My Lords, a sustainable welfare system needs to be affordable, but it also has to be inclusive and responsive to the realities of the contemporary labour market. For a long time, the national insurance and state pension system has been exclusive, indeed unfair, in its application to a particular group of workers, mainly women—a community which the department estimates to be about 50,000 and consisting of people who undertake mini-jobs. Each job delivers earnings below the lower earnings limit of £5,668, the access point for the national insurance and state pension system, but there is no provision for people with these mini-jobs to aggregate their earnings in a way that would allow them to enter the national insurance system. For example, a woman with two part-time jobs, earning £100 a week from each, will not accrue national insurance and pension rights unless she is covered by some alternative crediting arrangements. Someone earning £110 from one job would accrue. Yet £100 equals about 16 hours on the national minimum wage, so a person with more than one such mini-job could be working a significant number of hours.
Mini-jobs may be driven by caring responsibilities, work availability and, more recently, the increasingly common phenomenon of the zero-hours contract. Some of these women could gain state pension through their husband’s entitlement, but from 2016 they will not be able to build up an entitlement through their spouse because the new single-tier pension allows women to accrue pensions only in their own right. My noble friend Lady Hollis demonstrated the example of women in households who no longer have young children and whose spouse’s income floats them off universal credit being locked out of the pension system. The Bill makes the default position of entitlement through their spouse for many women disappear, which gives the problem fresh urgency.
My noble friend Lady Hollis has long campaigned to have this unfairness addressed and lists the rebuttals she has faced over the years: that it is not reasonable to try to share employers’ national insurance across mini-jobs; that the women will not want to pay class 1 contributions; that there are not very many of them; that their situation is temporary; that they have time to make up missing years; and, if all else fails, that there is pensions credit.
However, the urgency and the scale of the problem have increased exponentially since my noble friend started her campaign and those rebuttals are no longer valid. A much larger number of people with mini-jobs are affected as a result of the growing use of zero and short-hours contracts, where workers have little or no control over the hours they may be offered in any one week. The Office for National Statistics estimates that 250,000 people worked on zero-hours contracts between October and December 2012. However, its survey relied on people understanding that they were on zero-hours contracts, and the ONS has conceded that that may well have resulted in the true figure being substantially understated and that it may be much higher. The ONS is now running a survey to,
“obtain robust data directly from employers”.
The zero-hour mini-job problem is now systemic in nature. According to the Government’s workplace employment relations survey, in 2011 23% of workplaces with 100 or more employees used zero-hours contracts. Surveys reveal sector concentrations too: 61% of domiciliary care workers in England were employed on zero-hours contracts; and Unite and others report a high incidence in low-paying sectors such as the docks, retail, catering and social care, and they are not restricted by age. These workers face weekly insecurity in hours and pay and many are not building up entitlement to national insurance benefits. The DWP and the Government will have to address a problem that now has scale, is systemic and does not interface with the national insurance system.
“It is clear that they are much more widely used than we had previously thought”,
and further that:
“Our aim through this consultation is to find which options best prevent any abuse of zero hours contracts while maximising the opportunity and flexibility such contracts can present”.
This suggests he believes these contracts will be a widespread and sustained phenomenon. The noble Lord, Lord Freud, in his normal straightforward manner in Committee when responding to my noble friend Lord Browne, recognised the growing evidence of zero-hours contracts. He said that,
“the Government have estimated their costings and needs, on the basis that it is a tiny minority”,
and that this basis,
“will be undermined. He certainly makes me even more uneasy about the neglect of this group than I was before we discussed the issue today”.—[ Official Report , 18/12/13; col. GC 332.]
As my noble friend has said, little is said about the implications of these contracts for people’s access to the NI and benefit system. Universal credit may be a work in progress but meanwhile many people will be disadvantaged. A solution is needed so that those in mini-jobs and on zero-hours contracts are not excluded from the pension system. The noble Lord the Minister in Committee argued that the new systems—universal credit, real-time information and single-tier pensions—may provide a new opportunity to address this problem and to find a way of dealing with it. He said that the department intended to look more broadly at crediting arrangements to examine the possibilities of modernising and simplifying the arrangements. He was, however, reluctant to offer a timetable, implying it could take years.
Universal credit may or may not be available to help some of these workers in due course, but given the delays in rolling it out, realistically it may be several years beyond April 2016. We cannot wait that long. We need a solution that will work sooner. In April 2016 women will lose their default protection of building a pension entitlement on their spouse’s NI record; and those trapped in mini-jobs, including zero-hours contracts, are growing in number and will be excluded. A key criterion for the reform of the state system, often referred to by the Prime Minister, is that it must work for women. In this instance, it clearly does not. As my noble friend has clearly pointed out, there will still be young and single people in mini-jobs denied access to the pension system which the universal credit system does not resolve.
Already for many workers on zero-hours contracts who are low-paid, the interaction between variable hours of work and the tax credit system can be a source of concern, particularly where their hours do not fit the guidance from HMRC on regular, usual or typical hours. Eligibility under universal credit, while it is not based on a certain number of hours worked and will be based on real-time information provided by employers to the Revenue, is unlikely to be without significant problems for women and for workers on zero-hours contracts.
The new single-tier pension will be extended to cover some 4 million self- employed people—people who were previously only eligible for the lower basic state pension—a development which is to be welcomed. The political will existed to improve their position. Where is the political will which we need to deal with those doing mini-jobs, whose numbers have increased exponentially to millions?
We need a timely and fair response so that the national insurance state pension system is able to reflect the developments in the labour market and to cater for those in mini-jobs. My noble friend has suggested ways which the department could work through to find a way forward. The state pension system has not sufficiently evolved to be responsive to the modern labour market. With zero-hours contracts and mini-jobs, the scale of disadvantage embraces not only the 50,000 mini-job holders originally identified by the DWP but also the thousands—potentially millions—impacted by zero-hours and short-hours contracts.