Draft National Minimum Wage (Amendment) (No. 2) Regulations 2016

Bill Esterson Excerpts

Thursday 8th September 2016 General Committees

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Wilson. The Minister set out the good news about the 3.7% rise in the national minimum wage that is before us. She acknowledged that it has been some time since there have been significant rises; the regulations start to rectify the fact that rates have fallen behind over many years. This good news for young workers is tempered by the fact that if someone is under 25, they do not get the national living wage. The Scottish National party spokesman asked why; I am afraid that I do not find the Minister’s answer at all convincing, any more than we did when the national living wage first came through.

[Margot James]

I am sorry to interrupt the hon. Gentleman so soon in his speech, but will he acknowledge that young people aged between 21 and 24 will be paid, through this increase in the minimum wage, £6.95 per hour? Would he not agree that the difference between that and the national living wage is fairly small?

[Bill Esterson]

Perhaps the Minister has just told us that she has no intention of putting up the so-called national living wage by very much. I remind her that the Living Wage Foundation says that a living wage in this country is £8.25, or £9.40 in London—not the lower smoke-and-mirrors figure of £7.20 that the former Chancellor introduced.

[Michael Fabricant]

I was quite involved in the minimum wage when it came in under Tony Blair, the former leader of the Labour party, in 1999. The age of 25 was chosen was because the Labour party got good advice that if it priced the minimum wage for those under 25 at the same amount as for those aged 25 and over, those under 25 would not get employed. The Labour party wanted 21 to 25-year-olds in work; it is as simple as that. It may be that the old Labour party, as opposed to new Labour, resents or rejects that, but that was the view of the Labour party at the time, and it was correct.

[Bill Esterson]

I remember all too well the all-night sitting—I was a researcher at the time—during which Conservative MPs filibustered as long as they could to prevent the national minimum wage from being introduced, so we will not take any lectures about the implementation of the national minimum wage. [Interruption.]

[The Chair]

Order.

[Bill Esterson]

The point is well made that there is a difference. The reality is that old and young workers will potentially be set against each other. Employers in low-paid sectors might be encouraged to recruit up to the age of 24, to replace staff by using short-term contracts, and to discriminate against older workers. There are all sorts of problems and concerns arising from the differential. I will be interested to see whether the so-called national living wage goes up by a similar amount.

There are real problems with what has happened. We had a successful partnership between the Government, business and trade unions in the Low Pay Commission, which is still operating for under-25s. The way that the previous Chancellor went about introducing the national living wage undercut that partnership approach and has caused problems for low-paid sectors such as care and hospitality. In care in particular, and where budgets have been cut in local government and in the public sector generally, it has really caused a problem. Those employers, and employers whose private businesses are engaged by the public sector, have no way of making up the shortfall in order to pay the higher national living wage. I do not think the Government have addressed that point in their introduction of the national living wage. Surely they should have increased local government budgets, so that local government could in turn pass on those increases either to its own workers or to workers employed by contractors.

We have heard about M&S, and a similar point could be made about Sports Direct. The Minister talked about enforcement and how serious the Government are about it. She spoke about the welcome increase in funding for HMRC staff from £13 million to £20 million, but how many staff is that? How many prosecutions has HMRC started? How many times has the national minimum wage penalty been applied? What level of criminal evidence does HMRC require to start an investigation?

We have heard enough about Sports Direct’s behaviour for me to ask whether the Minister believes that it should be subject to a criminal investigation, notwithstanding its apparent Damascene conversion to the cause of workers and low pay over the past few days, just before its annual meeting. Of course, it turned out that the improvements in pay and conditions would affect 10 workers a year. I would like to hear a bit more about exactly what action has been taken. The SNP spokesman spoke of hundreds of thousands of cases across this country. I very much doubt there have been hundreds of thousands of investigations by HMRC, so let us have the figure, so we can see exactly how effective the measures are.

A successful economy is characterised as one where working people are paid well. There are a number of reasons for that—not just reasons of decency and prosperity. Where people are paid well, they have more money to spend with private businesses, and more people are in a position to pay tax to fund the high-quality public services that we as individuals need, and that the private sector needs to be able to run effective businesses. So we should all support attempts to improve the rates of pay and the standard of living of ordinary working people in this country. Is that really what is happening as a result of the differential between under-25s and over-25s? Will a 3.7% one-off rise in the national minimum wage, after years of stagnation and a fall in real terms, really cut it? I rather doubt it.

I look forward to the Minister’s response on the level of prosecutions, and on investigation and enforcement by HMRC. Employers who are allowed to get away with not paying the minimum wage are gaining an unfair competitive advantage over those who want to pay properly. We should be encouraging good, responsible business behaviour in this country, so let us see more enforcement. I look forward to hearing what the Minister has to say on those points.

[Michael Fabricant]

I was not going to speak, but I have been driven to do so by the hon. Member for Sefton Central. I agree with his last few words—enforcement is tremendously important—but his rewriting of history has been quite remarkable. He may have been here as a researcher when the minimum wage was introduced; I was the Opposition Whip at the time, but they would not put me on that Committee because the only row I ever had with our then leader, William Hague—now a noble Lord—was over the minimum wage. I said to him at the time that the minimum wage was something that we would come to support. He said, “It will never happen”—that was not a very good impersonation—and I said, “Oh yes it will, and it works in the United States.” On that occasion, I was proved right and he was wrong.

Earlier, talking about the level of the minimum wage, I gave the example of the United States, where the federal rate is just $7.25 an hour. Interestingly, there are many exemptions in the US. For example, disc jockeys—I was a disc jockey for a short while on a pirate radio boat—are exempt, and so are waiting staff. That is one of the reasons why people have to tip well when they go to the US—because the waiting staff live on tips. I go to the US a lot for private reasons. I was chatting to a barman who told me that he is on $2.50 an hour, which is only £1.90, so we really can be proud of the UK’s minimum wage.

The rate is tremendously important. It is all very well for the hon. Member for Sefton Central to say that it should be higher, but if people are not employed, the rate is zero per hour. It is always a balance. Tony Blair knew that; Gordon Brown knew that; sadly, the hon. Gentleman does not seem to realise that. If people are priced out of the market, they will not get anything, because they will be unemployed.

[Bill Esterson]

Given the hon. Gentleman’s belief that the national living wage prices people out of jobs, was he against the former Chancellor’s introduction of the national living wage at £7.20—a rate significantly higher than the then national minimum wage?