Small Business, Enterprise and Employment Bill — House of Lords, 2015-03-11
Topic: Labor
Richard Newby (Liberal Democrats, Centre to centre-left): My Lords, the noble Baroness, Lady Hollis, is again bringing to our attention the issue of workers in multiple low-paid jobs. We debated this matter in Committee and the noble Baroness put forward a number of proposals then for dealing with the situation. We have before us today a proposal to include people with earnings at or above the annual value of jobseeker’s allowance. As contributory jobseeker’s allowance is payable for only six months and there are different amounts, I assume that the noble Baroness means to proxy the higher rate of around £4,000 Just so that we are clear about the figures that we are talking about, I can confirm the characteristics of the workers that the noble Baroness is concerned about. They are people whose earnings in a single job fall below the threshold for paying or being credited with national insurance, that threshold being £5,700. That is the band of people the amendment is dealing with The noble Baroness has been very dogged on this issue and has suggested a number of other ways in which we might deal with it, such as changing the system to allow earnings to be aggregated; treating those people as self-employed and being able to pay class 2 contributions; treating them as unemployed and being able to receive NI credits; or lowering the earnings entry point for access to the NI system to £3,000 or, now, £4,000 However, as I explained in our previous debate, I am afraid that none of those solutions is at all straightforward and there is a danger that they could all, to a greater or lesser extent, involve unnecessary administrative expenditure, perverse outcomes and possible new inequalities in the national insurance system. I know that such potential unintended consequences are not the noble Baroness’s intention, but they exist and they underline the reason for treading carefully in this area The proposal before us today would, for example, create a new cliff edge for those who earn below the threshold and increase the exchequer cost in terms of both administration and benefits paid, with little or no corresponding revenue. It would also bring in workers who might not need protection, such as students with weekend jobs working fewer than 12 hours a week. Such students are highly likely to gain sufficient years to qualify for a full state pension later in their working lives. The noble Baroness’s other solutions would increase the burdens on businesses, require a significant compliance regime to police people’s employment status or need to be extended to everyone with more than one job in a tax year to avoid unfair consequences The noble Baroness has expressed a view on the likely size of the group, the persistence of this type of work pattern and its effect on benefit entitlements. In February, the Department for Work and Pensions published updated estimates that around 50,000 people a year have multiple low-paid jobs and are not paying, or being treated as paying, national insurance that they would otherwise do if their earnings were aggregated —that is 0.2% of the workforce In response to concerns from your Lordships’ House during debate on the Pensions Bill last year, the DWP set up a forum of analytical experts last July, with an independent chair, of which the noble Baroness, Lady Hollis, is a member. This forum’s remit is to consider the available evidence, the characteristics of this group, the effect of zero-hours contracts and the implications for state pension outcomes. The forum has looked at a number of alternative data sources, but none was found to provide more reliable information than that available from the Labour Force Survey on which DWP based its analysis. Having been party to the forum, the noble Baroness will be aware that it has yet to draw any firm conclusions, so in our view it would be premature to legislate now I accept that, of this group of 50,000 people, around 80% are women. However, this population is by no means static. Many of those affected are likely to build up their national insurance record in the future through paid or credited contributions. Under state pension reform, over 80% of people would be entitled to the full pension amount by the mid-2030s. There is also no evidence that this is a growing problem. The number of women working in two or more jobs has hardly changed for the past 10 years, remaining at about 5% of those in work. Furthermore, the recent Johnson review concluded that earnings change significantly over a lifetime and most low earners go on to earn more I reassure the noble Baroness and the House that the Government are continuing work in this area, and the findings of the forum, once available, will help inform what, if any, action should be taken. However, I believe that it would be premature to pass this amendment now. In part, that is because the point of setting up the forum was to examine the evidence presented and then move to the next stage. Secondly, before taking any action in this very complicated area, we should undertake a full analysis of the costs and benefits of the various courses before us—something that, in general terms, I believe the noble Baroness has been in favour of I doubt that I shall have satisfied the noble Baroness, but none the less I hope that she will feel able to withdraw her amendment.