I am grateful for the tolerance of the House in allowing me to delay speaking for a moment or two while noble Lords are leaving the Chamber. They are clearly underwhelmed by the issue that we are about to debate.
I strongly welcome the new state pension. Pensions are attached to the waged labour market. Only one job in four created since 2008 is, according to the Work Foundation, permanent; 1 million or more are zero-hours contracts with no certainty of any work at all. Hundreds of thousands of others are short-hours contracts and, along with other non-standard employment patterns such as term-time working, job sharing and so on, comprise 40% of all jobs—I repeat, 40%—as employers seek to match a flexible and irregular labour force to flexible and irregular demand.
Part-time work and flexible work may suit, and does suit, many women, students or older people on a pension. Those jobs are in cleaning, catering, domiciliary care—involving 150,000 people—hotel and retail, and are usually paid at around minimum wage level. Very many of those people will not be building a state pension. Our pension structure, both state and private, has not yet caught up. It is 10 or 15 years behind as the plates shift in the labour market.
This amendment, which is permissive, seeks to put a pension floor under workers who may work in several mini-jobs and put in quite long hours—30 or so a week—but who cannot, under rules set out decades ago, build themselves a new state pension. If they are in one job with sufficient pay they will build a state pension, but if they are in several jobs with identical pay they do not. If your Lordships agree today we can begin to do something about it.
Under Governments of both parties we have sought to credit people into the national insurance system for a state pension where, for good reason, people are not in waged work. They include mothers of young children, disabled people and carers. Universal credit, which I strongly support, will credit another 0.8 million people into national insurance, I understand.
So where are we? From 2016 you will need 35 years’ worth of credits or payments into the national insurance system to get a full state pension. If you are unemployed and on JSA, and later on UC, you are credited in for free. If you have a child under 12, are a grandparent caring for a child whose mother works or are on disability benefits or carer’s allowance, you are rightly credited in for free. Your Lordships have over the years been at the forefront of pressing all Governments to bring such groups rightly into the national insurance system. If you earn above the lower earnings limit, or LEL, at £5,700 a year you come into the national insurance system for free. If you earn more than £7,500 in a single job you come into the NI system but pay. If, however, you work 30 hours a week and earn £11,000 a year but in several, splintered jobs, you cannot add the pay together to get above the LEL. Come retirement, you do not have a decent state pension.
Hence this amendment. It seeks an entirely permissive way in which to future-proof our state pension structure for those in the new flexible economy who work in and combine mini-jobs, by allowing them to combine the earnings from several jobs for a pension if that takes them over the LEL at £5,700. In the past, perhaps 50,000 people, mostly women, were affected, especially in rural areas, as they stitched together a patchwork of cleaning, fruit picking, bar work and so on, and they relied instead on their husband through the married women’s dependency pension. That pension, which would have protected her, is being abolished. She—or you, or we—is on her own and will not get any state pension from her patchwork of mini-jobs. From now on she gets nothing at all. The reason is that the labour market has changed dramatically in the past decade or so with the growth of zero-hours and short-hours contracts.
Short-hours contracts guarantee part-time work for three, 13 or maybe 23 hours. Zero-hours contracts, however, do not guarantee you any hours at all. You may in practice work 10, 15 or more hours fairly regularly. Equally you could find at the beginning of your shift, 10 minutes before you are due to start work, that there is no work for you: you get no pay and go home. I understand that every Domino’s Pizza worker is on a zero-hours contract—ZHCs—as are hundreds of thousands of staff in McDonald’s, Boots, Burger King, Subway, Wetherspoon and Sports Direct. They work in food joints, call centres, customer services and domiciliary care; they are cooks, cleaners, drivers and waiters; they are agency workers—almost all of whom are on zero-hours contracts. Most are on, or on around, minimum wage. Far from this being a shrinking sector of the market, the number of such contracts is increasing rapidly and very many of those workers will not be building a new state pension.
How many people are affected? Labour force statistics show 250,000—from a very small sample—but everyone, including the ONS itself, thinks that this is a severe underestimate. The chartered institute of personnel directors polled 2,000 employers and believes that about a million people are on zero-hours contracts alone, excluding other short-hours contracts. The research of the Resolution Foundation and the Work Foundation works with these figures. The independent research by Mass1 of 5,000 union members for Unite includes all types of short-hours contracts, including zero-hours contracts, and estimates that they affect 5.5 million people. Some zero-hours contracts are in better paid IT or FE and above the lower earnings limit. Some may offer regular work; some may go to people who are in their 60s and are happy to amplify an existing pension. But how many who do need to build a pension are earning below the lower earnings limit of £5,700 in one job? Of these, how many are running alongside it another job, also below £5,700, which, added together, would bring them into the NI system and give them a pension? Of those, how long may they work in this way, outside the NI system, so that over the years ahead they cannot make good their shortfall? Finally, of those in several mini-jobs, how many may none the less come into the NI system through credits, because they have a child or because they are on universal credit?
My data come from all the existing research that I am aware of. With the different sample sets and with cross-cutting the findings—which I have done as honestly as I can—I can only make an estimate, so I apologise that the data do not allow more precision. Half of those under the age of 30—3.75 million, the Mass1 survey suggests—are on short-hours contracts of some form or another. Usually, they will not get credits, not even for children, or qualify for UC if they are single people, which they usually are, and living at home, as often they are. From the personnel directors’ survey of zero-hours contracts, nearly 40% work under 16 hours a week, in other words, below the LEL. Of all part-time workers in April 2013, 30% earned below the LEL, the entry point to NI, according to Unite. A third of those run other part-time work alongside their first short-hours jobs and two-thirds of those second jobs are at minimum wage or also below the LEL.
Such patterns of work may continue for many years. It is not a question of this being temporary, for students who will soon be in full-time jobs. Such patterns may continue for many years. The chartered institute of personnel directors’ polling of employers shows that 40% of zero-hours workers have been with their employers for five years or more and 20% for 10 years or more. In that time, most of them will not be building up a state pension. If in that period they cannot earn above £5,700 in any one job, they will not qualify for an adequate state pension, whatever their total wage. I calculate as best I can—it is a guesstimate—that perhaps 250,000 people, very often in their 20s, are working in two or even three part-time jobs, each of which is below the threshold but which, aggregated, could bring them into the NI pension system. Most want but cannot get more hours in any one job. They might earn £11,000 from two jobs and may even pay tax, but they cannot build a state pension for the simple reason that their wage comes from two jobs, not one, and they are not allowed to put them together.
In the past, we were told that their pay could not be aggregated for national insurance purposes because you could not divi up employers’ national insurance among different employers and that, in any case, the numbers were small, were temporary, were declining and UC would sort it. Not one of those statements do I believe to be true, and we need to rethink the issue.
UC will indeed help some and I welcome it, but it will not usually help single people—the largest group—nor usually women without younger children or households where the joint income, including his income, floats them off UC altogether. Nor are the numbers small and declining: I estimate the figure to be some 250,000, and it is growing. Given the real-time information built into UC, we now know who gets what without burdening employers. In other words, the old obstacles to aggregation have gone. In any case, do we actually need an employer’s contribution? After all, those on benefits such as JSA have no employer, do not pay and are in the system, and those in a single job earning £7,000 or so do not pay but are in the system.
This Bill rightly—and I congratulate the Government on it—brings 4 million self-employed people into the new pension system without an employer’s contribution but paying just £2.70 a week. We could bring short-hours workers, including zero-hours contract workers, into the system by credits, as we do the unemployed, or by payments, such as with the self-employed. We could use voluntary buy-back NICs when people approach retirement, except that the Government currently will not allow us to do so because it is not possible to go far enough back. The amendment does not propose a particular solution, although I can think of several. We need departmental resources to see which makes best sense. The amendment as moved is permissive and would cost no money at all.
It is said that future regulations may allow this sizeable cohort of people—I believe there are a quarter of a million or more at any one time and perhaps several million people over their working lives—to come into the NI system by whatever route any future Government may choose, or indeed not choose. It would mean that in future, if we wanted to address this issue, we would not need primary legislation because a permissive power would be built into the Bill—a statement which could be drawn down in any future policy development. Zero-hours and short-hours contracts are a growing part of our deregulated labour market.
The amendment would help to future-proof the Bill and allow us, should we see fit following Vince Cable’s review or beyond, to put a pensions platform under thousands of people who are poorly paid and deeply insecure with fractured work and yet are often unable to move on to better jobs. Why should they lose their state pension because we want services and employers want flexible staff around the clock? That should not cost them their pensions. It is the dark side of the flexible labour economy. This afternoon, with your Lordships’ agreement, we could do something about it at nil cost. Therefore, I beg the Minister to accept the amendment and to take this power for the future. We should not turn our backs on some of the most vulnerable and insecure workers in the country. They have difficult working lives. Let us not blight their pensions as well. I beg to move.