Pensions Bill

Baroness Drake Excerpts

Monday 24th February 2014 Lords Chamber

The amendment would help to future-proof the Bill and allow us, should we see fit following Vince Cable’s review or beyond, to put a pensions platform under thousands of people who are poorly paid and deeply insecure with fractured work and yet are often unable to move on to better jobs. Why should they lose their state pension because we want services and employers want flexible staff around the clock? That should not cost them their pensions. It is the dark side of the flexible labour economy. This afternoon, with your Lordships’ agreement, we could do something about it at nil cost. Therefore, I beg the Minister to accept the amendment and to take this power for the future. We should not turn our backs on some of the most vulnerable and insecure workers in the country. They have difficult working lives. Let us not blight their pensions as well. I beg to move.

[Baroness Drake (Lab)]

My Lords, a sustainable welfare system needs to be affordable, but it also has to be inclusive and responsive to the realities of the contemporary labour market. For a long time, the national insurance and state pension system has been exclusive, indeed unfair, in its application to a particular group of workers, mainly women—a community which the department estimates to be about 50,000 and consisting of people who undertake mini-jobs. Each job delivers earnings below the lower earnings limit of £5,668, the access point for the national insurance and state pension system, but there is no provision for people with these mini-jobs to aggregate their earnings in a way that would allow them to enter the national insurance system. For example, a woman with two part-time jobs, earning £100 a week from each, will not accrue national insurance and pension rights unless she is covered by some alternative crediting arrangements. Someone earning £110 from one job would accrue. Yet £100 equals about 16 hours on the national minimum wage, so a person with more than one such mini-job could be working a significant number of hours.

Mini-jobs may be driven by caring responsibilities, work availability and, more recently, the increasingly common phenomenon of the zero-hours contract. Some of these women could gain state pension through their husband’s entitlement, but from 2016 they will not be able to build up an entitlement through their spouse because the new single-tier pension allows women to accrue pensions only in their own right. My noble friend Lady Hollis demonstrated the example of women in households who no longer have young children and whose spouse’s income floats them off universal credit being locked out of the pension system. The Bill makes the default position of entitlement through their spouse for many women disappear, which gives the problem fresh urgency.

My noble friend Lady Hollis has long campaigned to have this unfairness addressed and lists the rebuttals she has faced over the years: that it is not reasonable to try to share employers’ national insurance across mini-jobs; that the women will not want to pay class 1 contributions; that there are not very many of them; that their situation is temporary; that they have time to make up missing years; and, if all else fails, that there is pensions credit.

However, the urgency and the scale of the problem have increased exponentially since my noble friend started her campaign and those rebuttals are no longer valid. A much larger number of people with mini-jobs are affected as a result of the growing use of zero and short-hours contracts, where workers have little or no control over the hours they may be offered in any one week. The Office for National Statistics estimates that 250,000 people worked on zero-hours contracts between October and December 2012. However, its survey relied on people understanding that they were on zero-hours contracts, and the ONS has conceded that that may well have resulted in the true figure being substantially understated and that it may be much higher. The ONS is now running a survey to,

“obtain robust data directly from employers”.

As my noble friend said, the Chartered Institute of Personnel and Development suggested that up to 1 million people—around 3% to 4% of workers in the UK—are on zero-hours contracts.

The zero-hour mini-job problem is now systemic in nature. According to the Government’s workplace employment relations survey, in 2011 23% of workplaces with 100 or more employees used zero-hours contracts. Surveys reveal sector concentrations too: 61% of domiciliary care workers in England were employed on zero-hours contracts; and Unite and others report a high incidence in low-paying sectors such as the docks, retail, catering and social care, and they are not restricted by age. These workers face weekly insecurity in hours and pay and many are not building up entitlement to national insurance benefits. The DWP and the Government will have to address a problem that now has scale, is systemic and does not interface with the national insurance system.

When launching his consultation on zero-hours contracts, the Secretary of State, Vince Cable, said:

“It is clear that they are much more widely used than we had previously thought”,

and further that:

“Our aim through this consultation is to find which options best prevent any abuse of zero hours contracts while maximising the opportunity and flexibility such contracts can present”.

This suggests he believes these contracts will be a widespread and sustained phenomenon. The noble Lord, Lord Freud, in his normal straightforward manner in Committee when responding to my noble friend Lord Browne, recognised the growing evidence of zero-hours contracts. He said that,

“the Government have estimated their costings and needs, on the basis that it is a tiny minority”,

and that this basis,

“will be undermined. He certainly makes me even more uneasy about the neglect of this group than I was before we discussed the issue today”.—[Official Report, 18/12/13; col. GC 332.]