Draft National Minimum Wage (Amendment) Regulations 2022

James Gray Excerpts

Thursday 10th March 2022 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

I beg to move,

That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2022.

It is a pleasure to serve under your chairmanship, Dr Huq. The purpose of the regulations is to raise the national living wage and national minimum wage rates on 1 April 2022.

We should be proud of the labour market’s recovery from the pandemic. In the UK, the current number of payroll employees is over 400,000 more than pre-pandemic levels, while unemployment has fallen to 4.1%. That is in no small part down to Government intervention in protecting jobs and livelihoods, ensuring that businesses can get back to working with their customers, increasing footfall, and getting back to a sense of normality so that they can go through the gears. On the economic recovery, GDP recovered to the pre-pandemic level at the end of 2021 and increased by an estimated 7.5% over the year.

However, we are aware, clearly, that a key issue on people’s minds is the cost of living. We have already acted to support households with rising energy bills. We recently announced a package of measures worth £9.1 billion in the coming financial year, including a £200 reduction in energy bills and a £150 rebate in council tax bills for all households in bands A to D in England. That is in addition to measures already announced, such as the universal credit taper rate and freezing fuel duty for the 12th year running.

We are committed, in our recovery, to supporting the lowest paid. We cannot have a recovery off the backs of the lowest paid. Since 2015, we have increased the national living wage significantly faster than average wages, and more than twice as fast as inflation, meaning more money for the lowest-paid workers. An increase in rates this year will continue to protect the lowest paid against the increase in the cost of living.

The regulations will increase the minimum wage rates from 1 April. We estimate that that will give a pay rise to around 2.5 million workers, and I am delighted to say that we accepted all the rate recommendations made by the Low Pay Commission in October 2021. The independent Low Pay Commission brings together the business and worker stakeholder views, informed by expert research and economic analysis, and I am grateful for its well-informed recommendations and the work it has done to reach them.

We have set a target for the national living wage to equal two thirds of median earnings by 2024. When the Low Pay Commission made its recommendations last October, it took into consideration that target and the strong economic and labour market recovery—to that point—as well as the remaining uncertainty and feedback from the wide range of stakeholders it spoke to and engaged with.

We are pleased that the increase keeps us on track to reach the target for 2024, which we remain committed to. The LPC’s recommendations are based on significant stakeholder evidence from business, worker, and academic representatives. Businesses told it about the concerns they face, at this stage of the recovery, and how they continued to plan for the future, based on our target for the national living wage.

[James Gray (North Wiltshire) (Con)]

I thank the Minister for giving way. May I congratulate the Government on being able to increase the national minimum wage in this way? It is extremely good news. However, I feel that the figures, which the commission came up with, are a little odd. Would it not be easier, from the point of view of a worker or apprentice, if the figure was rounded, so they would know that they were getting £8.90 or £5.20—or whatever it might be—rather than these rather odd, random figures?

[Paul Scully]

The figures are based, as I said, first on the evidence, weighing the benefits for the lowest paid with the increased cost pressures on business. Of course, it is not only for the minimum wage or living wage itself, but pushing the differentials up for other people who are slightly further up the chain. I suppose that we could make the argument, “Do you want a rounded percentage or a rounded cost?”

Having had that evidence, there is then, effectively, a negotiation between the employers’ and workers’ representatives on the commission. They then come up with that recommendation, in between, of what they feel the economy can bear. It is not always rounded—clearly, that would be easier for everybody concerned—but we do not always allow perfection to be the enemy of the good. I think we have come up with something that is good for low-paid workers and for keeping to the manifesto commitment.

The national living wage for those aged 23 increasing by 6.6% to £9.50 is an increase of 59p. A full-time worker will be more than £1,000 better off over the course of the year. The regulations also increase the rates for younger workers and apprentices, and the accommodation offset, so workers aged 21 and 22 will receive an increase of 82p an hour to a minimum hourly rate of £9.18. Workers aged 18 to 20 will be entitled to an extra 27p an hour, taking their rate to £6.83. Under-18s will have an increase of 19p to an hourly rate of £4.81, and apprentices aged under 19, or those in the first year of their apprenticeship, will receive an increase of 11.9% to an hourly rate of £4.81—51p more.

I will announce another change to the regulations that we will shortly bring forward. Last year, we asked the Low Pay Commission to gather evidence on the use of the live-in domestic worker exemption to minimum wage entitlement, which exempts employers from having to pay the minimum wage to workers who live in the employer’s home and are treated as part of the family, such as au pairs. The Low Pay Commission heard evidence from au pairs, domestic workers, and agencies for those workers. The commission concluded that the exemption is not fit for purpose, and recommended that it be removed. We have accepted that recommendation, and will introduce legislation to remove the live-in domestic worker exemption when parliamentary time allows.

We have pledged to continue raising the minimum wage in the coming years. As I mentioned, our manifesto includes a target for the national living wage to reach two thirds of medium earnings by 2024.