David LindenMain Page: David Linden (Scottish National Party - Glasgow East)
Department Debates - View all David Linden's debates with the Department for Work and Pensions
I thank the Minister for his remarks. Auto-enrolment has proven to be one of the most positive developments for savers and in securing people’s long-term prosperity in recent memory. It was a Labour Government in 2008 who first introduced legislation to require auto-enrolment, and millions of people have benefited since. It is heartening that the current Government appreciate the value of the scheme, and are committed to continuing and, indeed, expanding it.
The current economic climate is a tough one. The coronavirus pandemic has left many employers and employees facing unexpectedly difficult decisions. In this light, it is right that the Government focus on ensuring the long-term sustainability of schemes and helping employers weather the immediate crisis. It is for this reason that Labour will not be voting against the statutory instrument tonight, even though it only represents a relatively small real-terms increase in the number of employees set to be automatically enrolled by their employers into pension schemes and a small real-terms increase in the earnings that employers must pay contributions on. I would like to take this opportunity to urge the Government not to abandon the ambitious spirit in which the original legislation was introduced in 2008, and to make sure that, once the economy has regained its strength, the Government do all they can to ensure workers are saving more and are saving earlier for their retirement.
Many experts have made the case for lowering the qualifying earnings threshold and, indeed, the minimum age. The People’s Pension, for example, has endorsed proposals to do so. It argues that millions of new savers would be created, many of whom would be women and people from ethnic minority backgrounds. Similarly, the Association of British Insurers found that employees would be able to save an additional £2.6 billion a year if the earnings trigger was scrapped. At a glance through Hansard, we can see that a large number of colleagues, many of whom have expertise in this area, from all major parties and in both Houses have also called for these changes. In fact, I remind the Government that they made a commitment themselves in 2017, in the review of auto-enrolment, among other things to remove the lower earnings limit and to reduce the age threshold for automatic enrolment to 18 by the mid-2020s. It would be disappointing if this goal could not be met on time or soon after, and I urge the Government to clarify their position on this issue.
It is also important that the Government are clear about the implications of freezing the earnings trigger and only modestly increasing the upper limit for the qualifying earnings band. Labour has pushed for this in previous years, pointing out last year, for example, that 37% of female workers and 28% of black and minority ethnic workers are still not eligible for the scheme. This is an area of pensions policy that I urge the Minister to look at most closely.
I would like to use this opportunity to provide some context for the decision that we are being asked to make tonight. We will see how the roll-out of the pensions dashboard in the not-too-distant future may benefit savers and we must do all we can to ensure that this service lives up to its potential. Similarly, it is right to work hard to continue the fight against pension scams, to increase the take-up of pension credit and to give savers more transparency around their investments. I would also like to take this opportunity to remind the Minister of a commitment that he made to my predecessor, my hon. Friend the Member for Birmingham, Yardley (Jess Phillips), about meeting the Allied Steel and Wire pensioners group, which is very concerned about its pension scheme.
I should also say that Labour supports the pensions triple lock as a way of ensuring a fairer state pension, and that we will be working hard in the coming months and years to continue to push the Government to take bold steps to use the economic might of pension funds to support the fight against climate change. I have raised these points to emphasise that there is much to do in the pensions and savings sector, and because I believe that it is important to consider the whole picture when taking big decisions such as the one being made today.
Labour wants to make this the best country in which to grow old. If we are to achieve that goal, we must be ambitious and build on the success of auto-enrolment to make it as good as it possibly can be. We should address the other issues that I identified earlier as part of that work.
I understand the case for stability in the course of the pandemic; that is represented by the order and I would not quarrel with that at all. However, the order does raise a number of issues about the Government’s longer-term intentions on auto-enrolment, which others have raised and which the Minister touched on, and I would like to ask him about that.
On freezing the earnings trigger, again, £10,000 probably represents a very modest increase in the number of people brought into auto-enrolment. The Government’s analysis refers to another 8,000 people, of whom 72% will be women, but the order does not represent any real progress towards the changes set out in the 2017 review, which, as my hon. Friend the Member for Reading East (Matt Rodda) reminded us from the Front Bench, would see contributions made for all employees aged 18 and over from the first £1 that they earn. When the review was published, the Government said, and the Minister reiterated it this evening, that the ambition was to implement those changes before the mid-2020s. We are now halfway from 2017 to the mid-2020s, and it would be helpful if the Minister was able to give some indication to us of when the legislation necessary to achieve that will be made. Is it the Government’s aim to legislate for those changes in the pensions Bill, which the Minister has said he wants to introduce perhaps next year? Is that when we can expect concrete steps to be made?
The previous Work and Pensions Committee recommended in its auto-enrolment report that, as part of their review, the Government should consider
“approaches to increasing contributions beyond the statutory minimum of 8% of qualifying earnings, including mandatory increases in employee and employer contribution rates and means of encouraging greater voluntary contributions”.
Can we look forward to progress along those lines in a 2022 pension schemes Bill as well?
As the Minister knows, and this has not previously been raised in this debate, the Supreme Court recently found that Uber drivers are workers for the purpose of section 54 of the National Minimum Wage Act 1998. That means that Uber drivers are entitled to a minimum wage for the period when they have the app switched on in the area covered by their licence. If they and other gig economy workers are entitled to the minimum wage, they may well also be eligible for auto-enrolment on the terms set out in the order. Auto-enrolment contributions might well need to be paid retrospectively in relation to them. Will the Minister set out what the Government’s view about that is? Are they considering how gig economy workers could be brought into auto-enrolment? Is there a need for legislation to address this, or is it the Government’s view that the existing legislation can do the job?
The Work and Pensions Committee has now launched the second of our three-stage inquiry to assess the impact of the pension freedoms five years on from their introduction, following the first part, which was on pension scams, which I hope we will be able to produce a report on later this month. The third part of the inquiry, which we will launch later in the year, will look at these issues around auto-enrolment for gig economy workers such as Uber drivers and for self-employed people more generally.
The Government launched a series of trials and research exercises around enabling retirement saving for the self-employed at the end of 2018. That followed a report from the Select Committee at the end of 2017, “Self-employment and the gig economy”, which said:
“Low levels of retirement saving amongst the self-employed risk storing up grave problems of potential hardship and reliance on the welfare state in later life. While auto-enrolment for employees has been a great success, current structures are not encouraging sufficient pension saving by the self-employed. The idea of using an opt-out system on tax returns to encourage greater contribution to pensions is an interesting one that merits further consideration.”
Can the Minister, following the trials, which began a couple of years ago now, indicate what the Government’s plans are for extending the success of auto-enrolment to the self-employed?
Those trials involved: marketing interventions aimed at people who previously saved, such as those being automatically enrolled while employed, to encourage them to continue their saving; marketing interventions using trusted third parties for the self-employed, such as trade bodies and trade unions, to promote the value of saving and to provide an easy connection to an appropriate savings vehicle; and behavioural prompts, including testing messages combined with prompts through invoicing services or the banking sector to try to engage self-employed people to think about starting regular saving at a point when they are receiving their income.
What has been learned from those activities over the past couple of years? When will the Government publish the findings? When does the Minister intend to take an initiative based on those findings for the benefit of self-employed people?