National Minimum Wage

Debate between Jo Swinson and Steve Rotheram

Tuesday 16th December 2014 Westminster Hall

[Jo Swinson]

The hon. Gentleman addresses both the youth rates and the apprentice rate, and the hon. Member for Heywood and Middleton (Liz McInnes) also raised that issue. I share those concerns, particularly on the apprentice rate. We want to encourage people to take up apprenticeships, and under this Government there has been a great increase in their number. Two million apprenticeships have started since the general election, but both hon. Members are right that £2.73 an hour is a very low rate. It is worth bearing in mind that the average pay for apprentices is upwards of £6 an hour and that most employers of apprentices pay well above the minimum rate, but there is also a concerning level of non-compliance with the apprentice minimum wage. Of course, there never used to be an apprentice minimum wage at all—it was introduced by the Government because apprentices were previously not covered by the national minimum wage. Although that was a step forward, there is still a real issue here.

Earlier this year, my right hon. Friend the Business Secretary stated that he is minded to seek a significant increase in the apprentice rate. He suggested that it might be combined with the £3.79 rate for 16 and 17-year-olds, which would provide a boost of more than £1 an hour. We have asked the Low Pay Commission to consider that carefully, and we look forward to hearing its views on the proposal as part of its overall report in February 2015.

The hon. Member for Heywood and Middleton mentioned bogus apprenticeships, under which people were taken on but not given the training that should go alongside an apprenticeship. The reason for the lower apprentice rate is because employers rightly have to support the development and upskilling of apprentices with training and qualifications. Where that is not happening, national minimum wage law is being broken, even if the apprentice rate is being paid. I encourage anyone who is concerned that they are not being paid the right amount to contact the pay and work rights helpline on 0800 917 2368. I will never tire of saying that number because I want people who are not properly paid the national minimum wage to get in touch and make a complaint. Her Majesty’s Revenue and Customs will investigate every complaint, and we have increased the resources available for enforcement. I am determined that people who do not properly pay the national minimum wage are brought to book and that those who have been underpaid are given the arrears that they are due. That would discourage employers who might be tempted not to pay properly.

The hon. Member for Liverpool, Walton (Steve Rotheram) mentioned prosecutions. I understand his point, but prosecution is not the only way to address non-compliance. The number of prosecutions is not high. We are talking single figures every year since 2007, and there are sometimes no prosecutions in a given year, but the number of prosecutions was in single figures when his party was in government, too. The reason for that is pretty compelling: the most important thing is that people who have not been paid the national minimum wage get the arrears that they are due. If they go through the civil process through which HMRC takes employers, people will get their arrears paid and a penalty will be paid to HMRC—there is effectively a fine for the employer—which delivers a better result for the employee. Of course, prosecution is appropriate in the most extreme circumstances where employers have been wilfully and continually not paying the national minimum wage, but given the costs of bringing a prosecution and the interest of ensuring that people get their arrears, the civil process is the right way to go about it.

[Steve Rotheram]

The Minister is absolutely right about trying to get the best deal for the person who has been short-changed. There is no argument about that, but the message needs to be sent out to unscrupulous employers who continue to underpay that they will be prosecuted. That is the only way that we will stop them, not by good will, nor by appealing to their better nature, but by saying, “If you continue to underpay your employees, we will prosecute.”

[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.

Oral Answers to Questions

Debate between Jo Swinson and Steve Rotheram

Thursday 24th October 2013 Commons Chamber

[Steve Rotheram (Liverpool, Walton) (Lab)]

The Secretary of State will be aware of my concern about the legal requirements when a company goes into administration. Will he look at making it a mandatory requirement for administrators to prioritise the wider social consequences of the sale of a company rather than allowing asset strippers to destroy jobs and local communities?

[Jo Swinson]

The hon. Gentleman rightly outlines the devastating impact on communities that can happen when companies go into administration. Those involved in dealing with the administration of a company have a variety of different issues to prioritise. We are making sure that the problem is looked at in a range of ways. We are simplifying insolvency processes and considering some of the issues rightly raised by Members—about pre-packs, for example, with an ongoing review. We are looking at fees, too, which have sometimes meant that people cannot get as much of their money back as they should in these unfortunate circumstances. The Government are taking forward all those issues.

Payroll Companies

Debate between Jo Swinson and Steve Rotheram

Wednesday 16th January 2013 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

As always, it is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Leyton and Wanstead (John Cryer) for securing and introducing this debate, and for outlining the range of issues about which he and his colleagues are concerned. Towards the end of his speech, he rightly spoke about how it can be a challenge for people who are worried or vulnerable within the employment market to speak up on things that are not right. That is one reason why it is important that they can bring such matters in confidence to their Member of Parliament, so that MPs can take the opportunity to raise issues in the House and question Ministers through such vehicles as Westminster Hall debates. It is right and fitting that he has done so today.

It is worth putting on the record that the problem we are discussing is not the existing model for payroll companies per se. As the hon. Member for Edinburgh South (Ian Murray) pointed out, there is a range of different employment statuses and ways of working. We enjoy having the kind of labour market that has flexibility, which has many benefits for our economy. At the same time, however, that does not mean that we should not be concerned when vulnerable people are subject to practices that should not be going on.

It is worth noting that, even in the investigation that was carried out, not all the companies approached acted in any way improperly, as has been mentioned. Many payroll companies provide a valuable role, not least in small and medium-sized enterprises up and down the land that may not be able to have their own full human resources departments. Outsourcing that service can be essential, but of course we want to ensure that that service is not being used as a front for tax avoidance or to deny people rights to which they should absolutely have access.

The practice that the hon. Member for Leyton and Wanstead described, from that investigation, of a company basically wanting to shift people from PAYE to self-employment, without changing anything else about their work, management structures and so on is absolutely unacceptable. He is right to highlight that that type of behaviour is fake self-employment. HMRC has powers to investigate and clamp down, and those companies will then be liable for tax and national insurance contributions and issues such as holiday pay, when an individual was effectively an employee rather than self-employed. The company, not the individual worker, would be liable for those costs.

[Steve Rotheram]

Will the Minister give way?

[Jo Swinson]

I will certainly give way to the hon. Gentleman, who I am shocked to learn was a teenager in the late 1970s—some appalling kind of child labour must have been going on.

[Steve Rotheram]

I was exploited at a young age. If money is demonstrably not being collected by HM Treasury, has the Minister queried why? Why is a blind eye being turned to the construction sector? Is that perhaps because the casualisation of our industry that results from payroll companies’ practices is a price worth paying?

[Jo Swinson]

I do not agree, and I do not accept that a blind eye is being turned, because HMRC is able to investigate. One of the concerns that has been mentioned is the reduction in the number of investigations opened. I can understand why, at first glance, those figures are of concern, but it is worth bearing in mind the context. Basically, there is much greater use of intermediaries and employment businesses in the recruitment of people into the industry, so the smaller number of cases opened by HMRC does not necessarily reflect a smaller number of individuals covered. A case may be opened now that would have involved many individual cases some years ago, and therefore I do not draw the same conclusion as the hon. Gentleman.

It is important that HMRC investigates, because none of us wants to see tax avoidance. We may disagree on the figures and estimates. The hon. Member for Leyton and Wanstead suggested that the figure was £1.9 billion. The Government’s estimate—it is based on the previous Labour Government’s estimate, which is very much in line—is about £350 million a year. We therefore disagree on the scale, but whether it is £1.9 billion or £350 million, we can all agree that tax avoidance is not welcome or acceptable if the practice is deliberate and people are actually employed rather than self-employed. The Government are, of course, taking significant steps to clamp down on tax avoidance.

The hon. Gentleman also raised the worrying issue of companies suddenly trying to transfer to self-employed status people who had previously had full employee status. Of course, as he acknowledged, that would be illegal, because companies cannot unilaterally change employment contracts.

It is worth recognising that more can be done to improve the information available to individuals about their rights. The Government website, which is a good source of information, is being revamped under the gov.uk banner. We in the Department for Business, Innovation and Skills will look at the information about different employment statuses that we provide through that website and at how best to get across that information. In doing so, we will consider some of the issues that the hon. Gentleman raised in his speech.

There is also the pay and work rights helpline, which is a free service. It is confidential, which is important, given the fear that vulnerable employees might sometimes face. There is somewhere that is free for them to go for advice in confidence. The number is 0800 917 2368, which I encourage MPs to be aware of and to pass it on their constituents.

We have a flexible labour market in this country, which is valuable in itself. The challenge is to distinguish between false and genuine self-employment. Of course, not everyone who is self-employed and works in the construction industry is falsely self-employed; it is an entirely legitimate path for individuals to choose. Equally, we should not assume that everyone who works in that way in the construction industry is in some way cheating the system.

We have a range of different employment statuses—employee, worker, fixed term, part time, temporary—and it is right for employees and companies to be able to choose between those options, so that they can find the approach that works best for them. It would not be helpful to suggest that any type of employment status is better than the others, because people value different elements. Flexibility is often appreciated in both directions, as is the extra control that workers often have on how they undertake their contracted work, rather than being directed as an employee would be.

[Steve Rotheram]

I do not think that anyone is suggesting that every self-employed person is dodgy or that they are going through an organisation that is in some way dodgy. Like many people, my hon. Friend the Member for Leyton and Wanstead (John Cryer) and I were self-employed in the construction industry. The issue here is about the practices that are demonstrably called into question by the report that was referred to earlier. If nothing else, will the Minister agree to meet the Union of Construction, Allied Trades and Technicians and perhaps other unions to discuss the matter in detail?

[Jo Swinson]

The debate today gives us an opportunity to discuss a range of related issues and for the Department for Business, Innovation and Skills to look at what it can do. HMRC plays a significant role in the matter, so it would be worth engaging with Treasury Ministers. I will undertake to contact my counterparts in the Treasury after the debate to express the concerns that have been raised, particularly those in the UCATT report. I will make sure that they have a copy of that report and are aware of the issues. Anyone who likes can report any concerns about tax evasion directly to HMRC. The authors of the report and, indeed, hon. Members may want to do so on 0845 915 3296.

The resourcing of HMRC was mentioned, and we are investing more than £900 million in HMRC to tackle tax evasion, criminality, unpaid tax debt and avoidance. We announced on 3 December an additional £77 million by the end of 2014-15 to expand the anti-avoidance and evasion activity, because it is important. Some issues have been mentioned today not only in the construction sector but through false self-employment, which we recognise is a problem. More widely, there have been well publicised cases of tax avoidance, and we want to ensure that they are dealt with.