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Baroness Carnegy of Lour: I do not know what the noble Lord, Lord Goodhart, intends to do with his amendment. However, when he made the point that he had worded the amendment so that it would cover children up to secondary school age, I would remind him that we are legislating for Scotland as well, where children go to secondary school a year later. Therefore, what he said did not apply to Scotland.
Baroness Castle of Blackburn: As always, the Minister's flow of statistics requires careful analysis. I do not know about the rest of the Committee but I find that when she speaks I am almost carried away on a flood tide of protestations which are so convincing that I am immediately suspicious of them. Therefore, I am sure that she will understand and forgive me--
Baroness Castle of Blackburn: "Almost persuaded"? I am sorry; I must be feeling rather stupid at this time of the day. I intend my remarks, as always, as a great compliment to the Minister. However, it means that I would like a little time to think through what she has said. Therefore, I withdraw my amendment for the time being.
Again, these amendments deal with the whole issue of credits. The Government propose that state second pension rights should be credited for a year, throughout which a person receives long-term incapacity benefit. That would exclude the first year of a spell of incapacity during which short-term incapacity benefit is paid. It would also exclude anyone who receives incapacity benefit for only part of the year. The first of the two amendments would result in the whole year of incapacity, including the first year, being taken into account. The second would mean that a person who received long-term incapacity benefit for at least 26 weeks in any year and did not have earnings above the lower earnings limit for the year as a whole would qualify for credits. It would also apply to a
Amendments Nos. 120 and 121 relate to subsection (3) on page 27 of the Bill. That subsection appears to introduce the labour market attachment test. People who propose to obtain state second pension credits in respect of a period of incapacity benefit will have had to pay contributions as an employee for at least one-tenth of their working life. That seems a little unnecessary and unfairly restrictive, and the amendment would remove that test. Amendment No. 121 would enable periods of self-employment to count towards the labour market attachment test. So far as concerns that particular amendment, I must say that I am not quite certain whether it works in the way that I intended. However, as I said earlier, the intention was that periods of self-employment could count towards the labour market attachment test, which is contained in subsection (3) on page 27 of the Bill. I beg to move.
Baroness Hollis of Heigham: Amendments Nos. 117, 118, 120 and 121 all relate to disabled people and entitlement to State second pension. Amendment No. 117 would mean that people entitled to short-term incapacity benefit were brought into State second pension, whereas under our proposals access is limited people entitled to long-term incapacity benefit, as my noble friend clearly explained.
Amendment No. 118 would mean that people would accrue a year's worth of S2P where they had been entitled to long-term incapacity benefit for as little as half a year, whereas under our proposals people must have been entitled for a whole year.
Amendment No. 120 would remove the 10 per cent work test qualifying condition whereby disabled people with broken work records must have worked and paid class 1 contributions for at least one-tenth of their working lives since 1978 to qualify for S2P.
Finally, Amendment No. 121 is again about the 10 per cent work test and would mean that years of working and paying class 2 contributions would count towards the 10 per cent requirement, thereby bringing certain self-employed people into additional pension provision.
Disabled people with broken work records are one of our most disadvantaged groups in the labour market. Under SERPS, every single year out of the labour market meant a smaller pension on retirement. Many disabled people who had worked for significant periods of their lives ended up with little or no additional pension because of their periodic absence from the labour market. I do not think that that was fair.
Under our proposals, long-term disabled people who are out of the labour market for periods of time will be protected. If they are on low wages when working, they will receive the extra help that we are directing at the low paid as well. I will give an example. Take a disabled man in employment throughout his
I turn to specific amendments. Clearly, disabled people who are out of work for long periods lose out most heavily under SERPS. That is why we are seeking extra help for those with long-term incapacity benefit, as they have the least opportunity to build up decent second pensions. Short-term incapacity benefit, to which this amendment applies, as the name suggests, covers short spells of illness and incapacity which are less likely to be disruptive to pension build-up.
Of course, there are some people who experience short but frequent spells of incapacity. They may have a fluctuating illness and may have a mental health illness and are therefore in and out of work. The linking rules in incapacity benefit mean that people in this position will eventually move on to long-term incapacity benefit. The spells of entitlement to short-term incapacity benefit can be added up until they reach 52 weeks, at which time long term IB becomes payable. Thereafter, a full year out of work will qualify for S2P.
Amendment No. 117 will bring people whose short-term periods of incapacity did not add up, in aggregate, to long periods out of work into S2P. I do not think that is appropriate because two-thirds of all IB claims which terminate are short term or, to put it another way, only two-thirds of those people who are on short-term IB do not go on to long-term IB. In other words, it is a natural break and there is a lot of "churning" at that point.
Amendment No. 118 raises the question of the need for a whole year's entitlement to long-term incapacity as a gateway to S2P. The principle underlying S2P is to look at someone's position over a complete tax year. SERPS operates on the same principle. I do not think that there is a compelling case for altering the whole-year principle, particularly since long-term IB is normally paid for long periods covering several years. Long-term IB is not a benefit which people move on to and off and on to and off. They do on short-term IB, but not once on IB long term.
The remaining amendments, Amendments Nos. 120 and 121, relate to the 10 per cent work test. I will set out the principle. S2P will continue to be a contributory benefit. It is not aimed at permanently disabled people who have no contact with the labour market. They are covered by the non- contributory parts of the benefits system, both before and after retirement age.
Amendment No. 121 would enable periods of self-employment to count towards the 10 per cent work requirement. This brings in the wider question of pensions for the self-employed. We recognise that the nature of self-employment is changing. We recognise that there are real questions about which we have consulted as to how best to encourage the self-employed to save for their retirement. For example, there are questions about the provision and how compulsory it should be. The issue of whether they were brought into S2P was indeed part of our consultation exercise and we are still considering that. I think that there are arguments fairly finely balanced as to whether one should compel self-employed people--whose businesses they may regard as their pension--to be required instead to pay into a pension direct, with the problems that might produce for their cash flow. We do believe that as a result it would be premature to accept an amendment on the question of S2P and the self-employed at the moment. I am sure that we shall return to it in due course.
In conclusion, our proposals on the state second pension will do a great deal for disabled people with broken work records. Indeed, it brings them into additional pension provision for the first time. Of course we could go further, but I think that we have it about right. People will receive it if they are on long-term IB; they will receive it if they are in work--over £67 a week throughout the whole of the year; they will receive it if they have fluctuating conditions that have been covered by the linking rules. Given all that, the only year when someone would normally lose that benefit entitlement is the year one moves off short-term into long-term incapacity benefit. I think that we have it about right. I hope that, as a result, the Committee will not wish to pursue these amendments.
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