Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I beg to move amendment No. 232, in page 49, line 5, leave out ''average'' and insert ''normal''.

The clause inserts substitute wording into the Social Security Contributions and Benefits Act 1992. Earlier parts of the Bill insert sections into the 1992 Act; new section 171ZL(2)(d), inserted by clause 4, refers to ''normal'' weekly earnings rather than ''average'' weekly earnings. I recall the Minister telling us when we debated that provision that it was necessary to have a definition in that form—''normal weekly earnings''—because average weekly earnings could inadvertently include abnormal payments such as annual bonuses. I was therefore a little surprised to see that in clause 46, the provision to be inserted into the 1992 Act includes the phrase ''average weekly earnings''. The amendment would delete ''average'' and insert ''normal'' to probe the Minister about the justification, if any, for including ''average'' in that instance, and about the way in which that meshes with his explanation of the need to use ''normal'' in clause 4.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

The hon. Gentleman understandably, but rather devilishly, questions the significance of the use of ''average''. He says, rightly, that we debated the matter when we dealt with statutory maternity pay. However, there is a difference: statutory maternity pay is paid by the employer, whereas maternity allowance is paid by the Benefits Agency. I shall explain the difference. It may be rather tortuous, but the point is worthy of an explanation, provided it is not too long.

''Average'' is a more appropriate term in the context of the maternity allowance because earnings from more than one job can be used to work out a woman's entitlement to maternity allowance, and the woman may not have ''normal'' earnings as such, in the way that she would have normal weekly earnings from only one employer.

Take the example of a woman who has three jobs. Her earnings vary in each job, depending on the number of hours that she puts in, but she usually earns £20 a week in job one, £40 a week in job two and £5 an

hour for the few hours that she occasionally puts in on job three. Given that her wages vary, what is ''normal'' for her? The important concept for maternity allowance is the ability to add all her earnings together and average them out to calculate her weekly rate of maternity allowance. It is not the same as statutory maternity pay, where I explained that if, for instance, a woman was receiving arrears of a pay increase from a previous year which all fell in one week, it would be excluded, because the task would be to find normal rather than average earnings. In that respect, maternity allowance is different.

In 2000 we improved maternity allowance by extending entitlement to pregnant women on low earnings who did not earn enough to pay national insurance contributions. We did so by basing entitlement on the level of a woman's average weekly earnings from all sources rather than on the payment of national insurance contributions. To obtain maternity allowance a woman must satisfy two tests. First, she must have been employed or self employed—we extended the allowance to the self-employed in 2000—for at least 26 weeks out of the 66-week period ending the week before that in which she expects her baby to be born; that is known as the test period. Secondly, she must earn on average at least £30 a week.

Under the current scheme, that average is compared with the lower earnings limit for national insurance in force at the beginning of the test period. If the average is at least equal to that limit, the woman will receive standard rate maternity allowance. If it is less than that but at least £30 a week, she will receive weekly maternity allowance worth 90 per cent. of her average weekly earnings. From 2003, she will simply receive £100 a week—the biggest increase in maternity allowance since 1948—or 90 per cent. of her average weekly earnings if that is less.

Average weekly earnings for maternity allowance are worked out over a 13-week period; it is a different calculation from the one used for statutory maternity pay. The woman may choose the 13-week period in which she received her highest earnings. She can therefore take account of any period in which she was paid a bonus or other payment that boosted her earnings to maximise the maternity allowance paid to her. From 2003, we intend that the maternity allowance scheme will have even more flexibility so that the woman can maximise her average weekly earnings, reach the qualifying maternity allowance threshold of £30 and thus get the best rate of maternity allowance that she can. From 2003, she will be able to average out her earnings from the best 13 weeks in her test period.

Maternity allowance is intended to help pregnant women who work close to or during their pregnancy but who cannot qualify for statutory maternity pay because they are low paid, have more than one job, have a broken work record or have recently left employment. By enabling those women to choose the best 13 weeks' earnings from different sources and average out their earnings, we help more women to get

the financial help they need to stop work for a period around the time of their baby's birth.

We therefore believe that the expression ''average earnings'' rather than ''normal earnings'' is the correct one, in that it more exactly describes the process by which relevant earnings are assessed for maternity allowance. The Committee will note that the rules for maternity allowance are different from those for statutory maternity pay, which takes average earnings over an eight-week period ending with a fixed point 15 weeks before the expected birth. The reason for the different approach is that for statutory maternity pay there must be a method of establishing earnings close to the start of maternity leave that achieves a balance between fairness to the employee and operational simplicity for the employer. Women claiming maternity allowance might not be in employment at the time of their pregnancy and might have a more broken record of employment. For them, therefore, it is fairer to examine earnings over a longer period.

I appreciate the reasoning behind the amendment, but there is a specific reason for the difference between ''average'' and ''normal'' which I hope I have explained. I hope that that allows the hon. Gentleman to withdraw the amendment.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I just wanted to make sure that there was no mistake. The Minister could have reassured me just by standing up and saying that there was not. I am not sure that I am much the wiser for having listened to the explanation.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West & Hessle, Labour)

Shall I go through it again?

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

No, I shall resist that offer. I genuinely and simply wanted to probe to ensure that there was nothing lurking in the depths. It is clear from the Minister's explanation that there is nothing, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 46 ordered to stand part of the Bill.