National Minimum Wage (Amendment) (No. 2) Regulations 2010

Lord Myners Excerpts

Wednesday 8th December 2010 Grand Committee

[Lord Myners]

My Lords, I declare an interest as a former chairman of the Low Pay Commission. I am grateful to the Minister for her clear explanation of the regulations. I welcome the simplification that is being suggested and I am delighted to be reminded again of the coalition Government’s commitment to the national minimum wage.

I have four questions relating to the regulations. Would I be correct in understanding that an employee currently receiving precisely the adult national minimum wage who was also receiving assistance for transport to work would, as a result of this regulation, effectively have a lower benefit as a consequence of employment?

Secondly, I was somewhat surprised to see the explanation in paragraph 7.3 of the Explanatory Memorandum that,

“only around 90,000 low paid workers”,

will be affected. The figure of 90,000 seems to be quite large. What percentage is that of the total number of employees estimated to be earning the national minimum wage? I suspect that the use of the word “only” may be misleading.

I would also like to know a little more about the impact of the judicial review explained at paragraph 8.2 and what impact that might have on the timing of the implementation of these revised regulations. Finally, perhaps the Minister can explain paragraph 10.1 of the Explanatory Memorandum, which makes no sense to me at all.

While officials in the Box prepare the answers, I will do the Minister the courtesy of talking on another subject so that they can prepare their notes. I know how much anxiety can be prompted when you look around and they are filing their nails and not writing a note for you.

I have four general points on the national minimum wage. I was delighted to hear the Minister reiterate her commitment to the minimum wage in a Question to the House last week in connection with internship. Am I correct in understanding that her clear statement that there would be no change in the way in which the minimum wage operates reflects the fact that we continue to believe that the RPI is the appropriate index for inflation that should be used when assessing whether the minimum wage represents an increase or decrease in real income?

Secondly, can the Low Pay Commission be asked to look at the accommodation allowance, which has not kept pace with the cost of accommodation and is falling behind in terms of value?

Thirdly, the Low Pay Commission should also give its attention to piece work. For example, hotel service operatives—or chambermaids as we used to call them—are sometimes assumed to be able to complete four bedrooms an hour for the purposes of earning the minimum wage. There is a lot of evidence that the rate of productivity assumed is altogether too high. Therefore, the minimum wage is being breached in both spirit and purpose.

Finally, can the Minister confirm that, as part of the coalition Government’s commitment to the minimum wage, there will be no diminution in the resource available for compliance and enforcement? The word “fairness” was used earlier. The national minimum wage has to be fair both to employees and to employers who comply. When employers in the vicinity do not comply, that means a disadvantage for businesses which meet their legal obligations. I came across many examples of firms which did not comply. Resource was already very stretched in terms of monitoring compliance and enforcement. If the Government were in any way to reduce the resource made available for these functions, that would undermine the national minimum wage, which I believe the Institute for Government recently listed as one of the top 10 achievements of recent Governments. I think it is fair to say that the national minimum wage has had universal support from all political parties, and commitment to compliance, monitoring and enforcement is critical.

I think that I have now allowed sufficient time for those in the Box to perform their duties. I support the proposed regulations.

[Lord Jones]

Perhaps I will give them a little more time. I thank the Minister for her exposition at the onset. I am very glad to follow my noble friend Lord Myners, who on these matters has a very distinguished track record. The Committee may well learn from his expertise.

I welcome the details given, which were detailed enough. I support the regulations and would not be able to contribute without praising the minimum wage legislation overall. It was a very great social advance in Britain. It has been hugely beneficial to my own country of Wales and perhaps also particularly to sparsely populated areas across Britain—those, for example, which are dependent on tourism, the hospitality industry and aspects of agriculture and forestry for employment. It is a huge advance for many ordinary people in our nation.

Like the noble Lord, Lord Cotter, in another place I observed the clamour, controversy and opposition when the Blair Administration brought forward the minimum wage legislation. It was almost unbelievable. The opposition was strong and, looking back, there was much sound and fury. I am glad that I was able to support that legislation and use my vote in the other place. I, for one, am very proud that the minimum wage is on the statute book and I am grateful for the information that the Minister has given us today.

--- Later in debate ---

[Baroness Wilcox]

My Lords, I am grateful to all noble Lords who have participated in the debate. I believe that the regulations raise important issues of principle about the minimum wage and the rights of workers and employers, so it is essential that we give them very careful consideration. I was therefore happy to hear the comments today and to hear some supporting views, which is always nice. I really had not taken it on board that my noble friend Lord Cotter had been a member of the national minimum wage committee in another place. Hearing that he sat for 24 hours, our Chief Whip would, no doubt, remind us that other people in other places sit longer than we do. However, it was a wonderful piece of work and it has been supported over the years.

The noble Lord, Lord Myners, asked several questions and I think that I can answer a goodly few. On the first, we recognise that workers participating in travel and subsistence schemes may see a small reduction in their take-home pay as a result of the changes in the regulations. However, our experience is that the direct cash benefit to the worker is minimal in comparison to the direct cash benefit to the employment business. We consider it wrong in principle that profits should be made by employers from low-paid workers through the application of salary sacrifice schemes. There is evidence that significant numbers of low-paid workers do not understand the way in which these schemes work. Indeed, the noble Lord, Lord Young, pointed that out in his remarks.

The regulations will remove the risk that, by participating in travel schemes, low-paid workers will not be able to meet the requirements for entitlements to earnings-related benefits, in particular the basic and additional state pension. Again, I pick up on something that the noble Lord, Lord Young, said: let us make sure that everybody knows and understands what is happening to them because they are already complaining that they do not at the minute. We must be very sure that what we do makes that clearer.

On the second question from the noble Lord, Lord Myners, about a percentage of temporary workers as opposed to workers on the national minimum wage, we estimate that approximately 1 million workers are earning that national minimum wage so 90,000 is, for interest, roughly 10 per cent of that total. His third question was on why we have not waited until the result of the judicial review to put forward the regulations. We consider that the judicial review application has no merit and we are strongly defending ourselves against it. There are good reasons for the Government to make these regulations and we are confident that the court will agree with us. We therefore see no reason to delay the regulations until the result of the judicial review is known.

On the noble Lord’s fourth question, it says here that there is an error in paragraph 10.1 of the memorandum, for which we apologise. We thank the noble Lord, Lord Myners, very much for bringing it to our attention. Yes, jolly good. On enforcement compliance, this Government are firmly committed to the national minimum wage and to effective risk-based enforcement. Enforcement is essential in ensuring a level playing field for legitimate businesses and in protecting workers who are at risk of abuse by those who refuse to play by the rules. BIS has published a strategy for national minimum wage compliance. It focuses on how the compliance and enforcement landscape should look over the next three to five years and recognises that our approach must continue to be based on intelligence and data. In the context of reduced budgets we will need to prioritise, but we are clear that underpayment is not an option. The strategy will help us to make informed choices to ensure that we have the right tools for the job and that resources are focused where they are most effective.

The noble Lord, Lord Jones, also talked about his time in the other place. He spoke with Welsh passion about the national minimum wage. It was very nice to hear him and good to have his support for the work going forward. I hope that we do not disappoint him.

The noble Lord, Lord Young, talked of the beneficial effects of the previous Government’s work in this area and of closing the gap between men and women’s pay. To that, I would say, “Yes, but we are not there yet”. We will keep trying to improve on the previous Government’s work. The noble Lord also paid tribute to the excellent work of the Merits Committee. I agree with that, as I am sure would all other noble Lords.

I was asked whether we would make sure that people were properly informed of the changes. Yes, we certainly will. I was asked also whether workers will face a claw-back of overpaid tax credits at the end of the year as a result of their pay being adjusted. No, they will not. For tax credits to be adjusted downwards for 2010-11, there would need to be a substantially greater increase in taxable pay for 2010-11 than will arise from the proposed amendment to the regulations.

There were one or two other questions which the noble Lord, Lord Myners, very kindly put to me as I was waiting for the answers to the first ones. I am not sure that I am able to answer them all at the moment; if that is the case, I shall write to him.

[Lord Myners]

I congratulate the Minister on doing a superb job in answering the questions. Many members of the coalition Government would do well to study the skill, openness and sincerity with which she attempts to answer questions and, indeed, succeeds in doing so.

I have only one question to ask at this point; it is fortunate that we have a Minister from the Department of Business with us to answer it. Which is the right rate of inflation? The Government are using CPI for changing benefits and pensions, but they are using RPI for increasing the payments that students make in connection with university education. Both decisions come from the same department of state. Can the Minister put my mind at ease and tell me which is the relevant index to be used for the purpose of determining fair value for people on low incomes or of paying for their education?

[Baroness Wilcox]

I think that the noble Lord, Lord Myners, will understand the answer that I can give him. The Government will consider the recommendations of the Low Pay Commission when deciding on the appropriate rates for the national minimum wage.

[Lord Myners]

That is a very good answer to a question that I did not ask but I am happy to leave it at that.

[Baroness Wilcox]

That is most gracious.

[Baroness Wilcox]

I am told that this Government never commit—at least, not at this moment—so I think that I just have to say that we are considering the Low Pay Commission’s recommendations.

[Lord Myners]

This Government may never commit. They pledge, but we know what the pledges are worth. However, it is right to point out that the Low Pay Commission’s recommendations on hourly rates have never been rejected by government. I sincerely hope that this Government will respect the commission’s independence, integrity, foresight and professionalism and not lightly even contemplate rejecting its recommendations.

[Baroness Wilcox]

I am sorry, my Lords. I was being flippant and was somewhat thrown by the question, which is a little wide of the regulations that I am introducing today. Yes, of course, we shall be listening very carefully to the Low Pay Commission. We shall remember its independence and integrity, which we will honour. If there are no further questions that anyone wishes to put at the moment, I commend the regulations to the Committee.