National Minimum Wage (Amendment) (No. 2) Regulations 2024

Lord Offord of Garvel Excerpts

Tuesday 12th March 2024 Grand Committee

Moved by

[Lord Offord of Garvel]

That the Grand Committee do consider the National Minimum Wage (Amendment) (No. 2) Regulations 2024.

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)]

My Lords, the purpose of these regulations, which were laid before the House on 31 January, is to raise the national living wage and the national minimum wage rates on 1 April 2024.

The Government will increase the national living wage for workers aged 21 years and over by 9.8%, to £11.44 an hour. This record cash increase of £1.02 per hour means that we will hit this Government’s long-term target for the national living wage to equal two-thirds of median earnings for those aged 21 and over in 2024. With this national living wage uplift, this Government are also delivering their long-held ambition to extend the national living wage to workers aged 21 and over, as we reduce the age threshold from 23 and over this April, meaning that those aged 21 or 22 will see a £1.26 cash increase in their hourly pay.

This is a historic moment, as we are ending low hourly pay for those on the national living wage in the UK. The UK was the first country in the world to set such an ambition, and we are now proud to achieve it. A full-time worker on the national living wage will see their gross annual earnings rise by over £1,800 per annum. In total, the average earnings of a full-time worker on the national living wage will have increased by over £8,600 since it was announced in 2015. That is double the rate of inflation.

The Government will also increase wages for young people under the age of 21. For those aged 18 to 20, the national minimum wage rate will increase to £8.60, which is an increase of 15%. For those aged under 18, the national minimum wage will increase to £6.40 an hour, which is an increase of 21%. The minimum hourly wage for an apprentice under the age of 19, or in the first year of their apprenticeship, will increase to £6.40 an hour, an increase of 21%. The accommodation off-set will also see an increase to £9.99.

The new rate increases are based on recommendations from the Low Pay Commission, following its extensive consultation with stakeholders and consideration of the current economic data and circumstances. The Low Pay Commission is an independent expert body made up of employer and worker representatives and independent commissioners. This year has seen some challenging economic circumstances for both workers and employers, including high inflation. When the Low Pay Commission recommended the new rates for the minimum wage, it took into account many of these economic circumstances, including how affordable the rate increases are for businesses and the current state of the economy. By accepting these recommendations from the Low Pay Commission, the Government are striking the right balance between the needs of workers and the affordability to business, while also ensuring that we deliver on our long-term commitments on the national living wage.

The Government would like to place on record their thanks to the Low Pay Commission, its previous chair Bryan Sanderson and the commissioners for their commitment to gathering thorough evidence and providing these recommendations. I also welcome the noble Baroness, Lady Stroud, to her role as the new chair of the Low Pay Commission.

We expect that this increase to the minimum wage will put more money in the pockets of around 3 million of the lowest-paid people in every corner of the country. The new rates are due to come into force on 1 April 2024. In the meantime, any worker who is concerned that they are not being paid the correct wage should check their payslip and speak with their employer. If the problem is not resolved, they can contact ACAS or complain to HMRC.

Since 2015, the Government have more than doubled the budget for compliance and enforcement to £27.8 million in 2022-23. HMRC enforces the national living wage and national minimum wage on behalf of my department. I thank HMRC for its ongoing work with employers and workers to ensure that all workers receive the pay they are due and help give businesses the right resources to stay national minimum wage compliant.

I remind the Grand Committee that, on 1 April, regulations will also come into force to ensure that so-called live-in domestic workers are paid at least the relevant minimum wage rate, providing protection from exploitative low pay. This will help protect these workers, giving them a new right to the entitlement to the national living and minimum wage for the first time. These regulations, alongside the regulations debated today, will aim to reward the lowest-paid workers in every sector and in every part of the country for their contribution to our economy.

This Government are aware of the cost of living pressures and will continue to closely monitor all the impacts of increases to the national living wage and national minimum wage rates on workers and businesses alike. We will continue to carefully monitor economic developments as the NLW target is implemented. The Government will shortly publish this year’s remit to the Low Pay Commission and ask it to provide recommendations for the rates, which will apply from April 2025.

[Lord Leong (Lab)]

My Lords, we are pleased to welcome this instrument and thank the Minister for introducing these regulations. As he referred to, they implement the recommendation from the Low Pay Commission to lower the age of eligibility for the national living wage from 23 years old to 21 years old. We also welcome the inflation-related annual increases in the national minimum wage and in the apprentice hourly rates for those aged under 21.

However, even after the increases enabled by this instrument come into effect on 1 April this year, under-18s will earn just £6.40 per hour, while 18 to 20 year-olds will earn only £8.60 per hour. Unfortunately, as young people know, most shops, landlords and services do not offer lower prices for customers aged under 21. Ironically, many of these businesses actually employ people under 21 on the national minimum wage. What further sanctions will apply to businesses that do not pay the national minimum wage?

If we are privileged to be elected, the next Labour Government will use its New Deal for Working People to eradicate in-work poverty by tackling the structural causes of inequality. We are committed to raising the national living wage to ensure that it is adequate and addresses the rise in the cost of living and inflation. Having a national minimum wage that does not reflect the actual cost of living particularly impacts people who do not have family who can support them; care leavers are one severely affected group.

Some of the most disadvantaged and economically insecure young people in the country, even if they try to do the right thing and work hard, can find themselves unable to meet basic costs. As most noble Lords know, the previous Labour Government proudly introduced the national minimum wage. The next Labour Government would make sure that the national living wage actually lives up to its name. We would ensure that a genuine national living wage is applied to every adult worker and is properly enforced, because we know that giving working people more money in their pocket means that more money will be spent in their community and in the everyday economy, nourishing their neighbourhoods and creating more and better-paid jobs locally.

Without hesitation, we support these regulations. I look forward to the Minister’s response to my question about sanctions.

[Lord Offord of Garvel (Con)]

I thank the noble Lord for his contributions to today’s debate. As I said, these updated regulations will reward low-paid workers right across the country for their contribution to our economy.

I will deal with some of the points made, especially in relation to our young people. As was discussed in the Chamber recently, it is crucial that we get young people into work immediately after they come out of school. If at that point in their early careers, they do not have the skills to make that wage, we must not lock them out. The graduated scheme to allow them to come in at the lower rate and move up as they get to 21 is similar to what any of us who have been in work experienced. When we started out and were relatively unskilled, we were on a lower wage rate, and then we graduated to the national minimum wage aged 21. That is a perfectly reasonable graduation scheme for our young people. We know the impact on their lives of not getting into work immediately—it can create a lifetime wage scar—so it is very important that we do not lock them out of the market at the most formative period of their working life.

On sanctions, HMRC administers the scheme. We very actively monitor who is not paying the right rate. Every year, we do a very public name and shame on those companies—sometimes some well-known names are named—which we know has a major impact on behaviour. There are sanctions that can be applied by HMRC directly to companies that do not comply.

It is absolutely fair to congratulate the previous Labour Government on introducing the minimum wage. The noble Lord referred to a possible change of Government, but a note of caution is that we must take businesses with us on this journey. There are 5.5 million companies in the UK, of which 99% are SMEs. That is why the Low Pay Commission is so crucial to this debate: it sets what is considered to be a fair rate. Bearing in mind that the burden will fall on businesses—this will cost £3 billion over the next five years—we need to get the right rate.

I will make one more point on that. Prior to this Government being in place, our lowest-paid cohort had a higher percentage of their annual income coming from benefits. Today, a higher percentage comes from earnings, so we have been successful in moving that cohort into work. I emphasise that a full-time worker on the national living wage is earning £8,600 more today than in 2015. That will be an increase of 70% by 1 April this year. As inflation has been 35% in that time, this cohort has had a double increase in their wages. We are now in a position to say that with the national living wage being set at two-thirds of median earnings, that cohort has been taken out of low pay, which is defined as being below two-thirds of median earnings. There are now 1.5 million people on the national living wage who are no longer in that category.

We are proud of the Government’s record of delivery. We have achieved our target of the national living wage reaching two-thirds of median earnings for all workers aged 21 and over. I again extend my thanks to the Low Pay Commission, which is very important. Its independent and expert advice means we can ensure that the right balance is struck between the needs of workers, affordability for business and the wider impact on the economy. We look forward to receiving its recommendations for the 2025 rates, which will be published later this year.

Motion agreed.