National Minimum Wage: Care Sector

Christina Rees Excerpts

Wednesday 23rd March 2016 Westminster Hall

[Christina Rees (Neath) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. I congratulate my hon. Friend the Member for Sheffield Central (Paul Blomfield) on securing this important debate.

The care industry and, in particular, its workforce play a vital role in our society. The UK has a care sector that is ever growing, which is essential with an ageing population. It is important to ensure that, as people age, they can still live in their own homes for as long as possible. That will not only allow people to enjoy the comforts of home as they spend more time there, but will help to reduce the pressure on the NHS, which we all understand would help enormously.

Where it is not possible for people to remain in their homes, they should be provided with the best care possible in a care home facility that meets the high standards we can expect in our society. To ensure that people are given the opportunity to remain in their home as they get older, the work of home care workers, who care for the elderly and disabled in their own homes, is vital. That is why it is so shocking that so many home care workers are routinely paid less than the national minimum wage. The absence of the most nominal of payments is condemning huge numbers of home care staff to the contemporary phenomenon of in-work poverty, as well as significantly undermining care standards across the industry.

The direct effect of underpayment is that care workers are plunged into poverty, leading to much higher rates of staff turnover, with a subsequent negative impact on care standards. Too many experienced or skilled care workers are being forced out of the industry simply because they cannot afford to stay. That is unacceptable.

Due to the lack of time, I will move swiftly on and cite an example from my constituency. The Government’s lack of concern about care workers not being paid the national minimum wage is in stark contrast to the efforts of the Unison branch at Neath Port Talbot County Borough Council. The union has worked closely with the local authority to ensure that social care has remained a priority, reaffirming that care workers feel appreciated and, most importantly, that they are not being taken for granted.

The care sector in Neath Port Talbot, as in many other places, is a mixed economy, whereby the local authority directly provides around £11 million of services, and commissions about £32 million more from third-party providers from the private and voluntary sectors. Council staff are already paid at the national living wage rate, so in-house services act as a pacemaker for pay and conditions in the local care economy—that is to be commended. Were those in-house services not to exist—so with the absence of a pacemaker—we would be in danger of seeing a race to the bottom on pay and conditions, as third-party providers sought to maximise profit by decreasing resources.

A mixed economy works because the local authority uses its influence responsibly, as a quasi-monopoly purchaser of services, to ensure that workforce contracts do not cause detriment to local communities. A good and topical example is the recent decision by members of Neath Port Talbot Council to meet in full the national living wage for staff employed in private sector residential care homes, from which the council purchases a significant amount of residential care. Neath Port Talbot Council is one of the few local authorities in the UK that has decided to afford the national living wage from the outset—it might even be unique. It is important to point out, however, that the council has not simply gifted the money to residential care providers; it pays to ensure that its high-quality standards are met. If third- party providers fall below the standards, funds are withdrawn.

To conclude, perhaps that model will be adopted by the Government. I look forward to hearing the Minister’s response to the proposal.

--- Later in debate ---

[George Freeman]

I will deal with the right hon. Gentleman’s points, with which I have a lot of sympathy, if I am given time to crack on.

Hon. Members have rightly raised the issue of non-compliance with the minimum wage in this sector. I want first to set out the measures that we are putting in place now and that we have put in place already, before touching on some things that we may go on to do in due course. HMRC responds to every complaint made by workers through the ACAS helpline. When a third party reports suspected non-compliance, HMRC evaluates the report and investigates the employer when there are grounds to do so.

Since HMRC began enforcing the minimum wage in ’99, it has identified more than £65 million in arrears. Between April and November 2015, HMRC took action against 557 businesses, clawing back over £8 million for 46,000 workers who had been illegally underpaid. That is already the largest amount of arrears identified in any single year since the national minimum wage was introduced and is possible as a result of the increased investment and extra measures we have put in place to support enforcement.

We are going further. The Prime Minister has committed to a package of measures that are currently being implemented that will build on Government action to date and strengthen the enforcement of the national minimum and living wage. First, we are increasing the enforcement budget from April 2016, demonstrating our ongoing commitment to ensuring that the hardest-working and lowest-paid people receive the pay that they are entitled to. HMRC will also continue to promote compliance with the law and respond when employers have got things wrong.

Secondly, the Government are further increasing the penalties that employers will have to pay when they break the law. From 1 April, the calculation will increase further, to 200% of the arrears that an employer owes. By increasing the penalties for underpayment of the national minimum wage, we intend that employers who would otherwise be tempted to underpay comply with the law and that working people receive the money they are legally due.

Furthermore, under changes being implemented through the Immigration Bill, we are creating a statutory director of labour market enforcement, who will set out a single set of priorities for the enforcement bodies across the spectrum of non-compliance. That should ensure a targeted approach that addresses problems and best helps victims.

Under the Immigration Bill, we are also creating a new type of enforcement order. That labour market enforcement undertaking will be supported by a criminal offence for non-compliance. We want to tackle employers who deliberately, persistently and brazenly commit breaches of labour law and fail to take remedial action. That cannot always be done satisfactorily through the repeated use of existing penalties or offences, which may lead to the continued exploitation of workers.

[Christina Rees]

I am grateful to the Minister for giving way. Will he provide examples of where that happens in the care sector? He is quoting a lot of statistics overall about the national minimum wage and recovery, but they are not specific to the care sector.

[George Freeman]

Perhaps I can come back to the hon. Lady on specific cases—I do not have them to hand. I just want to talk about what we are doing to deal with the issues that have been raised, but she makes an interesting point.

In the care sector, we have a particularly high incidence of workers who have not been paid the national minimum wage in the right way. Other sectors are hairdressing and retail, and there is some dispute about where the worst practice exists, but the care sector clearly has a major historical problem. That is in part attributable to the fact that many of the more complex rules on calculating working time are prevalent in the sector—for example, the calculation of travel and sleeping time. On those points, although I am sure that Members will appreciate that I cannot comment on individual cases, I want to restate the Government’s position: when workers are performing work under their contracts, they must be paid the minimum wage.

It is also worth noting that there is no perfect measure of non-compliance within the sector, and there is a possibility that current estimates of non-compliance overestimate work time and underestimate pay, because the information is reported by workers themselves. That is why we are continuing to work with the Low Pay Commission, the Office for National Statistics and others in order to improve our estimates and better understand the scale of the problem.

On the point that was mentioned by the right hon. Member for Oxford East (Mr Smith) and others, the Low Pay Commission’s proposals on transparency merit serious consideration, and we are looking at those and a number of its other recommendations. We are determined to continue to drive forward and send the very clearest signal to companies and employers that we are becoming less tolerant of non-compliance, and we want them to recognise that.

None the less, increasing compliance with the minimum wage in the sector remains a top priority for us and we are taking a number of steps to promote compliance and take stronger action against those who break the law. First, HMRC continues to focus on tackling non-compliance, but that activity is no longer reliant on worker complaints and instead targets employers with the highest risk of non-compliance, based on a range of intelligence and information. HMRC can now analyse information from, for example, other Departments, trade union representatives and the Low Pay Commission, and the evidence indicates that this targeted approach in the care sector is working. From April 2013 to January 2016, HMRC opened 443 cases in the social care sector and closed 308 of those. Of the 308 closed cases, underpayment of the national minimum wage was found in 32% of investigations—for total arrears of £442,000 to 3,000 workers, with penalties issued for a total value of £100,000.

Members have also raised the important issue of affordability within the sector, given the introduction of the national living wage. That pay rise for the lowest paid could be seen to be a threat in terms of increasing non-compliance. That is partly why we are taking steps to signal strongly our commitment to clamp down on it.

With an ageing society, social care funding is a major strategic issue for the country and this Government. We are engaging closely with all the relevant stakeholders on that issue to ensure that councils recognise the need to increase the price that they pay for care in order to cover costs and to reflect rising costs and, not least, the national living wage. That is partly why we are giving local authorities access to an extra £3.5 billion of new support for social care by 2020, to be included in the better care fund. Councils will also be able to introduce a new social care precept, allowing them to increase council tax by 2% above the existing threshold. Taken together, the new precept and the additional better care fund contribution mean local government has access to the extra funding that it will need to increase social care spending in real terms by the end of this Parliament.