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Pensions Bill [HL]

My Lords, I hope the wording of this amendment is reasonably clear and self-explanatory, although I am absolutely sure that it is technically deficient, but I do not think that matters for the purposes of Committee stage. I think we all agree that it is essential to bring as many men and women as possible into the state pension system. That has been aided by past changes, which we mentioned earlier—for example, the Labour Government’s changes, which were carried with all-party support. The number of qualifying national insurance contribution years was reduced to 30 from 39 for women and 44 for men. Other groups, including carers not doing heavy-end caring but caring for 20 hours or more, were brought in. We allowed the amalgamation of hours of caring to bring people, including grandparents, within the basic state pension system. In all ways, we have sought to bring more people within the basic state pension system. However, there is leftover business, which this amendment seeks to address. I am very grateful to the Minister, who has taken a very constructive attitude towards this issue, and I am hoping that he may have found a way through for us which has been unavailable to us in the past. As a result of all the changes to the national insurance system, we expect that about 90 per cent of men and about 90 per cent of women will have full coverage of the basic state pension certainly by 2020 and maybe earlier than that. However, there is still a key group of people, among other small groups, who remain outside the basic state pension through no fault of their own, who are in the waged labour market, especially women with a portfolio of mini-jobs. Individually the jobs may be six hours or eight hours and the women may hold three or four such jobs together, but at present you are not allowed—and we do not have the technology—to add those hours and those wages together to bring somebody into the NI system. Oddly enough, if you are a lone parent and are entitled to tax credits at 16 hours, you are allowed to add those hours together for tax credit purposes but not for NI purposes, except that the tax credit itself would then give you a right into the national insurance system. So there was a rather complicated loop through for some women in the past, but we were not able to do it directly. The stats are flaky, and we raised this issue at Second Reading. My latest information—which may have been superseded by the Minister’s information—is that there are some 50,000 people, mostly women, with more than one part-time job. For upwards of 15,000 women, the summation of those jobs might take them into the national insurance system and therefore into the state pension if they were able to add those jobs together. At Second Reading, the Minister helpfully reminded us that some 250,000 women might be coming into the mini-job scenario in the future under universal credit who might find themselves in a similar situation. The problem is likely to increase rather than decrease. Why do we need this change? I suggest three reasons. First, it seems to me entirely fair that women—and they are nearly all women—should qualify for the full state pension by the fact that they are in the labour market, whether waged or unwaged, especially given their precarious financial situation. It seems unreasonable, if you are working 16, 18 or 20 hours, however that is split up, that you should be denied access, which you have earned, to the national insurance system and therefore, above all, to the state pension system, particularly given women’s precarious financial situation which remains, even though we have made it much easier for women, along with men, to enter the NIC system. Secondly, particularly in rural areas, it is quite difficult for women to find a full-time job of over 16 hours a week if they wish to do so. I come from Norfolk, and the women I know in the more rural areas of the county mix and match according to season. For example, their jobs may include picking mushrooms, cleaning boats, caravans or private houses, being a lollipop lady, making sandwiches during the summer season or doing bar work. It is a mix-and-match. Even if women wish to build a mini-job into a job of over 16 hours a week in a clean, simple way, they are not available to very many women, particularly in rural areas, where decent jobs are in very short supply. All they can do is add another mini-job to their existing mini-job, and their portfolio may eventually take them over the 16 hours. Those mini-jobs are extremely valuable to employers in giving them a resource of very flexible labour. It may be a couple of evenings of bar work when there is the most customer demand, it may be part-time work at a newsagent’s or launderette when there is the most demand, or it may be work in a shop or a supermarket where there is the most demand. To my knowledge, a number of employers keep an employee’s hours under 16 hours in order to avoid paying the NICs that would become due when she goes over. Receptionists have told me time and again that their hours are capped quite deliberately by their employer. If I may reiterate, the first reason is that I think that it is simply fair that if you work the hours you should be able to come into the national insurance system; the second is that, for many women, a mix of mini-jobs may be the only way that they are going to be able to put together an adequate or appropriate income for themselves, and it is a useful form of flexibility for the employer. The third reason was advanced by the Minister, which is that the whole thrust behind universal credit, and one which I strongly support, is that work pays and that six hours pay more than four hours, 10 hours pay more than six, and 16 hours pay more than 10. At the moment, as your Lordships will know, you may get a disregard for the first two to three hours of work, particularly if you are a lone parent. At 16 hours, you will then click into adequately paid work because tax credits will double your minimum wage and therefore your take-home pay, but between two to three hours’ work and 16 hours, there will be 100 per cent deductions from your wages. That is an incentive either not to work or to go into the fraud economy. I would not like to speculate on which of those women choose. For the most part, what is clear is that the noble Lord’s strategy of a universal credit will reward and encourage women to go into part-time jobs. Those mini-jobs may be bundled together into a portfolio of mini-jobs, or may they lead on to a fuller job in due course, particularly as women’s children get older. However, it is essential to universal credit that work pays, even in mini-jobs, because we know that the best predictor of a full-time job is when someone had a mini-job the year before. Given that, and for the purposes of universal credit, the Minister will need to have all the information from the mini-jobs coming into the system in order to calculate the universal credit. It therefore seems to be perfectly feasible, which it has never been before, to send back to employers as well as to employees the information on whether there may be any national insurance consequences. Then there is the question of what should happen after that because the other disincentive and barrier to bringing women with a portfolio of mini-jobs into the national insurance system and therefore the state pension system has been not only the fact that we have not had the computer information, but the problem of divvying up the impost on the employers—some of whom may have been paying for six or eight hours’ work—regarding who pays what proportion of what NI. Given that there will be a computer system that brings in that information from employers—from possibly two, three or four sources—and will put it together for the individual to calculate the universal credit that may be payable to a woman who is below the universal credit target income, we can obviously do that on a technical basis, but how should we do it? My suggestion—which was prompted by an e-mail from the department, for which I was grateful, because it helped to clarify my thoughts—is that for the purposes of NI, we should treat the bundle of mini-jobs exactly as if those hours and earnings had been acquired by a single job. In other words, if the woman earns above the lower earnings limit of £5,200 or so, but below the earnings threshold of £7,450, she will be credited in, as she would be now if she were in a single job that paid between those amounts. If she earns above the threshold, and if she is working 16 or 18 hours and therefore pays national insurance, because her hours from her mini-jobs put her in that position, she should be treated in the same way. As we now have the technology, we can then debit back to the employers their pro-rata contribution. However, the noble Lord, Lord Freud, may know a more acceptable way of handling this than I have come up with, but it seems to me that it would be fair to treat a portfolio of jobs in the same way as if a person had one job. To bring her into the state pension system, she should also be treated in the same way for the purposes of paying national insurance. I hope that the Minister, who has been very helpful and constructive on this so far, and who is well appraised of the situation, can tell us how his thinking has been developing on this because if we want to make universal credit work, and want work to pay, an important incentive for women will be not just the wages they earn through those mini-jobs, but the fact that in the long run, I hope, they will be entitled to a state pension. I beg to move.