National Minimum Wage

Wednesday 15th January 2014 Commons Chamber

[Madam Deputy Speaker (Mrs Eleanor Laing)]

I must advise the House that Mr Speaker has selected the amendment in the name of the Prime Minister.

16:15

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House celebrates the 15th anniversary of the introduction of the National Minimum Wage, which falls this year, and the contribution it has made to making work pay, boosting living standards and tackling in-work poverty; notes that, before the National Minimum Wage was established, poverty pay was widespread and that the Conservative Party and many Liberal Democrat hon. Members opposed its introduction; further notes that families are on average £1,600 worse off a year and that the National Minimum Wage is now worth less in real terms than in May 2010; further notes that the Government has not backed up its promise to name and shame firms not paying the minimum wage; calls on the Government to strengthen enforcement of the National Minimum Wage, including by increasing fines for non-payment of the National Minimum Wage and giving local authorities enforcement powers; and further calls on the Government to encourage employers to pay a living wage and take action to restore the value of the National Minimum Wage so that the UK can earn its way out of the cost of living crisis and to help control the cost of social security.

For me, the proudest achievement of the previous Labour Government was the introduction of the national minimum wage. It was important because, as we know, the best way out of poverty is work and because taxpayers should not have to pick up the bill of subsidising bad employers. Making work pay is also vital to getting the social security budget under control and we will not allow the Government to let the national minimum wage wither on the vine.

Fifteen years ago, on 1 April 1999, the national minimum wage took effect. We should and do celebrate the difference it has made to millions of people. We have also called this debate today, at a time of difficulty for so many low-paid workers and with low pay a growing problem across our country, to call on the Government to take action to strengthen the minimum wage, crack down on rogue employers and restore the value that the minimum wage has lost over the past three years. We call on them to do more to build a stronger economy that enables people to earn their way out of the cost of living crisis.

[Ms Karen Buck (Westminster North) (Lab)]

Social care workers do one of the most important jobs in our society. Does my hon. Friend share my concern that in my borough, Westminster, and, I am sure, in others, social care workers are not even guaranteed the minimum wage as the travelling time between appointments is not counted for the purpose of payment?

[Rachel Reeves]

An investigation by the Low Pay Unit looked at pay rates before the national minimum wage was introduced and back then one worker in a residential care home was paid just £1.66 an hour. I agree that today, too, people working in that sector are too often exploited and that their employers get round the legislation.

The Low Pay Unit considered pay before 1997 in a range of industries. I mentioned residential care but it also came up with other examples, such as a factory worker who was earning just £1.22 an hour in 1997 and a person working in a chip shop in Birmingham who was earning just 80p an hour. That is sheer exploitation. It is poverty pay and it was taxpayers who picked up the bill.

Let us also remember what Government Members said back then. The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), now Secretary of State for Work and Pensions, said in 1997 that a minimum wage would

“negatively affect, not hundreds of thousands but millions of people.”—[Official Report, 4 July 1997; Vol. 297, c. 526.]

The right hon. Member for Richmond (Yorks) (Mr Hague), now Foreign Secretary, said back then that a minimum wage would have to be

“so low as to be utterly irrelevant”

otherwise

“it would price people out of work.”—[Official Report, 17 March 1997; Vol. 292, c. 617.]

The right hon. Member for Sevenoaks (Michael Fallon), now the Minister of State responsible for business and enterprise, said that a minimum wage

“will add costs to British business”.—[Official Report, 11 July 1997; Vol. 297, c. 1240.]

And the right hon. Member for Witney (Mr Cameron), now Prime Minister and then a parliamentary candidate in Stafford, darkly predicted in 1997 that a minimum wage would lead to a rise in unemployment.

[Mark Tami (Alyn and Deeside) (Lab)]

Conservative Members are very keen on calling for us to apologise for things. Does my hon. Friend think that it is time for them to apologise for such comments?

[Rachel Reeves]

It is not just the Tories who should apologise; the Government’s junior coalition partners should apologise, too, because they were worried back then as well about the impact of the minimum wage. In 1994, their then leader attacked Labour’s

“umbilical attachment to a national, high-rate minimum wage”

and said that

“a national minimum would…force many on to the dole”.

The Liberal Democrats went into the 1997 general election with a manifesto commitment not to a national minimum wage but to a

“regionally variable, minimum hourly rate.”

Let us be grateful that they did not get their way. Despite the then Opposition fighting the legislation tooth and nail, line by line, clause by clause, using every trick in the book to slow, frustrate and obstruct its progress, the national minimum wage became law.

[Caroline Dinenage (Gosport) (Con)]

I am grateful to the hon. Lady for her fascinating history lesson. I wonder whether her bit of paper also says that 500,000 people lost their jobs under the previous Labour Government and whether she agrees that the announcement made this morning demonstrates the Government’s absolute commitment to ensuring that no employer will be able to exploit their employees by paying unfair wages.

[Rachel Reeves]

Two million jobs were created under the last Labour Government and employment reached a record high, so I am not sure where the hon. Lady gets her statistics from.

I have quoted the former leader of the Liberal Democrats but, back then, where was the Secretary of State for Business, Innovation and Skills, the right hon. Member for Twickenham (Vince Cable)? He was nowhere to be seen in the debates. He was nowhere to be seen on the voting record. On Second Reading and Third Reading, he failed to vote. Apparently, he abstained because he had reservations about a minimum wage. Perhaps he will stand up today to profess his concern for the plight of the low-paid. I am happy to take an intervention from the right hon. Gentleman if he wants to make one.

[Ian Mearns (Gateshead) (Lab)]

Although the Secretary of State for Business, Innovation and Skills had reservations about the minimum wage, many of my neighbours who worked in the security industry on 90p or £1 an hour back then are eternally grateful for the Labour Government’s action in introducing the minimum wage. It made a massive difference to their lifestyle.

[Rachel Reeves]

I thank my hon. Friend for that intervention, which reminds me of a story that my predecessor as MP for Leeds West told me. He saw a job advert in our constituency for a security guard back in the mid-1990s that said, “Pay, 90p an hour. Uniform provided. Bring your own dog.” Those were the sort of jobs that existed back then, but members of this Government opposed the national minimum wage legislation. I look forward to hearing what the Secretary of State for Business, Innovation and Skills has to say later, but people will be entitled to ask him where he was when we abolished the scandal of jobs paying less than £1 an hour and when British workers won the right to be paid a decent minimum wage.

[Grahame M. Morris (Easington) (Lab)]

Notwithstanding the Secretary of State’s reservations about the minimum wage, what does my hon. Friend think about the reservations of ordinary working people about the Government’s plan to give 100% bonuses to bankers at the Royal Bank of Scotland? Will that be well received?

[Rachel Reeves]

Many people earning £6.31 an hour will be shocked and outraged to find out that bankers this year will get bonuses worth more than they earn, but they will be even more shocked to find out that they are the ones who are paying for those bonuses.

[Alex Cunningham (Stockton North) (Lab)]

I am suspicious about a tomato company that is expanding in my constituency. It appears to be replacing Stockton workers with people from overseas and paying them the minimum wage. I am told that those foreign workers are charged accommodation costs, so reducing the value of that wage. The company will not answer my letters. Does my hon. Friend understand my suspicions?

[Rachel Reeves]

I will come to that point shortly because the number of firms that are getting out of paying the minimum wage is incredibly worrying. We suggest increasing the fine to £50,000 for not paying the minimum wage, but there is no point in having such a fine if the legislation is not enforced.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Today’s Glasgow Herald reports that the fine will go up to £20,000 from where it is today. Surely, that is not nearly enough, given that hundreds of thousands of people are not even paid the very minimum wage of £6.31 an hour.

[Rachel Reeves]

At the Labour party conference, my right hon. Friend the Leader of the Opposition called for the fine to be increased to £50,000, and I support that. It is also important that companies that get out of paying the minimum wage are prosecuted, and we are not seeing that under this Government.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

With regard to the advert about the security guard and the dog, I remind my hon. Friend that the RSPCA refused to allow the dog to work, yet the security guard had to do so.

My hon. Friend is running through a list of the abstentions in the vote on the minimum wage. Please do not leave out the separatists in Scotland, who I think were washing their hair that night.

[Rachel Reeves]

I thank my hon. Friend for drawing the attention of the House to the voting record of other Members of Parliament on that night.

Thanks to Labour Members of Parliament and a Labour Government, for the first time in history, in England, Scotland, Wales and Northern Ireland, British workers had a legal floor below which their hourly pay could not fall. Slowly but surely during the following years the rate rose. It was attacked every step of the way by many Government Members and, in 2003, when the Labour Government announced a 16% increase in the minimum wage over two years, the right hon. Member for Twickenham attacked the policy directly, saying that it would set a dangerous precedent.

The result of the minimum wage was to boost the wages of nearly 2 million low- paid workers, two thirds of whom were women. It helped to lift 1 million children out of poverty and every authoritative economic study concluded that it brought no negative employment effects, despite the warnings of Government Members. No wonder that a survey of academic policy experts conducted by the Institute for Government judged the national minimum wage to be the greatest policy success of the past 30 years. It is now a policy supported by the CBI and the TUC, whose nominees work together on the Low Pay Commission. It is seen by the British people as a vital British institution, underpinning basic rights and decency in the way our economy works.

[Mr David Hanson (Delyn) (Lab)]

rose—

[Susan Elan Jones (Clwyd South) (Lab)]

rose—

[Rachel Reeves]

I give way to my hon. Friend the Member for Clwyd South (Susan Elan Jones).

[Susan Elan Jones]

When Members are a little shy, they should have a little encouragement from the rest of us. I worry that some Government Members are a little shy. They are not usually frightened of defending their party in government. Would they like to do so now, and will my hon. Friend allow them to do so?

[Rachel Reeves]

I have already made the offer to the Secretary of State, but we have not yet heard from him. All Members are welcome to make interventions, but in the meantime I will take an intervention from my right hon. Friend the Member for Delyn (Mr Hanson).

[Mr Hanson]

I confess that I was here when we voted for the minimum wage. I did vote for it, having stayed up most of the night, because I was kept up by the Conservative and Liberal Democrat Members who ensured that we did have to support that with our votes.

Does my hon. Friend accept that the additional spending power given to many millions of people, including in my constituency, which was spent locally, helped to boost jobs in retail, on the high street and in locally produced goods?

[Rachel Reeves]

I congratulate my right hon. Friend on his work in helping to put the national minimum wage on to the statute book. He is absolutely right to suggest that one of the contributions to the cost of living crisis that we see today is that the national minimum wage has not kept pace with the increase in prices during the last few years. The introduction of the minimum wage did indeed help to boost the spending power of workers.

[Julian Smith (Skipton and Ripon) (Con)]

rose—

[Mr Brooks Newmark (Braintree) (Con)]

rose—

[Rachel Reeves]

I am so shocked. We have two interventions from Government Members. I will happily give way to not one, but two Government Members.

[Julian Smith]

As a fellow Yorkshire Member, I thank the hon. Lady for allowing me to intervene. Will she welcome this week’s announcement on inflation at 2%, and will she accept that this, as well as the Government’s phenomenal job creation results, are a key part of the package of getting people better paid in this country?

[Rachel Reeves]

For 41 of the 42 months that the Prime Minister has been in office, prices have risen at a faster rate than wages, and that continues to be the case. The only month that it was not the case was in April last year, when bank bonuses were deferred from March to April to take advantage of the cuts in the top rate of tax from 50p to 45p. [Interruption.] That is the only month in which prices grew at a slower rate than wages, not for ordinary workers, but the privileged few who the hon. Gentleman’s party always supports.

[Mr Newmark]

Will the hon. Lady—[Interruption.]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The Chair has noted that the hon. Member for Skipton and Ripon (Julian Smith) has departed immediately and too soon.

[Mr Newmark]

I fear that the hon. Lady’s answer might have frightened my colleague away. I promise that I will not run away after she answers me. Will she at least acknowledge that this Government, by raising to £10,000 the level at which tax hits, thereby taking 2.7 million people out of taxation altogether, have indeed helped the low-paid?

[Rachel Reeves]

Work by the Institute for Fiscal Studies has shown that, taking account of all the changes to taxes, tax credits and benefits since the Government came into office, the average worker is now £850 worse off. The hon. Gentleman points to one thing, but the VAT increase means that people are worse off, as do the tax credit changes. Overall, when all those things are added up, people are worse off, not better off. I hope that he will stay a little longer than his colleague to hear a bit more of the debate.

We know that we need to build on the success of the national minimum wage, because today we face a new challenge: getting our economy working for working people and tackling the worst excesses of insecurity and exploitation in our labour market.

[Mel Stride (Central Devon) (Con)]

Further to the point made by my hon. Friend the Member for Braintree (Mr Newmark), does the hon. Lady not accept that the pressure on living standards is a function not just of wages, but of the costs that average families face? Will she thank the Government, as I do, for having frozen council tax during the period we have been in office, unlike her party, which doubled it during its period in office?

[Rachel Reeves]

If the hon. Gentleman looks at what has happened to living standards, he will see that the average worker is £1,600 worse off than they were in 2010. I am surprised that he applauds what the Government are doing—I certainly do not—because workers in his constituency are worse off, not better off, after three and a half years of Conservative government.

[John Robertson (Glasgow North West) (Lab)]

Does my hon. Friend agree that Government Members, after giving up attacking us on the minimum wage, have now moved on to more sinister things, such as workers’ right, zero-hours contracts and a vast increase in the number of people in part-time employment, to mask the fact that people are so much worse off than they ever have been? The outlook for those people now is something we never saw until the Government came to power.

[Rachel Reeves]

I thank my hon. Friend for that intervention. The reality is that under this Government we have seen record numbers of workers on zero-hours contracts, record numbers of people who want to work full time having to work part time, and wages failing to keep up with prices. The average worker is now £1,600 a year worse off and the number of people being paid less than the living wage is up from 3.6 million in 2010 to more than 5 million today. The value of the minimum wage has fallen by 5% over the past three and a half years. For a full-time worker that means a real-terms pay cut of £13 a week.

[Mr David Hamilton (Midlothian) (Lab)]

Is my hon. Friend as surprised as I am that Government Members are not supporting good employers? There are good employers in my constituency who are arguing very clearly that undercutting the minimum wage is affecting their business. They want good employers, not bad ones.

[Rachel Reeves]

I thank my hon. Friend for that intervention. We saw similar things when Labour introduced the national minimum wage in the first place, because in many cases those who benefitted were the good employers who wanted to pay their workers a decent wage and who were being undercut by the cowboys.

[Jim Shannon (Strangford) (DUP)]

I congratulate the Opposition on bringing this matter before the House for consideration—we all have an interest in it. Does the hon. Lady share my concern about those in long-term apprenticeships who are not receiving the minimum wage? That has been brought to my attention on a number of occasions. They are glad to have the experience and a vocation at the end of it, but in my opinion they also deserve the minimum wage, which many of them do not receive.

[Rachel Reeves]

There is an apprentice rate for the minimum wage, which is important, but we need to ensure that more people are doing good-quality apprenticeships so that at the end of them they can get jobs not only at the minimum wage, but above it. My worry is that too many of the current apprenticeships do not offer the decent training that will enable people to get a good-quality job.

[Steve Rotheram (Liverpool, Walton) (Lab)]

My hon. Friend is making an excellent speech. Does she agree that while it was a brave Labour Government who brought in the national minimum wage, they were working in conjunction with the unions, which were pivotal to bringing in the policy? It will be the unions, working together with the Labour Government in 2015, that will introduce a living wage.

[Rachel Reeves]

I thank my hon. Friend for that intervention. Trade unions, including the Union of Construction, Allied Trades and Technicians, of which he is a member, did a huge amount of campaigning for the introduction of the minimum wage and campaign today to ensure that more people are paid a living wage. I will say a little more about what we are willing do in government to ensure that more people are paid a living wage above the national minimum.

[Mr Jim Cunningham (Coventry South) (Lab)]

The freeze in council tax, which was mentioned earlier, looks good on the surface, but councils are not being compensated for it, and they are stacking up a problem for two or three years down the road, when there will be massive cuts to services.

[Rachel Reeves]

My hon. Friend is absolutely right. Many councils, including mine in Leeds and his in Coventry, have been hard hit by the cuts to the local authority grant, which are affecting some of the services that the most vulnerable people rely on.

[Guy Opperman (Hexham) (Con)]

Can we get to the nuts and bolts of policy? Will the hon. Lady give the House an assurance that policies such as the petrol duty freeze and the council tax freeze—[Interruption] I am sorry, but the hon. Member for Rhondda (Chris Bryant) is chuntering so much that it is hard to hear him—would be continued under a Labour Government were they to be elected?

[Rachel Reeves]

I suggest that Government Members look at what we are debating: the national minimum wage. I know they do not want to talk about it, because they did not support it in the first place, but it would be nice if they could talk about its impact on their constituencies. However, I think we may have to wait for another occasion.

We have a Government who opposed the national minimum wage when it was introduced and who are not enforcing the legislation properly today. Thanks to an investigation by the independent Centre for London, we know that as many as 300,000 workers are being paid less than the minimum wage. We have reports of workers having the costs of uniforms, accommodation, transport or training illegally deducted from their pay packets. We have shocking accounts of working conditions for some people in sectors such as elderly care which hurt not only employees but vulnerable people who need a reliable and good-quality service from people who are paid a decent wage. There are stories of legal loopholes being used to bring in migrant workers who are, as my hon. Friend the Member for Stockton North (Alex Cunningham) said, forced to work at exploitative rates of pay that also undercut and undermine the pay and conditions of all workers.

Despite that, the number of enforcement cases opened or registered has fallen in every year of this Tory-led Government, and it is now at less than half the level it was in the last year of the Labour Government. Since this Government came into office, just two prosecutions have been brought for non-payment of the minimum wage. They have repeatedly said that they will name and shame firms that are flouting the legislation, but they have not named a single one.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

My hon. Friend is making a very powerful speech. Does she agree that perhaps one of the reasons the national minimum wage has not been enforced is that Government Members are not 100% committed to it? For example, the hon. Member for South Northamptonshire (Andrea Leadsom) has called for businesses with three employees or fewer to be exempt from the national minimum wage, as well as from regulations on maternity and paternity rights.

[Rachel Reeves]

Not only are Government Members not 100% behind the national minimum wage; they cannot even bring themselves to say “national minimum wage”.

[Charlie Elphicke (Dover) (Con)]

The Government are asking the Low Pay Commission to review the minimum wage with a view to increasing it. Does the hon. Lady welcome that—yes or no?

[Rachel Reeves]

The hon. Gentleman is a little behind the curve. That is what the Low Pay Commission does: that is what we set it up to do.

The failure to enforce the legislation properly has contributed to a worrying rise in in-work poverty. It used to be thought that if someone got a job, put in the hours and put in the effort, they would be paid enough to keep them and their family out of poverty and have a decent standard of living—that was the deal. But today, for the first time since records began, the majority of people in poverty are in work and the majority of children in poverty are brought up in working households. It is just not good enough that in today’s Britain an honest day’s work does not bring in a decent day’s pay.

[Dame Anne Begg (Aberdeen South) (Lab)]

Does my hon. Friend agree that perhaps the best way to make savings in the welfare bill would be to make sure that people are not just in work, but in well-paid work, so that they would not have to depend on welfare?

[Rachel Reeves]

I could not agree more with my hon. Friend. If more people were paid a living wage, if the minimum wage were enforced and if more people who want to work full time were doing so rather than working part time, all those things would help bring down the rising costs of social security.

A Britain where people who are putting in the effort and the hours still cannot make ends meet cannot be right and it is not fair. A Britain where parents who want to spend more time with their family and children but can hardly see them because they have to take on a second job is not right and it is not fair. A Britain where a young worker who wants to go to evening classes to improve their prospects but cannot because they have to take on an extra shift in the evening just to make ends meet is not right and it is not fair. A Britain where a woman cleaning the offices of well-paid executives before they arrive in the morning and who is still at work in the evening serving on the supermarket tills is not right and it is not fair.

This is not just an injustice to those families. It is, as my hon. Friend has said, imposing cost on the rest of us as well, because lower pay means more money spent on tax credits and housing benefit. The bills of in-work poverty are rising faster than this Government can cut people’s entitlements. It also means less tax and national insurance going into the Government’s coffers. If we want to get the costs of social security under control and if we want to put our public finances on a sustainable footing, we need to get our economy working for working people, so that we can all earn our way out of the cost of living crisis that this Government have created.

What solutions do Government Members have to offer? As my hon. Friend the Member for Feltham and Heston (Seema Malhotra) has indicated, the hon. Members for Christchurch (Mr Chope), for Wellingborough (Mr Bone), for Cities of London and Westminster (Mark Field), for Windsor (Adam Afriyie), for Clacton (Mr Carswell) and for Bury North (Mr Nuttall) sponsored a Bill that would have enabled employees to agree with their employers that they should not be paid the minimum wage. The hon. Member for South Northamptonshire (Andrea Leadsom) has said that people working for businesses with three employees or fewer should not have to be paid the minimum wage. The hon. Member for Esher and Walton (Mr Raab) has said that 16 to 21-year-olds should not have to be paid a minimum wage. The hon. Member for Shipley (Philip Davies) has said that disabled workers should not have to be paid the minimum wage. Shame on them and shame on the Conservative party. It is the same old story from the same old nasty Tories. Their only answer to our economic problems is to cut taxes for the richest and cut pay for the poorest.

[Andy Sawford (Corby) (Lab/Co-op)]

The push to stop a minimum wage for 16 to 21-year-olds is appalling at a time when the Government have made life so difficult for that group of people in our society through their changes to the education maintenance allowance and the increase in tuition fees, which the Liberal Democrats, of course, promised would not happen. It is absolutely wrong and we must fight it.

[Rachel Reeves]

I could not agree more with my hon. Friend. With almost 1 million young people out of work—250,000 of them for more than a year—hitting them further by saying that they should not be entitled to a minimum wage is doubly unfair, cruel and callous.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Is not a further point that there are many threats to wages in rural communities in particular—where the cost of living is higher—not least as a result of this Government’s shameful decision to abolish the Agricultural Wages Board, which protected the pay of many low-paid people?

[Rachel Reeves]

I thank my hon. Friend for that intervention and for his work on these issues as a shadow Environment, Food and Rural Affairs Minister.

Labour Members know that a strengthened minimum wage and practical policies to promote the living wage are essential to building a recovery that works for working people and to securing rising standards of living for the future. That means stronger penalties and effective enforcement against rogue employers who flout the minimum wage. It means plans to restore the value of the minimum wage, which has been lost over the past three and a half years. It means the Government doing their bit to support the campaign for a living wage by setting an example with their own employees and contracts, as Labour councils are doing up and down this country, and it means the Government sharing the savings to the Treasury with employers who commit to paying the living wage, as we will do with our Make Work Pay contracts.

The national minimum wage is one of Labour’s proudest achievements. It was opposed by the Tories every step of the way, while their coalition partners tried to water it down and frustrate its purpose, and the current Business Secretary sat on his hands. That is why we cannot trust the Tories or their Liberal Democrat supporters to protect the minimum wage, why we cannot trust the Tories to enforce or strengthen it, and why we cannot trust them to deal with the cost of living crisis.

It therefore again falls to Labour to protect and strengthen the national minimum wage by increasing fines for those who exploit workers; investigating rogue employers and enforcing the law properly; restoring the value of the national minimum wage and catching up the lost ground of the past three years; and encouraging employers who can do so to go further and to pay the living wage.

I suspect that when the Secretary of State gets to his feet, he will tell us how he now supports the minimum wage and wants it to be increased and to be enforced better. If that is his way of apologising for his past sins, so be it, but I must warn him and his Government that we will be watching. Working people who are struggling to earn a living and to survive the cost of living crisis need more than warm words and liberal promises; they need action, and only a Labour Government will deliver that.

16:46

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes that since 2010, the Government has increased the National Minimum Wage each year, despite the worst recession in living memory, to protect the income of the low paid and increase their wages relative to average earnings, and is cutting taxes for the low paid to boost take home pay by £705 a year, taking 2.7 million out of income tax altogether; welcomes increased employment under this Government, which is at its highest ever level; notes that the Secretary of State for Business, Innovation and Skills has asked the Low Pay Commission for an assessment of how it might achieve a higher National Minimum Wage in the future without damaging employment; further notes that the Government has maintained a central enforcement body that covers all areas of the UK and ensures a consistent approach and high quality service; and further notes that the Government is quadrupling fines for employers in breach of paying the National Minimum Wage and has already made it easier to name and shame employers who flout the rules.”.

I am delighted to have the opportunity to move the Government amendment. Before I get down to the detailed substance of the motion, I want to say that this debate gives us the opportunity to discuss in more detail the regulations that, following my announcement before Christmas, I have laid today to increase penalties for non-compliance with the minimum wage by a factor of four. I also want to reinforce my earlier commitment that we will not merely do that but will proceed to introduce primary legislation to enable fines to be applied per worker, rather than per company, which will make them a great deal more forceful.

[Mr Donohoe]

Will the Secretary of State give way?

[Vince Cable]

I will take an intervention later.

The shadow Secretary of State, the hon. Member for Leeds West (Rachel Reeves), misadvised one of her Back Benchers, the hon. Member for Westminster North (Ms Buck), who quite rightly intervened, in relation to care workers, about there being no payment between jobs for social workers carrying out domiciliary care. That is actually an abuse of the minimum wage legislation. It has now been recognised as an abuse, and colleagues in the Department of Health, as well as my Department and Her Majesty’s Revenue and Customs, are making efforts to ensure that the regulations are properly enforced.

[Mr Donohoe]

Will the Secretary of State give way?

[Vince Cable]

Let me carry on for a few minutes. The hon. Gentleman knows that I always take interventions. Let me just build an argument and then I will allow him to respond.

Let me start with the very basics. It is a little difficult to do so in the face of the relentless tribalism that we have just heard, but I would say at the outset that the introduction of the national minimum wage was a real achievement of the previous Government. There were not many achievements, but two will stand the test of time: the establishment of the independent Bank of England and the establishment of the national minimum wage. [Interruption.] Indeed, there were others, but those were the two main ones in the economic field.

Having said that, I attempted to be constructive about the motion, but one blindingly obvious point is that the centrepiece of the national minimum wage legislation—the establishment of a non-partisan, non-political Low Pay Commission—did not even merit a mention. The shadow Secretary of State referred to it only in response to an intervention. That is rather important, because it suggests one of two things. The first possibility is that Labour Members do not understand how their own system works. Indeed, I heard a Labour Member cry out earlier, “Why don’t you make it increase the minimum wage?”, so there are clearly people who do not understand the mechanism. The second possibility is that Labour Members do not respect the basis of the system, which is independent advice from a non-partisan body. That advice has been followed consistently by successive Secretaries of State, including my Labour predecessors. That is the strength of the system and that is why there is political consensus behind it.

[Several hon. Members]

rose—

[Vince Cable]

I will just deal with the politics of this matter before I take interventions.

The hon. Member for Leeds West made a great deal of the fact that, as she put it, the Conservatives opposed the national minimum wage and many Liberal Democrats opposed it. She speaks with all the self-confidence of somebody who was not here at the time.

[Chris Bryant (Rhondda) (Lab)]

You were and you didn’t vote.

[Vince Cable]

I did not particularly wish to raise this, but I am being asked personally to explain why I did not vote. It had a lot to do with the fact that my late wife was terminally ill at the time and I was in the Royal Marsden hospital. That is why my voting record at the time was poor on that and other issues.

As it happens, my party supported the national minimum wage; nobody opposed it. I became the party’s spokesman shortly after the vote and I made it absolutely clear throughout that Parliament that we supported the principle of the national minimum wage. There was never any question about that.

Perfectly legitimate issues were raised about why there was no regional variation. There is a proper debate to be had about whether there should be a regional or a national minimum wage. As it happens, I endorsed the principle of the national minimum wage. However, there is a perfectly respectable argument for regional variation. As I understand it, the Labour party now promotes the living wage, at the heart of which is the idea that there should be regional differentials, with people in London being paid more and people in the west country or the north of England being paid relatively less. There is an argument for that. Why criticise people who have put forward that idea in good faith?

As for the Conservatives, although I do not always speak in their defence, I think that they should get credit for accepting that there is a good system that works and for deciding to support it. That is creditable. Although I and my party have supported the national minimum wage, there is a perfectly respectable intellectual and moral argument for not having a minimum wage. Countries that do not have a minimum wage include Sweden, Finland, Norway, Denmark and Austria. Those countries are all in the social democratic tradition, but have felt that it is too problematic. Germany, which has had either social democratic or national unity Governments for most of the post-war period, has adopted a national minimum wage only in the last few weeks. In those countries, where there are civilised values and a sense of solidarity, the costs and benefits of the minimum wage have been debated properly. Why should we criticise people in this country who wanted to have such a debate, but who have now come to a consensus that it is a good system and that we should make it work?

[Seema Malhotra]

Is the Secretary of State saying that Government Members and Conservative Members in particular support the national minimum wage for all businesses in all circumstances?

[Vince Cable]

Yes, it is now the law. Of course we support enforcement of the law. I do not understand the question.

[Mr Donohoe]

Will the Secretary of State tell us why he came to the conclusion that the fine should go from £5,000 to £20,000, rather than the £50,000 that would deter all those gangsters out there who are not paying the minimum wage?

[Vince Cable]

The rise to £20,000 is a fourfold increase. However, the big difference is in applying that fine per worker rather than per company. That is a considerable escalation of the penalties. I hope that we will have the support of Opposition Members in voting that through.

[John McDonnell (Hayes and Harlington) (Lab)]

Is not the difference between this country and the countries cited by the right hon. Gentleman that they still have vibrant trade union rights and are not condemned annually by the International Labour Organisation, as this country is, for undermining trade union rights?

[Vince Cable]

Those countries have had a variety of Governments, both left-wing and right-wing. I was simply making the point that it is possible to have a perfectly viable system without a national minimum wage. I agree with the hon. Gentleman that in practice what is needed is either a strong system of trade union rights or a national minimum wage. We have now all accepted that the national minimum wage is the best system. I think all the minority parties accept that, too.

[Mr Hanson]

I am grateful to the Secretary of State for giving way. Does he accept that enforcement, as well as the fine, is important? Currently, the national minimum wage is enforced only by Her Majesty’s Revenue and Customs. Will he give serious consideration to supporting giving local councils the power, as they now have on trading standards, to enforce the minimum wage locally?

[Vince Cable]

As the right hon. Gentleman says, the primary authority is HMRC, but it works with other agencies to enforce the national minimum wage. There are some important cases where HMRC has worked with local authorities—I think with Blackpool council and others—to enforce it in areas where we have sensed there is a systematic weakness.

[Jim Sheridan]

I thank the Secretary of State for giving way. The national minimum wage is exactly what it says on the tin: a minimum wage. Does he accept the overwhelming evidence that union-organised work forces are paid more and have better conditions than non-union-organised workplaces?

[Vince Cable]

In general, that is the case. However, my experience, from talking regularly to trade unions and employers, is that most of our trade unions, certainly in the private sector, are extremely pragmatic and flexible on wages—indeed, that is one of the reasons why we have had relatively low unemployment. They deserve some credit for that.

[Mr David Anderson (Blaydon) (Lab)]

I thank the right hon. Gentleman for giving way; he is being very generous. At whatever level the fines are set, will he look at the possibility of reinvesting the money they raise directly into enforcement, so that the enforcement keeps on going to the point where, hopefully, we do not have to fine anybody, because nobody is breaching the rules?

[Vince Cable]

In line with the commitment to enforcement, I think we have produced more resources for that. My hon. Friend the Economic Secretary to the Treasury, who will be summating, may want to say a little more about that, but we recognise that the enforcement authorities need resources to do their job.

[Charlie Elphicke]

I thank my right hon. Friend for giving way. As a Conservative Member of Parliament representing a constituency with a lot of social deprivation, I support the national minimum wage and the work of the Low Pay Commission, which is really important. In response to my intervention, the shadow Secretary of State dismissed the Low Pay Commission and talked about restoring the value of the minimum wage. Does my right hon. Friend know what exactly restoring the value of the minimum wage means and how much that would cost?

[Vince Cable]

I welcome the hon. Gentleman’s support and I know that it is shared among his colleagues. This is a historical issue: it has now been laid to rest. I will talk a little more about the mandate of the Low Pay Commission and the fact that successive Secretaries of State, including me, have respected its judgment, which is non-political, non-partisan and represents both the union and employer standpoint.

Let me talk about the wider economic consequences. The shadow Secretary of State talked with a real sense of righteous indignation about things that are, frankly, blindingly obvious. We have had a massive financial crisis, the biggest in our history—certainly in modern times. As a result, the country is poorer. That is a matter of fact. It is not a polemical point: the country is poorer, and that has been translated into lower earnings. That is simple economic reality and nobody is disputing that.

In the wake of the economic crisis in 2008-09, we now know that British GDP fell by 7.5%. That was more than after the great crash in 1929 and worse than in any other western country. I am not going into the business of who did what when; I am just recording a matter of fact. Recession inevitably followed the financial disaster and real earnings have been affected. The shadow Secretary of State is right on simple matters of fact: real earnings fell by 7% and the minimum wage fell by 5%. That is a matter of fact. What I find so very difficult to understand is that the Opposition Front Benchers—it is not just her; her colleagues are the same—have seen the greatest economic disaster in modern economic history and apparently not noticed it, and they have not taken any account of the inevitable economic consequences. What matters is that the Government of the day seek to mitigate those effects.

[Mr William Bain (Glasgow North East) (Lab)]

Does the Secretary of State accept that while he has been in office, the real-terms value of the adult national minimum wage has declined by 50p an hour since May 2010? It is his responsibility to review the remit of the Low Pay Commission. Why is he acting so slowly on this, given that 28% of part-time workers in his constituency are earning less than the living wage? Does that not show the failure he is presiding over on poverty pay across the whole country?

[Vince Cable]

I do not know about the numbers, but certainly the minimum wage, in real terms, has declined by 5%, as a result of my predecessor on two occasions and me on three occasions following the advice of the Low Pay Commission.

[Alex Cunningham]

The RBS bankers and others in the City who led us into this terrible economic situation do a lot better than the national minimum wage, so does the Secretary of State think they should get bonuses of more than 100% of their salaries?

[Vince Cable]

I think hon. Members have had a chance to debate that already. I am a great advocate of the new model developed by Handelsbanken of relationship banking and no bonuses—that is what we ought to have—but I suspect that even their branch managers are paid above the minimum wage.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Does my right hon. Friend share the incredulity of Government Members that for all the talk of bankers not having been affected, not one person has condemned the fact that trade union leaders have been getting double-digit pay rises in the same period?

[Vince Cable]

I suspect that that is also true, but I am trying to get away from the tribal debate that the shadow Secretary of State was so keen to launch.

To return to the thread of the argument, we have had a major shock, and it has reduced real earnings and the real minimum wage. I fully acknowledge that; it is a matter of fact. The question is: what is being done to mitigate the effects? Two major changes have taken place. First, the Government have recognised that earnings are not the same as take-home pay and disposable income, and we have therefore concentrated our tax policy on lifting low earners out of tax. As a result, 2.7 million low earners now pay no income tax. Those working 28 hours a week on the minimum wage pay no income tax, while those on 35 hours pay only one third of the income tax they paid at the beginning of this Government. We have therefore considerably reduced the impact of the squeeze on real incomes by using tax policy.

The second highly relevant issue is the level of unemployment. After the great crash in 1929, unemployment rose to 20%. In the recent financial crisis, countries less affected than the UK have had considerably higher unemployment—I am talking about France and Sweden, among others. We reached a peak of 8.5%; it has now gone down to 7% and is falling. We have record numbers of people in work, while the number of jobs has increased by 1.3 million, in the wake of this enormous economic crisis. Now, why has that happened? It has happened because millions of individual workers, realising that there is a choice to be made between jobs and pay, have wisely decided that it is much more important to keep the employment.

The Low Pay Commission, speaking for the country as a whole, rather than for individuals, has reinforced that assessment. In its 2012 report, it explained its analysis in the following terms—let us remember this is not the Government, but an independent commission representing unions, employers and independent assessors. It said its aim was a minimum wage that helped

“as many low-paid workers as possible without any significant adverse impact on employment or the economy.”

That became the mandate—the remit—that I have used, and it is virtually identical to the remit used by my Labour predecessor. I simply ask Labour Members what they object to in that remit. Do they seriously think that the Low Pay Commission and the Secretary of State should ignore the state of the economy or the level of employment? What do they think is fundamentally wrong with the remit?

[Gavin Shuker]

From the tone of the Secretary of State’s remarks, it is clear that, following the banking crisis of 2008, this is a deep issue that confronts us as a nation. He is right in his analysis, and many workers have chosen not to push for pay rises in the light of that situation. The challenge facing us, however, is surely one that requires a political response. I disagree slightly with his characterisation of this Government’s policy. What it has resulted in has been clearly demonstrated in 41 of the last 42 months, with people being able to buy less with what they are being paid. If he is saying there will be no change, then Opposition Members will continue to call out for that change.

[Vince Cable]

I keep hearing the call from Opposition Members for a political intervention. Are the hon. Gentleman and his colleagues saying that this system—a very good system that his Government established, based on the Low Pay Commission analysis—should be torn up and a political settlement imposed? Is he suggesting that the remit, which takes account of the impact of the minimum wage on employment, should be disregarded? Is that the argument?

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Let me give the Secretary of State an example. The Low Pay Commission recommended against amending section 31(1)(b) of the minimum wage regulations, which allowed employers to pay hospitality workers out of their tips. The last Government took the courageous step of changing that provision and preventing that from happening. That is a good example of where politics looks to the good of the individual and does not play to what I believe are the prejudices and fears of people in the Low Pay Commission. Is it not also true that if the minimum wage were raised—I have seen many cases of this—the bill for tax credits would go down and the Government would probably be better off in terms of public sector expenditure?

[Vince Cable]

On the last point, the hon. Gentleman may well be right, although I have seen an analysis suggesting that, because of the effect on corporate taxation, which offsets those gains, he is not. However, on the more substantive point about politicians intervening to override the Low Pay Commission, I believe that we should not be dogmatic about it. In the overriding majority of cases, it behoves the Secretary of State to listen carefully to the Low Pay Commission and it would be unusual to override it. He cites one case, and I have actually overridden the Low Pay Commission—on the apprenticeship wage, which I thought was excessively low, giving the wrong signal to young people and others who wanted to do apprenticeships. I made a decision on that specific issue to intervene and disregard the advice of the Low Pay Commission. If that became a habit, however, and if its advice were overridden on a major issue of pay policy, the minimum wage structure would crumble from being politicised in that way.

[Mr Donohoe]

To ask a simple question, what is the minimum wage for apprenticeships?

[Vince Cable]

I think it is £2.68, and it was going to be frozen at £2.65. [Interruption.] It is a very small increase, but there was an issue of principle involved, which is why I intervened to change it.

Let me proceed on the issue of the mandate. The Low Pay Commission has consistently regarded jobs as an important objective of policy—rightly, and we must respect that judgment because it is based on serious analysis. Let me quote a good study carried out by the Resolution Foundation, and I believe the National Institute of Economic and Social Research was involved, too. It analysed the effects of a general increase to the living wage level, which Labour Members would like to see happen.

The analysis suggests that if other things were equal and if all low pay were increased to the level of the living wage, there would be a net loss of 160,000 jobs. Worse than that, there would be a loss of 300,000 jobs among the unskilled and among young workers, because massive substitution would take place. That does not mean that the living wage is a bad idea as a voluntary principle, but it does spell out very brutally what would happen if Governments ignored the Low Pay Commission and took a cavalier view of the impact of the minimum wage on jobs.

[Chris Williamson (Derby North) (Lab)]

Is that not precisely the argument that was used by those who opposed the introduction of the national minimum wage in the first place? Is this not just a repetition of that flawed argument?

[Vince Cable]

I must tell the hon. Gentleman that it is an argument to which the trade unions on the Low Pay Commission fully subscribe. This is the first time that I have heard Members seriously question the competence of the Low Pay Commission and challenge the whole principle of its remit. I am appalled and alarmed that they should want to tear up and politicise a basically good system which has worked well under the last Government and under this one, in different circumstances. That really is very dangerous.

[Alec Shelbrooke]

What I find strange—I am sure that my right hon. Friend agrees with me—is that the subject of the living wage keeps popping up on the Opposition Benches. Today’s debate is about the minimum wage, and the Labour motion does not call for the Low Pay Commission even to consider the issue of the living wage.

[Vince Cable]

Indeed. Admittedly the issue of the living wage is now part of the public debate, and of course I believe that if employers are profitable they should adopt it—particularly if they are taking advantage of their work forces—but we must be clear about the fact that making the living wage mandatory, either directly or indirectly, would have enormous implications for jobs.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

Will the Secretary of State give way?

[Vince Cable]

I will give way once more.

[Mark Lazarowicz]

The fact is that millions of workers are now enjoying the living wage because of the actions of local authorities—the vast majority of them Labour-controlled—and progressive employers. Rather than just saying that the living wage is a good idea, should not the Government encourage employers to adopt the living wage through specific measures, such as those suggested by Labour in the motion and in our policies generally?

[Vince Cable]

I have noticed the word “encourage” before. Ministers are being told that they should encourage employers to pay the living wage. I have thought about that: what does it actually mean? It is motherhood and apple pie on one level, but if we take it seriously, what does it mean?

If I encounter a company that is perfectly profitable, particularly if it seems to be taking advantage of its work force, of course I will urge it to pay the living wage, but many companies are on the brink of bankruptcy. Would Members urge them to increase their pay levels substantially in those circumstances? That would be extremely irresponsible. These bland phrases, although they may be superficially attractive, are potentially very dangerous.

[Several hon. Members]

rose—

[Vince Cable]

I have given way a number of times, and I should now like to finish what I have to say.

Along with the element of its remit that relates to the impact on employment, one of the key concepts in the work of the Low Pay Commission is what it calls the “bite”. That terrible bit of jargon refers to the relationship between the minimum wage and the median. It may be technical, but it is very important, because the closer the minimum wage gets to the median, the more likely it is that a big increase will displace employment. When the minimum wage was first introduced in 1999, it was about 46% of the median; now it is 53%, and there have been successive increases.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The median wage is falling.

[Vince Cable]

It did fall slightly last year—just slightly. However, the minimum wage is now significantly above that level.

That is a major issue for young workers and for apprenticeships. For young workers, particularly those aged 16 and 17, the so-called bite is close to 80%, which means that any significant increase in the minimum wage would have the unfortunate effect of displacing most of them from the labour force. That is a factor that has weighed very heavily with the Low Pay Commission when it has made its recommendations.

[Grahame M. Morris]

Will the Secretary of State give way? I will be very brief.

[Vince Cable]

I will be indulgent.

[Grahame M. Morris]

I am grateful to the Secretary of State. He is being very generous, and I appreciate the way in which he has engaged with interventions. May I just put one thought in his mind? A number of very profitable companies are offering their workers—many of them young workers—zero-hours or four-hours contracts, which have a terrible effect on a person’s ability not just to live but to exist.

[Vince Cable]

I have already said in the House on several occasions that the Government are now engaged in a public conversation about how we deal with zero-hours contract abuses. I think the hon. Gentleman has to be careful as the research that has been carried out suggests that very large numbers of people on zero-hours contracts like that model, but we must deal with the abuses, of course.

[Mr MacNeil]

rose—

[Vince Cable]

It would be remiss of me not to take at least one intervention from the Scottish nationalists, so I will do so.

[Mr MacNeil]

May I put in the right hon. Gentleman’s mind the words of Paul Krugman earlier this week? He spoke about unemployment insurance and how when money is in the hands of the poorest in society, that creates demand, which in turn creates jobs. The corollary of that is that the higher the minimum wage, the more money is put in people’s pockets and the more it circulates, and we return to a system, as in the 1950s, when inequality is reduced, rather than the situation now, when inequality is equivalent to what it was in the 1920s.

[Vince Cable]

Of course an increase in wages among other things increases demand, and that is one factor that has to be taken into account. That leads me on to the next point I want to make, which is how this year I have approached the issue of the mandate of the Low Pay Commission. Opposition Members have been questioning that and saying, “Why don’t you change the way we look at it?” I have done that, while respecting its independence. I have said the Government want a faster increase in the minimum wage, reflecting the fact we now have a real recovery, and in order to achieve that the LPC should look at a wider range of factors governing low pay. They include the fact that at the national economy level, the Governor of the Bank of England has now said that if unemployment falls to 7%, he would want there to be some tightening of monetary policy, as the environment will have changed. We would want to see what impact that will have on the cost of employment, which has been cushioned by the Chancellor’s decision to bring in the employment allowance—£2,000 for the first employee—as it significantly changes the cost of employment. We also need to look at the impact it would have on the Government, because there is an interaction with tax credits, tax yields and corporate taxation. There is the impact on take-home pay, too, and therefore we have to factor in our tax policy.

I have therefore asked the LPC to look at this problem in a much more holistic way. I do not know what it will conclude, and I will be respectful of its independent advice, but that is the way we are approaching this and we do now recognise that in a recovering economy low-paid workers should derive benefits, and that is how we are approaching this matter.

[Katy Clark (North Ayrshire and Arran) (Lab)]

Will the right hon. Gentleman give way?

[Vince Cable]

I have taken several interventions already.

Finally, let me say a few more words about enforcement. Clearly the minimum wage is only effective if it is properly enforced and has the force of law. It is important not just for its own sake but to give workers confidence that if they complain, those complaints will be followed through. There are several levels as enforcement is a complicated process. First, it is a problem of securing arrears and then imposing fines. We then have a name and shame system, and ultimately there is prosecution in court, but that has hardly been used either under the last Government or this one because it requires a demonstration of proof of intent, which is very difficult to demonstrate.

Let me explain how these various levels are now operating. In the last year, arrears of about £4 million were paid, compared with an average of about £3 million over recent years. About 26,000 workers benefited from that. Fines are crucial, because under the last Government and this one, that is where the main enforcement action has been taken. Last year 700 enforcement cases were taken to the level of fines. The amount paid was seven times as much as was paid under the last year of the Labour Government. One can argue about this from one year to another, and these things fluctuate, but any suggestion that the regime has become easier is simply not true.

[Michael Connarty]

rose—

[Vince Cable]

I am going to proceed to the end of my speech.

We are now in the process of considerably increasing the penalties, both in terms of raising the fine from £5,000 to £20,000, subject to the House approving the legislation, and applying it per worker rather than per firm, which is, of course, much more draconian.

The new guidelines for the naming and shaming process were issued to HMRC in October. There is also the question of due process. Companies that are about to be named and shamed can appeal, and it is estimated that that process takes roughly 150 days. I imagine that a significant number of cases would begin to emerge by the end of February; we can test that when the issue arises.

To summarise, we have a good system, but we want to strengthen it, and to strengthen enforcement. We also want to respect the principles of the Low Pay Commission. We want to see improvements to the minimum wage, but that needs to be done properly, through the independent Low Pay Commission. I therefore urge my colleagues to oppose the motion, and to support the Government’s amendment.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. There will be a five-minute time limit on all Back-Bench contributions in this debate. That might need to be reviewed, but I hope not.

17:19

[Dame Tessa Jowell (Dulwich and West Norwood) (Lab)]

Having listened closely, as I always do, to the Secretary of State for Business, Innovation and Skills, I am hard pressed to see how he can recommend voting against our motion, which focuses on the enforcement of the national minimum wage.

The existence of a national minimum wage is a major statement about the kind of country that we are. Beyond the clichés about hard-working families, what does hard work actually involve? Are we prepared to be citizens and representatives in a country where too many mothers ship their children from one childminder to another, often late at night and very early in the morning, because they work for employers who do not honour their statutory obligation to pay the national minimum wage? This is about decency, and if the Government are serious about the enforcement and enforceability of the national minimum wage, they must surely acknowledge that the proposals in the motion are unexceptional.

I am proud to have been part of the Government who introduced the national minimum wage, and I hope that that progressive change has now become irreversible. Over its lifetime, one of its most powerful effects has been to start to close the gender pay gap. It stood at more than 16% when the national minimum wage was introduced in 1999; its present level of 9.2% is still unacceptable. The greatest burden resulting from the lack of growth in the economy and from the Government’s tax and benefit changes has been borne by women. Women’s employment is also concentrated in poorly paid occupational groups that include care, cleaning and catering. Whatever low pay threshold is used, the proportion of working women who are low-paid is about twice that of working men on low pay.

The need for enforcement of the national minimum wage goes without saying, and the failure to enforce it is a stain on the stated ambition of the Government. I commend the next stage of the ambition, which is to move towards a living wage. I pay tribute to Citizens UK and, in particular, to London Citizens, which have been at the forefront of introducing the living wage since 2005—so much so that 214 London employers and 12 London councils have now signed up to pay it.

Many opportunities are open to the Government to urge more employers to pay the living wage: the leverage of procurement; the increased tax receipts for Her Majesty’s Revenue and Customs resulting from more people being in better-paid jobs; and the practical benefits that businesses that pay the living wage report, such as more corporate resilience and social purpose, reduced absentee rates, greater loyalty and enhancement of the quality of work. Good businesses know that the living wage is good for their business; this is about the interconnection between corporate success, commercial success and social purpose.

When we talk about changes to the benefits system, we must remember that the living wage is one way in which we move families off and out of tax credits, and shift the responsibility for decent levels of pay from the state—the social security system—to employers. Having rather curtailed my remarks, I wish to finish by saying that we can follow the example of the best of business, but we should also remember what the difference means to families. The mother whose child—

[Madam Deputy Speaker (Dawn Primarolo)]

Order.

17:26

[Robert Halfon (Harlow) (Con)]

The hon. Member for Leeds West (Rachel Reeves), who opened this debate, is right about one thing: it was a mistake for my party to have opposed the minimum wage. I am glad that we support it now. If we are honest about our mistakes, the Opposition need to be honest about what went on: that it was a mistake to abolish the 10p income tax rate; that median real wages stopped rising from 2003; and that the value of the minimum wage did not decrease from 2010 but from 2008. All of us have made mistakes in these areas, and the Opposition should have welcomed the fact that we have taken 2 million lower earners out of tax altogether.

[Alec Shelbrooke]

Does my hon. Friend agree that it was also a mistake to put in petrol price rises year after year—Labour would have added the equivalent of 64p a gallon by this time—which dig directly into hard-working people’s pockets?

[Robert Halfon]

My hon. Friend is right; our party has a relentless focus on helping the lower paid. We should support the minimum wage because we are the party of aspiration and working people, and increasing the minimum wage eliminates the poverty trap, cuts the benefits bill and encourages more people to get back into work. If we do just one thing, it should be to increase the minimum wage at least to reflect the increase in inflation over the past few years.

I also urge the Government to institute a regional minimum wage—in addition to the national minimum wage, not as a substitute for it—because of the different costs of living in different parts of the country. I am talking about the differing costs not just from north to south, but within regions. That has been done in other countries, such as Canada and the United States, where individual states can set minimum wage rates above the federal minimum. We need to consider such an approach seriously.

[Jackie Doyle-Price (Thurrock) (Con)]

My hon. Friend and I represent constituencies in Essex, where the cost of living is higher than it is in other parts of the country. Does he agree that we often see people trapped in a life on benefits because it does not pay to work as a result of the loss in housing benefit owing to higher property prices?

[Robert Halfon]

My hon. Friend makes an important point, and the Conservative party is the workers’ party. We are here to get people out of dependency and back into work, and the Labour party is the party of benefits.

Although it is important to support a fair wage, we must not hurt small businesses—the Secretary of State was exactly right on that. We should move towards a living wage, but there are ways of doing it. The important thing is to put the burden on government to achieve the living wage, not on businesses. I support the minimum wage and the living wage, but we have to make sure that they are not raised to unsustainable levels. Labour’s solution of offering companies tax breaks if they pay employees the living wage for a year is said with the best of intentions, but it has flaws because it does not fully offset the cost. Many companies would still be unable to meet the additional cost of paying their workers an extra £2 an hour. It would also only last a year, so many people would not benefit in the long term.

We should remember that 5 million low earners in Britain are earning less than £10,000 a year. To achieve the living wage, we need to look at two ends of the equation. First, we could reintroduce the 10p income tax band. That would halve the income tax bill for those on the minimum wage and significantly reduce the cash gap between the minimum wage and the living wage. It would also cost less than raising the personal allowance, and ensure that people continue to pay into the system while letting them keep more of their own money. Alternatively, we could continue raising the threshold of income tax. Those are the ways to get people up to a living wage, and I am happy with either solution.

National insurance is the one tax that is still taken directly out of lower earners’ pay packets. A worker who earns around £7,500, which is around half of what the Government say they need to live on, still pays national insurance. We should take a small step to help the lower paid by increasing the national insurance threshold, so that it is in line with income tax for employees. The 2020 Tax Commission found that nearly three-quarters of company bosses said that national insurance contributions curbed the rates they paid their staff.

A bigger step would be to remove altogether national insurance and income tax from the national minimum wage, which would mean that someone working 40 hours a week would be earning just £10 a week less than someone who is currently earning the living wage. If we did that, national insurance and income tax could be merged into just one tax.

Although some argue that we need to maintain national insurance because of the contributory principle, it effectively acts as a double income tax, and a contributory system could be transferred into any consolidated form. Such a system could have enormous benefits, such as a simplification of the tax system, greater transparency, fewer administration costs and it would leave workers with more money in their pockets. It would be costly, but there would be benefits, such as people spending more and being less reliant on the state for welfare and encouraging people back into work. It would benefit all low-paid workers, especially those who work just part time. It should be the long-stated aim of my party to try to introduce this over a number of years.

As Conservatives, we are on the side of hard-working people, which is why we capped taxes for 20 million-plus lower earners. It is right that the Government increased the personal allowance, but if the slogan “For hard-working people” is to mean something, we have not only to become the workers’ party but to shout from the roof tops our support for the minimum wage. A real-terms rise in the national minimum age, a regional top-up and raising the national insurance threshold would give us legitimacy as the party standing up for millions of workers.

17:33

[Chris Ruane (Vale of Clwyd) (Lab)]

I was elected in 1997 in a Labour landslide on a manifesto with a commitment to introduce the national minimum wage. It was Keir Hardie who, in 1906, put forward the idea of a national minimum wage and it took almost 100 years to deliver it. Incidentally, he also proposed devolution for Wales, Ireland and Scotland and reform of the House of Lords. Both of those were introduced after Labour’s historic win in 1997.

When I was a parliamentary candidate in 1996, I organised a low-pay survey in my constituency. The person who came out top—or should I say bottom—was a taxi driver who was on £1 an hour. There were other incidences of women in the care sector who were working 12-hour night shifts for £2.50 an hour.

Seaside towns such as Rhyl probably benefited more than anywhere else from the introduction of a national minimum wage. A table produced by the House of Commons Research Department shows that 29% of those who worked in hotels and restaurants and in the entertainment industry were affected by the national minimum wage. In seaside towns, we have a huge number of care homes and the second biggest sector to benefit, at 15.1%, was the one that undertakes community and social services activities. Seaside towns have done really well under the national minimum wage.

Could any of us in the Chamber today work for £1 an hour or its equivalent today? Could we have brought up our families on £2.50 an hour, working throughout the night? I have a great deal of respect for the hon. Member for Harlow (Robert Halfon) on these issues, as he is what I would consider to be a compassionate Conservative, but he said that he was concerned about unsustainable levels when this is about trying to increase pay for people on the lowest rung by 50p or £1 an hour. We never hear about the unsustainable levels of high pay. For example, two captains of industry in the energy companies were given £14 million and £15 million golden handshakes without a peep from the Conservative party. It is one law for the rich and one for the poor.

[Mr Anderson]

My hon. Friend spoke about care workers’ pay before the 1997 election. I was then a negotiator for care workers in the public sector, who were getting at least £5 an hour—twice as much. We introduced this legislation because people were being exploited by private companies. Is that not the same worry that we see today?

[Chris Ruane]

I concur entirely.

When we want to improve the efficiency of businesses, we say that we must pay those at the top as much as we can to reward their energy and enterprise and that we must reduce the pay of those at the bottom because it is in their own best interest. There is one rule for the rich and one for the poor.

[Katy Clark]

Of course, we did not hear from the Secretary of State this afternoon about the fact that although most people in this country face a cost of living crisis and although wages are going down for the vast majority, those at the top are doing very well, thank you very much. The salaries of chief executives and those at the top are soaring. At the time of the 1997 election, we heard time and again that we could not afford the national minimum wage. Does my hon. Friend agree that the arguments we are hearing now should be treated in the same way as those arguments were then?

[Chris Ruane]

Absolutely. The Conservatives were whingeing when I raised these points, but it is obscene that the Chancellor of the Exchequer scurries off to Brussels to protect the multimillion pound bonuses of British bankers at the same time as he is reducing workers’ rates by £1,600 a year.

[Stephen Barclay (North East Cambridgeshire) (Con)]

Will the hon. Gentleman give way?

[Chris Ruane]

No, I will not.

More than 7,000 people have visited me in Parliament since I was elected in 1997. Many have been schoolchildren and sixth formers. I always allocate a good period of time for questions and one of the most common questions is, “What are you most proud of from your 16 years as an MP?” I am most proud of this piece of legislation, which Labour introduced in 1998. It is totemic. It was an indicator at that historical time of what Labour was about and what the Tories were about. We were for the many and they were for the few. I welcome the massive U-turn that the Conservatives have made on that, but it is too little too late.

[Mr MacNeil]

rose—

[Chris Ruane]

I am afraid that I must make progress, as I am now using up my own time. I thank my hon. Friends the Members for Blaydon (Mr Anderson) and for North Ayrshire and Arran (Katy Clark) for their interventions as they gave me an extra two minutes, which I am eating into now.

The policy was resisted tooth and nail by the Tories. The House sat for two days in the Chamber and there were 70 hours of debate in Committee between 22 January and 17 February 1998. The Tories made the direst predictions about the introduction of the national minimum wage, predicting that 2 million jobs would be lost and every single person who received an increase would be sacked. That was absolute nonsense; an extra 2 million jobs were created.

The then Secretary of State for Wales, the right hon. Member for Richmond (Yorks) (Mr Hague), said:

“He is right: the adoption of a minimum wage and the social chapter would gravely inhibit employment opportunities in Wales. There is no question about that.”—[Official Report, 27 February 1997; Vol. 291, c. 461.]

What about when the Conservatives were closing down the steel mills and the coal mines in south Wales? Did that gravely inhibit employment opportunities in Wales? He said:

“Adoption of the social chapter and a minimum wage would price tens of thousands out of their jobs along with hundreds of thousands throughout the rest of the United Kingdom.”—[Official Report, 17 March 1997; Vol. 292, c. 609.]

He was on the mild side in referring to hundreds of thousands; the Conservative party nationally was predicting 2 million job losses. The Conservatives fought tooth and nail against the legislation, but it was passed. That is the proudest moment of my time here in the House.

In my constituency, we saw no job losses. We saw the number of people in employment go from 23,000 to 30,000. The St Asaph business park, which was built by the Conservatives in my constituency at the cost of £11 million, was empty for seven years. When Labour came to power, it was filled, and there are now more than 2,000 jobs on the park.

The national minimum wage legislation is fantastic, but we should not rest on our laurels. We need to move upwards and onwards to the next frontier, which, as has been mentioned by hon. Members, including shadow Ministers, is zero-hours contracts and a living wage. We need to push for better conditions and better payments for workers. That is in the best interests of those workers, their families and the economy.

17:40

[Gordon Birtwistle (Burnley) (LD)]

The Opposition motion mentions that the Liberal Democrats were all against the minimum wage. I do not think that many current Liberal Democrat Members were here 14, 15 or 16 years ago. As a Liberal Democrat, I was always in favour of the minimum wage, and the engineering company that I owned always paid well over the minimum wage. If companies want really skilled people to work for them, they find that the minimum wage is far below what skilled workers are paid today.

I was a little bit offended by the attack on my right hon. Friend the Secretary of State for Business, Innovation and Skills by the hon. Member for Leeds West (Rachel Reeves). She should apologise for the fact that she did not understand the reasons why he was not in the House at the time. I accept that she is new and probably inexperienced, but hon. Members need to know the reasons why someone did something before attacking them in the House.

As has been said many times by the Secretary of State, we went through an appalling crash. There is no getting away from the fact that the Labour party and the bankers drove the country virtually into bankruptcy, and we have had to do something about it. We have managed to maintain employment. As has been said, 1.5 million people are now working who were not expected to work. The Opposition’s hope for a triple-dip recession has not happened. We have managed to drag the economy round and things are moving on, but these things need to be explained.

What can the Government do about the minimum wage? I agree that the Low Pay Commission should look at the minimum wage. I believe that it should be given the right and the power to decide what the minimum wage is, and it is quite right, as the Secretary of State said, that we should not have political interference in things of that nature.

What have the Government done to try to mitigate what we have got? By the fact that the Government have been doing what they have with the economy, we have managed to keep interest rates really low. Let us imagine what would have happened if we had gone along with the Labour party’s proposals on the economy. What would interest rates be now? We have mitigated the effects of a lot of the low salaries by keeping interest rates and mortgage rates down to a very low level. If we look across the rest of Europe, we see interest rates in Greece and similar places that have climbed to as much as 20%. Let us imagine what would have happened in this country if we had allowed that to happen. We have mitigated those effects.

All right, the country has not been able to increase the national minimum wage, and I for one would like that to happen. As the Government’s apprenticeship ambassador, I would certainly like the minimum wage for apprentices to increase, because we should be investing in young people and delivering jobs of the future, and we are now doing so. If I had the authority to speak to the Low Pay Commission, I would ask it to look at that issue.

[Katy Clark]

The hon. Gentleman’s colleagues who sit alongside him like to say that we are all in this together, but he will know that those with the highest earnings, such as the chief executives, are doing very well and their wealth is increasing, and the profits of many companies have risen considerably. Should not those factors be taken into account along with the cost of living crisis when looking at the level of the national minimum wage?

[Gordon Birtwistle]

The very profitable companies, such as the big engineering companies and the major multinationals, invariably pay well over the minimum wage. Many minimum wage payments occur, for example, in the care industry and those industries where low pay is accepted. I agree that if a company is profitable and doing well, it should recognise that its employees are creating not only wealth for the chief executive but wealth and security for themselves and for the country. I agree that companies should recognise what employees do, and the vast majority that do so pay a lot more than the national minimum wage.

[Mr MacNeil]

The hon. Gentleman is actually referring to the productivity gains that have been made. Studies in the United States of America show that the productivity gains have gone to the top 1%. The federal wage in the United States is about $7.25. Had that kept pace with the minimum wage in the 1960s and had the productivity gains been distributed at that level, the federal wage would have been treble the present rate. It is a fair bet that the same would be happening in other western countries, this one included.

[Gordon Birtwistle]

I am not conversant with what the hon. Gentleman says. I do not study the wage rates of the federal states of America. I have enough to do looking at rates in the UK. But we have kept inflation low and we have mitigated the effect of that on the minimum wage, and we have also managed to create extra jobs and wealth. It is interesting that the motion says that the Opposition agree with making work pay. That is the first time since I became a Member in this House that the Opposition have agreed with making work pay. Hallelujah! They have always had a go at Government Members for promoting work to create wealth for families instead of paying out in benefits. I am over the moon about those three words. If they were in the motion, I would vote for it; unfortunately, they are not.

The Opposition do not have the confidence to include in the motion what they believe the minimum wage should be. I understand that what they suggest runs for only 12 months. What will happen after 12 months? Will everyone go back to what they had before, or will people lose their jobs? It is a half-baked motion. [Interruption.] It is part of the non-economic plan. There is no long-term plan—or a short-term plan. There is no plan at all. The majority of the statements in the motion have been covered in the amendment, which is a far more sensible approach. I urge hon. Members to support the amendment.

17:48

[Mr William Bain (Glasgow North East) (Lab)]

Nothing speaks more to how the economy simply does not work at the moment for ordinary people in this country than this Government’s record of dither and inaction on low pay. It should be genuinely shaming for every Member of this House that the United Kingdom had the fifth worst levels of poverty pay in the OECD in 2013. We should also remember today the tireless work of living wage campaigners, trade unions and those enlightened employers across the United Kingdom who accept that our country has no future as a low-skill, poverty-wage economy and who have achieved fairer deals for workers from the financial services sector through to local government.

Now the Government must meet their share of the responsibilities by using the procurement system more effectively to secure the living wage for workers through Government contracts wherever that is possible, because although the burden of poverty pay falls most heavily on the working poor, who are now using food banks in record numbers, it is paid for by every single taxpayer in this country. They are subsidising, through the tax and benefit systems, unacceptable levels of low wages paid by bad employers. That also damages the interests of good employers.

Over the past three decades, the share of growth finding its way into the pay packets of ordinary workers on the lower half of the income scale has slumped to just 12p in every £1 of GDP growth generated. Having denied for months that there is a cost of living crisis in our country, the Business Secretary and the Government now ring their hands, for ever pledging change in the future but failing to take the action needed now to enforce the minimum wage properly, to reverse its real-terms fall in value under this Government, or to produce any long-term plan to restore the broken link between growth, productivity and wage growth, which is vital to generating a lasting uplift in living standards for millions of people across our country.

The Chancellor has been sending out mixed messages over the past few weeks ahead of his Budget. He has briefed some newspapers that a significant uplift in the minimum wage is on the way, but other newspapers have received a different story. Whatever he announces on 19 March will be weighed against the fact that under his stewardship since May 2010 the real-terms value of the adult minimum wage has fallen by 50p an hour. He is also launching a £600 million stealth raid on work incentives for the low-paid through the freeze in the work allowance of universal credit for the next three years. A single parent with children will be up to £230 a year worse off as a result of that sneaky change buried deep in the documents that accompanied the autumn statement.

Business investment is flatlining, exports are poor, productivity is weak, the squeeze on wages is extending into 2015, and people are working longer hours than they did in 2008 but have a lot less to show for it. This is not a Government who can say that they have a credible long-term plan to boost the living standards of ordinary working people in Britain.

The Government should be enforcing the minimum wage better. The hon. Member for East Dunbartonshire (Jo Swinson) said that bad employers would be named and shamed, but we have seen nothing of that so far. The Office for National Statistics told me at the end of last month that nearly 300,000 people across our country are being paid less than the minimum wage, including 17,000 in Scotland, yet we have seen only two prosecutions over the past four years, and the average fine for each breach was only £1,500.

[Mel Stride]

Does the hon. Gentleman not welcome, as I do, the fact that we are moving from a fine of up to £5,000 per company to a fine of up to £20,000 per employee who does not receive the minimum wage? If 50 employees in a company were affected, presumably the fine could be as much as £1 million.

[Mr Bain]

I am grateful to the hon. Gentleman for his intervention, but that would simply mean that the maximum fine was only 40% of the maximum fine for fly-tipping in this country. Is he genuinely saying that there should not be an equivalence between the maximum fine for fly-tipping and the maximum fine for failing to pay the national minimum wage? I urge him to think again.

[Mr MacNeil]

Does the hon. Gentleman agree that minimum wages must have some link with productivity? Productivity is like a cake, with workers and CEOs each getting a slice, and that is what is making the difference to equality in this country.

[Mr Bain]

Unusually, I find myself in agreement with the hon. Gentleman; I will try not to make this a bad habit. He is right that industrial policy has a big part to play.

We need to be creating better-skilled jobs to replace those lost over the course of 30 years. We also need a transformation in skills in the workplace, because evidence from this country and from the OECD shows that an uplift in skills gives people the ability to progress in a job, to get new jobs, and to see a lasting increase in their wage levels across their career. That is what we need to be doing across our country in our industrial policy.

The scale of the crisis is being felt in every part of the United Kingdom. A written answer that I received from the Cabinet Office last Thursday, at column 250W of Hansard, shows that according to the most recent survey of wages and hours worked, conducted last April, over 16% of my constituents were paid less than the hourly rate for the living wage. Startlingly, in Chingford and Woodford Green, the constituency of the Work and Pensions Secretary, work is not paying under this Government, because 43% of workers are earning less than the living wage, including two in every three male part-time workers. That shows the scale of what is happening even in the constituencies of members of the Cabinet such as the Work and Pensions Secretary.

The case is clear: there has to be an increase in the minimum wage. We can work towards the living wage through Make Work Pay contracts, but the Government should be fulfilling their responsibilities in saying to the Low Pay Commission that low-wage Britain needs a pay rise, and needs it now.

17:55

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

As I recently outlined, I am not in favour of a statutory living wage, but I am in favour of raising the minimum wage.

A rise in the minimum wage, as national wage growth returns, fundamentally leads to a smaller state, as has been outlined by Labour Members. Now that the Government have reduced business taxes—national insurance, corporation taxes and small business taxes—and brought in last year’s rebate, the time is right to look at how we can create a sustainable growth in the wages of the lowest-paid by giving the taxation that the Government were taking back to the people who are creating the wealth in companies. That means that the potentially inflationary pressures will not occur because the Government are not taking tax from a company just to give it back to a worker.

[Robert Halfon]

My hon. Friend talks about the Government cutting business taxes. Does he agree that they have also raised taxes for the rich by increasing capital gains tax from 18% to 28% and increasing to 45p the 40p rate that existed in the 13 years under Labour?

[Alec Shelbrooke]

My hon. Friend puts it most eloquently, as always.

This is an uncomfortable truth for Labour Members. [Interruption.] They have been yelling and shouting this afternoon, and they are at it again now as soon as they do not want to hear an inconvenient truth. The hon. Member for Vale of Clwyd (Chris Ruane) put forward the false premise that Government Members are saying we should increase wages for the people at the top and cut them for those at the bottom—no Government Member has ever made such a comment; it was a disgraceful thing to say—but failed to mention that under his party’s Government, the noble Lord Mandelson said that he was perfectly comfortable with people getting “filthy rich”.

[Mr MacNeil]

Is not this debate about the division of the spoils of productivity? We are looking for a division that is more like that of the 1950s, when those at the bottom were given a larger percentage than they get at the moment and those at the top got a smaller percentage. We now have a share-out of the spoils that is creating a level of inequality between sectors of society that we have not seen since the 1920s.

[Alec Shelbrooke]

I am grateful to the hon. Gentleman for giving me that extra minute. I will come to my own history lesson in a moment. He will of course welcome the fact that under this Government the gap between the poorest and the richest in society is the smallest it has been for 30 years, having grown under the previous Labour Government.

Let us talk about the problems of falsely increasing wages and go back to the 1970s. In 1975, my parents, who were young teachers, were given a 25% pay rise under Harold Wilson and were delighted with it. Twelve months later they suffered a 3% pay cut, because inflation had gone up to 28%. We also remember the then Labour Chancellor, Denis Healey, demanding wage restraint at the Labour party conference, only to be booed by the floor. Having listened to this afternoon’s speeches, I am sure that some Members present would boo him now, too.

Wage inflation creates a real problem for people on fixed incomes who have worked hard their entire lives and paid into private pension funds, only to then see them eroded by inflation running out of control. For example, in 1965 my great uncle retired at the age of 65 on what was then a very reasonable pension of £15 a week. By the mid-1970s it was absolutely worthless.

If we go ahead with wage inflation in the way suggested by the Labour party without linking it to cutting taxes for business and making sure that it is sustainable, we will end up, as Neil Kinnock said, with a Labour council running around the city in taxis, giving out redundancy notices.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

The problem for people on the minimum wage, though, is that it simply has not kept pace with inflation. Those people would each have been £675 better off had the minimum wage kept pace with inflation, even over the past five years.

[Alec Shelbrooke]

I entirely agree with everything the hon. Lady has just said. She is absolutely right. The minimum wage has not kept pace with inflation, but neither has anybody else’s wage, because of the devastation that the Labour party caused to the economy. It is going to take decades to get this country back on track, but what we are seeing now is a long-term, credible economic plan that is leading to real growth in business and GDP.

It is fundamentally evil to introduce policies that create inflation which people who are on fixed incomes and who have worked hard all their lives are unable to keep up with. Such policies must sound very good to the Islington elite as they sit around their dinner tables and say, “Let’s talk about a living wage. We must have a living wage.” It is notable, however, that Labour’s motion does not encourage the Low Pay Commission to look at a living wage.

[Mr Dave Watts (St Helens North) (Lab)]

Will the hon. Gentleman give way?

[Alec Shelbrooke]

I have already given way quite a lot, so I am afraid that I will not use up any more time. Having listened to the contributions of Labour Members, it seems to me that every single one of them has a different idea of what to do with a living wage.

Conservative Members accept the lessons of the past. Our party accepts that it was wrong to oppose the minimum wage. The Chancellor, the Prime Minister and many Conservative Members have made that clear. Indeed, we are a party of young people from normal backgrounds these days. As the previous Member for South Shields said, the trouble is that the Conservative party is the party with working-class people in it and the Labour party is full of failed polytechnic lecturers. The fact is that their philosophising and great ideas that sound good around the table have a real impact on the lives of people at the bottom of society.

Those who cannot afford to keep up with inflation because their income may not rise with it need proper, sustainable policies. One such policy is the opportunity we have taken in this economic climate to cut taxes on business and cut the national insurance contributions of business leaders and employers, followed by making sure that those tax cuts go back to the people who create the wealth in the first place. That is a sustainable and sensible policy and a long-term economic plan. For all those reasons, I urge the House to support the amendment in the name of my right hon. Friend the Prime Minister.

18:04

[Chris Williamson (Derby North) (Lab)]

Last Wednesday was fat cat Wednesday—the day by which top executives in FTSE 100 companies had, two days after returning to work from the Christmas holidays, earned more money than the average worker, let alone someone on the minimum wage, will earn in the entire year.

Like my hon. Friend the Member for Vale of Clwyd (Chris Ruane), I undertook a job centre survey in 1996—in Derby—and I was absolutely shocked by the number of jobs on offer at £1 an hour or less. It had a hugely civilising effect on our country when the Labour Government, who were elected in 1997, introduced the national minimum wage and took millions of people up the income scale as a consequence.

We know that the national minimum wage was opposed by the Conservatives in this place and elsewhere in the country, and that the Liberal Democrats could not really make up their mind: some were in favour and some against. True to form, since returning to power, they have frozen the amount of resources available for its enforcement. That is utterly disgraceful, because the consequence of the freeze is to make it that much more difficult to bring to book exploitative employers who pay below the minimum wage.

I have to say that the Secretary of State for Business, Innovation and Skills was all over the place when he addressed the House. He said that the political process should not interfere with the Low Pay Commission, but he went on to say that he had interfered on some occasions, and let us remember that it was a political decision to bring in the national minimum wage in the first place. Given the Government’s parsimony in relation to ensuring that the necessary resources are available to the enforcement body, I want the Secretary of State to make a political intervention by conferring a formal third-party role on the trade union movement. Trade unions could help to monitor and enforce the minimum wage by ensuring, when they complain about non-compliance, that such complaints are investigated by HMRC as a matter of course, which would make a big impact.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Chris Williamson]

I will not take any interventions, if the hon. Gentleman does not mind, because I know that some of my hon. Friends want to speak and they may run out of time.

We certainly need better enforcement. It annoys me that the Conservative party is quite happy to use taxpayers’ money to subsidise the well-heeled in our society. Not enforcing the minimum wage and, indeed, not supporting the living wage is a case in point, because taxpayers’ money goes to subsidise low pay in our country. We therefore need not just support for the living wage, but greater penalties to ensure that the national minimum wage is enforced. It is welcome that penalties are being increased, but that is still not enough; more needs to be done.

Let us be clear that, as my hon. Friends have already said, when people on low incomes have more money in their pockets, they spend that money, which creates economic activity and growth, and helps to sustain and create jobs in other industries and businesses. In my view, that is really important.

Having listened to the Conservatives today and knowing their record from history, it seems to me that one thing is pretty clear: we cannot trust them—or, indeed, the Liberal Democrats—with the national minimum wage. It will take a Labour Government coming to power in 2015 to ensure that the national minimum wage is enforced, that appropriate penalties are imposed on recalcitrant employers and that we can move rapidly towards a living wage to bring all citizens up to a decent standard of living. We owe that to the people of this country, but it will take a Labour Government to achieve it.

18:04

[Mr Brooks Newmark (Braintree) (Con)]

I am delighted to follow the robust speech by the hon. Member for Derby North (Chris Williamson). I am probably the first Conservative in the Chamber to begin mine by supporting the first part of the Opposition motion, which states:

“That this House celebrates the 15th anniversary of the introduction of the National Minimum Wage”.

I support the minimum wage, as I believe all Government Members do, because it is important to make work pay, to boost living standards and to tackle in-work poverty. I cannot, however, support the rest of the motion.

The Secretary of State for Business, Innovation and Skills recently said:

“Anyone entitled to the national minimum wage should receive it. Paying anything less than this is unacceptable, illegal and will be punished by law. So we are bringing in tougher financial penalties to crackdown on those who do not play by the rules. The message is clear—if you break the law, you will face action. As well as higher penalties, we have made it easier to name and shame employers who fail to pay their workers what they are due.”

[Mel Stride]

Does my hon. Friend agree that it is a significant step forward that the fines will now relate to the individuals who have not received the minimum wage, rather than to the companies?

[Mr Newmark]

I thank my hon. Friend for that intervention. I will go into that matter in a little more detail in a minute.

The Government are taking strong action to deal with the last Labour Government’s failure to have a robust system of enforcement for the national minimum wage. I welcome this week’s announcement that tougher financial penalties will be brought in to crack down on those who do not play by the rules.

[Justin Tomlinson (North Swindon) (Con)]

I support everything that my hon. Friend has said. When I was an employer, I always recognised that I would get what I paid for. When a business is successful, that success should be shared with its employees. I welcome the fact that the Government are increasing the fines and are naming and shaming businesses, but I want to see the naming and shaming of the decision makers who disgracefully choose to exploit their staff.

[Mr Newmark]

My hon. Friend is right that there should be more publicity about those who abuse the system. Naming and shaming is a good idea.

To put some numbers on what has been said about penalties, in 2012-13 HMRC identified 736 employers who had failed to pay the national minimum wage, which led to the recovery of £3.9 million in unpaid wages for more than 26,000 workers. This week’s announcement will see the penalty for rogue employers raised to up to £20,000. The Government are taking punitive, robust action.

We should not forget that the last Labour Government left us with the biggest recession in recent history. This Government are helping some of the lowest-paid people in our society by raising the tax threshold and taking more than 2.7 million people out of tax altogether.

[Mr Anderson]

Will the hon. Gentleman give way?

[Mr Newmark]

No, I cannot take any more interventions.

Furthermore, under this Government we have seen a net increase of almost 1 million jobs. That means that a record 30 million people are in work. In other words, more men and more women are in work than ever before. Youth unemployment is falling. In the past three months, it has fallen by 19,000. I warmly welcome the abolition of employer’s national insurance contributions for the under-21s, which is something that I have campaigned for hard over the past year with the Million Jobs campaign. I encourage businesses to take on young people and to give our young men and women their first step on the job ladder.

The cost of living is an issue for the low-paid. Given that the recovery is well under way, I ask the Government at least to consider increasing the minimum wage further. I believe that would be a win-win. It would be a win for the low-paid because it would help with the cost of living issues that have been raised by Opposition and Government Members. It would also be a win for the Exchequer because it would reduce the amount that is paid in tax credits. Notwithstanding that, I support the Chancellor’s position that we should leave the final judgment to the Low Pay Commission, which takes into consideration the impact on overall employment and on businesses.

Although I join Opposition Members in celebrating the 15th anniversary of the introduction of the minimum wage, I believe that the Government are tackling the issues that they have raised. I therefore cannot support the overall motion, but will support the Government amendment.

18:14

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I was one of those in 1998 who spent the night here as Conservative Members did everything in their power to try to stop the national minimum wage legislation. Today, they are still warning about employment risk. Only last week the Chancellor talked about his fear that a rise in the minimum wage would jeopardise jobs and risk the recovery. I am afraid that is all too familiar.

We are supposed to believe that there is a new-found enthusiasm for the minimum wage on the Conservative Benches. They are leaking stories to the press that suggest there is a Conservative-Liberal Democrat battle over who will promise a hike in the minimum wage in their 2015 manifestos. Well, they are the coalition. If we are all in it together, give us something on account: give us some of it now.

[Mr David Burrowes (Enfield, Southgate) (Con)]

On support for the living wage, does the hon. Gentleman agree that leading by example is important in the private and public sector, including in Government Departments? Does he recognise that Conservatives have been on the case for a number of years? Boris Johnson, the Mayor of London, has introduced the London living wage in city hall.

[Steve McCabe]

I am a fan of the living wage and I will mention it before I finish.

Forgive me, Mr Deputy Speaker, if I am a little cynical, but there is a consistent thread to Tory opposition. In 1983, they abolished the fair wage resolution. In 1993, they abolished wages councils. It took them until 2005 to give a manifesto commitment to retain the minimum wage. Of course, nobody told the hon. Member for Christchurch (Mr Chope), who has made successive efforts to sabotage it. All of that is probably why only 14% of people think the Tory party best represents low-paid, private sector workers. The sad truth is that the minimum wage has not kept pace with inflation and the early gains have been wiped out. In October, those on the minimum wage got a 12p rise while the Government were busy giving millionaire bankers a tax cut worth £100 million. It is funny how that poses so little threat to the economy. In fact, it apparently poses no threat at all, because they are about to give them another one.

[Mr MacNeil]

Given that the stories of doom about the minimum wage did not amount to anything, does the hon. Gentleman look back with hindsight, as openly and as honestly as he can, and think that the minimum wage could have started on a higher rate without any ill effects?

[Steve McCabe]

What is absolutely the case is that we should not be listening to people who want to do anything to squeeze it down now.

The real tragedy has been the appalling lack of enforcement. Last year, my hon. Friend the Member for Rhondda (Chris Bryant) pointed out that there had not been a single prosecution for failure to pay the minimum wage between March 2011 and 2013. I am extremely indebted to the Tory party researcher who contacted me to suggest that the figures my hon. Friend used, which were obtained, as I understand it, from a parliamentary question, were not true. There had indeed been a single prosecution: a Mr Kenneth Ikerrunaan was apparently fined £1,000 on 26 February for non-payment of the minimum wage, as part of a multiple charge sheet that included extensive VAT fraud. Lest Government Members think I am being unfair, I will acknowledge the only other prosecution that has come to light, that of a butcher in Sheffield who was fined £700. Some, of course, argue that the fines are not that important because the Inland Revenue can negotiate penalties, but of the 937 cases subject to penalties so far, the average penalty has been less than £600. That is for people who are defrauding their workers of wages running into hundreds of thousands of pounds.

I acknowledge plans to increase the maximum fine because, as we heard earlier, it is absurd that people can be fined more for fly-tipping than failure to pay the minimum wage. It will only make a difference if it is used to deter those who treat this law with contempt, and it will only make a difference when we see those employers named and shamed as the fraudsters they are.

I am pleased that there is some talk about supporting better wages, and I welcome the comments of the director of the CBI, but as well as employers evading their legal responsibilities regarding the minimum wage, it is estimated that nearly 5 million workers in this country do not earn a living wage. I was shocked to discover only last week that the university of Birmingham was refusing to pay 250 of its lowest-paid staff a living wage, but could afford to pay its vice-chancellor a salary increase of £28,000. We need a living wage from those who can afford it, we need an enforcement policy so that the minimum wage can be made a reality, and we need rogue employers who recruit foreign workers to undercut the minimum wage told bluntly that we do not want that kind of business here.

18:20

[Andy Sawford (Corby) (Lab/Co-op)]

It is a pleasure to speak in an incredibly important debate that has huge implications for people in my constituency. In 1905, boot and shoe workers from the second-largest town in my area, Raunds, marched near Parliament to demand fair pay from the War Office, and they won their campaign. There is a long tradition in my constituency of fighting for a living wage, and we all owe a debt of thanks to those hon. Members who passed the minimum wage in 1997. It was, indeed, a great achievement for the Labour party—not just that Labour Government, but the Labour movement—in more than a century of fighting for a better standard of living for working people in this country.

Today, though, my constituency is plagued by problems, particularly in connection with employment agencies that treat many workers unfairly and make unfair deductions from pay—for example, transport costs, unlawfully charging for personal protective equipment and making workers pay a payroll company just to get their own very low pay—and those deductions take people below the minimum wage. The latest scandal involves local agencies charging workers £2.50 a week for personal accident insurance, which they buy for pennies and then sell on at a profit to the worker, when of course the worker is already protected by the employer’s liability insurance. It is another way of bringing down the employer’s premium and scamming the workers.

I am grateful to the hon. Member for East Dunbartonshire (Jo Swinson), who I wish well—she recently gave birth to a son—for supporting me in getting Her Majesty’s Revenue and Customs and the Employment Agencies Standards Inspectorate to come to Corby to investigate the 32 agencies operating in my area. They found that 12 agencies were breaching the minimum wage law and that £120,000 was payable to more than 3,000 local workers. Two of the investigations have been completed, and penalty charges totalling £1,532 and wages totalling £3,154 have been paid back to workers, but that is just the tip of the iceberg. These are very small figures. The remaining 10 agencies have an average of £12,000 to pay back to local workers, but for some of the largest agencies—they are also national agencies—operating in my area that figure will be up to £40,000 or £50,000.

On the two agencies that have had to pay penalty charges, I must say to the Government that it really is not much money. Having to pay back £1,532, having scammed local workers out of £3,154, is hardly a deterrent to them and other local employers. I appreciate the support from the Government so far, but will the Minister consider whether, in those cases, fines should have been imposed? We know that they have breached the law. If in the other 10 cases we find even more substantial breaches, as we surely will given the figures HMRC is looking at, I hope we will impose fines. I welcome the move to increase the fines announced today. I would like it to go further, but let us acknowledge that the Government are moving in the right direction. Enforcement is critical, however. The increase in the fines is meaningless unless we take enforcement action to deter people from breaching the law. It is a huge rip-off.

We have taken other initiatives. I am delighted that Channel 4’s “Dispatches” worked with me to investigate the issues in my constituency and did some undercover reporting that was shown on Channel 4. A director of Staffline, one of the biggest agencies in my area with known issues of exploiting workers, was filmed saying that he could ensure, through a legal loophole, that Corby workers would be paid less than workers for a particular company on another site in this country. That is absolutely wrong. These agencies find ways to exploit workers and help companies to do it.

The companies are responsible for their own actions. I say to them all that they should sign up to the employment agency charter that we have launched in Corby. Some of the best agencies have worked with us because they are proud of their practice. There is a role for temporary employment and there can be a role for agencies in certain circumstances. Some of our local employers have signed up, too, but I want them all to sign up. I want them to know that if they do not, we will be on their backs; and that if they break minimum wage law, the Government will fine and fine them properly so that they do not do it again.

I had hoped to cover other issues on the living wage and, in particular, on zero-hours contracts. I hope all hon. Members will support my private Member’s Bill on zero-hours contracts, which I shall introduce next Friday.

18:25

[Mrs Mary Glindon (North Tyneside) (Lab)]

In 1999, the national minimum wage lifted 1.5 million people out of poverty pay. As has been said, it was one of the greatest achievements of Labour in power. I am proud to say that my predecessor, Stephen Byers, then Secretary of State for Trade and Industry, was instrumental in introducing this policy, which has made a difference to the lives of so many low-paid workers in the last 15 years. More than 5% of workers earn the minimum wage, and I am pleased to see that, for some, thanks to the work of unions such as GMB and Unison, this has been upgraded to a living wage. If we are serious that work should pay for everyone, including young people, this must surely be achieved for all workers in future, which is Labour’s ambition.

This debate acknowledges the introduction of the minimum wage and its benefits, but it remains shocking to see that figures from the Office for National Statistics show that last year, 279,000 people received less than the minimum wage. I was disappointed to find that 15,000 of those workers were in the north-east. Those figures show why it is so important to make sure that employers—even in these hard times—comply with the law.

The general-secretary of the TUC has today welcomed the increases in penalties for employers who fail to pay the minimum wage. She cautioned, however, that Her Majesty’s Revenue and Customs must have the appropriate resources to enforce those penalties. In fact, the Public and Commercial Services Union has pointed out that there are only 90 full-time staff employed as compliance officers. Although the union welcomes the increase in penalties, it believes that the emphasis needs to be on the worker. The priority should be making sure that employees get the pay they are owed, rather than concentrating only on fining the employer.

Last year, HMRC managed to get £4 million for workers, but that sum would have been more if HMRC had not had a budget underspend. Since 2010, HMRC has underspent on the national minimum wage enforcement budget, year on year. I agree with PCS that HMRC should have more money for enforcement, but that the Department must not be allowed to underspend in order to meet Government savings targets, which negate those enforcement efforts. I hope that the Government will heed the union and the TUC on this matter.

Finally, let me raise an issue on behalf of Longbenton air cadets—the top air cadets in the country. Before Christmas, I attended an evening with the cadets about the working of Parliament, in which a role-play Commons debate was acted out. Young people’s pay was debated, and they asked me to raise the issue of apprentices’ wages, which are only £2.68 an hour. Those who have apprenticeships are grateful, but they would like to be paid a more realistic wage. After all, who of us in this House could live on £2.68 an hour if we were young today?

18:29

[John McDonnell (Hayes and Harlington) (Lab)]

Let me use the last few minutes of the debate to identify some cases, as my comrades have done. We have been asked to name and shame, so let us do that. We have been campaigning in the maritime sector for a national minimum wage for a long time. To be frank, people were disappointed at developments under the last Government, but we did secure a working party between the National Union of Rail, Maritime and Transport Workers, Nautilus and the Department, which produced a redefinition of the national minimum wage qualifications for seafarers. It was done on the basis of the individual’s connection with the country and so forth, and we felt that it was a breakthrough, but it is not being enforced.

Let me provide an example. The most notable exception that we found involved the lifeline passenger freight ferry routes from Portsmouth, Poole and Weymouth to the Channel Islands. They are operated by Condor Ferries, which employs seafarers from outside the European economic area who are paid £2.35 an hour. Despite frequent protests against the pay discrimination by the RMT, the HMRC enforcement team has taken no action, and is not enforcing the Government’s own policy. I agree with the Public and Commercial Services Union that that is because there are so few staff and they are not given enough powers or resources. That firm is a disgrace. We have raised the issue time and again, but we have been completely ignored, and enforcement action is now necessary.

In 2012, we pointed out that Streamline Shipping was operating a freight service from Aberdeen to the Shetland Islands and exploiting the Government’s lax national minimum wage and Equality Act 2010 regulations to employ Filipino workers and pay them half the minimum wage. We want all workers, whatever their nationality, to be paid a decent wage.

Another scam has been referred to by my hon. Friends. The cost of accommodation is now being deducted from seafarers’ wages. The sum deducted is currently £4.91 per day, or £34.73 per week. On most ships that sail from our ports, seamen work two weeks on, two weeks off, so that amounts to a deduction of some £70. That is extraordinary. Do the seamen clock off and go home on their own boats? Are dinghies attached to the boats? It is ridiculous, and it is yet another way of undermining pay in the sector.

Finally, let me take up what was said by my hon. Friend the Member for North Tyneside (Mrs Glindon) about apprentices’ pay. Along with the UK Chamber of Shipping, the employers and the unions—the RMT and Nautilus—we have embarked on a drive to get young people back on to British ships as ratings. They can train with a grant, and subsequently rise to officer level. We are trying to encourage people to learn the skills of British seafaring so that we can maintain the industry itself. Our efforts are not helped by some recruitment practices, but at least we have a campaign going. Paying people £2.68 an hour, even when they are apprentices, is not acceptable. In the last few years, the apprenticeship rate has gone up by 18p. That is a derisory amount, and I do not think that it can serve as an incentive for our young people.

We want the national minimum wage regulations to be reviewed again. Following a campaign by us, they were reviewed, and we were told that the minimum wage would apply in British waters, but the Government then redefined the concept of British waters, which became a narrow channel consisting basically of the Norfolk Broads. That was about it. As a result, employers were able to pay below the minimum wage, and also to avoid some elements of the Equality Act. That is unacceptable in this day and age. I urge the Government at least to consider enforcement against that company, so that we can use it as an example to make clear to other shipowners that we will not tolerate any more poverty pay on British ships.

18:33

[Mr David Anderson (Blaydon) (Lab)]

The hon. Member for Vale of Clwyd (Chris Ruane) reminded us that in 1906 the Labour party was in favour of a national minimum wage. During the 92 years before we got one, the people who kept the light shining for the campaign were members of the trade union movement, although I should add that some union members were not in favour.

Throughout the dark days of the 1980s and 1990s, the person who led the campaign more than anyone else was Rodney Bickerstaffe, the leader of the National Union of Public Employees and Unison. In 1997, I was proud to sit with Rodney at the first Low Pay Commission hearings, where we gave evidence about what should be done about the national minimum wage. The union argued at the time that the level should be set at £4.15 an hour, but unfortunately the Government of the day, although they were doing the right thing in general, decided to press for a level of £3.60.

If the Government had listened to the unions, we would not be having a debate about the living wage, because if the minimum wage had been set at £4.15 then, it would be a living wage now. That would not only have been the right thing to do for people in work, but it would have saved the billions of pounds in benefit that we have been spending over the past 15 years to supplement the wages paid by exploitative employers. We could do a lot worse than listen to what the unions are saying now. Unison’s submission to the Low Pay Commission for this year includes a number of recommendations which I hope will be supported by both Front Benches.

First and foremost, the union makes the point that it is clear that the national minimum wage has slipped behind, and we should move progressively in stages towards having a living wage for all workers. In particular we should make up the ground that has been lost, as the Secretary of State acknowledged, of its being at least 5% behind the retail prices index this year. The Government as well as the trade unions should have that objective going forward.

The subject of breaches of the legislation has been talked about on both sides of the House. The unions are putting forward the case that there should be a new formal complaints mechanism, meaning that if a trade union, law centre or citizens advice bureau puts forward a formal complaint on behalf of workers, that should be treated by HMRC as a formal complaint and must be investigated. That should be supported, because those are the people on the ground with direct contact with workers.

On enforcement, the unions make the case clearly that instead of freezing funding for enforcement, which is what has happened over the last period, it should be dramatically increased for the people on the ground. If that were the case, we would not be seeing the exploitation that was mentioned by my hon. Friends the Members for Hayes and Harlington (John McDonnell) and for Corby (Andy Sawford).

On penalties, we welcome the increase and the fact that the penalties will be for each worker not just per company, but I asked the Secretary of State whether he will reinvest the money raised through fines in funding for enforcement. That is where it should go. It should not be a windfall to the Treasury so that the vicious circle is continued.

The right treatment for 18 to 20-year-old apprentices has always been clearly argued for by the trade union movement. The differentiation based on a person’s age is immoral. If somebody is good enough to do the job, they are old enough to do the job and that principle should be enshrined in law. If they are not doing the full job, then differentiation is fair enough, but if they are doing the full job they should be paid the full rate. The Secretary of State mentioned that apprentices were getting a derisory 3p pay increase to £2.68. We cannot buy a pint of beer in this place for £2.68—and before somebody from the TaxPayers Alliance has a go at me about that I will add that we all know that the beer here is subsidised. Apprentice pay should be at least the development or the youth rate. There must also be a discussion about zero-hours contracts and the national minimum wage and exploitation.

The argument put forward about travel time is an absolute disgrace. The care workers who do such important work for people in our communities are not being paid for travelling from house to house. The Secretary of State says that is illegal, so let us make sure everybody in this country gets behind that. It is also clear that we must give the people running care in this country—the councils and private organisations—the necessary funds.

It is also a disgrace that people are being made to lose money because of having to live where they work, as has been mentioned. After all, £4.91 might not be very much to us, but it is a big chunk out of some people’s pay.

Finally, there is another scam: people being made to pay for uniforms and work equipment. That is wrong, it is immoral and it should not happen.

18:38

[Ian Murray (Edinburgh South) (Lab)]

The small number of Members on the Government Benches at the tail-end of this debate highlights their commitment to the national minimum wage, and I have to say I was slightly disappointed by the Business Secretary’s response to this debate. He said he did not want a tribal debate, and then went on to give a very tribal response to the shadow Secretary of State. He also said he was delighted to have laid regulations today to increase the amount in fines that would be payable by employers if they did not abide by the national minimum wage legislation. I do wonder with my cynical nature why those regulations were laid only today yet the Prime Minister announced this policy back in November. Perhaps the Opposition’s calling for this debate has oiled the wheels.

It was unkind of the Business Secretary to say that the previous Labour Government had only one or two successes, the national minimum wage being one. Several others were shouted at him across the Dispatch Box and he responded by saying perhaps there were those things as well. However, the one thing that the Business Secretary has managed to do—his one great success and what his legacy will be—is to destroy completely the Liberal Democrats party.

I would like to acknowledge and put on record that we were perhaps slightly unkind to the Business Secretary, not realising the circumstances behind his not voting in favour of the national minimum wage, and we apologise if we got that wrong. However, that does not take away from the fact that the Liberal Democrats were against the national minimum wage when they were campaigning in the run-up to the 1997 election. They supported it in the Chamber on Second and Third Reading of the Bill, but that simply shows that they flip-flopped between what they stated in their manifesto and what they did in the House. I am sure that we have seen that before. Also, in the House of Lords they strengthened the regulations on the requirements for the Government to take enforcement action. I was disappointed by the Secretary of State’s response to this debate.

When moving the Second Reading of the National Minimum Wage Bill in December 1997, the then President of the Board of Trade, my right hon. Friend the Member for Derby South (Margaret Beckett), said that the national minimum wage was

“a clear example of how a Labour Government can and will make a real difference to the lives of people across Britain, contributing to fairness and prosperity for the many, not the few.”—[Official Report, 16 December 1997; Vol. 303, c. 173.]

How relevant that statement is today.

Fifteen years have passed, and the national minimum wage is now an economic and political fact of life for us all. It is undoubtedly one of Labour’s proudest achievements, and I wonder whether the present Prime Minister now regrets campaigning against it in the mid-1990s. The then Opposition castigated the policy as a burden on business, arguing that increasing wages at the bottom would cost more than 1 million jobs. It did nothing of the sort. We should celebrate the fact that it contributed to the ending of poverty pay and boosted living standards in this country. That was confirmed by the Low Pay Commission in 2013, when it stated that

“the research had…found few adverse effects on aggregate employment;…individual employment or unemployment probabilities; or regional employment or unemployment differences.”

The days when an employer could legally pay someone as little as £1 were brought to an end despite the vehement opposition of the Conservatives.

It was not only the Conservatives who were against the introduction of the national minimum wage. I should like to draw the attention of the House to the record of the First Minister for Scotland. When he was in this House, he abstained on Second Reading of the National Minimum Wage Bill, and the Scottish National party as a whole did not vote on Third Reading.

[Dr Whiteford]

Will the hon. Gentleman give way?

[Ian Murray]

I am afraid I do not have time to give way, although I see that when the nationalists are provoked, they tend to respond.

I want to comment on some of the contributions from both sides of the House to today’s debate. My right hon. Friend the Member for Dulwich and West Norwood (Dame Tessa Jowell) was right to say that the existence of the national minimum wage is a statement about the kind of country we are. She was also 100% right to highlight the real-life impact of low pay on individuals and families, and particularly on women with child care responsibilities, who are disproportionately affected by employers who do not abide by national minimum wage legislation.

I was quite taken by the remarks of the hon. Member for Harlow (Robert Halfon). He was right to be contrite, and to apologise for his party’s previous stance on the national minimum wage. Unfortunately, however, as recently as yesterday, the hon. Member for Esher and Walton (Mr Raab) wrote in the Evening Standard that any increase in the national minimum wage would be a

“massive jobs tax on business”.

He also described it as “oversold”, and said that this

“policy cross-dressing is more likely to confuse than impress voters”.

Perhaps the hon. Member for Harlow is a lone voice on the Conservative Benches when it comes to defending the national minimum wage in the trenches. That would be a shame.

My hon. Friend the Member for Vale of Clwyd (Chris Ruane) said that the very low-paid could not even comprehend the pay packets of the most wealthy in this country. He summed up the debate well when he said that the minimum wage was for the many and not for the few. He also reminded us that the National Minimum Wage Bill Committee sat for an unprecedented 70 hours. Anyone here who has served on Bill Committees over the past four years will realise that to do so for 70 hours involves quite an undertaking. That just shows the then Government’s commitment to getting the legislation through.

I am always delighted to hear the hon. Member for Burnley (Gordon Birtwistle) speak in the Chamber, although I never agree with a word that he says. Given that he is a Liberal Democrat, I thought he might have been a little more contrite on this subject. Let us give credit where it is due, however. He did say that he had always supported the national minimum wage and always paid it. If any of the hon. Gentleman’s employees or former employees want to get in touch to dispel that rumour, we would be willing to hear from them.

My hon. Friend the Member for Glasgow North East (Mr Bain) reminded the House of the statistic that the UK has the fifth worst levels of poverty pay in the OECD. We should be doing something about that. He also mentioned the impact of low pay on the welfare budget, and the fact that since 2010 the national minimum wage has fallen behind to the tune of 50p an hour.

The hon. Member for Elmet and Rothwell (Alec Shelbrooke), always an entertaining speaker in this House, talked about how increasing wages for the lowest paid was false and fake. I do not think the pay of the poorest in this society is false and fake, but I did enjoy his restatement of the Tories’ trickle-down policy of economics in this country. My hon. Friend the Member for Derby North (Chris Williamson) talked passionately about the need for effective enforcement and rightly said that it would take political direction to bring in the living wage. The Business Secretary did say that the Low Pay Commission should be free of political interference, but bringing in the national minimum wage and, indeed, the living wage is a political direction, and we should all be striving for that.

My hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) was one of the hon. Members who stayed in this House all night trying to get the national minimum wage legislation through. Let us not underestimate the former right hon. and hon. Members, and those who still sit in this House, who made such effort to get this legislation through, despite the vehement opposition of many on the Opposition Benches.

My hon. Friend the Member for Corby (Andy Sawford) has done some wonderful work in his constituency since he was elected in that wonderful by-election victory, and he gave numerous examples of where workers are paid less than the national minimum wage because of unlawful deductions. He mentioned the increasing problem of the personal accident insurance that is being taken off employees; it is costing employers pennies but they are taking pounds from employees. We have to make sure that there is enforcement on such issues.

My hon. Friend the Member for North Tyneside (Mrs Glindon) is a passionate advocate for the living wage and rightly gave credit to the councils that are paying it. My local council in Edinburgh is paying above the living wage and has done since 2011, and we should encourage more councils and employers to do more. When I am at this Dispatch Box I always find that my hon. Friend the Member for Hayes and Harlington (John McDonnell) speaks last, or second last, and is curtailed in his contributions. I would like to hear an awful lot more of him speaking in this Chamber, because he deserves significant congratulations on the campaign he has run against national minimum wage exploitation; we heard some of the issues relating to the shipping industry from him.

Last, but certainly not least, my hon. Friend the Member for Blaydon (Mr Anderson) talked about why enforcement fines should go back into the enforcement industry, to make sure that we can enforce the system better and that exploitation is rooted out.

We have had a robust debate on the national minimum wage, in which I have been struck by the Government’s restatement of their policies. Indeed, they have re-announced their policy on naming and shaming more times than they have actually used it, which is surprising. We need more action from the Government on these issues, rather than the restating of policies. When the Prime Minister, no less, announced the increase in fines back in November, I am sure that the Government had no intention of rushing them through—until the Opposition called this debate. But that is not new in this House, and this Opposition will continue to press the Government to get results.

Labour will also bring in Make Work Pay contracts to encourage people to pay the living wage, and we have instigated a review led by Alan Buckle, the former deputy chairman of KPMG. He will look in detail at how to restore the value of the minimum wage; how to ensure that sectors that can afford to pay more do so; and how we can promote better the living wage. In November, the Leader of the Opposition also outlined how a future Labour Government will provide tax incentives for employers that sign up to pay the living wage—employers, employees, trade unions, the Government and the Treasury all working together to share the benefits of lifting pay for the lowest paid in this country. Those benefits can be shared for all; I think that that is the right way to go.

Labour created the national minimum wage, despite strong opposition, and it is Labour that will strengthen it for all the low-paid people around our country, moving together towards the shared goal of making work pay for all. It is Labour that will take proper sanctions against those who do not pay it. That is only fair to those who work hard, do the right thing and deserve to be paid properly. That is what we are trying to do today, and I hope that the Government will support our motion.

18:48

[The Economic Secretary to the Treasury (Nicky Morgan)]

This afternoon’s debate has been a good one, and we have heard interesting contributions from all parts of the House. I counted 13 Back-Bench Members of Parliament who have been able to contribute in the couple of hours available to us. I will try, shortly, to address as many of the points raised as possible in the time allowed to me.

The shadow Secretary of State and many Opposition Members have taken great pride in pointing out that 17 years ago some members of my party had reservations about the impact that a minimum wage might have on UK businesses. The Opposition are right to point out that some of those fears—[Interruption.] I think they might want to listen to this. They are right to point out that some of those fears have been unfounded and that the minimum wage has been important for our lower-paid workers. I hope Opposition Members will realise that acknowledging mistakes is not terribly hard. The shadow Chancellor might want to think about that when he realises who crashed our economy.

What we have to remember is that this is all about finding the right balance. Yes, we would like to see a faster increase in the national minimum wage and everyone sharing in the recovery, but if an increase were to cost people their jobs or to slow down the recovery, then it would, as my right hon. Friend the Chancellor said last week, be completely self-defeating. That is why my right hon. Friend the Business Secretary has asked the Low Pay Commission, whose judgment and expertise we value greatly, to consider the conditions that we would need for a faster increase.

[Chris Williamson]

Does the hon. Lady deprecate those employment agencies that seek to use the Swedish derogation model to get around the implementation of the minimum wage? Is that not a gross abuse of that derogation, and does she deprecate it?

[Nicky Morgan]

I will come on to that point, as the hon. Member for Blaydon (Mr Anderson) mentioned it in his speech. If Members will forgive me, I will accept only a few interventions because I want to reflect on the points that have been raised this afternoon.

As all Members are aware, the Low Pay Commission will report to us next month on the recommended wage for 2014, and the Government will respond shortly after. As we have heard this afternoon, we must ensure that the existing wage rates are properly enforced, which is why this Government’s steps to hit those firms found guilty of failing to pay the wages with penalties and publicity will be so important.

Let me turn to the points that have been made by Members across the House this afternoon. We started with a typically thoughtful contribution from my hon. Friend the Member for Harlow (Robert Halfon), who has looked a great deal at this area. He mentioned the reintroduction of the 10p tax band, which is an interesting suggestion. [Interruption.] Yes, who did abolish the 10p tax rate? I think it was the Labour party! My hon. Friend also talked about making some changes to national insurance contributions, but the most important thing he said was that we want to leave workers with more money in their pockets, and that is what this Government are all about.

The hon. Member for Burnley (Gordon Birtwistle) reminded us all that the Low Pay Commission is independent, which is critical. It was set up by the previous Government and we need to wait to hear what it recommends before we make any further decisions.

My hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) was absolutely right about the importance of low inflation. I am sure that he, like all Members, will welcome the recent fall in inflation and the impact that that will have on people’s wages and the amount of money that households have to spend.

My hon. Friend the Member for Braintree (Mr Newmark), who is not in his place at the moment, talked about the policy to abolish national insurance contributions for those under the age of 21, which was announced by my right hon. Friend the Chancellor in the autumn statement. He was absolutely right to say that we must encourage businesses to take on as many young employees as they possibly can.

Let me move on to the contributions from Opposition Members. The right hon. Member for Dulwich and West Norwood (Dame Tessa Jowell) and the hon. Members for Glasgow North East (Mr Bain), for Derby North (Chris Williamson), for Corby (Andy Sawford), for North Tyneside (Mrs Glindon) and for Hayes and Harlington (John McDonnell) all talked about enforcement. I am sure that others did as well. In 2012-13, Her Majesty’s Revenue and Customs collected £3.9 million in arrears for workers; 26,500 workers benefited. That was a 33% increase in the number of workers benefiting and a 26% increase in the number of arrears identified. Seven hundred employers were penalised last year for failing to comply with the national minimum wage rates, and the value of fines, as my right hon. Friend the Secretary of State said earlier, was seven times higher last year than it was in 2009-10.

In 2009-10, 381 penalties were charged, and last year it was 696, although it had risen to more than 900 in the previous two years. Opposition Members talked about the amount of money that was given to the enforcement agencies. However, it is not necessarily about how much money is given but how effective those enforcement agencies are with the money that is given to them—a principle that Government Members take very seriously.

I must comment on the point made by the hon. Member for Vale of Clwyd (Chris Ruane) about the fact that although it had taken the Labour party nearly 100 years to deliver the national minimum wage, it got there in the end. It looks like it is going to take the shadow Chancellor 100 years before the Labour party comes up with a long-term economic plan. He has plenty of time and we look forward to hearing it.

Opposition Members, particularly the hon. Member for Glasgow North East, did not tackle the fact that the rise in the income tax threshold introduced by the Government has left more money in workers’ pockets. The hon. Gentleman talked about comparisons with the minimum wage and what it was when Labour was in government, but the fact is that constituents come to MPs from both sides of the House and say that they have more money in their pockets as a result of the fact that the personal allowance has gone up.

The hon. Member for Birmingham, Selly Oak (Steve McCabe) talked about UK employees being undercut. We have asked the Equality and Human Rights Commission to explain what enforcement action it is taking against employment agencies that discriminate against our nationals, for example by advertising UK jobs exclusively overseas. That is an issue we are aware of and we have asked the EHRC to address it.

I thought that the hon. Member for Corby (Andy Sawford) was very fair in his remarks about enforcement in his constituency. There is clearly more to come and I heard what he said about the new penalty figures and the penalties that have been levied. I am sure that my colleagues in BIS will take note of what he said.

The hon. Member for Blaydon talked about care workers. As my right hon. Friend the Secretary of State said, the guidance on travelling time has been updated. It is right that we should do more to get that guidance out. I have been approached about it in my constituency office as the Member of Parliament for Loughborough and we certainly need to disseminate it better.

We had some interesting contributions from Members this afternoon and I thank all Members for their contributions. I am aware that I have not necessarily been able to respond to all the points that have been raised this afternoon. I shall certainly take away what has been said and I will read the debate to see whether we need to tackle any other issues.

It is fair to say that almost everyone who has spoken in the Chamber today wants to achieve the same goals. We want to see those who receive the minimum wage paid fairly and we want to see those who do not pay the minimum wage treated harshly. I am sure all Members welcome today’s announcement, mentioned by Government Members, that the fines have been quadrupled from £5,000 to £20,000. As my right hon. Friend the Secretary of State said, we would also like to increase those fines to £20,000 per worker, which will send a clear message to employers who think that they can flout the minimum wage regulations that that is not an option and that they need to pay a fair wage for a fair day’s work.

We want wages to continue to rise, unemployment to continue to fall and our economy to continue to recover, and we want everyone in this country to share in that. I ask the House to wait for the Low Pay Commission’s report, to reject the motion and to support the Government amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

18:58

Division 180

Ayes: 235

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Labour: 225
Scottish National Party: 5
Plaid Cymru: 2
Social Democratic & Labour Party: 1
Green Party: 1
Democratic Unionist Party: 1

Noes: 299

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Conservative: 252
Liberal Democrat: 44
Independent: 1

Question put forthwith (Standing Order No. 31(2)), That the proposed words be there added.

19:11

Division 181

Ayes: 297

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Conservative: 251
Liberal Democrat: 44
Independent: 1

Noes: 227

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Labour: 217
Scottish National Party: 5
Plaid Cymru: 2
Green Party: 1
Democratic Unionist Party: 1

The Deputy Speaker declared the main Question, as amended, to be agreed to (Standing Order No. 31(2)).

Resolved,

That this House notes that since 2010, the Government has increased the National Minimum Wage each year, despite the worst recession in living memory, to protect the income of the low paid and increase their wages relative to average earnings, and is cutting taxes for the low paid to boost take home pay by £705 a year, taking 2.7 million out of income tax altogether; welcomes increased employment under this Government, which is at its highest ever level; notes that the Secretary of State for Business, Innovation and Skills has asked the Low Pay Commission for an assessment of how it might achieve a higher National Minimum Wage in the future without damaging employment; further notes that the Government has maintained a central enforcement body that covers all areas of the UK and ensures a consistent approach and high quality service; and further notes that the Government is quadrupling fines for employers in breach of paying the National Minimum Wage and has already made it easier to name and shame employers who flout the rules.