Small Business, Enterprise and Employment Bill

Lord Newby Excerpts

Wednesday 11th March 2015 Lords Chamber

Over the years, Parliament has recognised the unfairness of locking certain groups out of the national insurance system and has amended the rules accordingly. This is another unfairness, and the amendment poses a solution. Basically, it says that if you are unemployed and looking for work, you can receive £72 a week in JSA and enter the NI system. So if a worker is employed and earning the annual equivalent of JSA—that is, approximately £3,750—they should be eligible for inclusion in the national insurance system.

[Lord Newby (LD)]

My Lords, the noble Baroness, Lady Hollis, is again bringing to our attention the issue of workers in multiple low-paid jobs. We debated this matter in Committee and the noble Baroness put forward a number of proposals then for dealing with the situation. We have before us today a proposal to include people with earnings at or above the annual value of jobseeker’s allowance. As contributory jobseeker’s allowance is payable for only six months and there are different amounts, I assume that the noble Baroness means to proxy the higher rate of around £4,000.

Just so that we are clear about the figures that we are talking about, I can confirm the characteristics of the workers that the noble Baroness is concerned about. They are people whose earnings in a single job fall below the threshold for paying or being credited with national insurance, that threshold being £5,700. That is the band of people the amendment is dealing with.

The noble Baroness has been very dogged on this issue and has suggested a number of other ways in which we might deal with it, such as changing the system to allow earnings to be aggregated; treating those people as self-employed and being able to pay class 2 contributions; treating them as unemployed and being able to receive NI credits; or lowering the earnings entry point for access to the NI system to £3,000 or, now, £4,000.

However, as I explained in our previous debate, I am afraid that none of those solutions is at all straightforward and there is a danger that they could all, to a greater or lesser extent, involve unnecessary administrative expenditure, perverse outcomes and possible new inequalities in the national insurance system. I know that such potential unintended consequences are not the noble Baroness’s intention, but they exist and they underline the reason for treading carefully in this area.

The proposal before us today would, for example, create a new cliff edge for those who earn below the threshold and increase the exchequer cost in terms of both administration and benefits paid, with little or no corresponding revenue. It would also bring in workers who might not need protection, such as students with weekend jobs working fewer than 12 hours a week. Such students are highly likely to gain sufficient years to qualify for a full state pension later in their working lives. The noble Baroness’s other solutions would increase the burdens on businesses, require a significant compliance regime to police people’s employment status or need to be extended to everyone with more than one job in a tax year to avoid unfair consequences.

The noble Baroness has expressed a view on the likely size of the group, the persistence of this type of work pattern and its effect on benefit entitlements. In February, the Department for Work and Pensions published updated estimates that around 50,000 people a year have multiple low-paid jobs and are not paying, or being treated as paying, national insurance that they would otherwise do if their earnings were aggregated —that is 0.2% of the workforce.

In response to concerns from your Lordships’ House during debate on the Pensions Bill last year, the DWP set up a forum of analytical experts last July, with an independent chair, of which the noble Baroness, Lady Hollis, is a member. This forum’s remit is to consider the available evidence, the characteristics of this group, the effect of zero-hours contracts and the implications for state pension outcomes. The forum has looked at a number of alternative data sources, but none was found to provide more reliable information than that available from the Labour Force Survey on which DWP based its analysis. Having been party to the forum, the noble Baroness will be aware that it has yet to draw any firm conclusions, so in our view it would be premature to legislate now.

I accept that, of this group of 50,000 people, around 80% are women. However, this population is by no means static. Many of those affected are likely to build up their national insurance record in the future through paid or credited contributions. Under state pension reform, over 80% of people would be entitled to the full pension amount by the mid-2030s. There is also no evidence that this is a growing problem. The number of women working in two or more jobs has hardly changed for the past 10 years, remaining at about 5% of those in work. Furthermore, the recent Johnson review concluded that earnings change significantly over a lifetime and most low earners go on to earn more.

I reassure the noble Baroness and the House that the Government are continuing work in this area, and the findings of the forum, once available, will help inform what, if any, action should be taken. However, I believe that it would be premature to pass this amendment now. In part, that is because the point of setting up the forum was to examine the evidence presented and then move to the next stage. Secondly, before taking any action in this very complicated area, we should undertake a full analysis of the costs and benefits of the various courses before us—something that, in general terms, I believe the noble Baroness has been in favour of.

I doubt that I shall have satisfied the noble Baroness, but none the less I hope that she will feel able to withdraw her amendment.

[Baroness Hollis of Heigham]

My Lords, I thank my noble friend Lady Drake for her superb contribution. She put it wonderfully well.

Although the noble Lord, Lord Stoneham, intervened, I thought that he might make a fuller contribution. His basic charge was that we did not do anything about this. We did. I do not normally go around shouting about this, but we persuaded James Purnell that grandparents who were caring for children and carers of older people should come into the national insurance system and be credited at 20 hours a week. Previously, carers of older people came into the system only if they worked for 35 hours a week—effectively full time—for one person only. I persuaded the then Secretary of State that a carer doing more than 20 hours a week should get, not carer’s allowance, but national insurance credit. I also persuaded him that grandparents caring for their grandchildren and thus freeing their daughter to work should benefit from what was then HRP. This was effectively transferred from the daughter, who, since in work, would be in the national insurance system in her own right. I thank James Purnell, the last Secretary of State with whom I worked on this, who agreed both those changes.

--- Later in debate ---

Moved by

[Lord Newby]

75: Clause 152, page 141, line 29, leave out “prescribed” and insert “qualifying”

[Lord Newby]

My Lords, Clauses 152 to 154 give Her Majesty’s Treasury powers to make UK-wide regulations with regard to public sector exit payments. Amendments 77 to 80 seek to address concerns raised by the Delegated Powers and Regulatory Reform Committee that these powers are framed more broadly than is required for the stated policy intent. The Government are grateful to the DPRRC for its scrutiny of the Bill.

Since the Government have now consulted on the detailed use of the powers, we are able to narrow their scope to match our settled intentions for implementation. This intention is that exit payments may only be recovered within a year of exit from the employment or office in respect of which the payment was made. None the less, in order for the regime to work effectively, it is crucial that we retain sufficient flexibility in the powers to enable the regulations to deliver the policy intent. This flexibility may include the types of exit payments that can be recovered to circumvent any potential for avoidance by using new or novel types of payment. Regulations will also set out prescribed circumstances for recovery, so that subsectors can be adequately defined and in order to accommodate changes in the machinery of government. Both flexibilities will be subject to the overriding requirement of return to the public sector within a year.

Further to the DPRRC’s most recent report, I can also announce today that the Government intend to bring further amendments at Third Reading to enable the first set of the secondary regulations to be made by the affirmative procedure. This first use will be the substantive one, which establishes the exit payment recovery regime. Further regulations which make minor and technical changes, for example to the list of bodies covered by the regulations, will be made by the negative resolution procedure. I should take the opportunity to say that we have also published draft regulations which will provide a further indication of how these powers are intended to be used.

Amendment 81 is a minor and technical amendment to ensure that the Scottish Parliamentary Corporate Body falls under the scope of Scottish exit payment regulations. The body has the duty to ensure that the Scottish Parliament is provided with the property, staff and services required. It controls its own remuneration, and the Government and Scottish Government always intended for it to fall within the Scottish exit payment regime.

Finally, Amendments 82 and 83 are further minor and technical amendments to correct potential ambiguity in the drafting of Clause 159. I beg to move.

[Lord Young of Norwood Green]

My Lords, I thank the Minister for his introduction to the amendments. He will be pleased to know that at this time of night we do not wish to pick holes in them. We think that they address an understandable concern, which I suppose became apparent in the NHS reorganisation that we thought we would never see where people disappeared out of one door and came back through another. It is right that a hole is being plugged that needs to be plugged. I welcome the point made about flexibility to prevent any avoidance tactics and the assurance that some of the important further amendments will be the subject of affirmative resolution. We are happy to support them.