National Minimum Wage (Workplace Internships) Bill

Jacob Rees-Mogg Excerpts

Friday 4th November 2016 Commons Chamber

[Mr Nuttall]

I am grateful for my hon. Friend’s report of that. I have been completely consistent in my approach to the proposed legislation. I voted against the previous Bill when it was put to a Division a couple of years ago, so he and I have both been consistent.

As it happens, I was an employer when the national minimum wage legislation was introduced. At the time, I suspect I was employing about 30 or 40 people, so I know from first-hand experience about the impact that it had, not just on me but on many of my clients, which were small businesses. It undoubtedly took up some staff time; it was new legislation and we had to look at how to comply with it. To be fair, although rogue employers will do all they can to break the rules—that will always be the case—the truth is that most businesses and most small employers bend over backwards to try to comply with laws that emanate from this place. Although some extra administration was involved, I do not want to over-egg the pudding; it did not take up a huge amount of time or dominate our practice, but we did have to deal with it.

The biggest problem was not so much the administration but the economic costs of the minimum wage. I refer not so much to those who were not covered by the legislation—in our small practice, perhaps only one or two employees felt any benefit initially from the imposition of the minimum wage—but to the knock-on effect that it had on wage differentials. That was the economic problem for small businesses. If, for example, the salary of the lowest-paid worker—say, the office junior—is increased to the same level as, say, the junior typists, they can legitimately and understandably claim that in order to restore the pay differential, they should have a pay increase. That has a knock-on effect on the next grade up, and so on. The ripple effect of increasing the wages at one level can soon be felt much higher up the pay grade.

Turning to the engagement of additional staff, the fact is that if an employer has work that needs doing, they will engage a new member of staff. That may be part-time, of course—there might not be enough work to fill a full-time role, but the employer will engage either a part-time or full-time staff member. I accept that there might be unscrupulous employers who, seeing a short-term amount of work that needs doing, might seek to engage an unpaid intern to do that work. As I demonstrated earlier, however, my view—which, to be fair, is backed up by cases—is that that situation would already be covered if the person involved could demonstrate that they were carrying out work and were entitled to be paid the national minimum wage. So who would be covered by my hon. Friend’s Bill? People who are doing work are already covered, so the only other people who could be covered are those who are not working: the ones who are watching. Is my hon. Friend really suggesting that the national minimum wage should be paid to people who are simply watching someone else work?

I shall let hon. Members into a little secret. What goes on in this Chamber might be considered a spectator sport, and quite rightly, but I take the view that running a small business is not. When I was running a small business, I could not afford to pay people to come and watch me work. I did not mind paying them if they were carrying out work, but I could not afford to pay them simply to come and watch. I did not mind them coming to do work experience, and I got lots of requests—I still do, as a Member of Parliament—from people asking to come and spend time with me. I said, “Of course, there’s no problem. I will chat to you and I will give you advice.” But I could not pay them to do that. The reality is that an employer, and particularly a small business, cannot afford to pay people who want to sit and watch and then simply walk away having added no value whatever to the business.

Let us ask ourselves what determines a wage on the open market. It is an essential truth that work should be compensated according to productivity. A wage is the price at which a worker is prepared to sell his or her labour; the wage is the balance between what the employer is prepared to pay and at what level the labourer is prepared to sell. The employer will of course take into account the productivity of the labourer, and the labourer will consider how much they value themselves working for that employer. They will also take into account the experience of working there and the working environment. Someone who is prepared to spend time going on work experience—or an unpaid internship, if that is what we want to call it—is demonstrating that they value the experience of just being there and the contacts that they will make while they are there. In their eyes, those considerations cancel out the need for any monetary compensation. I believe that it is absolutely right that an individual should be free to decide for themselves the value of their own labour.

So what would happen if that basic arrangement were interfered with? What would happen if the law said—as I believe would be the case if the Bill became law—that an employer would have to pay to be watched? The obvious conclusion is that a black market would develop, as happens in any market where the price of a product or commodity is set at an artificially high level, higher than the genuine market level. If someone wants to do a few weeks’ work experience—whether it is called an internship or not—without being paid, the law should not prevent that from happening.

Let me deal briefly with the claim that unscrupulous employers are somehow exploiting a loophole. It seems to me that there is much more likelihood of an unscrupulous employer exploiting an individual who is being paid, because they will then expect a return on their payment. If someone is not being paid at all, it is surely far more difficult to exploit them and far more likely that that intern doing work experience would simply walk away.



I want to look in detail at the problems in the Bill. The first problem revolves around the definition in clause 1, which states:

“For the purposes of this Act, a workplace internship is an employment practice in which a person (“the intern”)—

undertakes regular work or provides regular services in the United Kingdom for—

(i) another person;

(ii) a company;

(iii) a limited liability partnership; or

(iv) a public authority; and”.

At the moment, the word “intern” has no legal definition. The official Government website, gov.uk, states:

“Internships are sometimes understood to be positions requiring a higher level of qualification than other forms of work experience, and are associated with gaining experience for a professional career.”

The key term in clause 1 is “employment practice”. Those two words are central to what I would call the obfuscation at the heart of the Bill. What is an employment practice? I venture to suggest that it is actually an employment contract. In other words, this clause is attempting to cover every employment contract in just about every conceivable working environment. Perhaps my hon. Friend would agree, and say that that is exactly what he is trying to do. Perhaps he is trying to make this so watertight and all-encompassing that absolutely no one could escape from it, but let us consider for a moment the problems that could arise from that.

Let us take the example of someone who is setting up a gardening business and regularly volunteering their time to maintain the garden of, say, an elderly neighbour. For the gardener, who wants to work, this is an opportunity not only to help the neighbour but to demonstrate to the neighbourhood that they are capable of the job, which could lead to paid work. Clause 1(b) states:

“(b) the purpose of the employment practice is—

(i) that the intern meets learning objectives or gains experience of working for the employer listed in section 1(a); and

(ii) to provide practical experience in an occupation or profession.”

We know from clause 1(a) that the intern could be working for a sole individual, which would cover the example of someone wanting to work for their neighbour. In that scenario, could the neighbour become liable to pay the national minimum wage? To me, that seems very likely. I submit that that would be an unintended consequence that could result in a financial cost when the person was simply trying to do someone a favour.

Nowhere in the Bill is there a definition of regular work or regular services, a point made earlier by my hon. Friend the Member for Shipley. While we are fortunate that the Bill comes with some explanatory notes, they do not give any further clues as to what actually amounts to regular work or regular services. When something is not specifically defined, there is the potential, as pointed out by my hon. Friend the Member for Rugby (Mark Pawsey) in an earlier intervention, not only for further references being necessary in order for an industrial tribunal to clarify the situation, but for terms to be widely construed. If someone is called in to do some filing in an office every Tuesday, is that regular? If a volunteer assists with a monthly live event, is that regular? It clearly means that something happens more than once, but there is no clear guidance.

I suspect that what would happen with the Bill is that the term “internship”, which has been adopted and is widely used and which this Bill seeks to outlaw, will be rapidly replaced by another term. People will try to get around the legislation by using another term—perhaps “work shadowing”. It may be that work shadowing is already covered by the Bill—we would have to see—but if someone has not been promised future work, that situation could be caught by the Bill. I would therefore submit that the Bill’s scope is too wide.

Clause 3 attempts to narrow that scope by setting out some exclusions. It excludes students who are required to do work experience as part of their course. In other words, the Bill recognises that work experience, when part of a wider course of study, does not have to be paid. To be fair, my hon. Friend the Member for Elmet and Rothwell touched on that in his remarks, but I did not intervene because he made it clear that he was not going to take any more interventions. However, the Bill’s true effect will be to discriminate against precisely those who have been told this morning that it seeks to help. If someone is lucky enough to go to college or university, the Bill says that it is fine for them to go on a placement or have 12 months’ work experience. If someone is not that lucky and just wants the opportunity to see what workplace life is like, the Bill states that an employer must pay them. That cannot be right. I am unsure whether that has been thought through by the Bill’s promoter, but it seems that that is exactly what would happen if the Bill became law.

The Bill also excludes those “of compulsory school age”, who are excluded from the National Minimum Wage Act 1998 anyway; those who are doing apprenticeships; and those otherwise excluded under devolved powers. However, I now want to comment on clause 3(1)(d). Clause 3 states:

“For the purposes of this Act, section 2 shall not apply if the person is—

(a) a student at a higher or further education institution…

(b) of compulsory school age;

(c) undertaking an approved English apprenticeship…

(d) meets the terms of a definition set out in regulations made by the Secretary of State or, as the case may be, the relevant Scottish, Welsh or Northern Ireland Ministers.”

Taken together, those words state that

“section 2 shall not apply if the person is-

… meets the terms of a definition”.

I gently suggest to my hon. Friend that there must be some words missing from clause 3(1)(d)—probably “someone who”. I think it should say that section 2 “shall not apply if the person is—someone who meets the terms of a definition”. It does not make sense as it stands.

The clause also runs the risk of different regulations being made in different parts of this United Kingdom. I hope that my hon. Friend will say that I have missed something and that that is not the case, but the clause seems to suggest that if regulations are made by the Secretary of State in this place or by relevant Ministers in the devolved Administrations, different classes of people would be excluded in different parts of the United Kingdom. Is that the case? Perhaps my hon. Friend will reflect on that and comment on it when he winds up.

I am conscious of the fact that many other Members wish to speak , but I want to talk about the many other people who have looked into this problem. In 2011, the policy group Perspective produced a paper called “Arguing for the introduction of paid internships”, detailing international comparisons of the action taken on this issue. It referred to the 2010 report from the International Labour Office “Global Employment Trends for Youth”, which looked at international comparisons. I do not know whether my hon. Friend, in drawing up the Bill, has examined the situation in other countries and whether the problem he has identified has been solved anywhere else in the world—it may well have been. Some countries, such as Canada and South Korea, have committed to funding internships in key sectors, which may be one way of doing this; we could simply throw Government money at it and say, “We will pay for people who need work experience.” South Korea extended its state-supported youth internship programme and introduced wage subsidies for small and medium-sized enterprises that engaged interns on regular contracts at the conclusion of their internship. I would not want to go down that road, but it has happened in other countries.

More interestingly, the Institute of Economic Affairs, perhaps spurred into action by the publication of my hon. Friend’s Bill, published a discussion paper in August entitled “And how much do you earn?”. One of its conclusions was that the current minimum wage legislation “should be simplified”, and I strongly support that. If this Bill were to be amended in Committee and to go down that road, there would be a lot of merit in that approach. The authors of that paper, Ryan Bourne and J. R. Shackleton, acknowledged that the national minimum wage has “broad public support”, but they said that

“the introduction of the National Living Wage threatens to lead to a populist arms race in terms of statutory minimum pay rates.”

The paper made a number of suggestions, including reducing the number of bands to just two, one for people 18 and over and the other for people 25 and over. It also suggested that the Government should:

“re-emphasise the independence of the Low Pay Commission, allowing it to continue to recommend changes to both rates in the new system according to the best evidence available on the pay-employment trade-off. This is particularly important given the pressure there will be to continue increasing wage rates even in economic recessions.”

In conclusion, the website Simple Politics calls this Bill “The ‘pay interns’ Bill”. I would argue that on closer inspection it is not that, but “The making work experience unaffordable Bill”. Even worse, it could be called “The denying young people opportunities Bill”. The growth in the number of unpaid internships has arisen as a consequence of the minimum wage legislation. I said earlier that I had not previously come across the term “internship”; it has arisen only since the arrival on the scene of the minimum wage, and with it has come the problem of elevating people who are doing work experience to the status of workers.

It was never the intention—the Minister actually said this, in terms—that businesses would have to pay wages to people who were not actually working, but simply experiencing the workplace. The most likely result, if the Bill became law, would be a reduction in the number of opportunities available to young people. Why? Perhaps because the law recognises that work placements do not have the same status as actual work. If an intern is actually working, it is already illegal not to pay them the national minimum wage; that is in the national minimum wage legislation, which Her Majesty’s Revenue and Customs is enforcing. The Bill is simply unnecessary.

[Mr Rees-Mogg]

I am interested in what my hon. Friend says. Will he talk a bit about the status of voluntary work? Some people want to volunteer, and lots of charities have business arms; there are charity shops and so on, which have a mix of employee and volunteer help.

[Mr Nuttall]

rose—

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[Philip Davies (Shipley) (Con)]

It is always a pleasure to follow my hon. Friend the Member for Bury North (Mr Nuttall).

I commend my hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke), my fellow west Yorkshire Member of Parliament, for bringing forward this Bill. As we all know, he is a very decent man. As my hon. Friend the Member for Bury North pointed out, he made a promise to his constituents and, as a decent, honourable man, he is honouring that promise. Nobody in this place should criticise him for doing that. It is what we have come to expect from him. Having said that, I do not think it was a particularly good promise to have made or to be fulfilling, although I admire him for following it through. I do not support the Bill but I do support—

[Mr Rees-Mogg]

I am sorry to intervene on my hon. Friend’s speech at such an early stage, but last year we established a tradition of congratulating the Chairman of Ways and Means on the brilliant way in which he carried out the lottery to ensure that our hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) came third in the ballot and had this Bill to introduce. Perhaps my hon. Friend would like to say a few words on that subject.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Let us assume that he does not need to, and we will get the lottery done shortly.

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[Philip Davies]

I will come to that in a bit more detail, but just so that I do not look like I am dodging my hon. Friend’s question, let me say that it has varied wildly: some people come for a day, some come for a few days and some—I would imagine it is the majority—come for a week. However, some have come for months—five or six months in a couple of cases—and I will refer to them later, because part of their experience was part of what I see as the problem with the Bill.

The issue is what will be lost, and the definition in the Bill spells out what could be lost, not just in Parliament but when people are looking for jobs elsewhere. Clause 1(b) says the national minimum wage would apply where

“the purpose of the employment practice is…that the intern meets learning objectives or gains experience of working for the employer listed in section 1(a); and…to provide practical experience in an occupation or profession.”

That seems to be good old-fashioned, traditional work experience, but my hon. Friend seems to want to cover it through the minimum wage, and that would not be sensible. Learning and gaining practical experience are what is at stake. People doing work experience do it for the invaluable opportunity to gain that experience, and that is often something money cannot buy.

For many people thinking about going down a particular career route, spending even a small amount of time just seeing what happens and what the role actually means, rather than how it is portrayed in the media, is invaluable. They might actually think, “This job isn’t for me. I thought it was, because of what I thought about it, but after spending just a week here, I’ve seen what it’s really like, and it’s not for me.” The money someone can save by not pursuing a career that is no good for them is actually far more than they could ever earn by being paid the minimum wage for doing these things.

[Mr Rees-Mogg]

Do we not also have to have confidence in people and in the fact that they can make decisions for themselves? If they decide that they loathe the internship after a week, they are not paid and they are not contractually obligated, so they can leave and take on another internship or paid employment.

[Philip Davies]

My hon. Friend is absolutely right—as he invariably is, I might add.

Under the heading “What is work experience?”, the Government’s own guidance on their website about the minimum wage, work experience and internships says:

“The term ‘work experience’ generally refers to a specified period of time that an individual spends with a business—during which they have an opportunity to learn directly about working life and the working environment.”

I should say at this point that work experience has actually proven quite an essential part of the Government’s welfare reforms—reforms that Conservative Members, including, I am sure, my hon. Friend the Member for Elmet and Rothwell, are very proud of. I am sure we all recall when the Government had to introduce emergency legislation because they lost the Cait Reilly case in the courts over the work experience she was asked to do as part of her benefits regime. The Government introduced emergency legislation, the Jobseekers (Back to Work Schemes) Act 2013, which made it clear in law that people on benefits should have to do work experience in certain circumstances. Labour Members agreed to help the Government rush through that legislation because they too saw the importance of those people having to do work experience. The right hon. Member for East Ham (Stephen Timms), the shadow Minister at the time, gave Labour’s support to it. The legislation was about people doing unpaid work experience in the workplace because the Government believed, and everybody agreed, that that was one of the best ways to help them get into work. I think the Government said—I am happy for people to correct me if I am wrong—that about 50% of people on benefits who did the work experience got a job at the end of it. I would even be prepared to wager that my hon. Friend supported the Government in passing that legislation, because I am sure he appreciated how important that unpaid work experience was in people getting a job.

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[Philip Davies]

Yes, I absolutely agree. However, my view is that the outcome of my hon. Friend’s Bill would be to take away opportunities from people and not to add extra opportunities for them. I will make a suggestion a bit later—if I ever get the opportunity to do so, Mr Deputy Speaker—to suggest how we might actually do what my hon. Friend says, which is not to take away opportunities that exist but to make sure that there are more opportunities for other people.

[Mr Rees-Mogg]

Will my hon. Friend examine the figures just given by our hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke)? He said that 40% of people do not take up internships because they cannot afford to, but 66% of internships are paid. That does not seem quite to work. It must mean that people are refusing to take up paid internships as well as unpaid internships, in which case simply paying people will not solve the problem.

[Philip Davies]

Of course my hon. Friend is absolutely right. That is a point that I, too, have considered during this debate, because my hon. Friend the Member for Elmet and Rothwell made a point about how expensive it is to live in London and to take accommodation in London, which is absolutely right. Many opportunities for internships and work experience are in London, so I have to say to him that paying under-18s £4 an hour—the current rate of the minimum wage for under-18s—will not give them the opportunity to come and take up a work experience place in London; they would still have to rely on parental support, other family support, or other means.

The Bill will not make a blind bit of difference to the people my hon. Friend is targeting. They still will not be able to afford to take up opportunities in London, which will still be the preserve of more affluent people. Again, that is why the Bill will not achieve what he sets out to achieve and why I think I have a better solution.

My hon. Friend the Member for Bury North (Mr Nuttall) was right: many people doing work experience are already entitled to the national minimum wage. We should make that point clear. I made it earlier in an intervention, but I see a difference between people who are—[Interruption.] I think that my hon. Friend the Member for Rugby (Mark Pawsey) does not agree with me here; he is a bit more hard-core than I am.

--- Later in debate ---

[Philip Davies]

I am grateful to my hon. Friend for being prepared to be flexible with his Bill. We should commend him for that. I think there are areas where my hon. Friend can make the Bill better, but just making it better does not make it better than the status quo, so I cannot promise that if he were to amend it in that way it would all of a sudden command my support. I would say, however, that the Bill can be better than currently drafted, and my hon. Friend might want to explore that avenue. I am not entirely sure the Bill can be amended to make it into a good Bill, but it could be amended to make it a better Bill.

We should be clear about the rates of the minimum wage. It varies depending on people’s age. That is because we want to make sure that younger people get a fair crack of the whip; they would potentially be overlooked for someone older and more experienced if the minimum wage was the same across the board. So the Labour Government introduced a minimum wage, which has been maintained, which varies depending on age: it is £7.20 for those aged 25 and over, falling to £4 for those under 18, with different scales in between. In this context, I want my hon. Friend to bear in mind a further unintended consequence of introducing his Bill: there would clearly be an inbuilt advantage to take on younger people as interns if they have to be paid, because if they are being paid the minimum wage, they will be paid less than the cost of taking on somebody older. In this case, therefore, for the business concerned it would be a case of the younger the better. Schoolchildren would be exempt, as would students in full-time employment if it was part of their course. So this means anyone of that age could be taken on as an intern—schoolchildren could be taken on as interns for free—but for those aged 25 or over, the sum would be £7.20 an hour right away.

Somebody of 25 or over might, however, be in the greatest need of work experience, because they have clearly been finding it pretty difficult to get themselves a paid job, and they are having to do more to make themselves employable. It would be unfortunate if people in that position, who are striving to get a job and are prepared to do whatever it takes, are turned away because they have to be paid £7.20 an hour, which an employer either could not afford or was not prepared to pay. They might take on someone younger who does not have the same needs. One of the flaws of the Bill is that it is not needs-based; it does not look at who most needs these internships. Its strategy is too simple and is therefore flawed. Older people will lose out first even though they are most in need. That would need to be amended.

There is also no exemption in this Bill for participants in Government schemes or programmes to provide training, work experience or temporary work. I do not know whether that would conflict with other Government legislation. I imagine there would be another charter for making lawyers richer—as my hon. Friend the Member for Bury North feared—in establishing which legislation had precedence. I am not a lawyer, and those with a legal background would be better placed than me to comment, but my understanding is that usually the latest legislation trumps previous legislation.

[Mr Rees-Mogg]

rose—

[Philip Davies]

I knew my hon. Friend would want to correct me, and I will of course allow him to do so.

[Mr Rees-Mogg]

I am grateful to my hon. Friend. I, too, am not a lawyer, but according to implied repeal, a later Act trumps a former Act—except, I am sorry to say, with the European Communities Act 1972, which has been deemed constitutional statute.