Clause
69
”Employee”,
“worker” and related
expressions
Andrew
Selous:
I beg to move amendment No. 185, in
clause 69, page 33, line 20, leave
out ‘whether oral
or’.
The
Chairman:
With this it will be convenient to discuss
amendment No. 186, in clause 69, page 33, line 29, leave out
‘whether it is oral
or’.
Andrew
Selous:
Clause 69 is a veritable dictionary of definitions
of different terms, which is very helpful. Words need to have precise
meanings that we all understand when we are passing legislation, so it
is certainly a helpful clause from that point of view. This is purely a
probing amendment; note the word “probe” rather than
“prove”, which may have been there originally, that
comment is just to help the Minister in case he is working from an old
brief. It is just to tease out exactly what an oral contract of
employment might be, particularly one that is implied. In my naivety, I
had thought that all contracts of employment would be in writing,
express and quite clear, but that is clearly not the case; I have
obviously led a more sheltered life than I had realised. It seems to
conjure up all sorts of possibilities, so can the Minister paint in
some of the detail on what types of contract of employment we are
talking about being expressed or implied, particularly
oral?
Danny
Alexander:
The amendment raises an important point. I
appreciate the hon. Gentleman making the point that this is a probing
amendment and it will be interesting to hear the Minister’s
response. The reference to oral contracts in the Bill is important to
retain. Particularly among the target group, who are working for low
incomes perhaps in several different jobs who we have rightly worked on
at various stages of the Bill, there are circumstances where some will
be left out of the scheme because their are earnings are below the
qualifying limit, which is a point that I made earlier in the Bill.
They may not have what hon. Members on the Committee would regard as a
written contract, which we would have with our staff—well, many
Members would—or whatever, none the less, an oral contract would
be regarded as a contract of employment. Certainly in Scots law there
is strong protection for oral contracts and I know that that is what
the Bill seeks to do. There are precedents for written contracts being
required; the Employment Rights Act 1996 requires that the case of
money being deducted from a salary must be in written contract. I can
see the hon. Gentleman’s point in relation to central costs, but
none the less it is important from the point of view of giving the
maximum possibility for people in the target group to benefit from
personal accounts that the provision that the amendment seeks in a
probing nature to delete is retained in the
Bill.
Mr.
Plaskitt:
I was interested to hear the hon. Member for
South-West Bedfordshire declare how possibly sheltered his life had
been. It is a fact of the matter, as the hon. Member for Inverness,
Nairn, Badenoch and Strathspey pointed out, that there are a great many
oral contracts in existence, certainly non-written formal employment
contracts. As Members of Parliament we do not have formal written
contracts, which is a point that we will
come to later in the Bill and I am sure that we are
all looking forward to that. As the hon. Member for South-West
Bedfordshire says, clause 69 provides an array of definitions. I will
take the opportunity now to respond to his specific points about oral
contracts, while fully appreciating that the amendment is of a probing
nature. A contract exists when it is written down or when an individual
is told by someone offering work to start work on a given date for a
set rate of pay, which in itself constitutes an oral contract. In an
ideal world, of course, a contract would be written so that both
parties were fully aware of the terms and conditions of employment, and
the majority are.
However, we know that there are
people without written contracts and we do not want to exclude them
from the reforms. I know the hon. Gentleman does not want to do that
either. The fact that someone may not have a piece of paper does not
mean that he or she is not entitled to employment rights, and those
extend beyond pension issues into other employment issues. The
amendments would simply enable employers to avoid the duties
established in the Bill by using an oral contract in place of a written
contract. Obviously, that would not be right, because these reforms are
about extending workplace pension saving with a
minimum employer contribution to as many individuals as possible. The
hon. Member for Inverness, Nairn, Badenoch and Strathspey is right to
say that there are likely to be many in the target group with oral
contracts.
Andrew
Selous:
It genuinely is a probing amendment, and that
clarification is useful. I was interested in the hon.
Gentleman’s definition of an oral contract as one
where somebody was told to do some work at a
particular point. Could the employer get out of having a contract by
saying, “I would like my house cleaned, but I will leave the
time up to you, as long as it gets done,” without giving a
particular start date? Would that avoid an oral contract, by the
Minister’s
definition?
Mr.
Plaskitt:
I am no expert on oral contracts, but I suspect
not. As I understand it, once an engagement has taken place between
employer and employee, a function has started, and payments are being
made in respect of that activity, an oral contract
has commenced. If that is incorrect, I will let the hon. Gentleman
know, but that is my understanding at this
point.
Danny
Alexander:
For clarification, there are many
people in my constituency who work in the tourism
industry. In some cases, what happens is that one applies for a job,
interviews for the job, agrees to start the job on Monday, working four
days a week at x rate of pay, and does so. Custom and practice means
that what one has is therefore a contract of employment. Although it is
not written down, that is a legally binding arrangement, to which all
employment laws should
apply.
Mr.
Plaskitt:
I think we have reached broad agreement on what
constitutes an oral contract, and I hope with that reassurance the hon.
Gentleman will agree to withdraw the
amendment.
Andrew
Selous:
Without further ado, I beg to ask leave to
withdraw the amendment.
Amendment, by leave,
withdrawn.
Clause 69 ordered to stand
part of the
Bill.
Clause
70
ordered to stand part of the
Bill.
Clause
71
Crown
employment
Question
proposed, That the clause stand part of the
Bill.
Andrew
Selous:
I want to take the opportunity in the stand part
debate to ask the Minister what estimates, if any, the Government have
made about the cost to their own payroll of the provisions in the Bill.
There is also the issue of local Government staff, who are obviously
not in Crown employment, and that of bonuses to Crown employees, in
which form considerable sums are paid from time to time, which we know
will be subject to the 3 per cent. employer contribution.
It may be that I have missed
it. I looked through the impact assessment quite
carefully, to see if I could determine the Bill’s impact on the
Exchequer as far as Crown employees are concerned. I appreciate that it
is a few years off. I am not looking for detailed figures down to the
last pounds and pence, but it would be useful to know that some of the
clever people in the Treasury or elsewhere, to whom my hon. Friend the
Member for Eastbourne often refers, are at least running their slide
rules across the Bill’s implications for the public
purse.
Mr.
Plaskitt:
I would seek some clarification from the hon.
Gentleman. He may wish to intervene on me again. There are two issues
he may be getting at, and while I listened carefully to what he said,
it was not quite clear which of those two issues it was. One would be
the potential implication if he sees the clause resulting somehow in
additional auto-enrolment into schemes. I am not sure if he does mean
that, because all of the existing public sector schemes will satisfy
the qualifying criteria, or whether he means the cost to the exchequer
of revisions to public sector pension as a result of the reforms that
have taken place. If he wants to intervene I might be able to be more
assistance to him.
Andrew
Selous:
It was kind of the Minister to seek further
clarification. He has in part answered my query. If he has just said
that all Crown employees are already fully covered, I
think that does go some way to answering my question. There is the
question of bonuses. One reads quite regularly of high flying members
of the public service being given large bonuses. The Child Support
Agency senior staff were given bonuses quite recently, just to quote
one
example.
In
an earlier provision we put into law that bonuses commissions will be
part of the contribution that makes up personal accounts. It may be
that this is already covered because public sector pensions for Crown
employees are so wonderful anyway that it does not apply. I thought it
would be remiss to go through clause 71 without at least probing the
Minister and asking for some clarification.
Mr.
Plaskitt:
I am a little clearer as to the direction he is
seeking to take. I think he will be aware that there is a great deal of
public sector pension reform taking place. He will know that there are
new schemes for teachers that have been in operation since January of
last year, and a new scheme for civil servants, which he referred to,
which was introduced in July of last year. From April this year a new
scheme for the NHS comes into effect and in due course there will be a
new scheme for local government workers as well. He
will know that the thrust of all these reforms is to ensure
affordability to the public purse of all of these schemes. He will have
seen the long-term public finance report that the Government published
in December 2006, which confirms that expenditure on public service
pension provision across the board remains sustainable over the next
50-year period. That includes and anticipates the impact of bonus
payments, for example.
The Government’s
assessment of the cost of these schemes and their sustainability over
the foreseeable future has therefore been clearly
assessed, with actuarial evidence behind it. I hope he will accept
this.
Andrew
Selous:
Just to be absolutely clear, is the Minister is
saying that pensions for Crown employees are so good that they are well
above the levels of contribution of the personal accounts scheme? If
so, the personal accounts scheme will not apply at all to Crown
employees within the salary bands we are talking
about.
Mr.
Plaskitt:
My understanding of the great bulk of the
schemes that are currently in existence in the public sector is that
they would not have a difficulty meeting the qualifying criteria,
though I do not have the opportunity to go over every single
conceivable little corner of the public sector to be sure about that. I
have looked at the terms of all of the existing ones in which most
people are enrolled and they satisfy the criteria. Now he has come back
to the first of the two things he raised, I do not think the financial
impact of this clause will be at all
significant.
Danny
Alexander:
The Minister is right in that respect, given
that the implied employer contribution for High Court judges is 31 per
cent., for Members of Parliament it is about 25 per cent. and for
senior civil servants it is also in the low 20 per cent. region. Is he
worried that the advent of personal accounts is likely to lead to
levelling-down for these levels of
contribution?
Mr.
Plaskitt:
We have had a very lengthy discussion about
levelling-down already. As the hon. Member knows, there are clear
criteria that the Government seeks to apply to the public sector
pension provision, one of which, most importantly, is
affordability.
10.15
am
Any
changes that are to be made to employer or employee contributions
within the schemes will be made in the light of those criteria. For
example, the cost-sharing and capping arrangements that have been
introduced may in future have an effect on the employer or employee
contributions. The governing criteria are the long-term sustainability
of the schemes and the fact that they give
decent value to the taxpayer. The effect of the proposal will not be a
significant driver of any of those changes, although such changes may
take place, but I think it will be for other
reasons.
Danny
Alexander:
The Minister is right to make the point about
affordability. Presumably, he is unworried by the recent conclusion of
an independent body—the Institute for Fiscal Studies—that
unfunded liabilities in the public sector pension arrangements at
present amount to about £700
billion.
Mr.
Plaskitt:
As I suspect the hon. Gentleman knows, that
assessment depends on the basis on which it is calculated—a
variety of numbers can be used. Indeed, I have seen some figures that
suggest that the unfunded liability is even larger than the figure he
cited. He must carefully consider the assumptions that have been made
in calculating the figures, from which he will see that the higher
numbers, including the figure he gave, are not assessed simply on the
basis of pension payable to known individuals who will receive
them.
The larger
figures take into account all those who are currently in employment who
are potentially building pension pots and assume that they will always
be in employment and in the public sector, therefore all their pot will
be in the public sector. But one cannot make such an assumption,
because employees may not stay in the public sector. The kind of
assessment to which the hon. Gentleman refers on future unfunded
liability could have been made at any stage at any time in the past in
respect of public sector pension liability. It would always have
produced a large number if it had been calculated on the criteria that
he cited and always have looked scary but we have never hit a point
when it has become unfundable, unsustainable or overly
burdensome.
I caution the
hon. Gentleman on waving the big numbers around. He should first check
on the assumptions that lie behind them and bear in mind that
historically it has always been possible to carry out such an exercise.
It does not mean as much as some of those who wave the numbers around
imply. The key test is whether the schemes are sustainable over the
long-term period of 50 years or so. The hon. Gentleman has the
Government’s published information on that, and it has actuarial
support behind it. I hope he will therefore support clause stand
part.
Clause 71
ordered to stand part of the Bill.
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