 per cent. What are they getting for that increase? We know that they get no retirement pension, that they cannot get jobseeker’s allowance if they become unemployed and that they receive no sickness benefits. Yet, in all the Government’s bravado about the restrictions that they would place on increasing national insurance contributions, they could not exempt this group. That seems to be at one with an awful lot of the dispositions made by the Chancellor and by Ministers responsible for Treasury matters over the past few months. I think particularly of child benefit for women who earn more than £40,000 a year. Whether intended or not, the legislation seems to discriminate pretty heavily against women when we would have thought that, if the Government were true to the principle that the noble Lord adumbrated in his concluding remarks, which reflected some fairness, this group would have been treated more generously. Will the Minister comment on that? In more general terms, the Opposition are supportive of the regulations.
Lord German
My Lords, perhaps I may add a few words of welcome for these regulations. They give effect to a significant commitment that this Government made to try to reduce the costs to business of employment, to try to make sure that those who are in employment at lower levels of income receive a boost and to give effect to that commonly held and often-referred-to statement that work will always pay. Taken in the round, we cannot omit the other part of this package—the Welfare Reform Bill—which will ensure that those on lower earnings always benefit by being in work and that they do not lose their pensions.
Primarily, these regulations give help to support people on lower incomes. They help those at the lower end of the pay scale but, as the Minister said, they are part of a package to lift people—many tens of thousands and nearly a million in this case—out of national insurance contributions altogether and to reduce the tax burden as a whole for a substantial number of working people throughout the country. That is a crucial change, which, taken with the Welfare Reform Bill, will support the poorest and ensure that it will always pay for people to be in work, to seek work and to find work. It is progressive and as such should be encouraged.
We were told by the opposition party during the last general election that it would be better not to raise VAT but to raise national insurance contributions. We have increased VAT to 20 per cent. To what level would national insurance contributions have to rise to match that switch? Is it not far better to ensure that people who are on the lowest earnings can keep more of their income and that the poorest in our society benefit most from these changes? Is not the progressive nature of these changes crucial to fairness in our society?