Pensions Bill

Sheila Gilmore Excerpts

Monday 17th March 2014 Commons Chamber

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I beg to move, That this House disagrees with Lords amendment 1.

We are on the home straight of the Pensions Bill. It has been all the way through this House and their lordships’ House, and we have come back to it today to deal with amendments that, with one exception, make it a better Bill. I am grateful to my noble Friends Lord Freud and Lord Bates who, from the ministerial Benches, took the Bill through another place. I am also grateful to all my colleagues who have contributed to the Bill, and to peers on both sides of the House of Lords who have made insightful contributions and improved the Bill in a number of ways.

We have made a number of amendments in response to concerns raised by noble Lords, so I emphasise that our decision to ask this House to disagree with their amendment 1 is exceptional. Indeed, that is the only amendment with which we are asking the House to disagree, so I hope that we will be seen to have taken a constructive approach and that we have sought to improve the Bill on a cross-party basis wherever possible. For reasons that I will explain, however, we ask the House to disagree with this amendment.

As the House will know, access to the national insurance system through employment is dependent on earning above the lower earnings limit, which is currently £109 a week or, expressed annually, £5,668. People earning above the lower earnings limit but below the primary threshold of £149 a week receive a credit and do not pay national insurance but effectively build up national insurance rights. The issue raised by Baroness Hollis in another place related to the position of people who have more than one job, none of which, by itself, results in their paying national insurance but whose wages, if added together, would be above the lower earnings limit. It was suggested that there was apparent unfairness, because someone with a single job that pays £120 a week would get a year of national insurance, whereas someone with two jobs, each paying £60 a week, would not.

We are grateful to Baroness Hollis for raising the issue. We will set out the extent to which we think the issue is significant, the extent to which we think there is evidence for it and how the Government plan to address it. We ask the House to disagree with the amendment, but we accept the principle that we need a pensions and national insurance system that is fit for the modern age. Crediting and various other issues have evolved and need to evolve to reflect the fact that we are dealing with a changing labour market. I want to share with the House some examples of how that has happened and will continue to happen. One particular example is the introduction of universal credit.

At present, there is a set of low-earning individuals who do not get credits. When universal credit is fully in place and they come within its scope, they will receive credits. Potentially, some will be the very same people we are talking about in relation to the amendment. The House may not be aware that the introduction of universal credit will bring an estimated 800,000 additional low-earning households into the scope of crediting. That demonstrates that the Government are not complacent about the changing labour market, or the position of low earners and their access to the national insurance system. This is a concrete and substantive way through which people will gain access in future.

I understand the concern of Baroness Hollis that people might miss out on a qualifying year for national insurance. Why does that matter? If they were repeatedly to miss out on qualifying years, they might fail to build up a full single-tier pension. That requires 35 qualifying years, bearing in mind that these are years of contributions or credits. However, the mere fact that I have used the phrase “35 qualifying years” demonstrates the first reason why the problem might not be as significant as one might, at first sight, imagine. An 18-year-old might, for the sake of argument, have a 50-year working life, or possibly slightly more. Of that 50 years, only 35 years need to be qualifying years for a full single-tier pension. That person could, therefore, spend 15 years doing multiple small jobs—which is exactly what the noble Baroness is concerned about—and it would not make a jot of difference to their single-tier pension entitlement.

We do not know how many people spend how many years in this situation, and that brings me to one of my central points: we do not have the evidence base to know the scale of any potential problem, let alone to rush to solutions, which is what the amendment does. We have cross-sectional data. On the basis of surveys, we know how many people report having multiple jobs in any given year. We know what the wages are and we can have a stab at aggregating them. What we do not know very reliably is how that changes over time: whether the people who in any given year have multiple small jobs are the same people the next year and the next year. If it is just a transient phase that happens for a few years of someone’s working life and does not happen again, it may be entirely irrelevant to their state pension position.

[Sheila Gilmore (Edinburgh East) (Lab)]

This matter came to my attention through a constituent who was in exactly this position, and the Minister will be aware that I raised it in Committee. The amendment is an enabling amendment rather than a prescriptive amendment, and even if there are only a few people who will be in that position, is it not worth making provision for them? Not everybody will necessarily enter the labour force at 18, particularly with greater further education and so on, so reaching 35 years might be quite difficult for some people. If there is a small number, as the Minister keeps telling us, I do not understand the objection to the amendment.

[Steve Webb]

I am grateful to the hon. Lady who, as she says, has shown an interest in this issue. There will be an issue of proportionality in any change. We estimate that perhaps 50,000 people might at any given point be doing multiple small jobs that together take them over the floor, but do not on their own. If, for most of those people, this happened for a few years and did not happen again, and it was relevant to the state pension for only a handful of people, should we legislate for that handful? It could happen and it probably does happen to some people, but to make well-informed policy the Government ought at least to assess the scale of the problem.

In particular, we should not rush into specific solutions. The amendment advocates a specific model, but I believe that we must begin by identifying not just the number but the types of people who are doing multiple part-time jobs of this kind. For instance, are they people with children? Is that why they are doing such jobs? If they have children under 12, they will receive credits under the general system.

We must match our data on multiple small jobs with data from other sources. We must look at longitudinal as well as cross-sectional data in order to gain a sense of the scale of the problem and the types of people affected, rather than legislating for a single solution. We believe that the amendment is technically flawed for a number of reasons, but we certainly think that rushing to amend the Bill in order to give ourselves power to do something that we might or might not want to do because it is one possible solution to a problem whose scale we do not know would be premature.

[Steve Webb]

My hon. Friend is right. It is important to attribute value to the time that people—both men and women—spend at home bringing up young children, and I can reassure her that years spent doing that will count in full as qualifying years towards a single-tier pension. For the first time, more or less, since the introduction of the system—at least, since earnings-related pensions were introduced— those years will count just as much as years spent running a FTSE 100 company. A year is a year, and a qualifying year is a qualifying year.

The provision will apply to anyone who is looking after a child under 12 and entitled to child benefit—well, it is slightly more complicated, but that is the basic idea—and to anyone who is caring for an elderly relative and receiving carers allowance, or, in certain cases, caring for more than 20 hours a week. There is, rightly, a network of credits which bring people into the system. Those will remain, and, in many respects, will become more valuable in the single-tier context.

[Sheila Gilmore]

The Minister advanced exactly the same arguments on Second Reading and in Committee. He said on those occasions that he did not have enough information. Given that we last considered the Bill several months ago, may I ask what steps he has taken to obtain the information that he feels is needed?

--- Later in debate ---

For example, I understand that the average person with a zero-hours contract could typically work 15 to 20 hours a week or so. The zero is just what is guaranteed, but the typical outcome is very often a week of work that pays someone enough to have to pay national insurance. Again, related to that is the fact that qualifying years for national insurance are based on the situation over a whole year, so even if someone is on a weekly zero-hours contract and does not work every week—they work zero hours some weeks—they could still build up a full qualifying year, because in the weeks they work they might pay significant amounts of national insurance. Therefore, again, simply saying there are lots of zero-hours contracts does not prove that it is an issue. The fact that someone is on a zero-hours contract does not mean they have multiple jobs. The fact that people are on zero-hours contracts and sometimes work zero hours does not of itself stop people getting qualifying years. I imagine the debate may move in the direction of saying, “Oh, there’s all these zero-hours contracts. It’s a scandal and therefore we need this amendment,” and there are about 17 logical flaws in that reasoning.

[Sheila Gilmore]

Does the Minister feel that there is a technical problem in including such people, however small a group he thinks they form, because he seems to accept that people might end up not making up the 35 years towards a pension?

[Steve Webb]

We have always been clear that there will be people who will not make the 35 years, particularly those who come into the country later in life, for example, but the link between multiple mini-jobs and not making the 35 years, which we are talking about here, is unclear at best. We simply do not know whether it is a transient phase for people or whether they are in a recurring pattern. Again, I counsel the House against rushing to policy conclusions in amendments that are not accurately drafted rather than saying, “Let’s get the evidence base together.”

As well as undertaking to update our own figures, we are happy to commit to a literature review of what is known about this end of the labour market, making sure we have access to all the available data. We are also content to convene what we have grandly called an analytical stakeholder forum—that is three words of jargon in one go, so it must be impressive. The point of that is to pick the brains of those who study this end of the labour market, and we will be very pleased to benefit from the insights of the noble Baroness Hollis, with whom I have already had an informal conversation about this matter. I should stress that she would like us to retain Lords amendment 1 to avoid misrepresenting her views. We are very keen to gain her insights and those of economists and others who study this end of the labour market to try to establish what more we might be able to find out through existing data and whether any further work needs to be done.

It seems to us that we need to take a step-by-step approach, rather than rushing to policy conclusions as the amendment would. If we found that there were lots of people in this situation and that something must be done, even the something that must be done might not be the thing proposed in this amendment, and it seems a bit odd to pick one option, which as far as we can see is a sort of opt-in crediting option, when there might be others. For example, one might think that lowering the lower earnings limit might be a better solution. That would reduce the number of people in this position because their combined wages would be more likely to be above that floor. It would not necessarily require an opt-in process, and it would be simpler. That might therefore be a better solution; there might be others. We might relax the rules on voluntary national insurance contributions and the deadlines for payment. One can think of a whole raft of solutions, but if we are not clear about the scale of the problem, the groups affected and the permanence or otherwise of the situation, putting just one such provision in primary legislation—giving ourselves a power we might not use through what is, at that, an ambiguous amendment—does not seem to us to be the way forward.

Let me try to draw these threads together, because we have a lot to get through. We are concerned that the amendment itself is unclear, and I have run through a number of reasons why, such as the reference to the lower earnings “level”, not “limit”, and the reference to “income”, not “earnings”. National insurance liability is based on earnings, so the wording would have to be thus changed. The lower earnings limit figure is currently a weekly figure, whereas the amendment refers to an annual figure. Of course, all these things could normally be tidied up, but we do not have the opportunity to do so because if the House accepts the amendment, that is it: it is the end of the parliamentary process, the Bill becomes law and a deeply flawed amendment is on the statute book.

It is unclear exactly how the amendment is meant to work. As was said earlier, would people have to opt in and get credited, or would there be a duty on Her Majesty’s Revenue and Customs to combine these incomes and then levy national insurance, which might be to the detriment of some? There are a great many issues to be examined, but it is not our view that we should not look at them. We should, and as I said at the outset I absolutely accept the principle that we should have a system of pension rights and national insurance that reflects the current labour market, rather than the one in existence after the second world war. We are making a number of changes in that regard, but as I have said, the amendment as it stands is flawed in a number of respects and ambiguous in others. It rushes to a single solution to a problem whose scale and nature we simply are not year clear about, so we believe that—

[Sheila Gilmore]

Will the Minister give way?

[Steve Webb]

A poetic conclusion was nearly reached; but before I conclude I give way to the hon. Lady.

[Sheila Gilmore]

I understand that the Minister is anxious not to rush to a conclusion, but can he tell us what time scale he has in mind?

[Steve Webb]

We envisage updating our own estimates by the summer and would be very happy to do that, and bringing together experts and trawling through the related literature in the latter part of this year. We do not want to kick this into the long grass. If we concluded that further data-gathering was needed, and it was qualitative rather than quantitative, that would take some time, but well-informed evidence-based policy making sometimes does take time, frustrating though it may be, and that is the approach the Government wish to take.

I urge the House to disagree with the Lords in their amendment 1.

--- Later in debate ---

[Gregg McClymont]

The Opposition’s view is clear: the issue of job insecurity, of short-hours working and of zero-hours contracts is a significant problem for the pensions market and, specifically, for the state pension. In that context, it seems wise to us to allow the Minister to crack on with solving this problem. I have confidence that he will ensure that this amendment, if agreed to by the House, provides the basis for matching up the state pension with people on these insecure and flexible employment contracts. On that basis, we disagree with the Minister’s disagreement, and we intend to support the Lords amendment.

[Sheila Gilmore]

Having been with this Bill from the outset, I remain disappointed, given the answers that the Minister gave to my interventions, that we have not made any substantial progress on resolving this issue. It will be predominantly women, although not necessarily entirely so, who will be disadvantaged. In other aspects of the Pensions Bill, the Minister has said how important it is that people will now build up their own entitlements for their own individual pensions. Being able to get a derived pension from a spouse, a deceased spouse or an ex-spouse will disappear from the system. We discussed that issue at considerable length during the passage of the Bill. Indeed the Minister has majored on this whole issue of people having their own individual entitlement.