National Minimum Wage (Offshore Employment) (Amendment) Order 2020
Viscount Younger of Leckie
That the draft Order laid before the House on 6 May be approved.
Viscount Younger of Leckie (Con) [V]
My Lords, this draft order amends Article 2 of the National Minimum Wage (Offshore Employment) Order 1999, known as the 1999 order, and will extend the provisions of the National Minimum Wage Act 1998, known as the Act, to seafarers working domestically in UK territorial waters or in connection with offshore activities in the UK sector of the continental shelf. The amended order will not, however, apply the provisions of the Act to seafarers employed on a ship which is exercising the right of innocent passage or the right of transit passage, which I will explain.
It is clear that the current provisions do not go far enough to enable the minimum wage to be paid to most seafarers working domestically. This draft order has come about following a significant amount of engagement and consultation. The background is that in 2017, a working group encompassing government and industry was formed to explore this issue, which had been an area of significant interest for more than a decade. The working group was chaired by the Department for Transport, with policy and legal representation from interested government departments: BEIS, the Foreign and Commonwealth Office, and HMRC. The working group also included the maritime unions—the RMT and Nautilus International—plus the UK Chamber of Shipping and representatives from individual shipping companies. It met formally three times over nine months and was preceded and succeeded by other dialogue with industry and unions. This measure has also been considered, and is supported, by the Maritime and Coastguard Agency.
The result was that this group recommended that the existing legislation should be amended to extend the eligibility of the minimum wage to all seafarers working domestically in UK territorial waters, on the UK continental shelf or in the UK’s exclusive economic zone. This order seeks to implement those recommendations as far as they apply to the UK continental shelf.
I have referred to several concepts as they are defined in the 1982 United Nations Convention on the Law of the Sea—UNCLOS—and will give some further explanation. The continental shelf of a coastal state comprises the seabed and subsoil of the submarine areas that extend beyond its territorial sea to the outer edge of the continental margin. Where the outer edge is beyond 200 nautical miles, it shall not exceed 350 nautical miles. The coastal state has sovereign rights to explore or exploit the natural resources of the seabed or subsoil. The exclusive economic zone is related but does not extend beyond 200 nautical miles. The coastal state has sovereign rights to explore or exploit, conserve or manage the natural resources—whether mineral or living—within the sea, the seabed or its subsoil, and the area above the sea. In simple terms, the continental shelf could be considered with regard to oil and gas and the EEZ with regard to fishing and renewable energy.
UNCLOS defines a vessel’s passage through a state’s territorial sea as being innocent if it is not prejudicial to the peace, good order or security of the coastal state. The word “passage” means navigation through the territorial sea for the purpose of traversing that sea without entering internal waters, calling at a roadstead or port facility outside internal waters, proceeding to or from internal waters, or a call at such a roadstead or port facility. Transit passage means the exercise of the freedom of navigation and overflight solely for the purpose of continuous and expeditious transit of the strait between one part of the high seas and another, or between exclusive economic zones.
We expect this order to benefit primarily seafarers in non-officer roles, such as ratings. These are a broad range of semi-skilled to skilled roles that cover a range of activities on board a vessel, whether on or below deck, in technical areas or in providing onboard services. Industry has stated that many seafarers working domestically in the UK or supporting the UK offshore sector are paid at or above minimum wage. We therefore think that it will be a relatively minor cost to industry when compared with other recent regulatory measures such as the sulphur emission measures. It is expected that the cost to industry will be approximately £3.2 million a year.
However, that should not diminish the importance of this measure. We are aware that other states are also seeking to improve standards for seafarers, but minimum salary for seafarers is not legislated for internationally or at a European level, so I am very pleased that it is understood that the UK will be the first country to provide such explicit protection to all seafarers working domestically. The ILO’s Maritime Labour Convention sets out that ratifying states should seek continuous improvement to the rights for seafarers, and this is exactly what the UK is doing.
I will provide a little more detail. Section 1 of the Act provides for the national minimum wage to be paid to individuals who, under their contracts and subject to other requirements of the Act, are working, or ordinarily work, in the UK. Specific provision about employment outside the UK is made by Section 40 of the Act and by the 1999 order that was made under Section 42. There is currently a wide exception in Article 2(2) and (3) of the 1999 order; that is, that the order does not apply the Act to individuals working on ships in the course of navigation, on fishing vessels, or on ships engaged in certain dredging activity. The amendments to the 1999 order will extend entitlement under that order to individuals working on vessels operating in UK territorial waters or, in connection with specified activities, in the UK sector of the continental shelf, subject only to an exception for employment for the purposes of activities on a ship exercising the right of innocent passage or the right of transit passage. The 1999 order is without prejudice to Section 40 of the Act, which operates in parallel and will continue to do so.
The 1999 order extends the Act to cover individuals who meet two conditions. The first condition is that they are in “offshore employment”, as defined in Section 42(1). The second condition is that they are working, or ordinarily work, in UK territorial waters or the UK sector of the continental shelf.
In the interests of time, I will cover ferries in my closing remarks as I understand that noble Lords may raise questions on it. By happenstance, today is the Day of the Seafarer. This is an opportunity to recognise the invaluable contribution that seafarers make to international trade and the world economy, often at great personal cost to themselves and their families. It is not lost on me that we would be in a worse place today, during this crisis, if seafarers were not bringing vital supplies and goods to the UK. This country has a long history of leading on issues regarding the welfare and employment of seafarers, and I am pleased that this continues. I commend the draft order to the House.
Lord Foulkes of Cumnock (Lab Co-op) [V]
My Lords, I thank the Minister for his comprehensive introduction and I am grateful for the opportunity to speak on this order. I also want to endorse the valuable role played by seafarers, given the dangers they face from time to time; we do understand that. In particular, as a Scottish Peer, it is important to highlight the critical role that offshore industries such as renewables, fisheries, oil and gas play in the Scottish economy, as well as the UK-wide economy. Indeed, I am proud of the progress that Scotland has made in piloting renewable generation, particularly onshore and offshore wind generation, paving the way for its adoption right across the United Kingdom.
However, in the current climate, it is important to highlight the huge uncertainties facing workers in many offshore industries. Our fishermen are already facing extensive uncertainty over the impact of Brexit as well as the effect of the Fisheries Bill, currently being scrutinised so effectively in this House, as we saw in the Divisions yesterday. The result of all this will impact on fishermen, including those on the west coast of Scotland. Fishermen still live in Girvan and Ballantrae in my old constituency. Today I read that prawn catches, for example, have halved and that their price has also halved. That will affect many men and women in Ayrshire. On this occasion I should like to pay tribute to the late father of the noble Viscount, Lord Younger. I worked very closely with him and had the greatest respect for him.
For many offshore oil and gas sector workers in Scotland, the impact of Covid-19 will result in substantial job losses, not to mention the further redundancies made as we transition towards a net-zero climate. Given that, I support this order and welcome the greater financial security that it will offer the seafaring community by guaranteeing workers the national minimum wage. However, given these increasingly uncertain times, even more should be done to support these communities. We should be going further than the national minimum wage by agreeing to pay these workers a real living wage—the wage rate that people need to have a halfway decent existence. The Living Wage Foundation has calculated that the real living wage should be £9.30 and hour across the UK and £10.75 an hour in London.
The Minister might respond to my criticisms by saying that in 2016 his party introduced a higher minimum wage for staff aged over 25, with the so-called national living wage. But as everyone in the House should know, this change to the national minimum wage for the over-25s was just a cynical attempt by his Government’s party to claim to be on the same side as workers, when we know that in reality that is not the case. The Government’s national living wage is not based on what workers and their families need to live, whereas a real living wage is.
With that in mind, in his reply, will the Minister tell the House whether he will consider introducing a real living wage as part of what has been described as a “clean and just transition”? With these few comments, I nevertheless confirm that I am willing to support this order today.
Baroness Burt of Solihull (LD) [V]
My Lords, I too welcome this order, which closes a loophole that allows companies operating in British territorial waters potentially to pay their workers below the minimum wage. The order amends Article 2 of the National Minimum Wage (Offshore Employment) Order, but I would like to ask the Minister why it has taken so long to close this loophole. Have some seafarers been paid below the minimum wage for many years? Did anyone know about that and did any of the unions complain?
The order newly applies to shipping, with certain exceptions as described by the noble Viscount, operating in UK waters whether or not the vessels are UK-registered, and to workers who may or may not ordinarily be employed in the UK. I welcome this: anyone employing people working in British waters should not be allowed the undercut the competition by underpaying its staff.
My second question relates to the estimated cost of implementation. The Explanatory Notes state that HMRC cannot estimate this exactly because there is
“no robust data as to how many employees are in this position, and a lack of concurrence amongst sources which are available.”
How will the requirement be policed and how can the legislation be enforced? I would be grateful to the Minister if he could explain that.
Apparently some ship owners have said that certain services will no longer be viable on the implementation of this order. My heart bleeds for them. Any business that makes money on the backs of underpaid and exploited workers does not deserve to be in business. I remember business groups using the viability argument before the national minimum wage was first introduced. Today, it is an accepted part of business practice in this country and only cowboys, as opposed to pirates, exploit it.
Finally, on the Day of the Seafarer, I would like to ask a slightly tangential question about the estimated 150,000 international and British seafarers who have been trapped at sea since the beginning of the lockdown, awaiting crew changes. They cannot get home and their relief crews cannot get to ports to board. As I said in a debate on 19 May:
“Tragically, suicides have been reported as individuals suffer mentally, trapped on board and trying to get home, but unable to because of the lack of organised transport.”—[Official Report, 19/5/20; col. 1004.]
There are also issues with visas. Will the Minister please favour the House with an update on this?
Baroness McIntosh of Pickering (Con) [V]
My Lords, I congratulate my noble friend Lord Younger on bringing this very worthwhile order before the House today. He referred in his opening remarks to the costs of the sulphur emissions measures that were passed on to the industry. One of the costs of doing that was highly regrettable for me because any remaining ferry link to Denmark and the rest of Scandinavia was discontinued. I have family reasons for wishing to visit Denmark. Obviously, that was a very expensive measure indeed.
I warmly welcome the measures set out in the order. As my noble friend said, this will bring huge benefits to seafarers and it is particularly appropriate that it will benefit non-officers—ratings working on or below deck. The order will extend to workers on fishing vessels operating in UK territorial waters, workers on dredgers in the territorial waters, and those working in the UK sector of the continental shelf, as well as well as all the seafarers in all the categories to which my noble friend alluded. I join others in celebrating seafarers’ day today and I recognise the immeasurable contribution to the economy and employment that the British shipping industry makes. The UK is an island nation, which has been built on trade, with a high percentage of goods travelling by sea.
I note what the noble Lord, Lord Foulkes, said about the contribution of offshore workers and note in passing that the offshore industry and the fishing industry are two of the most dangerous industries, alongside farming. It is a matter of celebration today that we welcome this order but, as other speakers have noted, it has taken us some considerable time to reach this pass in adopting it.
My noble friend remarked in passing about the ILO asking for continuous improvements for seafarers and other workers in this measure. Will he set out what other measures the Government envisage going forward? I thank him for introducing the order today and I wish it a safe passage.
Lord Hain (Lab) [V]
My Lords, I, too, welcome this proposal to extend minimum wage protection to a group of workers whose vital contribution to the UK economy too often goes overlooked and underappreciated and who frequently do their jobs in dangerous conditions. Mentioned fleetingly in paragraph 7.8 of the Explanatory Memorandum is the Government’s claim that the amendment,
“will allow HMRC to focus enforcement on seafarers working domestically in UK territorial waters”.
Our whole experience of minimum wage law since 1999 has been of weak enforcement with insufficient resources spread widely and thinly, leaving low-paid workers vulnerable to rogue employers who ride roughshod over the minimum wage laws. In 2017, the then director of labour market enforcement Sir David Metcalfe pointed out that a UK employer was on average likely to be inspected by HMRC only once every 500 years. In February this year the Department for Business, Energy and Industrial Strategy reported that since 2007, only 15 employers had been successfully prosecuted for underpaying the minimum wage, around one a year. Neither the department nor HMRC has the budget or the staff numbers vigorously to enforce Britain’s minimum wage laws. We have become used to this Government overpromising and underdelivering and sadly, they are doing so again here for seafarers working in UK territorial waters or in the UK sector of the continental shelf. The Low Pay Commission reckons that between 300,000 and nearly 600,000 over-25 year-olds were paid below the minimum wage in 2016. No wonder the Low Pay Commission concluded that
“there remains a rump of employers and businesses that consider the low likelihood of enforcement worth the non-compliance gamble.”
That is the reality of life in Britain’s so-called flexible labour market, including for seafarers. Sir David Metcalf believes we need tougher penalties for breaking the minimum wage laws. Companies caught paying staff below the minimum wage can currently be fined up to twice the value of the wage arrears they owe. Metcalf says that five times might be better. The total amount of fines imposed on employers for underpaying the minimum wage recently was £3.9 million, much less than the £10.9 million in wage arrears identified by HMRC. Millions of exploited people work in low-paid, insecure jobs and they deserve much better, including offshore workers.
Baroness Northover (LD) [V]
My Lords, I, too, thank the noble Viscount for introducing this statutory instrument, and his officials for their very useful Explanatory Notes. The noble Viscount’s party opposed the minimum wage when it was first introduced by the Labour Government. We supported its introduction as long overdue. There was concern at the time that paying the minimum wage might price people out of jobs, but that proved not to be the case. It is interesting and encouraging to see how times have changed, with widespread support for the principle. The debate has now moved on to a discussion of the more substantial living wage, as the noble Lord, Lord Foulkes, said. I am sure that we will come back to that as we come out of Covid, with the Government talking about levelling up yet facing an economy in crisis.
When the national minimum wage was introduced in 1998 and then applied in 1999 to offshore workers, it did not include seafarers, and this SI remedies that. It is surprising that it has taken more than 20 years to do so, as my noble friend Lady Burt noted. The SI excludes boats that are in transit through our waters, and I note the UN definition of those with right of innocent passage. That rather begs the question of whether we should include in the minimum wage those invading us, which would certainly be very generously turning the other cheek.
As the notes explain, the SI aims to include those whose work is on, for example, fishing vessels and dredgers in UK territorial waters and the UK sector of the continental shelf and other seafarers working domestically in UK territorial waters. It is striking to note that the question of whether they should be covered was raised more than a decade before the working group was set up. I am glad that the group included the maritime unions as well as the UK Chamber of Shipping and shipping companies, and that it seems to have made very clear and agreed recommendations. Has any estimate been made of the nationalities of those covered? What proportion are UK nationals? What proportion come from the EU and what proportion from the rest of the world? Are there any other groups which as yet have not been properly included in minimum wage legislation? If there are, what plans are there to remedy that?
I welcome this statutory instrument and look forward to the noble Viscount’s response.
Lord Mann (Non-Afl) [V]
My Lords, some of my family benefited financially from the introduction of the national minimum wage in 1998 and have done so since, so I support this statutory instrument today, but there are a number of questions about how it applies. I presume that the entirety of the burgeoning offshore wind energy workforce, maintenance as well as installation, will be covered as we are rightly and proudly the world leader in offshore wind energy production.
If a seafarer is offshore for more than a day, their birthday occurs while offshore and their minimum wage entitlement therefore increases, will that increase automatically be applied, despite the fact that the birthday occurred while they were offshore?
It is of concern that ferries—for example, Dover-Calais—appear not to be included. The Minister may want to confirm what was said in the House of Commons on this. Regarding the definition of spending a majority of one’s time working in the waters of our continental shelf, will any ferries to the continent be covered by this statutory instrument? If not, is this not a major omission of a group of British workers who sometimes work in difficult conditions, have important responsibilities and are not particularly well paid? As we enter Brexit, should not those working on our ferries, and those from this country working on other ferries that use our ports and harbours, have the best wages in Europe, rather than potentially being some of the cheapest ferry workers in Europe? Should this measure not therefore apply to all ferry workers?
Lord Sheikh (Con) [V]
My Lords, I congratulate the Minister on introducing this order, which was long overdue. The National Minimum Wage Act 1998 created a minimum wage across the United Kingdom for workers. The aim of the Act was to guarantee a decent minimum standard of pay for workers and to promote fair competition between businesses. However, the Act excluded from its provisions various workers in offshore employment. Some of those workers were brought into the scope of the Act by The National Minimum Wage (Offshore Employment) Order 1999. However, certain exemptions applied. It did not cover employment on a ship in the course of navigation or workers on shipping vessels or dredgers. It is therefore important that these loopholes be examined.
I commend the Government on setting up a working party to look at the issues and to commence consultations. The working party was made up of maritime unions, the UK Chamber of Shipping, and the shipping companies. Following the consultations, it is now proposed that the wide-exception 1999 order be amended and that the 1998 Act will apply to employment in connection with a ship in course of any kind of navigation, or for workers on fishing vessels or dredgers. However, a narrow exception will apply to workers
“employed for the purposes of activities on a ship exercising the right of innocent passage or the right of transit passage.”
Can the Minister say why that exception applies?
It is appreciated that the provisions of the National Minimum Wage Act will apply to seafarers working in UK territorial waters or in connection with certain activities in the UK sector of the continental shelf. Can the Minister say whether there is any intention to extend the scope of applying the 1998 Act?
We were, and we are still, a great maritime nation. However, it is important that we do not have cheap labour in our shipping industry, and that these workers enjoy the same rights as employees working on land. We need to close as many gaps as possible to ensure that workers in our shipping industry are paid adequately in accordance with the spirit of the 1998 Act. We also ought to make sure that UK workers are not replaced by cheap workers from abroad in our shipping industry. In the past, UK workers made up less than 20% of the industry, which was not acceptable. I therefore support the order.
Lord Berkeley (Lab) [V]
My Lords, I too support this order and congratulate the Minister on finally bringing it to our attention over 20 years after the previous order, as the noble Baroness, Lady Burt, said. As they both said, it is the Day of the Seafarer, which is also appropriate. I declare an interest as honorary president of the UK Maritime Pilots’ Association. I do not think it is affected by this order, but obviously it welcomes the order too. I congratulate the RMT trade union on its consistency and its continuous lobbying for this. I will ask the Minister a few questions on the Explanatory Note.
The first is in connection with paragraph (c), as other noble Lords have mentioned:
“the exploration or exploitation, in a foreign sector of the continental shelf, of a cross-boundary petroleum field.”
I think I understand that but, if this will be allowed for workers working in the oil exploration sectors, surely it should also apply to those maintaining or installing wind turbines and things like that, and, for that matter, people fishing, to the extent that they are employed in the same area above that boundary. Can the Minister say whether it matters where the offshore bases are located for these workers in paragraph (c) to be considered? They may of course be based somewhere else in another EU member state or in the UK, but does that matter? Does it matter where the vessel is registered? I would be pleased to hear the Minister’s responses to those issues.
I believe that dredging operations are included, and it is a very good thing that they are. Does it also matter where the fish are landed, if the fishermen are included in this?
Lastly, the noble Lord, Lord Mann, mentioned ferries. Ferries stretch from connecting Norway, all around the continent and of course now to the Republic of Ireland. It seems quite ridiculous that some ferry operators —for example, between England or Scotland and Northern Ireland—come under one regulation, but if the same ship is operating to Dublin from England, it comes under a different regulation. Is it not about time that the Government brought all ferry workers that come into the UK, from maybe no more than two days’ steaming, into the same regulation?
Lord Holmes of Richmond (Non-Afl) [V]
My Lords, I support this order and congratulate my noble friend Lord Younger of Leckie on the clear way in which he introduced some complex elements of the regulation and brought them into clear focus for all noble Lords. It could not be more appropriate that we are having this debate on the Day of the Seafarer—I pay tribute to all those who work on the high seas and offshore. They work in some of the most difficult conditions, keeping us fed and warm, and keeping the electricity flowing and the lights on. I declare an interest in that my grandfather was a merchant seaman, so I am aware of a number of the issues in this area. I support the order, which puts “fair” into “seafarer”.
But I will take the Minister into some slightly different waters. All the arguments that he quite rightly and clearly made in favour of this order apply also to all those who currently suffer the indignity of unpaid internships. As the noble Lord, Lord Hain, said, there have been precious few prosecutions under the National Minimum Wage Regulations. Can the Minister say how many prosecutions there have been under the NMW for those involved in operating unpaid internships? Does he agree that we need as a Government to increase funding so that HMRC can pursue far more NMW claims, not least in the area of unpaid internships? Would he also agree that there is a need for greater advertising communication to all to know and understand their rights under the National Minimum Wage Regulations, not least those suffering the indignity of unpaid internships?
Finally, would my noble friend agree to meet with me to see what can be done to ensure that everybody who should is availing themselves of the benefits of the national minimum wage, not least those who find themselves with nowhere to turn who are currently doing unpaid internships?
Lord Bhatia (Non-Afl) [V]
My Lords, this amendment order deals with the rights of people who work on ships within the territorial waters of the whole United Kingdom. In the present era of coronavirus, wages and incomes for workers must be protected. These are unusual times, where any loss of income or delays in the receipt of it can push families into poverty.
In the Explanatory Memorandum to this order, paragraph 10.3 says:
“The legal working group recommended that the existing legislation should be amended to extend the protection of the minimum wage to all seafarers working on any vessel working domestically in the UK territorial waters.”
Paragraph 10.4 says that most of the bodies said that wider public consultation was not necessary. Companies not paying the national minimum wage to their employers will see a rise in their staff costs. I am surprised that there are still companies that continue to deny the minimum wage to their employees. The Department for Business, Energy and Industrial Strategy, BEIS, should issue the necessary guidance so that all workers receive the national minimum wage. As I said earlier, the wages of those working must be protected in these difficult times.
Lord Wei (Con) [V]
My Lords, I declare my interests as listed in the register. I, too, welcome this measure. As is the case for many other speakers, my main concern relates to enforcement. Given that there are limited resources and that many vessels go through our waters and work in our fishing and other industries, how will we police this? What do we do if there are bad actors who try to game the system and say that they are from other jurisdictions?
One question that I have for the Minister and for the wider team at HMRC is whether any plans exist to work with the industry both to weed out bad actors and to ensure that there is enforcement. I know that other sectors, such as in the mobile technology space with companies such as Apple, are starting to use satellite technology. This could be used, for example, to see how heavily the boats are weighed down or how many workers are on deck. Automation could be used to track the situation so that there are some teeth to this measure, rather than it being something that people regularly ignore.
Similarly, given the pressures that our fishing industry might face with Brexit and Covid, as mentioned by another noble Lord, what can we do to work with the industry to modernise it and ensure that resources are focused on paying people well and that they are looked after? There could be a danger that this measure will put quite a lot of our fleet out of business. I accept that there might be a number of bad actors who should not be in the game if they cannot make it work at this kind of wage level but, equally, we have a duty to work with the industry to make sure that it is sustainable and viable. There might be potential for the better actors within the industry to help both police this measure and improve practices with technology and so on, so that there is better transparency over how workers are looked after and so that we still have a viable and healthy fleet in fishing and other maritime industries in the future.
Lord German (LD) [V]
Like many other noble Lords, I welcome this order, but I believe that it could go further. In particular, I wish to make the case for the inclusion of workers on short sea crossings from the coastline of the United Kingdom.
The rationale given for leaving these services out of the scope of the order is given in paragraph 7.5 of the Explanatory Memorandum. It is because short sea crossings are designated as exercising the “right of innocent passage”. It is correct that if you applied this criterion universally, these short sea crossings would be ruled out of the requirements of the national living wage legislation. However, Members of your Lordships’ House will be familiar with the not infrequent use of carve-outs, where exceptions are created. Why have the Government not created one for UK-resident workers on short sea routes? These workers are being treated differently from other UK-resident workers doing exactly the same job. Is this legislation needed for them?
It is difficult to find exact levels of pay for those working on short sea crossings, but some job placement agencies are posting jobs with salary levels below the £8.20 national minimum living wage. That national minimum living wage, based on a full-time 38-hour week, gives a yearly equivalent of about £17,200. At that level, all will pay national insurance contributions, as they are earning above the £9,516 earnings threshold, and they could possibly also pay income tax, depending on their individual circumstances.
Short sea-crossing ferries are a strong component of local economies around the ports they serve. Therefore, it is difficult to understand why the Government have stopped short of ensuring the national minimum wage for those who work on these ferries, both passenger and freight. Let us take the examples of Heysham and Liverpool. Ferries go from these ports to Belfast, so are captured by this legislation. Other examples are the Isle of Man and Dublin, both of which fall outside this legislation. There is an additional level of unfairness for those working out of Holyhead, Fishguard and Pembroke Dock, compared with those in Stranraer or Penryn.
Treating UK taxpayers and residents differently depending on which short sea crossing they are working on is clearly unfair. Typically, those working short sea crossings will have a home at one end or the other of the crossing. The Government can easily identify those resident in the UK because they pay national insurance contributions. Therefore, in reality, this group of workers is being discriminated against by virtue of the fact that their place of work moves. Add to that the failure to apply the very sensible obligation in this order to short sea crossings to France and other nearby neighbours, and we have let down a number of low-paid workers across our country. I ask the Minister to explain why the Government have failed to include them in this order and to say whether the Government will bring forward further statutory instruments to correct this matter.
Baroness Altmann (Con) [V]
My Lords, I congratulate my noble friend the Minister on his excellent introduction to this SI, which I fully support. The vital work of seafarers is often unrecognised. They operate all year round, in often the most dangerous conditions, to keep global trade afloat. Moving vital supplies and goods is essential for the availability of the products that we take for granted in our way of life, and that has been particularly pertinent at this time of global crisis, when it has been so important to see goods reach our shores.
The Government estimate the cost of this measure at just £3.2 million, which is surely a price worth paying to ensure that all seafarers, offshore or in UK territorial waters and the UK continental shelf, at least receive the minimum wage. Especially as we celebrate the 10th anniversary of this annual Day of the Seafarer, I also encourage my noble friend to consider pressing for seafarers to be classed as key workers. Recently, the pandemic and the effects of the restrictions on travel have caused repatriation problems, with crew changes and people often being stranded and unable to be readily repatriated.
As my noble friend explained, this SI will ensure that the UK is the first country to offer this minimum protection to seafarers.
Baroness Bennett of Manor Castle (GP) [V]
My Lords, it makes a welcome change to speak in your Lordships’ House on a measure of social progress brought forward by the Government. That is rarely the case and I really hope that we will see more of it. It is also welcome to see the co-operation with unions behind this order. It would be lovely to see more of that, particularly with the teaching unions with regard to Covid-19 and the reopening of schools.
I noted that in his comprehensive introduction the noble Viscount referred to semi-skilled and skilled roles being affected by the order. That is quite telling. People who have probably developed their skills through training and experience should see a rise in their wages with the minimum wage. It brings to the fore the way in which in far too many industries the minimum wage has become not a floor but the standard payment for a large number of people.
I also echo the remarks of the noble Lord, Lord Hain, about enforcement. We all know that one prosecution per year in no way reflects the level of failure to comply with the existing minimum wage legislation.
Like the noble Lord, Lord Foulkes, I have to focus on the fact that we have a minimum wage but not a living wage. The situation for people under the age of 25 is particularly difficult. They are not paid enough money to live on, and often they are paid a lot less than others over the age of 25 who work beside them and do the same job. The fact is that younger workers have to live too, and any kind of assumption that they can rely on family support instead of decent pay cannot be considered well founded.
If we are talking about the minimum wage, we need to look at the real living wage, as calculated by the Living Wage Foundation, and at the work of the Joseph Rowntree Foundation on minimum income standards. In 2019 the JRF concluded that the wage level for a single person is £36 below what is needed for a basic minimum standard, and for a couple working full-time with two children it is £47 a week below what is needed. In the age of Covid-19, we have to focus more and more on resilience, and that has to mean at a foundational level the resilience of households. Households cannot save or deal with shocks if the minimum wage is not a real living wage.
Finally, we have to look at training more seafarers. A number of noble Lords referred to offshore wind, in particular, and perhaps, in the future, offshore tidal power. We will need to see the necessary training and development of the skills required to work in those areas. We also need to see the necessary skills to carry out research in our oceans, as we very much need to understand the desperate state of our nature crisis and our climate emergency.
Lord Chidgey (LD) [V]
My Lords, I support and welcome this legislation. First, I declare an interest because I have been a long-time supporter of the Shipwrecked Mariners’ Society, which has well advertised the issue. This is the international Day of the Seafarer, which will be followed by Seafarers Awareness Week in July. One reason for my support is that I come from a long line of master mariners in north Somerset, who, in the 19th century, sadly suffered severe loss when five members of the family were lost at sea in a storm off Land’s End. That affected my family for some time after.
The purpose of the order is to extend the provisions of the National Minimum Wage Act 1998, the passing of which I remember well. I vividly recall taking the Bill through the other place for the Liberal Democrats. It was fiercely opposed by the right-wing press, which claimed that the legislation would wreck our economy. Evidence from the USA was to the contrary, where Senator Edward Kennedy had produced reports and studies demonstrating how introduction of the national minimum wage created uplifts in local low-wage economies. Notwithstanding that, the then Conservative Opposition fought the Bill tooth and nail, filibustering in Committee to the extent that one meeting continued throughout the night. It became the longest continuous Committee session ever recorded at that time.
As regards the order, I have several general points and I should be grateful for the noble Viscount’s response. I am particularly concerned about the assessment that the Government have made of the number of UK employees who could be affected by the legislation. I understand that we do not have definitive figures. When can we expect them?
There are other points on which I am not clear. Does the order apply to crews of pilot vessels? Perhaps the Minster can clarify that. How are employees stationed on offshore oil rigs and supply vessels affected? The wide exceptions in paragraphs (2) and (3) of the original 1999 order are replaced. These set out in detail which ships fall within the scope of the order, how they are crewed and how they sail. This appears to be a complex task for the regulatory process. Given the history of the national minimum wage and the lack of prosecutions for failure to comply, how will the logistics be managed? Which agencies will be responsible?
Finally, section 12 of the Explanatory Notes, entitled “Impact”, states that
“the total cost to business could be as high as £3.2m per annum.”
Can the Minister provide us with guidance on how and when we will know the total number of employees that the figure is based on, and what resources will be required to implement the order effectively?
Baroness Randerson (LD) [V]
My Lords, this order is good news. It considerably broadens those categories of workers who will be entitled to the minimum wage. The 1999 order made several exceptions that this order narrows considerably, whereby the requirement for the minimum wage will apply in future to fishers in UK territorial waters and to dredgers, irrespective of where the vessels are registered or whether the workers themselves normally live or work in the UK.
This SI will, therefore, simplify the system and, I hope, make it more enforceable. Above all, it will bring long-overdue justice to the pay of both seafarers and those who work on offshore installations. It is a measure of how far the debate has moved on this issue that it now seems shocking that the original legislation was cast in a way that allowed for two rates of pay, according to nationality, for people doing the same job on the same ship. Shipping is one of the last sectors to apply differential rates of pay. The argument is sometimes put forward that for seafarers from poorer countries whose pay is lower than that of fellow workers, it is still good by the standards of their home nation. To me that sounds remarkably imperialist and should be an argument consigned to the past. That is the basis for exploitation of foreign workers.
We are leaving the sheltering umbrella of EU legislation that for decades has served to raise the standard of employment practices in the UK. It is therefore more important than ever that we measure ourselves by the highest standards, and I am delighted that the noble Viscount pointed out that we are leading the world on this. It is a matter of regret that it is not possible to modify or exclude Section 43 of the Act, and the minimum wage requirement still excludes share fishers. It is also important to bear in mind that this will not apply to a lot of self-employed workers and micro-businesses. My noble friend Lord German drew attention to the exclusion of those working onshore for sea crossings. Are there any other important exclusions?
A cross-departmental legal working group was convened in 2017 to look at the issue, following a decade of concerns among stakeholders. There was broad representation on this group from across the industry—unions as well as ship owners—and a clear recommendation for action. Like my noble friend Lady Burt, I ask the Minister: why has it taken three years to get round to this legislation, which comes after at least seven years of debate? Is it simply that it has been on hold because of Brexit, or have there been genuine legal complexities?
I detected a note of frustration on the Government’s part as I read the Explanatory Memorandum. They have clearly not had the full co-operation of all ship owners. Paragraph 12.3 states that ship owners have said that certain services may “no longer be viable” but they have not been able to provide any examples. As my noble friend Lady Northover said, the minimum wage did not lead to the predicted job losses when it was introduced. We can probably assume that the industry will be more robust than those ship owners predict. The size of the problem and hence its true cost cannot be quantified because of the lack of information from the industry. I therefore ask the noble Viscount: if he cannot give us precise numbers, does he have any estimate of the proportion of maritime workers who will be drawn into the minimum wage as a result of this SI?
Paragraph 13.3 refers to familiarisation costs. I realise the complexities of this for small businesses, so will the UK Chamber of Shipping be providing information and training to assist those involved?
Finally, while this SI is not part of the legislation relating to Brexit, it is an opportunity for me to remind the Minister that the Government have a large backlog of maritime-related EU legislation, some of it dating back a decade, not yet incorporated into UK law. This has been repeatedly cited as an matter of concern by the Secondary Legislation Scrutiny Committee. Can the noble Viscount provide an update on progress with that backlog?
Lord Rosser (Lab) [V]
My Lords, I put on record our recognition and appreciation of the vital contribution and role of seafarers at all times, and particularly at present.
We support the order since it reflects the agreed recommendations of a working group chaired by the Department for Transport on which seafarers, ship owners and companies were represented through their respective organisations. I understand, though, that the scope of the working group was restricted in advance to conditions on domestic—that is, UK-to-UK—and offshore energy routes, primarily North Sea oil and gas installations.
As the Minister has said, the order amends the National Minimum Wage (Offshore Employment) Order 1999 by extending the provisions of the National Minimum Wage Act 1998 to all seafarers working in UK territorial waters or in the UK sector of the continental shelf, except where they are working on a ship exercising the right of innocent passage or the right of transit passage. In practical terms it secures an enforceable legal baseline for seafarers’ pay on domestic offshore supply and cargo routes between UK ports, including the UK continental shelf.
What the order does not apply to is international routes from UK ports, including the short sea routes to the European mainland. UK ratings have been systematically replaced over the last three decades, to the extent that they now only account for just under 20% of seafarers in the UK shipping industry. That is because there is no legislation covering seafarers employed on ships working from UK ports that provides a baseline for seafarers’ pay that better protects UK ratings’ jobs from basic rates of pay well below our national minimum wage.
I understand that the working group that made the recommendations reflected in the draft order was an ad hoc body, and presumably it no longer exists. Surely, though, we need to look at the position of UK seafarer employment further in the light of what has happened over the last 30 years. There is a new restart and recovery group on which the International Chamber of Shipping and the seafarer trade unions are represented. Can this group not be asked to look also at means of increasing UK seafarer employment post Covid-19 to increase the resilience of ferry, coastal cargo and other merchant shipping sectors?
Do the Government not accept that we need plans to address the effect of nationality-based pay and other forms of discrimination against seafarers on international ferry and other routes from UK ports? Indeed, I understand that the Secretary of State told the Commons Select Committee this week that very low crewing costs for foreign seafarers on the publicly subsidised Hull to Rotterdam route is perfectly legal, so the Government cannot do anything about it. Does that mean that the Government are going to throw in the towel on this issue? That does not sound like “standing up for Britain”. Can the Government give an undertaking that they will take this issue on board and look seriously, with seafarer and employer organisations, at what needs to be done to address the issue of low-cost crewing well below our minimum wage that occurs on international ferry and other routes from UK ports to even other European countries with a similar standard of living?
I turn to the Explanatory Memorandum. I wanted to ask some questions about the extent of the impact of the order, but the memorandum’s wording in paragraph 12 suggests that this might not be a straightforward or simple question—an issue to which, for example, the noble Baroness, Lady Burt of Solihull, referred. The memorandum says that the total cost to business of extending the scope of the national minimum wage in line with the order
“could be as high as £3.2m per annum.”
It goes on to say that there is no robust data on how many employees who would now be covered by the order are not already being paid in accordance with the UK minimum wage, and that there is
“a lack of concurrence amongst sources which are available.”
Despite this lack of robust data, the memorandum goes on to indicate:
“Shipowners have stated that certain services may no longer be viable, but have been unable to identify any that may be impacted.”
Surely employers know how many people they employ and how much they currently pay them, so why was it not possible to provide a realistic costing of the changes to the scope and application of the minimum wage provided for in the order and the impact that it will have? How indeed was the figure of “as high as £3.2m” calculated?
Maybe there is a straightforward explanation for this lack of clarity, in which case, since the Department for Transport chaired the working group, I hope that the Minister will be able to tell us what it is. The other possible explanation is that that part of the shipping industry that will now be covered by the further national minimum wage order is all at sea when it comes to keeping accurate records—or, alternatively, that it does keep accurate records but, for reasons about which one can only speculate, is not prepared to disclose them.
Despite this—since, as I said, his department chaired the working group—I ask the Minister: how many seafarers are covered by this extension of the application of the national minimum wage? Can the Minister also tell us what impact this order is expected to have on the low-percentage figure for the number of seafarers in the UK shipping industry who are UK ratings?
The Government have said that this order will allow HMRC to focus enforcement on vessels working domestically. Like my noble friend Lord Hain, I want to ask: what budget will be provided to HMRC and the Maritime and Coastguard Agency to check, effectively and thoroughly, vessels working domestically, and what will be the additional training requirements?
Finally, the Explanatory Memorandum states in paragraph 12.4:
“In addition to the anticipated staff cost to business, there is the potential for extra costs as a result of proceedings in employment tribunals and the courts.”
What is the extent of these potential extra costs, and what circumstances are envisaged that could lead to the proceedings in employment tribunals and the courts that are referred to?
Viscount Younger of Leckie [V]
My Lords, I start by saying that I am very pleased that this order has been broadly welcomed by the House this afternoon. As the noble Lord, Lord Hain, said, seafarers make a vital contribution to our economy, and my noble friend Lady McIntosh reminded us of the dangers faced by those working offshore, including in fishing. I was also rather struck by the speech from my noble friend Lord Holmes, who mentioned proudly his grandfather’s experience.
I will pick up on a couple of points made by the noble Baroness, Lady Bennett. I reassure her that seafarers are classed as key workers. I take her point about the different roles, defined as non-skilled, skilled or semi-skilled, but I remind the House that many of these roles are already paid above the national minimum wage. So the picture is not quite as bad as the noble Baroness painted, but more needs to be done. I also want to answer a question about age raised by the noble Lord, Lord Mann. He asked about the effect of a birthday occurring—presumably because, of course, there are different rates for different ages as regards this order. Under national minimum wage legislation, what matters is the age at the start of the pay reference period; we do not see the need to change the rules on the calculation.
I shall address as many questions as I can. Inevitably, there were a lot and I feel that I will be writing a letter; I shall be reading Hansard very carefully after this debate. I shall go straight into answering questions raised about costs, led by the noble Lord, Lord Rosser, and the noble Baronesses, Lady Burt and Lady Randerson. Although we have asked the salary costs for seafarers working domestically, operators have been reluctant to share detailed employment costs with government, as I think the noble Lord, Lord Rosser, recognised. The UK does not restrict access to its domestic market, and therefore not all seafarers will be represented by a domestic union.
To assist the noble Lord, perhaps, we have statistical data on vessel types and vessel operations, which has allowed us to estimate the number of seafarers working domestically. We have a knowledge of expected salary levels across grades and have evidence from collective bargaining agreements and other sources such as job adverts. This has allowed us to make reasonable assumptions regarding costs and the number of seafarers. This is set out, as he may have seen, in the de minimis assessment that was undertaken in connection with this order.
We must also be clear that industry bodies have stated that many seafarers working domestically are already paid at rates commensurate with the minimum wage—a point I made earlier. We believe that setting a minimum salary level in our domestic market will benefit UK ratings and allow them to compete for jobs on a more level playing field. I realise that the answer I have given is not perfect and, clearly, I agree with many in the House that there is more work to be done to analyse the data in this area.
The subject of ferry routes cropped up—as I predicted it might—raised by the noble Lord, Lord Mann, who made some very good points on ferry wages, and the noble Lord, Lord Berkeley. We are aware that concern remains that ferry routes are largely not covered by the amendments and that some ferry services may be using low-cost employment models. Let me be clear that routes operating between Great Britain and Northern Ireland, the Scottish ferries and other domestic services are covered. Ferries operating to the rest of Europe are on international voyages and, unless flagged with the UK, are outside our jurisdiction. Operators on the North Sea routes have stated that low-cost models are necessary to allow them to provide such a service; otherwise, these services would not be economically viable—a point raised again during the debate.
We are committed to improving standards here and will consider other options in regard to these operations. I note the pertinent points raised by the noble Lord, Lord German, on short crossings. Perhaps I might give some reassurance by saying that UK resident seafarers are also covered by Section 1 of the Act, so if working regularly on a service to or from a UK port, seafarers should be, invariably, eligible for the national minimum wage. In answer to the question asked by the noble Baroness, Lady Randerson, there are no other exclusions that I know of.
The noble Baroness moved on to discussing differential pay. Maritime is the only sector in the UK that continues to permit this. This is set out in the Equality Act 2010 (Work on Ships and Hovercraft) Regulations 2011. The then coalition Government did not outlaw it completely as the protection would apply only to UK-registered vessels and there was concern that owners would simply flag away from the UK to avoid the requirement, thereby removing protection from any seafarer, regardless of nationality. The industry will still state that differential pay is the necessary requirement and that seafarers are paid a competitive rate when considered against the average salaries they could receive in their own countries. I acknowledge that this remains a difficult argument to accept when it would not be accepted in any other sector. The Government will consider whether further changes are required when the Equality Act regulations are reviewed towards the end of this year.
The noble Baroness, Lady Randerson, also asked about the outstanding maritime legislation and I hope I can give an explanation here. A programme of planned legislation up to 2023 was shared with the Secondary Legislation Scrutiny Committee last year. This identified no less than 44 separate SIs. Of that list, four SIs have been completed, with a further 10 planned to be laid by the end of 2020; 12 are expected to be completed in 2021, with the remaining 23, including five that have since been added to the list, expected to be completed by the end of 2023.
The unprecedented and challenging global pandemic we are all facing has meant that work on some SIs has been temporarily paused, while others have been deferred to 2021 to help alleviate pressures on parliamentary time in late 2020, allowing for necessary EU-related legislation at the end of the current implementation period.
I move on to several questions raised by the noble Lord, Lord Chidgey. I was interested to hear about his family background and the stark reminder of how dangerous the sea is. First, he inquired about enforcement, which was also raised by my noble friend Lord Wei. BEIS is responsible for funding HMRC enforcement of the minimum wage. The 2021 overall budget is £27.5 million, of which £26.4 million is allocated to HMRC enforcement. HMRC takes a risk-based approach to enforcement, which means it can flex its resources to tackle an emerging threat or issue, including for seafarers working in the shipping industry. HMRC recently closed a seafarer case, identifying approximately £31,000 in arrears for nine workers and issuing penalties of over £56,000.
In 2018-19, HMRC identified over £24.4 million in arrears for more than 220,000 workers. This is more than a 50% increase on the amount of arrears identified in the previous financial year and a 10% increase on the number of workers identified. The increased clarity of the requirements should allow HMRC better to target its resources and ensure greater overall compliance.
The noble Lord, Lord Chidgey, asked about the status of pilots and offshore workers. They may already be covered within the existing requirements of Section 1 or Section 40 of the Act; if not, they will meet the eligibility requirements set out in the order. Employees on offshore oil rigs are already covered by the existing requirements but this will bring crew on offshore supply vessels into scope.
The noble Lord, Lord Foulkes, spoke about Scotland. He made some very kind remarks about my father, for which I am grateful. Of course, the minimum wage is a reserved matter. However, we have kept the devolved Administrations informed. This order should be particularly welcomed by the Scottish Government, who have made an admirable commitment to ensuring that the minimum wage is paid on all Scottish ferries. The order will further strengthen their position and should greatly support those working in the supply sector of the UK offshore energy market.
The noble Baroness, Lady Randerson, and the noble Lord, Lord Berkeley, made important points about skills and training. Creating a skilled, diverse and flexible workforce is essential to the future success of the maritime sector. To support the sector, the Government have worked with industry in creating a suite of maritime apprenticeships and are driving up the cadet intake though SMarT—Support for Maritime Training—with funding increasing to £30 million by 2024-25. The department has provided £300,000 in funding to establish a maritime skills commission. It has also provided £100,000 to support the 1851 Trust STEM roadshows for girls, £40,000 to the Maritime and Me project and £40,000 to the Institute of Chartered Shipbrokers Trust.
The noble Baroness, Lady Northover, asked a number of questions. She will be pleased to know that I have answers but they are only semi to hand so, bearing in mind the time, I will write to her.
I hope noble Lords will agree that this is a small but significant step toward raising employment standards for seafarers working domestically in the UK. We are an island nation, yet we are often sea-blind to the seafarers who do so much to support our economy, as I said earlier. The UK has rightly been lauded for its support and compassion for seafarers not just in the UK but of all nationalities. The MCA and the Marine Accident Investigation Branch are recognised around the world for their high standards.
We are not standing still. People are an integral part of our Maritime 2050 strategy. We will continue to work closely with the sector to attract more people to it. Today, we announced that the UK Government will host the first international summit on the impact of Covid-19 on crew changes next month, bringing together UN, political and business leaders from across the globe. This will be led by the Maritime Minister, Kelly Tolhurst, and will be an opportunity to reflect on the impact of this dreadful pandemic on the global shipping industry and on what Governments and industry must do to protect the welfare of crew workers around the world.
On the question asked by the noble Baroness, Lady Burt, the UK has repatriated more than 7,000 seafarers from cruise vessels recently.
We have a long and important maritime history. I am sure that the UK will continue to play its part on the global stage.