Draft National Minimum Wage (Amendment) Regulations 2022
(Limited Text - Ministerial Extracts only)
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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 2022.
It is a pleasure to serve under your chairmanship, Dr Huq. The purpose of the regulations is to raise the national living wage and national minimum wage rates on 1 April 2022.
We should be proud of the labour market’s recovery from the pandemic. In the UK, the current number of payroll employees is over 400,000 more than pre-pandemic levels, while unemployment has fallen to 4.1%. That is in no small part down to Government intervention in protecting jobs and livelihoods, ensuring that businesses can get back to working with their customers, increasing footfall, and getting back to a sense of normality so that they can go through the gears. On the economic recovery, GDP recovered to the pre-pandemic level at the end of 2021 and increased by an estimated 7.5% over the year.
However, we are aware, clearly, that a key issue on people’s minds is the cost of living. We have already acted to support households with rising energy bills. We recently announced a package of measures worth £9.1 billion in the coming financial year, including a £200 reduction in energy bills and a £150 rebate in council tax bills for all households in bands A to D in England. That is in addition to measures already announced, such as the universal credit taper rate and freezing fuel duty for the 12th year running.
We are committed, in our recovery, to supporting the lowest paid. We cannot have a recovery off the backs of the lowest paid. Since 2015, we have increased the national living wage significantly faster than average wages, and more than twice as fast as inflation, meaning more money for the lowest-paid workers. An increase in rates this year will continue to protect the lowest paid against the increase in the cost of living.
The regulations will increase the minimum wage rates from 1 April. We estimate that that will give a pay rise to around 2.5 million workers, and I am delighted to say that we accepted all the rate recommendations made by the Low Pay Commission in October 2021. The independent Low Pay Commission brings together the business and worker stakeholder views, informed by expert research and economic analysis, and I am grateful for its well-informed recommendations and the work it has done to reach them.
We have set a target for the national living wage to equal two thirds of median earnings by 2024. When the Low Pay Commission made its recommendations last October, it took into consideration that target and the strong economic and labour market recovery—to that point—as well as the remaining uncertainty and feedback from the wide range of stakeholders it spoke to and engaged with.
We are pleased that the increase keeps us on track to reach the target for 2024, which we remain committed to. The LPC’s recommendations are based on significant stakeholder evidence from business, worker, and academic representatives. Businesses told it about the concerns they face, at this stage of the recovery, and how they continued to plan for the future, based on our target for the national living wage.
James Gray (North Wiltshire) (Con)
I thank the Minister for giving way. May I congratulate the Government on being able to increase the national minimum wage in this way? It is extremely good news. However, I feel that the figures, which the commission came up with, are a little odd. Would it not be easier, from the point of view of a worker or apprentice, if the figure was rounded, so they would know that they were getting £8.90 or £5.20—or whatever it might be—rather than these rather odd, random figures?
Paul Scully
The figures are based, as I said, first on the evidence, weighing the benefits for the lowest paid with the increased cost pressures on business. Of course, it is not only for the minimum wage or living wage itself, but pushing the differentials up for other people who are slightly further up the chain. I suppose that we could make the argument, “Do you want a rounded percentage or a rounded cost?”
Having had that evidence, there is then, effectively, a negotiation between the employers’ and workers’ representatives on the commission. They then come up with that recommendation, in between, of what they feel the economy can bear. It is not always rounded—clearly, that would be easier for everybody concerned—but we do not always allow perfection to be the enemy of the good. I think we have come up with something that is good for low-paid workers and for keeping to the manifesto commitment.
The national living wage for those aged 23 increasing by 6.6% to £9.50 is an increase of 59p. A full-time worker will be more than £1,000 better off over the course of the year. The regulations also increase the rates for younger workers and apprentices, and the accommodation offset, so workers aged 21 and 22 will receive an increase of 82p an hour to a minimum hourly rate of £9.18. Workers aged 18 to 20 will be entitled to an extra 27p an hour, taking their rate to £6.83. Under-18s will have an increase of 19p to an hourly rate of £4.81, and apprentices aged under 19, or those in the first year of their apprenticeship, will receive an increase of 11.9% to an hourly rate of £4.81—51p more.
I will announce another change to the regulations that we will shortly bring forward. Last year, we asked the Low Pay Commission to gather evidence on the use of the live-in domestic worker exemption to minimum wage entitlement, which exempts employers from having to pay the minimum wage to workers who live in the employer’s home and are treated as part of the family, such as au pairs. The Low Pay Commission heard evidence from au pairs, domestic workers, and agencies for those workers. The commission concluded that the exemption is not fit for purpose, and recommended that it be removed. We have accepted that recommendation, and will introduce legislation to remove the live-in domestic worker exemption when parliamentary time allows.
We have pledged to continue raising the minimum wage in the coming years. As I mentioned, our manifesto includes a target for the national living wage to reach two thirds of medium earnings by 2024.
Chris Stephens (Glasgow South West) (SNP)
The Minister talked a lot about consultation with business, but he will be aware that some businesses do not comply with the legislation. Can he tell us a bit more about that, what the Government are doing to invest to ensure that their national minimum wage compliance unit is fully staffed, and whether there will be any approach to increase staffing in that area?
Paul Scully
I thank the hon. Gentleman. Enforcement, which is covered by Her Majesty’s Revenue and Customs, is clearly really important. We work closely with HMRC to ensure that it is resourced to enforce in this area. We will also look at a single enforcement body, as part of our wider work. One of the things that it will look at, in a number of enforcement areas, is the national minimum wage and the national living wage. Clearly, that will bring even more experience and resource to bear for it to enforce in this area, along with a number of other areas that businesses may be encroaching on. That is really important, because if a business is falling short in one area there is every chance that it is falling short in other areas as well. By bringing those enforcement regimes to a single enforcement body, it will be more effective and efficient, and it will be able to drive out poor behaviour by employers.
We understand the difficulties faced by business, workers and consumers at the moment, and our targets remain dependent on the economic circumstances, but we will continue to monitor the labour market. The draft regulations ensure that the lowest-paid workers are fairly rewarded for their valuable contribution to the economy. We will continue to monitor the impacts of increasing the national minimum wage, and will remain abreast of concerns on the cost of living. We will shortly publish this year’s remit to the Low Pay Commission, asking it to provide recommendations for new minimum wage rates to apply from April 2023. In the meantime, I commend the draft regulations to the Committee.
Paul Scully
Thank you, Dr Huq, and I thank hon. Members for their contributions to this debate. The national minimum wage and the national living wage will make, and do make, a real difference to millions of workers across the country. The increase will be welcomed, I am sure, by the people who see a real, tangible benefit. Undoubtedly, as the hon. Member for Glasgow South West said, we have the ongoing cost of living issues, and we need to look at the measures in the round, but as you rightly say, Dr Huq, we do not want to go out of scope of the measure being debated. It is therefore important that in other debates we can look at support measures for everybody, but especially for the most vulnerable in our society. We can do that in other fiscal events and in other places, with other measures that we have. However, I am glad that there is agreement that the lowest-paid workers in this country deserve a pay rise, which will help to protect them from rising inflation and protect their standard of living.
This year’s change means that on 1 April, workers on the national living wage will be earning more than £5,000 more than they did in 2015, when the policy was first announced. Younger workers will also get more money through the increases to the other national minimum wage rates. There were a number of questions about the differentials between those. The apprenticeship figures were a lot higher because we are gradually aligning them with the under-18 rate, which was preannounced by the LPC back in 2020. It has given businesses the opportunity to become aware of that and to factor it into their cash flows, for the reasons that I have given.
Let me address the point about the differentials for people doing the same job—the example was flipping burgers. Young people have a competitive disadvantage when entering the labour market because of their lack of work experience, and because they have less knowledge of the area. They may have lower productivity while they are being trained and learning the job, and employers may need to provide additional training. Any minimum wage structure has to recognise and reflect that, because if we do not have that within the system, some employers may well be unwilling to give young people those critical first opportunities that are really important for them. None the less, we are starting to align more of the age group’s living wage to make sure that we can flatten it as much as possible, and we continue to monitor economic conditions.
We are indeed more cautious about increasing wages for younger people, but for the right reasons. We want to make sure that they get paid as much as possible, but we also want to make sure that they are in work. At the end of the day, the cost of living situation is far easier to face if people are in work in the first place, although it is still a challenge. What we do not want to do is to stifle our productivity. We do not want to stifle our recovery, which is one of the reasons why we have more people on payroll now than we did pre pandemic. That is a testament to our plan for jobs and growth.
The hon. Member for Ellesmere Port and Neston talked about enforcement and naming and shaming. Some cases can be incredibly complicated to go through and can involve quite technical breaches. None the less, it is right that we do not exclude companies from being named and shamed because of ignorance of the law, but it can sometimes take a while to enforce. Bear in mind that we paused the naming and shaming process throughout the early stages of the pandemic, and we are now effectively playing catch-up with some of those cases.
Justin Madders
I am grateful to the Minister for giving way. I appreciate that sometimes these things are quite technical, but it has been eight years. What is the reason why it has taken so long for some of the cases to be published?
Paul Scully
As I say, some of that was the pausing of the naming and shaming, and we are effectively playing catch-up on that.
On the percentage points that the hon. Member for Glasgow South West talked about, he asked whether I would write to him, but I recommend that he looks at the Low Pay Commission report, which details how the LPC came up with them. That content is already there. There are 400 full-time equivalents in the enforcement area of the national minimum wage under HMRC, but I will certainly look into the vacancies and fill in any more detail for the Committee in writing.
I think I have covered most of the points that have been raised.
Chris Stephens
I do apologise, but I think the only thing that has not yet been covered is whether the Government are keeping the minimum wage rates under review for the next year because of what is happening with the cost of living crisis.
Paul Scully
It is difficult to do mid-year, but there will be other fiscal events, and there are other areas of support for people during the cost of living crisis. At the moment, we are going through the process of setting the remit for the Low Pay Commission to consider. It is doing a lot of evidence work now. April and May are usually its busiest time for gathering evidence, which it then considers. The LPC effectively goes away on retreat in the autumn to have those negotiations, and we usually announce the figures in October so that they are ready to start in the next financial year. It is difficult to get something substantive mid-financial year, but, as I say, there is always scope for us to look at how we can work through the cost of living crisis and pressures, which will invariably increase.
We all know that with Putin’s war, he has inflicted misery on Ukraine, and it is right that we support Ukrainians and stand steadfast with them. Hon. Members will have seen the increase in sanctions this morning, and they will inevitably have an effect on us. That is the price we are paying for Putin’s war and for freedom, frankly, and we have to acknowledge and face up to that. We will certainly see what we can do in the round, whether it is on energy, inflation or supply chains. However, I am going slightly off on a tangent, and I do not want to push that too far.
Once again, I put on the record my thanks to the Low Pay Commission for the evidence gathering that it performs and the way it works to get a consensus between employers’ representatives and workers’ representatives, which is not always easy. The LPC believed that it would face a particular challenge this year, but it came up with a really good settlement that will benefit millions of people up and down this country. I am looking forward to receiving the Low Pay Commission’s recommendations for 2023 later this year, but in the meantime I commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2022.