13:49 - The House divided: - Ayes: 5 / Noes: 33 - Question accordingly negatived.
Sir Peter Bottomley (Worthing West) (Con)
On a point of order, Mr. Deputy Speaker. Would it be open to my hon. Friend the Member for Christchurch (Mr Chope) to move the Bill formally?
Mr Christopher Chope (Christchurch) (Con)
I beg to move, That the Bill be now read a Second time.
I am delighted that my hon. Friend the Member for Worthing West (Sir Peter Bottomley) is here, because the Bill incorporates the Training Wage Bill, which he has expressed support for, and he has expressed concern in the House that on a previous Friday I chose not to put that Bill forward for debate, which I did because I was anticipating this occasion today. I am grateful for his presence and support, as I am grateful for the presence and support of other hon. Members. I know that my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) is particularly enthusiastic about clause 1, if not about the whole of the Bill. Obviously, the message to all those who like parts of it but not the whole is that the Bill should be given a Second Reading so that it can be filleted as appropriate in Committee.
Sir Peter Bottomley
My hon. Friend refers to clause 3, which I am sure he will get to, but as I have to leave the Chamber to meet some young people, I hope he will allow me to make a point now. I do not think that the clause is broad enough. Clearly a training wage matters, but when I was a teenager and often taking casual work, it was not the training I was after, it was the work experience, being with people and earning money instead of spending money. I hope he will think of broadening the Bill in Committee so that it allows people to take worthwhile work, whether or not there is training, with a wage. That work should also be worthwhile to the employer and the customer.
Mr Chope
My hon. Friend makes a brilliant point, and I hope very much that he will be willing to serve on the Committee when that occasion arises. I am sorry that he will not be able to participate fully in the debate, but I understand that he is seeing constituents. His long-standing interest in common sense applies particularly to work opportunities for young people and is well known and respected across the House.
Members of the House are so conditioned to the advances of state socialism by stealth that the Bill may come as a bit of a shock.
Mr Denis MacShane (Rotherham) (Lab)
Perhaps later on the hon. Gentleman could give us an example of socialism in Britain. Some Opposition Members might be interested to find out more about this new invention. Should not the Bill properly be called the increase in working poverty Bill, because the assault on the minimum wage—that thin line that protects the poorest workers from employer exploitation—which is the thrust of the Bill, is the meanest most miserable act from a mean and miserable party that hates the working people of this country?
Mr Chope
The right hon. Gentleman once again demonstrates his bitterness and his socialist credentials. When I introduced the Employment Opportunities Bill in the 2009 Session, I had, by this stage on the Friday morning, been inundated by hostile e-mails from various vested interests in the trade unions. The fact that that has not happened on this occasion shows that there is now a completely different climate of opinion out there, and that the trade unions realise that the minimum wage is of less significance than the fact that too many of their potential fellow workers and, particularly, too many young people do not have jobs. The right hon. Gentleman has failed to catch up with that change in the climate of opinion and the desire of most of us to ensure that we have increased international competitiveness and, as a result, higher standards of living and greater employment.
Mr Thomas
I meant, “I am very grateful to the hon. Gentleman for giving way.” I am sure his time will come again.
Does the hon. Member for Christchurch (Mr Chope) think the climate of opinion has changed among his Front Benchers? Does he think that they will be tempted to support his Bill this morning?
Mr Chope
I doubt it, frankly. I am delighted to see the Minister of State on the Front Bench, but we do not have a Conservative Government, we have a coalition Government, and that is the Achilles heel. In due course we will see that my hon. Friend speaks not from a Conservative party brief but from a coalition Government brief. None the less, I and, I hope, some of my colleagues will be able to speak freely on behalf of the Conservative party.
The hon. Member for Harrow West (Mr Thomas) will recall that back in 1997-98, when his party introduced the minimum wage legislation, the Conservative party strongly opposed it on principle and on the basis that it would prove to be counter-productive and not in the long-term interests of Britain’s competitiveness or, indeed, of people wanting to get into work.
The initial level at which the minimum wage was brought in was so relatively low that it did not bite as acutely as some people had feared it might, but since then the level has risen by the best part of 70%, far ahead of average earnings and of inflation, and as a result it bites a lot more than it used to. That is why I hope that my hon. Friend the Minister and, certainly, my party will look again at the issue and see what is happening in the real world as a result of the minimum wage legislation that we have.
Philip Davies (Shipley) (Con)
Does my hon. Friend also recall that it was not only the Conservative party that opposed the minimum wage when it was first introduced, but the Liberal Democrats?
Mr Chope
My hon. Friend is second to nobody in his knowledge of parliamentary history and, in particular, of the Liberal Democrats, and I am grateful to him for reminding us of that and for putting it fairly and squarely on the record. I saw that at the same time as he was doing so the Deputy Leader of the House moved from his place to chat to Mr Deputy Speaker—perhaps so that he might feel absolved from the requirement to intervene.
Sir Peter Bottomley
We recognise that the Deputy Leader of the House is still here as an invigilator and monitor, but has my hon. Friend noticed that the hon. Gentleman’s Liberal Democrat Back Benchers—our allies—have kindly trusted my hon. Friend to do what he wants? He should do what he wants and not hold back.
Tony Lloyd (Manchester Central) (Lab)
I appreciate that the hon. Gentleman is only in the foothills of his speech, and I am sure that we will enjoy every moment of it—at least its comedy, if not in reality. On a serious point, however, he notes correctly—as far as I am aware—that both the Lib Dems and the Conservative Front Benchers have never formally stood up in Parliament and said that they recognise the validity of the minimum wage. Does he believe that his Front Benchers have now changed their minds, or are they, like him, waiting for the right time? How does he square that with the position of Boris Johnson, who is not simply in favour of the minimum wage but wants to go higher and put people on the living wage?
Mr Chope
The hon. Gentleman makes a good point, but I think that the Mayor of London would be very supportive of clauses 4 to 6, which basically call on the Low Pay Commission to look at the impact of different wage levels on regions and travel-to-work areas, because the Mayor recognises that the cost of living in London is much higher than in other parts of the country. In order to afford that cost of living, people on the whole in London need to have higher levels of minimum wage, or higher levels of wages, than people in other parts of the country. At the moment, the rigidities of the national minimum wage legislation and the regulations made thereunder exclude that flexibility.
Tony Lloyd
That is very helpful, because the hon. Gentleman says that in London people need to have a minimum wage, so I think he is buying into the concept of the necessity of the minimum wage. We may be debating this rather unhappy idea of a regional differential, but it is interesting that he is making progress in his support for the minimum wage.
Mr Chope
The hon. Gentleman will know that my Bill does not actually abolish the minimum wage; it enables freely consenting adults to opt out of it and calls on the Low Pay Commission to look at the market for labour throughout the country, having regard to the differences in individual travel-to-work areas. I hope therefore that, if he wants to oppose the Bill, he will do so on its merits, but following his intervention I am bound to observe that on today’s Order Paper he has his own maximum wage Bill.
I do not know whether that Bill is designed to curb the excesses of footballers or what, but as always he seems keen to intervene in the market rather than to allow the market to dictate what should happen and to allow people to make free agreements. I am as much in favour of allowing footballers to agree with their clubs terms that to most of us seem incredibly generous. Why should they not be able to do so if those terms are agreed freely? In the same way, why should not people who are willing to work for less than the minimum wage be allowed to do so freely?
Tony Lloyd
Has the hon. Gentleman read his own Bill? He said that the Mayor of London might want a minimum wage in London set higher than the national minimum wage, but that is not what clause 4 states. It allows for a recommendation
“that the minimum wage in any…area should be set at a level below the national minimum wage,”
but it does not mention “above the national minimum wage”. Seriously, if the hon. Gentleman promises to read his own Bill, perhaps we can debate its real merits.
Mr Chope
If we have a national minimum wage, we should be able to opt out of it. If the hon. Gentleman is arguing that there should be not a national minimum wage but a regional minimum wage, that is a completely different proposition, and it would need a different Bill, but I suppose that my Bill might be amended to reflect his wishes, were that the wish of the House.
Mr David Nuttall (Bury North) (Con)
Is there not some confusion between the “national minimum wage” and what is described in London as the “London living wage”? That is something entirely different and, as I understand it, something set annually here in London, not by the Low Pay Commission.
Mr Chope
My hon. Friend is absolutely right, and I do not know, because I have not inquired, how many hon. Friends of the hon. Member for Manchester Central (Tony Lloyd) employ people as interns for well below what my hon. Friend and the Mayor of London would describe as the London living wage, but perhaps we will hear about that in due course.
I do not want this Bill to go forward without some focus on clause 1, because under current law we deny those foreigners seeking refugee status the right to work in this country.
Clause 2 deals with the problems that the current law restricts British citizens from selling their labour at a price of their own choosing; discriminates against those who are young, inexperienced or seeking on-the-job training; prevents people from agreeing to cut their wages to save their jobs; and imposes nationally uniform rules on the labour market, ignoring regional and local variations. All those shortcomings are tackled in the Bill, which effectively recognises the right to work.
The context for that can be found in article 23(1) of the universal declaration of human rights:
“Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.”
Article 6 of the international covenant on economic, social and cultural rights, to which the UK is a party, states:
“The States Parties to the present Covenant recognize the right to work, which includes the right of everyone to the opportunity to gain his living by work which he freely chooses or accepts, and will take appropriate steps to safeguard this right.”
I think it will come as a shock to many Members to know that currently many people are not given the right to work enshrined in those important United Nations articles. The Bill is designed to address that problem.
To make it clear to the hon. Member for Manchester Central that I have read my own Bill, I have noticed that there is a typographical error in clause 1. As a consequence, it would enable only foreigners who are in detention to work, rather than the reverse, which was the intention. I put that firmly on the record and apologise to the House. I will address my remarks to clause 1 as it should be, rather than as it is.
Clause 1 refers directly to those unlucky enough to be seeking asylum in this country as a result of persecution, and obviously to their families. Why are we depriving people who are seeking asylum of the ability to earn money while in this country, so that they can make ends meet and not be wholly dependent on the state? The shock of seeking refugee status should not be exacerbated by the humiliation of not being able to take employment and contribute to the society that is acting as their host while their application is considered.
Mr Peter Bone (Wellingborough) (Con)
Speaking as the chairman of the all-party group on human trafficking, one problem for victims who have been trafficked into this country is that if they are rescued by the police and start to recover, they are not allowed to work because they are treated as asylum seekers.
Philip Davies
As my hon. Friend knows, he and I agree on virtually everything. However, as I reflect on the delicious irony of the Labour party stacking up to oppose a Bill that would allow asylum seekers to work, I wonder whether he thinks that his measure would be a further magnet for vexatious attempts to claim asylum in this country.
Mr Chope
If it would be, I certainly would not put it forward. In fact, I want it to be the complete reverse. I want the Bill to put pressure on the Home Office to deal with asylum applications a lot more quickly than it does. If asylum applications were regularly dealt with within a few weeks, the issue of asylum seekers being unable to work and support themselves would not be as serious. However, I have had constituents come to me—I am sure my hon. Friend has had similar experiences—and say that they have been waiting for seven or eight years to have their asylum cases dealt with. That goes back to the days when the Government of the hon. Member for Harrow West were trying to run the country. That puts asylum seekers in an impossible position. They want to work, but they are prevented from doing so by the law of the land.
Tony Lloyd
Or it may not. The hon. Gentleman might be interested to know that I have long held the view that he is putting forward. It is ludicrous that there are Zimbabweans whom we will not return to Zimbabwe—quite rightly because of the situation in that country—but who are prevented from working for themselves, their families and, frankly, the rest of the country. That makes no sense. He might be surprised to learn that there is a lot of support for that view among Opposition Members.
Mr Chope
I am delighted to learn that that was a useful intervention, and I am glad that I gave way. When I gave the example of my constituents, I had a Zimbabwean in such a position in mind.
Obviously, in putting forward a proposal such as clause 1, one needs a statistical basis to show how many people would be affected. It seems as though all the statistics produced by the Home Office in this regard are completely unreliable. The Daily Telegraph reported on 26 April that 25,345 new asylum cases submitted since 2008 still awaited a conclusion. The Home Affairs Committee reported on 24 May that the independent chief inspector of the UK Border Agency agreed that there was a new backlog, but did not know its extent. He advised that he might find out what the extent of it was in due course. We know that the Government were going to achieve the target of completing 90% of asylum cases within six months by December 2011. My understanding is that that target has been abandoned in favour of what is described as a “basket” of 11 alternative indicators. The National Audit Office report of 15 March indicates that up to 181,000 people might have overstayed their work, student or family reunion visas in the past four years. We also know that migrants are arriving in this country at a rate of between 500,000 and 600,000 a year. That is more than 10,000 a week.
There is a problem here. I think that the most deserving people who come in as migrants are genuine asylum seekers and refugees. However, the UK Border Agency makes it quite clear on its website, under the heading “Employment”, that asylum seekers are not allowed to work:
“You will not normally be allowed to work while we consider your asylum application, except in very limited circumstances.”
It continues:
“Currently, most new asylum applications receive a decision within 30 days.”
That is what the website says, but it is not borne out by the statistics to which I have referred. So what actually happens? Instead of allowing asylum seekers to obtain employment, we, as national taxpayers, give them support. We provide them with cash, housing, access to the health service and access to our schools when children are involved. We are paying out a lot of extra money to support people while denying them the opportunity to support themselves.
Does that make sense? In my book, it does not make any sense whatever. I therefore hope that the Government will look carefully at my proposition.
We know that in Sweden, for example, asylum seekers are given the right to work. We can contrast the situation there with that in Greece, about which I have recently received a lot of evidence in my capacity as this year’s chairman of the Committee on Migration, Refugees and Population of the Parliamentary Assembly of the Council of Europe. The situation in Greece is desperate, because the Greek authorities will not allow the tens of thousands of asylum seekers in the country to work. As a result they cannot get their cases dealt with quickly, and some have been waiting there for many years. Now there is a outbreak of lawlessness, including murder and a lot of robberies, in Athens and surrounding areas, committed by desperate asylum seekers who do not have the means or ability to lawfully seek jobs. They are locked into Greece because they cannot get into any other country. They cannot go back to Turkey, through which most of them arrived. The situation for asylum seekers there is chaotic and desperate. I do not want to see that replicated in this country.
Mr Bone
The problem in this country, at least from my experience in Wellingborough, is that although people are trying to deal quickly with new asylum cases, the backlog includes people who have been here for years and years. Their cases are not being decided because of the concentration on new applicants. That means that they have to live on benefits for years, when they want to go out and work. Often, they have married and had a family. That situation cannot be right.
Mr Brian Binley (Northampton South) (Con)
My hon. Friend is as eloquent as ever, although I hope he will speed up a little in order to allow me to deal with my Bill
Is my hon. Friend going to talk about the black economy? One problem with the employment law he is talking about is that it enlarges the black economy. There is certainly evidence of that in Greece, and from my experience there is evidence of it in Northampton, too.
Mr Chope
My hon. Friend is absolutely right about the black economy, and indeed I will refer to it in due course. The Low Pay Commission itself accepts that there are more than 1 million operating in the black economy at below the national minimum wage. That demonstrates that the minimum wage legislation is not working anyway and is widely ignored.
Jacob Rees-Mogg (North East Somerset) (Con)
It occurs to me that one advantage of what my hon. Friend proposes is that the mood towards asylum seekers in this country would improve dramatically. Many people feel that if asylum seekers are coming here and claiming benefits, claiming benefits was their reason for coming here. If asylum seekers were working and contributing, the British people would regard them more sympathetically
Mr Chope
My hon. Friend makes a really good point. This month we are celebrating 60 years of the UN refugee convention. One of the problems of public perception is that although everybody supports refugees—I think almost everybody would say that we are happy to look after refugees—they do not regard all asylum seekers as genuine refugees. They now think of asylum seekers as what are called illegal or irregular migrants. If we were able to give the genuine asylum seeker enhanced status, as he says, that would raise the esteem in which they are held in this country and their own self-esteem.
I turn now to clause 2. You will know, Mr Deputy Speaker, that the minimum wage is currently £5.93 an hour for an adult over 21, but this October it will rise to £6.08 an hour for such an adult, to £4.98 for those aged 18 to 20 and to £3.68 for those aged 16 or 17. In addition, for apprentices who are within a particular age range there will be a minimum wage of £2.60 from this October. To illustrate the consequences of my Bill, I will use the October figures rather than the current ones.
Defenders of the minimum wage argue that it represents the minimum living wage, but if so, why do hundreds of thousands of self-employed people work for far less, and why does the state tax the minimum living wage? I am enthusiastic about the coalition Government’s tax policy, which recognises that the minimum wage is so basic that it should not be taxed, but we are a long way from that at the moment. From October, the minimum wage for a 40-hour week will amount to £12,646 a year, whereas even the enhanced tax-free allowance for a single person will be £7,475. That means that even somebody on the minimum wage is paying tax on more than £5,000 of their income. In consequence, far from actually receiving a minimum wage of £6.08, the amount that people who are working full-time can take home is more like £5.
Mr Chope
My own view is that the Government got it wrong—I will be blunt about it. There is no point in beating about the bush. I know that I am supported in that opinion by a lot of other commentators. I will discuss later one comment on the increase of 2.5% for adults and an even smaller percentage for young people, which is that it will be disastrous for young people. If that modest increase in the minimum wage is going to make an enormous difference to young people, what would be the consequences of introducing the flexibility in my Bill? It would be nirvana for young people who do not currently have work and are seeking it. We need to consider the matter in context, and I think there is a much bigger issue than whether the minimum wage should be raised by 2.5%, as it has been this year.
Raising the personal allowance will do a lot more to help people on the minimum wage than the 2.5% increase. The effect of the interaction between the minimum wage and income tax is that about 8% of the income of somebody working on the minimum wage will be taken in tax, plus what is taken in national insurance contributions.
If a single adult is out of work, he is entitled to an out-of-work benefit payment of between £60 and £70 a week—well below £2 an hour, even for a 35-hour week. However, the minimum that he can be paid if he works for 35 hours is more than £200 a week. That is a big gap. If he is offered, and willing to take, 35 hours’ work for, say, £140 a week, which is twice what he can get on the dole, the state does not allow him to take it despite the fact that it would save the state a significant amount of money. I put this to the House and to the Government: how ludicrous, mad and silly is that situation? Why can we not allow somebody who would otherwise try to exist on benefits of between £60 and £70 a week to go out and obtain gainful employment and double his remuneration? Currently, we do not allow that.
The freedom to work for less than the minimum wage would not be attractive to everyone, which is why the Bill does not seek to abolish the minimum wage but to facilitate an opt-out by mutual consent. That freedom would not be attractive to everybody. Some might choose to invest some of their time looking for much better paid work rather than undertaking work below the minimum wage.
Jacob Rees-Mogg
It just occurred to me that somebody who refused a job who had not opted out of the minimum wage could exclude themselves from receiving jobseeker’s allowance. Would that be the case, or could the Bill make provision for that?
Mr Chope
The Bill could make provision for that—I certainly intended to make provision for that, but it is not expressed in the current wording. My hon. Friend makes a good point, because we do not want to introduce more disincentives to opting out of the minimum wage, such as putting people in a position in which they are not entitled to any benefits should their circumstances change.
Another reason why people may not want to opt out of the minimum wage is that unemployment benefit or jobseeker’s allowance provide access to passported benefits—meaning that they bring with them money for dependents and help towards housing costs and so on—so people could be worse off working for less than the minimum wage than if they were on benefits. My question is why should these people not have the freedom to decide for themselves whether or not they wish to work for the minimum wage?
Many self-employed people earn far less than the annualised minimum wage for full-time work, thereby avoiding the constraints of the national minimum wage legislation and fixed penalties. There are fixed penalties, which can run into thousands of pounds, for employers who take people on at below the minimum wage, even if that person wants to work for less than the minimum wage.
Of course, not everybody wants to become self-employed. Another argument that I expressed when the minimum wage legislation was originally before the House in the late 1990s was that it discriminates unfairly and disproportionately against people who are not classified as fully disabled—for the purposes of this argument, I shall describe such people as conscientious plodders. It might take such people a bit longer to do a given bit of work than it would take the average person, but by having a national minimum wage we are putting them at a significant disadvantage, because they might otherwise be able to work longer hours for less money per hour to achieve the same objective. If they did that, they would take pride in being able to work and contribute to our society. I do not have the figures with me, but I believe that the proportion of disabled people who are unable to get a job is rising rapidly. That might well be linked with the advent of the national minimum wage.
What would be the consequences of enabling people to opt out? There are many examples of people who offer work to others, such as window cleaning, gardening and car washing, that is not worth as much as the minimum wage. I am not talking only about what we used to know as boy scouts’ bob-a-job week jobs—it is probably more than a bob a job these days. Many people would be willing to offer something less than the minimum wage for a job, but they are currently not allowed to do so. If the price is right, a potential employer will be willing to provide work. I am sure that there is a lot of opportunity out there in the marketplace. People would offer work to people if the wage demanded were not as high as it is currently under the minimum wage. That is particularly true in the more remote regions of the country.
Mr Thomas
I am grateful to the hon. Gentleman for being so generous in giving way. As part of his preparations for today’s debate, has he had the opportunity to study a paper published by the National Institute of Economic and Social Research that suggests that the minimum wage has helped to increase rather than reduce employment?
Mr Chope
I did come across a document that seemed to say just that, but I am not sure whether it was the one to which the hon. Gentleman refers. I read it, but I was not convinced. Indeed, I shall refer in due course to an article that I believe is much more in tune with my views on this matter. It is interesting that he refers to documents from that body, which includes in its title the words “social research”. If anybody should examine this issue, I would have thought it should be the Low Pay Commission and objective, independent commentators.
Philip Davies
On that point, is it not bizarre that the previous Labour Government used to believe that if we put the price of something up, we would get less of it? Hence they fervently increased the price of tobacco, because they thought that would mean that fewer people would smoke, and increased the price of alcohol on the basis that fewer would drink. Surely by the same logic, if we increase the cost of employment, there will be less employment.
Mr Chope
My hon. Friend is absolutely right. It is certainly true that we would get less official employment, which goes back to the point made by my hon. Friend the Member for Northampton South (Mr Binley) on the black economy. If the minimum wage results in higher numbers of people in work, why are more than 1 million people working in the black economy below the minimum wage, as the Low Pay Commission assesses?
Mr Nuttall
So if we continued to increase the minimum wage, would we get rid of all unemployment? That seems to be the logic.
Mr David Hamilton (Midlothian) (Lab)
What would the hon. Gentleman say to the many employers in my area in small and micro companies who want to pay a fair wage, and indeed do so, if they were undercut by an unscrupulous employer down the road who did the same work? In the latter’s profit margins, one factor would be the lowest wage possible. What would he say to the good employer who wants to pay a fair wage because he knows his employees personally?
Mr Chope
That is happening in the real world anyway. Employers in the black economy do not pay tax or national insurance, or offer basic health and safety protection, but they compete with employers such as the ones to which the hon. Gentleman refers.
Let us consider my situation. In the House of Commons, I happen to employ a researcher/intern and pay them more than the national minimum wage, but I do not feel that I am at a competitive disadvantage compared with those colleagues who pay interns nothing or significantly less than the national minimum wage. If employers in the hon. Gentleman’s constituency have good quality employees and look after them well and reward them appropriately, all other things being equal, they can prosper in the marketplace. Currently, many jobs go to countries in the third world that do not have minimum wages or wages anything like as high as we have. However, if we are to provide good-quality jobs in this country, we need the freedom to allow people to compete, and we need to allow people the freedom to work and reach an arrangement with their employer, if they want to.
Let us imagine that one of the constituency firms to which the hon. Member for Midlothian (Mr Hamilton) referred was up against it, had had a big drop in its order book, was facing problems with the bank and all the rest of it. If these people were on the minimum wage and the employer went to them and said, “Look chaps, we’ve got this financial crisis in the company, so we need to come to an agreement whereby we all reduce our wages and salaries if we are to get through this crisis”, that would not be allowed to happen. How inflexible and absurd is that? I hope that the hon. Gentleman will consider this issue in a different light following this debate, and discuss these important issues with employers in his constituency and, more importantly perhaps, people in his constituency who are currently not working but willing to work for less than the minimum wage, if allowed to do so.
The right to work covers not only remuneration, but how many hours are worked. I will not go into this, but obviously there are considerable worries about restrictions on the ability to opt out of the 48-hour working week. That brings me on to clause 3, which incorporates the training wage into the Bill. I am sure that I speak for many colleagues in saying that I could fill my office with unpaid volunteers and interns. Large numbers of organisations now rely on getting young people into their workplaces for no remuneration at all, even when they have to work in London. That is grossly unfair, but one of the reasons it is happening is that there is no flexibility for such people to be paid something between zero and a national minimum wage. If a person is inexperienced and lacking in qualifications, they will obviously be at a disadvantage in the labour market compared with somebody who has got experience and better qualifications. We should be encouraging, facilitating, enabling these people to join the labour market, rather than acting to exclude them.
That is particularly the case for young people. Record and rising numbers of young people are out of work. There was a blip in the figures published this week, but the trend is unmistakable—the number of people between 18 and 24 who are out of work is rising exponentially. Figures for my constituency show that in the period up to May the number of under-24s out of work was rising, whereas the numbers for those in the older age groups were falling.
Mr Thomas
I rise to enable the hon. Gentleman to find the figures from Christchurch, and gently to make the point that perhaps abolition of the future jobs fund, which I think he supported, might not have been such a good idea after all. May I draw his attention to clause 3(2), in which he talks about an
“entitlement to training from the employer in skills relevant to the employment”?
There is no sense in the clause of a quality threshold for that training. Is that not a further reason for the scepticism of those in the House and outside who worry that this part of the Bill would also undercut the minimum wage and allow, as my hon. Friend the Member for Midlothian (Mr Hamilton) hinted at just now, rogue employers to undercut the quality jobs offered by the many, many good businesses in this country?
Mr Chope
I am grateful to the hon. Gentleman for intervening, and I will return shortly to the figures I have now been able to find as a result of his intervention. On the training wage, I am disappointed by his intervention because it shows that he is trying to be pedantic. He is not sure whether under the contract of employment entered into voluntarily between the employer and the trainee—for want of a better expression—the training would be of a sufficient quality. However, that would be a matter between the person being trained and the employer. If that is the hon. Gentleman's only objection, I would be happy to see what could be done in Committee, but I suspect that his objection is much more fundamental, because he is on the side of producer interests backed up by the trade unions. He is not really interested in having a genuine training wage, which is what I suggest we should promote through the Bill. I do not want to appear too sceptical or cynical about what his interventions are really motivated by.
According to statistics from the House of Commons Library, in my constituency in April 2011, there were 205 jobseeker’s allowance claimants under the age of 24, which was an increase of 2.5% over the year. For those between 25 and 49, there was a reduction of 375, which was a 22.7% reduction, and for those aged 50 and over, the numbers were 150 and a 30% reduction. Those figures speak for themselves—they show that we have a real problem. While the numbers of people receiving jobseeker’s allowance in the older age groups are declining—certainly in my constituency—the same is far from true for those in the younger age range. A rational body deciding on policy would say, “There’s a problem here. We have to try and address it.” I hope, therefore, that my hon. Friend the Minister will tell us when he winds up the debate what the Government are going to do to get more young people trained and back into work, if they are not going to adopt my suggestion in clause 3.
Mr Bone
Before my hon. Friend moves on, may I use the word “scandal” about the situation with interns? People come to me asking to be interns—people with university degrees—but I cannot pay them anything because of rules set by the Independent Parliamentary Standards Authority, which means effectively that the only people whom I take on as interns are people from wealthy backgrounds. That cannot help social mobility and is wrong. IPSA needs to reconsider that specific point.
Mr Chope
I am sure that the powers that be in IPSA will be listening to every word my hon. Friend says. I agree with him. This, again, is one of the problems with having centralised bureaucracy intervening in the marketplace. Perhaps if clause 3 was on the statute book, it would provide a complete answer to the problem he has identified.
I was talking to a colleague yesterday who said that his son, a recent university graduate, was out of work. At the moment, about 20% of graduates are unemployed. That does not mean that they are unemployable—most of them want to get a leg up into the workplace, but at the moment they are being deprived of that. I had a case in my constituency of a graduate, aged about 24 or 25, who said that he would be happy to work for the so-called apprenticeships minimum wage—it will be £2.60 from October—but he is not allowed to do so because it applies only to people aged 18 or 19. That, too, is a real issue.
I promised earlier that I would refer to Mr David Frost of the British Chambers of Commerce, who said:
“The change to the national minimum wage rate is the wrong increase at the wrong time and will risk pricing young people out of work when youth unemployment is at a record high”.
As I pointed out earlier, if he thinks that a 6p an hour increase in the minimum wage for young people will break the bank, would not completely removing the constraints of the national minimum wage from young people undertaking training have an even greater impact? That is not always the case, but I do not go as far as Eamonn Butler from the Adam Smith Institute, a good friend of mine, who on 17 February called for the minimum wage for young people to be totally scrapped. He set out some cogent arguments and said that the minimum wage
“prices them out of jobs, so does them no good at all. For them, low-paid work is a way of building up some human capital that will make it easier to find a better job. But we stop them even getting that work at all—and all in the name of protecting workers.”
I very much agree with those sentiments.
The last part of my Bill deals with the need to ensure flexibility in the labour market in different parts of the country and sets out a method by which the Low Pay Commission will be required to address those problems.
I hope that this Bill will command the support of the House. However, I hope also that it will trigger a much more serious debate than we have had so far across the Chamber, among my political party, the coalition Government and the Opposition, because this issue is far too serious to be the subject of yah-boo politics—“Are you in favour of the minimum wage or are you against it?” We need to examine the issues in a rational, non-prejudiced and hard-headed way, so that we can get more people back into jobs and enable our economy to prosper.
Mr Thomas
I am grateful to the hon. Gentleman for giving way, as he is clearly winding up to his summary and peroration. With all due respect to him, he has a tendency to march his troops up the hill on a Friday, only to march them straight back down just a little bit later. If those on the Government Front Bench do not share his analysis, will he force a vote on the Bill, or will he once again march his troops back down the hill?
Mr Chope
The hon. Gentleman is uncharacteristically disparaging, if not insulting. First, I am not aware of having any troops. Secondly, if he is referring to the fact that I withdrew my two earlier Bills—the Training Wage Bill and the Minimum Wage (Amendment) Bill—he makes a fair point. However, I withdrew those Bills from the Order Paper because their provisions are incorporated in the Employment Opportunities Bill word for word. Having the good fortune to have secured a debate that could go on for five hours, I thought it better to have one, proper debate, rather than three separate debates. If it is the hon. Gentleman’s accusation that I withdrew those two Bills so that they could be incorporated into this Bill, I plead guilty.
So far as forecasting what will happen after the Minister has spoken, I cannot do that. When the Whips ask, “How will you be voting?”, I always say, “I’m going to wait and hear what the Minister says,” because I have an open mind on these issues. The Minister may well announce that he will support my Bill. Indeed, I had the wind taken out of my sails last Friday when a Minister said just that, and my Bill was unopposed on Second Reading.
Mr Chope
I am disappointed about that, because it sounds as though my hon. Friend may have come to the Chamber with his hands tied—perhaps by the coalition strings—and unable to address the arguments that have been deployed. Perhaps he will tell us a little more about that in due course.
Mr Chope
I certainly do have the guts. Should the matter arise, I would obviously need two people as Tellers, but it would be good to test the will of the House, if the Government are indeed as intransigent as it seems they are from what the Minister said in his short intervention.
Mr Bone
I hope that my hon. Friend is not missing the point. The shadow Minister—the hon. Member for Harrow West (Mr Thomas)—has been really helpful, because clearly the Opposition are fully behind the Bill and want to have a Division to help us. My hon. Friend should please not miss that point.
Mr Chope
A Division puts people’s positions on the record. For example, the hon. Member for Manchester Central (Tony Lloyd), who says that he supports the Bill—certainly clause 1, if not all of it—might be forced into the position of voting against it, but that would then be on the record. If he wants to vote against the Bill, I hope that he will have the opportunity to do so. I cannot remember how many Bills of mine have gone to a Division this Session—my hon. Friend might know the exact number—but quite a lot of them have. I assure the hon. Member for Harrow West that there is no deal between me and the Government to discuss the Bill and for me then tamely to withdraw it, but obviously I am conscious of the fact that we can have a Division on the Bill only if it is not talked out beyond 2.30 pm. We would also need to take into account the other, equally meritorious Bills seeking debate this morning.
Nick Smith (Blaenau Gwent) (Lab)
I would encourage the hon. Gentleman to have a Division on his Bill, which I see as a bob-a-job wages plan. In Blaenau Gwent we would definitely be against his plans to allow, as he put it previously,
“freely consenting adults”
to
“opt out of the minimum wage”.—[Official Report, 10 February 2009; Vol. 487, c. 1258-59.]
I see this Bill as a miserable attempt to gouge down the wages of workers across our country. We should have a Division, and we should vote against this miserable Bill.
Mr Chope
I do not have time to look up the unemployment figures in the hon. Gentleman’s constituency, but I am sure that all those without jobs who are seeking them will be really pleased to know that they have his full-hearted support for opening up the labour market and giving them better employment prospects.
This Bill is about the fundamental freedom, liberty and right to work. It also has consequential benefits for the competitiveness of our economy. Clause 1 would save quite a lot of money for the taxpayer, and the other clauses would generate more employment and less dependency on benefits. This is a really good Bill, and I commend it to the House.
Tony Lloyd (Manchester Central) (Lab)
The hon. Member for Christchurch (Mr Chope) has an almost unique parliamentary role. I am never quite sure whether he is like an interesting piece of baroque architecture—delightful to look at, although I am not absolutely certain what the real purpose is—or whether he is at the dangerous end of the Conservative party, dragging it back to where it feels most comfortable. I feel sometimes that he is the latter. I know that he will be disappointed by the Minister’s indication of opposition to the Bill, but I hope that the Minister will indeed oppose it, because although I would support parts of it, this Bill is essentially a retrograde, unfortunate and, in the end, quite dangerous little piece of social legislation.
Nevertheless, there is a real debate to be had on these issues. It is a debate that ought to take place from time to time, if only to remind people of two things: first, why we need the national minimum wage; and secondly, just how unsympathetic and unreconstructed parts of the parties of Government are on such issues. The hon. Member for Christchurch and one or two of his hon. Friends who are going to speak later represent a significant body of opinion, not in the nation generally, but in the Conservative party. That ought regularly to be put on record to remind my own constituents and, for example, those of the hon. Member for Shipley (Philip Davies) just what a rotten, nasty party the Conservative party can be.
Philip Davies
I would be grateful if the hon. Gentleman could get away from the insults and on to the issues. Given that the national minimum wage has clearly been such a triumph, will he tell us what the adult and youth unemployment figures in this country were when the minimum wage was introduced, and what they are now?
Tony Lloyd
Those were not insults; they were matters of fact. We can debate facts, but we should not trade insults; that would not be reasonable. Mr Deputy Speaker, I am sure that you would deplore my insulting hon. Members, and the fact that you did not call me to order suggests that the basic fact that I have just described has now been established and placed on the public record.
Let us talk about the real impact of the minimum wage—
Tony Lloyd
Will the hon. Gentleman please be patient?
I shall begin by examining the Bill sequentially. I want to talk first about the part of it that I agree with. The hon. Member for Christchurch began his speech by talking about the impact of clause 1, and I had a lot of sympathy with what he said. We really ought to have a serious debate about this in the House, and I have urged the previous Government and this one to take the issue seriously. It makes no sense in a country such as ours to force into unemployment those asylum seekers who are willing to work and to make a contribution to their families, the wider community and the taxpayer. Sometimes, they are forced into worse than unemployment. As we know, the fact that we push asylum seekers into destitution is one of the drivers of prostitution and some types of crime. The hon. Member for Wellingborough (Mr Bone) made a valid point about women who are being trafficked into our society, and we ought to take that issue seriously.
Governments classically respond to the argument in favour of allowing asylum seekers to work by pointing out the danger of creating a magnet that will attract further waves of asylum seekers. The hon. Member for Christchurch was absolutely right to say, in response to the hon. Member for Shipley, that the problem with our asylum system is not that it operates as a magnet, but that we deal so slowly and incompetently with the processing of asylum cases. This was the case all through the years of the Labour Government, and, sadly, it is still the case now. We need rapid resolution of those cases.
Let us take the example of a woman who is legitimately claiming asylum because she has been forcibly trafficked from the far parts of eastern Europe, or wherever, and forced into prostitution in our society. She has no capacity to return home and genuinely fears for her life and for her family back home. We need to be able to say to that woman, “Yes, you are a genuine asylum seeker and you can play a constructive role in our society.” We also need to say to the illegitimate, bogus asylum seeker, “Please return quickly to where you came from.”
There is real merit in having this debate. Even though I disagree fundamentally with everything else in the Bill, I profoundly agree with the hon. Member for Christchurch that we need to have a debate on this subject. We need to debate not only what a civilised society ought to be, but what is practical and proper for our society. In fact, I would go further and suggest that there should be an expectation on legitimate asylum seekers to begin a process of finding work, because that shows commitment to the values and the ethos of our society. That would create a good two-way set of responsibilities, which relates to the proposal in clause 1. Alas, the rest of the Bill does not have the same merit as that first part.
It is always delightful to listen to the hon. Member for Christchurch. He always offers us an entertaining race around the now rather worn and old economics textbooks from the 1920s, the 1870s and the 1850s. Those books are now a little thumbed at the corners, but they are still interesting to read because they shed some light, not so much on the working of a real economy in the 19th century, and still less in the 21st, as on the thinking of those who suggest that the Bill is about freedom. It is not about freedom; it is about taking away social protection for vulnerable people in our society, and that is what we need to talk about.
That is the nub of the intellectual debate about the merits of free-market economics versus what the hon. Gentleman would call the crushing hand of state socialism. Were the minimum wage an example of the crushing hand of state socialism, some Labour Members might be a little happier with the direction of travel in our society’s support for the vulnerable and its recognition of the relationship between those in the most powerful economic positions and those at the bottom of that pile.
Mr Nuttall
I am pleased to hear the hon. Gentleman’s welcome for clause 1. Does he think that asylum seekers and others covered by the clause should have the right to work for less than the minimum wage if other people should not?
Tony Lloyd
No. If that is what the hon. Member for Christchurch is proposing, I have absolutely no sympathy with that view. The reason for having a floor is the ambition to prevent the undercutting of wage rates for individuals, whether they are born nationals, as the hon. Gentleman would have it, or asylum seekers. The suggestion that the hon. Member for Bury North (Mr Nuttall) has just made lacks merit because it would erode the whole concept of a minimum floor below which people ought not to be expected to fall.
I want to deal with the argument put forward by a number of Conservative Members that it is legitimate to do away with that floor. They have cited reasons of competitive pressure and the black economy, to which the hon. Member for Northampton South (Mr Binley) referred. Of course we know that the black economy exists and that it exerts a dangerous influence at the bottom end of the labour market, but we do not want to make it a model for how we deal with the whole economy. We should be seeking to get rid of the black economy, rather than institutionalising it by getting rid of social protection relating to wage rates.
That same black economy erodes health and safety standards at work. In my somewhat distant youth, I worked for companies that thought health and safety was an optional extra, and that put my life and those of other employees seriously at risk. The minimum wage and health and safety legislation all form part of the same debate, which we have had many times. I know that different views exist, but I believe in a proper floor below which people in a decent society should not be allowed to fall.
Mr Binley
Does not the hon. Gentleman recognise that most employers want good employees? If they want good employees, they have to look after them. The great majority of employers in this country, certainly in the small and medium-sized enterprise sector, think in that way. The suggestion that all employers are evil, which seems to be emanating from the hon. Gentleman, is absolute nonsense. Will he admit that?
Tony Lloyd
I do not have to admit that, because I have not indicated that that is what I believe. Of course there are many good employers, and they should not be forced to face competitive pressures from the unscrupulous ones who would undercut them. That is the reality in the black economy; it would also be the reality if we had a differential or arbitrary minimum wage rate. That would result in the good employer who wanted to pay his or her employees a decent wage being undercut in the marketplace by the rogue employer. Of course I am not claiming that rogue employers are in the majority, but, sadly, they exist in many different areas of our national life. That is why we have to have floors through which people must not fall.
The hon. Member for Shipley asked me about unemployment rates. I cannot quote him the figures, but I am sure that when he makes his own speech, he will probably have them to hand. Let me tell him something that I know he will disagree with profoundly: nobody has demonstrated any link between the levels of unemployment in our society and the introduction of the national minimum wage. The last person who I think tried to put that concept forward was the former Member for Folkestone and Hythe and sometime leader of the Conservative party—perhaps I should call him the noble Lord Howard. He once claimed in a debate about the minimum wage that it would see the loss of 500,000 jobs, only to claim later that it would result in 1 million or 2 million job losses. When it was brought in, in 1999, we did not see that impact on employment; indeed, we saw employment levels rising.
Mr Bone
As usual, the hon. Gentleman makes a powerful speech in line with his beliefs. To put the record straight, he talks about what the then Michael Howard said, but at that time the Labour party was promising to bring in the minimum wage at a much higher rate than it actually did. If it had been brought in at that higher rate, it would have resulted in more unemployment.
Tony Lloyd
That simply does not square with the facts. I lived through that period and, more importantly, I was a member of Labour’s employment Front-Bench team that began to develop national minimum wage policy and I can think of no occasion when we over-promised on the national minimum wage. Indeed, the hon. Gentleman should know that some people now feel that the Labour party under-promised what it might have done across a whole range of issues in those early days; it certainly did not over-promise. If he went back to check the record, he might want to acknowledge that he got this wrong.
Mr Thomas
As ever, my hon. Friend makes a strong and powerful case. Given his experience in helping to devise the minimum wage policy, does he recall the decision at the conference of the Federation of Small Businesses in 1997 to support a national minimum wage sensibly negotiated? Is that not a sign of the support that existed for the introduction of the national minimum wage at the time and a reason why it continues to have strong support from business?
Tony Lloyd
To be totally frank with my hon. Friend, I do not remember that, but I am very grateful to him for reminding me. He makes a very important point. The idea that the minimum wage is some kind of creation by the ultra-left or the most luddite of trade unions is ridiculous. The minimum wage has had support and continues to have support across a whole range of different groups in our society, including groups representing small businesses. The Low Pay Commission comprises people not just from one side of the employment divide; employers are represented on it and they play a constructive part. As Conservative Members will know, those employers have been supportive of the changes in the level of the minimum wage over time.
Mr Binley
I recognise the hon. Gentleman’s great experience in these matters. He will remember—I believe this to be true—that the Federation of Small Businesses did not come to that position until after the will of the Government had been made absolutely clear, when it became politic from its perspective to adopt it. Is that not the truth of the matter?
Tony Lloyd
I am in some difficulty there in that having admitted that I did not remember the FSB making the decision in the first place, I am reluctant to claim that I know how it made that decision.
Let me use the hon. Gentleman’s point as an important example. He is describing circumstances where groups of people can be coerced by political pressure into making a decision that runs counter to their own best interests. That is the line of argument he adopts about the FSB—that it was dragooned by greater power into making that decision. Is that not precisely the problem with what the hon. Member for Christchurch wants in the workplace? Cannot unscrupulous employers say to weak individual employees—people weak in the sense of their bargaining position relative to their employer—something like, “I, your employer, want to persuade you that it is in your interest to drop your wages below the minimum wage”? It is very difficult to accept that as a legitimate element in the Bill, as we know that unscrupulous employers do that to their employees. I think the hon. Member for Christchurch referred to “the regular plodders” or used some term like that. Some people in our society do have genuine social difficulties in negotiating their wages and they need our protection; they do not want us to take away the minimum floors that protect their wage rates.
Mr Binley
I thank the hon. Gentleman again for being generous in giving way, but is he not perverting the meaning of the clause, which makes it quite clear that this happens only when an employee, not an employer, wants to argue for a lower wage. Is that not the truth of the matter? Is the hon. Gentleman saying that unscrupulous employers throughout the nation will go out to their employees and in some way victimise them and force them to argue for that? Is that what he expects us to believe?
Tony Lloyd
I do not know what the hon. Gentleman believes as it can be quite difficult to work it out, but I suspect that we do not have much in common on these issues. Yes, I do think there is a real danger of that. I know it, as I have worked for employers who were extremely dubious in their labour practices. I know that when people are young and inexperienced and they need the work, it is difficult for them to say to an employer, “No, I will not do that.” The hon. Gentleman might be surprised to find out that that is why trade unions grew up—because people needed collective protection. It is why trade unions and political parties like the Labour party campaigned for a national minimum wage—because people at the margins in our economy need that collective support, through collective action or by legal support. Indeed, it is why the Government Front-Bench team has been persuaded of the need for a national minimum wage. If the Government did not believe in the need for a basic floor below which people cannot fall, they would not have opposed the Bill and supported the national minimum wage.
There is a gulf in understanding of how the world of work works between the hon. Member for Northampton South and myself—and ever may it remain thus, as our experience might have been different. Perhaps he has met only benign and happy employers—I am sure he was one of them—but I have met some quite malign and quite nasty employers. One day, I will perhaps buy the hon. Gentleman a half pint of our subsidised beer and tell him all about it.
Mr Binley
I look forward to that and thank him for the half pint. Does the hon. Gentleman not recognise, however, that unless an employer has working people who want to do the job and want to be involved, he will not get the sort of work out of them that he clearly needs—especially in the SME sector?
Tony Lloyd
The hon. Gentleman rightly pushes me to refer to some of the realities. Let us go back to the time before the national minimum wage. Let us go back to a time when young hairdressers in cities like Manchester were being paid under £1 an hour. Why did they take that work? Because they were young people who felt that they had to buy into the workplace. They had to accept way below any acceptable level of remuneration and way below an income that anyone could seriously live on in the hope that it would give them the experience to carry on in the trade. That was wrong then and it would be wrong if we were to bring it back again. That is the reality of what the Bill would do. It would take the clock back to a time when bad employers were prepared to compete unscrupulously against the better employers at the expense of their employees.
I am totally on board with the hon. Member for Northampton South in advocating the point that good employers work well with their employees. In many cases, good employers train, pay reasonably and provide acceptable working conditions. I have worked for good employers: but not all employers are good; not all employers are acceptable; not all employers operate proper health and safety standards; not all employers offer an acceptable wage for people to live on. That is why we have a floor through which people should not fall.
Philip Davies
I assume from the hon. Gentleman’s earlier comments that he accepts that unemployment is higher now than it was when the minimum wage was introduced, although he could not bring himself to say so. Does he also accept what was said by my hon. Friend the Member for Christchurch (Mr Chope), namely that if the level of the minimum wage is so important, the hon. Gentleman will support the Government in ensuring that people who earn it need not pay any income tax or national insurance?
Tony Lloyd
As I do not support the Bill in the first place, I am not sure how I could be expected to support certain parts of it. However, the ambition to remove taxation from the lowest paid is an excellent one. If the hon. Member for Shipley will support me in trying to ensure that the higher paid make a bigger contribution, it will be easy for us to relieve the low paid of their burden.
The hon. Gentleman’s intervention has led me to another point that I was going to make. If the hon. Member for Christchurch were willing to drop most of his Bill while incorporating my proposal for a high pay commission to ensure that the top rate of pay is reduced, I would feel able to support the first part of it, and we might then be in business. However, I suspect that my views on high pay are as hard for him to accept as his views on low pay are for me to accept.
Let me say something about the economic arguments that the hon. Member for Shipley has invited me to consider. When the Better Regulation Executive investigated the impact of the national minimum wage, it found no link with levels of employment and unemployment. I fear that unemployment will begin to increase, but an interesting aspect of the way in which the labour market has operated recently is the fact that those in work have remained in work much more consistently than was the case during earlier recessions. That is almost certainly partly due to levels of flexible working, but it also belies the proposition that the minimum wage has served as a disincentive to employment, because had it done so the existing work force would have been undercut by would-be entrants. That throws a cloud of doubt over the argument about the operation of free markets at the bottom end of the labour market.
A more important finding by the Better Regulation Executive was that paying a national minimum wage conferred an overall benefit on our economy. The minimum wage has important regional impacts, which is why the idea of a regional differential is ridiculous. The clue lies in the phrase “the United Kingdom’s national minimum wage”. We are indeed a United Kingdom, and the national minimum wage is national. There are good and profound reasons for that. The national minimum wage prevents the dislocation, already too prevalent in our economy, between the overheated south-east and other parts of the country.
I cannot go as far as the hon. Member for Christchurch in describing those other parts of the country as the “more remote” regions. Those of us who live in such regions do not feel that they are particularly remote. However, we “remoters” feel strongly that the people whom we represent and the economies in which we work should enjoy the same level of protection and the same capacity for operation of the minimum wage, partly—indeed, if for no other reason—because it is important in creating regional demand. That is one reason why groups such as the Better Regulation Executive have found that the national minimum wage is, overall, in the national economic interest.
Mr Bone
The hon. Gentleman is, again, generous in giving way.
If we view the minimum wage in terms of what it can buy rather than the actual amount involved, it is clear that it is worth a great deal more in the hon. Gentleman’s constituency than it is in, say, London. Might that be an argument for two different rates? I do not know the answer, but I should like to hear what he thinks.
Tony Lloyd
That is a genuine issue for debate. It is obvious that it is much easier for someone to live on the minimum wage in, for instance, the north-west of England than in central London. That is why the Mayor of London has begun to advocate strongly—I think I agree with him on this—the introduction of a living wage, which does not simply enable people to operate at or below some notional national level, but recognises such factors as housing costs. However, we must still maintain a national floor through which people cannot fall.
Nick Smith
I congratulate my hon. Friend on what I consider to be a sensible defence of the minimum wage. Does he agree that the Bill’s “bob a job” wages plan would dramatically undermine it, particularly in areas such as mine in south Wales, where it helps to boost local economies?
Tony Lloyd
That is the point that I was making about the word “national”. It ought to be recognised that, in one nation—whether we measure it from the tip of Scotland to the far south or from the west to the east—we are all in this together. We cannot have an economy that is dislocated. Although the last Labour Government got some things right and introduced some valuable measures, they failed to wrestle successfully with the regional impact of economic decisions. The dash for the City over-emphasised the needs of a particular region of the south-east at the expense of the rest of the economy. The level of the pound proved disadvantageous to manufacturing industries: it hurt south Wales, parts of the north of England, and even parts of the traditionally industrial midlands. There are significant reasons for our failure to operate entirely effectively in relation to the national economy, and, as my hon. Friend suggests, we should not lose sight of the important role of the national minimum wage in that context.
Let me say something about the training opt-out. The hon. Member for Christchurch did not mention the fact that when the minimum wage was first introduced in 1999, there was also a six-month training discount called the development rate. In 2005, the Low Pay Commission recommended that it should be discontinued, because it had become totally discredited. Not only was there no evidence that employers claiming the discount were training employees; there was evidence that they were not training. As my hon. Friend the Member for Harrow West (Mr Thomas) pointed out to the hon. Member for Christchurch, the Bill contains no provision guaranteeing the quality of even the quantity of training.
There are important issues that the House should debate in relation to how we train in our society. I have strong views with which even my party’s Front Benchers may not always agree. For instance, I still believe that we should consider imposing a training levy on those who will not train. As things stand, a freeloading bad employer can undercut a good employer by refusing to train, and can then poach the product of the good employer’s training. We ought to think about those issues, but I do not think that we should do so in the way proposed by the hon. Gentleman. I do not believe that the Bill will produce different results from the old development rate. There were good reasons for getting rid of that, and I think that he should think carefully about what he has advocated in his Bill. It simply would not work. It would operate as a perverse incentive for rogue employers, and I do not think that we should give them incentives.
This has been an interesting debate, and I shall now draw my remarks to a conclusion as I know that other Members wish to contribute to it. In a way, I hope the hon. Gentleman does press the Bill to a Division, as it will be interesting to count Members through the Lobbies, although I suspect that there will not be enough of us around today for that to be a defining moment in the political history of our Parliament and the economic history of our society.
I do not think the hon. Gentleman is a mean-spirited human being; I say that genuinely, although I cannot say it of all the people who advocate effective gouging of the minimum wage structures. I think his view of how the modern economy works is profoundly wrong, however. It is important that we debate this matter from time to time because although some Conservative Members do not believe this, it is a tough, tough world out there for those at the bottom. We should not return to a tough world in which young kids are paid less than £1 an hour, and adults are paid between £1 and £2 an hour, because that kind of society is both irresponsible and, at best, amoral. We want a society that has basic social standards for all our citizens, and where we can say to our young people, “Get into the world of work because you will be paid well.” We want a society where the “regular plodders” to whom the hon. Gentleman referred are not forced to work hour after hour to take home an unacceptable level of pay, but can be paid a dignified wage because they contribute in the best way they can. That is the kind of society to which we ought to be aspiring, and it is not so very difficult to achieve, but it would be a lot more difficult if we were to accept the premise of the Bill.
Mr Edward Leigh (Gainsborough) (Con)
On a point of order, Mr Deputy Speaker. Have you received any request from the Government this morning to give an urgent statement on the crisis in the eurozone? This is urgent and important. President Sarkozy and Chancellor Merkel are locked in discussions, the Commission is battling to reach an agreement, the Greeks are being prevented from devaluing, and our own people are threatened with having to pay for a £1 billion bail-out. Are Treasury Ministers coming here today to give a statement so we can question them on this important matter?
Mr Deputy Speaker (Mr Lindsay Hoyle)
I have no knowledge of a statement to the House being prepared; I have not been given notice of that. As the hon. Gentleman knows, it is not for me to ensure such a statement is given; that is up to the Government.
Mr Binley
Further to that point of order, Mr Deputy Speaker. We may be in a very serious crisis indeed. Greece is no doubt bankrupt. In addition to our international obligations, our banks are owed tens of billions of pounds, and that will impact massively on Britain’s own financial standing. How can we use our abilities through you, Mr Deputy Speaker, to ensure there is a statement not later than Monday of next week?
Mr Deputy Speaker
The hon. Gentleman knows that that is not a point of order and it is not a matter for the Chair, but I am sure people in high office are listening, and that his comments will have been taken on board.
Philip Davies (Shipley) (Con)
It is bizarre that the hon. Member for Manchester Central (Tony Lloyd) thinks that it is appalling for young people to be going out to work for low wages, and that he would therefore prefer them to be sat at home watching Jeremy Kyle and “This Morning” and visiting their local amusement arcades, rather than having gainful employment. That is a matter for him, of course, and we all have our own views on what we think is best for people to do. I think that working is better than doing as the hon. Gentleman suggests, but he obviously disagrees.
I have risen to support my hon. Friend the Member for Christchurch (Mr Chope), and to commend his courage, because there are certain political views people are not allowed to hold. The principle of free speech fell away in this country a long time ago, and it certainly went out of British politics a long time ago. Over time, a situation has arisen whereby we are not allowed to express certain views in polite company, such as questioning the merits of sex education in schools. Also, in the previous Parliament nobody was allowed to question the benefits of the Climate Change Act 2008.
Mr Leigh
It is impossible to have any sensible debate on the national health service, too, as it has become a kind of religion. We have had a catastrophic health statement this week, ruling out competition. There are clearly no-go areas in the arena of public debate, on which the two Front-Bench teams join together so there is no proper debate as to how we can best take matters forward. On the NHS, for instance, the social insurance systems on the continent are far superior and give patients a much better deal, but there is no proper debate of how we might introduce such insurance systems.
Philip Davies
Mr Deputy Speaker, you would not want me to start talking about the national health service in this debate, so I shall resist my hon. Friend’s tempting offer, but he is absolutely right that it is considered unacceptable in politics to argue for certain unpopular causes. I always ask people to celebrate anybody in politics who will stand up and say something controversial or unpopular, because I think they are doing a great service to our democracy, even though they may be insulted by Labour Members. I therefore commend my hon. Friend the Member for Christchurch on bringing this important issue before the House, and for trying to generate a grown-up debate about the benefits, or otherwise, of a fixed national minimum wage that people are not allowed to get out of.
I have always believed that a political consensus is usually a precursor to a disaster. Every party in this House supported joining the exchange rate mechanism, yet it turned out to be a complete disaster. The setting up of the Child Support Agency had cross-party support and it was seen as a great thing, but it has been a complete fiasco. Everyone across the political divide has had to support the setting up of tax credits, too, yet anybody who has had any dealings with the system knows that it has been a complete fiasco as well. The fact that there is political consensus in support of a measure does not mean to say it is good, therefore; it just means to say the measure is likely to be politically expedient.
Mr Chope
My hon. Friend makes a good case. Does he agree that that problem is not confined to our Parliament? The political consensus getting it wrong is precisely what happened in Greece: there was cross-party consensus that the country should join the euro, and what a mess they have made of it!
Philip Davies
My hon. Friend is absolutely right. We should never allow political expediency to prevent a serious debate about what is right, which is why I particularly commend my hon. Friend for raising this issue.
I apologise for not having been present in the Chamber for the beginning of my hon. Friend’s speech. He may well have said then what I am about to say now, but if he did not, I certainly wish to do so. We must acknowledge that the introduction of the national minimum wage has been a huge benefit to a lot of people in employment. As a result of the national minimum wage, the pay of a lot of people who were being paid a low wage went up, so it has been a great success for them. It would be churlish to argue otherwise. I certainly would not pretend that the national minimum wage has been a total disaster for everybody, because it clearly has not. However, just as I would not argue that, I think it would be churlish for Labour Members to put on their political blinkers and just see the benefits that have been accrued by certain people, without being open-minded enough to look at the potential downside of a national minimum wage in its current form. If Labour Members do not think there are any downsides whatever from having a national minimum wage, they are either totally blinkered in their view or they do not live in the real world.
Philip Davies
The hon. Gentleman should know that my hon. Friend is never swayed by my opinion on anything, so whatever I say will not influence his decision. I do not know why the hon. Gentleman thinks everybody else is as lily-livered as he clearly is on controversial matters. All I can say to him and to my hon. Friend is if my hon. Friend does decide to press the Bill to a Division, I will vote for it. I do not think I can make my position any clearer than that.
When the national minimum wage was introduced it was not supported by my party or the Liberal Democrats, as we had a principled objection to it. Like my hon. Friend the Member for Christchurch, I am interested to hear the Minister’s view on this. Mine is that that principled objection turned into expedient support for the minimum wage, but I am sure that the arguments that were relevant then remain relevant today.
We were told that the minimum wage would not make any difference to employment levels. Given that over the following eight years there were higher levels of employment and lower levels of unemployment, it was taken as read that the national minimum wage must have no negative impact on employment. Given that we all want people to be properly rewarded for the jobs they do and that no politician wants to argue for lower pay for people, we have a political consensus on this matter. However, during those eight years there were high levels of economic growth, so it was inevitable that employment levels would rise in that period, with or without a national minimum wage. This clearly has not crossed the minds of Labour Members, but even more employment may well have been created if there had not been a national minimum wage. I used to work in the supermarket industry and retailers in that sector made it clear that about 100,000 extra jobs would probably have been created without a national minimum wage during that time. The fact that the employment level rose during that time does not mean that it was caused because of the minimum wage; it probably occurred despite the impact of the minimum wage.
The real test of a national minimum wage was always going to come when we came to an economic slow-down. It is very easy for employers to maintain those employment rates in good times, but the test was always going to come during a downturn. There are legitimate concerns now about the effect of the national minimum wage, and it would be irresponsible for us to ignore them, even if it would be expedient to do so.
I must make the point that I was never supportive of the principle of the national minimum wage. I think that the payment of an employee by an employer should be a private matter and that if someone is happy to do a job for a certain wage, it should not be any business of the Government to prevent them from doing that job. However, I have to accept that that philosophical argument was lost some time ago, so my concerns are now based on the minimum wage’s practical and unforeseen impact on some of the most vulnerable people. The people who are most disadvantaged by the national minimum wage are not the unscrupulous employers. As my hon. Friend the Member for Christchurch so eloquently said, such employers are still alive and kicking in the black economy; they are still employing people and paying them below the minimum wage. The people who are most disadvantaged by the national minimum wage are the most vulnerable members of society. My concern is that the minimum wage prevents those people from being given the opportunity to get on the first rung of the employment ladder.
The great myth when the minimum wage was introduced was that people who are paid low wages are paid those low wages for the rest of their career. Many people have been paid a low wage to begin with and that has given them some work experience which has allowed them to move up the employment ladder to get higher quality jobs and better wages. My concern is that the first rung on the jobs ladder is far too high for many of the most vulnerable people ever to reach and they are thus unable to move further up. I shall set out an example that I am able to give, having spoken to people in this field.
Let us consider an employer who needs to take someone on and can choose between a former prisoner and someone who has never been to prison. In the real world, who is the employer going to take on, given that they would have to pay both these people the same wage? I suggest that 99 times out of 100 the person who has not been to prison will get the job. As the employer would have to pay both these people the same wage, why would they give the person who has been to prison a chance? The only way the former prisoner would be given a chance by the employer is if the employer was able to say, “I’ll give you a smaller amount for a certain period of time and we’ll see how it goes. If you prove yourself, I’ll move you up.” The employer is not being given that opportunity as that flexibility is not available, and that is preventing certain people from being able to access employment. Consequently, many of these people—even the ones who want to get a job—cannot find employment and so they commit crime again and add to the problems in society.
I went to visit a charity called Mind in Bradford a few years ago. One of the great scandals that the Labour party would like to sweep under the carpet is that in this country only about 16%—I stand to be corrected on the figure—of people with learning difficulties and learning disabilities have a job. The others are unemployed, but why is that? I spoke to people at Mind who were using the service offered by that charity, and they were completely up front with me about things. They described what would happen when someone with mental health problems went for a job and other people without these problems had also applied. They asked me, “Who would you take on?” They accepted that it was inevitable that the employer would take on the person who had no mental health problems, as all would have to be paid the same rate. Given that some of those people with a learning disability cannot, by definition, be as productive in their work as someone who does not have a disability of that nature, and given that the employer would have to pay the two people the same, it was inevitable that the employer would take on the person who was going to be more productive and less of a risk. The situation was doing the people with learning difficulties a huge disservice.
As I said at the start of my remarks, the national minimum wage has been of great benefit to lots of low-paid people. However, if the Labour party is not even prepared to accept that the minimum wage is making it harder for some of those vulnerable people to get on the first rung of the jobs ladder, we will never get anywhere in trying to help these people into employment.
Tony Lloyd
The hon. Gentleman’s arguments are always seductive—they are wrong, but they are very seductive. How low would he be prepared to drop those wages? If someone with learning difficulties was only a quarter as productive as the competing would-be employee, would he be prepared to drop their pay rate to a quarter of the minimum wage? Should it drop to less than a quarter? What is his floor?
Philip Davies
I made my position clear in my earlier remarks but, given how uninteresting I am, I forgive the hon. Gentleman for perhaps nodding off during that section. I did make it clear at the outset that I did not agree with the national minimum wage in principle. I said I thought that what somebody was prepared to work for and what somebody was prepared to pay was a private matter between two people and it should not be interfered with by the Government. The big difference between him and me is that I would much prefer the person with the learning disability to be given the opportunity to get a job, do something worth while and contribute in a way that they want to, whereas he would prefer them to be sat at home, unable to get a job in the first place. He may think that he is taking the moral high ground by believing that it is far better for these people to be sat at home unemployed without any opportunity, but I do not
Tony Lloyd
The hon. Gentleman avoids the question. If there is no floor, people will be paid wages that would be an outrage in our society. If he wants to protect people, he can do so in other ways—he can offer supported employment and he can offer subsidised employment. As you know, Mr Deputy Speaker, our society has on many occasions offered the concept of the “sheltered workshop”—that may not be a good modern term—and we ought to think about that.
Philip Davies
I will tell the hon. Gentleman what is an outrage. It is an outage that in 1997, 47,000 people had been on incapacity benefit for five years or more, but by the time his party had ruined the country that figure had risen to 1.5 million. That is an outrage that he should be reflecting upon. He should think about the fact that so many people were either priced out of the jobs market or were just out of that market as a result of his Government’s policies. That happened either because of the national minimum wage or because the benefits system penalised people for going out to work. That is the real outrage, rather than what he is pointing out.
Mr Chope
My hon. Friend is making a brilliant contribution. Does he accept that one of the tragedies is that this situation was forecast? Back in 1998, the Low Pay Commission said that
“minimum wages may cause a transfer of jobs between groups such as the substitution of more skilled for less skilled workers”.
The less skilled workers are the ones who have lost out as a result of the minimum wage.
Philip Davies
My hon. Friend is absolutely right. Of course, it is very easy for everyone to try to sweep such matters under the carpet, but we would be doing this place a great disservice if we did. I am appalled that Labour Members, who supposedly—as they claim—represent the most vulnerable in society, are perfectly happy for those people never to be given the opportunity to get a job as a consequence of Labour’s policies either on this matter or on benefits.
Mr Leigh
My hon. Friend is making an important contribution and it is important that we have this debate, but let me ask him a question as a critical friend. Let us forget the fact that there is a minimum wage at the moment. Why should a disabled person work for less than £5.93 an hour? It is not a lot of money, is it?
Philip Davies
The point is that if an employer is considering two candidates, one who has disabilities and one who does not, and if they have to pay them both the same rate, which is the employer more likely to take on? Whether that is right or wrong and whether my hon. Friend would or would not do that, that is to me the real world in which we operate. The people who are penalised are those with disabilities who are desperate to make a contribution to society and who want to get on the employment ladder, but find time and again that the door is closed in their face. If they could prove themselves earlier and reassure the employer who took them on that they would not cause a problem in the way the employer might fear—I am sure that there are a lot of myths out there and that many of these people would be just as productive as those without a disability—they might well move up the pay rates much more quickly. At the moment, they are not getting any opportunities at all.
We all know that some employers break the law and pay below the national minimum wage, but it strikes me that the only way employers are likely to get away with that is if they employ illegal immigrants. If an employer is employing a British citizen or someone who is here legally and tries paying them below the minimum wage, legal action can be taken against them, they will face a huge fine and the employee can do something about it. If that employer is employing an illegal immigrant, the power rests with the employer, because they will judge that the illegal immigrant will not take up the case officially. If they do, their illegal status in this country will be exposed and they will be turfed out of the country.
One consequence of the national minimum wage is that it encourages illegal immigration into this country. Illegal immigrants know that they can get employment below the national minimum wage and are happy to do so because it is probably higher than the wage they would earn back in their country. They also know that they will have no problem getting a job because some employers will be crying out for someone whom they can pay less than the national minimum wage. I am not sure whether any research has been done on this, but I would be interested to know how much illegal immigration into this country has come about as a result of the introduction of a national minimum wage.
Whatever the effects on employment of a minimum wage are in general, its effects in a recession must be worse. My hon. Friend the Member for Christchurch may well have made this point before I entered the Chamber, as I was a few minutes late, but people will recall that at the start of the credit crunch, or recession, a couple of companies—my hon. Friend, who is more knowledgeable on this than I am, will correct me if I am wrong, but I am sure that those companies were JCB and Corus—told the people working there that the wage bill needed to be reduced by 20%, so either 20% of the staff could be made redundant or everyone could take a 20% pay cut. One way or another that wage bill had to be reduced. If I remember rightly, the workers in those places—JCB sticks in my mind in particular—got together and voted to take a 20% pay cut. They made that choice themselves. Rather than being made redundant, they chose to take a pay cut.
Mr Bone
My hon. Friend is making a very powerful speech, but does he agree that a 20% pay cut is not a 20% cut in take-home pay for those people who take the cut, because they save on the tax, and is more than a 20% saving for the employer because there is not the same on-cost? It helps both ways, but it is not quite the same.
Philip Davies
My hon. Friend is right and reinforces my point. Those people decided they would prefer a 20% cut to risking a 20% chance of being made redundant.
Mr Leigh
Again, it is very important that we tease out these arguments. Those people took a pay cut, but presumably it still did not reduce their wage below the minimum wage. What worries me about my hon. Friend’s argument is that although I know the Bill says that everything will be voluntary, will there not be massive pressures from employers? Might they not tell staff that they are in awful trouble and ask whether they will consider taking less than the minimum wage? Might they not say to a disabled person, “You’re not quite so good at doing this job; will you please take less than the minimum wage?” Although the provision is ostensibly voluntary, there will be pressure on the employed to take less than the minimum wage.
Philip Davies
My hon. Friend might think that such choices should be available only to people who are highly paid, but a firm in which all the staff are paid the minimum wage might be faced with the same predicament. Why does he think that the only people who should have the choice are highly paid people? Why should more lowly paid people not have the same option to take a pay cut or to be made redundant? Why does he want to deprive them of that choice? Why does he think that only highly paid people are capable of making that decision? Why are not more lowly paid people capable of doing so, if they feel it is in their best interests? To force those people to be made redundant in such circumstances is, I think, an outrage. It is an outrage that we would not allow them to make the choice themselves. The whole principle is that the Government and state know best and know what is best for everybody, so they will not even allow anybody to make the choice for themselves.
Mr Chope
My hon. Friend knows that our hon. Friend the Member for Gainsborough (Mr Leigh) can be a bit paternal at times, but I wonder what he would think of what happened in Ireland? Owing to the centralised situation to which my hon. Friend the Member for Shipley (Philip Davies) refers, the Government decided to reduce the minimum wage in order to get out of a financial hole.
Philip Davies
My hon. Friend raises an interesting point. As I have said, I have lost the philosophical argument and so I think some of the practical arguments should be explored. He pre-empts my speech—I am not sure whether he has been looking over my shoulder—because I was about to make the point that, although a national minimum wage might well be sustainable during periods of economic growth, the Government ought to consider introducing some flexibility to the system during an economic downturn. For example, during a recession they could consider suspending the minimum wage or reducing it. If we are to try to help people into employment during difficult economic times, it is obvious to everybody—bar Labour Members, it seems—that it will be easier without a national minimum wage.
Let me return to the point I made in an intervention. The Opposition have based their whole policy on a number of things on the argument that if we increase the cost of something as much as possible, we will reduce its consumption. For example, the argument goes that if we increase the tax on tobacco and alcohol, we will have fewer people smoking and drinking alcohol to excess. The same principle must apply to employment: if we increase the costs of employment, we will see a reduction in it. That follows the same logic. If the Opposition have decided that if we tax something more, we will not see less of it, I would welcome their conversion, but they cannot have it both ways. They cannot say one thing about tobacco and alcohol and think that the principles are somehow completely different as regards employment.
I want to return to the point made by my hon. Friend the Member for Christchurch about the tax and benefits system, because he was on to something. He powerfully made the point that many people who are self-employed in this country do not earn anything like the minimum wage, particularly when their business faces financial problems or uncertainty. I never hear Labour Members speaking up for those people and arguing that they are being underpaid. It is usually those people who are criticised by Labour Members for trying to reduce the wages of their staff, glossing over the fact that the person who runs and owns the business may well not be making any money at all at that time. It comes back to a point made by my hon. Friend the Member for Northampton South (Mr Binley) about the attitude of Labour Members. I will be charitable and put it down to a simple lack of understanding of what it is like to run a business. I am sure that they are not really nasty people; they are just misguided. They do not understand, because so few of them have ever employed anyone, run a business or faced the pressures of that. They simply do not understand what it is like.
Philip Davies
I have given way enough to the hon. Gentleman. I want to crack on because other Members want to speak. I put Labour Members’ attitude down to their being misguided. I know that the hon. Gentleman was a university lecturer. I am not sure that I class that in the wealth-creating sector. Perhaps we will debate that in the Tea Room afterwards.
Labour Members have the attitude that basically the only way for businesses to make a profit is to screw the customers and the employees into the ground as much as possible; that that is the secret for businesses in making as much money as possible; and that, if it were not for the Labour party intervening at every possible opportunity, across the country the customer and the employee would be squeezed and fat cat businesses would make massive profits. I genuinely think that that is their view of the world. That may be the view in the Victorian age that the hon. Gentleman lives in, but in the modern world that is not how business works. That is not how to make money as a business.
In the real world today, the hallmark of successful companies—the thing that they have in common—is that they look after their customers and their employees. The thing that failed businesses have in common is that they do not look after their customers and their employees. That tends to be what differentiates successful and failed businesses. I am sorry that, still in this day and age, the Labour party has not woken up to the fact that, to be successful in business, people have to look after their staff and customers and that, if they do not, they will go out of business.
Jacob Rees-Mogg
I was concerned about my hon. Friend’s attack on the Victorian age, which was one of the finest ages in British history, when most employers were benevolent, kindly, good and not out of a Dickens novel: they were more Trollope than Dickens by and large.
Philip Davies
I can always rely on my hon. Friend to speak up for the Victorian age. In fact, he usually speaks up for an age before the Victorian age, so I commend him for being so modern, but he is right. In passing, I should say that I know that better than most, because in my constituency, I have Saltaire, which is a world heritage site made famous by Sir Titus Salt, who had his mill in Saltaire, built houses all around the factory for his employees and was the epitome of a benign Victorian mill owner, so I thank my hon. Friend for allowing me to give a plug to Saltaire in case people are looking for a great place to visit.
My hon. Friend the Member for Christchurch made a point about tax. It is perverse that hon. Members can be so wedded to the idea that it is outrageous for anyone to be paid below £5.93 an hour, yet in the next breath be perfectly happy for those people to be taxed. If we are going to have a national minimum wage, if it is a minimum that people can be expected to earn and live on as an employment wage, surely those people should not be taxed on whatever happens to be the minimum wage.
I cannot make a logical case for why the minimum wage should be taxed. It is not that people are taxed by just a bit. People in full-time employment on the minimum wage are taxed, if income tax and national insurance contributions are combined, at about £1,500 a year. If people want to argue for a minimum wage, that is a perfectly respectable position to hold, but surely those same people should be arguing that people on that wage should not pay any income tax. If Labour Members want to confirm now that they agree that people earning the minimum wage should not be taxed, I will happily give way.
Tony Lloyd
I think that the hon. Gentleman is proposing that we should not have taxation below the levels of about £11,000 or £12,000 a year. I think I would go along with that, but there would be a consequence: we would have to find the tax elsewhere and it would probably mean looking at those on high incomes, not those on middle incomes, to fill that gap. I wonder whether he would join me in saying that there should be a bit more tax on the high earners and a lot less on the low earners. We might have a good deal.
Philip Davies
I congratulate the hon. Gentleman on his ingenuity in trying to debate his own Bill before it gets the chance to get off the ground. I will not incur your wrath, Mr Deputy Speaker, by debating that other Bill.
Philip Davies
I will in a second.
Where the hon. Member for Manchester Central and I disagree is that I think that reducing taxation stimulates the economy and ends up giving more revenue to the Exchequer. I know that he has been about a long time. He will find that, in the golden age when Mrs Thatcher was Prime Minister, she proved beyond all doubt that, if we cut the rate of tax, we can increase the receipts from tax, because it stimulates the economy.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I have looked at the Bill and I am not sure where it deals with taxation. I know that it is about the minimum wage but we are drifting into the area of taxation, to which I know the hon. Gentleman would not want to take us.
Philip Davies
As ever, Mr Deputy Speaker, I am grateful for your guidance. I am sure that you are right that I was in danger of being taken away from the main issue by the hon. Member for Manchester Central. I am happy to give way to my hon. Friend the Member for Wellingborough (Mr Bone), unless he feels that he will also incur the wrath of the Deputy Speaker.
Philip Davies
We are all grateful to you, Mr Deputy Speaker, for your guidance.
Mr Thomas
On the question of take-home incomes for low-paid workers, and given the hon. Gentleman's enthusiasm for tax cuts, I wonder whether he saw the comments yesterday of my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor, calling for a temporary drop in VAT. That is surely a perfectly sensible way of meeting the objectives that the hon. Gentleman wants to achieve.
Philip Davies
Mr Deputy Speaker, I fear that I would incur your wrath again if I were respond to that, so may I just say in passing that I thought what the shadow Chancellor said yesterday was drivel. I will now move on to the rest of the Bill.
My point is that the minimum wage could be reduced by about a pound an hour, which would be a great benefit to employers and may encourage some of them to take on more people. If tax rates were adjusted accordingly and those people currently earning the minimum wage of £5.93 an hour were taken out of tax, they would not be any worse off. Therefore, no one would be penalised by that. Those people would still take home the same rate of pay as they do now, yet it would be a great fillip to employers, many of whom are struggling; as my hon. Friend the Member for Wellingborough helpfully pointed out, there would be benefits in terms of the employment contributions that they have to make as well.
Philip Davies
I have heard that argument. I do not want to be sidetracked, but I do not agree with my hon. Friend. The fewer people at the lower end who pay tax the better. I do not see why we should expect the lowest paid in the country to contribute to taxes. They should be allowed to take home and keep what they earn. It is very rare that I say this to my hon. Friend, but I simply do not agree.
Jacob Rees-Mogg
People on the minimum wage, regardless of their income tax position, will also pay VAT, council tax, tax on cigarettes particularly, tax on alcoholic beverages and often tax by playing the lottery. They will be contributing, even on the minimum wage.
Philip Davies
My hon. Friend is absolutely right; many of those people already pay an excessive amount of tax through their spending, as he says. The best thing that we could do is give them some relief in the income tax that they pay. There is an easy way of ensuring that we can help to stimulate the economy without penalising anybody in the amount that they take home. If the only purpose of the minimum wage is to ensure that people take home a certain amount of money each week, I do not see what objection there could be to people taking home exactly the same amount of money.
I could talk about the provisions in the Bill on asylum seekers. I am not entirely persuaded of the case made by my hon. Friend the Member for Christchurch, because I wonder whether the Bill might unintentionally encourage even more people to come here falsely claiming asylum. He did go some way to persuading me of the merits of his case, so I would not allow that to be an objection to my supporting the Bill. I would be happy to support the Bill because of the minimum wage provision that allows people to choose whether they wish to be subject to it or not, and I would perhaps try to delete the part on asylum seekers in Committee. If hon. Members support the provision to allow asylum seekers to work and to be paid, they could equally support the Bill on Second Reading and attempt in Committee or on Report to delete the part on the minimum wage that they do not like. Given that that opportunity is there for them, I hope that we will not hear any weasel words from people who will be seen to have voted against allowing asylum seekers to work and to be paid. They are voting against that just as much as they are voting against anything else in the Bill. I hope that the hon. Member for Manchester Central will not try to weasel his way out of the fact the he is in danger of voting against something that he claims that he enthusiastically supports. He could try to delete the part he does not like at a later stage.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. This has been an important debate, but we are in danger of overstepping the mark. “Weasel” is right on the edge, and I do not want the debate to deteriorate. It is a good debate and we should not insult each other.
Philip Davies
For the avoidance of any doubt, Mr. Deputy Speaker, I will withdraw the word “weasel”. I certainly did not mean it in any pejorative sense.
Jacob Rees-Mogg
I encourage my hon. Friend to elaborate a little on his views on clause 1, as it is tremendously important. I know that the people of Shipley will be interested, and I am pretty sure that the people of North East Somerset would like to know what he thinks.
Philip Davies
My hon. Friend tempts me. I have no problem in principle with what my hon. Friend the Member for Christchurch said in terms of people being allowed to work, particularly when they have been here for so long. There is a massive issue—the hon. Member for Manchester Central also made this point—where people have been waiting years and years for their cases to be heard and in some cases have set up a family and are still deprived from being able to work. I would prefer to tackle that by speeding up the process, rather than by accepting that the process will take ages and allowing them to work. That is my preferred solution. That is why I am not so enthusiastic about this part of the Bill. However, I will not allow that to prevent me from supporting the Bill if my hon. Friend puts it to a vote.
I appreciate that the national minimum wage is popular, I understand perfectly that it is politically expedient not to oppose it in any shape or form, and I absolutely accept that many people in this country have benefited from the national minimum wage and have seen their pay rise as a result. I do not want to undermine that point. Many people in my constituency and others have benefited from it. But in politics it is crucial that we do the right thing, even if it is sometimes unpopular to do it or to say it. It is essential that we have a proper, sensible debate about these issues to ensure that we get them right. Instead of engaging in a sensible debate where we all agree that everyone has the best interests of the public and low-paid people at heart, those who disagree with us on these matters tend to engage in some rather childish name calling and abuse, often through a lack of reason in their debates.
We want the best for everybody, and although Government Members might have different ways of going about it and a different perspective on it, nobody should be under any illusion, because we want the best for low-paid workers and people who are out of work just as much as Labour Members. I do not decry their different perspective, and I hope that they will not decry ours but instead be grown-up enough to accept that the national minimum wage has made it harder for some people to access the jobs market. If Labour Members are not prepared to accept even that, we are not going to get anywhere with trying to tackle the scourge of unemployment.
The hon. Member for Manchester Central either would not answer my question or did not know the answer to it, but the fact is that unemployment has gone up since the national minimum wage was introduced. When it was introduced, unemployment was at 1.7 million and youth unemployment was 1.1 million, and now unemployment is at 2.43 million and youth unemployment is at 1.5 million. That has happened since we have had the national minimum wage. Whether people like it or not, and whether it is convenient to point out those facts or not, they are the facts of the matter.
I am sure that all Members want everybody to have the opportunity to get a job, to develop their career and for it to flourish in every possible way, but for some people the national minimum wage may be more of a hindrance than a help, and if those people—in my view, some of the most vulnerable people in our society—consider it a hindrance and feel that for a short period taking lower pay to get on the first rung of the jobs ladder is a good thing, I do not see why we should stand in their way.
I hope that we can have that sensible debate, so that we can help everybody in society—not just people in work, but those people who are really struggling to secure their first opportunity on the jobs ladder.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
I rise to set out the Opposition’s view on the Bill. In so doing, I congratulate the hon. Member for Christchurch (Mr Chope) on securing such a desirable spot to set out his views on how the laws of this country should change. No one in the House is remotely surprised that he should have secured this spot; he is a skilful exploiter of House procedure and an essential Friday participant.
This is probably my first opportunity to exchange views with the hon. Gentleman on private Members’ Bills since our positions were reversed some time ago—he was leading for Opposition Front Benchers one Friday and I was hoping to secure the support of the House for reforms to modernise co-operative law. I fear that I cannot be as helpful to him today as he was to me then.
Let me be clear, however, that I hope that there will be a vote, and that the hon. Gentleman will have the courage of his convictions and encourage the House to divide. I suspect that he does not have the courage of his convictions and will not put his Bill to a vote. Nevertheless, during the debate he has made a number of interesting points, and I shall touch on them briefly.
The hon. Gentleman mentioned the significance of training for future of employment, and I very much agree with that. He also touched on the growing crisis of youth unemployment, and rightly challenged his Minister to explain what the Government will do if they will not support his Bill. That may have been his coded way of echoing the Opposition’s call for a plan B on the economy.
The hon. Gentleman also mentioned the concern that some 20% of graduates are out of work. I simply pose the question, do we want more people in work? Of course we do, but should the Government direct the bulk of their efforts at encouraging low-paid, low-skilled jobs, as he appears—by moving this Bill—to imply they should; or should they encourage higher-skilled jobs for graduates to enter? That is one of the tragedies of the Government’s refusal to provide a loan to Sheffield Forgemasters.
The hon. Gentleman lamented the delay in the Home Office’s consideration of asylum applications. Sadly, with some 5,200 jobs set to go in the Home Office over the next two or three years, I suspect that his aspiration and that of most Back Benchers and Labour Front Benchers for the Government to clear the backlog of asylum applications is unlikely to be realised any time soon.
Mr Thomas
I will come to youth unemployment and the wider situation in the economy a little later. If the Minister bears with me, I will come on to what needs to be done.
My hon. Friend the Member for Manchester Central (Tony Lloyd) also made a series of interesting points. He rightly drew the House’s attention to the work of the Better Regulation Commission, which highlighted the complete lack of a link between unemployment and the national minimum wage. He drew attention to the membership of the Low Pay Commission, and the important role of its business representatives in analysing economic conditions and ensuring that the minimum wage reflects economic realities across the UK.
The bulk of my hon. Friend’s remarks underlined the inequality in the relationship between the employer and the employee. The vast majority of businesses are highly reputable. I recognise the point made by the hon. Member for Northampton South (Mr Binley), who is not in his place, that it is very much in the interests of the business to protect and support its staff, and to help them to gain skills. The concern rightly outlined by my hon. Friend the Member for Manchester Central is that rogue employers—there were certainly examples of this from before the introduction of national minimum wage—may well be tempted to take advantage of the inequality in the power relationship between the employer and employee, and persuade the employee to take a worse rate of pay.
The hon. Member for Shipley (Philip Davies) also made a series of interesting remarks, not least in arguing that those with mental health problems or learning disabilities face greater challenges in finding work, which I accept. However, I cannot accept the logical conclusion of his argument that we, as a country, should accept that those with learning disabilities or mental health problems should accept lower wages than others.
I cannot support the Bill presented by the hon. Member for Christchurch. It would drive a coach and horses through the national minimum wage legislation and leave low-paid workers at risk of being exploited by unscrupulous employers who want to undercut other businesses that want, perfectly legitimately, to pay the national minimum wage.
Mr Thomas
It is for the hon. Member for Christchurch to press his Bill to a Division or not. We are ready to vote, and we will vote to oppose it. I look forward to finding out whether the hon. Member for Wellingborough (Mr Bone) intends to encourage the hon. Member for Christchurch to force a vote.
Nick Smith
One of the good things about being here for this debate is that it has reinvigorated my interest in politics, because it is an opportunity to argue against the pile it high, sell it cheap attitude that Government Members have towards working families in this country.
Mr Thomas
I welcome my hon. Friend’s attendance at and participation in this debate. If I am able to secure your indulgence, Mr Deputy Speaker, I hope to set out at greater length what the Opposition think would be a proper way to help working families, as opposed to this legislation.
Crucially, the Bill would enable the minimum wage to be lowered in areas of relatively high unemployment. It would undermine the national nature of the minimum wage, enabling rogue employers to compete on the basis of lower and lower wage rates. I recognise that the hon. Member for Christchurch, as he set out, has always been an unreconciled opponent of the minimum wage—he has been commendably consistent in his views. He must know, however, that with unemployment rising, the Bill would make it easier for minimum wage protection to be eroded.
As I hinted in an intervention on the hon. Gentleman, under clause 3, on the training wage, there would always be ways for employers to claim that training was being undertaken. There would be absolutely no quality control, and there would be a risk of lower wages as a result. Given the Government’s acceptance of the Low Pay Commission’s recommendation of an apprentice rate of £2.50 an hour, there is even less need for the training rate for which he argues. The apprentice rate recognises that someone is not yet up to maximum productivity, but the apprenticeship ensures that proper training is being undertaken, with the employer showing a genuine commitment to quality training.
The Bill would leave low-paid workers even more vulnerable to in-work poverty, and we certainly cannot support that. I gently suggest to Government Members that the minimum wage has been a huge success. It helped to raise pay for more than 2 million people when it was introduced, and some 50,000 low-paid teenagers received a boost in income when a minimum wage for 16 and 17-year-olds was introduced in 2004. When the Conservative party opposed the minimum wage back in 1997, it claimed that it would cost some 2 million jobs. In practice, 3 million extra jobs were created in the following 10 years.
Members may be interested to know how many people benefit from the minimum wage at the moment. Some 1,080,000 individuals were benefiting from it as of last October. In the south-east, where the hon. Gentleman’s constituency sits, there were some 110,000 individuals benefiting from it. In Yorkshire and the Humber, where the constituency of the hon. Member for Shipley is, there were some 100,000.
Philip Davies
I am enjoying the hon. Gentleman’s selective use of figures. Will he confirm that unemployment among adults and youths is now higher than it was when the national minimum wage was introduced?
Tony Lloyd
My hon. Friend might also want to confirm that the number of people in employment is far higher today than it was at the time of the introduction of the national minimum wage.
Mr Thomas
I am grateful to my hon. Friend for adding further light to the debate.
The enthusiasm of the hon. Member for Shipley for figures encourages me to set out that in London, some 80,000 people benefit from the minimum wage. I have given a series of examples that give a sense of the sheer scale of the benefit that it has brought our country.
Mr Chope
The hon. Gentleman talks about people who benefit from the national minimum wage, but I presume that what he means is that they are being paid no more than the national minimum wage. That is not to suggest that they would be any worse off without it. He is not suggesting that, is he?
Mr Thomas
I am simply setting out how many people receive the minimum wage. I will explain later the previous low rates of pay and the significance of the minimum wage.
I understand that there remains a significant problem of underpayment of the national minimum wage. The hon. Gentleman and the hon. Member for Northampton South alluded to that in their reference to the black economy. There is a real need for a continued effort to ensure proper enforcement of the minimum wage legislation. I hope that the Minister will explain how the Government intend to tackle that.
I worry that allowing employers to drop the requirement to adopt completely the minimum wage will begin to have another impact on the public purse, because the Government and the taxpayer will have to help, through the benefit and tax credits system, even more than they currently do those on poverty wages. One must ask why the taxpayer or indeed parents, as my hon. Friend the Member for Manchester Central alluded to in a sedentary intervention, must pick up the tab more than they do for the actions of rogue employers, as egged on by Government Members.
Where is the evidence that there would be a significant increase in employment if the Bill became law? In its most recent report, the Low Pay Commission says, and I paraphrase, that the evidence suggests that the minimum wage has not cut employment to any significant degree. The commission also argues that although the number of jobs overall in the economy has continued to fall, the number of jobs in low-paying sectors has increased since the end of the recession. There is therefore no significant evidence to suggest either that the minimum wage has led to job cuts or that economic recovery is being held back by the continued existence of the national minimum wage.
Undermining the national minimum wage would also have an impact on inequality in this country. We face continuing challenges to reducing inequality, and reducing the pay for the very poorest would only exacerbate inequality. Surely nobody in the House wants that.
In preparation for this debate, I read the report of the Second Reading debate on the National Minimum Wage Bill from back in December 1997. The then Secretary of State, my right hon. Friend the Member for Derby South (Margaret Beckett), highlighted the impact that the abolition of wages councils had had on jobs in the 1990s. The right hon. and learned Member for Rushcliffe (Mr Clarke), who was then probably strongly supported by the right wing of the Conservative party—he probably is not now—had originally explained, when he was a member of the Government of the noble Baroness Thatcher, that they abolished wages councils to create employment opportunities, especially for young people and, in his words, to create an
“efficient labour market, where there are the minimum of constraints on the rights of employers and employees to agree to offer and accept jobs on contractual terms that suit them both.”—[Official Report, 11 February 1986; Vol. 796, c. 91.]
In the December 1997 debate, my right hon. Friend said:
“Abolition of the councils…saw earnings in those industries covered, particularly for the new entrants, fall in real terms. But employment in those sectors did not increase relative to the rest of industry.”—[Official Report, 16 December 1997; Vol. 303, c. 164.]
The evidence from that period fits with more recent evidence that confirms that the national minimum wage has helped to increase employment. I referred in an intervention on the hon. Member for Christchurch to a paper published by the National Institute of Economic and Social Research, “The UK Minimum Wage at Age 22”, which was authored by Richard Dickens, Rebecca Riley and David Wilkinson. The paper examines the effect of the increase in the minimum wage at age 22 and various labour market outcomes. The conclusion is that there was a 2% to 4% increase in the employment rate of low-skilled individuals, and that unemployment had declined, in particular among men.
Before the introduction of the national minimum wage, there were many horror stories about low pay. Before 1997, the low pay unit found an example of someone working in a chip shop in Birmingham and taking home just 80p an hour. It also found a factory worker earning some £1.22 an hour and a residential home worker earning just £1.66 an hour. I ask the Government Members who are championing the Bill this question: do we really want a return to those days, because that would be the impact of the Bill?
Mr Thomas
With all due respect to the hon. Gentleman, the situation is as my hon. Friend the Member for Manchester Central set out: by definition there is an inequality in the relationship between the employer and the employee, and a rogue employer wanting to take advantage of that inequality could force wages down, undercutting the wages paid by reputable—and the vast majority are reputable—businesses in this country that want to adhere to the national minimum wage.
By the time it was introduced, the national minimum wage had considerable employer support. Indeed, just before the 1997 general election, the private company DHL carried out a survey among UK exporters, almost 70% of which were either not opposed to, or directly supportive of, a national minimum wage. The case for a national minimum wage is not just a moral argument; it is not just an argument for social justice or greater equality; it is also an economic argument. Companies that can compete internationally only on the basis of quality almost always need a secure domestic base too. The small minority of rogue businesses that undercut that domestic market share of the mainstream business community undermine the latter’s ability to secure a share of the domestic market that enables it to compete on the quality that is essential to win orders in the international marketplace. Far from being a hindrance to businesses, therefore, the national minimum wage helps to ensure that employers wanting to export overseas are not undercut by other employers offering lower wages in the domestic market.
The idea that the national minimum wage is holding back employment in this country is as true as the nonsensical idea that Britain is, or was ever, in a similar economic position to Greece. That argument and those advanced today are like Don Quixote tilting at windmills. The truth is that the real danger to employment in this country are the Chancellor of the Exchequer’s economic policies—creating, as they are, a vicious circle in our economy, because of his decision to cut public spending too hard and too fast. The cuts are hitting families and those on low incomes, and leading to more jobs being axed than is necessary. The county desperately needs a sensible plan B to encourage growth. That is the way to help the unemployed, not this piece of legislation.
Mr Peter Bone (Wellingborough) (Con)
It is a great pleasure to follow the shadow Minister, the hon. Member for Harrow West (Mr Thomas), who put the official Opposition’s case clearly and well—I hope that he continues to do so for many years. I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on introducing such an interesting and productive Bill that has found support on both sides of the House—not in total, but in part. On the decision whether to vote on the Bill today, I should say that I, as a parliamentarian, believe that the will of the House should be expressed. However, I completely understand why the shadow Minister is jumping up and down asking for a vote. He does not really care whether this gets a Second Reading. He has already written a press release that says, “Nasty Tories divided over minimum wage. The real Tories want to abolish it”, which is nowhere near the truth, of course—the Bill in no way abolishes the national minimum wage. I shall, at the moment, be supporting the Bill wholeheartedly.
Tony Lloyd
Having quoted this press release—“Nasty Tories divided over the minimum wage”—the hon. Gentleman seemed to challenge the division over the minimum wage, not the concept of them being nasty Tories. Can he clarify that?
Mr Bone
I am not sure I really understand the hon. Gentleman’s point, but “nasty Tory” is clearly an oxymoron.
I plan, at the moment, to support the Bill, but of course we have not heard from the most important person in the House, the Minister. Many people would say that the Minister is one of the best in Parliament, and I would entirely agree with that. In fact, others would say that he is the Jim Hacker of Parliament. His Ministry is the closest to the Department for Administrative Affairs in “Yes Minister”, and he is responsible for getting rid of regulation and red tape, which is in part what this Bill would do. Everybody thinks that “Yes Minister” shows what really happens in this place, but of course, Jim Hacker went on to become Prime Minister, so I hope that the Minister will not forget me in future.
I refer Members to my entry in the register and the fact that I am a fellow of the Institute of Chartered Accountants in England and Wales. I want to take the politics out of this debate, or at least out of my speech. I have never doubted Opposition Members’ sincere concern about low-paid people and the unemployed; I just think that the policies that they propose do the opposite of what they want. Every Labour Government have left power with unemployment higher than when they came to power. That is not because Opposition Members set out to do that or because they did not care passionately about unemployment; it is because their policies lead to unemployment.
I happen to have with me the Library figures for the constituency of the hon. Member for Blaenau Gwent (Nick Smith). In April 2006, unemployment in his constituency was 1,917, but in April 2010, when Labour left power, it was 3,202, which is an enormous increase. After a year of this successful coalition Government, the figure has dropped to 2,955. I do not say that in any way to make a political point; I just think that the policies that the Opposition pursue sound good, but result in more unemployment.
Nick Smith
I fundamentally disagree with the hon. Gentleman’s point. Unemployment has gone up in Blaenau Gwent because of the recession and the banking crisis. Until then, the Labour Government did a very good job of boosting employment in my area, and I am proud of their policies.
Mr Bone
For many years I lived close to the hon. Gentleman’s constituency. It is a very nice constituency, made up of fine, hard-working people; there are just not enough jobs there at the moment, and I take a different view from him on how they might be created.
I thought that I could add most to this debate by not talking from within the Westminster bubble. I spent many years before I came to this place as an employer. I employed hundreds of people in both the manufacturing industry, and the service and travel industries. What particularly attracts me to this Bill is clause 3, which deals with the training wage. One thing that has been a problem for both parties for many years is this idea that we must get more and more people going on to university, because that is the way forward and the way we must progress. However, there are many young people who do not want to go to university. They want to leave education as soon as possible, get a job, work hard and progress in a career.
In the 1990s, when I was running a travel company, I was known as the meanest boss in Britain, because I made some points at a party conference that were translated into the claim that I was paying people less than £1 an hour. That is the level of debate that really frustrates me. We are talking about the kind of young people who used to come into my office. They were really bright young people, but they just did not like school. They wanted to get out of school as soon as possible, they wanted a job, they wanted training and they wanted a career. At that time, the travel industry had a good scheme in place whereby people were taken on and paid a nationally agreed wage—at that time it was, I think, £30 a week, although we are going back to the 1990s. For part of the time that they were working, they received on-the-job training, but they also went away to be trained in a classroom, which was paid for by my professional body, which I subscribed to through fees.
What we finished up with after two years were young people with national vocational qualifications who knew everything about the travel industry first hand. Furthermore—I can say this now, but I could not say it then—those young people have progressed and are now in senior positions across the country. One of the people I employed went on to become a director of my company.
We seem to have forgotten those young people who are not necessarily wealthy and who do not want to go on to university, but who want proper training and a proper career. The problem is that, if I were an employer now, I could not take on such people without paying them the minimum wage. I could not then afford to give them on-the-job training or to let them go off to college. I would also not be able to afford to let them travel to America to see how the operation worked there, as I used to do. That is a real problem, but it is addressed totally by the Bill. I freely accept, however, that there are many things in the Bill that might need to be changed.
Mr David Hamilton
May I put the converse argument to the hon. Gentleman? He is making a good argument for his particular circumstances, but I also used to be the chief executive of a company. I employed people and training took place. In the 1980s, companies such as Wimpey had hundreds of apprentices. They were operating in competition with other companies, and they had to stop taking on apprentices because the cost factor for them was far greater than it was for their competitors. A line has to be drawn, so that the same conditions apply to all companies. Surely that is the fair way forward.
Mr Bone
I am sorry that I cannot comment on that situation; I can comment only on what I know about.
There is a problem at the moment in that we are not providing those young people who want employment but do not want to go on to university with the opportunities that they need. The Government have moved forward with the apprenticeships scheme and a training rate of £2.50 an hour, but that rate is limited to those on apprenticeships. I am talking about providing good quality training in the classroom and on the job, as well as allowing the person to earn some money. That is why I would like the Bill to move into Committee.
The hon. Member for Manchester Central (Tony Lloyd) made a good point about asylum seekers, with which I entirely agree. The Bill also contains provisions relating to that. He is an outstanding parliamentarian, and I hope that he will vote for the Bill and seek to amend it in Committee. That would get around the silly business of the official Opposition saying that the Tories want to abolish the minimum wage. That is not what the Bill is about. I recently visited the British Footwear Association in Northamptonshire. Its representatives told me that they had a real problem getting people to come into the industry because there was no method by which to attract them. Clause 3 of the Bill could address that problem.
My hon. Friend the Member for Northampton South (Mr Binley) is an employer of many people. There is a fundamental misunderstanding on the part of people who have never employed anyone. They do not understand that the most important thing for an employer is to look after their employees. They are the company and the family, and the employer must ensure that they are looked after. The minority who do not do so is very small. Any company that does not look after its employees will go bust. It has frustrated me for years in this place that I cannot say, “Look, it is just not like that out there. We look after our employees. We want them to do the best they can. Yes, they might start on a very low wage, but we want them to progress within the business and go on to jobs elsewhere.”
I shall tell the House about something that has really wound me up about this place. In the first five years I was here, I never employed an intern. Our budget was high enough to pay people to do all the work that we as Members of Parliament had to do. Our constituency postbags are now getting bigger and bigger, and when the constituencies get even larger, we will have more to do. Then the dear old Independent Parliamentary Standards Authority came along and cut the staffing budget, which meant that we had to make people redundant. This is wholly relevant to the Bill as it concerns the minimum wage and training. I have recently taken on an intern. Two people approached me who were first-class people with university degrees. By the way, if anyone is looking for a researcher, those two are still available; they are very good. The problem is that I cannot pay them anything less than the minimum wage, so they would have had to work for free.
The real scandal is that unless people’s families can afford to allow them to work for free in this place, they cannot come here. There will be equally well qualified and good people, some of whom have come out of university, who cannot afford to take an internship, making them worse off when it comes to getting a job in the future. That cannot be right, but clause 3 would allow those people to be paid at least something while they are working to become interns. As I say, that is the real scandal. As for IPSA, many good things can be said about it—[Interruption.] No, they cannot. I withdraw that remark, Mr Deputy Speaker, as I was clearly wrong. There are some good things about IPSA, but on this issue, they have got it totally wrong.
In conclusion, my hon. Friend the Member for Christchurch has done a great job in introducing this Bill. It has created cross-party interest and arguments within the parties. The excellent Minister intervened earlier to tell him that he should not hold his breath. I also recall my hon. Friend the Member for Christchurch saying that he was previously winded when the Government accepted his Bill. I think that the worst thing that could happen to someone would be if they were holding their breath and then got winded. I expect the Minister to welcome the Bill.
Mr David Nuttall (Bury North) (Con)
It is a great pleasure to follow my hon. Friend the Member for Wellingborough (Mr Bone) and I thank him for the sound comments he made; and I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on bringing the Bill before us. I am conscious that time is marching on and that other Members wish to speak before we hear from the Minister. I shall not, therefore, reiterate the sensible and sound arguments made in support of this Bill, which I, too, am proud to support. However, one or two points have not been mentioned, so it might be of benefit to everyone if I highlighted them.
First, let me say at the outset that my support is based on my desire to do all I can to help those people in my constituency—people in Bury, Tottington and Ramsbottom—who are unemployed. The latest figures from the Library on the number of people claiming jobseeker’s allowance in my constituency as of May 2011 show that 625 such claimants are aged 24 or under; 1,055 are between 25 and 49; and 280 are aged 50 and over—totalling 1,960, which is nearly 2,000 people. Those are the people I want to help.
The great benefit that would accrue if the Bill reached the statute book is that we could make the rights of those people a reality. I mean the basic human right contained, as my hon. Friend the Member for Christchurch said, in article 23(1) of the universal declaration of human rights—that everyone has the right to work. The minimum wage legislation, however, removed that right to work from certain people, who were told, “We are sorry, but you cannot do what you would like to do. We have decided for you. We have taken that right away from you. We will tell you whether or not you can choose to work.” That cannot be right.
My hon. Friend the Member for Wellingborough, who is no longer in the Chamber, did not make clear whether he was an employer at the time when the minimum wage was introduced, but I can tell the House that I was. I can speak about the effects of that legislation on the basis of first-hand experience. Credit should be given where it is due: we were given notice, and we knew what was coming down the line. The legislation had been enacted, and we knew that, in time, a national minimum wage would be introduced. So we started to plan, and to assess the likely impact on our business.
Members might assume that it would be a simple matter of having to increase the pay of anyone who was earning less than the minimum wage at the level at which it was introduced back in 1999, and of course that was the first thing that we, as employers, had to do. However, it had a knock-on effect. Ours was a small business employing perhaps 40 people, and the introduction of the minimum wage probably affected two or three of them, although I cannot recall the precise number. They were the office juniors—the staff members who were at the bottom of our pay scales. They might have been with us for only a few weeks or months.
Most of our staff were moved on, and those who started as office juniors knew that they would be able to work their way up and become junior typists, then secretaries, and eventually, perhaps, trainee legal executives. Other staff members, however, had already progressed within the business and were earning what had now become the minimum wage. As soon as the office juniors were moved up, we had to start moving everyone else up. I understand that the process is known as “pay leapfrogging”. All that happened was that everyone was moved up the ladder.
Mr Binley
Another facet of the minimum wage was that it increased at twice the rate of inflation, which had the effect of shoving all wages up. Does my hon. Friend agree that Ministers in the last Government—the present Opposition—worked on behalf of their paymasters, the unions, to achieve that very objective? One wonders where it would have ended in terms of Britain’s competitiveness.
Mr Nuttall
My hon. Friend has made a good point. That was part of the overall effect of the introduction of the national minimum wage, with which I was about to deal. Earlier speakers have said that many employees—especially those at the bottom of the pay scales—benefited from its introduction, but it is sometimes forgotten that, by implication, it must have had an inflationary effect on the economy. Nowadays we are constantly hearing that the increase in the VAT rate has, understandably, had an effect on the inflation figures. Similarly, given that the cost of employing people is the biggest single cost incurred by many businesses—especially in the service sector—the introduction of a national minimum wage is bound to have a serious and significant inflationary effect. Therefore, the overall effect of helping those at the very bottom of the pay scales is perhaps not as great as may sometimes be thought.
We have heard a lot about the arguments for, and logic behind, the national minimum wage, but I submit that they are, in fact, arguments for a national income guarantee, as there would be logic in saying every member of society should have a given minimum level of income. That is not what the national minimum wage does, however. It is entirely different, and therefore in most cases—there are exceptions, one of which I shall touch on shortly—the choice is between a life on benefit and a life in work.
Let us consider the following hypothetical situation. An entrepreneur wants to establish a new restaurant in my constituency. It is a large restaurant with a number of tables, and he wants to employ waiters and waitresses. The restaurant will be open full-time, and he calculates that he can pay a total of £53.37 per hour for his workers. It just so happens that that is nine times the current national minimum wage of £5.93. At present therefore, he would be able to employ nine members of staff. The entrepreneur places an advertisement in the press, and 10 people apply for the jobs—the true figure would probably be much higher, of course. They are all friends who went to school together or met at the local job centre. They are probably some of the 625 people to whom I have referred who are unemployed. They say to the entrepreneur, “This is great. This is just what we would like to do. It is an opportunity for a job. We would all like a job.” The entrepreneur replies, “I’m sorry, but under the current legislation I cannot employ all of you. The best I can do is employ nine of you.” Therefore, the 10th friend is left unemployed and living on benefits, whereas the other nine can get a job earning the minimum wage.
Under the Bill’s provisions however, they would be allowed to say, “Actually, we’ll help our friend out. We want to help our friend No. 10; we want him to have a job. We all voluntarily agree to that. We would still be far better off if we worked for, let’s say, £5.33 an hour, and then all 10 of us will be able to have a job. We’ll all be friends working together. That will be tremendous, and our poor 10th friend will not be left on their own.” Without this Bill’s provisions, the great irony of the existing situation is that the nine would be employed while the 10th could become self-employed and would be entitled to work for less than the minimum wage in any case. That is an anomaly in the current legislation.
Whenever the national minimum wage is discussed and arguments are put for and against it, people always talk about “big businesses” and “rogue employers”, but let us not forget that the national minimum wage applies to all employers, including charities and small organisations in the voluntary sector. They are all affected by the national minimum wage. The Bill is a contribution to the big society, because it would mean that small charities would be able to employ more people, not only the young, but perhaps older people, too—this is not just about people in the under-24 category. My figures show that in my constituency this might apply to 280 people over 50. These people might be able to afford to work for less, perhaps because they have bought their own home and paid off the mortgage, and they may wish to help a local charity. I am talking about self-sufficient people who are not claiming benefits and who want to work for a small local charity. As the law stands, they would not be able to do so. The Bill therefore contributes to another other theme of the big society—that of passing power over.
Mr Alan Campbell (Tynemouth) (Lab)
In those circumstances, could the person not volunteer for the charity? They would therefore not be “working” and would not be subject to the minimum wage legislation.
Mr Nuttall
Many charities employ people and also have volunteers; many small charities employ a certain number of people on a full-time basis and also have volunteers.
Mr Campbell
But is not the premise of the big society that people should volunteer? It is about encouraging people to volunteer, rather than about people seeking employment.
Mr Nuttall
The big society is about helping to enlarge the voluntary sector. [Hon. Members: “It is voluntary.”] Yes, but some voluntary organisations still employ people to run the volunteers.
The other aspect of the big society is the passing of power from the Government down to the individual. What better example could there be of the big society than for this Bill to become law and for this House to say to the individual, “We will give you back the right to decide for yourself whether or not you wish to work.” That would be the biggest move that this House could make towards helping the big society, as it would give individuals the right once more to decide for themselves whether they want to live a life on benefit or to work for a living. I commend the Bill to the House, and I look forward to hearing the rest of the contributions.
Mr Edward Leigh (Gainsborough) (Con)
I apologise for being delayed and missing the start of this debate, Madam Deputy Speaker. I wish to congratulate my hon. Friend the Member for Christchurch (Mr Chope)—he is also an actual friend—on doing a signal service to the House by courageously raising this issue, as it is important that we have an honest debate about it.
There are many arguments in favour of what my hon. Friend is trying to do. That applies both in terms of the Bill’s wider context, which I shall deal with in a moment, and what he is specifically trying to do on the minimum wage. The first relates to the tragedy of youth unemployment, which is an increasing problem. In addition, businesses undoubtedly need to respond to the marketplace, because they are in the marketplace and they cannot avoid it. It is also undoubtedly better for people to work for less than be unemployed, because work helps people to get training, make contacts, gain experience and so on.
My hon. Friend has also said that we are talking about a voluntary process, but it is precisely on this point that his Bill has difficulty. As was well said by the hon. Member for Harrow West (Mr Thomas), who leads for the Opposition, this issue may well be a show-stopper that prevents the Bill from becoming law. There is undoubtedly a mismatch in power between an employee who is desperate for a job and an employer. Although my hon. Friend the Member for Christchurch assures the House that the process is entirely voluntary, one can undoubtedly envisage many situations in which there will be problems. My hon. Friend the Member for Shipley (Philip Davies), who has unfortunately been called away for a moment, mentioned the example of disabled people, who often find it more difficult to get jobs because what the employer has to pay them is on a level with people who are not disabled. As I said to my hon. Friend, the employer might summon the disabled person and say, “I’m sorry, but you have this disability and you are not quite as capable as doing this job as other people, so please sign on the dotted line to be paid less, as this provision is now law.” One has to assume that these Bills will become law, so we need to tease out these important points.
In other circumstances, an employer might say to employees that there are severe problems and that the marketplace is very difficult, so employees will have to sign on the dotted line and take less than the minimum wage. It is a bit simplistic—and, dare I say to my hon. Friend the Member for Christchurch, a bit naive—to assume that the process is entirely voluntary. I am not sure that the marketplace works like that.
Mr Bone
It was quite wrong of me to call my hon. Friend a shocking leftie on this issue—I clearly got that wrong. He makes a very fair point about the Bill needing to be considered carefully in Committee. The original version contained the idea of limiting the period for which someone could opt out of the minimum wage. Perhaps that would reassure my hon. Friend.
Mr Leigh
Obviously, if the Bill is allowed to progress to Committee, we will have to tease out some of those points. My hon. Friend the Member for Christchurch accused me of being a paternalist, but there is nothing wrong with thinking like a parent. I suspect that this is a clash between the free market wing and the socially conservative wing of the Conservative party.
The Victorian age has been mentioned. Many Victorian owners were very bad and we can read about them in Dickens’s novels, but many, particularly those inspired by conscience, religious faith and other such factors, were superb employers. There was a big debate about these issues in Victorian times. Without boring the House, I want briefly to allude to a papal encyclical called “Rerum Novarum”, issued in the latter part of the 19th century, which made it absolutely clear that the wage earner is entitled to a just wage and that we cannot live with an untrammelled free market because there is a mismatch in power between employer and employee. These are very important issues that must be addressed by my hon. Friend the Member for Christchurch before the Bill becomes law.
Mr Binley
I find my hon. Friend’s contribution interesting, but will he accept an example of an experience that was brought to me in my constituency? Some people were made redundant through no fault of the owner of the company—the recession smacked him hard. Three of the elder members of the group who wanted to work, for their own esteem and because they felt that working had a greater relevance to their lives than not working, went to him and suggested that they take a cut below the minimum wage for a limited period. He looked into it and found that he could not do that, of course. Is that not a foolish situation when we are trying to encourage people to recognise that work is a valuable part of the human experience?
Mr Leigh
That is an excellent intervention that shows the moral issues in our debate. There will undoubtedly be situations—this is where I agree with my hon. Friend the Member for Christchurch and why I think his Bill deserves to be debated in Committee—involving a perfectly good and caring employer, such as the one described by my hon. Friend the Member for Northampton South (Mr Binley), who is in a difficult situation and employees who are desperate to keep their jobs. We must be aware of that.
There are two other issues that are worth mentioning. The first is the increasing scandal of internships, particularly for young graduates. I feel quite strongly about this matter, which has already been mentioned by my hon. Friend the Member for Wellingborough (Mr Bone). I suppose I should declare an interest as a parent, and two of my children are already graduates. All of us who are parents know that whereas our generation—that of my hon. Friend the Member for Christchurch and myself—left university in times of full employment, young people are increasingly trapped in a disgraceful situation in which employers tell them that they can work for them, but only if they work for nothing. I do not think that that is right.
When I take on an intern in the House of Commons, I pay them the minimum wage. I am firm on that. It is fine if a young person between school and university wants to come here for a week’s work experience and work for nothing, but I am absolutely clear that if someone is working here for six months or so, they should get the minimum wage, and I will not pay any less than that. However, many young people are now trapped.
One advantage of the Bill—it is worth debating further—is the excellent idea of a training wage, which I see as a kind of halfway house. It would enable employers to pay graduates something, although my view is that, if the company involved is in the City, it should pay the minimum wage. It is better if young graduates, having worked so hard to get through university, are not in the dreadful situation of kicking their heels at home or, if they do work, getting nothing for it. We must have a proper debate about the scandal of internships. It is good that my hon. Friend the Member for Christchurch has put that in his Bill. It is a Back-Bench Bill and we all know that in reality it is unlikely to become law. However, we need a fuller debate on that matter.
We also need a fuller debate on clause 1, and my hon. Friend has been honest about that. It deals with a subject we do not hear much about. It is a scandal that in this country large number of foreign nationals—people whose applications for British citizenship are being considered, or asylum seekers—are trapped in the appalling situation of not being able to work. I think that we are a bit dishonest with ourselves about that.
The hon. Member for Harrow West, made the valid point that we should not allow employers to pay less than the minimum wage because all that will happen is that the taxpayer will have to step in through the tax credit system. My hon. Friend the Member for Shipley said that he did not agree with a tax credit system, but that is a bit of a simplistic argument. It is impossible for people with children to raise a family on anything much less than the minimum wage plus some tax credit. My hon. Friend the Member for Bury North (Mr Nuttall) made the point that we should have an honest debate about what basic national benefit should be paid to keep people in body and soul. I have always argued that a universal minimum benefit payment should be available, with a minimum of churning of taxation on top of that, and as flat a tax rate as possible, which would encourage people into employment. The trouble is that so much of our minimum wage-tax credit system does not help the poor. It often traps people in unemployment and dependency and discourages people from going into employment. Those issues need to be debated much more honestly, so I congratulate my hon. Friend the Member for Christchurch on introducing the Bill. It is an interesting Bill that raises issues of great importance, and I hope that it will be allowed into Committee.
The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)
I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on securing parliamentary time for the Bill. I confess that I have not been a regular attender on Fridays and I found this to be—how can I put this nicely?—a different style of debate.
We began with some rather florid language. I think there was talk of gouging and the crushing hand of state socialism by stealth—a particular favourite of mine—which presumably is the opposite of the hand which Adam Smith liked to talk about. Perhaps more predictably, we had some early fireworks from the right hon. Member for Rotherham (Mr MacShane) in response to that. Then there was a wide-ranging debate, ably chaired, Madam Deputy Speaker, by your fellow Deputy Speaker. We visited small business in Wellingborough, asylum seekers in Zimbabwe, and, at one point, the Victorian age, possibly in person, though my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) is not here now. Two topics which I suspect, although I am happy to be corrected, may be popular on a Friday morning—the EU and IPSA—also seemed able to be drawn into the heart of debate, all within order, of course. There was, just for a moment, the prospect of an unholy alliance between the hon. Member for Manchester Central (Tony Lloyd) and my good friend the hon. Member for Christchurch, but as my hon. Friend rightly concluded, this is an important debate to our constituents, and in many senses too serious for yah-boo politics. I will seek to address the range of issues that have been highlighted during the past three and a half hours.
There are four elements to the Bill. Clause 1 provides that no foreign national lawfully resident in the UK who is above compulsory school age can be prevented from engaging in remunerated employment. The rest of the Bill concentrates on the national minimum wage. Clause 2 provides an opt-out, clause 3 exempts a person who is getting a training wage from the minimum wage, and clauses 4 to 8 provide for the introduction of a regional minimum wage. As the Bill principally concentrates on the national minimum wage, I will discuss those provisions first, but I will address clause 1 as well.
I am pleased that the debate gives me the opportunity to remind hon. Members that the Government are committed to the national minimum wage. We believe that it gives protection to low-income workers and provides incentives to work, and we made that clear in our coalition agreement. As the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), who has responsibility for these matters, made clear, the aim of the national minimum wage is to establish fairness in the workplace and to make sure that work pays. It does that by ensuring that all workers receive at least the hourly minimum rates set. As well as helping workers, the minimum wage also helps business by ensuring that competition is based on the quality of goods and services provided, and not on the lowest price potentially based on exploitative low rates of pay.
Hon. Members will be familiar with the fact—we have talked about it in the debate—that the level of the minimum wage is recommended to the Government by the Low Pay Commission. The commission has widespread support, not just from the trade union movement, but from employers. It is independent of Government and comprises nine commissioners, and the aim is simply stated as to
“have a minimum wage that helps as many low-paid workers as possible without any significant adverse impacts on inflation or employment.”
Those impacts have been raised in the debate, and I will address them specifically because I know that they are of concern to right hon. and hon. Members.
Commissioners receive submissions and take oral evidence from a wide range of representative organisations. They also visit businesses throughout the UK. That puts them in direct contact with businesses in low-paying areas and areas with unemployed and low-paid workers and their representatives, so that they can understand the realities of the circumstances in the workplace. That consultation supplements the commission’s analysis of high quality and extensive research and official data, so the basis of the agreement that commissioners represent to Government is robust evidence. Since the introduction of the national minimum wage, the commission has carefully monitored its impact on the economy in general and the labour market in particular. It looks at a range of issues and variables, including profits, prices, productivity, investment and business creation.
Clause 2 provides that a person who would otherwise qualify for the minimum wage may elect to opt out of such an entitlement. It makes it clear that any such election must be made by an employee in writing to their employer and must be signed by both the employer and the employee. I believe that the proposals in clause 2 are flawed in a number of serious ways. First, they make it easier for workers to be exploited. My hon. Friend the Member for Christchurch stressed that he is talking about arrangements for freely consenting adults, but how will he ensure that that is in fact the case in every place of work? Low-paid workers who may be fearful of losing their jobs are unlikely to have that free choice—that equal position—over whether they should accept a pay cut taking them below the national minimum wage.
Some people might feel that that is far-fetched, but it is worth looking at the first evidence that the Low Pay Commission established. In its June 1998 report, it states:
“Most workers in the UK have seen an increase in their real earnings over the past two decades. But increases have not been uniform. Average earnings have increased much more rapidly than the earnings of lower-paid workers, and the earnings of the skilled have increased relative to those of the unskilled. Certain groups of workers are much more likely to be low paid than others: these include women (particularly those who work part time) as well as young ethnic minority and disabled workers. Temporary workers and male part-time workers are also more likely to experience low pay.”
The report concludes:
“We met many workers who felt trapped on low pay because of lack of skills, mobility or opportunities. They feared that their only alternative was unemployment.”
The commission also found examples of “gross exploitation”. In its report it cited the example of a woman employed in a bar who routinely worked what was described as a “four hour” evening shift for £12 gross. The four hours reflected only the time that she was serving, however; they did not include the requirement for her to spend another two hours after closing in order to clear up the bar. That time was not paid for at all. Those instances do occur, and we need to ensure that when we frame legislation we respect all of them.
There is no guarantee that an employer’s motives for getting a worker to accept pay below the minimum wage will be based on ensuring the business’s survival. That has come out in the debate from a number of contributors, and it goes to the heart of the economic reasons underpinning a national minimum wage. In technical terms, that would be described as monopsonistic competition, but in less technical language it is about market power, and several hon. Members, including the hon. Member for Manchester Central and my hon. Friend the Member for Gainsborough (Mr Leigh), have highlighted that issue.
Vulnerable workers—those with few qualifications, those who are in fact functionally illiterate and those with work-limiting disabilities—do not have equal bargaining power when compared with their employer. There is a mismatch, and there is that risk of exploitation, and the problem with clause 2 is that it does not take account of that potential problem. We believe that it could reinstate the problems that led to the introduction of the minimum wage in the first place.
That is not the only problem, however, important as the issue of vulnerable workers is, because the Bill’s proposals could be bad for business as well. The Low Pay Commission found in its first report that competing simply on the basis of low pay can lead to a damaging downward spiral of low wages and poor standards, which would be bad for businesses and workers. This was recognised by the British Chambers of Commerce, which stated in its evidence to the commission that
“businesses recognise that a low wage policy leads to a vicious circle of low morale, low performance and low productivity”.
It is important to remember that, although the vast majority of employers seek to do the right thing and do the right thing, there will always be that minority, and the danger of shifting away from that is one that affects employers and employees. That is not just my own view, or indeed that of the Government. I am in good company, because Winston Churchill made the point that
“the good employer—
without minimum wage protection—
“will be undercut by the bad, and the bad employer will be undercut by the worst.”
There is also no evidence that the provisions in clause 2 are necessary. I have mentioned what the Low Pay Commission set out, but it is also worth looking briefly at the balanced way in which it has implemented the national minimum wage over its lifetime. I know that there was much discussion about the expectations that were or were not raised prior to the introduction of the minimum wage, but the commission’s approach has been reasonably cautious. It has been cautious in difficult times, but, yes, it has balanced that with more generous rate recommendations in better times.
Mr Binley
Will my hon. Friend help me? I need to understand something, because under the previous Government—it could only have been under the previous Government—the minimum wage increased by twice the rate of inflation. Is that where this Government want to go with the minimum wage, or will it not increase at that rate under my hon. Friend’s jurisdiction?
Mr Prisk
I am saying that the Government will seek from the Low Pay Commission a careful assessment of the market conditions year on year, whether they are good or bad: what is affordable and where the balance can best be struck between ensuring that the minimum wage is reasonable for those who are affected and not having an unreasonable effect on businesses as a whole. The Government cannot set it in advance or seek for it to double.
Mr Binley
Perhaps my hon. Friend can help me further, because he did not answer my question. We all recognise that the double-inflation increase has had the effect of raising wages throughout the system. Given that, does the Minister understand why it is important, particularly at this time, to ensure that the minimum wage does not rise above the rate of inflation?
Mr Prisk
Absolutely; we will be careful to ensure that the recommendations we receive from the Low Pay Commission take that point into account. It should consider not only the conventional measures of inflation, but the costs that affect businesses, who are also the employers. This is a year-on-year process because flexibility is needed as the market changes.
In 1999, the commission set the rate at £3.60 an hour, which was pretty cautious. In the early years of the minimum wage, the commission continued to take that cautious approach. I do not propose to go through each and every year, although it is tempting. Since 1999, we have seen good times and bad, and I think it is worth considering how the commission has responded in those different contexts.
In 2001, the commission recommended that in 2001 and 2002 the adult minimum wage should increase to the level that it would have reached if it had always been raised in line with average earnings. In other words, at the start when things were challenging, the commission did not want to raise it too early. However, as the market improved and became more robust in labour terms, it was able to add to the minimum wage in a way that related to the costs of businesses.
In 2007, the commission came to the conclusion that a more cautious approach was again required. It looked at the pay differentials, particularly in the retail and hospitality sectors, both of which were progressing. That was coupled with concerns about price inflation feeding into wage inflation. The commission reported for the first time that it was concerned that the minimum wage was biting in that way.
In the most recent reports in 2009 and 2011, the commission was clearly dealing with a very different economic environment. By the time of the 2009 report, the UK was clearly in significant economic decline and recession, accompanied by sharp increases in unemployment and a fall in total employment. The decline in economic activity was much sharper than had been anticipated by most economists, never mind those working for the commission. That is why the commission recommended that the adult minimum wage should increase by only 1.2%—much less than in previous years.
The report published in April 2011 reflects the fact that the UK economy is recovering following the recession. The labour market has continued to show the resilience it had in the recession and unemployment remains below the median levels forecast at the time of the 2009 recommendations. The commission concluded that its approach needed to recognise the continued economic uncertainty, while protecting the lowest-paid workers from falling further behind—hence the recommended increase in the adult minimum wage of 2.5% to £6.08, which is broadly in line with average earnings and pay.
Those points in time—1999, 2001, 2007, 2009 and 2011—were all at different points in the economic cycle. The review that I have undertaken in preparing for this debate has demonstrated that the commission has been sensitive to the different market conditions. Sometimes it was able to be more generous and sometimes it had to be more restrictive. That is the right balance.
Many Members have raised the impact of the minimum wage. I will deal first with its impact on earnings and labour costs. Businesses react in different ways to labour costs. If they rise, some businesses absorb them by reducing non-wage benefits or adjusting their pay structures, as we have heard from several hon. Members. However, the employment picture is a little different from the one that has concerned several Members. In fact, I say in particular to my hon. Friend the Member for Shipley (Philip Davies) that since the minimum wage was introduced in April 1999, aggregate employment has grown. Despite the recession, it was still higher last September than it was prior to the introduction of the minimum wage. That occurred through the boom, through the Labour bust and back into the new coalition Government’s recovery. During that period, the number of employee jobs has increased by 1.1 million and the number of employees by 1.4 million. The number of hours worked has increased by 3.1%.
My hon. Friend—I do not see him in his place at the moment, but I will continue my point for the benefit of the House—asked the eminently sensible question whether the impact of the minimum wage on those on lower incomes had been adverse by comparison with the rest of the economy. I have sought the answer to that question. In the same period, from the introduction of the minimum wage in 1999 to the first quarter of 2011, the number of employee jobs in the low-paying sectors has actually increased by 366,000, which is 4.8%.
Nick Smith
Does the Minister agree with the suggestion of the hon. Member for Shipley (Philip Davies) of a drop in the minimum wage of £1 an hour, or nearly 20%?
Mr Prisk
Of course not. I hope that my reference to the figures on the employment impact will make people reconsider what I suppose is the natural suspicion that if all wages rise, people will be squeezed out of the labour market. The evidence suggests otherwise. The size of the labour market has changed since the minimum wage was introduced, and a series of factors have changed its character, but I take some comfort from the fact that the figures are heading in the right direction. However, we need to be continuously careful that the minimum wage does not start having a negative impact.
The consensus of the research on the impact of the national minimum wage is that it has greatly affected the distribution of earnings but not had a significantly adverse impact on employment, including of those on lower income.
Mr Chope
In trying to undermine clause 2, my hon. Friend has concentrated on the position of those who are already in employment. Does he accept that there are people who are out of employment who are looking for work and genuinely willing to work for less than the minimum wage? Why is he intent on preventing them from entering into an agreement with a potential employer to do so?
Mr Prisk
That brings us back to whether it is actually a choice to do so. I totally respect my hon. Friend’s point that there are people on the edge of the labour market who are keen to work. However, if we open up the system and return to competition based on the lowest pay, we will go back to the original problem. I agree that we must ensure that we do not have undue inflexibility in the system, but I believe that returning to the position that the Bill suggests would create more problems than it solved.
Mr Binley
I am most grateful. Does my hon. Friend recognise that most employers, and certainly my company, try very hard to set the wage levels for their low-paid employees above the market rate, to attract the very best labour? That is the major concern of most small and medium-sized enterprises. I recognise that a very few rogue employers would not do that, but does he accept that in the main, companies wish to pay more to attract better labour?
Mr Prisk
Absolutely. The vast majority of decent employers are keen to ensure that they get the brightest and best, and are willing to pay for that. We should not allow any characterisation of employers in this country as always wanting to do down their employees. That is not my experience, and I hope Opposition Members will not tolerate such a characterisation in future.
Clause 3 seeks to exempt a person from the minimum wage as long as they receive a training wage. We have had a constructive discussion on apprenticeships, training and the importance of helping young people, to which the clause is relevant. Ever since the Low Pay Commission’s first report in 1998, it has been argued that young people should be treated differently from their older counterparts. The rationale is that the threat of unemployment because of too-high wages is greater for younger people than it is for older people. Clearly, young people often lack experience in the workplace, and are therefore more likely to be both on lower earnings than older workers, and to work in lower-paying sectors.
Young people are therefore more likely to be more vulnerable in the labour market. We have seen that, sadly, in the last couple of years. If I may say, it is encouraging that since May of last year, there has been an improvement in youth unemployment. I am pleased that I can confirm today that youth unemployment is lower than that which we inherited. I hope that Opposition Members will acknowledge that, because it is an important issue on which we agree.
The current rate for workers aged 16 to 17 is £3.64 an hour, and the rate for those aged 18 to 20 is £4.92 an hour. That contrasts with the adult rate for those aged 21 or above, which is currently £5.93. In recommending minimum wages for young people, the commission aims to ensure that the rates neither provide an incentive for young people to leave education or training—that is an important balancing act—nor harm the employment prospects for those who decide to work. As well as the minimum wage rates for young workers, we last year accepted the commission’s recommendations to end the exemption from the minimum wage for apprentices under the age of 19, or those aged 19 and over in the first year of their apprenticeship.
We have hence introduced a new minimum pay rate for those people within that framework, which has ensured—for the first time, I believe—that all apprentices in the UK get the protection of the minimum wage. It gives them a fair deal, and therefore protects them from exploitation, but it does not deter businesses from taking them on. As we have heard, that apprentice rate is currently £2.50 an hour.
Mr Bone
The Minister is making a well-constructed argument, but on that specific point, the Government have accepted that there should be a different minimum wage for apprentices, like a training wage. Why cannot we extend that differentiation to the travel industry, which I mentioned in my speech, and other industries?
Mr Prisk
My hon. Friend is a few inches ahead of me, but he is right that that is the kernel of the argument on clause 3.
Let me give a little background, and then I shall address specifically how we expand our provisions and encourage young people in training and apprenticeships. The point about the apprenticeship rate is that it recognises that employers invest significantly in apprenticeships, and that apprentices—quite naturally, given where they are in their working cycle—are less productive than other skilled employees. In addition, young people who complete an apprenticeship derive significant long-term advantages. They know that by accepting a lower wage when training, they will enjoy future higher earnings and better job security. That fits into another Government policy, namely the significant expansion of apprenticeship places—we have increased spending by £250 million to encourage 75,000 extra places.
Is a training wage such as the one in clause 3 feasible? The clause states that someone who is contractually entitled to a training wage, and to training in skills relevant to their employment, does not qualify for the national minimum wage. However, the Bill does not specify what would be an appropriate training wage level. As the Bill stands—that is all we have to debate—employers would therefore be free to pay a training wage at any rate. In addition, individuals receiving those low wages would, as workers, be carrying out work or services for the employer.
The danger is that the provisions could be open to widespread abuse by unscrupulous employers—that small minority that look to pay exploitatively low wages.
Mr Prisk
I will come to internships later. It is important that we get right the balance between internships and work experience.
I want to continue my point about training. Another problem with the Bill is that what is meant by
“an entitlement to training from the employer in skills relevant to the employment”
is unclear. A contractual entitlement to training does not mean that the worker is actually receiving any useful training. Under the Bill, for example, a worker could, if they were working in, let us say, a cold-call centre, undertake that work—that would be allowed—because it could be deemed the best way to learn on the job and be trained. In other words, if an individual’s work involved cold-calling, they could become skilled, as described in the Bill, simply by doing the job, and not actually having a separate training programme with accreditation requirements. The question then is: would this mean that they are entitled to a minimum wage? The Bill is unclear. Under the Bill, two people doing the same job could have different contracts. Consequently, one would be entitled to the minimum wage, but the other, having a contract for a training wage, would not. The danger therefore is that these provisions could be open to abuse.
I turn to the question of how we could go beyond apprenticeships. This involves the question of whether we have some form of accreditation, which is a real problem that the Bill does not seem to address. Were we to have accredited training in certain circumstances, we would probably end up going down the route of the old development rate, which was set out in 2006, and under which there were complex rules and conditions seeking to determine exactly what the training was. That would create real problems for employers, who would want to know what the conditions were and how they would work. Would the opportunities they are providing qualify for the training wage? We would have all these grey areas and loopholes sitting between the existing minimum wage and the training wage. That is a practical problem about which I, as a former employer in the private sector—obviously I remain an employer as a Member of Parliament—would be very anxious. I would not want to find that I am unintentionally breaking the rules or finding that the guidance from the Government has to be so specific and complex that I spend too much time trying to comply with a new set of regulations, when in fact the original system was simpler—so there are real practical problems with this suggestion.
Mr Chope
Instead of putting up Aunt Sallies, why can the Minister not address the question put to me by one of my constituents who is out of work? He is aged 24 and says that he would be willing to work as a trainee for less than the minimum wage—in other words, at a training wage—but at the moment is not allowed to do so. No employer can let him, because the apprenticeship wage only applies to much younger people.
Mr Prisk
I come back to the point that were we to consider expanding this provision, we would need to put in place a system robust enough not to create either the complications I described or the uncertainties that I, as an employer, would not want. The Bill fails to do this. I agree that we need to encourage training, but to be blunt with my hon. Friend, I do not think that his Bill fulfils that task.
Mr Chope
Will my hon. Friend specifically answer my point, because I will be writing to this constituent to set out the Government’s response to his plea that he should be given the freedom to take a training job at less than the minimum wage from somebody prepared to offer him that training?
Mr Prisk
I can understand that frustration, but the moment we make law on the basis of one instance, we create difficulties for the scrupulous. That is the risk we are talking about.
I turn to work experience and interns. I understand the frustration and concerns of my hon. Friend the Member for Gainsborough. Work experience, whether as a paid or unpaid intern, can be a valuable way for young people to get the experience, skills and confidence they need to start up. The Government want as many internship opportunities as possible to be made available, but we are clear that those who are entitled to the national minimum wage should get it. The example he gave of how he works as an employer accurately describes exactly that position.
Mr Leigh
This issue is important, because we are talking about people who are being exploited. They are working 60 to 80 hours a week for big companies, big legal firms or big merchant banks all over the place, and they are being exploited. They are not training; they are working, and they should get paid. The Government should step in and do something about it.
Mr Prisk
I understand that, but as we have heard today, the Government are strongly of the belief that we should ensure that where people are entitled to the minimum wage, they should receive it. However, we would not want to intrude in the more informal areas that several Members have described, such as a week of work experience, and so on.
Mr Prisk
My hon. Friend has made a powerful point about those working longer term. We want to ensure that the law is upheld.
Before I return to clause 1, which deals with the unlawful prevention of employment, let me turn to the four clauses at the back end of the Bill, namely clauses 4 to 8. These relate to the regional minimum wage, the idea being that we should move away from a national rate, towards a more flexible, regional structure. It is worth looking briefly at how the existing law works. Under the National Minimum Wage Act 1998, workers of compulsory school age are entitled to be paid at least the national minimum wage, although there are some exceptions. Different treatment may be permitted in relation to different sectors of employment and for people of different occupations. However, having different areas poses practical problems.
Clause 4 sets out the role of the Low Pay Commission. It provides that the commission
“must consider and take evidence on the availability of employment opportunities and the impact of the national minimum wage on job creation and access to employment in…areas where the average level of unemployment in the preceding year has been above the national average”.
The commission must then
“consider in the light of that assessment whether to recommend that the minimum wage in any such area should be set at a level below the national minimum wage.”
It is not clear from clause 4 what happens if a lower minimum wage is applied to a travel-to-work area and the unemployment level of that area subsequently falls below the national average. We presume—although it is unclear from the Bill—that the lower minimum wage could no longer apply, and that the national minimum wage would therefore apply. It is also not clear whether the Bill envisages more than one lower minimum wage rate. For example, would the same lower rate apply regardless of the extent to which average unemployment in an area was greater than the national average?
Clause 5 sets out the duties of the Secretary of State in the event of the Low Pay Commission recommending that the minimum wage in a particular area should be set at a level below the national minimum wage. Perhaps peculiarly, clause 5 provides that the Secretary of State has no discretion in the matter, but must make regulations to bring the commission’s recommendations into force. I note that this is different from the Secretary of State’s position in respect of the national minimum wage, where it is for him to decide on the appropriate rate, based on the Low Pay Commission’s recommendations. It is unclear why the Secretary of State should have the discretion to implement the commission’s recommendations on the national minimum wage, which would affect around 1 million people, but not where its recommendations could affect a far smaller number of people.
Clause 6 provides that a change to the minimum wage in an area to a level below the national minimum wage would not affect existing contracts of employment. I will come to the issue of fairness later; I merely note now that this provision is another instance of allowing an employer to pay two workers different wages for doing the same job. It could also encourage employers to get rid of workers who were being paid at the national minimum wage and replace them with people paid at a lower rate.
Clause 7 presents significant practical challenges. It provides that a travel-to-work area is
“an area so defined by the Office for National Statistics.”
This point is crucial, because it affects the way in which the final four clauses operate. Ideally, a self-contained labour market is one in which all the commuting occurs within the boundary of that area. However, in practice it is not possible to divide the UK neatly into separate labour markets based on commuting patterns. They are just too diffuse. Our concern is that the opportunity for complexity and continuous change would make the operation of the proposed system significantly more challenging than at present. Speaking as an employer—which I continue to be—I am concerned about how this would work within and on the edges of those regions.
There are currently 243 travel-to-work areas. They were defined in 2007 using the old 2001 census data, so there is already a problem of time delay. The areas vary considerably in size. For example, Anglesey has two such areas, while Greater London has only one. I hope that no one will ask me why, because I do not have the answer. If we moved to a system of regional rates based on travel-to-work areas, the real problem would be the complexity that that would generate for employers. As someone who wants to see less regulation, I would be very much opposed to that. I hope that the House will acknowledge the specific practical problems associated with each of the clauses, especially relating to the way in which this part of the Bill would operate.
Clause 1 deals not with the minimum wage but with the question of unlawful prevention in relation to foreign nationals. It relates to foreign nationals above compulsory school age who are legally residing in the UK, and provides that such individuals shall not be prevented from undertaking paid employment unless certain conditions apply. The first condition is where the foreign national has only a visitor’s visa. The second is where the foreign national’s most recent application for entry into the UK has been refused. The third is that the foreign national’s most recent application to stay in the UK has been refused. Like my hon. Friend the Member for Christchurch, I noticed the typo in subsection (4), for which he has graciously apologised. The effect of the subsection as drafted would be to exempt foreign nationals who were not in detention. The problem that that would create is self-evident.
The Government support the principle that everyone of working age who has the legal right to work in this country should have the opportunity to gain a living by work which they freely accept. That is set out in article 6 of the international convention on economic, social and cultural rights, and the Government are committed to fulfilling our obligations under the convention. The problem is that the provisions in the Bill are contrary to the Immigration Act 1971. The fact that the Bill does not provide for the repeal of the relevant provisions of the Act raises an important technical issue. When we debate these Bills, we are debating whether they should become the law of the land. While I understand that points of principle are involved, we also need to ensure that we get the legislation right.
Mr Prisk
The problem is that the practicalities affect the principle. That is an important point for my hon. Friend to bear in mind.
Section 3 of the Immigration Act provides for a foreign national’s lawful stay to be subject to conditions preventing his employment or occupation in this country. That is the basis of the UK’s controls on access to the labour market. Foreign nationals who are admitted specifically for the purpose of employment may be subject to conditions of stay which require them to seek authorisation to change their employment. Those who enter for another purpose—study, for example—may be subject to conditions which require them to seek a variation of their conditions of stay if they wish to remain for the purpose of work. The provisions in the Bill are the basis for arrangements for determining the circumstances in which an individual would be allowed to take employment or not, depending on their skills.
My hon. Friend’s proposal appears to remove any legal basis for the operation of an effective control on migrants’ access to the labour market, including the operation of a labour market test in respect of a migrant’s employment, except at the point at which they initially seek entry to the UK. The Bill would therefore significantly undermine the Government’s ability to regulate the entry and stay of foreign nationals, other than at the point at which they seek entry, or to protect the interests of resident labour.
My hon. Friend might well have intended the provisions in clause 1, in respect of recent refusals of applications to enter or stay, to protect against such issues. However, they would not satisfactorily achieve that effect. It is also difficult to see how such provision could be reconciled with the effective operation of transitional restrictions, to which the Government are committed, on labour market access to nationals of new member states of the European Union who are not subject to immigration control but, as foreign nationals, would be covered by the Bill.
Mr Prisk
I think the challenge is to make sure that the asylum system works properly, which is what my colleagues in the Home Office and elsewhere are doing—and doing very ably—despite the mess they inherited. That is the challenge we face.
The national minimum wage is a key part of the Government’s overall strategy to establish fairness in the workplace and to make work pay by ensuring that all workers receive at least a set hourly minimum rate. The minimum wage has brought substantial benefits to a large number of workers, especially women and part-time workers, and it has established basic minimum standards in the labour market. To make the minimum wage optional, as clause 2 suggests, could undermine those achievements and leave some vulnerable low-paid workers open to exploitation.
The Government also believe that the proposals in clause 3 are unnecessary. There are already options available to employers who wish to offer training but not to pay the minimum wage. Certain apprentices are entitled to a lower minimum wage rate. There are some specific exemptions in the law that relate to training—where, for example, an individual is on a specified Government or European scheme, individuals acting in that context as volunteers are not, of course, entitled to the minimum wage.
Making the minimum wage more complex through the introduction of regional rates would have adverse effects on workers and businesses, and make the task of setting and enforcing the minimum wage far more complex. The proposal would introduce potential unfairness for workers, particularly those located near to the boundaries between regions. It is worth noting that when one looks at the evidence, one sees that there is already significant variety within those regions.
As for clause 1, we believe that it would have an adverse effect on the operation of an effective control on migrants’ access to the labour market and would significantly undermine the Government’s ability to regulate the entry and stay of foreign nationals and so to protect the interests of resident labour.
For those reasons, if my hon. Friend seeks to press his Bill to a Division, I have to tell him and the House that the Government cannot not support its proposals.
Mr Chope
With the leave of the House, I would like to respond to the debate. It has been a good one and I am most grateful to everyone who has participated in it.
I begin by commenting on the Minister’s performance, as I think that Antony Jay and Jonathan Lynn would have been proud of what the Minister’s officials have been able to provide him with in the form of a “Yes Minister” script. The tone and content of what the Minister said was so reminiscent of that wonderful series, which was performed on television and is now a play in the west end.
I understand that clause 1 deals with issues that are not full-square within the Minister’s responsibilities. However, he says that it would raise all sorts of difficulties of definition, but it is quite obvious from the evidence I adduced earlier that the Government do not know how to count the people coming into the country or the ones going out; they do not know how many people have applied for asylum; and they do not know how many people have been waiting for their asylum cases to be dealt with for more than three months or for more than six months. The Government do not have the basic material before them, yet when I come forward and say, “Wouldn’t it be a good idea if people who were seeking asylum had the opportunity to improve themselves and work?”, all I get is a whole lot of gibberish saying that my clause 1 is defective in the following 1,000 particulars.
I am not having that, Madam Deputy Speaker. If the Minister’s intention was to provoke me into testing the opinion of the House on this Bill, he has certainly succeeded in doing so.
I want to comment briefly on my hon. Friend’s observations about some of the other clauses. He failed to answer my simple question about a constituent, aged 24, who is out of work, wishes to engage in a training contract, and is willing to do so for less than the minimum wage. I shall therefore have to send my constituent a blank piece of paper, which I shall identify as the Government’s policy on the matter. The Government recognise that there is a problem, but have no solution. My Bill presents a potential solution, and all that has happened is that it has been rubbished.
I told my hon. Friend in an intervention that he was seeing clause 2 far too much from the point of view of a person who was already in work rather than that of a person who was out of work and seeking it. That constituted another big failure in the Government’s response.
A number of my hon. Friends commented on the problems of youth unemployment and access to employment. I do not know whether the Minister is aware of the figures, but according to figures for 2010 produced by Doing Business, an organisation which
“measures and compares regulations relevant to the life cycle of a small to medium-sized domestic business”,
in June 2010 a 19-year-old worker in this country had a minimum wage five times higher than that of an equivalent worker in Poland, 2.5 times higher than that of an equivalent worker in France, 50% higher than that of an equivalent worker in the United States or Germany, and about the same as that of an equivalent worker in Ireland. If we want to find an answer to the ghastly issue—the really serious issue—of rising youth unemployment, we could do a lot worse than examine the international comparators, which make it plain as a pikestaff that we have too high a minimum wage for our young people, leaving aside the need to give them access to a training wage.
My hon. Friend the Member for Shipley (Philip Davies) was inimitable in his fairness. He emphasised the number of people who benefit from the national minimum wage, but also wanted to ensure that more people could become employed. He has been an employee in a very large firm, and he and my hon. Friend the Member for Northampton South (Mr Binley), who made so many cogent interventions, and my hon. Friends the Members for Wellingborough (Mr Bone) and for Bury North (Mr Nuttall) have a mass of experience of employing people and participating in the real economy of the country.
My hon. Friend the Member for Gainsborough (Mr Leigh), a former Chairman of the Public Accounts Committee, also made some potent observations. He highlighted the scandal over internships, but again the Minister did not answer the question. Why should it not be possible for someone who wishes to be an intern to be paid something between zero pounds and the minimum wage? There came no answer from the Government, apart from the rather patronising, patrician response that if we introduced such an arrangement, some people might exploit it. I do not think that that is a Conservative approach; I do not think that it is a market-oriented approach.
This has been a rather depressing occasion for me. My worst fears about a Government who are losing touch with reality have been borne out by what we have heard today. However, I think it important for the debate to continue, and I therefore invite the House to take a view on whether the Bill should be given a Second Reading.
Question put, That the Bill be now read a Second time.