Automatic Enrolment: Lower Earnings Limit

Part of the debate – in Westminster Hall at 5:06 pm on 12th March 2019.

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Photo of Guy Opperman Guy Opperman The Parliamentary Under-Secretary of State for Work and Pensions 5:06 pm, 12th March 2019

We are getting slightly off topic, but I am very happy to make the point that in 2010, when the coalition came into government, the living wage—the minimum wage as it was then—was £5.80. It is now £8.21, going up to £9, as the hon. Lady will be aware. I am happy to have a discussion about the tax threshold, which means that individual members of our communities have a huge amount more in their pockets. The tax threshold was £6,500 in 2010. It is now going up to £12,500, which will make a massive difference to the individual take-home.

All those things are good things. There is also the benefit of free childcare. We have gone from having no free childcare available whatever, up to 15 and 30 hours. It depends on how one values childcare, but taking it even on a very low basis, individual low earners would have the benefit of 30 hours a week free childcare, in those circumstances where that applies. If they have 30 hours a week childcare, that is a benefit of £150 a week minimum. I have worked it out on a £5 basis, but other statistics could give the rate.

My point is that if one looks solely at individual earnings on a long-term basis, taken in isolation that is one thing, but we also have to look at the impact of the rise in wages. It may not be as high as the hon. Lady would like, but she is making my point, so I will stop being partisan and saying, “Aren’t we doing well on the living wage, the tax threshold and childcare?” Park that for a moment. Some of those matters are burdens on individual employers.

The harsh reality is that the corner shop in the hon. Lady’s Paisley constituency, or the coffee shop—forget about the big employer—is now paying a considerably larger wage bill, because the low earners who were previously on the minimum wage are now on the living wage. The larger employers are also potentially paying the apprenticeship levy, and in April will pay up to 3% on auto-enrolment. The engagement that took place in the 2017 review indicated that time should be allowed before we reassess the way ahead. I am absolutely sure that there should be consideration of that. I accept that there is pressure on that.

I will try to address the other couple of points that the hon. Lady made, before moving on to some of the other questions. She asked about the reduction of pensions tax relief and the difference between net pay and relief at source. It is entirely right to raise those matters; she will understand that they dealt with by the Chancellor and the Treasury.

The idea that I have full control over the spring statement or the Budget, as Neil Gray suggested, is something that I think we all understand is not the case. I do not have advance sight of the spring statement, but if he wishes to push for my promotion, I would be very keen for that—not that I want to be promoted, because I actually enjoy this brief.

The reality of the situation is that there is clearly a difference between relief at source and the net pay arrangement. It is acknowledged; there is no question but that something must be done on an ongoing basis. HMRC and the Treasury are aware, and there is ongoing discussion with them on that particular point.

While I am dealing with the Treasury, the question was raised about where we are in relation to long-term tax relief on pensions. Again, that is a matter for the Chancellor, but although I accept that there was some discussion about it in some comments made before the last Budget, hon. Members will be aware that there was no fundamental change to the tax relief on pensions.

I have rather disregarded my speech, but I will go back to a couple of key points. First, hon. Members will be aware that we debated this matter briefly in January, and the House debated and then agreed that the lower and upper limits of the qualifying earnings should be aligned with the national insurance earning bands in 2019-20, at £6,136 and £50,000 respectively. Not only does that provide stability and harmonisation on an ongoing basis, but we maintained the earnings trigger at £10,000, meaning a real-terms decrease due to anticipated wage growth, which brought an additional 40,000 savers into automatic enrolment, three quarters of whom were women.

I will address a couple of the other points raised. The hon. Member for Lanark and Hamilton East, whose constituency I know very well, having ridden at the Overton point-to-point far too many times—not very well; I did not win there—will be pleased to know that there are 14,000 individual employees in her constituency who benefit from the automatic enrolment. She specifically raised the issue of somebody aged between 16 and 22 who was earning but not able to get access to a pension. It is not often known—I have the great delight of telling the House this and urge the hon. Lady to tell others—that that individual aged between 16 and 22 can opt into an automatic enrolment pension with their employer. They have the ability to do that. Similar comments apply to the self-employed; they can opt in and be addressed on an ongoing basis.

The hon. Member for Airdrie and Shotts called for a pensions commission. With respect, we had that: it was called the Cridland report, an independent pensions commission to which all political parties, including the SNP, along with trade unions and the Labour party, made submissions. Whether they agreed with it or not, it was definitely the case that they made submissions.

On the self-employed, the reality is that we are continuing to expand in a great deal of detail the trials that are going on. We are considering the Taylor review, and it is my strong view that we should expand that more. I am certainly pressing to ensure that the self-employed have greater access to a pension.