Pensions Bill

Lord German Excerpts

Monday 24th February 2014 Lords Chamber

[Lord German (LD)]

My Lords, the issues raised by this amendment are important, and I congratulate the noble Baroness, Lady Hollis, on her dedication to the issue over many years. She kindly told us in Committee how she was rebuffed by her own Government and today she repeated the argument that they used against her: one could not reasonably divvy up an employer’s national insurance—she used those words today again—if there were two or more such jobs. She further told us that women would not want to pay class 1 contributions. For that reason, this is an important issue. We are looking at people being able to contribute to their own pension and get the credits that they need to win a full pension in under 35 years.

Much of the discussion that noble Lords have heard today and in Committee has been about the way that people behave individually in response to the issues in front of them and about how people’s live are dealt with. The problem that we face is that there are no reliable statistics or evidence that show how individuals’ behaviour works. It is clearly possible—I heard it both in Committee and here today—to illustrate that in a way that works to the best of the argument that says that we need to move on this swiftly because there are so many people involved in a particular category. I do not mind people making contributions about the way people behave, will want to behave or are forced to behave, but I want to know how we can sort this problem out and do so in a realistic way that will result in a concrete outcome.

We are bound to hear more and more about zero-hours contracts. They are not a new phenomenon. Over the past 70 years, the notion of a job for life has all but disappeared. More and more people are spending time in self-employment, many people have more than one job and more people have part-time jobs. The single-tier pension itself is designed in such a way that an individual with a more varied work history will be able to build up their national insurance records to achieve the maximum state pension outcome, provided of course they get credited for their national insurance contributions.

The crucial issue, therefore, is whether universal credit will pick up and deal with this issue. I suspect that the answer given to the noble Baroness, Lady Hollis, when she raised this issue with her own Government, was that this is a very typically difficult issue for HMRC, given the range of information that it would require from every company in the land about who they employed and that it would have to combine the results and put them into a single file. That is of course precisely the process that is taking place, and will take place, through universal credit, which will pick up levels of flexible income including, by implication, that relating to zero-hours contracts. It is interesting that the lower earnings level, below which you do not have to pay or get credit for national insurance contributions, is £5,772 per annum at present. The Labour Force Survey figures show that those on zero-hours contracts work, on average, 20 hours a week at £9 an hour, which is enough to exceed the lower earnings limit. If the figures we have before us are to be believed, most people will be receiving enough income to receive the national insurance contribution.

The other issue about universal credit is that it will look very carefully at how it credits people and bring, as we have heard, another 800,000 people into the crediting system. For example, a single person without savings, earning below that £5,772 per annum level, will be eligible for universal credit and thereby eligible for the national insurance contribution. The question that I have to ask my noble friend is about the delivery of universal credit. In Committee, the Minister said it would be delivered in 2016-17 and the noble Baroness, Lady Hollis, said in 2019-20, although she hoped it might be earlier than that. I apologise if it was somebody else on her Benches but those are the sorts of span. If we believe my noble friend, and it is 2016-17, will this problem be dealt with from the outset by those who are then brought into the universal credit system? If that is the timetable, I ask noble Lords to consider how long it would take to put in the interim solution. In effect, what is being asked for is an interim solution between now and when universal credit comes in for a pensions system that comes into play in 2016.

What is the interim position? Do we need to ask HMRC to invent a system for itself? When the noble Baroness, Lady Hollis, asked the Labour Government for one in their time, they rejected it. I believe they said that it would be cumbersome and expensive. Do we need to have that in place or could we be reassured that, almost within the very short period of the implementation of the single-tier pension, universal credit will be in place in a sufficient and timely position so that the vast majority of people who are occupying two or more jobs that produce an income over a year of less than £5,772 at the current rates will be able to be credited? That is the key question.

[Lord Forsyth of Drumlean (Con)]

I did not participate in Committee but I am listening to my noble friend’s carefully constructed argument. Is not the point about this amendment that it is permissive? It simply provides the Government with an alternative; it does not oblige them to do anything. I cannot really understand why my noble friend is opposing the amendment while advancing that argument.

[Lord German]

It is because we have a response in place, which is the universal credit system. What matters more than anything is that the system is in place in time to capture the people who will be most affected by this in the implementation years, from 2016 onwards. That is the fundamental question and I await the answer in my noble friend’s response.

[Lord Browne of Ladyton (Lab)]

My Lords, I support my noble friend’s amendment—and, having listened to the contribution of the noble Lord, Lord German, I am delighted that I do not have to answer the questions that he posed. I suspect that the noble Lord who is the Minister for Welfare Reform had wanted to avoid having to give a date as to when the universal credit system will be functioning well enough to provide the sort of functionality that the noble Lord, Lord German, seems to think that the alternative to this amendment requires. I will listen carefully to the Minister’s response and write down any date that he gives us in relation to that. It is also a pleasure to follow my noble friend Lord Morris, who speaks with significant experience of, and great authority about, the workings of the modern labour market, and who has assisted us greatly in understanding the need for this amendment.

As my noble friend said, this issue was debated in the Commons and in Committee at some length. I have considered carefully the various government responses, as my noble friends Lady Hollis and Lady Drake clearly have. They are to be congratulated for having produced here what could be described as an elegant, permissive, statutory device that adds to the Minister’s armoury in his desire,

“to seize this issue head-on”.—[Official Report, 18/12/13; col. GC 328.]

He used that phrase in our debate when he expressed equal concern—the words are mine—as the rest of us about this issue. I believed, as did all those who were present debating the issue, that he shared our concerns. Indeed, in his contribution to the debate he indicated why he had come to that conclusion.

In support of the arguments that I set out in my own contribution in Grand Committee, I simply want to make three points today. First, the phenomenon of people working in two or more low-earning jobs is not a limited one. They are often on zero-hours contracts but certainly on short hours, with each job under the level at which national insurance contributions are made, and are therefore not building up a contributions record towards the state pension. Nor indeed is it a temporary phenomenon, as has been argued, often coming at the end of a working life. Nor is it an experience limited to rural communities, although it is very prevalent there.

Since I shared the content of my overheard conversation on the Transport for London overground train, I have consciously inquired of young people whom I meet in this city and back home in Scotland how many of them are working for more than one employer. For noble Lords who have not heard this short anecdote, I will repeat it. A few days before we debated this matter in Committee, I overheard a conversation among three young people on an overground train as I was making my way home from your Lordships’ House. It was very clear to me that they had all been working together in what I suppose we would call a mini-job and that they each had two other jobs.

What was significant about them was that two were graduates and the third certainly had a tertiary level of education. I found that surprising. I do not know why I found it surprising, but it caused me to inquire the same of other young people, and I have come to the view that this is the norm for thousands of young people in the first phase of their employed life, even for graduates. It is a significant feature of a flexible labour market and, along with zero-hours contracts, it is part of the reason that politicians, particularly Ministers, and employers celebrate its flexibility. Undoubtedly the number of people in this situation is growing, not declining.

The question of numbers leads me to repeat a point I made in Grand Committee, which has already been made by my noble friends. The Government assert that there are about 50,000 people in this category. I am not convinced by their estimate of the scale of the problem. That is based not on my experience but on evidence that has already been referred to. We await the outcome of the—I think still anticipated—BIS consultation on zero-hours contracts, which was promised in October and is due to report by the end of March, but I have not seen a lot of evidence of it. We should reflect on the fact that in the fourth quarter of 2012, the ONS estimated that there were 250,000 people on zero-hours contracts. However, a contemporaneous survey of employers by the CIPD estimated that in fact the figure was around 1 million.

As we have heard, the union Unite estimates that as many as 5.5 million people are employed on such contracts up and down the UK. Following the CIPD estimate, the ONS conceded that the Labour Force Survey, which is based on responses by individuals, more than likely understated the numbers. The ONS then announced, as my noble friends have told your Lordships’ House, that it would change the way it collected its data from autumn 2013,

“so as to obtain more robust data”.

The importance of this contradictory information is not that it goes directly to the heart of the estimate from the Government, but that clearly it must have informed the Government’s estimate. None of the estimates that the Government have for the scale of this problem is at all reliable. Therefore, your Lordships cannot be convinced that a strategy based on unreliable statistics is a reliable strategy.

Finally, the Government’s responses appear complacent. Steve Webb, the Pensions Minister, suggested in the Commons that there was only a tenuous link between having multiple jobs below the LEL and being unable to build up the required 35 years’ contributions, and referred to this problem as a temporary phenomenon. In our debates in Grand Committee, the Minister promised that universal credit would resolve the issue. The noble Lord, Lord German, has already gone through the pros and cons of that in some detail, and my noble friend Lady Hollis significantly undermined that argument by pointing out the categories of people who are in these jobs who would be denied universal credit in the first place and therefore the consequent crediting of national insurance contributions.

I say with respect to the noble Lord, Lord German, that that is the one point of our argument that he did not engage with. Even if universal credit is the answer for some of those people, it cannot be the answer for all people in this category, and in the absence of reliable statistics, it is not easy to see what proportion of people would benefit from a universal credit system that met the coincidence of engagement with the challenge that the noble Lord, Lord German, set out.

What do we need? We need an alternative. We can have no confidence that the approach of either the Pensions Minister or the noble Lord, Lord Freud, will be sufficient. If it is not, the net effect will not only be to deny access to the modern pension system to a significant number of people, most of whom will be the least well paid working people in our society. As the numbers grow—and they will—it will also, in the long term, severely undermine the pensions policy that is now agreed across your Lordships’ House, because it will increase the number of people who have to depend on means testing in retirement.

We support the amendment tabled by my noble friend. We want to make it clear that this is a solution for now, in the context of the Bill. We hope the amendment will be agreed and will become law. It will then be for the Government to take it away and for the Minister to seize the opportunity to use it to address the issue head-on.

--- Later in debate ---

[The Lord Bishop of Wakefield]

My Lords, having been one of the signatories, along with 26 other Anglican bishops, to the letter that went to the Daily Mirror last week, I am loath to speak too much about amendments to government legislation. However, on this particular occasion, because bereavement support is such a notable part of our business and ministry, I am very bothered about the direction in which the legislation is going.

I should like to reinforce what was said earlier by the noble Baroness, Lady Hollis, about cost. It seems to me that it is not a question of cost but of how long support is given to people. What many clergy learn and what people often forget is that, as the noble Baroness said, it is not just the first three months which are difficult—the problems continue throughout the whole of the first year. More than that, it is a matter of showing support for people over the whole period of time that the emotional pain of bereavement continues to be very severe. The issue of supporting people financially has an impact on that emotional pain.

Speaking on behalf of a group of people who spend so much of their time trying to support those who have been bereaved and who need to understand how they can be helped, we might take good note of these amendments. They will not cost more money. They have been tabled simply to try to offer more support over a longer period of time—not only in the raw first year, but over the first three or four years, and particularly where young children are involved and the emotional impact is even greater.

[Lord German]

My Lords, these are delicate and sensitive issues. I pay tribute to the noble Baroness, Lady Hollis, for using her ingenuity to make sure that these issues are right at the forefront of our discussion on Report. The major issues have already been raised and were expressed from these Benches both at Second Reading and in Committee. The evidence I quoted from the research literature on these matters identifies absolutely clearly that one needs to be extremely careful when dealing with these very difficult times for families. Indeed, what we should recognise is that some people may be able to regain a sense of normality more rapidly than others. You cannot make a distinction or see clear lines between one family and another. It seems that this is very much about the circumstances in which people find themselves and how those positions are managed and handled. The issues raised by these amendments have to be a source of major concern to Members on these Benches, and as I say, they were raised earlier.

I am grateful to my noble friend Lord Freud for giving us an opportunity to discuss these matters in considerable detail between the Committee stage and today, and to help shape a Government response which adequately meets the concerns expressed. An adequate response from the Government has to satisfy the discussion we had in Committee and be highly relevant to the issues already raised today in this Chamber about these sensitive matters, particularly relationships within families. I want to see a process that meets the issues and was raised in that evidence. This is what I want to challenge and talk to my noble friend about.