National Minimum Wage (Amendment) (No. 2) Regulations 2014
Lord Popat
That the Grand Committee do consider the National Minimum Wage (Amendment) (No. 2) Regulations 2014.
Relevant document: 5th Report from the Joint Committee on Statutory Instruments
Lord Popat (Con)
My Lords, in moving the first Motion standing in the name of my noble friend Lady Neville-Rolfe on the Order Paper, I will speak to both Motions. The purpose of these regulations is twofold. The first set of regulations uprates the national minimum wage rates for all workers and increases the maximum amount for living accommodation that counts towards minimum wage pay in line with recommendations from the Low Pay Commission. The second set extends the apprentice rate to cover apprentices on trailblazer apprenticeship programmes—pilots trialling the Government’s apprenticeship reforms—so that apprentices on these pilot programmes are treated in the same way as apprentices on other government apprenticeship programmes.
First, I turn to the national minimum wage rates. The national minimum wage is designed to protect low-income workers and provide an incentive to work by ensuring that all workers receive at least the hourly minimum rates set. The minimum wage also helps businesses by ensuring that competition is based on the quality of goods and services provided and not on low prices based on low rates of pay.
Following advice from the Low Pay Commission, the Government are uprating the minimum wage from 1 October 2014 so that the adult rate will be £6.50 per hour. For young people aged between 18 and 20 years-old, it will be £5.13, and those between 16 and 17 years-old will have a minimum wage rate of £3.79 per hour. Finally, the rate for apprentices will be £2.73 per hour. This is an increase of 3% for the adult rate and 2% for the other rates. This 3% rise in the adult rate will mean that low-paid workers will enjoy the biggest cash increases in their pay packets since 2008. These rate increases will benefit more than 1 million low-paid workers on the national minimum wage and will mean full-time workers on the adult rate receive an additional £355 a year in their pay packet.
The Low Pay Commission has said that the rise—the first real-terms cash increase since 2008—is manageable for employers and will support full employment. Since its introduction, the national minimum wage has increased faster than average wages and inflation without an adverse effect on employment. It has continued to rise each year despite the worst recession in living memory. The Low Pay Commission has proved that a rising minimum wage can go hand in hand with rising employment.
Every year, the Government set the remit for the Low Pay Commission. Last year, we asked the commission to monitor, evaluate and review the national minimum wage and its impact and to review the levels of each of the different minimum wage rates. As part of its remit, the Government also asked the independent body to review the contribution that the national minimum wage could make to the employment prospects of young people.
The Low Pay Commission has consulted with academics, businesses and workers’ representatives, and undertakes extensive research and analysis to respond to this remit. The Low Pay Commission consists of three commissioners from employer backgrounds, three from employee representative backgrounds and three independents. Its recommendations reflect the objectives of both employers and unions, and are unanimous. The aim is that the rate should be affordable for business and that as many workers as possible should benefit from as generous an NMW as possible. The Government believe that the rates set out in the SI meet this objective.
I now turn to the inclusion of trailblazer apprentice programmes under the apprentice national minimum wage. Apprenticeships in England already offer great opportunities for business and young people. Some 96% of employers who take on an apprentice think that their business has benefited. We want to make all apprenticeships world class, so that the programme is rigorous and responsive and meets the changing needs of employers and the future economy. We want the new norm to be two equally prestigious routes to a great career—university or an apprenticeship.
Our reforms of apprenticeships will put employers in the driving seat, enabling them to lead on the design of apprenticeships to make them easy to access and understand. Long complex frameworks will be replaced by short, simple standards describing the skills and knowledge that an individual needs to be fully competent in an occupation. The reforms will increase quality through higher expectations of English and maths with more end-point assessment to ensure that the apprentice is fully competent. We will also raise aspiration for apprentices by introducing grading.
These are significant reforms so we are testing them with trailblazers. Trailblazers, led by small and large employers and professional bodies, are designing apprenticeships for occupations within their sector to make them world class. Trailblazer activity will help to create a sustainable employer model for future apprenticeship development. The first trailblazers were announced in October 2013 with a second phase in March this year.
The first trailblazers were in eight sectors: aerospace, automotive, digital industries, electrotechnical, energy and utilities, financial services, food and drink manufacturing, and life and industrial sciences. They have successfully produced the first apprenticeship standards and most are planning for apprentices to start on them in the next academic year. We want apprentices on these trailblazer apprenticeships to be treated in the same way for minimum wage purposes as other apprentices on government apprenticeship programmes. These regulations therefore add trailblazer apprenticeships to the list of government apprenticeship programmes covered by the apprentice rate.
I remind the Committee of the key benefits of the regulations. First, they uprate the national minimum wage rates in line with recommendations from the Low Pay Commission and, secondly, they add trailblazer apprenticeships to the list of government apprenticeship programmes covered by the apprentice minimum wage rate. I commend the regulations to the Committee.
Baroness Donaghy (Lab)
My Lords, I declare an interest as one of the members of the Low Pay Commission when it was first established in 1999. We established the first minimum wage and apprentice rate so I have kept a working knowledge of this subject throughout. The Minister said that the national minimum wage has not only kept up with average earnings but has surpassed them, and I acknowledge that. However, we have to accept that it is still a very low rate and all parties acknowledge that when the economy can afford it these figures should be substantially increased. I also acknowledge that the Government have done their best by accepting the recommendations of the Low Pay Commission. I hope that that will be the case with all future Governments and that the independent Low Pay Commission will continue and all parties will honour its recommendations.
My first point is on the impact of the minimum wage and there is an excellent sentence in the Explanatory Note, which says:
“The Commission’s recommendations are shared judgements rather than the mechanistic products of an economic model. They are strongly based in evidence and involve careful assessments of, among other things the NMW relative to median earnings and the number of jobs covered by the minimum wage”.
I emphasise this because I want to ask the Minister what further steps are being taken so that this impact is fully implemented by making sure that the minimum wage is honoured by employers. What resources are available to check up on the minimum wage implementation? Are we satisfied that we have sufficient staff to carry out the inspections and the check-in? That would be my first question, because, obviously, there will not be any real impact if employers think that they can get away without paying the minimum wage or can fiddle the hours so that there are some on the books and some off the books. We witnessed that in many employment situations, where all the books looked perfect but the workers themselves informed us that they did an extra six hours off the books for a lower rate, which took it below the minimum wage. What steps are the Government taking to make sure that that is fully followed up?
My other point concerns the Low Pay Commission itself, which said that the new Government website was insufficient to give information to people who were seeking information on low pay and the statutory national minimum wage. As we have all acknowledged, this is an independent body that we all respect. If it is saying that the revised website is insufficient and inadequate, are the Government taking steps to consult the Low Pay Commission to see whether that information can be improved, to maximise the impact of the minimum wage?
Lord Young of Norwood Green (Lab)
My Lords, I thank the Minister for introducing the regulations. We welcome the fact that the Government are accepting the recommendations of the Low Pay Commission. Over the years since 1999, despite the predictions of some of the party opposite that the national minimum wage would result in massive job losses, that has proved to be far from the truth. It has become an accepted way of partially protecting lower-paid workers from even lower wage rates. We cannot rest on our laurels, because we know that, as my noble friend Lady Donaghy said, it is still a low rate; hence the emergence in various parts of the country of a living wage, which is something that we would support. I would welcome knowing what progress the Government think should be made towards the introduction of a living wage. Although they have increased above average earnings, over a period of time there has been some decrease for workers receiving the minimum wage. If we form the next Government, we have said that we will try to ensure that the minimum wage rises faster in the next five years than it has in the recent past, as part of a national mission to tackle low pay and build a new economy with more highly skilled and highly paid jobs. Of course, as a balancing act, which we recognise, we do not want there to be a detrimental effect on jobs. Nevertheless, we think that progress can and should be made.
I have a couple of questions for the Minister, one of which reflects on the point made by my noble friend Lady Donaghy. Can the Minister update the Committee on the levels of national minimum wage enforcements by HMRC? Is the employee rights helpline receiving a greater number of complaints on the minimum wage or not? I would welcome knowing the latest figures.
I was interested in the statistic that 96% of employers think that apprenticeships are beneficial. That is the good news; the bad news is that only about 8% of employers employ apprentices. We still have a long way to go to ensure that we get more and more young people out of unemployment or, indeed, as NEETS, doing no activity at all. So there is still a long way to go. Of course, we recognise the progress made by trailblazers and their necessary inclusion as a part of national minimum wage protection. With those reservations, we support these statutory instruments, and I look forward to the Minister’s response.
Lord Popat
I thank noble Lords for their contributions and commend the work of the noble Baroness, Lady Donaghy, on the Low Pay Commission. She raised a couple of issues about whether companies could afford to pay more. We are committed to improving the living standards of low-paid employees. We support businesses that voluntarily choose to pay a living wage or more than the minimum wage, as long as this is affordable and does not cost people their jobs.
The only way to achieve a sustainable increase in wages is to have better economic growth so that companies can afford to pay higher wages, as the noble Lord, Lord Young, mentioned. One of the problems for this country is that while all the figures look interesting and good—manufacturing is up, growth is up and exports are up—our productivity is still static and has not returned to the peak achieved in 2007. Companies need to achieve higher productivity to be able to afford to pay higher wages.
The noble Lord, Lord Young, talked about the enforcement of the national minimum wage. HMRC investigates employers who are not paying the national minimum wage. Those employers will have to pay back arrears owed to workers or face a financial penalty and be publicly named and shamed under the national minimum wage naming scheme. Since HMRC began to enforce the national minimum wage in April 1999, it has identified more than £54 million in pay arrears, affecting more than 229,000 workers, and has carried out more than 65,000 employer interventions.
The noble Baroness, Lady Donaghy, asked what steps had been taken to ensure that the national minimum wage is enforced. I have just responded to the question asked by the noble Lord, Lord Young, on that. We are committed to increasing compliance by making sure that HMRC investigates every complaint that it receives. As I said, since 1999, the pay of some 229,000 workers has been looked into where companies have not complied with the regulations. We are committed to providing effective guidance. We will consider the Low Pay Commission’s views carefully and consult it further to ensure that our website provides better information to people who want to make a complaint about low pay.
These regulations increase the national minimum wage from 1 October. They also allow trailblazer apprentices to be treated in the same way for minimum wage purposes as other apprentices on government apprenticeship programmes. A number of specific points have been raised. I shall look at Hansard and will be happy to write to noble Lords if I have not covered all the points that were raised.
As I said, the Government are committed to the minimum wage because of the protection it provides to lower-paid workers and the incentives to work it provides. It is crucial that people at the lower end of the market are paid more. It is important that they are paid a living wage to enable them and their families to survive. This Government have also introduced fiscal measures, such as increasing the personal allowance. Although the relevant rate has gone up by between 2% and 3% over the last four years, pay net of tax has gone up due to the higher personal allowance. That allowance will go up to £10,500 from April 2015.
The regulations we have been discussing today support the Government’s commitment to delivering fairness, supporting business and delivering world-class apprenticeships. I believe that they are fair and appropriate. The increase in the adult rate will maintain the relative position of the lowest paid while also being one that business will be able to afford.
Lord Young of Norwood Green
I just want to make sure that the noble Lord is going to answer in writing—if he does not have the figures here—whether the number of complaints made to the employee rights helpline has increased and how many relate to the national minimum wage. I am trying to read the body language of the civil servants. If those figures are not available, then by all means he can write to me.
Lord Popat
My Lords, I do not have the figures in my brief but I am very happy to write to the noble Lord. I commend the two sets of regulations to the Committee.