Enterprise and Regulatory Reform Bill

Earl Cathcart Excerpts

Wednesday 16th January 2013 Grand Committee

[Lord Hunt of Kings Heath]

My Lords, that was an interesting contribution from the noble Baroness, who speaks from experience, but there is no guarantee that farmers will do the right thing. My concern, apart from the procedure, is that by removing the Agricultural Wages Board you are removing an essential safeguard. The noble Lord, Lord Plumb, also spoke with great experience. Both noble Lords gave us a rather warm-hearted view of how farmers will respond. Apparently, we can rely on them to do the right thing and pay much higher wages than are paid under either the minimum wage or the rates contained in the order issued by the Agricultural Wages Board—but I wonder.

If one looks at the evidence given during the very truncated consultation period, the fact is that the supermarkets will undoubtedly be looking to drive down those wages in order to ensure that they keep the profits themselves. That is the story in history of how the supermarkets have behaved time and again.

My principal reason for coming into this debate is that I, alongside my noble friend Lady Royall, led for the Opposition on the Public Bodies Bill. I find it extraordinary that we are debating the abolition of the Agricultural Wages Board in this Bill. We spent hours debating the Public Bodies Bill. We had two very good debates on the Agricultural Wages Board in Committee and on Report during passage of the Bill, and in no way was there any suggestion by the Government that they would not be using the process laid out in what is now the Public Bodies Act to deal with the Agricultural Wages Board.

We have lost the super-affirmative procedure, which would have allowed for extensive engagement and consultation with stakeholders. It would have allowed noble Lords who had an interest to have taken part in extensive debate. Instead, we have had this remarkably truncated consultation—four weeks for England and one week for Wales—when many people are engaged in other activities during the winter period. We all welcome the Minister to his place but it is remarkable that in his introductory remarks he gave no explanation whatever about why this amendment was being introduced at this late stage, why the Public Bodies Bill procedure agreed by your Lordships' House is not being used and why such a short consultation period was agreed.

The consultation has been discussed very recently by the Secondary Legislation Scrutiny Committee. It very helpfully undertook a review of the new approach to consultation by the Government. We have to go back only to November of last year when the Prime Minister made a speech to the CBI conference and said:

“When we came to power there had to be a three month consultation on everything and I mean everything”.

He continued:

“So we are saying to Ministers: here’s a revolutionary idea—you decide how long a consultation period this actually needs. If you can get it done properly in a fortnight, great, indeed the Department for Education has already had a consultation done and dusted in two weeks”.

We know where that has landed the Department for Education. The Prime Minister added:

“And we are going further, saying, if there is no need for a consultation, then don’t have one”,

at all.

We now have a remarkable situation where, instead of having a well ordered process to consultation, it is entirely up to Ministers to decide how long it should be. I should have thought that there would be the inverse rule of ministerial law, which says that the more contentious the issue the shorter the consultation will be. Here we sit: one week in Wales on the abolition of the Agricultural Wages Board when we know there is absolutely no support whatever for its abolition in Wales. No wonder it is a week. People should be grateful, should they not? Why not a day? Christmas Eve would no doubt have produced the result the Government wanted. The way the Minister’s department has acted is, frankly, a disgrace.

I refer the noble Lord to the evidence given to the Secondary Legislation Scrutiny Committee. It received a lot of evidence and, unlike the summation of the evidence that Defra made of the consultation receipts, which I regard as wholly inadequate, this is a very well ordered summation. The committee report refers to a quote from the Academy of Medical Sciences, which said:

“‘We are concerned that if adopting a consultation response time of less than 12 weeks becomes the default, this may prevent expert membership organisations from being able to provide considered responses to support evidence-based decision-making in policy … as so many legislative proposals impose additional costs on business, calculating their actual cost impact can often take time and resources’”.

The committee concluded that there was a,

“widely expressed preference for a 12-week standard duration”.

We can see from what has happened in relation to the Agricultural Wages Board why that should be the case.

The Fresh Produce Association, as my noble friend says, is a convenient front for the supermarkets; no wonder it is in favour. On the issue of what landowners’ companies will do, I noticed the Duchy of Cornwall Nursery response in the consultation. The manager there says: “Overtime rates are ridiculous”. We know what will happen to the overtime rates of Duchy of Cornwall employees when we abolish the Agricultural Wages Board. I doubt there will be any overtime rate at all. That is what will happen in practice when this wretched amendment is passed, if it is passed, by your Lordships’ House.

The Minister then talked about this being a “deregulatory” action. I was a Minister at Defra for a little while and I am reminding myself of the Agricultural Wages (England and Wales) Order. It is not a very long document and absolutely clear. It is one of the most readable documents that I have come across. Here is a very clear way for employers and employees to understand what the rates are and how to put them into practice. That is admitted by Defra, whose regulatory impact assessment, in talking about the impact on the affected groups, states:

“Employers will need to familiarise themselves with relevant legislation instead of”,

having to look at the agricultural wages order. I refer noble Lords opposite to their continued and frequent complaints about the complexity of employment legislation. I fail to see how getting rid of this very slim, readable document and replacing it with the need for hard-pressed farmers to go through and read Act after Act is, frankly, a nonsense.

The impact assessment goes on to say:

“Workers and employers will need to spend time on negotiations to agree pay levels & other terms & conditions individually”.

How on earth is that reducing the time and effort of both farmers and farm workers?

The Government are replacing a well ordered system, easily understood by everyone, with bargaining that will have to take place from farm to farm, involving both farmer and farm worker in the complexity of negotiations. Is there any group of workers who work harder than farm workers? I doubt it. Surely they are the “strivers” that this Government were so pleased to cite when Mr Osborne started to try to divide this nation up in a very disturbing and discomfiting way. We know that the real impact of this will be to drive down the wages of some very good and vulnerable people, and we ought to have nothing to do with it.

[Earl Cathcart]

My Lords, when these amendments came to my attention, my first rather tongue-in-cheek reaction was, “Blimey, does the Agricultural Wages Board still exist? I thought it went out with the ark”. I say that as a farm employer. When setting a farm worker’s salary, I have to pitch it to reflect the salaries in the wider market outside of farming; that is, the competition.

Within the past year, we have employed two new farm workers and I will use one of them as an example. Previously, he had been working for a road haulage firm, on a salary of £16,000. It became clear in the interview that he was keen to take our job and he seemed exactly the right man for it from my point of view. Getting him to switch jobs all rested on his salary package. I was advised that the job equated to about £7 an hour, which is just above grade 2 on the latest agricultural wages order scale. Let us look at the practicalities of using the agricultural wages order scale in negotiations. The prospective employee said, “What is my salary going to be?”. I replied, “£7 an hour”, because the Agricultural Wages Board only works in pounds an hour. He said, “What does that mean in gross per annum?”, because he wanted to compare my offer to the £16,000 from his existing job. I said, “That is £7 an hour grossed up for the year”. So we got out the calculator: £7 an hour times seven hours a day, five days a week, 52 weeks a year is £12,740. That is what the Agricultural Wages Board is saying I should pay him. He wanted the job and I wanted to employ him but the Agricultural Wages Board pay scale does not cut the mustard because he would not move jobs for a £3,260 cut in pay. I offered, and he accepted, £16,000—the same as he was getting from the job outside farming. The important point here is that it was the competitive wider employment market that determined his salary, not the agricultural wages order pay scales, which we ignored as not being helpful.

I asked my firm of accountants in Norfolk whether other farmers ignored the Agricultural Wages Board rates when setting salaries. Was I alone, and was I breaking the law? I now know that it is not strictly legal to pay a salary to a farm employee under the agricultural wages order. Happily, the accountants’ answer to both questions was no—I was not alone and it was not illegal. They said that few, if any, use the agricultural wages order rates nowadays because one has to pay over the odds to attract people into farming, especially if skills are involved, given, as my noble friend Lord Plumb said, the combine harvester worth £250,000—that is a big skill. I also asked my neighbouring farmers, who employ workers on their farms, and got the same answer.

Another point is that the way the Agricultural Wages Board works is archaic in that it sets pay rates per hour, rather assuming that we still hand out weekly wage packets. That is clearly impractical in today’s world. The preferred option for both parties is for a monthly standing order. If employers and their advisers are not using the rates set by the Agricultural Wages Board, what is the point of the board? Here is the rub because the practicality of today’s employment market has made the board obsolete. Also, the raft of modern employment law referred to just now has made the board irrelevant, not least by the national minimum wage that was just referred to, which currently stands at £6.19 an hour. The current minimum rate under the agricultural wages order is £6.21 an hour, a difference of a mere 2p, as has already been said. That 2p difference is not surprising because the board cannot set its minimum below the national minimum wage and it would look too simplistic to set it at the same rate—

[Lord Hunt of Kings Heath]

I am most grateful to the noble Earl for giving way. He has referred to the grade 1 rates, but he might have referred to the other grades listed in the Agricultural Wages Board order, particularly those around overtime. Where are the guarantees on those?

[Earl Cathcart]

If I may, I shall come on to that point later. As I was saying, the board cannot set the same rate as the national minimum wage because that would look too simplistic, so the rate is set at 2p more. Last year—surprise, surprise—it was also set at 2p above the national minimum wage. Next year, if the board still exists, I would hazard a guess that the rate will be set at 2p more. This is hardly rocket science.

Recent research shows that the average earnings of full-time farm workers are 40% higher than the rate set by the board and that in 2010 some 90% of farm workers received more than the grade 2 minimum. The conclusion must be that farm workers are paid well over the minimum set by the board. I have talked largely about full-time employees, but what about temporary workers? I would argue that they are and will be protected by the national minimum wage.

Apart from some noble Lords opposite, who does not want to see the abolition of the Agricultural Wages Board? It is the union, Unite, which is deploying scare tactics by saying that without the board farm workers will see reductions in their pay with only the national minimum wage to protect them. That is quite clearly rubbish. Going back to my employee on £16,000 a year, if the board goes, am I really going to reduce his pay to the level of the national minimum wage; that is, £11,300? I am not going to do so because he would not accept a drop in salary of some £4,700 and he would leave. That action would disrupt my business because I would have to interview new applicants, train the new person, and probably have to pay the new worker £16,000 to entice him to move from his existing job. It is highly likely that all existing employment terms and conditions will remain exactly the same as my noble friend the Minister has said, in spite of—

[Lord Knight of Weymouth]

Can the noble Earl square his estimation that no agricultural worker will lose any pay with the Government’s own economic impact assessment which states:

“Research suggests that workers’ wages may fall by £0-34.5m”,

A year, and that its best estimate is £32.5 million? Where is that £32.5 million going to come from if it is not from agricultural workers?

[Earl Cathcart]

I am not absolutely sure why—I can only give you my case—I would want to reduce their pay at all. As far as I am concerned, the system is working perfectly well. I am happy with their pay, and so are they. I do not know where those figures come from. My view is that it is highly likely that all existing employment terms and conditions will remain exactly the same, as the Minister has just confirmed.

[Lord Whitty]

I am sorry to pursue this point. The noble Earl may well be right in relation to his estate, but the department, which is supposed to know about the totality of the industry, estimates that there will be a significant cut in wages. Indeed, it is the major effect of this amendment in terms of the impact assessment. If the noble Earl is describing that argument as rubbish, it is not we on this side or United who made the argument, but the department, which got it seriously wrong. If that is what he is saying, it is another argument for the Government to look at what their information is based on.

[Earl Cathcart]

I am sure that the noble Lord will be interested to hear what the Minister says when he winds up.

I am happy to say that since employing new workers, my business has prospered. It may not be the norm, but the decision I have to make is not by how much I should reduce my employees’ salaries, but rather whether I should give them a bonus, a pay rise or a combination of both. It is a decision I shall make in spite of, not because of, the Agricultural Wages Board and contrary to the scare tactics that I suggest are being used by Unite.

If I wanted to expand my business beyond packing and selling my own farm produce by taking in produce from other farmers for packing and resale, any new workers for that expansion would not be classed as farm workers and would not come under the Agricultural Wages Board’s umbrella, so we would have the absurd situation of two people who are doing exactly the same job being paid at different rates—and all for 2 pence, which is a ridiculous complication. It is further complicated because I am told that if my expanded business had a busy period, say, before Christmas, under the Agricultural Wages Board’s rules I would have to pay time and a half to the agricultural workers packing my farm produce if they work more than eight hours a day or 39 hours a week. The workers packing my neighbouring farmers’ produce would be subject to the national minimum wage and paid the minimum rate regardless of the number of hours they work. What a dog’s dinner. I believe that the board is irrelevant in today’s employment market and an unnecessary cost to the taxpayer. It is outdated because it works on hourly wage rates, not salaries. Those who need an hourly rate are protected by the national minimum wage, and if the Agricultural Wages Board—

[Lord Myners]

I sense that the noble Earl is coming to the close of his comments. I want to remind him that he said he would answer the point raised by my noble friend Lord Hunt of Kings Heath; namely, that the higher grades are not protected by the national minimum wage. The noble Earl said he had an answer, and I think that the Committee is looking forward to hearing it.

[Lord Hunt of Kings Heath]

Perhaps I can help my noble friend. I am referring to grades 1 to 6: grade 6 is the farm management grade and the rate is £14.10 an hour; grade 5, which is the supervisory grade, is £13.05 an hour; and grade 4, the craft grade, which I suspect is the grade that the noble Lord has in mind, is £12.32 an hour, which on a 37-hour week comes to £22,000 a year. I really do not understand what he is saying.

[Earl Cathcart]

The noble Lord did raise a question and I did say that I would come back to it. This is all about the competitive market. I said before that one has to attract people with skills into farming and to pay a higher rate according to those skills, and that is exactly where I am; you have to pay a higher rate of salary—not a higher rate per hour—to the person with the greatest skills, and it is the competitive market that determines that price, which is normally higher than the Agricultural Wages Board rates.

I said that the board is irrelevant to today’s employment markets. It is outdated, working in hourly wage rates not salaries. Those who need an hourly rate are protected by the national minimum wage, and if the Agricultural Wages Board disappeared tomorrow I do not believe that most employers and employees would notice. Those who did would, I believe, breathe a sigh of relief as it would reduce the administrative burden on farmers and their advisers.

The noble Lords opposite have all argued strongly for the board’s retention, but they had 13 years in office to change, modernise and bring the Agricultural Wages Board into the 21st century. They chose to do nothing.

[Lord Myners]

My Lords, I welcome the Minister to his new role, although I feel rather sad for him that his debut is in promoting a Bill that most Members of the Committee will now recognise is a misrepresentation in its reference to the promotion of enterprise. I can say without any doubt after a career in business, including chairing a number of major public companies, that almost nothing in this Bill will have any beneficial impact on economic activity or on the growth of the economy.

This is a rather tawdry Bill, and we are now being asked to look at rather a shabby amendment. It must have been very clear to Members of the Committee that the Minister’s predecessor, the noble Lord, Lord Marland, did not really have his heart in the Bill at all. It was quite clear that he would much rather keep up his suntan overseas than put through legislation that will have such little economic impact.

The amendment has come about as the result of wholly inadequate consultation that is supported by evidence which is thin in the extreme, and the Minister will need to explain to the Committee why it is being proposed now. Why was it not incorporated into the original Bill? Why was it not mentioned, debated or discussed in the other place? Is it an afterthought? Was it overlooked when the Government were drafting not only the Public Bodies Bill but this Bill? If that is the case, those who work in the rural economy will have grounds for extreme grievance at the behaviour of a Government who can approach this issue, which is of great importance to them, in such a superficial and callous manner. My noble friend Lord Hunt of Kings Heath has already pointed out that by putting this amendment into this Bill, a number of procedures and processes that Parliament approved in the Public Bodies Bill will be avoided.

I noted the Minister’s strong endorsement of the national minimum wage and I declare my past role as chairman of the Low Pay Commission. However, as I listened to him I felt, as he advanced his arguments for the abolition of the Agricultural Wages Board, that one could have made the same speech and inserted the words “Low Pay Commission”. What is it about the Agricultural Wages Board that is different from the Low Pay Commission? His arguments about freeing up the economy, allowing the market to operate and establishing a market clearing rate apply to the whole economy. I ask myself whether we are seeing this shabby amendment incorporated into this Bill at such a late hour as a precursor for a deeper and more fundamental attack on the concept of the national minimum wage.

--- Later in debate ---

[Lord Knight of Weymouth]

I mentioned agricultural colleges because I am not aware of another sector that has a specific network of colleges for its training. There is something different and unique about agriculture, which is very important. There may be others that other noble Lords want to mention. Maybe if I racked my brains I could come up with them, but I think there is something unique about agriculture.

Other benefits are attached to the Agricultural Wages Board. For example, there is the entitlement to rest breaks, overtime, paid holidays and even the allowance of £7.63 per week for working dogs. There is an on-call and night allowance. All these things are negotiated. They are all part of the reason why agriculture can be regarded as a special case.

[Earl Cathcart]

I am not very good at employment law; I have to be frank about that. Are you saying that my man to whom I am paying £16,000, which is nothing to do with the wages board or that side of it, does not have holidays, sick pay or all the other entitlements that any other employee in every other walk of life has? Of course he does. In my view it is not the wages board that is protecting him. He has normal employment rules and regulations, enjoyments and privileges.

[Lord Knight of Weymouth]

I am most grateful to the noble Earl and his helpful intervention.

Under the national minimum wage legislation, there is no minimum statutory level of overtime. Under that legislation, you have an entitlement to 28 days’ paid holiday as opposed to 31 days under the Agricultural Wages Board. There is also a maximum of 38 days for workers working more than six days a week under the Agricultural Wages Board, with no additional entitlement under minimum wage legislation. In terms of rest breaks, under the Agricultural Wages Board you are entitled to not less than 30 minutes where the daily working time is more than five and a half hours, whereas under the minimum wage legislation—

[Lord Knight of Weymouth]

The noble Lord makes a good point. He quotes evidence and I do not need to add to it.

I could go on to help the noble Earl. The final point, which I think is most striking, is the entitlement to paid sick leave and the level of sick pay received. Under the Agricultural Wages Board, all workers, whether or not they are paid the minimum, are entitled to 13 to 26 weeks on full pay after one year’s continuous employment, after which statutory sick pay applies. Under minimum wage legislation, statutory sick pay—currently £85.85 a week—applies where a worker has been sick for at least four days or more and has average earnings of more than the lower earnings limit, which is now £107 a week.

[Earl Cathcart]

I thought that it had been established that 90% of farm workers are paid above grade 2 in the scales—£6.50 rather than whatever the level is under the AWB. They are not being paid as minimum wage earners. They are getting a proper wage like anybody else who might be employed is getting a wage. I concede that temporary workers are paid the minimum wage, but normal salaried farm workers are paid well above that.

[Lord Knight of Weymouth]

The important thing to remember is that these legal entitlements for the agricultural sector apply regardless of whether your wages are at or above the minimum level set by the Agricultural Wages Board. These entitlements—for one and a half the usual rate for overtime, for example—are there regardless of what you are paid. That is an entitlement in law and we should protect it. I think that it is a good thing for us as parliamentarians to protect these minimum standards for workers, which would go if the Government were successful with their amendment to abolish the Agricultural Wages Board.

Unfortunately, some people do not act as responsibly as the noble Lords who have spoken and declared their interests as farmers. I point to the case of Chris Blakeney of Marden Management Ltd, who has just recently been in court in Swindon, where he changed his plea to guilty in respect of his activities as a gangmaster supplying 500 workers to farms across the country from his base in Calne. There are bad people around exploiting workers. When this protection goes, that exploitation is likely to grow.

A good argument has been made on this side of the Committee for the retention of the Agricultural Wages Board. What about the arguments against? I looked at the letter from the noble Lord, Lord Marland, the noble Viscount’s predecessor, to my noble friend Lord Stevenson on 19 December, when this amendment was announced. I note the manuscript amendment to the letter written by the noble Lord, Lord Marland, in which he said, “I reluctantly agreed to this—decision above my unpaid grade!”. That clearly suggests that the noble Viscount’s predecessor thought that this was all a bit dodgy. I would be interested to know whether the noble Viscount agrees with his predecessor about the dodginess of this amendment.

I then looked at the letter from the noble Lord, Lord De Mauley, whom I am pleased to see in his place. I think that we have answered most of the questions. The noble Viscount repeated the notion that this will improve employment but, as we have said, the impact assessment—on page 19, in paragraph ii, headed “Employment”—says:

“This effect is highly uncertain, and may therefore not be significantly different from zero”.

The Government anticipate no employment effect at all.

We have heard the arguments around whether agriculture is unique—people take different views on that. We have also heard the concerns about consultation. The lack of consultation on the amendment is truly shocking, given that 154,000 workers are directly covered by it. Four weeks’ consultation is completely inadequate for such a measure. There is then the problem of the number of people who were not included in the list of consultees. Action with Communities in Rural England was excluded. The various training organisations, such as Lantra, were not included. Housing bodies, such as the National Housing Federation and Shelter, were not included, even though the housing committees are being abolished. Even the Arthur Rank Centre was not included, despite the important role that we know the church plays in rural communities.

The consultation has been shocking. The procedure has been ignored. I would have welcomed a four-week consultation if it had been for the ash trees, for which we had an eight-week consultation; that matter was urgent. There was a really good reason for a short consultation on ash tree disease and four weeks would have been great; but we chose to go for eight weeks where there is an urgent need but four weeks to get rid of something that has been in existence since 1917. That makes no sense to me. The proposal is then brought here to Grand Committee where issues debated are supposed to be non-controversial, and we have a big row about whether the board should be abolished.

There is principled opposition and the noble Viscount should now tell us that he will withdraw his amendment and go away and reflect on it. He can then choose to bring it back on Report but it is not appropriate for the Grand Committee.