Small Business, Enterprise and Employment Bill

Barry Sheerman Excerpts

Wednesday 19th November 2014 Commons Chamber

[Ian Murray]

It is worth reflecting on the debate yesterday. The Minister for Business and Enterprise, who is not in his place and was not in his place for most of the debate yesterday, said that we would take part 4, which deals with pubs, first yesterday because that was most important. By definition, it seems that the Government do not see the national minimum wage and zero-hours contracts as being important. The programme motion has restricted this debate and that on the important topic of insolvency to just two hours, which shows the Government’s view on these matters.

We have tabled the amendments in the same spirit as we did in Committee, to try to make the Bill a much better Bill than it was when it started its passage through the House. We hear from our constituents throughout the country concerns about pay and insecurity in the workplace. Part 11 is an opportunity missed by the Government to deal with the problems of national minimum wage enforcement and exploitative zero-hours contracts. They need to show that they are on the side of ordinary people who have had their wages cut by more than £1,600 per year since 2010, but again the Government have missed the opportunity to do so.

Fifteen years have passed since the introduction of the minimum wage and the Opposition will keeping saying, time and again, that it is one of the Labour Government’s proudest achievements, despite the significant opposition—I was going to say from the Government Benches, but there does not seem to be anybody on the Government Benches, so it would be unfair to level that charge at the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), who supported the national minimum wage. This is another example of the pitfalls of writing one’s speech before one sees who turns up to the Chamber. I apologise for aiming my comments at the hon. Lady. The lack of support from her colleagues on the Conservative Benches this afternoon highlights the seriousness with which they take the issue of national minimum wage enforcement and zero-hours contracts. In the run-up to the May election, their constituents will reflect on the fact that they decided not to participate in today’s serious debate on amendments to part 11.

The introduction of the national minimum wage gave 1 million workers a significant pay rise, and now nearly 2 million workers benefit directly from the minimum wage. For women especially, who are most often susceptible to poor pay, the national minimum wage has had a significant impact for the better on their salaries, their pay and their working lives. It has not affected job retention, despite cries from the Government Benches—although there is no one there today—that it would cost 1 million jobs when it was introduced back in 1998.

However, the problem is that the minimum wage has become the maximum wage for far too many, and has fallen in real terms since 2010. That is why the Labour party is pledging to increase the national minimum wage to a minimum of £8 per hour and significantly to promote the living wage in partnership with employers. Amendment 8 would require the Secretary of State to provide an annual report to Parliament on three crucial aspects of the national minimum wage—first, its enforcement; secondly, the level of the financial payment for underpayment; and thirdly and crucially, the relationship between the national minimum wage and how it reflects pay in the wider labour market, particularly in interaction with the living wage. I shall deal with each of those aspects.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

My hon. Friend makes some very good points, but does he not think that we restrict ourselves in our brave attempts to get a good standard of living for everyone in this country, and that the national minimum wage should be a national minimum wage plus? The plus should be a guarantee of skills training and much else that supports the minimum wage. I came into politics to provide the good life for the people in my constituency and the people of this country. I am sure my hon. Friend would agree.

[Ian Murray]

I am grateful for the intervention from my hon. Friend. Pay is a only a small element in the workplace, and skills, education and progression are key. As I said, the national minimum wage should be the very bottom, not the top, of people’s aspiration for pay in the workplace. My hon. Friend raises some important points for his constituents and those throughout the country.

I am delighted that the Minister for Business and Enterprise has now joined us. Without proper enforcement, the regulations will be rendered ineffective. Under this Government, enforcement of the national minimum wage has been poor. That is why we are asking the Secretary of State to produce an annual report on the effectiveness of enforcement overall.

The figures speak for themselves. Reports published earlier this year show that the number of national minimum wage compliance investigations has more than halved since 2010. The response to a parliamentary question tabled earlier this year revealed that the number of investigations had fallen from over 3,500 in 2010 to just under 1,700 by the end of 2013. In addition, the number of cases resulting from Her Majesty’s Revenue and Customs risk profiling or targeting enforcement action had fallen from 1,500 in 2010 to a mere 431 by the end of 2013.

On top of that, the naming and shaming policy, which the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire, announced four times—I am sure she is expecting me to say this—up until recently had been announced more times than it had been used. To be fair, I appreciate that there have been more instances of naming and shaming recently, but it shows why an annual report is necessary to ensure that the regulations are working, the deterrents are robust and all avenues are being explored to prevent exploitation of the national minimum wage.

The Opposition have also been clear that local authorities should be given the power to enforce the national minimum wage alongside HMRC. We know that joint working between HMRC and other enforcement agencies, such as local authorities, is sometimes weak, which limits opportunities to maximise resources across different Government bodies. Local authorities, by their nature, have good knowledge of local employers and already conduct significant enforcement activity through their responsibilities for licensing, planning, health and safety and environmental health inspections. In carrying out those duties, councils sometimes come across cases where they suspect national minimum wage violations, but they have no power to investigate them directly and can merely refer them to HMRC’s enforcement helpline.

Local authorities are perfectly placed to enforce the national minimum wage, given their knowledge on the ground. That move is supported by the report “Settle for Nothing Less: Enhancing National Minimum Wage Compliance and Enforcement”, published last year by the Centre for London, which recommended partially devolving enforcement to local authority level to sit alongside and complement the current central function. It would be interesting to hear whether the Minister has considered having local authorities take an active role in national minimum wage enforcement.

[Mr Sheerman]

My hon. Friend is making an excellent speech, but will he also mention local enterprise partnerships, which are becoming more mature and powerful at bringing a focus to matters? I have noticed recently that their links to small businesses, in particular, are better than those of some local authorities I know.

[Ian Murray]

My hon. Friend makes a good point. There are many agencies dealing directly with businesses, particularly small businesses, that could play a role in national minimum wage enforcement. Poor pay and enforcement should be a job for all of us, whether LEPs, local authorities, the national minimum wage enforcement section, Members of Parliament or whistleblowers. We need a drive towards ensuring that anyone who decides to flout the rules on the national minimum wage knows that there is an organisation out there that can report them and take action against them.

Amendment 8 would also require the Secretary of State to report on the level of financial penalty. Although an increase in the maximum fine to £20,000 per employee is welcome, we are disappointed that the Government did not follow Labour’s lead in Committee by increasing it to £50,000. By setting the penalty at £50,000, Ministers would send a clear message to rogue businesses that they run a real financial risk by not paying the minimum wage. It would also put the fine on a par with other fines, such as those for fly-tipping.

As the Minister might be aware, her colleague and party president, the hon. Member for Westmorland and Lonsdale (Tim Farron), at the start of the year echoed Labour’s calls for a higher financial penalty, stating:

“A £50,000 fine for fly-tipping versus a £20,000 fine for exploiting a human being is just ludicrous. It tells you all you need to know how we, as a society, have our priorities wrong.”

I suggest that it is not society that has its priorities wrong in that regard, but the Government.

[Ian Murray]

Absolutely. We see in the informal economy forced self-employment, bogus self-employment and people not being paid the national minimum wage. It is a big issue in relation to migrant workers and agency workers. It is a huge issue across not only the formal economy, but the informal economy. It is something we must stamp down on, because it undermines people’s wages and the ability to be paid properly. The crucial point is that it is also uncompetitive for business, because the businesses that do the right thing, pay proper wages and abide by all the legislation are undercut by those that do not, and we have to deal with that. These measures are both pro-business and pro-employee.

Finally, amendment 8 is also crucial to ensuring that the Government consider wider improvements in pay in our labour market—namely, the promotion of the living wage. Under this Government, the number of people paid less than the living wage has risen from 3.4 million to just under 5 million in just four years. That not only impacts on low-paid workers, their families and communities, but piles up costs for the country as more people in work have to rely on the social security system, with tax credits topping up their poverty pay.

Labour councils have led the way in paying their workers a living wage, even within tight budget constraints, and getting more workers in the private sector paid a living wage by using their procurement powers and encouraging the creation of local living wage zones. My local council, City of Edinburgh council, has been paying the living wage for some time now. Other organisations in the private sector are now seeing that paying the living wage is something they should be doing. I must declare an interest as a member of the board of Heart of Midlothian football club, which a few weeks ago took the historic decision to become the first football club in Scotland to pay the living wage to not only all its staff, but all its subcontractors.

[Mr Sheerman]

Before my hon. Friend moves on, may I commiserate with him about last night’s football result? On a serious point, I do not know what his local university is, but the university of Huddersfield, which is the biggest employer in my constituency, pays the living wage. If universities up and down the country could lead the way, that would have a powerful effect, especially if they pressed that on their supply chains.

[Ian Murray]

I appreciate what my hon. Friend says about what happens in his constituency. Public bodies could really take the lead in promoting the living wage. However, his initial comment about last night’s result means that I will have to demote him from being my hon. Friend to being the hon. Gentleman, but I will not hold it against him for too long.

The Labour party has a proper plan to encourage businesses to pay their employees the living wage. If this Government will not do this, the next Labour Government will launch a national campaign to agree “make work pay” contracts with British businesses, working in partnership with businesses to share in the benefits of the living wage and ensure that people are paid properly for a decent day’s work. The living wage is about bringing employers, employees, campaigners and communities together to build a stronger, fairer economy from the bottom up. The living wage improves the living standards of employees and benefits employers, too. They have found that paying the living wage can make good business sense, generating savings by boosting productivity and increasing staff morale.

I hope that the Government are minded to support amendment 8. It would be a step towards improving the enforcement of the national minimum wage and then improving pay for all working people. If Ministers do not, it will be up to Labour, the party that created the national minimum wage, to strengthen it for all the low-paid. Amendment 8 is about having a report from the Secretary of State to bring forward some of these issues and highlight them through Parliament so that we can ensure that the national minimum wage is being enforced properly, that the level of financial fines is appropriate and that the Government are doing everything they possibly can to promote additional wages through the living wage.

Amendments 9 and 10 to clause 145 relate to zero-hours contracts. The explosion in the use of zero-hours contracts is a trend that should concern Members right across the House. Although a small number of people find that type of contract suitable, too many are at the mercy of unscrupulous employers who exploit it. For many employees, zero-hours contracts present huge drawbacks in comparison with permanent, regular work. The increasing problem of underemployment and zero-hours contracts is highlighted by the recent reports from Her Majesty’s Revenue and Customs stating that income tax take has been flat over the past year despite the Government predicting a substantial increase. Do the Government not worry that they are creating the kind of economy where unemployment drops but there is no additional income tax take to the Treasury? We must use the opportunity of this Bill to prevent exploitative zero-hours contracts and do something about underemployment. It is not just me who is saying this. The Exchequer Secretary told the Bill Committee’s evidence session that it was the Treasury’s goal to have people on better contracts as it is better for tax receipts. I could not agree more.