Pensions Bill [HL]

Baroness Hollis of Heigham Excerpts

Tuesday 1st March 2011 Grand Committee

[Lord German]

There is a general sense that there is a group of people who are being treated unfairly because of the rate of acceleration, although maybe I will explain later that they shall actually be decelerating towards their pension. The general aspect here is that something needs to be done to ameliorate that unfairness. One of the key ways where that could take place, and I hope that the Government are minded to tell us about this, is to seek an upward revision and a much enhanced state pension as a right for all. That is an issue that would affect people in a much more radical way if it were the case. I have read many of the newspaper articles about the uprating of the state pension, but this seems to be almost a hand-in-glove issue. If you use the financing that comes from this measure and put it into a pot, you will be doing something to ameliorate the situation.

I am keen to examine the issue raised by my noble friend Lord Boswell about trying to make sure that we do not overly deal badly and unfairly with a particular cohort of people. The issue primarily relates to a singular group of women. This is a one-off group, because there will not normally be a similar group of people who are so badly affected by the one-year to two-year increase in such a rapid space of time. After all, there is an acceleration of something like three months in age and four months in pension age. You could not get much faster than that, unless you went to three months and 29 days, or whatever; you would be talking shades. It is a very fast rate of acceleration for a particular cohort of women, who will disappear when the system has worked its way through. That acceleration will not be apparent.

There must therefore be some measure which the Government can take to either improve the post-retirement abilities of women in this cohort or lengthen the timetable somewhat to accommodate the interests of a particularly badly-done-by group. When two people whose ages differ by as little as three, four or eight months, or whatever, stand shoulder to shoulder within a year, they will find that the differential in the rate of change in their retirement age is magnified. I hope that the Minister will reflect upon the amendments before us and try to see whether measures can be taken to ameliorate the situation of this group of women.

[Baroness Hollis of Heigham]

My Lords, like everyone else who has spoken, I support the amendment of my noble friend. We all agree—and I am sure that we will come back to this issue, following the point made by the noble Lord, Lord German—that what we also need is a decent state pension: the £140 pension espoused by his honourable friend Steve Webb in the other place, which would be transforming for both men and women in retirement. However, that does not address the issue here, which is about not just equalisation—no one disputes that—but the speeding up of that equalisation, including the very speedy additional year.

First, I suggest that that makes some easy assumptions that are false. Secondly, it has some unintended consequences that have perhaps not been considered. The first easy assumption is that because we are all living longer, we must work longer to support our old age. One understands the stats about the number of workers relative to the number of pensioners and the additional costs in the future of long-term care. However, increased longevity is not actually accompanied by increased years of full and healthy living, whereby one enjoys leisure, holidays and time with grandchildren. All the research shows that those extra years of longevity come with extra infirmity, particularly for those who are worse off. It is very much a class, as well as a gender, issue. Since the Black report, the health inequalities of those in the bottom E and D classes have widened, not narrowed, relatively—not absolutely, as obviously they have improved for us all.

Those extra years come with extra infirmity—fortunately not bed-bound infirmity necessarily requiring residential care but second-order infirmity, including the need for help with, for example, cleaning, transport, aids, appliances and care to allow you to stay in your own home. The implication is that the healthy years of retirement will be squeezed and reduced as retirement age increases, because you will not enjoy extra years of healthy living at the other end as a result of increased longevity. The first thing to address is the fact that we are squeezing the number of years people, particularly poorer people, can hope to expect to enjoy in retirement. The second assumption or myth is that women, as a result, will stay in the labour market longer and until they retire. That retirement age will increase first to 65 and then to 66. I do not know why we think that this will happen because it has not just been connected to the state retirement pension or even to the fact that employers have traditionally got rid of people at the age of 65. It has never been true for men. The majority of men leave the labour market at around 62 or 63 years old. It is even lower in Europe. In other words, half of all men have been on benefit for at least a year, sometimes two years or more, before they draw their state pension. Men compared to women have more secure and better paid employment. Therefore, they have more incentive to stay on until the age of 65. But they cannot and they do not.

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[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, the purpose of the amendments moved by the noble Lord, Lord McKenzie, is to delay any change to the age of 66 until women’s state pension age is increased to 65 on the current schedule. The amendments moved by my noble friend Lord Boswell aim for, if I may use the expression, a third way, by proposing a timetable that increases the state pension age to 66—one year later than the Government propose, but one year earlier than proposed by the noble Lord.

I begin, however, by welcoming the fact that, in each case, the amendments propose to bring forward the increase to 66, in the first case by four years and in the second case by five. This reflects widespread recognition that the current timetable for raising the state pension age to 66, which was approved by this House and in another place less than four years ago, has already been overtaken by events. I will not, therefore, detain proceedings by repeating the case for a faster rise in the state pension age, which I am pleased to note that my noble friend supports. I will just go to the point made by the noble Lord about the coalition agreement, and I say upfront that my honourable friend the Minister for Pensions has said in another place that women’s state pension age does not start rising to 66 until 2020.

I will endeavour to explain why, notwithstanding the impact which we recognise our proposals will have on a small minority of women, we believe that we should not delay until 2020 before we start on the path to 66. We estimate that our proposals will save £30 billion, in constant price terms, in state pensions expenditure, after taking account of all of the increased spending on working-age benefits—a point which the noble Baroness, Lady Hollis, was concerned about. The difference between what we have proposed and what is proposed under the amendment of the noble Lord, Lord McKenzie, is about £10 billion, which is a very significant sum. It is equivalent to one-third of the total savings to the public purse from our proposals. In proposing to forego this £10 billion, the noble Lord is perhaps losing sight of what such a sum represents. To help put this in context, in order to save even half of that today, which is broadly the annual savings from raising the state pension age by a year, we would, for example, have to cut the education budget by 10 per cent over the spending review savings. The estimated benefits from additional tax and national insurance receipts would also be cut by nearly a third, from £8.1 billion to £5.6 billion. The alternative proposition put forward by my noble friend would also significantly reduce the savings from our proposals, in this case by more than £7 billion.

The question is: who picks up the tab if we delay until 2022 or 2021? I suggest that the answer is: our children and our grandchildren. The point has been made that our proposals will make no contribution to reducing the budget deficit in this Parliament. This line of argument implies that, once the immediate fiscal crisis is out of the way, we can afford to relax. Although we expect public debt to be on a declining path by 2015-16, it will still be well above the pre-crisis levels. The OBR forecasts that public debt will be 67 per cent of GDP in that year, compared to less than 40 per cent five years ago. We need to do all that we can to keep debt down, and hold it down over the medium term, to ensure that we have the capacity to respond to future fiscal shocks. The cost of increasing longevity will not, unfortunately, stop increasing in 2015.

I turn to the impact on women, which is at the core of these amendments. The argument is that the adjustment we propose is unfair to women in their late 50s. I do not dispute the fact that a gender gap still exists in pension provision—a point made by several noble Lords. However, the proposals of the noble Lord, Lord McKenzie, do not suggest that we should delay increasing the state pension age to 66 until the gap is closed. Nor do I dispute that, because of our proposals, some women will need to work for longer than they may have otherwise planned to. I am prepared to say that I do not think that that is a bad thing. We need people to work longer because they are living longer. We need them to contribute more and, by working longer, they can save more for their retirement. Working longer has not just financial benefits for the individual; people of working age are generally healthier when they are employed than when they are not. Some of these women will indeed increase their pension saving as a result. Only a small proportion, some 4 per cent, of women currently aged between 55 and 57 say they are already retired; while around 70 per cent are still in employment.

Let me deal with two of the issues raised by noble Lords. On the point raised by the noble Baroness, Lady Hollis, on the cliff edge for men as well, I do not see a cliff edge in our proposals. The whole point is that there is a gradual increase. Anyone, man or woman, who is on pension credit, must already be above women’s state pension age, and by definition they will not lose out or have to move off pension credit as the state pension age increases.

[Baroness Hollis of Heigham]

That means that a man who is currently on pension credit, who qualifies for it shortly after his 60th birthday, will hold on to that for the next five years, while women’s pension age increases. Therefore, a woman of a similar age could have half his income.

[Lord Freud]

The point is that once you are on the system there is a gradual move up, so you do not bounce on and off it. You are on that system. Clearly, we are looking at two systems—a pensions system and a working-age support system. Nothing changes while we have that gradual increase for the individuals concerned. People will join the system at different points, depending on their age. Fundamentally, there is no difference between the Government’s position on either of the amendments.

Let me deal with the point raised by the noble Lord, Lord McKenzie, on buying back class 3 voluntary national insurance contributions. There has been a lot of debate about this matter during proceedings on various Bills, as he will be more aware than me. I believe that it took two Bills to allow people, mainly women, to buy additional years, going back to 1975. However, the noble Lord will also recall that this particular easement applied only to people who reached state pension age before 2015. People must weigh up their options when deciding to buy additional national insurance contributions, and we do not have any plans at this moment to provide refunds.

Let me turn to the facts about women’s life expectancy. Women will on average still draw their state pension for longer than men after the pension ages are equal—a fact that was rather put to one side during our debate before the Recess. It is important to record that, at the time that the decisions were made about when to raise the pension age to 66, a woman born in 1954 would be expecting to draw her state pension at 64 for an average of 24 years. Thanks to increasing life expectancy she will still on average draw her state pension for 24 years, even with the rise to 66 proposed in the Bill.

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I shall sum up. Bringing forward the increase to 66 is about helping to maintain fiscal sustainability beyond 2015. The proposals put forward today by the noble Lord would cost £10 billion, as I said, and my noble friend’s compromise proposal—the third-way proposal—would still cost more than £7 billion. That cost would need to be borne by people in work. I do not seek to underplay the scale of the increases that a small proportion of women will face from the proposals, but they are unavoidable if we are also to achieve a rise to 66 by 2020. For the reasons I have set out, I firmly believe that this is the right course. I urge the noble Lord to withdraw his amendment.

[Baroness Hollis of Heigham]

I should like to push the noble Lord again about the timescale. I think that there has been unanimity, pretty much, that the state pension age for women and men should be equalised. The debate has been about the increased speed of it and, therefore, the degree to which women can reasonably have been expected to make provision for it, and to take into account whether they are in waged or unwaged work. As we know, many women will be in heavy but unwaged work at that point in their lives.

Is the noble Lord aware of a similar instance some time back? In the 1982 social security legislation—I am not sure whether it was introduced by the noble Lord, Lord Fowler, but it might have been—the Government proposed, with some intellectual justification, to remove the right of widows to claim 100 per cent of SERPs entitlement, rather than the conventional 50 per cent as per the status of a widow. That was due to come into effect 20 years on, in 2002. The Government were going to give 20 years’ notice, except that they did not. They forgot about it entirely. Suddenly, in about 1997 or 1998, that issue landed four square on my desk. It was clear that women did not have sufficient notice and that three or even five years’ notice, as it would have been in 1997 for 2002, was regarded by the noble Lord’s party as unacceptable, even though it had been an omission of publicity.

We all agreed that five years’ notice of something which would happen only to a group who could not foresee their future, because it was about widowhood, and that they would inherit only 50 per cent rather than 100 per cent of SERPs as a result, was far too truncated and should be extended. Therefore, we brought back to your Lordships’ House, with all-party agreement, provision that that change should start from 2010 and that for each two years a 10 per cent SERPs reduction should take place. So, if you became a widow in 2012, you would get 90 per cent; in 2014, I think I am right in saying, you would get 80 per cent; and so on. Finally, you would get to 50 per cent by 2020.

In other words, we gave a further 15 years’ notice over and beyond what the Government of the day had originally intended because they had failed to publicise it. We were told that this was unfair and unreasonable, and might even be subject to judicial review, because people were not aware of what was going to happen. Five years’ notice at the point at which we could have escalated the publicity would not have been deemed to have been enough. Will the noble Lord care to comment on this story?

[Lord Freud]

My Lords, I thank the noble Baroness, Lady Hollis, for that. I have to confess that I was not aware of those events in 1982. I was aware of some events—I think that I was writing a Lex column in 1982 so I was not completely out of the picture. The noble Baroness makes the point that there were five years of notice. Clearly, the smallest amount of notice that we have in this instance is 6.5 years for those who are affected at the tightest level. We believe that that period, which admittedly is shorter than other periods that we have seen, will still allow women to plan for their retirement.

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[Lord Boswell of Aynho]

I wish briefly to comment on the amendment of the noble Baroness, Lady Turner. She is on to a substantive issue of concern: that there are clear occupational differences which, in a sense, mirror some of the concerns that many of us across the parties would have in relation to differential health outcomes between people with different occupations. In a sense, that supports some of the points that have been made about relative gender disadvantage. We understand why the Bill is conceived as it is, but those are issues that are entirely proper to raise in Committee.

I am not enthused by the text of the amendment, not least because I am not a Treasury official, and I notice that it provides a power to revise but does not explicitly state that there should be a power to revise downwards. Knowing one or two Treasury officials, they might have a go at the opposite. More seriously, there are concerns about whether we should differentiate the pensions and benefits system by different occupational groups, in the way that some of our continental neighbours have done. I may be old fashioned, but I would be reluctant to do that. Whether we could define the categories in any coherent way that did not give rise to further anomalies or whether this is the right approach, I am sure there is a problem which the noble Baroness is right to draw to the Committee’s attention. For example, I am sure that there are lots of issues in the construction industry or agriculture, which I know well, whereby we can try to mitigate and improve occupational health. We should do that, but I am not sure that a vehicle that is about the state pension age is the appropriate one to do it.

[Baroness Hollis of Heigham]

If I may, I want to use the amendment to raise an issue that has been touched on before but which needs to be re-emphasised, although I am sure that noble Lords are well aware of it. That is the differing work patterns, whether waged or unwaged, of women and of men through their working-aged lives.

We all recognise as appropriate that women, even those with children once the children are old enough, should be encouraged to enter the labour market. I have no problems with that at all; I think that it brings independence, increased income, sociability and all sorts of other life chances. Also, it encourages other members of the family to realise that work is indeed an option and appropriate for them in years to come. I have no problem with that, but that is the position of only about 60 to 70 per cent of women. When we talk about them being in work, we are including part-time work as well as full-time work. The number of women in full-time work is relatively very low—mostly among lone parents rather than married women, because married women tend to work fewer hours although more of them do some part-time work.

A group has been hinted at who are doing some of the most heavy-ended work of the lot without anything other than a most trivial benefit income attached to it. That is what I call heavy-end caring. I attach this to my noble friend's amendment. I do not have an easy answer for what should be done about it, except to say that I would like to see an age-related premium attached. Taking a woman who is perhaps in her early 60s at the moment, she is likely, if she is a carer—and several million of them will be—to be caring for someone in their upper 80s. We know that one person in three over the age of 85 is likely to suffer from dementia, which will become increasingly severe although their physical health may remain. We also know that another one of those three aged over 85 is likely to be experiencing severe physical health problems, although their longevity may expand. So she—and it will almost always be a she—will be involved in that heavy-end caring.

I am delighted that the previous Government have allowed for those doing what I call lighter-end caring of 20 hours a week to come into the NI system without payment—although, probably rightly, without paying a carer's allowance. Think about those women who currently receive a carer's allowance of about £57 a week, together with the right to earn up to £100 if they can manage it. The effect of what I call heavy-end caring—by that I am talking about 50 or 60 hours a week—is that, first, it almost certainly breaks the health of the carer. All the experience of caring is that the help of the carer suffers seriously.

Secondly, the carer’s savings run down. She is usually caring for another family member, probably her parents or possibly the parents of her husband. In order to make their life tolerable, she is using her money. What savings she may have will help to keep them afloat as well as herself. Thirdly, she will suffer, as a result of heavy-end caring, increasing isolation, so that when she comes to need care in turn there will be few people able or willing to care for her.

Finally, as a result of all that, given her caring record, she has become in the eyes of an employer someone who is tired, has been out of the waged labour market for perhaps 15 years, has poor physical health and has perhaps suffered, as a result of bereavement, from depression. She is then expected to go into the labour market, but she is effectively unemployable. Even if she were willing, able, fit, healthy and financially buoyant to re-enter the world of work, it will be very difficult for her to do so.

The women who are being asked to stay in the labour market between 60 and 65 are precisely that group who are doing what I call heavy-end caring. It is caring that gets heavier as they get older, because the person cared for is getting older and is more likely to have Alzheimer's and severe problems of longevity. I do not have an easy answer, except to say that if we cannot—as we obviously should not—keep women's pension age at 60, I would like some age-related premium or some version of what my noble friend mentioned: some recognition of carers’ responsibilities.

We are too easily assuming that women are in the waged labour market and will stay there for up to an extra six years. That is true for men; it is not true and never will be true for women who expect and embrace with grace the heavy-end job of caring which, as I said, will make them poorer, possibly break their health, may leave them isolated and almost invariably unable to re-enter the world of work at 63 or 64, when the person for whom they have cared has finally died.

I hope that, between now and Report, my noble friend can in conjunction with us think of ways to address that, because I think that those women will find themselves in a very bad situation.

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[Lord Freud]

I thank the noble Baroness, Lady Turner, for tabling this amendment and for giving us the opportunity to debate a key concern about increasing the state pension age and longevity. I use the soft “g”, whereas I notice that the noble Lord uses the hard “g”. We probably differ on other things as well. The noble Baroness raised the question of what older people want and whether they want to work longer. Research has found that people want to return to work, whether for financial, personal or practical reasons, and will find ways to do so if they are motivated, have recent work experience and if illhealth does not act as a barrier.

In essence, the amendment is about whether it is fair for the state pension age to be the same for everyone irrespective of their circumstances or whether we should have a variable state pension age for certain groups. To echo what my noble friend Lord Flight said, one of our aims—which is in common with previous Governments—is to simplify an extremely complicated pensions system. The Bill contains various measures to simplify, from the abolition of the fiendishly complicated and fascinating PUCODIs, to which we will come shortly, the flexibility to consolidate additional pension—

[Baroness Hollis of Heigham]

We are in a heightened state of expectancy.

[Lord Freud]

There are only two experts in the room on PUCODIs.

On the serious point, simplicity is really important in this system. Clearly, we have tipped over the edge in complexity in the pensions system, as we have in the welfare system. Our state pension system has always been based on a common state pension age—albeit differentiated by gender, at least for the time being. Each exception that we add would increase the complexity. Including health conditions, occupations—and even, as has been suggested, where someone lives if we add that into the mix—would rapidly pile confusion on confusion. Introducing different state pension ages at a time when we are working to simplify benefits and pensions would make the system very complex and difficult to administer, and would take us further away from our objective.

The amendment raises questions about parity of treatment between those who could get their state pension from an earlier date and those who could not. Of course, the kind of illness or infirmity envisaged would need to be defined, as would the types of employment that it suggests be covered. There are, of course, some countries where people are allowed to retire earlier than the standard state pension age from occupations which may be classed as particularly arduous or dangerous employment, but who is to say what is arduous or dangerous? The other point we must note here is that in many of those cases, retiring early results in a person’s state pension being reduced, as might be expected for any pension scheme. Through her amendment, the noble Baroness, Lady Turner, shares our view that having poorer pensioners is not a desirable outcome, but to allow early retirement without reducing benefits could be very expensive.

Noble Lords will share the great sympathy that we all have for people who are in ill health, whether they have the misfortune to become seriously ill or are infirm. We also have sympathy and respect for the carers referred to by the noble Baroness, Lady Hollis— particularly for what she calls the heavy-end carers. I do not have an answer to that, certainly not today, but I will reflect on her comments. As Michael Marmot has shown, there are long-term differences in disability-free life expectancy between socioeconomic groups, and they need to be addressed. Noble Lords will be aware, however, that there have been improvements in both life expectancy and healthy life expectancy across all sectors of our society.

[Baroness Hollis of Heigham]

Given that the Minister referred to last year’s Marmot report on health, can he confirm that it found a 17-year difference in healthy life expectancy between the richest and the poorest?

[Lord Freud]

I regret that I do not have that figure to hand, but I can provide it later. I am sure that the noble Baroness has it to hand and that that is the point of her question, but I will confirm the exact figure.

The other point is on life expectancy across the regions. There are differentials, but it is important that life expectancy has risen in all regions and looks set to continue to do so. In England, in the 29 years from 1981 to 2010, it increased from 79 to 86 for men and from 83 to 89 for women. In Scotland, it increased from 78 to 85 for men and from 81 to 87 for women; and in Wales, it increased from 79 to 86 for men—the same as in England—and from 82 to 88 for women. There are differentials, but they are all moving in the same direction at roughly the same pace.

Likewise in terms of occupations, male manual workers have seen an increase of almost two years in their life expectancy at 65 between 1992-96 and 2002-05. Women manual workers have seen a one-year increase in the same period. Reverting to the point that we discussed under the previous group of amendments, there is no doubt that on average we are living longer and healthier lives than in the past. I shall not go through the figures that we discussed then.

When we come to what kind of support we can offer to people as they get toward the end of their working lives, I need to emphasise that we have developed a support network in this country, and we are going to transform it. Many people in this Room will be part of the consideration of the new universal credit. There clearly is support for people of working age with health problems.

With the universal credit, we have the opportunity to sweep away the patchwork of benefits and credits and to bring in a much more coherent and simpler system. That system can take the weight of the concerns of the noble Baroness. That is a better place to address the concerns underlying her amendment. For that reason, I do not accept that varying pension ages is the right way to support people who have ill health towards the end of their working lives, and I therefore urge the noble Baroness to withdraw her amendment.

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[Lord Freud]

I thank the noble Lord, Lord McKenzie, for tabling this amendment and the noble Baroness, Lady Drake, for introducing it. It allows us to consider the role that pension credit plays in providing income-related support for those over a certain age. These amendments seek to keep the pension credit qualifying age at the existing timetable for women’s state pension age by proposing a new and separate age schedule that would apply to pension credit between March 2011 and March 2020. The effect of these amendments would be to break the link between pension credit qualifying age and women’s state pension age.

[Baroness Hollis of Heigham]

My Lords, do we not already do this for men?

[Lord Freud]

Yes, but it is being pulled together for men. That is the point of the 1995 proposition and, now, the acceleration.

The effect of these amendments would be to break the link, as I said. As the schedule proposed by the amendment would effectively follow the existing timetable, it would therefore see a divergence from the increase to women’s state pension age from 2016 as proposed by the Bill. The amendment also seeks to ensure that the pension credit qualifying age cannot be set higher than state pension age in the future.

As life expectancy is increasing for people at all income levels, it is right that we raise the starting point for pension credit in line with changes to women’s state pension age and, beyond that, state pension age. A key part of the Welfare Reform Bill that is currently going through Parliament and of the introduction of universal credit is to ensure that people of working age have the opportunity to do just that—work whenever possible. To ensure that we provide the appropriate work focus and work-related support for all those of working age, we will be setting the upper age limit for universal credit at pension credit qualifying age. Setting the pension credit qualifying age at an artificial point below women’s state pension age will therefore undermine this fundamental aspect of welfare reform.

The amendment also suggests that the means-tested help available through universal credit will not be adequate for those approaching state pension age, and this is not the case. Universal credit is intended to provide appropriate levels of support, including for those who, for whatever reason, are unable to work or have limited capacity for work. Universal credit will also provide for a more generous treatment of earnings, and it is not right to withdraw this support for people who wish to continue working.

To pick up the points made by the noble Baroness, Lady Drake, when she referred to the impact assessment, I should make clear that the stylised cases in the impact assessment are designed to show the maximum possible loss. Most of those affected will not experience such losses. The noble Baroness addressed the issue around minorities and disabled people. I accept that there will be differences, but we are determined, and we have various programmes now to do this, to tackle the labour market disadvantage that those groups have.

Given the proposed upper age limit for universal credit, the amendment is not particularly well targeted. The extent to which people may see any benefit will depend on their own circumstances and on those of their partner. I should also point out that as this change would require a concurrent but different rise in state pension age and the pension credit qualifying age, it would add complexity to the system which, as we discussed on the previous amendment, goes the opposite way from our intentions. It has the potential to create a very confusing message to give customers about qualifying ages and what benefits are available to them.

Pension credit is primarily a safety net benefit for those over state pension age. It has been set at women’s state pension age to avoid discrimination until men and women’s state pension age are equalised. There has never been an intention to raise the qualifying age above state pension age. It is clear that this amendment is intended to help those people who might be described as “vulnerable”—people who might be in ill health or who have been in manual jobs and are unable to continue working as state pension age increases.

I hope that the Committee will forgive me if I take the opportunity to answer the question raised by the noble Baroness, Lady Hollis, regarding the Marmot review. I have now been able to put my hands on those figures. She dropped a nought in the differences in life expectancy where the highest life expectancy, in Kensington and Chelsea, was not 17 years but 10.7 years above the worst, which was Blackpool, for men—

[Baroness Hollis of Heigham]

Perhaps the noble Lord will allow me to quote from the Strategic Review of Health Inequalities in England post-2010—the Marmot report, which states:

“In England, people living in the poorest neighbourhoods, will, on average, die seven years earlier than people living in the richest neighbourhoods”.

The report then refers to the graph in Figure 1, and continues:

“Even more disturbing, the average difference in disability-free life expectancy is 17 years … So, people in poorer areas not only die sooner, but they will also spend more of their shorter lives with a disability”.

The report goes on to state that even excluding the top 5 per cent and the bottom 5 per cent, the difference in years of disability-free life expectancy is 13 years.

[Lord Freud]

I thank the noble Baroness for saving my team from having to write a letter, given that she has isolated the issue. We are playing with different numbers—10.7, 17 and 7. I think that we have sorted out what each means. However, the point remains that for all groups there is a movement in the right direction towards longer lives and for longer healthy lives for all groups—albeit that there is a difference within groups.

[Baroness Hollis of Heigham]

Except that the point established by my noble friend Lady Drake and others is that the cuts, if you like, in spending on pensions and pension credit are falling heaviest on the poorest women who will have the least disability-free life expectancy along with their male counterparts.

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[Lord Boswell of Aynho]

My Lords, I endorse the amendment and the thinking of my noble friend Lord German. As we begin to move towards the end of the deliberations on Clause 1, he has capped an interesting piece of architecture that has developed during the afternoon. The first pillar was set jointly, and possibly independently of each other, by the noble Lord, Lord McKenzie, and me. We are clearly the Stakhanovites of this game and we have set out to proceed by formula and on principle in redesigning the architecture of the table for the withdrawal of benefit or the increase in the state retirement pension. That is clearly one approach, which also has the consequence that my noble friend Lord Freud has already pointed out to the Committee, of substantial expense.

It will be interesting to see how further consideration of the Bill unfolds, not only this afternoon, but one way to mitigate that might be some conjunction of large figures in terms of income, some other benefits being reshaped or males being asked to pay earlier, if that were possible, to try to balance those large aggregates. I understand that that is at least one approach.

Then, if I may put it this way, there was the approach of the noble Baroness, Lady Turner, of looking at pension credit, because it is the keystone in the middle. That is also using a piece of architecture which is already in being. Because it is income-related, or means-tested, if you want to put it the other way round, that is a way to deal with it for a lot of people who, as we have all acknowledged in this Committee, are most seriously affected. We now come to the other side of the pillar in the suggestion of my noble friend Lord German of what might be termed a targeted scheme which, as he said, might cost three and seven pence, or thereabouts, if that is all that the Treasury could provide, but would be designed to look at the specific problem for an age group that we have all identified as being particularly heavily affected, although that is mitigable in certain cases to see what could be done.

It may be that, on reflection, that is the most sensible approach for the Minister. Certainly, his most sensible short-term strategy would be to say that we will reflect on these things, that there are problems and that we need to think further about how best we might deal with them. If I implied, in having bound myself and the Opposition spokesperson together as Stakhanovites, that my noble friend Lord German was in any way a slacker, the way that he set out the different options was appealing and, I thought, covered most of the field.

I throw one specific point into the pot for the Minister's consideration. I do so tentatively, not least because it breaks some of my precepts about differential arrangements, but I have always felt strongly that one of the impacts that is underdescribed and underconsidered in relation to state retirement, almost irrespective of age, is the substantial hurt that it represents not merely in the receipt of a benefit that is taxable, but in relation to the withdrawal of an obligation to pay an employee national insurance contribution, because that can have a substantial effect.

I remember looking at my payslip and saying that the withdrawal of the NIC is worth nearly as much to me as is my state retirement pension. In my case, that is on a 40 per cent rate of tax, but it is underdescribed as a factor. I leave this for the Minister's consideration in due course, but it might be that one way of doing that would be to say, not least because we are interested in maintaining employment wherever possible, given that this is a particularly hard-hit group of individuals that is relatively easily definable and quite small, that we might be prepared to waive the NIC contribution for the employee while they continue in employment until they reach the state retirement age, as if they had already retired.

I put that only as a consideration, but the Committee is wrestling with some dilemmas. We know where the problem lies, in a relatively small group. Other groups are affected—I am not trying to say that they are not—but we know that there is a particular problem for a small number of people. One can either adopt a large architectural solution that redesigns the system and may claw back all or part of the cost of doing so, or one can adopt a much more targeted scheme directed towards their particular problems along one or other of the lines that my noble friend so helpfully suggested.

[Baroness Hollis of Heigham]

My Lords, I support the thrust of the amendments in much the same way as has the noble Lord, Lord Boswell. Whether this is the right way forward I do not know, but we have all identified that there is a problem. There will be a group, particularly of women—although there may be some men who currently would come under pension credit—who are among the poorest, because they are eligible for pension credit, and who have very reduced employment prospects and very poor life expectancy. That goes together. They are poor, their health is not good and they would normally have been eligible for pension credit.

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Moved by

[Baroness Hollis of Heigham]

13: After Clause 3, insert the following new Clause—
“Right to apply for amalgamation of earnings from multiple sources of employment for Basic State Pension accrual
A jobholder who in any week in a tax year—(a) is employed in more than one employment,(b) whose earnings do not exceed the lower earnings limit in any individual employment or self-employment in that week, and(c) whose earnings in aggregate reach or exceed the lower earnings limit in any week,shall be deemed to have earnings equivalent to or exceeding the lower earnings limit for the purposes of accruing entitlement to the Basic State Pension in that week.”

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[Baroness Hollis of Heigham]

My Lords, I hope the wording of this amendment is reasonably clear and self-explanatory, although I am absolutely sure that it is technically deficient, but I do not think that matters for the purposes of Committee stage. I think we all agree that it is essential to bring as many men and women as possible into the state pension system. That has been aided by past changes, which we mentioned earlier—for example, the Labour Government’s changes, which were carried with all-party support. The number of qualifying national insurance contribution years was reduced to 30 from 39 for women and 44 for men. Other groups, including carers not doing heavy-end caring but caring for 20 hours or more, were brought in. We allowed the amalgamation of hours of caring to bring people, including grandparents, within the basic state pension system. In all ways, we have sought to bring more people within the basic state pension system.

However, there is leftover business, which this amendment seeks to address. I am very grateful to the Minister, who has taken a very constructive attitude towards this issue, and I am hoping that he may have found a way through for us which has been unavailable to us in the past. As a result of all the changes to the national insurance system, we expect that about 90 per cent of men and about 90 per cent of women will have full coverage of the basic state pension certainly by 2020 and maybe earlier than that. However, there is still a key group of people, among other small groups, who remain outside the basic state pension through no fault of their own, who are in the waged labour market, especially women with a portfolio of mini-jobs. Individually the jobs may be six hours or eight hours and the women may hold three or four such jobs together, but at present you are not allowed—and we do not have the technology—to add those hours and those wages together to bring somebody into the NI system. Oddly enough, if you are a lone parent and are entitled to tax credits at 16 hours, you are allowed to add those hours together for tax credit purposes but not for NI purposes, except that the tax credit itself would then give you a right into the national insurance system. So there was a rather complicated loop through for some women in the past, but we were not able to do it directly.

The stats are flaky, and we raised this issue at Second Reading. My latest information—which may have been superseded by the Minister’s information—is that there are some 50,000 people, mostly women, with more than one part-time job. For upwards of 15,000 women, the summation of those jobs might take them into the national insurance system and therefore into the state pension if they were able to add those jobs together. At Second Reading, the Minister helpfully reminded us that some 250,000 women might be coming into the mini-job scenario in the future under universal credit who might find themselves in a similar situation. The problem is likely to increase rather than decrease.

Why do we need this change? I suggest three reasons. First, it seems to me entirely fair that women—and they are nearly all women—should qualify for the full state pension by the fact that they are in the labour market, whether waged or unwaged, especially given their precarious financial situation. It seems unreasonable, if you are working 16, 18 or 20 hours, however that is split up, that you should be denied access, which you have earned, to the national insurance system and therefore, above all, to the state pension system, particularly given women’s precarious financial situation which remains, even though we have made it much easier for women, along with men, to enter the NIC system.

Secondly, particularly in rural areas, it is quite difficult for women to find a full-time job of over 16 hours a week if they wish to do so. I come from Norfolk, and the women I know in the more rural areas of the county mix and match according to season. For example, their jobs may include picking mushrooms, cleaning boats, caravans or private houses, being a lollipop lady, making sandwiches during the summer season or doing bar work. It is a mix-and-match situation. Even if women wish to build a mini-job into a job of over 16 hours a week in a clean, simple way, they are not available to very many women, particularly in rural areas, where decent jobs are in very short supply. All they can do is add another mini-job to their existing mini-job, and their portfolio may eventually take them over the 16 hours.

Those mini-jobs are extremely valuable to employers in giving them a resource of very flexible labour. It may be a couple of evenings of bar work when there is the most customer demand, it may be part-time work at a newsagent’s or launderette when there is the most demand, or it may be work in a shop or a supermarket where there is the most demand. To my knowledge, a number of employers keep an employee’s hours under 16 hours in order to avoid paying the NICs that would become due when she goes over. Receptionists have told me time and again that their hours are capped quite deliberately by their employer.

Perhaps I may reiterate. The first reason is that, if you work the hours, it is only fair you should be able to come into the national insurance system; the second is that, for many women, a mix of mini-jobs may be the only way that they are going to be able to put together an adequate or appropriate income for themselves, and it is a useful form of flexibility for the employer.

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[Lord Freud]

My Lords, I am very grateful to the noble Baroness, Lady Hollis, for raising this matter. Clearly this debate has been conducted before, although I was not present, but there is a potentially a new context for it. The fundamental issue of the aggregation of low earnings from multiple part-time jobs and how they could be made to qualify for basic state pension has been a matter of concern to her for some time. It was considered by the Pensions Commission and during the passage of the Pensions Act 2007.

Like her, I am keen to encourage mini-jobs, which I think are not just good in themselves for people in supplementing income, but are an invaluable stepping stone which we have made difficult for people to use in the current welfare system. A system that encourages that process and takes it out of the informal or grey economy and into the proper economy, will be immensely valuable for many people. What I am going to say at this stage and in this debate will be rather correct, in the sense that, in the present situation and in the context of our present systems, it is not be possible to go ahead with something like this. Until we have a new system defined, laid out, and understand its technology, we will not be able to look seriously at what we can do here, and it is an immensely complicated issue in practice. The structure of this answer may be negative as I go through it.

[Baroness Hollis of Heigham]

Cautious.

[Lord Freud]

Thank you, cautious is a much better word. It will be somewhat cautious, but I will make a commitment at the end of it, based on what might be achievable later.

I start saying that many of the changes that have been made have already reduced the problem, and I know that the noble Baroness would have been involved in making those changes. I am thinking in particular of the reduction to a 30-year contribution making up a pension. The estimate now is that in only a few years’ time 90 per cent of women and men—both genders for different reasons—reaching state pension age will be entitled to the full basic state pension.

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I will make the commitment to look, as we develop the technology for this system, very hard at making sure that it incorporates the flexibility that would allow us to look at achieving some of these things. I do not think that there will be one magic wand and we are free. There are a lot of issues—I have tried to point out some—regardless of technology. But we can make sure that technology does not become a barrier for us to look at this in a new way. If it works and makes sense, clearly, we will be able to pursue it, but not in the context of the Bill. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Hollis of Heigham]

My Lords, that was probably superfluous to requirements, but I thank all noble Lords who have taken part in this short but interesting debate. The issues were fully aired and it suggested to the Minister that there is an understanding of the issue and the concerns and difficulties—I admit that there are difficulties—attached to it, as well as the need as far as humanly and technologically possible to address them. I am very grateful to everyone who took part.

I am intrigued that the figures have gone from 50,000 before the Recess to 65,000 after it, which shows how quickly the problem is growing, but I am grateful for the later information. I recognise that many of the women who could otherwise be covered by a proposal like this, were it to be implemented, are already partly covered by other arrangements that have occurred over the past 10 years or so. I remind the noble Lord that one of the changes that I accepted—I was in no position not to—was that we reduced what used to be called HRP to when the youngest child was 12. At 12, it stopped. In the past, it had been 16.

One of the things we have not, perhaps, brought into this debate—I was trying to get my head around it and I cannot usefully put any stats to it so I did not run it earlier—is that many women with a youngest child of 12 to 16 and so on have to manage work with continued responsibilities to their children which in the past HRP would have stopped. There is also the question of elder care. Many women who want to do part-time jobs will do unsocial hours because their partner will be keeping an eye on their children, who they do not wish to leave at home, who it would possibly be illegal to leave at home, but who are none the less not at school. Those unsocial hour jobs tend to be short jobs or mini-jobs. They are an evening in the bar, in the cinema as an usherette or very early or very late hours cleaning. I am surprised that we have not had legal challenges of the Government’s assumption that lone parents of children not just of five but even of 12 onwards are not liable for their care and attention. It suggests to me that this group will find mini-jobs one way out of the dilemma that we have given them, as well as all the rather better things that have happened with reducing the number of years you need to come into the NI system. There is a potential area there that we have not yet been able to track very far that may grow, particularly if there are JR problems associated with leaving children of 12, 13 or 14 unattended at home. We have already had babysitting issues in the court. Mothers have been strongly criticised by the judicial system for leaving their children at home at that age. If we can go further along this line in being able to find small slices of jobs that better fit around the need for childcare where HRP no longer applies, it would be valuable.

I accept the Minister’s assurance about universal credit and understand that it is not technically possible for employers or the department without the technology underpin that universal credit will provide. If universal credit is to work, virtually all the information the Minister will need to be able to make this call will be in the hands of the department, whether under a revised NIRS2 system or whatever, I do not know. I would like to see such women come within the BSP pension because they have earned a way to do so. As the noble Lord said, it is not just out of fairness to them, because they have the earnings; it is a way of producing a stepping stone—a ladder if you like—into further opportunities. The longer women stay away from the labour market, the harder it is for them to re-enter. The more we can make it easy, attractive, available and accessible to them, the more they will come in. They want to do it, but they want to make it commensurate with their family responsibilities and childcare. I think this is one way to do it, and I am trusting, as I am sure I can, to the Minister’s commitment to the values of this and his determination to make the technology work. I beg leave to withdraw the amendment.

Amendment 13 withdrawn.