Draft National Minimum Wage (Amendment) Regulations 2023
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I beg to move,
That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2023.
It is a pleasure to speak with you in the Chair, Mr Hollobone. The regulations will raise the national living wage and the national minimum wage on 1 April 2023. We remain proud of the strength of the UK labour market. There are now 1 million more people on payrolls compared with pre-pandemic levels, and demand for workers remains close to record levels. However, we recognise the continued impact of the cost of living pressures, which is why the Government have taken, and will continue to take, robust action to protect the most vulnerable in society.
The national living wage and the national minimum wage act to put more money in the pockets of the lowest-paid workers. This year will be no different, with the largest cash increase in the 24-year history of the minimum wage. We are also increasing benefit payments by 10.1%, in line with September’s consumer prices index inflation rate. Almost 12 million pensioners will benefit from the triple lock, as the state pension will also increase by 10.1%.
Our package of measures includes the energy price guarantee, which has saved a typical UK household around £900 since its introduction in October, and a series of cost of living payments worth hundreds of pounds for millions of eligible households on a means-tested basis. Our commitment to a high-skilled, high-productivity, high-wage economy will further address the cost of living, as well as level up every part of the UK and hasten the transition to net zero.
The regulations will increase the national living wage and national minimum wage rates and will come into force on 1 April. Following a comprehensive impact assessment, we estimate that they will give a pay rise to 2.9 million workers across the United Kingdom. I am pleased to confirm that the Government have accepted all the rate recommendations made by the Low Pay Commission in October. I place on the record my gratitude to the commission; I also gave my thanks personally in a meeting last week. As ever, it has worked tirelessly to bring together the views of business and worker stakeholders and remaining informed by expert research and analysis.
The regulations will increase the national living wage for those aged 23 or over by 9.7% to £10.42 an hour, which is an increase of 92p. After this year’s rise, the national living wage will have increased more than twice as fast as inflation since its introduction. The regulations will also increase the national minimum wage rates for younger workers and apprentices, as well as the accommodation offset. Workers aged 21 and 22 will receive an increase of £1, or 10.9%, to a minimum hourly rate of £10.18. Workers aged between 18 and 20 will now be entitled to an extra 66p an hour, taking their rate to £7.49, while the rate for under 18s will reach £5.28, which is a rise of 47p an hour. Those changes represent an increase of 9.7%.
Apprentices aged under 19 or those in the first year of their apprenticeship will also receive an increase of 9.7%, as their rate rises from £4.81 to £5.28. Meanwhile, the accommodation offset, which is the maximum daily amount that an employer can charge a worker for accommodation without it affecting their pay for minimum wage purposes, will increase by 4.6%, from £8.70 to £9.10.
The Government have continued to take action to fulfil their manifesto commitment to enhance the rights of workers and support people to stay in work. We are backing six private Members’ Bills in this Session to deliver on our commitments. Once passed, those measures will ensure that all tips, gratuities and service charges are allocated to workers; create a statutory entitlement to neonatal care leave for workers with caring responsibilities; protect workers from redundancy during or after maternity; and grant workers the right to request flexible working from day one.
Andy McDonald (Middlesbrough) (Lab)
On the right to request flexible working, what happens when the employer says no?
Kevin Hollinrake
The employer can say no when they have considered the request properly, and they need to set out their reasons. It is important to note that there are eight different business reasons. We want to ensure that businesses can also cope with the six new key measures, as well as the £2.5 billion of extra cost for business organisations throughout the country, of the national living wage increases. We want to ensure that any burdens that we place on businesses are proportionate, and a right to request delivers that balance.
Andy McDonald
If the answer is no because the business is exempt through the various ways to get out of it, what is the cost?
Kevin Hollinrake
I do not quite follow the hon. Gentleman, but according to our research 83% of flexible working requests are granted. The right to request flexible working, which is not related to the regulations, creates the opportunity for a conversation between an employer and worker about flexible working. That is its purpose. I understand that the hon. Gentleman would want to put a burden on business—I suppose he is saying there should be a right to insist—but we think that would go too far.
We are also looking to grant workers, including agency workers, the right to request more predictable terms and conditions of work. The private Members’ Bills will further strengthen our flexible and dynamic labour market and ensure that businesses have the confidence to create jobs and invest in their workforce, which will allow them to generate long-term prosperity and growth.
The Government set the ambitious target for the national living wage to equal two thirds of median earnings by 2024, provided that economic conditions allow. We remain committed to that target, and this year’s increases keep us on course to reach it. We also aim to further reduce the age threshold for the national living wage so that it will apply to those aged 21 and over by 2024.
We recognise that this is a difficult time for many businesses, workers and consumers, and we know that sustainable rises in the minimum wage rates depend on the wider economy. In making its recommendations, the Low Pay Commission will continue to take the wider picture into account, alongside extensive stakeholder engagement. I thank the commission for making additional recommendations relating to the accommodation offset in its recent report. We are considering them carefully and will respond in due course.
The regulations aim to protect the lowest-paid workers across all sectors and regions and reward them for their contribution to our economy. I commend them to the Committee.
Kevin Hollinrake
I thank hon. Members for their valuable contributions during today’s debate. As has been pointed out, these rises are more important than ever in the context of the continued high inflation and cost of living pressures. I am glad to see cross-party agreement—largely—on the issue.
A number of points were raised, principally by the shadow Minister, the hon. Member for Ellesmere Port and Neston. When the Low Pay Commission made the recommendation of 9.7%, which we fully accepted, inflation was at 8.9%, so the rise was greater in most cases than inflation at the time. As the hon Member for Ellesmere Port and Neston knows, this Government are committed to halving inflation by the end of the year, so lots of people who received those high pay increases, in percentage terms, will benefit even more as a result of reduced inflation and a growing economy. Creating more jobs is very important and eventually leads to high wages, as my hon. Friend the Member for Basildon and Billericay pointed out.
Justin Madders
I am grateful to the Minister for explaining that the Low Pay Commission recommended an above-inflation pay rate. We often hear from Ministers that one reason that they cannot accede to pay demands from various public sector unions is that anything approaching the inflation rate would boost inflation even higher. Does that not apply in this situation?
Kevin Hollinrake
No, because this applies to a much smaller cohort. If the hon. Gentleman is proposing that we pay everyone across the public sector an inflation pay increase, which I guess he is from his comment, he has to explain to the taxpayer how we will raise that £28 billion a year, because that is what it would cost. Obviously, the Low Pay Commission works with employer groups, but it also works with business groups, other stakeholders and other employers to try to strike a balance between what is affordable for employers and what is an appropriate rise for those at the bottom of the income scales.
The hon. Gentleman asked about our ambition to get to two thirds of the median salary by 2024. That is certainly what we believe to be attainable, and it remains our target. With the growing economy that we expect to see by the end of the year, the economic context will be a lot brighter than it has been over the last few months.
On age limits, the hon. Gentleman is right; our ambition is to lower the age limit in terms of access to the national living wage, as we did from 25 to 23 in 2021, based on the Low Pay Commission’s recommendation. We are hoping to lower it to 21 by 2024. Part of the reason that it is lower—other Members asked the same question—is that there is no doubt that there is a greater vulnerability for young people. Unemployment levels tend to be higher in these lower age groups and it is important that we do not price people of low age out of the market. That is probably why Labour had different rates for 18 to 21-year-olds when it introduced some of these provisions when it was in government.
Let me turn to zero-hours contracts. Only 3% of the population is on a zero-hours contract. Sixty-four per cent. of those people do not want more hours, so the contracts kind of work for both sides, but we recognise that there is an issue with exploitation in some situations and we are trying to create the conditions for a conversation between employers and employees while not putting too great a burden on employers. That is why we are legislating for a right to request predictable hours. We have already legislated for things such as exclusivity clauses, which are not allowed for zero-hours contracts. For those below the lower-earnings limit, there cannot be an exclusivity clause in a zero-hours contract.
On compliance, the hon. Gentleman was absolutely right. It is very important to us, which is why we have doubled enforcement since 2015. I have met His Majesty’s Revenue and Customs team to discuss that. I welcome the fact that they have put £100 million back in the pockets of lower-income workers since 2015 through their excellent work. The care sector is one of the sectors they look at all the time, and there was no differential between it and any other sector. As far as employment law is concerned, travel time to appointments should be covered within employment law when it comes to calculating the national minimum wage or national living wage.
We believe that internships should be paid positions and should be subject to the national minimum wage or national living wage, and that trial shifts should be no more than a few hours.
Andy McDonald
I did not quite catch what the Minister said about travel time. Is he saying that care workers should be paid the same hourly rate when they are travelling between domiciliary appointments—paid at the full rate, effectively? Is that his position?
Kevin Hollinrake
Travel to appointments certainly should be calculated under national minimum wage levels. That is our position under employment regulations.
The hon. Member for Ellesmere Port and Neston was right to point out that we have not named and shamed for some time. I am very keen—I have had conversations about it today—to do that as soon as possible. We hope to have some news very shortly about a list of people who have not adhered to our national living wage requirements.
We are still looking at the best way to create a single enforcement body and whether it is right to do so given parliamentary time. We also do not want to increase the costs of enforcement. I work closely with the director of labour market enforcement to ensure that she has all the measures at her disposal and that there are no gaps in enforcement between different areas.
My hon. Friend the Member for Basildon and Billericay is right that research and development leads to higher productivity, higher wages and higher growth. I support that 100%. He was the only speaker other than me to point out the cost to business of these measures, and it is disappointing that the contributions of Opposition Members did not point out that business has to bear this cost, which is about £2.5 billion for employers annually. He also raised the very important point about corporation tax. Under the new rules, 70% of businesses will not pay additional corporation tax, because there is a small profits rate. Indeed, in my 30 years in business, when corporation tax was at similar levels, I cannot think of a time when our boardroom considered not investing. Given a higher level of corporation tax than we see today, we still felt that we could invest. I understand my hon. Friend’s points, and I am sure that he will make them to the relevant Department, which is of course the Treasury.
The hon. Member for Glasgow North talked about whether the rise is sufficient for low-paid workers, and I understand his point. I urge him, as I said before, also to consider employers in this conversation. We have to ensure that we do not raise the national living wage too quickly, which would cause problems for employers. That could be detrimental to the labour market generally and could have difficult consequences for some people who work in these kinds of jobs.
I am a big fan of the Living Wage Foundation, and it is absolutely right that we want the national living wage to increase. The gap between the Living Wage Foundation level and the national living wage is narrowing, and the Living Wage Foundation has always been keen to point out that its campaign for the national living wage is about trying to encourage employers to pay higher wages on a voluntary rather than a coercive basis.
From April, a full-time worker on the national living wage will earn over £6,700 more before tax than in 2015, when the policy was introduced, while younger workers and apprentices will also benefit from large rate increases across the board. This package of measures will have a huge, positive impact on the lives of millions of people. It should also serve as a reminder of the progress that can be made when Members across this House work together. 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 2023.