HL Deb 18 October 2004 vol 665 cc165-7GC

In section 44A(2)(c)(i) of the Social Security Contributions and Benefits Act 1992 (c.4) (deemed earnings factor), for "six" substitute "twelve"."

The noble Lord said: Still on the subject of S2P, clearly home responsibilities protection (HRP) helps people who are not in paid work and who receive child benefit on behalf of one or more children aged 16 or below by reducing the number of qualifying years needed for the maximum basic state pension.

When I was in the predecessor department to that of the noble Baroness, I discovered that there were an enormous amount of women who did not know anything about home responsibilities protection.

Baroness Hollis of Heigham

They get it.

Lord Skelmersdale

The question arises as to how many women actually get it compared with those who ought to be entitled to it. From what the noble Baroness indicated from the Dispatch Box, it is automatically credited to their pension.

Baroness Hollis of Heigham

I am happy to confirm that.

Lord Skelmersdale

I am delighted to hear it. Under the proposed new clause, many women who would earn a new entitlement to S2P would have been entitled to additional means-tested benefits in place of the higher S2P. Therefore, I am not sure that much cost is involved to the public purse in achieving that.

In addition, there is a distinct logic to having a cutoff date for HRP in relation to S2P, which reflects the point at which someone's youngest child starts secondary school. School hours tend to increase then and it is easier for the caring parent to seek paid employment. Indeed, the Government and the official and unofficial Opposition all encourage that. So this makes sense on a whole range of bases. I beg to move.

Baroness Hollis of Heigham

The amendment is generous in spirit, but it is also generous in cost. On today's prices, we estimate that it would rise to an estimated £1.3 billion in expenditure by 2050—roughly 3 per cent of the total spend on S2P. Again. I do not want particularly to put my argument on the grounds of cost. The basic state pension HRP provision recognises women's caring responsibility until their youngest child is 16 years-old. Then the proportions of entitlement are accordingly determined.

The state second pension was designed for something else; namely, to give those who were in the labour market an alternative pension that was more generous than SERPS because it produced the same, whether a person had an income of £5,000 or £11,000 a year, unlike SERPS which was an integration all the way up, for people who could not or did not have access to a private occupational pension. It was therefore deliberately linked to being in the labour market.

In my view, we rightly made appropriate concessions—perhaps that is the wrong word. But we shaped it so that those who were caring and, therefore, those for whom they were caring were protected by S2P because they did not have access to waged work that would have generated an alternative pension.

As regards women with young children, we have accepted that where the youngest child was under the age of six, a woman, unless she has access to childcare that she is able to afford and trusts, cannot reasonably be expected to enter the labour market. But once a child is six years old, it is reasonable to expect that a woman can and could work if she wishes to enjoy this pension. The lower earnings limit at which one would trigger one's entitlement to S2P is 16 hours a week or just over three hours a day and earnings of about £79 a week. Obviously, national insurance is not paid until a person earns the lower earnings threshold, which is some £10 or £15 higher.

We do not think that this is an unreasonable requirement for S2P, which is meant to be a pension for those in the labour market, except where a person cannot be by virtue of caring responsibilities or being disabled. That pension should be attached to women in the labour market once the youngest child is six years old. From the experience of my friends and colleagues, but also people in my local ward in my city, when children were six years old most women I knew were choosing and wanting to go into part-time jobs. Three or four hours working a day would cover it. Therefore, it is not unreasonable that the break should be at six rather than at 12 years old. As a result of that, I hope that the noble Lord will withdraw his amendment.

Lord Skelmersdale

Surely, at the minimum wage or even at the average wage, three to four hours work a day would not entitle a person to a pension at all. That would be my first quibble with the noble Baroness. My second quibble is about the cost of £1.3 billion a year. On 8 February 2000, it was stated in the Standing Committee that the cost would be £1.3 billion a year in 2050. Since then we have had the introduction of the pension credit, we have had higher employment rates and we have had an increase in other means-tested benefits. Therefore, £1.3 billion is looking increasingly unlikely. I suspect that by now the department might well have been able to reconfigure its addition and come out with a considerably smaller sum. That said, I am not at all clear that three to four hours employment a day would produce enough money to make the entitlement.

Baroness Hollis of Heigham

On a point of information, basically people would come into S2P and would build for it if they were over the lower earnings limit. The LEL is just over 16 hours a week at the national minimum wage, which represents an income of £4,108 a year, at which point national insurance contributions are paid and people would come into S2P. I was dividing 16 by five, which comes to about three to three-and-a-hours a day at the national minimum wage, which would give people their entitlement into S2P. Whether a person was earning £4,000 or £10,000 a year, he or she would get the same pension as a result. The noble Lord may or may not agree with whether those hours can be fitted in, but the sums work.

As regards the sum of £1.3 billion, that is the latest figure and not an early run at it.

Lord Skelmersdale

I am interested to hear that latter answer. However, 16 hours a week takes no account of children's illness, half terms, school holidays and so forth. I still think that it is mean, but clearly at this point I cannot go any further. So I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Skelmersdale moved Amendment No. 336:

Before Clause 284, insert the following new clause—