National Minimum Wage

Jim Shannon Excerpts

Tuesday 16th December 2014 Westminster Hall

[Dan Jarvis]

My hon. Friend makes an important point, and the figures bear out what he has said. I would be interested to hear what the Minister has to say on that point, but I agree that the tiny number of rogue employers who have been prosecuted for paying people less than the national minimum wage is a disgrace. That reflects poorly on the Government’s record.

I believe that the proposal I have just outlined regarding the Low Pay Commission is straightforward and reasonable, and that it is the right thing to do. I would be grateful if the Minister would respond directly to that point.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on securing this important debate. The problem is not simply the minimum wage; many workers have had their hours reduced just to stay in employment. Some workers have not had a wage increase in three years. Some people do not even have the minimum wage let alone a living wage. Does he feel as well that the Government need to address the issue of the living wage so that people can survive?

[Dan Jarvis]

That is a helpful and constructive contribution. If the hon. Gentleman will bear with me, I will talk about the living wage later in my speech. It would be useful to hear what plans the Minister has. The hon. Gentleman makes an important point that we currently have record numbers of people in this country who are underemployed. Record numbers of people want to work full time but cannot get full-time work, so they are stuck in part-time employment and struggling to meet their costs. That is a good point, and I look forward to the Minister responding to it.

[Dan Jarvis]

Completely by coincidence, my hon. Friend has made a timely contribution that neatly introduces the point that I was about to make. If we want to win the fight against poverty wages, the remit of the Low Pay Commission must be expanded. It should not be simply a national minimum wage commission that sets the level of wages; I believe that it should lead our national effort to tackle the problem of low pay. We need to give new powers to the Low Pay Commission to investigate the causes and consequences of low pay in different areas of our economy.

We know that some sectors have particular, systemic problems of low wages. More than half of cleaners, 48% of hospitality workers and more than 40% of hairdressers are paid less than £7 an hour. At the same time, other sectors—the banking sector, for instance—could pay a higher minimum wage. I would be grateful if the Minister could tell us today whether the Government would consider giving new powers to the Low Pay Commission to bring together task forces to tackle such issues. Those task forces could include all the key stakeholders and recommend a strategy to the Secretary of State on the best way forward.

[Jim Shannon]

To that list of bodies that the hon. Gentleman referred to, would he add the catering industry? Many workers in the catering industry receive a wage that they cannot live on, which is below the minimum.

[Dan Jarvis]

I absolutely would. There are number of different sectors of the economy to which that could be applied.

--- Later in debate ---

[Jo Swinson]

We may have a difference of opinion. I agree that there should be very tough consequences for employers who do not get it right. We have ensured that the fines are in place, increased the maximum penalty to £20,000 per worker—that is currently going through Parliament in the Small Business, Enterprise and Employment Bill—and introduced a naming and shaming scheme that is far more comprehensive than the previous scheme, the criteria of which were almost impossible to meet. We now regularly list employers that have not properly paid the national minimum wage, and we name them publicly so that in their local area people can be aware that those companies are not paying the national minimum wage, which affects the reputation of those businesses.

In response to the hon. Gentleman’s plea for more prosecutions, I would say that, in the cases that are named, in most circumstances the underpayment is not necessarily a malicious act by the employer. That does not make it right, and it does not make it okay, but very often someone has put the wrong digits into a computer program so somebody is not been paid the right pence per hour. There may be mistakes on the accommodation offset allowances or mistakes on the apprentice rate. Of course, if we increased the apprentice rate to the lower age rate, we would simplify the system and make it easier for employers to get it right. That is not an excuse, as employers have a responsibility to get it right, but I would not necessarily contend that those circumstances should also result in a criminal prosecution. Our tough penalty regime, increased fines and the reputational consequence of naming and shaming are the right way to address underpayment. We are increasing the resources available to HMRC to address this issue.

[Jim Shannon]

There might be an individual working for a firm who is getting less than the minimum wage. They might be concerned but there is a fear factor in pursuing the issue. That goes back to what the hon. Member for Liverpool, Walton (Steve Rotheram) said in his intervention. Is that part of the reason why we have a low prosecution rate? People fear losing their job for making a complaint. Would it be better for complaints to be tied to the company, not the individual?

[Jo Swinson]

I hope I can provide a lot of reassurance on those points. The hon. Gentleman is right that there is a fear factor, which is why it is important for people to recognise that they can make complaints in confidence. It will not necessarily be clear which member of staff has made a complaint. The HMRC investigator will not just go along to a company and say, “Can you show me the records for this particular member of staff?” The investigator can ask to see the records for all members of staff. That has two benefits. The first is confidentiality, but secondly, of course, if one member of staff is not being paid the minimum wage properly, it is possible—indeed, likely—that other members of staff are also not being paid properly.

To put the issue in context, the hon. Member for Strangford (Jim Shannon) suggested that the reason why there are not as many prosecutions as he might like is that people are not coming forward. Actually, since HMRC began enforcement back in 1999, more than 229,000 workers have received arrears worth more than £54 million. In the last year alone, £4.6 million in arrears was delivered to 22,600 workers, a significant 17% increase in the number of workers helped compared with 2009-10. The amount of arrears per case is also rising. HMRC is learning how to ensure that it does not just look at one person in the business; now it routinely looks much more widely at lots of workers within the same business. That is important to ensure that enforcement works.

We are the fastest-growing G7 economy at the moment, and that strong growth is reflected in our employment statistics, with more people in employment than ever before. That is good news, but hon. Members have raised issues about the type of employment and whether it is just insecure part-time employment. It is worth recognising that our figures from the Office for National Statistics show that full-time work made up three-quarters of the growth in employment since the election and 85% over the last year. The growth in the labour market is significantly of full-time work, but of course there are issues around the insecurity of work, which the Government are taking steps to address. We understand those issues too.

We will return to this matter, rightly, many times in this House. I pay tribute to the Members present today, who in their different elements have been campaigning on the issue. The hon. Member for Stockton North (Alex Cunningham) is particularly assiduous in the care sector, where HMRC has done a significant investigation and is seeking to follow up. That is an area where HMRC found a lot of non-compliance. We need to stay on the case of industries where there are greater problems, because lack of compliance is much less widespread in other industries.