Draft National Minimum Wage (Amendment) Regulations 2022

Justin Madders Excerpts

Thursday 10th March 2022 General Committees

[Justin Madders (Ellesmere Port and Neston) (Lab)]

It is a pleasure to see you in the Chair, Dr Huq. I am grateful to the Minister for setting out the draft regulations. As he said, their purpose is to amend the National Minimum Wage Regulations 2015 to increase the single main hourly rate of the national living wage, which applies to people aged 23 or over, and to increase the national minimum wage for those aged 21 or over, those aged 18 or over, those under 18, and apprentices who are under the age of 19 or in the first year of their apprenticeship. As the Minister said, the draft regulations also increase the maximum daily amount for living accommodation, known as the accommodation offset rate, which is counted towards pay for the purpose of calculating whether the minimum wage has been met.

The regulations are not contentious and we will not be opposing them today. Any rise in the minimum wage is welcome. That is not to say that there are not areas where we think more could be done and more progress made. It is also fair to say—this is not a criticism of the Minister—that the rates were set before the current inflationary pressures that we have been talking about over the last few weeks emerged.

We recognise that the regulations provide for different rates of national minimum wage for different age groups, at the recommendation of the Low Pay Commission. We note that there is an above-inflation rise for 21 and 22-year-olds and apprentices. However, conversely, the rise is below inflation for those aged 18 to 20 and those under the age of 18.

We also note the Government have retained the age limit, which we think fails to acknowledge that those under 23 face many of the same pressures as those over 23. Many have to pay rent and other bills, and buy food and fuel. Those costs are not cheaper just because a person is younger. Perhaps the Minister can set out why it is still the Government’s position that those between 18 and 20 should be paid a far lower rate than those aged 21 for exactly the same work, and even less than those aged 23 and over. The impact assessment for the regulations notes that the roll-out of the main rate for those aged between 23 and 25 has gone smoothly, so I would be interested to hear from the Minister whether he will consider extending that rate in the light of the progress made so far.

The Opposition value the contribution of people in work equally, regardless of their age. We believe their value to society and the economy is worth the full rate of the national minimum wage; it is time that everyone was paid the same rate for the same job. There are increases in the cost of living and the pressures faced by people in work. One in six working households are in poverty. Despite increases in the minimum wage, we have had a decade of stagnation—debts have been running up and savings have gone down. Millions of people are unable to deal with an unexpected loss of income or an unexpected one-off payment, and are in a very precarious economic situation.

Of course, none of this helps those who are self-employed—almost half of whom, according to the TUC, do not earn the minimum wage. There is an argument, for another time, about whether all those who are self-employed are genuinely self-employed or whether they should be classed in another category.

As the hon. Member for Glasgow South West noted, not everyone who is entitled to it receives the national minimum wage. Underpaying remains a serious problem, particularly in certain sectors of the economy such as the care sector. Employers continue to find ways to cheat their workers out of pay. The Government’s list of shame, which came out at the end of last year, of minimum wage transgressors showed the care sector along with hospitality and retail as the main sectors where transgressions took place.

I note the Government have finally appointed a new director of labour market enforcement, 10 months after the departure of her predecessor. The Government have said part of that role will be to oversee an annual assessment of the scale and nature of non-compliance in the labour market. I know the new postholder has only been in the job for three months, but I hope the Minister can set out in his reply what work has been done on that matter to date and what level of detail the assessment will entail.

As I have mentioned, in December last year the Government named and shamed 208 employers who were failing to pay their workers the national living wage or the national minimum wage. Those employers were found to have breached the law to the total of £1.2 million, leaving some 12,000 workers out of pocket. Of course, not all those underpayments will be intentional, but there can be no excuse for underpaying workers. Some of those employers included such well-known high street names as House of Fraser and Waterstones, and I am sorry to say that even Lancashire County Cricket Club appeared on the list. Those are not fledgling companies that can say that they were not aware of the legislation. There really can be no excuse for such long-established employers failing to pay the right amount to their staff.

I note that on the list there are some companies that are well known for contracting with the public sector, such as Mitie and Greencore. Those are not fledgling organisations either, and they really ought to know better. The question for the Minister is whether he thinks that Government ought to be doing better. Why should minimum wage transgressors be allowed to pick up contracts from the Government, the NHS or any other part of the public sector? Does he agree that we really ought not to be rewarding that type of behaviour?

I wonder whether the Minister has had any thoughts on the geographical spread of those found to have broken the regulations. The top regions on the list were the east midlands, London and the north-west, in that order. Does that mean there is a particular problem in those regions, or does it mean that people in those regions are more willing to report issues? I would be grateful to hear the Minister’s reflections on that. It is also worth noting that the investigations referred to in the report were concluded between 2014 and 2019, so some of the breaches that appeared on the list were up to eight years old. I wonder why it has taken so long to conclude the investigations.

It is right that we call out those who are in the wrong, but we need to go further. This would be an opportune point at which to hear from the Minister about the progress in the Government’s own consultation. The “Good Work Plan” established a new single enforcement body for employment rights. The Minister will know that three quarters of respondents to the consultation for that plan supported a balanced approach to enforcement, based on compliance and deterrence.

It was also noted in the consultation that there was support for a compliance notice system for less serious breaches, giving employers a fixed period of time to take corrective action before further measures, such as the issuing of a fixed notice, are taken. Even the TUC has agreed that there should be greater use of labour market enforcement orders and undertakings, recognising that they form an important bridge between informal action and official prosecutions.

When the Minister responds, can he tell us how many enforcement orders have been issued? If he cannot tell us that today, perhaps he can write to me with that information. Can he also tell us how many undertakings have been given by employers, how many undertakings have been breached subsequently, and how many prosecutions have followed when undertakings have failed? It is important that stronger sanctions are imposed as a deterrent. Some of these fines are for only a few thousand pounds, and it does not seem as though there are many prosecutions, either. Finally, when will the single enforcement body that has been promised so often end up on the Order Paper as part of some legislation?

We want to build a Britain where everyone in every part of the country, regardless of their background, can get a good quality job that provides security, treats them fairly and pays them a proper wage to enable them to live a good life.

--- Later in debate ---

[Paul Scully]

Thank you, Dr Huq, and I thank hon. Members for their contributions to this debate. The national minimum wage and the national living wage will make, and do make, a real difference to millions of workers across the country. The increase will be welcomed, I am sure, by the people who see a real, tangible benefit. Undoubtedly, as the hon. Member for Glasgow South West said, we have the ongoing cost of living issues, and we need to look at the measures in the round, but as you rightly say, Dr Huq, we do not want to go out of scope of the measure being debated. It is therefore important that in other debates we can look at support measures for everybody, but especially for the most vulnerable in our society. We can do that in other fiscal events and in other places, with other measures that we have. However, I am glad that there is agreement that the lowest-paid workers in this country deserve a pay rise, which will help to protect them from rising inflation and protect their standard of living.

This year’s change means that on 1 April, workers on the national living wage will be earning more than £5,000 more than they did in 2015, when the policy was first announced. Younger workers will also get more money through the increases to the other national minimum wage rates. There were a number of questions about the differentials between those. The apprenticeship figures were a lot higher because we are gradually aligning them with the under-18 rate, which was preannounced by the LPC back in 2020. It has given businesses the opportunity to become aware of that and to factor it into their cash flows, for the reasons that I have given.

Let me address the point about the differentials for people doing the same job—the example was flipping burgers. Young people have a competitive disadvantage when entering the labour market because of their lack of work experience, and because they have less knowledge of the area. They may have lower productivity while they are being trained and learning the job, and employers may need to provide additional training. Any minimum wage structure has to recognise and reflect that, because if we do not have that within the system, some employers may well be unwilling to give young people those critical first opportunities that are really important for them. None the less, we are starting to align more of the age group’s living wage to make sure that we can flatten it as much as possible, and we continue to monitor economic conditions.

We are indeed more cautious about increasing wages for younger people, but for the right reasons. We want to make sure that they get paid as much as possible, but we also want to make sure that they are in work. At the end of the day, the cost of living situation is far easier to face if people are in work in the first place, although it is still a challenge. What we do not want to do is to stifle our productivity. We do not want to stifle our recovery, which is one of the reasons why we have more people on payroll now than we did pre pandemic. That is a testament to our plan for jobs and growth.

The hon. Member for Ellesmere Port and Neston talked about enforcement and naming and shaming. Some cases can be incredibly complicated to go through and can involve quite technical breaches. None the less, it is right that we do not exclude companies from being named and shamed because of ignorance of the law, but it can sometimes take a while to enforce. Bear in mind that we paused the naming and shaming process throughout the early stages of the pandemic, and we are now effectively playing catch-up with some of those cases.

[Justin Madders]

I am grateful to the Minister for giving way. I appreciate that sometimes these things are quite technical, but it has been eight years. What is the reason why it has taken so long for some of the cases to be published?

[Paul Scully]

As I say, some of that was the pausing of the naming and shaming, and we are effectively playing catch-up on that.

On the percentage points that the hon. Member for Glasgow South West talked about, he asked whether I would write to him, but I recommend that he looks at the Low Pay Commission report, which details how the LPC came up with them. That content is already there. There are 400 full-time equivalents in the enforcement area of the national minimum wage under HMRC, but I will certainly look into the vacancies and fill in any more detail for the Committee in writing.

I think I have covered most of the points that have been raised.