Draft National Minimum Wage (Amendment) regulations 2021

(Limited Text - Ministerial Extracts only)

Wednesday 3rd March 2021 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

I beg to move,

That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2021.

It is a pleasure to serve under your chairmanship, Sir David.

The purpose of the regulations is to raise the national living wage and national minimum wage rates on 1 April 2021. The economic impact of coronavirus has been significant—the UK economy contracted by 9.9% in 2020. This recession has clearly been more severe than previous ones. However, effects on the labour markets have so far been muted. The latest Office for National Statistics headline estimate of the unemployment rate was 5.1% from October to December 2020, lower than forecasted, or than following the 2008 recession. That is partly due to Government intervention, including the coronavirus job retention scheme, which allowed workers to retain some form of attachment to a job. I am pleased that earlier today, the Chancellor announced that this scheme would continue until September, with some changes in the final months. That will bring businesses and workers much needed certainty.

The regulations will increase the minimum wage rates. We estimate this will give around 2 million workers a pay rise. I am delighted to say that we accepted all the recommendations made by the Low Pay Commission in 2020. The independent LPC brings together business and worker stakeholder views, supported by research and analysis, to provide their advice. I would like to state my gratitude for their work.

Low-paid workers have supported the country through these challenging times. The Government recognise that many businesses are also struggling during this crisis. The LPC sought to balance those needs against the wider economic conditions in its recommendations. Owing to this, the 2021 increase to minimum wage rates is smaller than previous years. We have concluded that these rates will give low-paid workers, who have contributed throughout this pandemic, a real-terms pay rise, recognising their contributions, without presenting a significant risk to employment prospects. Business stakeholders supported cautious increases to minimum wages. The regulations increase the national living wage by 19p to £8.91, and we are lowering the age threshold for the national living wage to 23. As a result, 23 and 24-year-olds will get a 71p increase. We are also increasing the rates for younger workers, apprenticeships and the accommodation offset.

This year, we are also making another change to minimum wage regulations to do with the records employers must keep to ensure compliance with the minimum wage. Currently, the records must be held for three years. We are extending that period to six years. This will align the time period for which an employer must retain records with the period of liability under the National Minimum Wage Act 1998, which is six years. I thank the hon. Member for Liverpool, Wavertree (Paula Barker), who introduced a private Member’s Bill on this issue; our discussions on that helped to formulate the change. Making that change will ultimately enable underpaid workers to receive the money they are owed as soon as possible.

Last year, we announced a target for the national living wage to reach two thirds of median earnings by 2024. The national living wage is also to apply to those aged 21 and over by 2024. Earlier today, as part of the Budget, we published the Government’s remit to the LPC for 2021. In this, we reaffirmed our commitment to those targets, recognising decisions continue to be dependent on economic conditions. We asked the LPC to provide its recommendations for rates to apply from 2022 this autumn.

The regulations ensure that the lowest paid workers are fairly rewarded for their valuable contribution to the economy during this crisis. I commend them to the Committee.

--- Later in debate ---

[Paul Scully]

I thank the hon. Member for Bradford East for his contribution to the debate, and I thank other colleagues for being here in a collegiate spirt to look at this important issue. The national minimum wage and national living wage make a real difference to millions of workers in this country, particularly during the current crisis. I am glad that he talked about apprenticeships, which are incredibly important to our recovery, as well about the prospects of young people, who have been particularly badly hit by this pandemic. I hope he welcomes the doubling of the apprenticeship payments to £3,000 for all new hires of any age, which was announced earlier by my right hon. Friend the Chancellor of the Exchequer, and the flexi apprenticeship scheme as well.

The hon. Member for Bradford East talked about the changes to the rates for younger people. Traditionally, we have looked at young people having more vulnerability in the employment market, but the LPC’s advice noted that, generally, employment transfers of workers aged 23 and 24 tended to be similar to those of workers aged 25 and over. That is why we have decided to cautiously expand the full rate to younger people.

Clearly, there is agreement that the lowest-paid workers in this country, who have contributed so much during this pandemic, deserve an above-inflation pay rise to protect their standards of living, which the regulations will provide. The policy of the national minimum wage was first announced in 2015, and workers will now be accumulatively £4,030 better off over each year compared with that point—a 33% increase. For the first time, the national minimum wage increases will benefit workers aged 23 and 24. We know that most businesses support increases in the minimum wage rates, and I am glad that we can bring businesses clarity by approving the regulations. I am also pleased that we are making changes to the record-keeping requirements for employers. That will improve our enforcement of the national minimum wage and ensure that underpaid workers receive the money that they are owed.

We committed to raise the national living wage to 60% of median earnings back in 2016. We reached that target with the increases in 2020. Although this year’s increases are more modest than in recent years, we remain committed to the target for the national living wage to reach two thirds of median earnings by 2024, provided that economic conditions allow. We will monitor the labour market closely and carefully over the coming months, to make the best decisions to support low-paid workers and their employers.

Again, I would like to thank the LPC for the substantial evidence gathering that it performs, and for providing well-reasoned recommendations. It reached a consensus agreement on its recommendations to the Government, and those increases balance the ambitions of the Government’s long-term target against current economic conditions. We look forward to receiving the LPC’s recommendations for 2022 later this year. I commend the regulations to the Committee.

Question put and agreed to.