Report (1st Day)

Part of Pensions Bill – in the House of Lords at 3:45 pm on 24th February 2014.

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Photo of Lord German Lord German Liberal Democrat 3:45 pm, 24th February 2014

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 hasbeen 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.