My Lords, I start by addressing the amendments relating to self-employment, Amendments 61 and 66, tabled by the noble Baroness, Lady Donaghy. Amendment 61 relates to self-employment and the minimum income floor, and how it works within universal credit. Universal credit is there to support those on low incomes and ensure that work always pays. It supports self-employment where it is a realistic route to financial self-sufficiency, alongside other support available to help businesses.
However, the welfare system is not there to prop up unproductive or loss-making businesses. The minimum income floor is there to incentivise individuals to increase their earnings from their self-employment. Those subject to the minimum income floor are exempt
from having to search for or carry out any other work, allowing them to concentrate on making a success of their business and maximising their returns up to and beyond the level of the minimum income floor. I should just point out that the changes to the national living wage mean that the pay of the competitor to the self-employed will go up, so in relative terms they have an opportunity also to increase their pay. The other thing that the minimum income floor does is address a loop-hole in the tax credits system whereby individuals can report little or zero income but still receive full financial support, which is neither a desirable or sustainable situation to maintain.
Amendment 61 seeks to allow for flexibility in the application of the MIF. This power already exists and provides a number of significant easements on when the MIF is first applied and the level it is set at. The most significant example of this is our exemption from the MIF, for up to 12 months, of claimants who are within one year of starting out in self-employment and are taking active steps to increase their earnings. Monthly reporting allows universal credit to be adjusted on a monthly basis, which ensures that claimants whose income from self-employment falls do not have to wait several months for an increase in their universal credit. Following a report from SSAC, we have put in big disregards on the surplus earnings on a monthly basis. This approach eradicates the overpayment and underpayment issue generated by the current system, which is done on assumed average earnings.
The noble Baroness was quite right that we need to make this work for particular groups. She picked out Equity, with which we do have regular meetings, to make sure that we understand not so much its concerns as the reality of the working lives of people within Equity and adjust to them. We are testing how to provide support for the self-employed and to help them increase their earnings, employing some specialised work coaches in a trial. We will test all this out as we roll out. The noble Baroness is, of course, well ahead of the game. The number who are self-employed among universal credit claimants is currently low. We need to monitor how all this works, including the implementation of the minimum income floor, as we roll out universal credit with more self-employed in it.
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I turn to a series of amendments to provide for the annual report on full employment to include specific data on various groups. I must point out that we have not built into universal credit the requirement to capture specific new management information associated with the amendments under our current plans. In my view, seeking to do so now would not represent value for money, given the relatively short timescale for which we want to report the information. More importantly, I think, it could disrupt the universal credit implementation timeline.
Amendment 66, tabled by the noble Baroness, Lady Donaghy, would extend the reporting duty to include information about the self-employed. The UK labour market is one of the most diverse in the world, with self-employment accounting for more than a quarter of the growth in employment since 2010. As we want to do all we can to encourage entrepreneurs, the
Government have launched two reviews to consider how we can better support self-employment. In addition, the new enterprise allowance provides a weekly allowance during the first six months to all JSA and ESA claimants, income support lone parents and some universal credit claimants from day one of their claim to help them build their business.
The amendment would require the annual report on progress towards full employment to include information on the number of people who are self-employed. As noble Lords will be aware, these figures are published every month by the ONS as part of labour market data. We do not feel, therefore, that we need to monitor specifically the share of self-employed jobs.
I turn to the other amendments in the group. I think that the noble Lord, Lord McKenzie, misspoke he said Amendment 62—he meant Amendment 63. I am sure that everyone else in the Chamber understood exactly what he was referring to. He said that full employment should mean 80% of the working-age population. I of course blushed with pleasure when he mentioned my piece in 2007 on reducing dependency, which set out the challenges that the country needed to face if it was to be serious about full employment. As he rightly said, I wrote about it in the context of the then Labour Government’s aspiration to achieve employment of 80% of the working-age population.
Quite a lot has changed in that 80% figure. The first reason we have to adjust is that the ONS definition of the population has moved as a result of equalisation of pension age at 65 for both men and women, which means that the 80% aspiration has moved down to 78% mechanically. There is another, slightly less mechanical change, which is the make-up of the population moving towards older people and young people entering the labour market later because their participation in education has been increasing. The combined effect of those changes, I have estimated—I had a feeling that the noble Lord might want a very detailed analysis—probably pulls the 80% figure to nearer 75%.
The manifesto commitment uses as the comparator the highest employment rate of the big seven industrialised countries. As things stand, ironically, that would mean raising our employment rate to around 75%—more or less the same figure. I am using the UK stated rates, not the international comparison rates. From today, it is moving from 73.7%, in the latest reported figures, to 75%, which is roughly a million people. That would represent our highest employment rate—actually, we currently have our highest employment rate—but the target also means that, if the other competitive countries move up further, that pulls our target up with it. On balance, achieving the target would put us pretty close to something as challenging as I wrote about way back in 2007.
The first part of Amendment 63, along with Amendments 65 and 67, tabled by the noble Baronesses, Lady Manzoor and Lady Hollins, and the noble Lord, Lord Low, would require a separate annual report on the progress being made towards halving the disability employment gap. The latter amendments would also require some specific information, such as the employment
rates of different groups of disabled people. However, as progress against the disability employment gap commitment is a key factor of our overall commitment to full employment, these amendments are not necessary, as that progress will be reported in the annual report on full employment in any case.
The point raised by the noble Baroness, Lady Campbell, on how we need to bring together employment, health and social care to support disabled people into work is one that we accept. One of the things that we are proposing, which the noble Lord, Lord McKenzie, has called for, is a radical reform of how we provide this support, which is what we intend to do with a White Paper in 2016 which will set out our proposals in this area.
On the access to work issue, the spending review announced a real-terms increase in funding, which will allow it to expand sustainably. That is in response to a query from the noble Baroness, Lady Grey-Thompson.
A similar request was made in Amendment 64 on carers. This Government recognise the vital role that carers provide; many carers are also in work. The current Family Resources Survey data show that in 2013-14 around half of all carers were in some kind of work, with 34% working full time. The ONS already publishes information on the number of people who are outside the labour market and looking after family or home, but the reality is that it would be very difficult to track all former carers who have returned to employment following the end of their caring role, because some will not claim benefits as they will be able to move back into work without the help of Jobcentre Plus. Those who start looking for work and initially claim benefits can get access to a range of support through the Jobcentre Plus network. Work coaches can tailor appropriate help drawn from a menu of provision to prepare people for a return to work, but when they successfully move into work they do not have to tell Jobcentre Plus the reason why they have ended their claim.
The noble Baroness, Lady Drake, proposed Amendment 64A, which would require the report to include information on the self-employed, which I have already discussed, NEETs and underemployed groups. In discussing some of the trends, she made the point that self-employment makes up most of the total employment growth since 2007—that is a slightly statistical quirk, since it happened because the number of employees fell sharply in the recession, as it always does. All the losses in employee numbers have since been regained and figures are up by 1.5 million since 2010.