Clause 2 — Entitlement to state pension at full or reduced rate

Pensions Bill (Programme) (No. 3) – in the House of Commons at 3:47 pm on 17th March 2014.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 3:47 pm, 17th March 2014

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 to repeatedly 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.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

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.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

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 to at least 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.

Photo of Sarah Newton Sarah Newton Conservative, Truro and Falmouth

Is it not especially important to enable women to juggle caring for young children with part-time employment? Will the Minister reassure me that the great improvements that we have made in relation to credits will continue, so that women will retain the flexibility that so many of us really appreciate when our children are young?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

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.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

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?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

We have increased our earlier estimate of the number affected from about 20,000 to about 50,000. In 2010, the last Government reduced the scope of what used to be known as home responsibilities protection by reducing the upper age of children being cared for following the end of child benefit and not being covered by credits from 16 to 12, and that has slightly increased the number affected by our proposals. We also made a technical change in starting credits for 16 to 18-year-olds. Those two factors, combined with more recent data, give us an estimate of 50,000. So we have updated our estimates, but, as the hon. Lady says, we need to take the matter further. Although we do not accept the amendment, we do accept the need to build an evidence base, and I will explain in a moment how we plan to do that.

Photo of Steven Baker Steven Baker Conservative, Wycombe

The Minister is demonstrating that for low-paid people the system is currently so complicated that they cannot tell whether or not it is worth working an extra hour. Will he make it simple for me? If the amendment were adopted, would low-paid people be worse off in that year while they were earning?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

The honest answer to the question is that because there is not enough information in the amendment, we do not know, but that might be so.

Let us take the example of someone with two jobs paying £75 a week, who does not currently pay national insurance. If the two sums were added together to make £150 and national insurance were levied on that basis, that person would then have to pay national insurance. Such people might turn out not to need the qualifying year, because they would already have 35 qualifying years. As the hon. Gentleman says, a set of people could be worse off if the amendment were interpreted to mean what we assume that it means. It may merely mean opting in for a credit, which would be a free entitlement and would therefore constitute pure gain, but in that case there would be a different unfairness. We would have people who did a single job at £150 a week who had to pay NI and somebody else who had two jobs paying £75 a week who did not have to pay NI but got a free year of national insurance. My hon. Friend highlights an important point, and I am grateful to him.

We believe the amendment is both unnecessary from a legislative point of view, because we have crediting powers elsewhere, and sets a precedent which concerns us. The amendment is not clear either. Gregg McClymont has tabled a motion to agree with the amendment, indicating that he disagrees with the Government’s view on this amendment. In a number of respects the amendment is flawed, and were he to be successful in a vote on its staying in the Bill, there would be no further parliamentary opportunity to correct it. This is the only amendment on which we disagree with the Lords, so that would be the end of the process. He would therefore have ensured that a defective clause became part of the law of the land and I am sure he would not want that to happen.

Let me give some examples of the flawed drafting. The amendment refers to the “lower earnings level”, but in fact there is no such thing. There is the lower earnings limit, which is what we imagine Baroness Hollis meant, but the amendment is unclear and we could not have in primary legislation a reference to a threshold that does not exist.

Secondly, the lower earnings limit, if that is what is meant, is normally expressed in weekly terms and has to be multiplied by 52 to be expressed in annual terms, so we would have to make sure that there was consistency. The amendment refers to a year, but it is unclear whether it is a calendar year or a financial year; we presume it is the latter. There are a whole raft of reasons why the amendment is flawed. I am sure that the hon. Gentleman would not want to put a flawed provision on the statute book, but that is exactly what voting against the Government would do.

We do not know for certain how the proposal would work, although we have a clue. If it is about crediting—about giving somebody a qualifying year without their having to pay for it—then we think that crediting ideas would fit better in section 22 of the Social Security Contributions and Benefits Act 1992 rather than as part of this Bill. Extensive regulation-making powers are available to us to modify the crediting system, if that is what is intended, so we do not think that such a proposal would be necessary from a legislative point of view.

If, however, we are talking about combining wages and aggregating and then levying national insurance, that would bring in a different set of unfairnesses. That applies particularly to the example of a person with a single job at £150 who has to pay NI and someone who has two jobs at £75 who does not have to pay that but who could be credited. That creates different anomalies which we obviously want to avoid.

On the issue of the evidence base, we have looked at people who have multiple jobs. Clearly, someone can have multiple jobs and one of them might pay above £109 a week, so the fact that someone has multiple jobs does not of itself exclude them from national insurance. Each job has to pay below £109. Of course, some people do not go above £109 even when their multiple jobs are put together—someone who does two lots of babysitting, perhaps, or a couple of cleaning jobs—so presumably they would not qualify. We are therefore talking about a very specific group of people with multiple jobs which together take them over £109, but neither of which is over £109 on its own.

We also would not want to include in our figures those who have children, those who are doing multiple small jobs because they are carers, or those on universal credit, because they would all be credited in. There are quite a few people with two or more small jobs, but Members can easily see that it is a big leap to the assertion that there is a big problem. Furthermore, as I have indicated, the fact that in any given year a person is in that situation may have no effect on their eventual state pension, because it depends on how long they are in that situation. We therefore need more evidence before we rush to policy conclusions.

We take seriously and respect these issues, so let me explain how we propose to build up an evidence base. First, we need to look further at the characteristics of people in such situations—who they are and how long they might have that kind of working pattern. Secondly, we commit to updating and revisiting our 50,000 figure to make sure it is the latest available. In that context, before moving on I want to say a few words about the issue of zero-hours contracts, as I have a feeling that might come up in our debate.

It is said that zero-hours contracts are a growing part of the labour market; the recent official figures substantially increased the estimated number of people with zero-hours contracts. There is some suggestion that the number of zero-hours contracts certainly has not risen as quickly as the figures might suggest, and that because of the discussion of this issue in the media, people are more aware that that is the kind of arrangement they have; the Office for National Statistics has urged caution in assuming that there has been this big surge in zero-hours contracts. However, I am pleased to be able to tell the House that the ONS is undertaking employer research into the use of zero-hours contracts, which should, I believe, be published next month and provide us with some robust evidence on the scale and use of that form of contract.

Although zero-hours contracts are a feature of the modern labour market, they are not what we are talking about in this debate. To be clear, we are talking about people having two or more mini-jobs which together take them above the £109 threshold. They might be zero-hours contracts, but there is no reason to assume that a zero-hours contract is a mini-job, that it results in someone earning less than £109, or that people who have zero-hours contracts have multiple jobs. Those are all dirty great leaps to an assumption that we are not entitled to make on the basis of the data.

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.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East 4:00 pm, 17th March 2014

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?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

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—

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

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

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

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?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

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.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

I shall of course be disagreeing with the Government’s disagreement with Lords amendment 1.

Let me begin by putting the amendment and the labour market issues it pertains to into some context. Since 2008, only one quarter of the jobs created in this country have been permanent. There are hundreds of thousands of short-hours contracts and, according to some figures, approximately 1 million zero-hours contracts, in addition to other non-standard job patterns. Some 40% of all jobs are not the permanent, full-time positions that we traditionally associate with the UK labour market. That context is important to bear in mind: the Minister rightly referred to the need for the pensions system to keep up to date with changes in the labour market, and that is the reality of the labour market we are now all living with and working in.

The labour market structure needs to be seen alongside the structure of the state pension system. The Minister alluded to that, but as things stand, by 2016, under the Government’s state pension reforms, people will need 35 years of contributions to get a full state pension. Alongside that is the system of credits, which has been mentioned and others will doubtless refer to. Someone who is unemployed and on jobseeker’s allowance gets credits for the state pension, as does a working mother who has a child under 12. A grandparent caring for the child of a working mother can get credits for the state pension, as can someone on disability benefits or carer’s allowance. It is important to recognise those points in the context of an ever more complicated labour market.

The amendment is clear that it does not propose a particular solution. It is a permissive amendment and relates clearly to job insecurity issues and the changing nature of our labour market. The House had a very interesting debate on job insecurity at the beginning of February that covered a number of important issues, yet during it, the pensions aspect was not raised. That reflects the extent to which we are all trying to catch up with this non-standard labour market—the shift from the full-time permanent employment that has historically characterised work in this country.

The Minister said, I think, that those who support the amendment should be aware that the Department for Business, Innovation and Skills is currently assessing zero-hours contracts. He is absolutely right, but if the Government accepted this permissive amendment, the DWP would be poised to respond swiftly to the BIS zero-hours contract review.

The amendment seeks to future-proof the Bill, to construct a pensions platform underneath the poorly paid—those in deeply insecure, fractured work—and to make it clear that this House believes that they should not lose or be denied a full state pension because of changes in the labour market structure which are not of their doing.

Let me deal with some of the other points the Minister made. I shall begin at the end, so to speak, with the extraordinarily attractive offer that he made. He said that the Government are committed to a literature review and to an analytical stakeholder forum. One can hardly wait. He suggested that there are 17 logical flaws in the amendment. I am sure that Baroness Hollis would be delighted to hear all 17—assuming he has not just come up with that figure spontaneously—and it would be useful to know what they are. After all, we all believe in saying what we mean and meaning what we say.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 4:15 pm, 17th March 2014

For the avoidance of doubt, I think the hon. Gentleman will find that the record shows that I did not say there were 17 logical flaws in the amendment. I said that there were 17 logical flaws in leaping from the assertion that there are lots of zero-hours jobs nowadays, to this amendment. My point was that it takes an awful lot of logical assumptions, all of which are false, to get to the amendment.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

Of course Hansard will tell this story, but it was a short quote and I think I managed to get it down correctly. If the Minister is saying that it was not that there were 17 flaws in the amendment, I am sure the whole House is delighted to have that clarification.

Let us probe a little further into the Minister’s argument. He says that on the Government’s estimates only about 50,000 people are affected, that there should be no “rush to solutions” and that the amendment is flawed technically for many reasons—but perhaps not 17. He says that the Government need to build their evidence base on the issue. Interestingly, he said that the Office for National Statistics has urged caution about the notion of an upsurge in zero-hours contracts. His point was, and the ONS’s point is, that it might be that individuals are more aware that they are on such a contract than that the upsurge has been so great. If that is the case, it does not negate the point that there are a significant number of these sorts of contracts around, and that has significant implications for a state pension system based on contribution.

I asked the Minister about the 17 logical flaws, but his argument also was that we do not know enough to go forward with an amendment to solve the problem. However, he also said he understands that the average zero-hours contract gives an individual between 15 and 20 hours of work a week. Is that his estimate or is it based on research? In a world where we are not precisely aware of the figures involved, there is a danger of bandying around our own figures without a relevant citation.

What situation are we trying to deal with through this amendment? As I said, we have an increasingly fractured and insecure labour market, and the question is whether individuals in that labour market and the pension system relating to that market are appropriately structured and linked. The amendment, introduced effectively in the other place by Baroness Hollis, seeks to deal with what is, on any measure, a significant problem. We welcome the fact that the Bill brings 4 million self-employed individuals into the state pension without an employer’s contribution, and of course those self-employed people pay £2.70 a week. The amendment’s thrust is that we need a similar approach for short-hours workers. The Minister rightly said that this is not just about zero-hours contracts; it is about the insecurity of short-hours working in the labour market more broadly and matching that up effectively with a universal state pension—the Minister is keen on that.

Photo of Susan Elan Jones Susan Elan Jones Opposition Whip (Commons)

I have been listening to my hon. Friend and to the Minister, and I was alarmed by the Minister’s statement that people on zero-hours contract “could” be okay, be that to do with their working arrangements in other areas or the fact that they may work a sufficient number of hours. That implies that they also might not be okay.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

As usual, my hon. Friend makes a pertinent intervention.

There is an issue to address and the question is how to do it. The Minister suggested that Baroness Hollis’s amendment, which my colleagues and I agree with, prescribes a specific solution, but of course it does not; it is a permissive amendment. As the Minister, using that fertile mind of his, started to think about different solutions, one could see the point of the amendment even more: to give him and his colleagues in the Department for Work and Pensions the authority to think carefully about how to solve this problem. He gave a number of ideas as to how it might be solved, which was when we particularly saw the function of this amendment. It would bring the best minds in the DWP together to deliver a solution, and it would remove the need for subsequent primary legislation. So, by his own words, the Minister gives succour to the amendment.

The amendment has a clear purpose: it is a permissive amendment to enable the Government to more finely match the state pension reform that the Minister is introducing with the nature of the modern labour market. He talked about estimates of the number of individuals involved. As he will know, Baroness Hollis has come to a different conclusion about the number affected and is very clear that the universal credit, which he mentioned, will not help the largest group—single people—nor, usually, will it help women without younger children or households where the joint income, including the man’s income, floats them off universal credit altogether. She calculates the number of individuals affected as being 250,000, which is a very different figure from the one the Minister gives. Universal credit, which he said would ameliorate the problem, will not help single people, women without younger children or households where the joint income, including the male income, floats them off universal credit. It is important to put that on the record. If a significant number of people are affected by this and if the Minister wants to make the state pension as universal as possible, as the Opposition believe he does, it would seem sensible for him to accept a permissive amendment allowing him to go forward on the basis of his thoughts about the various ways in which this might be taken up by the Government and to get cracking on it. The fundamental point is: why should those who, through no fault of their own, are in short-hours working or zero-hours contracts—those various kinds of flexible employment contracts—be denied the benefits of a full state pension?

The Minister said that the problem is not as significant as Baroness Hollis has suggested and that someone would need only 35 of 50 years in the labour market to qualify, but the issue is that where people spend significant parts of their life on these contracts, what is meant to be a universal state pension does not necessarily become one.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I sense that the hon. Gentleman is concluding. The amendment is flawed in a number of respects. For example, it refers to a lower earnings level, but there is no such thing. Does he not have any qualms about the fact that if his vote were to succeed, he would be putting flawed legislation on to the statute book?

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

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.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

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.

I can understand a Minister saying in Committee that an amendment is flawed and could perhaps have been better expressed. However, given that we have been at this for some months and that there has been such interest in the matter, which goes right back to the evidence session and before, it is disappointing that an effort has not been made to reach out and say, “We think this is flawed, but this is what we can do about it to make it real.”

I am not convinced that the time scale suggested by the Minister is sufficiently energetic to allow this matter to proceed. Even if there are only a few people who fall outwith the other categories, they are none the less real. As my hon. Friend Gregg McClymont said, universal credit—even if does emerge in its full form, which is slightly doubtful—is not the complete solution. Those women who, in the past, depended on their husband’s contributions will no longer be able to do that and will not qualify for universal credit if their household income lifts them above the required level. I am disappointed that the Minister has not found a solution to the matter so far, and regret that he has not used this opportunity to do so.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 4:30 pm, 17th March 2014

Let me respond briefly to the debate. On the issue about the typical number of hours worked by someone on a zero-hours contract, I said 15 to 20 from memory, but the exact figure is 20 hours. The ONS estimates that the average number of hours worked by people on zero-hours contracts in 2013 was more than 20 hours. There is a danger that when we hear the words “zero hours” we assume that it means there is no money coming in. However, it simply refers to the number of hours guaranteed under the contract. Lots of people with zero-hours contracts are building up full qualifying years.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

Of course the Minister will be more than aware that averages can hide a multitude of sins; I am sure he accepts that.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

Yes, I do. The point is that 20 hours on a minimum wage would get someone above the lower earnings limit. If half of everyone on zero-hours contracts are doing more than 20 hours, we can immediately say that they will qualify, and those doing slightly fewer hours will also qualify. The link between zero-hours contracts and multi mini-jobs, which is the subject of the amendment, is, at best, unclear. In extremis, it could be that no one on a zero-hours contract is even covered by this amendment, if they have only one job at a time and no other job. We do not know and nor does the hon. Gentleman. Our sequencing is evidence first and policy next; the Opposition’s is the other way around.

The hon. Gentleman refers to the emerging labour market, and chose 2008 as his base because that enabled him to get a figure that worked for him. However, let me bring him right up to date. In the past year, the number of women working full-time increased by 270,000 while the number of women in two jobs, which is germane to the amendment, decreased by 25,000. The suggestion that there is some sort of inexorable rise might be wrong. If we were to update our figures, we might find that the number has continued to go down. There is a whole raft of statistics I could give the hon. Gentleman, but to assume that this is a vast issue and that the numbers are inexorably rising is far from the case.

The case of Sheila Gilmore is that even if only one person were in this situation, we should fix it, but there is an issue of proportionality here. To set up the lightest touch crediting regime based on past precedent would probably cost about £1 million and more than £1 million to run. One must always ask the question—as least we do on the Government Benches—about value for money. That is why we need to know how many people are affected, who is affected and the best way to deal with the issue.

Finally, when the hon. Gentleman was asked whether he cared about putting flawed amendments in the Bill, he essentially said that he did not; he simply wanted to make a political point. That is regrettable. As legislators, we are voting today on legislation. This is not an Opposition day debate where he can make a point. This is deciding what goes into the law of the land. I am rather disappointed that he feels that it does not matter if an ambiguous and unclear amendment, which uses terms that have no meaning in reality, should just go in the Bill, so that he has the chance to have a vote and put out a press release. That is obviously where he is coming from. I regret that, and urge the House to disagree with the Lords amendment.

Question put, That this House disagrees with Lords amendment 1.

The House divided:

Ayes 274, Noes 198.

Division number 233 Pensions Bill (Programme) (No. 3) — Clause 2 — Entitlement to state pension at full or reduced rate

Aye: 274 MPs

No: 198 MPs

Ayes: A-Z by last name


Nos: A-Z by last name


Question accordingly agreed to.