(5 days, 16 hours ago)
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The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
I beg to move,
That the draft National Minimum Wage (Amendment) Regulations 2025, which were laid before this House on 4 February, be approved.
The purpose of the regulations is to increase the national living wage rate and the national minimum wage rates on 1 April 2025. The regulations were laid in draft before Parliament on 4 February and approved by the other place on 17 March.
The Government are committed to making work pay. The plan to make work pay will tackle the low pay, poor working conditions and poor job security that have been holding our economy back for far too long. Earlier this month, the House approved passage of the landmark Employment Rights Bill, which will benefit more than 10 million workers in every corner of the country and deliver the biggest upgrade to workers’ rights in a generation. Some aspects of the Bill and accompanying legislation and guidance will not come into effect for some time as the Government continue to engage with stakeholders, businesses and trade unions on its implementation. When we took office last year, however, we committed to taking immediate action where we could, and on the minimum wage we have done so.
One of the proudest achievements of the last Labour Government was the creation of the national minimum wage, which eliminated the extreme low pay that was blighting our country. We are proud to say that one of the first actions taken by this Labour Government within a month of last year’s general election was to overhaul the remit to the Low Pay Commission. For the first time, the remit now explicitly includes the cost of living as one of the key factors to be considered when making national living wage recommendations. We have begun the journey towards creating a genuine living wage, as well as extending that to all workers aged over 18 by moving towards a single adult rate.
Before turning to the precise details of the regulations, I want to extend my thanks to the Low Pay Commission. The commissioners and their officials have worked diligently and efficiently, particularly after the updates to the remit were made, and we were pleased to accept all their recommendations. That is testament to their social partnership model and expert analysis and engagement, which ensure that the Government can deliver on their ambitious agenda, but without adversely impacting on businesses, the labour market or the wider economy.
Turning to the detail of the regulations, which, after parliamentary approval, will take effect on 1 April, the national living wage rate, which currently applies to workers aged 21 and over, will increase from £11.44 to £12.21. That represents a rise of 77p or 6.7%, which is well above all measures and projections of inflation, therefore delivering real terms pay increases to an estimated 3 million workers.
We will also be delivering large increases to the other national minimum wage rates. The 18 to 20-year-old rate will increase by £1.40 from £8.60 an hour to £10 an hour. That is a record 16.3% increase for that age group. It means that a full-time worker on the 18-to-20 minimum wage rate will see their gross annual earnings increased by around £2,500 a year—a well-earned pay rise and a significant step towards parity with the headline rate. The national minimum wage rate for 18 to 20-year-olds will be equal to 82% of the national living wage in 2025, compared with 75% in 2024.
The minimum wage rate for workers above school leaving age but under 18 years old will increase from £6.40 to £7.55 an hour—a large rise of £1.15 or 18%. The same rise will apply to the apprenticeship minimum wage rate, which applies to apprentices aged under 19 or in the first year of their apprenticeship. Finally, the accommodation offset rate, 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 6.7%, or 67p, to £10.66.
I draw Members’ attention to the comprehensive impact assessment, which the Department published alongside this legislation. As they may have noted, the impact assessment, which includes an equalities assessment, has received a green fit-for-purpose rating from the independent Regulatory Policy Committee. As I have touched on, we estimate that the increases to the minimum wage rates will deliver a direct pay increase for over 3 million workers, while an additional 4 million could benefit from the positive spill-over effects. The minimum wage has greatly reduced pay inequality in the UK, with the share of low-paid jobs in hourly terms estimated at 3.4% in 2024. That is a record low, and down from 21.9% in 1999.
But the work does not stop there, as we continue to build towards a genuine living wage and the extension of eligibility to workers aged between 18 and 20 by ending the discriminatory age bands. To that end, we will publish in due course a fresh remit to the Low Pay Commission, asking it to recommend minimum wage rates to apply from next April. As part of this, the Low Pay Commission will consult about the appropriate trajectory towards the single adult rate as we ensure that this is delivered without adverse impacts on youth employment as well as participation in training and education. Like the previous Labour Government, with their creation of the minimum wage over a quarter of a century ago, this Labour Government will be proud to leave a profound legacy for workers’ rights, because we are making work pay and we are proud to make more progress on this by supporting this instrument today. I commend the regulations to the House.
Dame Harriett Baldwin (West Worcestershire) (Con)
I rise to say that we will not oppose the increases to the national minimum wage or the national living wage—the national living wage being something that my party introduced to make work pay. We celebrate the fact that progress was made in ending low pay, and the Minister cited that from the Dispatch Box this evening. But it is also our duty, as His Majesty’s official Opposition, to scrutinise the Government on all matters, so I have several questions for the Minister this evening.
In particular, I want to highlight the fact that the work that the Low Pay Commission has done—for which I also thank it—was done before the Hallowe’en Budget of broken promises last October. After the increases to the national living and minimum wages in the Budget—but also measures such as the increase to national insurance—the Unison assistant general secretary Jon Richards welcomed the increase to the pay measures but said that
“as it stands, the new legal minimum is more than the current lowest hourly rate in the NHS, universities and some other public services. This will give employers multiple headaches.”
So my first question is: what will the Government do to address the pay implications of this rise on those working in the public sector in such important roles?
The second question relates to the national minimum wage for workers above school leaving age but not yet 18 going up by nearly 18%. On 1 April this year, the national insurance threshold for employers drops to £5,000 per year. This means that an employer will have to start paying national insurance on any young person if they work for 13 or more hours a week. Because of this, businesses have warned that they are cutting back on hiring younger workers or reducing the hours that they give to them. That risk, of course, is faced not solely by those in work, but by those seeking to get into work. What assessment has the Minister made since the Hallowe’en Budget of the impact of the increase on young people’s ability to access jobs? What will the Government do to ensure that young people or those looking for a job will not be penalised by this increase?
The increase will significantly affect small and medium-sized enterprises. As usual, it looks like they will bear the brunt of the increased labour costs. It looks that way not just to us; according to the Government’s own impact assessment, SMEs will face 56% of the cost of the increase despite representing only 37% of the share of employment. That is another cost increase on smaller businesses, which already have to pay for this Government’s national insurance jobs tax, for the hike in business rates, and for the impact of the measures from the Employment Rights Bill. In particular, businesses in the retail, hospitality and leisure sector are most likely to pay the minimum wage.
I remind the House that the Government’s own impact assessment states that they expect the policies covered within the Bill to impose a direct cost on businesses of up to £5 billion a year. It also notes that, on average, those costs will be greater for those smaller businesses and microbusinesses. Will the Minister provide the House with a figure for the total cost increase of employing someone full time on the previous national living wage because of the other changes introduced by his Government?
The Government have created a challenging business environment. They recognised that themselves when they stated in their impact assessment that
“there is some evidence of challenging business conditions for SMEs”.
Around 42.7% and 36.8% of microbusinesses and small businesses respectively reported having less than three months of cash reserves in September 2024. We support the principle of fair pay for workers and making work pay. However, having listened to businesses, we are concerned that the rises could impact workers and businesses in industries already facing financial challenges through a range of unintended consequences.
It is easy for those in Whitehall to squiggle their pen, but all those measures combined have real-life consequences for businesses across the country. The national insurance jobs tax and the Employment Rights Bill are piling additional costs on to businesses and hammering the private sector, which we rely on to grow the economy.
In summary, have the Government considered the full impact of all these increases on businesses that are happening at the same time? I fear that tomorrow’s emergency Budget will be another wakeup call.
Yuan Yang (Earley and Woodley) (Lab)
We have heard how the rise in the national minimum wage will deliver a direct pay increase for over 3 million workers. For the first time in history, the minimum wage in this country is being linked to the true cost of living, beginning the journey of making it a genuine living wage. We can take from history a wealth of economic evidence on the positive impacts of minimum wages, which shows they lead to overall rises in pay with no significant impact on employment.
Although I take on board the questions of the hon. Member for West Worcestershire (Dame Harriett Baldwin), and I appreciate her contributions as a fellow Treasury Committee member, studies have shown time and again that while similar concerns echoed throughout the ’80s and ’90s, the overall outcome of increasing the minimum wage is simply that: an increase in pay with no significant impact on employment.
Mark Ferguson (Gateshead Central and Whickham) (Lab)
Does my hon. Friend agree that many of the concerns shared by the Conservatives are the same as those raised at the time of the introduction of the minimum wage?
Yuan Yang
Yes, that is the case. We have heard such concerns raised throughout history, yet when we look at econometric evidence that looks in hindsight at the actual impact on the economy, we see that there is no discernible impact.
I will whizz through a few different studies. In the United States there is David Card and Alan Krueger’s study, based on the 1992 increase in New Jersey’s minimum wage, the 1988 rise in California’s minimum wage and the federal minimum wage increase the following year. In the European Union there is Tomas Kucera’s 2017 study from 18 countries. In the UK there is Christian van Stolk’s 2017 study. We can go on and on about the evidence, but we can see from the trends that, although these concerns have been raised over time, the outcome is increases in the minimum wage, which is what we are seeking to ensure.
Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)
Does my hon. Friend agree that these uplifts are a huge boost for equality, because they benefit women, younger and older workers, workers with disabilities and those from minority ethnic backgrounds more than others?
Yuan Yang
I absolutely agree. As the Women’s Budget Group has shown, the measures on the minimum wage in the Employment Rights Bill will disproportionately benefit female workers, who are likely to be paid less than men.
These studies on the minimum wage use econometric methods to confirm what many of us can see in our communities at first hand: that too many people have too long been due a pay rise, and when we make the lowest paid better off, that spending goes back into our high streets and local economies. I would like to see even more studies done, producing better data. That must start with improvements to the labour force survey, which the hon. Member for West Worcestershire and I have discussed on the Treasury Committee, as many organisations have flagged that data as an area of concern.
Today I want to focus on one particular group of low-paid workers who are very significant for me and my constituency of Earley and Woodley: young people. There are around 13,000 undergraduates at the University of Reading, which sits in my constituency, who will be better off because of this new law that raises the minimum wage for 18 to 20-year-olds to £10 an hour. It will mean a record wage boost for that age group, who will see their gross annual earnings rise by £2,500, and for apprentices, too, who are the skilled workers of tomorrow.
I support the Government’s youth guarantee, to ensure that all young people are in education, employment or training. The King’s Trust has found that one in 10 young people outside of education, employment or training have turned down a job because they could not afford the costs associated with it—for example, travel, clothing or childcare. For many young people, a barrier to employment is that it does not pay well enough for them.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
My hon. Friend is making an excellent speech. I was concerned by what I think I heard the hon. Member for West Worcestershire (Dame Harriett Baldwin) say about the rate at which the living wage is paid to young people, almost advocating for a reduction in that rate because of the impact it would have on business. Does my hon. Friend agree that is a rather regressive view, given that what young people need is the ability to pay their bills, live a life they enjoy and build a home for themselves in the future?
Yuan Yang
I very much agree with that sentiment. Young people are the future, and to ensure they get off to the best possible start in life, they need work that pays and enables them to live in stability, not concerned about paying the bills from day to day or month to month.
Most young people nowadays have to do a mixture of work and education or training to make ends meet. More than half of full-time students were working long hours in paid jobs in 2024, which is a significant rise from 2021, during the pandemic, when two thirds had no term-time employment. That has been driven by the escalating cost of living for young people, and especially rises in rent.
I want to quote a constituent of mine called Poppy, who is 20 years old and studies at the University of Reading. She says:
“Working part-time was never optional but rather a necessity... With my wages being so low…I found myself working 20-25 hours a week—leading me to miss some lectures and seminars throughout the month”.
I want to ensure that young people such as Poppy are able to study without worrying about how they are going to pay their bills. We also know that young people are less unionised, which means they have less bargaining power and less ability to fight against unfair terms or ask for pay rises, so it is even more important that we support them by raising the minimum wage.
In conclusion, it is essential that we make work pay, for the sake of our high streets, our living standards and our future—our young people. Poppy said:
“I personally cannot wait for the new minimum wage increase in April as it means I should be able to reduce my hours at work, giving me more time to focus on my studies”.
For people like Poppy, in my constituency and across the UK, the new deal for working people is transformational, and I am very glad to support today’s motion.
Madam Deputy Speaker (Judith Cummins)
I call the Liberal Democrat spokesperson.
Sarah Gibson (Chippenham) (LD)
Let me begin by thanking the Government for laying this important statutory instrument. The Liberal Democrats welcome this uplift in the minimum wage. We all have constituents who we know are struggling to make ends meet. Nobody should be in a position where they cannot pay their bills despite being in employment. I am particularly pleased that apprentices and those under 18 will benefit from increased pay under this instrument. In a few weeks’ time, I will join Wilshire College students and businesses across my constituency at a careers fair, and this will be an important piece of legislation to share with them.
My constituency is rural, and many of the people I represent are elderly and depend on the social care system to stay independent. Unfortunately, they are struggling to get the care they need and deserve, in part because care workers are not being paid properly. If we paid care staff more, we might encourage more people into that hugely understaffed sector. In south-west England alone there are 13,000 vacant jobs, and in a rural constituency such as mine, where public transport is expensive and unreliable, care staff are not compensated for their travel time, and they often end up bringing home less than the minimum wage. While I share the official Opposition’s concern about small businesses, of which my constituency has a huge number, it is important that low-paid workers earn enough to live, especially our young people and women.
If the Government were to adopt the Liberal Democrat proposal for a carer’s minimum wage, which would see carers receive £2 more per hour than the current minimum wage, a staggering 850,000 care workers across the UK would benefit from that increase in pay, and over 80% of them would be women. We understand that the carer’s minimum wage is not a silver bullet, but it is serious proposal that could make a big difference to patients and families across the country. Although the Liberal Democrats support increasing the minimum wage, it is a shame that this statutory instrument does not go further and give weight to that proposal.
Liz Twist (Blaydon and Consett) (Lab)
I draw the House’s attention to my entry in the Register of Members’ Financial Interests: I am a member of the Unison trade union.
When the national minimum wage came into force on 1 April 1999, I was working as a trade union official in Unison’s northern region, representing many low-paid members of staff who were working in social care and other sectors in the north-east, and with colleagues in the TUC, who in many cases were on even lower wages. That fantastic achievement came after 30 years of fighting in the face of huge opposition at the time from the Conservative party, but after 26 years of the national minimum wage, I think we can say that the argument has been definitively won—so much so that there are Members of this House who have never known a time without a statutory minimum wage.
On 10 April 1999, I was proud to don a high-vis vest and join my trade union colleagues and Members on a march across the Tyne bridge from Gateshead to Newcastle. That was part of the campaign for a living wage to celebrate the introduction of the national minimum wage, and to argue for it to be improved. We were led by the then general secretary of Unison, Rodney Bickerstaffe, and I well remember a photograph in our local newspapers as we prepared for the march, with an AA sign directing traffic that said, “Campaign for a living wage—long delays expected.” Well, we have continued to campaign for a living wage since that time.
I am so glad to speak here today, with a Labour Government again in power, making real progress towards a real living wage. The changes we are making with this legislation will mean a direct, real-terms pay increase for over 3 million workers. That includes steps towards a single adult rate, with a record increase in the minimum wage for 18 to 20-year-olds, amounting to £2,500 per year, as well as directions to the Low Pay Commission to look at the cost of living in its future decisions.
Back in 1999, when the national minimum wage was first introduced, it made such a difference to so many people in the north-east. Similarly, I know that the legislation we are passing today will make a huge difference to my constituents.
Let me be clear that my ambition is for good, well-paid jobs for people in the north-east. My constituents and people in our region deserve decent pay and secure work, and I will continue to work towards that. Meanwhile, for those on minimum wage, this legislation will mean more money in their pay packets, which is a real Labour achievement. Taken with our Employment Rights Bill, that means there will be a real shift for working people across the country and in my region.
Chris Law (Dundee Central) (SNP)
Increases to the national living wage and national minimum wage will always be supported by Scottish National party Members. Indeed, we have been pushing for the UK Government to adopt the real living wage for those of all ages since 2011. Disappointingly, we have to continue to do so, as the Labour party has failed to take the opportunity to do that, now that it is in government.
While we support the changes that are being introduced today, the SNP’s position is clear: we want the real living wage for all workers, not just a politically convenient definition of the living wage that falls short of meeting the actual costs of living, and not just for those who are 21 and over. The Resolution Foundation has the real living wage set at £12.60, whereas this regulation increases the national living wage for workers aged 21 or over from £11.44 to £12.21 per hour. It is evidently still short of where it needs to be.
Furthermore, for those aged between 18 and 21, the national living wage is 18% lower, at £10 per hour. Given that the Minister today said that there would be a consultation looking at the cost of living, can he tell me if rent is 18% lower for those under 21? Do 18-year-olds get a special rate on their electricity bills, or on petrol for their car? Do supermarkets give them an 18% discount?
Chris Law
I will not, as I would like to make this point very clear, because it is important. The answer to my questions is obviously no. While I welcome the Minister’s comment that the national living wage may be looked at next year, and may be increased so that there is parity for everybody, we are not there yet. I would like the Government to go further, and I look forward to hearing more about how they will consult on doing so next year.
It is worth noting that in Scotland, the SNP Government have taken proactive steps to ensure that the real living wage is implemented wherever we have control, particularly in our public sector. The Scottish Government have paid all staff within their pay scheme, including NHS staff, the real living wage since 2011—that is 14 years ago. Scotland has the highest proportion of employees paid the living wage of any nation in the UK, with 25% of accredited real living wage employers in the UK based there. The Scottish Government are also providing funding to enable adult social care workers to be paid the living wage, benefiting up to 40,000 care workers, and they are working to ensure that all staff in private nurseries delivering our childcare pledge are paid the real living wage, too.
The Labour Government should demonstrate similar willingness to tackle the scourge of low pay. In their manifesto, they pledged to make changes in line with the real living wage, and to take into account the cost of living, but they have failed, at least today, to do so. They were voted in with a mantra of change, and it is in their power to legislate for the introduction of the real living wage for all, but so far, they have chosen not to. They must go further and adopt the living wage for people irrespective of their age, as the SNP has called on successive Governments to do for the past 14 years.
Sally Jameson (Doncaster Central) (Lab/Co-op)
I draw the House’s attention to my entry in the Register of Members’ Financial Interests and to my trade union membership.
I welcome today’s move by the Government to bring a record pay boost of around £1,400 to over 3 million workers. The measures will also mean a record wage boost for 18 to 20-year-olds, who will see their gross annual full-time earnings rise by £2,500. For apprentices, the skilled workers of tomorrow, there will be a boost of 18%, so that they can learn their trade with better financial security. Why is all of that important? Because when I visit food banks in my constituency in Doncaster, I have been saddened to learn that some of the people accessing those services are in work, yet still cannot make ends meet. For too long in this country, work has not paid, but with this legislation, that will change.
We hear a lot about the tough choices that this Government have had to make after the 14 years of Conservative Government, whether because of the Conservatives’ disastrous mini-Budget, which left mortgages soaring; the neglect of our prisons, which were allowed to fill up to the point of collapse; or the lack of investment in our NHS. This Labour Government have taken a number of very difficult decisions to get our country back on track, but I can tell hon. Members that it has not been a tough choice to give millions of workers a pay rise. It has not been a tough choice to ensure that our apprentices have better financial security—in fact, it is a choice that I am proud to make; it shows that this Government value workers across the country and value the working contribution of young adults from the age of 18. This measure, along with our landmark Employment Rights Bill, will mean that it will once again pay to work in this country, and secure employment will be the foundation of the British economy, which will be strong going forward.
Richard Foord (Honiton and Sidmouth) (LD)
The increase in the national minimum wage in the next fortnight is very welcome. Nobody in work in this wealthy country of ours should be struggling to make ends meet. While that uplift is a step in the right direction, it does not address the challenges that we face in social care, both nationally and in Devon, the area that I know best. Devon has 28,000 filled social care positions, but 2,000 positions remain unfilled, and I am very concerned about that shortage in the workforce. It partly explains why people are going without care, and why our hospitals are struggling to discharge patients.
Deirdre Costigan (Ealing Southall) (Lab)
I take the hon. Member’s point about the social care sector. Does he therefore welcome Labour’s Employment Rights Bill, which includes a negotiating framework for our social care staff, to ensure that they are properly paid and can progress in their jobs?
Richard Foord
I think a negotiating framework might be helpful, but a lot will depend on the negotiations. It would be far better if the Government looked at the minimum wage, sector by sector, and identified social care as a special case.
The turnover rate for social care staff in Devon is 27%. That is not only higher than the national average, but roughly double the figure for other sectors. That is why I want a separate, higher minimum wage for social care. A striking 16% of social care workers cited low pay as the primary reason why they left the job. Many of them are simply not paid enough for the skilled, difficult and vital work they do, and many are earning more by moving into jobs such as stacking supermarket shelves—important though that is—than by doing the vital work of social care. In a rural county such as Devon, people have to travel long distances between the people for whom they care, which sometimes means that their real income is less than the national minimum wage.
We in Devon are looking at a shortage of social care beds. Devon county council projects that by 2027, Devon will face a shortfall of 270 care home beds for older people with complex needs. Looking further ahead, the situation gets worse. By 2033, in Honiton, the unmet need will be 72 care beds; in Cullompton, the need will be 79 care beds. In Seaton and Ottery St Mary, an additional 40 care beds will be required by then.
The shortage of facilities in mid and east Devon makes it plain that even more care workers will be required to meet the growing demand for social care. That is why the Liberal Democrats are calling for the introduction of a carers’ minimum wage, £2 per hour more than the minimum wage. Of course, that funding cannot come from thin air. According to Skills for Care, increasing pay by between £1 and £2 per hour above the national minimum wage for care workers could save up to £947 million from reduced hospital admissions, but there would need to be some funding up front to make that happen. I suggest that the remaining funding comes from an additional tax on the gambling industry, which, according to Public Health England, costs the UK economy about £1.4 billion annually due to the financial, physical and mental impacts of problem gambling and the resulting crime and loss of productivity.
According to the Gambling Commission, 300,000 adults and 40,000 children in the UK suffer from problem gambling. It is not an industry that we should be incentivising through low taxation. Doubling the remote gaming duty is recommended by the Social Market Foundation. That would not only address the harms of problem gambling, but be a fairer way of funding that £2 per hour increase above the national minimum wage for social care workers.
It is time that the Government acted to ensure that those who profit from gambling contribute more to the public good. Increasing pay for the lowest-paid social care workers is a simple, effective step to attract and retain staff, and ensure that people in our communities receive the care that they require. I support the national minimum wage increases, but we must go further and pay our social care staff more, recognising their vital role in looking after the elderly and vulnerable.
Alan Strickland (Newton Aycliffe and Spennymoor) (Lab)
I strongly welcome the proposed increases to minimum wage rates, which will help people of all ages across all communities in our country. There is a particularly welcome boost for apprentices, who are the future of our economy. Those increases will make a real difference to people in my constituency and across our great nation, for three reasons.
First, as colleagues have said, we must make work pay; that is vital for the health of our economy. It is crucial that we ensure that those who contribute to our economic growth, deliver services in our communities, and manufacture the goods that we need are fairly rewarded, but for too long, that has not been the case in my constituency, or in other areas. Between 2014 and 2022, salary growth in County Durham was among the lowest in the United Kingdom, increasing at less than half the rate of the growth in regions such as London. To tackle these issues, we need to drive economic growth in regions like mine, but we also need clear action to ensure that those on the lowest wages see the growth in their pay that they deserve.
Secondly, it is crucial that we tackle the cost of living crisis. In the two and a half years I spent campaigning as a Labour candidate before being elected to this House, the cost of living crisis was raised with me time and again. Family after family has been hit by rising bills but flatlining pay. That issue affected my local residents particularly acutely, because median weekly pay for those in full-time work in my constituency is £150 less a week than the UK average—that is £600 a month less to pay the bills and make ends meet. That is why it is so vital that this time, the Government have taken the cost of living into account when setting minimum wage levels.
Thirdly, we must support growth. If we are to grow our economy, routes into work—including apprenticeships, entry-level jobs and other routes into starting a career—must be attractive. A key part of that is having pay levels that reward those going into work and incentivise participation in the labour market. For young people in my constituency, getting a job with decent pay has too often meant moving away from the town they grew up in. That is another reason why this direct action to tackle low pay is so important. As the representative of a constituency with a significant history of manufacturing, including modern manufacturing, such as in the fantastic Hitachi trains factory, I particularly welcome the wage increase for 18 to 20-year-olds, and for those on apprenticeships. It will ensure that young people going into work, who are the future of our country’s manufacturing sector, are paid properly, and that a secure future is possible locally.
I came into politics to make a genuine difference to the people of my home town of Newton Aycliffe, the wider constituency, and our country. Increasing the minimum wage is one way to do that, putting more money into the pockets of 3 million of our citizens. That is the difference a Labour Government make.
Rosie Wrighting (Kettering) (Lab)
This Government have made a solid commitment to make work pay and put more money into working people’s pockets. In my constituency, we have a large number of distribution jobs, and as a result of this Government’s actions, people in Kettering on the minimum wage will have more money in their pockets to last them through to the end of the month.
Having spent my career in business, I know how important it is for businesses to have a productive, motivated workforce with minimal turnover. That benefits not only businesses but workers. In Kettering, it means that people earning a decent wage will spend their money supporting our local economy. It is shameful that the Conservative party let this country get to a place where people who work full time are queuing at food banks to feed their family. The uplift in the national minimum wage is a huge part of the national renewal that Labour has promised this country, and will mean a pay increase for 3 million people in Kettering and across the UK.
Young people in my constituency deserve a minimum wage that reflects the work they do. I speak to many 18 to 20-year-olds in Kettering who face the same financial pressures as adults older than them. One of the best things about my job is visiting many schools and colleges across my constituency, where young people talk to me about their plans for their future. This uplift will mean a wage boost of 18% for apprenticeships in Kettering, so that we can incentivise young people to see apprenticeships as a financially viable option and start to fill the skills gaps that businesses across the UK face after 14 difficult years under the Conservatives.
The last Labour Government brought in the national minimum wage, and it is this Labour Government who will secure Britain’s future and make work pay.
David Pinto-Duschinsky (Hendon) (Lab)
I start by declaring an interest as a proud member of the GMB and Unison unions. This is a debate about four numbers: 3 million, £1,400, £2,500 and 10 million. Three million is the number of people who will benefit from the fantastic measures being announced today; £1,400 is how much they will benefit—a real life-changing amount—while £2,500 is how much someone aged 18 to 20 years old will benefit from these changes and 10 million is the number of people whose lives will see a transformative impact from our Employment Rights Bill. All of that is being achieved by a Labour Government, with our plan for change delivering security for working people, but so much of it is opposed by the Conservatives.
On a day when we are debating giving a pay rise to 3 million people, it is striking and speaks volumes that the Opposition Benches are completely empty. That is the difference between the Government and the Conservatives. That pay rise is the difference that a Labour Government make.
The Opposition spokesperson, the hon. Member for West Worcestershire (Dame Harriett Baldwin) just tried slightly to rewrite history, but I am old enough to remember the pre-minimum wage era and who brought it to an end: a Labour Government. The introduction of the national minimum wage was a radical and transformative step, and it was opposed every step of the way by the Conservatives. When Labour included a policy for a minimum wage in our 1992 manifesto, Michael Howard claimed that it would destroy up to 2 million jobs. When we brought it to this place as legislation in 1998, the Conservatives fought it tooth and nail every single step of the way.
The Conservatives’ concerns turned out to be totally unfounded. It was a pointless opposition to measures that increased the wages of more than a million workers immediately in the UK, as the evidence from my hon. Friend the Member for Earley and Woodley (Yuan Yang) pointed out. Indeed, the shadow Chancellor at the time, now better known for his railway journeys, eventually ended Tory opposition to the minimum wage, saying:
“The minimum wage has caused less damage to employment than we feared.”
How different the picture looks today. We have a Leader of the Opposition who recently said that the minimum wage was “overburdening” business and that maternity pay was “excessive”. In an article for ConservativeHome, the shadow Chancellor, the right hon. Member for Central Devon (Mel Stride) said that our measures to boost employment rights and make work pay would have a negative effect on business,
“especially in lower-wage sectors like hospitality and retail”.
Perhaps the shadow Chancellor does not realise that the entire point of these measures is to bring these workers—in particular, young workers—out of low pay, to improve retention, to keep people in work and to boost our economy. The low-wage, low-growth economy that the Conservatives presided over for 14 years brought with it stagnation and a growing number of people who either left employment or never entered it in the first place. Given that, we all know where we stand.
I will wrap up by saying that this measure represents a choice. Our choice is to increase the minimum wage and put money back in the pockets of working people. It is a choice to put people first. It will help thousands of people in Hendon and millions of people across this country, and it is a choice I am proud to support.
Deirdre Costigan (Ealing Southall) (Lab)
May I begin by declaring an interest as a member and former employee of Unison? I know that its young members will welcome the unprecedented rise in the minimum wage for 18 to 20-year-olds. As we have already heard, it will add £2,500 a year to their gross salaries.
This is a record change, and it will make a huge difference for young constituents of mine. Moreover, the Labour Government have made it clear that this is only the start of a journey. We are working towards increasing the youth rate so that we eventually have a single adult rate. Equal pay for equal work has long been a belief of the Labour party, and it is right that that also extends to younger people, but I am delighted that this Labour Government will also deliver for disabled and black, Asian and minority ethnic workers, and that we have embarked on a consultation on the introduction of mandatory pay gap reporting in respect of those workers.
The change in the youth rate, in particular, goes hand in hand with our youth guarantee and our plan to create pathways to good-quality employment for those under 22 with health conditions, whom the last Government left on the scrapheap with no help at all. Labour will ensure not only that those young people are helped to find jobs, but that those jobs are decently paid. We will make work a better choice than benefits for young people.
As I said earlier, the decision that we are making today is the beginning of a journey. The shadow Minister, the hon. Member for West Worcestershire (Dame Harriett Baldwin), said that the Conservatives would not vote against the motion, although I must say that in her speech she gave a very good impression of someone who was against it. In my view, if the Conservatives do not agree with it they should vote against it, and should tell us how much they think young people are worth. They should tell us whether we should pay them £10 an hour. They should tell us whether £12.21 is the minimum wage that they would pay. They should let us know by how much they would cut people’s wages. In contrast, the Labour Government are proud to be putting money back into 3 million working people’s pockets—money that they will spend with local businesses and in local high streets. After 14 years of failure from the Conservatives, Labour is making work pay.
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
With the leave of the House, Madam Deputy Speaker, I will begin by addressing the many contributions that were made to what I think was, overall, a very positive debate. I welcome the support of the Liberal Democrats, and also welcome the hon. Member for Chippenham (Sarah Gibson) to the Chamber: it is good to see her back in her place. She made some important points about the social care sector. We know that the abuse of travel time reimbursement is a huge issue. The Low Pay Commission is keen to look into it, and I am sure that once the fair work agency is up and running, it will focus on it as well.
The hon. Lady’s colleague, the hon. Member for Honiton and Sidmouth (Richard Foord), also talked about the importance of that sector. Our impact assessment has established that about one in five social care workers will receive a direct pay rise as a result of the increases announced today. As would be expected, before making its recommendations the Low Commission has consulted widely with, among others, representatives of social care workers. We believe that they have been undervalued for far too long, which is why we are introducing the first ever fair pay agreement in the adult social care sector so that care professionals are recognised and rewarded for the important work that they do. While I appreciate the hon. Member’s wish for a separate rate for care workers, we think we are taking the right measures to recognise and value them. The operation of different rates brings a range of challenges relating to enforcement and to clarity for employers, which we think is important.
There were, I have to say, a number of excellent speeches from the Labour Benches. My hon. Friend the Member for Earley and Woodley (Yuan Yang) made the positive economic case and referred to the wealth of evidence in support of increases in the minimum wage. On the Labour Benches, we passionately believe that increased protections at work and increases in the minimum wage are good not just for individuals but for the wider economy. She mentioned the many young people in her constituency who will benefit from the moves to parity for the 18 to 20 age band with the adult rate.
My hon. Friend the Member for Ealing Southall (Deirdre Costigan) has great knowledge and experience in this area. She said that this is the beginning of the journey. That is right. We recognise that it will take time to achieve our ambitions for the Low Pay Commission for the people in this country, but it is a journey we are determined to finish.
My hon. Friend the Member for Blaydon and Consett (Liz Twist) took us back into the depths of history. I must declare that I am one of those who can remember what it was like before the minimum wage. When I tell my children how much I used to earn in my first jobs, they cannot believe it. But it was true: that is what the world was like before the minimum wage. She also reminded us of the doom-laden warnings we got from the Conservative Opposition at the time. We heard a small echo of that tonight, but I think history has proved that those warnings were wrong.
My hon. Friend the Member for Doncaster Central (Sally Jameson) spoke passionately about the issues with in-work poverty, which is one of the key things that we must change in this country. For too long, people have not had work pay for them. Earnings have not kept up with the cost of living and that is one of the reasons why the Low Pay Commission’s remit has changed.
Mark Sewards (Leeds South West and Morley) (Lab)
I am very grateful to the Minister for giving way. The Low Pay Commission previously said that about 300,000 people are not being paid the minimum wage despite being on it—they are being underpaid. Will he update the House on the Government’s progress to ensure that all people on the minimum wage are paid the minimum wage?
Justin Madders
My hon. Friend makes a very important point that those rights are only as good as the ability of the Government to enforce them. As we know, His Majesty’s Revenue and Customs has a very effective system to deliver on the minimum wage and we will shortly be releasing our latest round of naming and shaming of those employers who have not done the right thing. We hope that the fair work agency, when it is established, will be even more effective at delivering fairness across the country and ensuring that everyone gets the minimum wage they deserve. We know there are particular sectors where there are acute challenges.
I turn to the points made by the Scottish National party spokesperson, the hon. Member for Dundee Central (Chris Law), about the bills and costs of an 18-year-old being the same as those for an adult. That is something I absolutely understand. It is why we changed the Low Pay Commission’s remit to ensure that we eventually get parity for that age group on the full adult rate. It is also why we have changed the remit of the Low Pay Commission to move towards a real living wage for all adults. We understand that that is such an important thing for us to deliver on. He may feel that we are not quite there yet, and we must ensure we take evidence as we go along from businesses on how it impacts on particular sectors and particular parts of society, but 18 to 20-year-olds are getting a £2,500 pay rise this year as a result of the regulations. That is something I am sure he will welcome.
My hon. Friend the Member for Newton Aycliffe and Spennymoor (Alan Strickland) raised very well the regional impacts of the wage increase in his part of the world. It is the case that the regulations will mean 140,000 workers in the north-east, or 14.5% of the total workforce in that region, will benefit from the increase. We should all be absolutely delighted about that.
My hon. Friend the Member for Kettering (Rosie Wrighting) also raised in-work poverty. That is why the remit is being changed. We want to ensure that in-work poverty is consigned to the history books.
My hon. Friend the Member for Hendon (David Pinto-Duschinsky) set out in stark terms the figures associated with the regulations. I may mention them again at some point before I finish. They are the bold numbers that will go directly into people’s pockets and that we can show as tangible proof of a Labour Government delivering for working people.
My hon. Friend also raised the matter of the empty Opposition Benches. I do not want to equate that with meaning that the Conservatives do not support these increases, as I think the shadow Minister, the hon. Member for West Worcestershire (Dame Harriett Baldwin), said that they did. I do put her on notice, though, that her party leader has been less than full in her support for the minimum wage, so I hope that the shadow Minister’s support for today’s measures has not damaged her career prospects. It may well be that there is another leader in a few months anyway, and that things will be looking up. We do hope that the Conservatives continue to support the minimum wage as we move forward and that they do not change tack now that they have entered opposition.
However, the shadow Minister did raise a number of important questions, which I will now try to address. She raised the impact on public sector workers. Of course, pay for most frontline workers is set through pay review body processes, which do take account of national living wage increases as part of their processes. We do not believe that many public sector workers will be directly affected by this change, but it is something the Departments will take into account when they set their budgets.
The shadow Minister also asked about the cumulative impact of the changes. The impact assessment does show that this year’s upratings will represent a 0.14% increase in the UK-wide wage bill, which I think is incredibly good value for what we are delivering into people’s pockets. Of course, the total impact of the Employment Rights Bill is, at most, 0.4% of the total wage bill.
The hon. Lady raised questions about burdens on SMEs. The Low Pay Commission does take into account the impact on business as part of its operations. It looks at the competitiveness of individual businesses, the labour market and the wider economy, drawing on extensive labour market pay analysis and stakeholder evidence when recommending rates, and we would expect the commission to do exactly the same next year. Small businesses have, of course, had support from this Government. We have increased the employment allowance from £5,000 to £10,500, meaning that 865,000 employers will pay no national insurance contributions at all, and more than half of employers will gain or see no change from this measure. We have also extended business rates relief for the retail, hospitality and leisure sectors.
The hon. Lady raised concerns about the impact of the measures on young people. The youth guarantee will ensure that every young person has access to education or training to help them to find a job, and we are transforming the apprenticeship levy to ensure that young people get the opportunities they deserve.
The shadow Minister raised concerns about the overall labour market. I would just make the point that payroll employment is actually higher now than it was this time last year, and the latest labour force survey last week showed record numbers of people in work. Perhaps the negative headlines that we have been seeing are not actually the reality of the situation. I like to deal with facts, Madam Deputy Speaker, and the facts are that these regulations will put more money into the pockets of workers around the country—around 200,000 workers in Scotland, 160,000 workers in Northern Ireland and 150,000 workers in Wales. This will make a real difference to people: £1,400 for a full-time worker and £2,500 for someone on the 18-to-20 rate.
This is truly a worthwhile exercise, and we thank the Low Pay Commission for its work, as well as HMRC, which enforces on behalf of the Department, and ACAS, which offers impartial advice and expertise to ensure that workplace disputes can be resolved and workers’ rights can be upheld. This is a meaningful change being delivered by this Government that delivers a powerful message: this Government, and indeed this Parliament, are committed to making work pay. These real-terms increases to the minimum wage will end insecurity at work. I commend these regulations to the House.
Question put and agreed to.
Resolved,
That the draft National Minimum Wage (Amendment) Regulations 2025, which were laid before the House on 4 February, be approved.