Terms and Conditions of Employment
(5 years, 10 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
I beg to move,
That the draft National Minimum Wage (Amendment) Regulations 2019, which were laid before this House on 28 January, be approved.
The Government want fair employment for all. Through our industrial strategy, we committed to boosting productivity and increasing earning power across the country. The way in which people work is changing, thanks to new technology and new employment models. We need to ensure that the labour market continues to work for everyone.
In December, we published the “Good Work Plan”, which sets out the biggest package of workplace reforms in over 20 years. This includes our vision for the future of the labour market and our ambitious plan for implementing the Taylor review recommendations. The important package will ensure that workers have access to the rights and protections that they deserve. It will also create a level playing field for employers, ensuring that responsible employers are not undercut by a small minority who seek to circumvent the law.
The national minimum wage and the national living wage are crucial to those commitments. They help to protect the lowest paid in our society. We can be proud of our labour market. Our employment rate of 75.8% is the highest since comparable records began in 1971. Unemployment is down to 4%. Since 2010, the national minimum wage has increased faster than average wages and inflation, meaning more money for the lowest-paid workers while employment continues to increase. This success means that we can continue to increase the rates above inflation. We will continue to work towards our target of the national living wage reaching 60% of median earnings by 2020, subject to sustained economic growth.
Andrew Griffiths (Burton) (Con)
The Minister is doing a brilliant job as the Minister responsible not only for small business but for the labour market. I was lucky enough to be the Minister when we brought forward the biggest increase in the national minimum wage for 10 years. Does she agree that the greatest beneficiaries of that are women in the workplace who tend to be the lowest earners, and that our actions in increasing the minimum wage on the scale that we have has gone a long way towards helping to reduce the gender pay gap?
Kelly Tolhurst
I thank my hon. Friend, my predecessor, for making those comments on what the Government have undertaken over recent years to increase wages for the lowest-paid workers. I agree with him that what we have done to increase the rate of pay for the lowest-paid workers has supported women in the workplace and has been able to help to reduce the gender pay gap. We also have other programmes coming forward, including our consultation on mandatory ethnicity pay reporting, which we will say more about soon.
The regulations will increase the rates of the national minimum wage and national living wage from 1 April. We estimate that this will lead to a pay rise for more than 2.1 million workers. I would like to place on the record my gratitude for the work of the independent Low Pay Commission, which recommends the rates, bringing together the views of businesses and workers, using research and analysis to inform its work and reaching a consensus on what the rates should be. I am delighted to say we have accepted all its recommendations for the increases to the rates from 1 April.
The regulations will increase the national living wage for those aged 25 by 38p to £8.21. This is an above-inflation increase of 4.9% and means a pay rise for a full-time worker of more than £690 a year.
Andrew Griffiths
May I too commend the work of Bryan Sanderson from the Low Pay Commission and his team? Given that he manages to bring together unions, labour market experts and businesses and get them to agree, does the Minister think we should get him involved in our European Brexit negotiations?
Kelly Tolhurst
I thank my hon. Friend for pointing out the good work of the Low Pay Commission and how it brings people together to come up with balanced proposals, such as those before us today, which the Government have accepted.
The regulations mean that a full-time worker will be more than £2,750 better off next year compared with the year the national living wage was introduced. The regulations also increase the rates for younger workers and apprentices. Those aged between 21 and 24 will be entitled to a minimum hourly rate of £7.70, which is a 32p increase; workers aged between 18 and 20 will receive an extra 25p an hour, taking their rate to £6.15; 16 to 17-year-olds will earn at least £4.35 an hour—a 15p increase; and apprentices aged under 19 and those in the first year of their apprenticeship will receive the largest percentage increase of 5.4%, meaning an hourly rate of £3.19.
Alison Thewliss (Glasgow Central) (SNP)
Does the Minister appreciate that that is not even enough to buy a Freddo?
Kelly Tolhurst
I point out to the hon. Lady that we are talking about the apprentice rate.
The regulations will also change the amount employers can charge workers for accommodation without it affecting their pay for national minimum wage purposes. From April, this will increase to £7 per day.
Changing the law is the first step, but we also need to make sure all workers know they are entitled to the national minimum age and that all employers know they must pay it. The Government run an annual campaign to increase awareness of the national minimum wage and the national living wage. Last year, we spent £1.48 million reaching workers and employers through posters and billboards as well as digital and online channels. We know that most businesses are good employers and pay at least the national minimum wage, but where non-compliance exists the Government will step in and make sure that money is recovered on behalf of workers.
Since 2015, we have doubled our investment in enforcement of the regulations to more than £26 million per year. More than 420 staff in Her Majesty’s Revenue and Customs are involved in the enforcement of the national minimum wage, and they follow up every worker complaint they receive. HMRC also conducts pro-active, risk-based enforcement in sectors or areas with a higher risk of workers not being paid the legal minimum wage, including those identified by the director of labour market enforcement. In this work, it co-operates with other labour market enforcement bodies to share information and conduct joint operations where that makes sense for businesses and workers.
Mike Wood (Dudley South) (Con)
When businesses are repeatedly found to have breached national minimum wage regulations, will the Minister ensure that HMRC proactively investigates other cases of staff employed on similar terms and with similar contracts, rather than requiring each employee to demonstrate separately that he or she has been underpaid?
Kelly Tolhurst
I assure my hon. Friend that we take HMRC’s enforcement of the national minimum wage very seriously. There are many actions that we can take when people breach the law and do not pay the minimum wage. We will prosecute companies that are found not to be paying it, but our priority remains ensuring that workers who have been underpaid receive the arrears owed to them, and in such cases companies must also pay a penalty. We are committed to the enforcement of the minimum wage, which is why we have doubled our expenditure on it.
Chris Stephens (Glasgow South West) (SNP)
How many people are currently employed in HMRC’s national minimum wage compliance unit, and how does that number compare with, for example, the number employed in the Department for Work and Pensions to chase social security fraud?
Kelly Tolhurst
Unfortunately I do not represent the DWP here, so I am unable to make comparisons at the Dispatch Box today. However, as I have just said, 420 staff are involved in enforcement, and we have doubled our spending on it because we are determined to ensure that businesses pay workers what workers are entitled to. We will continue to enforce that where we can.
Nick Smith (Blaenau Gwent) (Lab)
How many companies have been penalised for breaking the rules on the national minimum wage? How many prosecutions have been brought in the last year?
Kelly Tolhurst
There have been 14 prosecutions since the introduction of the minimum wage, and other companies are undergoing investigations. However, as I have said, our priority in regard to enforcement is to ensure that people who have been underpaid receive the arrears to which they are entitled, and the payment of those arrears is matched with a penalty of up to 200%. We can undertake prosecutions, among other actions, but that is our priority.
Nick Smith
The Minister replied to my question by saying that there had been 14 prosecutions since the introduction of the national minimum wage, but that was not the question I asked. I asked how many prosecutions there had been in the last year. Could the Minister clarify that, please?
Kelly Tolhurst
I will happily try to find some information for the hon. Gentleman. He referred to “the last year”; perhaps he will clarify which part of the year he was referring to, 2019 or 2018. I do not have the year-on-year breakdown, but I have told the hon. Gentleman how many companies have been prosecuted since the national minimum wage was introduced.
We will continue to help businesses to comply by issuing guidance, and through the advisory work of ACAS. Alongside these regulations, new legislation will come into force from April dealing with payslips. Under this, all employers must provide payslips to all workers. If a worker’s pay varies according to time worked, their payslip must show the number of hours worked. This will increase pay transparency and help workers understand and check their pay.
These proposed increases in the national living wage will keep it on target to reach 60% of median earnings by 2020. This Government have an aspiration to end low pay. In his 2018 Budget speech, my right hon. Friend the Chancellor of the Exchequer said that
“we will give the Low Pay Commission a new remit, beyond 2020.”—[Official Report, 29 October 2018; Vol. 648, c. 667.]
This will be set out in the Budget 2019. In developing this remit we will engage both with employers and workers to balance the needs of both.
These regulations make sure that the lowest-paid workers are fairly rewarded for their valuable contribution to the economy. The regulations contribute to our commitment to promote a labour market that increases people’s earning power and boosts businesses, and they will give over 2.1 million people a pay rise this year. I therefore commend these regulations to the House.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
In the Labour party’s long history of standing up for working people, the introduction of the national minimum wage in 1998 was a particularly proud moment, and let us never forget that Conservative Members unanimously opposed that introduction.
I want to start by saying that we will not oppose this increase in the minimum wage for working people; any increase in pay for those on the lowest pay is to be welcomed. However, this small rise is entirely insufficient, and is emblematic of a Government who will only do the very barest minimum for working people, and often not even that.
There is a crisis in our country. Millions are struggling to make ends meet. Work is no longer a guarantor of a decent standard of living; indeed, work and poverty are no longer contradictory under this Government. The failed policy of austerity has had a terrible impact on our communities. Years of austerity have bred wage stagnation, which in turn has meant that 4 million workers across the country are living in poverty. Real wages are still almost £15 a week lower than 10 years ago, and they will not recover to those levels until the mid-2020s.
But at the same time, the rich are getting richer and our country gets even more unequal. Top executives are now paid 133 times more than the average worker, which means the salary of the average FTSE chief executive is the same as that of 386 workers on the minimum wage combined.
Andrew Griffiths
The hon. Lady is making a very good speech, but does she agree that as a result of the taxation policies of this Government, the richest are paying more tax than ever before, and that by changing the tax rates we have lifted the lowest paid in our society out of paying tax entirely?
Chi Onwurah
I thank the hon. Gentleman for his intervention, but it does show a lack of understanding of the economic realities in our country. The richest are not paying their fair share; the poorest are paying more in tax, particularly through that most unequal and unprogressive of taxes, value added tax, which the coalition Government immediately raised when they came into power. So the poorest in our country are being taxed more and the richest are not bearing their share of the burden.
Andrew Griffiths
The hon. Lady mentioned VAT. Is it her party’s policy to lower VAT, should it ever come into power?
Chi Onwurah
As one of my colleagues helpfully says, the hon. Gentleman must wait and see. In our 2017 manifesto, we set out our fully funded taxation and spending policy. The hon. Gentleman needs to recognise that a fairer taxation policy would not only enable us to fund our public services better but ensure that our economy was growing and that the growth was shared by all those who contributed to it, unlike what is happening at the moment. Last month, we learned that household debt was at its highest rate ever. Many people are reliant on borrowing, not for luxuries but for essentials such as putting food on the table for their children, and food bank use has skyrocketed.
Mike Kane (Wythenshawe and Sale East) (Lab)
My hon. Friend is making a powerful case. Our 2017 manifesto was fully costed and full of figures, but the only figures in the Conservative manifesto were the page numbers. According to the StepChange charity, 3,500 families containing 5,000 children in my constituency are in toxic debt, owing about £14.5 million. Does she agree that this is because of eight years of austerity?
Chi Onwurah
My hon. Friend makes an excellent point. The burden of debt has been shifted. We still have our public debt, but the burden has been shifted on to our poorest families. The national figures for debt are a matter of great concern for our future economic stability. As a consequence, food bank use has skyrocketed, with wages no longer covering basic living costs. In my constituency, Newcastle’s West End food bank is the largest in the country. That is not an achievement of which we are proud, but we are proud of the generous Geordies who take on the role that this Government have abandoned in feeding the most vulnerable among us.
We know that 5.2 million people are trapped in low pay, and small single-figure percentage increases in the legal minimum wage will not put an end to this misery. Shockingly, one in four employees earning the minimum wage for five years have been unable to move out of that low pay, which is the highest figure since records began. Low pay is becoming a trap, and the workers least likely to escape the low pay trap are those in the north-east and women. They are being trapped by the lack of action from this Government. Will the Minister admit that, under the Tories, low pay means that work is not a protection against poverty? I want to make it clear that, despite its name, the Government’s minimum living wage is not a real living wage. The small increase that this statutory instrument introduces will not make it a real living wage. More than 5 million people are paid less than the living wage—a huge increase from the 3.4 million people in 2009.
Mike Wood
The shadow Minister refers to small increases in the minimum wage. An increase of 38p in the national minimum wage is now being introduced. Can she tell the House in how many of the 10 years after the introduction of the national minimum wage the Labour Government made a bigger increase than the 38p that workers will see under this increase?
Chi Onwurah
When we introduced the national minimum wage, it was a transformative change for the pay of so many low-paid people, and our commitment to a real living wage of £10 an hour will also be transformative for working people.
Research by the Living Wage Foundation, which the hon. Gentleman might be interested in, revealed that one in five workers—more than 5 million people—is paid less than the living wage, which is a huge increase from 3.4 million in 2009. In Newcastle, 30% of workers who live there and 20% of those who work there are paid less than the real living wage. In the north-east, around 238,000 jobs are not paid the living wage. I am therefore particularly proud that, despite having its budget halved by reckless Tory austerity over the past decade, in January Newcastle City Council renewed its commitment to pay all staff the real living wage. After a decade of imposing austerity, this Government will still not give workers a real living wage. Will the Minister tell me why the Government will not follow Newcastle City Council’s example and raise the minimum wage to a real living wage?
The Minister said that she does not represent the Department for Work and Pensions, but she does represent the Department for Business, Energy and Industrial Strategy, which is not paying the London living wage to all its staff. Will the Minister confirm the number of employees who are not receiving the London living wage? Will she explain how we can have confidence in her ability to enforce even the national minimum wage when her own staff are striking due to the lack of a decent wage from the Government of the day?
Chris Stephens
The shadow Minister makes an important point. UK Departments are not complying with the London living wage, and people are taking industrial action. Does she agree that that needs sorting out today?
Chi Onwurah
The hon. Gentleman is absolutely right. A Government who cannot even guarantee a decent wage to their own employees should not be able to speak in this debate. I hope that the Minister will clarify the points that I have raised and confirm that a real London living wage will be paid to the Government’s employees. It is totally within their ability to do so.
The increase in the minimum wage will be of some help to the lowest paid, but it will not be transformative. It will not tackle extreme and growing levels of inequality, and it will certainly not end the growing levels of in-work poverty faced by millions. Even if it was a sufficient safety net, the minimum wage would not catch all workers. With the growing gig economy forcing more and more workers into sham self-employment, it is more important than ever that every worker is paid a decent living wage. However, the minimum wage does not cover self-employment, and TUC figures show that almost half of self-employed people earn less than the minimum wage, meaning that 2 million self-employed workers are now stuck on poverty pay. Does the Minister think that that is acceptable? What is she doing to address poverty pay among the self-employed?
Another glaring inconsistency is the huge discrepancy in the minimum wage for people over 21 and for those aged 18 to 20. Will the Minister set out why the Government believe that workers aged 18 to 20 should be paid a far lower rate than those aged 21 for exactly the same work? Why is the adult rate for under 25s less than for those over 25? What is it about a 24-year-old doing exactly the same work as a 26-year-old that leads the Minister to believe the former deserves less?
Layla Moran (Oxford West and Abingdon) (LD)
Does the hon. Lady agree that the anger felt by young people is palpable? The message that the Government are sending is, “By being younger, you’re not worth as much as someone who is older than you.” What kind of message is that for young people?
Chi Onwurah
The hon. Lady makes an excellent point. What message is being sent to the under-25s about their contribution to our economy? They are exactly the people whose confidence and contribution we need to promote, especially during these difficult times.
In its latest report, the Low Pay Commission found that more than 200,000 workers were underpaid by a cumulative total of £15.6 million last year. From 2017, measured underpayment for those aged 25 and over increased to 23% of all those covered by the national living wage. Does the Minister agree that is simply not good enough?
Labour will stand up for workers against unscrupulous employers by properly resourcing Her Majesty’s Revenue and Customs, which is critical to enforcement, and will strengthen the enforcement of labour laws. We will crack down on employers that breach labour market rights and regulations through increased fines and sanctions.
Labour is committed to making work pay, which is why we will ensure a real living wage of at least £10 an hour for all workers aged 18 and over. There is no justification for differential rates based on age. Increasing wages, particularly for the lowest paid, would not only immediately help those workers and their families but would increase demand in our economy and reduce the subsidising of low pay by the state. Given the Government’s chaotic handling of Brexit and the perilous state of our economy as a consequence, does the Minister agree that the economic benefits that a significant increase in the living wage would create are desperately needed?
It is important that the state sets a minimum rate of pay based on the Low Pay Commission’s recommendations, but state minimums are just one part of the solution to low pay. Trade unions are the collective voice of workers and are best placed to bargain over what workers are paid, within a negotiating framework that includes employers. Does the Minister agree that it would be far better if workers had a direct voice in the setting of their pay through, for example, national sectoral collective bargaining?
Workers in this country deserve far better than this Government are offering, and they deserve far better than this Government. That is why Labour will set up a new Department to roll out sectoral collective bargaining, protect the interests of workers and strengthen trade unions, introducing new rights and freedoms so that every worker gets the support, security and pay at work they deserve. This Government are clearly incapable of doing that, but I hope the Minister will at least be able to answer my questions.
Gillian Keegan (Chichester) (Con)
I am pleased to see the national living wage and the national minimum wage continue to increase and support the lowest paid. Those on the minimum wage often have the hardest jobs, and those jobs are vital to our daily lives. Carers are just one example; many of us who have a cared-for relative know just how demanding and invaluable—indeed, priceless—such work is. We need to make sure that carers and many on the minimum wage are properly rewarded for their work, as everybody should be. The Government have made some promising steps, with net wages for people on the minimum wage increasing by 39% since 2010.
It is estimated that 2,600 people in Chichester are on either the national living wage or the national minimum wage, and they are all set to benefit from the above-inflation increases to their hourly rate. They represent about 6% of the local workforce, and Chichester chamber of commerce and industry has welcomed the Government’s acceptance of the Low Pay Commission’s recommendations. The CCCI has said that Chichester businesses want to recruit the very best employees, and this needs to come with a decent wage. I completely agree. I am encouraged by the fact that the CCCI does not foresee any adverse effects on local businesses from of the proposed increases.
I am not saying that raising the minimum age alone is the silver bullet, but the proposed increases mean that the earnings of a full-time minimum wage worker will increase by more than £2,750 annually from next year—that represents a number of Freddo bars. That good news comes on top of other Government measures, such as increases to the personal tax allowance.
I also celebrate the 20p increase to the hourly rate for an apprentice, which represents by far the biggest proposed increase—a 5.4% rise on current rates. That will be a welcome boost to the pockets of the 540 people who started an apprenticeship this year in Chichester, although we should not forget that this is a minimum wage and many people pay apprentices above the minimum wage. I was an apprentice at 16, more than 30 years ago, when the Labour policy was not to pay me the same minimum wage as someone aged 50. It seems that that could be the policy Labour is about to introduce, according to their Front Benchers. In addition, apprentices are getting valuable new skills, which are sponsored and paid for by their employers. As a newly appointed apprenticeship ambassador, and with National Apprenticeship Week coming up, let me use this opportunity to say that, along with learning the necessary skills, this increase will be one of the benefits of taking the apprenticeship route into the workplace. I will be welcoming that.
Unemployment is at an all-time low under this Government. Only 1.2% of people in Chichester are unemployed, so the jobcentre’s aim to get everybody a job, then get them a better job and then move them into a career is a realistic ambition. The minimum wage will help along that journey, so I welcome the proposed increases and I am pleased that we are on our way to making the national living wage reach 60% of median income by 2020. Hard-working people deserve an income that reflects their importance to our economy and the services we rely on daily. We all want to make sure that work pays, and I think these inflation-beating increases are a good step in making that a realistic prospect.
Chris Stephens (Glasgow South West) (SNP)
This is my first statutory instrument debate in the Chamber, and it is a pleasure to see you in the Chair, Mr Deputy Speaker. It is also a pleasure to follow the hon. Member for Chichester (Gillian Keegan).
When we are in this Chamber, I am sure there is always a moment when we ask ourselves whether the party of the establishment actually has a clue about what happens in real life. That moment was revealed today when my hon. Friend the Member for Glasgow Central (Alison Thewliss) pointed out to the Minister that one of the increases in the minimum wage rate was the price of a Freddo bar, and we saw that some Government Members did not know what a Freddo bar was. The Prime Minister’s Parliamentary Private Secretary—I did tell him I was going to mention him—was shouting from a sedentary position that he thought the price of a Freddo bar was 10p. What chance does the country have if someone who has advised the Prime Minister does not know the exact price of a Freddo bar? Perhaps the Library might want to do some research on the minimum wage rates we would be presented with today if the minimum wage rate had increased at the same rate as the price of the Freddo bar. I suggest that the rates would be higher than what the Government are presenting today.
Mike Wood
Clearly, one does not get a fine figure such as mine without knowing precisely the price of a range of chocolate bars. I am sure the hon. Gentleman will be aware, as I am from having young children, that as recently as last month Freddo bars were indeed 10p in Tesco.
Chris Stephens
It seems unlikely—perhaps we will ask for photographic evidence from the hon. Gentleman of the price of a Freddo bar, or make that a competition for Members of Parliament this weekend.
Statutory minimum wage rates are important because in some sectors of the economy the statutory minimum rate actually becomes the maximum wage rate. It is important that statutory minimum wage rates are enforced properly. In answer to a question, the Minister notified me that the national minimum wage compliance unit has hired 420 staff to enforce national minimum wage compliance across these islands. There are 4,754 full-time equivalent posts for staff to chase social security fraud. Yet we know that more than 200,000 workers are not paid the proper statutory wage. That is an absolutely scandalous figure that needs to be addressed, so I hope the Minister can tell us what plans the national minimum wage compliance unit has to hire additional staff to correct the current situation and to ensure that the national minimum wage rates are enforced properly, so that in the future we do not have more than 200,000 workers being paid incorrectly.
The Minister mentioned the “Good Work Plan”. It is certainly the view of SNP Members that it does not go far enough. In fact, the Minister should just pick up the Workers (Definition and Rights) Bill that I have introduced and take that forward, as it would give workers far better protection. My Bill would sort out the status of a worker, eliminate zero-hours contracts, provide protection for wages if a company ceases to trade or a company owner absconds, and deal with the increasingly common workplace situation in which workers turn up at work and are subjected to short-notice shift changes, in some cases being told, “We don’t need you today,” but in others being told, “You’re going to be working far more hours than we said when you turned up to work.” When does the Minister expect the statutory instruments relating to the “Good Work Plan” to come before the House? Will they be debated in the Chamber, like these regulations?
We welcome any increase, but these measures do not go far enough. Indeed, the Government are not dealing with age discrimination in minimum wage rates, which must end. Young people are being denied a real living wage—not the pretendy living wage—of £9 an hour, or £10.55 in London. I agree with the shadow Minister that UK Government Departments should be paying the London living wage. The fact that they are not is a disgrace.
Let us look at the percentage increases: for over 25s the increase is 4.9%; for 21 to 24-year-olds the increase is smaller, at 4.3%; for 18 to 20-year-olds the increase is 4.2%; and for 16 and 17-year-olds it is 3.6%. The apprentice rate is going up by 21p an hour, which will be scant consolation to those women born in the 1950s whom the Government keep telling they should take up apprenticeships as opposed to fighting for their pensions. They would get an apprenticeship rate of £3.90 an hour. Will the Minister tell us when this age discrimination is going to end? Does she not accept that 21 to 24-year-olds often have the same responsibilities, payment demands and bills as those who are 25 and over?
Why was the age of 25 picked for the pretendy living wage? We have never had a proper explanation of why it applies to those aged 25 or over, which seems to me to be a particularly ludicrous position. I remember the arguments that we used to use when I served on the Unison Scottish young members committee not that long ago. We argued a rather sensible position: if two individuals both work at a fast food restaurant flipping hamburgers and one is 17 and the other 37, they are both active participants in the labour market, yet the difference in pay as a result of the regulations is as much as £3.84 an hour. For an eight-hour shift the pay difference would be £30 a shift, and as much as £150 a week. It really is time for this age discrimination to end, and I look forward to the Minister telling us when that will happen.
Alison Thewliss (Glasgow Central) (SNP)
I know that many Members across this House share my concern that Brexit and the removal of hard-won EU legislation will mean a race to the bottom for workers’ rights in the UK. In that respect, it is at least a little bit encouraging to see a commitment to continuing to increase minimum wages; however, as I have said time and again in this place, it does not go nearly far enough. The UK Government’s pretendy living wage is not enough to live on. The real living wage, as calculated by the Living Wage Foundation, is set at £9 an hour, or £10.55 an hour in London; the pretendy living wage falls short of that. For those of us who want a highly educated, highly skilled, high-wage economy, it continues to be extremely disappointing that the UK Government choose not to increase the minimum wage to a level people can actually live on.
High wages are linked to increased productivity—an issue the UK has struggled with for many, many years—increased staff retention and higher standards of workers. A substantial increase in wages is not a choice between acting in the interests of businesses and acting in the interests of employees; it is entirely possible to cover both. The attitude that I am hearing from Government Members is that the national living wage falls short of a real living wage, but we should celebrate it anyway because it represents a pay rise for working people. That shows a real lack of aspiration on the part of the UK Government—a Government who claim that they want to help people work their way out of poverty but whose actions fail those people time and again.
If this UK Government really wanted people to work their way out of poverty, they would be investing in our labour markets, increasing the powers of trade unions and improving the rights of those in insecure work. They are presiding over one of the lowest rates of real wage growth among the advanced nations of the G20. Andy Haldane at the Bank of England has described the past 10 years as “a lost decade” for workers, and the measures today will do very little to address that problem.
As things stand, the Chancellor is giving with one hand and taking away with the other. For those at the lower end of the income scale, the proposed increase in the minimum wage does not even offset the impact of the benefits freeze. I and my hon. Friends have consistently called for an end to the benefits freeze, which is a pay cut by stealth for some of the lowest earning people in this country. We welcome the Labour party’s commitment to scrap it, even if it did not feature in its 2017 manifesto.
The age pay gap is the income inequality that the national minimum wage policy creates between age groups. The Department for Business, Energy and Industrial Strategy impact assessment on the policy explicitly states that the purpose of a lower minimum wage for under 25s is to
“maximise the wages of low paid younger workers, without damaging their employment prospects.”
It also says that the Government asked the Low Pay Commission to recommend separate national minimum wage rates
“by age band (16-17, 18-20 year olds, and 21-24 year olds).”
There is no real evidence to justify why that is necessary. It is insulting to young people in my constituency and across these islands to say that employers would not want them if they had to be paid a fair wage; quite apart from that, it entices employers to make hiring decisions based on age, encouraging unscrupulous employers to break the law.
Make no mistake, this is state-sponsored age discrimination. In the impact assessment, the public sector equality duty sets out that the Government must
“eliminate unlawful discrimination, harassment and victimisation and other conduct prohibited by the Act”.
It goes on:
“The protected characteristics consist of nine groups: age, race, gender, disability, religion or belief, sexual orientation, gender reassignment, pregnancy and maternity, marriage and civil partnership.”
If women were to be paid less than men, that would be against the law because gender is one of the protected characteristics; mysteriously, however, this impact assessment does not extend to age. I would really like to see some smart lawyer take a legal challenge against the Government, because there is clear discrimination in the terms of this statutory instrument on the basis of age alone. There is no justifiable reason for this policy.
To compound matters further, the proposal that we are discussing today will increase the pay gap between age groups. The uprating that will result from the regulations means that 24-year-olds could earn £90 less a month than 25-year-olds for exactly the same job, amounting to a difference of more than £1,000 a year. The gap would increase even further within the under-25 age groups, making it even harder for young people to get by. Since the measure was brought in in 2016, 18 to 20-year-olds have seen the age pay gap between themselves and someone on the higher rate go from £1.90 to £2.06; 16 and 17-year-olds have seen it rise from £3.33 to £3.86—that gap between the highest wage and all that they are legally entitled to be paid—and for apprentices, the gap has gone from £3.90 to £4.31. No justification is given in the impact assessment for that state-sponsored age discrimination.
If I were to suggest that Members of Parliament—an MP born in 1973, perhaps, like my hon. Friend the Member for Glasgow South West (Chris Stephens), or an MP born in 1978, like the Minister, or myself, born in 1982—were to be paid different rates depending on age, I cannot imagine any MP in the House signing up to that. Why should young people face the discrimination in law that the Government are proposing today?
Gillian Keegan
I am listening carefully. Having started my working life aged 16 as an apprentice, I would not expect to get the same minimum wage at 16 as I would starting in a new job when I was 20, 30 or 40. Surely there is some recognition that experience comes with age, even if it is not always experience in the workplace. I think that perhaps people when they are older might expect to see a differential to reflect their experience.
Alison Thewliss
The hon. Lady misses her own point, because the regulations are not called “The National Experience Wage (Amendment) Regulations”. The regulations discriminate by age alone, not by experience, so if the hon. Lady, as a 16-year-old, walked into a job on the same day as somesone who was 25, she would not be legally entitled to the same wage. The 25-year-old would have no more experience in that job, regardless of their experience in life. There might be 20 or 16-year-olds who are far more savvy on the first day in the job than a 25-year-old, or a 45-year-old, or a 65-year-old. We are not measuring experience here.
Mike Wood
Surely the hon. Lady acknowledges the Low Pay Commission’s conclusion:
“In light of this evidence we concluded when thinking about the pay floor for this age group, that it could not currently be set to the same level as the national living wage without risks to employment.”
Alison Thewliss
That was exactly the type of comment that the Conservatives made when the national minimum wage was introduced—that it would risk people’s employment. That has not been the case. The impact assessment says that the Government asked the Low Pay Commission to set the national minimum wage at these levels. The Government have instructed the Low Pay Commission to do this. That is quite different, and I do not buy the hon. Gentleman’s arguments at all.
The gap amounts to a difference of thousands of pounds in the take-home pay of a 16-year-old, an 18-year-old, a 21-year-old and a 25-year-old, and it is completely unjustifiable, because this is not about experience, as I said. It does not say that in the regulations; they specify the age, and age alone.
I shall quote from the excellent report by the Young Women’s Trust, called “Paid Less Worth Less?”, which I commend to the Minister. Shanae, who is 24, said:
“A 25 year-old starting out on their first job and just entering the workplace would have the same experience as a 16 year-old who is also just starting out. If companies want to pay based on experience, then that should be reflected in what they choose to pay people. But that’s different from paying us on our age.”
She is absolutely correct.
At 25 or younger, many people have families of their own to support and their own responsibilities, and in the research by the Young Women’s Trust, Tia mentions her circumstances specifically. She says:
“I am a care-leaver and I have lived independently since I was 17, so that makes my costs exactly the same as maybe like a 30 year-old who is living in a private rented flat. You have bills to pay like any other adult. Everyone gets hungry. Everyone has to pay for gas, electrics, toiletries, clothes and food. It still adds up the same. So I don’t see why there should be a pay difference.”
I do not see why there should be a pay difference either. It is completely unjustifiable.
Young people have to pay the same amount as somebody over 25 for rent, for getting the bus to work, for childcare, for the cinema, and maybe for a Freddo bar. All those prices are exactly the same. Young people are not entitled to discounts on their rent because of their age, and indeed they get less in benefits from this Government as well because of their age, so they are doubly missing out. Young people deserve the right to be paid a fair market value for their skills, and not be subject to state-sponsored age discrimination.
I mentioned unscrupulous employers. When I was at school, it was well known among my peers that some employers would employ young people right up until the point at which they would have to pay them more, and then they would let them go. That is particularly true for people on zero-hours contracts or in precarious employment, who can be let go at a moment’s notice. As soon as an employer has to pay them more, they are shown the door. There is very little by way protection, particularly for young people, who often do not know their rights and cannot afford legal representation to challenge an employer. A few years ago I met a constituent who had been working in a bar when the rate of pay went up. She was pretty sure that she was let go because she was the oldest person employed there, but she could not prove it. This Government are leaving the door open for unscrupulous employers to do that time and again to low-paid workers, often female workers in part-time jobs. This Government are aiding and abetting those unscrupulous employers.
Scotland is the best performing part of the UK when it comes to paying the real living wage. There are 1,363 real living wage employers in Scotland, and I am proud to say that the latest among them in my constituency include the Scottish Fairtrade Foundation, Silver Cloud and the spectacle manufacturer IOLLA, which has a shop in Finnieston. I am proud that those responsible employers are seeing the benefits of paying the real living wage, because it improves retention and morale. However, powers over the minimum wage are not currently devolved; they remain with this Government, who are not interested, frankly, in making the change for young people in this country. If the Minister is not interested in doing this, will she devolve the powers to the Scottish Government and let us get on with the job?
Kelly Tolhurst
I thank all Members who contributed to the debate. I was pleased to hear that the Opposition will not oppose this statutory instrument, although I was disappointed by some of the comments about the Government’s commitment to workers and, in particular, to young people—it seems to be a recurring theme, because some of these criticisms were levelled against me in a debate last week. This Government and the Prime Minister have been clear about our commitment, so I will take no lectures from the Opposition on supporting low-paid workers, and no suggestion that Government Members do not understand the real world. As I have said numerous times, I am proud to be a member of a Conservative Government who are committed to the biggest reformation of rights in the workplace in 20 years. I am proud to be a Minister who is part of that.
Andrew Griffiths
I thank the Minister for what she has said so far. We hear a lot about workers’ rights being eroded by us leaving the European Union, but are we not demonstrating, through the Taylor report, that we are actually going further and faster than Europe in guaranteeing new rights to the lowest paid and to vulnerable workers?
Kelly Tolhurst
I thank my hon. Friend for that point. He is indeed correct, because we have been clear that we will not be rolling back workers’ rights when we leave the European Union. That has been further guaranteed by the introduction of the “Good Work Plan”—I will say more about that later—and we have already laid three SIs dealing with workers’ rights. We are going further on workers’ rights and increasing the wages for the lowest paid. We are sticking to our commitment. I am proud to be part of a Government who have put workers’ rights and the lowest paid in our society at the top of our agenda, so I will take no lectures from the Opposition in that regard.
We will increase the personal allowance of the lowest-paid workers to £12,500 in April. That will take 1.7 million people out of tax. Since 2015, the national minimum wage has risen faster than average wages and inflation. For the lowest paid, there has been 8% growth, above inflation, between April 2015 and April 2018. I will therefore not listen to accusations that we have not continued to work towards our commitment to reach 60% of median pay by 2020.
Bob Stewart (Beckenham) (Con)
May I confirm that the lowest paid will get the same deal that they get now, or better, if Brexit happens, which it will?
Kelly Tolhurst
Absolutely. My hon. Friend is right. The rates that come into force in April will be the same whether we leave the European Union or not—[Interruption]—as we leave the European Union.
Those increases did not happen year on year under the last Labour Government. This Government have made and delivered that commitment. This year, we have come forward with another plan, which accepts the recommendations of the independent Low Pay Commission. It takes its job extremely seriously, produces great reports, consults businesses and workers, and ensures that its independent recommendations to Government are objective and fair.
Daniel Zeichner
Will the Minister remind the House who introduced the national minimum wage and the Low Pay Commission?
Kelly Tolhurst
I point out that we introduced the national living wage in 2016. As I said, we have made increases year on year and stuck to our commitment.
I want to answer a few more questions, particularly the question that the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) asked about pay for the Department’s security staff. We value all the staff, who deserve fair and competitive wages. The Department has agreed with its contractors to align the pay of cleaning, catering, mailroom and security staff with the median rates for those occupations. That will come into effect on 1 March.
Chi Onwurah
I thank the Minister for that clarification. Is she saying that all staff at the Department for Business, Energy and Industrial Strategy will be paid the London living wage from this financial year?
Kelly Tolhurst
I welcome the hon. Lady’s comment about the London living wage, and we value the work of the Living Wage Foundation. However, it is the Government’s responsibility to set the minimum rate and, as I said, it has been agreed that the wage rates will be aligned with the median rates for those occupations, and that will come into effect on 1 March.
As a result of the increases in pay that will come into effect in April, another 350,000 young workers will benefit. Nine out of 10 workers between the ages of 18 and 24 are paid more than the minimum rates. There has been much criticism of age-related rates, but they are not new. Age-related rates have been in place since the national minimum wage was introduced in 1999. In fact, this Government have asked the Low Pay Commission to review the youth rates this year to see whether they are fit for purpose, and it will report later in the year.
Chris Stephens
Surely the Minister must concede that the Government have made this situation worse by introducing the pretendy living wage rate for those who are 25 and over. Has that not actually increased age discrimination, and not reduced it?
Kelly Tolhurst
As I have already highlighted, age rates are not new to these regulations. We have asked the Low Pay Commission to review the age-related rates to see whether they are fit for purpose, and to report back later in the year.
As hon. Members have raised in the House, it is absolutely true that younger workers are the most vulnerable with regard to employment. I must point out that, from September and November 2018, 11.7% of 16 to 24-year-olds were unemployed, compared with 2.9% of over-25s. It is absolutely right, when these rates are set, that we have in mind that we want young people to be in work and getting experience in order to have the future earning capacity to reach their full potential and be able to fly. They can do that through work experience, and by getting into a place of work and gaining such experience, while in some cases they will get the entrepreneurialism they need to go on to do great things.
Kelly Tolhurst
I want to make one more point about the age-related model. This model has been in place since 1999, and it is used across OECD countries, so it is not specific to the UK.
I will move on quickly to enforcement. I have said at the Dispatch Box a number of times since I have had this role that we take enforcement extremely seriously. That is why we have doubled spending on enforcement to £26 million. In 2017-18, there were 810 penalties, totalling £14 million. This is five times more in penalties than were imposed in the last five years of the previous Labour Government. To level the criticism that we are not taking enforcement seriously is just factually incorrect.
Kelly Tolhurst
I am keen to make some progress because I know there is other business to be getting on with.
On enforcement, we are committed to making sure that anyone who underpays on the minimum wage will be investigated and penalised or prosecuted. As I have said, HMRC will always investigate every worker complaint and make sure there is compliance with the national minimum wage. This Government are clear, as I have been all the time I have had this role, that the enforcement of the national minimum wage is important and delivering this is central.
To level the criticism that we are deliberately discriminating against young people in the workplace is pure fantasy; we are not discriminating. In actual fact, this Government are taking forward plans and making progress with work to make sure that workers in this country are not discriminated against, and we are going as far as we can.
On the specific questions about the SIs that have been laid, three have been laid. In fact, the first will be debated on 6 March, and I am looking forward to bringing it forward in the House.
The national minimum wage and the national living wage make a real difference to the lives of millions of workers in this country. I am glad that there is agreement across this House that the lowest-paid workers deserve a pay rise, which these regulations will provide. These regulations mean that, on 1 April, over 1.7 million workers on the national living wage will receive a pay rise. A full-time worker will receive an additional £690 a year. Younger workers will also get more money, through increases to the youth rates. I hope we can do more in the future.
Our industrial strategy aims to build an economy that works for everyone, wherever they live and wherever they work. Creating good jobs and increasing people’s earning power is one of the pillars of our strategy. Having a UK-wide minimum wage, recommended by the independent and expert Low Pay Commission, makes sure that the lowest paid in society are protected in terms of pay. It also means that businesses compete on a level playing field.
The increases for this year will mean that wages continue to rise above inflation. We remain on track for the national living wage to reach 60% of median earnings by 2020. We also have the highest employment rate since comparable records began. We can be proud of our labour market, and we can be proud of these regulations. I commend them to the House.
Question put and agreed to.
Resolved,
That the draft National Minimum Wage (Amendment) Regulations 2019, which were laid before this House on 28 January, be approved.