The
Committee consisted of the following
Members:
Chair:
Philip
Davies
†
Aldous,
Peter (Waveney)
(Con)
Burt,
Lorely (Solihull)
(LD)
†
Davey,
Mr Edward (Parliamentary Under-Secretary of State for Business,
Innovation and
Skills)
Davies,
Geraint (Swansea West)
(Lab/Co-op)
†
Ellis,
Michael (Northampton North)
(Con)
Evans,
Chris (Islwyn)
(Lab/Co-op)
†
Flynn,
Paul (Newport West)
(Lab)
†
Greenwood,
Lilian (Nottingham South)
(Lab)
Hepburn,
Mr Stephen (Jarrow)
(Lab)
†
Liddell-Grainger,
Mr Ian (Bridgwater and West Somerset)
(Con)
†
Lucas,
Ian (Wrexham) (Lab)
†
McDonagh,
Siobhain (Mitcham and Morden)
(Lab)
†
Morgan,
Nicky (Loughborough)
(Con)
†
Newmark,
Mr Brooks (Lord Commissioner of Her Majesty's
Treasury)
†
Nuttall,
Mr David (Bury North)
(Con)
Simpson,
David (Upper Bann)
(DUP)
†
Stewart,
Bob (Beckenham)
(Con)
†
Whittaker,
Craig (Calder Valley)
(Con)
Glenn McKee, Committee
Clerk
† attended the
Committee
First
Delegated Legislation
Committee
Monday
28 March
2011
[Philip
Davies
in the
Chair]
Draft
Employment Equality (Repeal of Retirement Age Provisions)
Regulations
2011
4.30
pm
The
Parliamentary Under-Secretary of State for Business, Innovation and
Skills (Mr Edward Davey):
I beg
to
move,
That
the Committee has considered the draft Employment Equality (Repeal of
Retirement Age Provisions) Regulations
2011.
It
is a great pleasure to serve under your chairmanship again, Mr
Davies.
The
regulations will deliver the Government’s pledge to phase out
quickly the default retirement age from 6 April. They will
repeal the legislation that currently allows an employer to dismiss an
employee for the sole reason that he or she has reached the age of 65.
The administrative procedures with which employers using the default
retirement age must comply will also be repealed. To give employers
currently using the default retirement age—or the
DRA—time to adjust, the repeals are subject to transitional
arrangements that will allow retirements to proceed where individuals
have been notified of retirement before 6 April and are 65 or above
before 1
October.
The
regulations will also introduce an exception to age discrimination
legislation for group insurance benefits provided by employers for
their employees—for example, income protection, health cover and
life assurance. The consultation on the removal of the DRA identified a
real risk that, with an age limit no longer in place, those benefits
might be reduced or removed for not only older workers, but everyone.
The exception will make it lawful to withdraw such benefits from
employees at 65 or over, and that minimum age for the withdrawal of
assured benefits will increase in line with increases to the state
pension
age.
People
today are living longer and enjoying healthier and more active
lifestyles. For many individuals, that means wanting to extend their
working life. Motivations for remaining in employment past retirement
age are varied. A survey by the Department for Work and Pensions in
2008 found that money, cited by 63% of people, was the major cause,
while 57% said that they enjoyed their jobs and 38% said that working
helped to keep their minds active.
Repealing the
legislation is good for the UK economy. Older workers offer a wealth of
talent and experience as employees and entrepreneurs. They make
a vital contribution to securing our country’s recovery, future
growth and prosperity. The over-50s currently make up just under a
quarter of the work force, rising to nearly a third by 2020. The latest
figures from the Office for National Statistics show that the number of
people over the age of 65 working in the UK more than doubled in recent
years—from 412,000 in 2001 to 870,000 by the end of
2010.
Nevertheless,
we all have to stop working at some point, and we all need to think
about how to manage the transition from working life to retirement.
Everyone wants to enjoy a comfortable retirement, so it makes sense to
plan for the future. That might involve saving more, working longer or
reducing work commitments gradually over several years. The Government
are committed to reinvigorating retirement and are taking significant
steps to enable people to plan with confidence. We have re-established
the link between earnings and the basic state pension and, as confirmed
in last week’s Budget, have introduced a triple lock, so that
basic state pensions rise by the rise in earnings, prices or 2.5%,
whichever is the highest. In addition, we are working to create a new
framework for private pensions, including the introduction of automatic
enrolment.
The
ability to choose when to stop working must also be at the heart of any
new system of fair and sustainable pensions. As I have said, older
workers make an important contribution to securing the economic
recovery and to the UK’s future economic growth. With increasing
life expectancy, demographic change and skill shortages, it is more
important than ever that employers make full use of all available
talents, regardless of age, and that older people are encouraged to
carry on working.
Put simply,
the country cannot afford to ignore the contribution and potential of
older workers. Someone’s age should not be the sole criterion on
which their ability to do their job well is judged. Research shows that
productivity does not decrease with age in the vast majority of jobs.
It also shows that older and younger workers often bring complementary
skills and qualities to the
table.
Extending
working life would also play an important part in reducing pensioner
poverty and ensuring that individuals are able to fulfil their
expectations of retirement. For example, the single man with a good
employment history who decides to work one year beyond state pension
age can increase his retirement income by up to 10%. As I said, there
is a range of benefits to be had from employees’ being able to
continue working for as long as they are willing and able. There are
also considerable benefits for employers, so it is a win-win
situation.
Many
employers are recognising the importance of retaining the valuable
skills and experience of older workers to help them through and out of
the recession. Research shows that older workers can bring qualities
such as accuracy, commitment and punctuality to their roles, as well as
having a more responsible attitude to health and safety risks, based on
years of experience in the workplace. All those attributes are highly
sought after and valued by employers across the
board.
I
recognise that some among the roughly one third of employers who
currently rely on the DRA have misgivings about managing without it,
but my Department has worked closely with ACAS and a number of
important stakeholders to provide fit-for-purpose guidance. Using that
guidance will allow employers to go on managing their work forces
without facing claims of unfair dismissal or age
discrimination.
The Government
have laid the regulations to abolish the DRA so that older people will
have far greater choice over when to end their working lives. They will
now have the opportunity to work up to the age of 65 and
beyond if they wish. In turn, that will boost the UK’s labour
supply and contribute to economic growth.
Older people can bring a wealth of talent and experience to the
UK’s labour market and it is quite wrong to dismiss those simply
because a person has reached a certain age. For those reasons, I
commend the regulations to the
Committee.
4.37
pm
Ian
Lucas (Wrexham) (Lab):
It is a pleasure to serve under
your chairmanship, Mr Davies, and to hear the Minister set out his
case.
The proposal
to abolish the mandatory retirement age has been under discussion for
some time—indeed, the previous Government indicated an intention
to consult on it. The proposal was discussed during the Equality Bill
Committee, and amendments were tabled by various of its members. In a
demographically changing Britain—and world—abolishing the
mandatory retirement age is something that we should consider, and the
Government’s consideration of the matter is sensible.
The Labour
party manifesto stated that it would support the abolition of the
mandatory retirement age in due course. We undertook to take the
measure forward following consultation, because there are profound
implications for employees, who largely welcome the proposal, and for
employers, some of whom have reservations and concerns. The
Government’s position was made clear when the noble Baroness
Wilcox stated:
“We are
committed to phasing out the default retirement
age”.—[Official Report, House of Lords, 3 June
2010; Vol. 719, c.
WA10.]
Brendan
Barber of the TUC said that, from an employee’s point of view,
it could not be right that an employer should be able to sack someone
for being too old. That bold statement is a very good way of putting
the
issue.
However,
we need to consider the implications of the proposal and I want to ask
the Minister some questions. He gave some interesting statistics in his
helpful speech. He said that since 2001, the work force aged over
65—I think I have noted the figures correctly—has
increased from 412,000 to 870,000, which is an increase of more than
400,000 in fewer than 10 years. The number of people who are over 65
and are taking jobs in the economy has, therefore, increased very
substantially.
First, what
assessment has the Minister made of the measure’s impact on the
number of jobs in the economy? How many jobs must be created to provide
employment for people aged under 65 to replace jobs that will be taken
by those who choose to work beyond that age? Secondly, do the
Government have any indication of the proportion of workers who are
likely to take advantage? What will be the impact of the removal of the
mandatory retirement provisions? Will more people continue to work
because of their removal than would otherwise have done?
When the
measures were considered in the context of the Equality
Bill—subsequently, the Equality Act 2010—the details were
proposed largely by Back Benchers. The measures were not taken forward
at that stage, however, because there was not the element of consent or
the strong element of consultation necessary when such a profound
decision is to be taken.
The concerns
that I have heard have largely come from employers, a number of whom
have expressed concerns about in-work benefits. The Minister has
referred to the exception concerning life assurance and provisions
that employers sometimes provide that relate to
health benefits. Will he indicate in a little more detail what
representations he has received from employers concerning such
benefits?
Benefits are
often an important part of an employee’s contract. If an
employer is to be disallowed from discriminating on the basis of age in
provision of health benefits and life assurance benefits, that may
influence him when he determines whether to offer that type of benefit
in any employment contracts. Will the Minister indicate whether there
will be total exclusion of the grounds of age when considering any
disallowance of benefits that are included in such contracts? Will such
exclusion lead to tribunal consideration of that particular area of law
where those elements have not previously been considered?
Compulsory
contractual levels of retirement have been imposed in certain
professions within the UK. In the past, for example, High Court judges
were required to retire at a certain age. Can the Minister confirm that
the provision will apply to all contracts that are in place at present?
I recall that Lord Denning was still on the bench when the compulsory
age for retirement of High Court judges was introduced. That measure
did not apply to him because it was introduced only for those who were
under the age concerned. He continued on the bench for many
years—to the detriment, some thought, of his
reputation.
Certain types
of professions or roles may particularly need individuals who have a
particular proficiency or even physical ability. Can the Minister
confirm that, if there is evidence that an individual cannot fulfil his
employment requirements because his age has introduced some level of
infirmity or inability to fulfil the role, an employer will be able to
take steps to remove that individual, lawfully, from that
role?
4.45
pm
Paul
Flynn (Newport West) (Lab):
We knew that the Government
would, one day, come up with a good idea. It has taken 11 months, but
we ought to congratulate them warmly. I am also wearing the same badge
as the Minister, so there really is an outbreak of unanimity in the
House.
I
should declare an interest—as the fifth oldest Member of
Parliament, I was slightly outraged to hear the Minister say
that people must retire one day. Why? If people are still capable of
doing a job, and they wish to do it, of course they should be allowed
to continue. We have had the cruelty of outdated regulations, which
were laid down in about 1945, when only a minority of people
reached retirement age—and those who did, did not live long
afterwards. But we have still been stuck with the
regulations.
I
have a constituent who worked in the distinguished role of policeman
for 30 years; he has now been retired for 36 years. Good luck to him,
but he would have preferred to have it the other way around, working
longer as a policeman. We have civil servants retiring at the
ridiculously early age of 60; when they are approaching the prime of
life and the best of their talents, they are cast
aside.
We
know that to many people work is a drudgery and they welcome the
opportunity to have a period at the end of life in which they have
alternative activities to fill their time. However, for many people
now, work is that core of dignity around which we build our
lives.
The measure is
to be welcomed and encouraged, and we look forward to an extension. I
point out that one of the many anachronisms in the law is that people
in my position—past retirement age—who get the state
pension, also stop paying national insurance. I have never understood
that. If we are on the kind of income that we are on in the House, that
is worth almost as much as the state pension. It seems unreasonable.
The reason for the decision, which was made in 1945, was that if people
got that far, they ought not to be paying into a scheme into which they
had been paying for all their lives; they should be enjoying the
benefits of
it.
People
now, however, live about 20 years after retiring, on average. As we
heard this week, they are much happier than people who are in the
turmoil of middle age or younger. There should be a case for those
earning more than £30,000 a year, for example, at least being
able to have the opportunity of contributing to the national insurance
scheme, from which they might still take many benefits.
Finally, will
the Minister explain why there should be a compulsory retirement age at
some age? That is what he appeared to
say.
4.48
pm
Lilian
Greenwood (Nottingham South) (Lab):
As hon. Members have
said, I am sure that the regulations will be welcomed by many older
workers.
I
want to make the Minister aware of concerns expressed by members of the
Derbyshire and Nottinghamshire chamber of commerce, when I met them a
couple of weeks ago. All the evidence shows that, for most jobs,
productivity does not decline with age. However, the chamber of
commerce pointed out that, if employees’ performance has
declined, that could be dealt with by moving them into standard
retirement, enabling them to leave an employer with dignity. Some
employers are concerned that, without a default retirement age, they
might have to performance-manage older workers. That can be a difficult
process, especially for those with long and loyal service with the
employer, and it could have a significant impact on morale. That is
particularly significant for a smaller employer, with everyone knowing
the individual
concerned.
What
advice and guidance would the Minister offer to the chamber of commerce
and other such
employers?
4.49
pm
Mr
Davey:
I thank hon. Members for their questions. I will
start with those asked by the hon. Member for Wrexham. I welcome his
support for this measure. He asked what impact the measure will have on
jobs and the economy. On page 46 of the impact assessment, there is a
set of different forecasts on baseline growth, central growth and high
growth. The impact assessment estimates that the increase in labour
supply will be 6,000 in the first year, rising to 9,000 to 10,000
subsequently.
The hon.
Gentleman asked whether people would want to take the measure up. The
survey evidence suggested that a third of people say that they want to
work after 65. Some have argued that that will not have an effect on
the labour supply because it will displace young people from the labour
force, and part of the
research that went behind the impact assessment addressed that question
in particular. It showed that that is not the experience in other
countries. It is worth reminding people that the United States of
America got rid of mandatory retirement ages in 1986 and Australia,
Canada and New Zealand got rid of that type of regulation some time
ago. They certainly have not seen that sort of problem. That is not
surprising because, as I said, old and young employees tend not to be
substitutes in the labour market; they are often complementary to each
other. We believe that there will be a significant net increase in the
labour
supply.
The
hon. Gentleman went on to talk about what happened during the
deliberations on the Equality Bill, and how this provision was not
taken forward because of the need for consultation. I am sure that he
is right about that, although this measure should have been introduced
a long time ago, frankly; it has been a long time coming. He asked a
specific question about in-work benefits, such as when employers
provide a whole number of benefits as part of the employment package.
As I said, the exception in these regulations covers only group insured
benefits. It does not extend to other types of benefits, such as
company cars. I hope that that gives him some reassurance.
The hon.
Gentleman asked what representations we had had on the exemption. In
making provision for it, we are responding to representations, mainly
from business and insurers that were worried that it could create
problems. We were particularly worried about that, and we think that
the exemption is justified. If we had not put that provision in, it
could have undermined those group benefits and meant that they were
withdrawn not only for older workers, but for all workers. The cost
could have mounted and made them unaffordable. The exemption is in the
interests of older workers and all
workers.
The
hon. Gentleman then asked whether abolishing the default retirement age
applied to all contracts today. I am sure that he is aware that it will
still be possible to have a mandatory retirement age in a company, but
it will have to be objectively justified, on grounds that are legal.
The advice that we have given comes from ACAS. Because it is a complex
area, we have stipulated that any employer that wishes to have a fixed
retirement age, and seeks to justify that objectively, needs to seek
legal advice.
The hon.
Gentleman also asked—and this partly relates to the question
from the hon. Member for Nottingham South—whether employers will
be able to ask someone to leave employment if their capability to do a
job declines well before they reach retirement age or at retirement
age. I absolutely stress that the ability to dismiss an
employee fairly, under the ordinary fair dismissal rules, still
applies.
Section 98 of
the Employment Rights Act 1996 sets out what an employer has to follow
for a fair procedure and the reasons for which someone can be fairly
dismissed. They include capability, conduct, redundancy, illegality or
some other substantial reason. The issue of capability speaks to the
hon. Gentleman’s point—employers can still use that
legislation to ask someone to leave their employment if they are not up
to the
job.
The
hon. Member for Newport West said that this was the first good idea
from the coalition Government, but I dispute that fiercely. He seems to
think that the
triple lock for pensioners, ensuring that the pension goes up in line
with prices or earnings, or by 2.5%—whichever is the
highest—is not a good idea. I have to say, however, that it was
a particularly poor policy on the part of the previous Labour
Government to raise the state pension by 75p. Under our proposals, that
will not happen again. I could talk at length about the good policies
that the coalition Government have implemented and which the hon.
Gentleman would surely welcome, but I think that Mr Davies would call
me to
order.
Paul
Flynn:
I will not discuss the benefits that those at my
time of life had from the previous Government, because you will rule me
out of order, Mr Davies. Will the Minister explain one thing? When the
Prime Minister said, in the election campaign, that he was not going to
cut the winter fuel allowance, people understood that to mean that he
was not going to cut the winter fuel
allowance.
The
Chair:
Order. I commend the hon. Gentleman’s
ingenuity in trying to get a point in. The same applies to the
Minister. We must, however, stick to the regulations before
us.
Mr
Davey:
I will, of course, abide by your ruling,
Mr Davies.
I turn to the
other remark made by the hon. Member for Newport West. He said that I
said that everyone must retire, but I did not actually say that. I
said, “Nevertheless, we all have to stop working at some
point”. That may mean retirement, or that may mean going into a
coffin; it does not mean that we have some new, higher, compulsory
retirement age. I was suggesting that, although many people want to
retire at some point, we will not force people to retire. That is why
we are here today. I think that deals with the hon. Gentleman’s
remarks.
I
come to the points raised by the hon. Member for Nottingham South. She
rightly reflected a concern that a number of employers have about how
they manage someone who has given loyal service to a company for many
years and who is beginning not to be able to perform their job as they
used to be able to. I have heard that before from a number of
employers, but people’s productivity, by and large, does not
decline with age. There is little evidence of that in the vast majority
of jobs, although I accept that it may happen in certain jobs. I am
happy to take on the point, and I recognise that it can be difficult
for an employer when they are faced with someone who has given loyal
service but is beginning to be less
productive.
To
be honest, it is patronising for employers not to deal with that
employee on how they are performing—it is slightly
disrespectful. It may well be that that employee would like a
conversation about how their duties can be changed or how they can be
moved to fewer hours or lighter duties. Sometimes, some employers hide
behind
fixed retirement ages so as not to grasp difficult issues. Yes, the
regulations may require employers to performance-manage their staff, as
ACAS discusses in its guidance, but that is a good thing—for the
company, the employee and the economy. That is one of the reasons why
the impact assessment is so clear that this deregulatory measure,
although opposed by a small number of employers and one or two employee
organisations, has such a positive impact. It will be positive for
labour supply and it will be positive for productivity in
general.
Lilian
Greenwood:
I thank the Minister for his response. He is
absolutely right to say that employers need to think innovatively and
creatively and, in this situation, to work with employees to improve
performance or move them to lighter duties. In my experience, employers
vary in how they deal with performance issues, from the very good to
the not so good. Are the Government intending to bring forward anything
to help support and guide employers so that they operate those systems
effectively and in a way that leaves employees feeling supported? That
would avoid an employee’s having suddenly to face disciplinary
action after 20 years on the grounds of capability, leaving them
feeling hurt and upset, and understandably
so.
Mr
Davey:
Yes, we are doing, and have done, that. I refer the
hon. Lady to two pieces of guidance available on Government websites,
as well as to the Employers Forum on Age, which very much supports the
Government on this. Its members include many FTSE 100 companies, as
well as other organisations. The first of the two pieces of guidance is
the ACAS guidance, which I have mentioned and which was a result of
consultation with employers. It will help many employers if they are
having problems.
The other
piece of guidance is that which the Department for Work and Pensions
has put on its website, which looks at all the best practice already
out there for performance management, particularly in the area of older
workers. Whether it is the guidance on how to manage the legal side or
the guidance that shows best practice, or whether it is the fact that
many, many employers—the majority, in fact—already manage
the issue without any problems, employers have those resources to go
through, which will deal with any concerns that they still
have.
This
has been a useful discussion and I hope that it has convinced some of
the doubters that we are taking the right approach. For those reasons,
I commend the regulations to the
Committee.
Question
put and agreed
to.
Resolved,
That
the Committee has considered the draft Employment Equality (Repeal of
Retirement Age Provisions) Regulations
2011.
5.2
pm
Committee
rose.