Unpaid Work Experience (Prohibition) Bill [HL]

Lord Mendelsohn Excerpts

2nd reading (Hansard): House of Lords
Friday 27th October 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I thank the noble Lord, Lord Holmes of Richmond, for introducing this Bill and for the opportunity to discuss this important issue today. He has been a committed champion of ending unpaid internships and has set out extremely well in his outstanding speech the unfairness of the status quo, the broad base of support for action and the weakness of the arguments against change. I also paid tribute to the noble Lord, Lord Mitchell, for what he has done to advance this issue and for the strength of his words. I thank, too, the campaigners and others who have done so much to bring this issue to the top of the agenda. I congratulate Intern Aware, the Social Mobility Commission, the Sutton Trust and many more on their hard work. I hope that it will pay off and that the Minister will be able to give us some welcome news at the end of this debate.

As far as these Benches are concerned, there is really no good excuse to brush this issue under the carpet once again. The great contributions from all sides of the House today demonstrate that the time for action has arrived; it is far overdue—and we on these Benches lend our support to the Bill. In saying that, let me be absolutely clear about what this is not about and what it does not cover, and to address many people’s concerns that there may well be unintended consequences. This is about internships, not work experience or about trying to impair work experience or limit or reduce volunteering, which has a tremendous place. Indeed, volunteering is crucial for many organisations and provides a great supplement to many institutions. As the co-president of a charity that supports people with learning disabilities, I know that we have many people who volunteer, not just in running some of our shops to help to raise money but in supporting some of the facilities and enhancing the care and support available. They are not in replacement of full-time staff who have departed. The role of volunteering is particularly clear. In this regard, the noble Lord, Lord Thurlow, raised an important point about businesses also being able to provide work opportunities for those in similar conditions. I do not believe that there is a case not to pay them or not to pay them properly. The definitions of how they work can be as part-time or under other sorts of arrangements, but I do not necessarily agree that just giving someone such an opportunity should allow someone to believe that there is a no moral responsibility to pay them. I am not sure that we are entirely comfortable with that.

People have, however, made a very good point about the importance of work experience—this is absolutely essential and very important. It is important also to draw the distinction. Many people have made the case for work experience, which we support. It was raised by the noble Baroness, Lady Brady, and the noble Baroness, Lady Wyld, made an important point about one school saying that not just do you ensure that those people who are likely to wish to get that sort of thing are able to, but you reach out to find those who do not. That is absolutely crucial. We face the problem with work experience that we are not providing the right sort of opportunities or access to people. Those groups of people who are the “hard-to-reachers”, the ones who have for quite some time not been used to the world of work, are the ones who we should try actively to give some form of work experience. I would like the Government to use their convening power to find better ways to look at how we can expand access to and opportunities for work experience. This is an important aspect.

I disagree with my noble friend Lord Winston about the extent of work experience. He made an important point about people’s opportunities and chances but I do not believe that, if you have to train someone for two months to do a task, it can in any way be described as work experience; it is a short-term job. We have had some unfortunate circumstances in the health sector regarding how we can extend work experience or the requirements for it. The noble Baroness, Lady Nicholson, raised an important point about what is happening at Imperial College and the extension of opportunities there to address that. We should not create a system that creates mistakes in and of itself.

The Labour Benches have been calling for action to deal with this issue for a number of years. In 2015, we pledged to introduce this very policy of a four-week limit for unpaid work experience and, in our most recent manifesto, we again pledged to ban unpaid internships because, as we said then,

“it’s not fair for some to get a leg up when others can’t afford to”.

Eliminating unpaid work experience lasting over four weeks will not solve every issue of social mobility and inequality, but it would have a good impact for such a simple measure. The four-week limit, as proposed by the Social Mobility Commission and expressed in this Bill by the noble Lord, Lord Holmes, strikes the right balance between ensuring that we do not inhibit genuine work experience or volunteering, while introducing vital legal clarity for businesses and workers and, most importantly, making a huge dent in a significant root cause of inequality.

The noble Lord, Lord Flight, made the point—for which I applaud him—that he is uncomfortable about even a four-week limit and that it should be from day one. I think that the use of four weeks is important for creating legal clarity to define that there are not unintended consequences, but I applaud the noble Lord and Metro Bank for paying from day one. Even though we support a four-week limit to help to clarify the law, I think that it is a disgrace that any company can take someone on an internship and not pay them from day one. We should establish a cultural sense that they should be paid from day one, not from the end of week four—that is a cultural component that we have to introduce and then champion. Establishing the law, it has been said, does not change the heart; it restrains the heartless. The point of this is to restrain the heartless. We all have to encourage this way and make sure that people are properly recompensed for their labour.

One thing I want to be absolutely clear about is that part of this is that we are witnessing quite a large explosion in low-paid, insecure and unpaid roles and exploitative and bad practices. The noble Baroness, Lady Stowell, made an important point about young people feeling lied to. The noble Lord, Lord Haskel, made an extremely good point about making sure that we are socially and emotionally aware of the needs of those aged 18 to 25 as they face this new world of technology. Because practices are changing and the world is different, we have to address those needs in different ways.

There is an importance to the CV now that was not around even when I was younger. When I was 18, I went off to do some work experience, largely just to get a bit of money. I was a dustman and road sweeper for the London Borough of Barnet. Needless to say, I have never written a CV since, and it probably would not impress anyone if I did, but they were not as important then. Things change. It is important to recognise that this measure recognises that change and has the support of business. The measure is not anti-business, as some tend to argue. A survey by YouGov and Intern Aware showed that a clear majority of employers—two-thirds—would support a four-week limit and the clarity it would bring, and that only one in 10 would oppose it. Moreover, banning unpaid internships would likely boost economic growth by opening up opportunities and unleashing the creativity of a far wider pool of talent. Those who can be supported by their parents or have savings are not necessarily the most talented or the hardest-working. Public support is similarly emphatic, with the Social Mobility Commission finding that nearly three-quarters of the public support the four-week limit. This is not just about strivers; we have to ensure that this measure addresses those who are not.

I stress that internships are not a part of labour market flexibility. It is completely wrong and incorrect to suggest that they play any part in that flexibility. There is no economic case whatever for claiming that they are part of labour market flexibility and no economic risk whatever in adopting this measure. It is also important to say that small business does not require some special measure. If businesses cannot afford to pay people, their business models are wrong. We cannot give these things a free pass. It is absolutely wrong that the sectors which for years have been the bastions of a lack of social mobility and of middle-class advantage should ever be given a free pass on this. It is totally unacceptable that the practices adopted for years by companies in areas including the law, broadcasting, the media, production companies, the fashion industry and journalism can continue to be given a free pass. We have to put a stop to that.

To put it bluntly, I do not think people appreciate that the world is changing. I saw an information memorandum for a company that was going to be sold which revealed that a third of its workforce were interns. This device was used to reduce its employment costs as it operated on the basis of employing those interns. This is totally unacceptable. If we continue to allow these practices, people will evolve and adopt measures to enhance them. This is happening across the piece. I do not want to sidetrack this debate but we should not allow zero-hours contracts to have a couple of hours added, thereby changing the nature of the contract so it is no longer termed a zero-hours contract. We should not give people free passes to turn income into capital and private equity. If we allow accountancy firms to tell companies they can retain good workers by creating two companies, thereby ensuring that they reduce their pension commitments, we are giving them free passes when we should not do so. The evidence is there. We have to act, and responsible businesses want this measure. The Government should not stand in the way.

We have heard from the Government and others that new legislation is unnecessary because interns are already eligible for the national minimum wage if they meet the definition of worker. We need to move beyond this unhelpful impasse. It is true that if every unpaid intern took their employer to court, the likely result is that they would be found to be workers who were due the minimum wage. The few cases that have been brought by interns have been successful. However, given that the point of internships is the possibility of a full-time job in the end, does it make sense to place the onus on interns to take legal action, even if they are aware of that possibility, as some are not? The fact that legal action can be taken only once the internship has commenced further undermines the argument that enforcement of current legislation can alone solve this problem.

I think that the noble Lord, Lord Flight, is absolutely correct and the Taylor review is absolutely wrong about the legal position. It is absurd to say that HMRC can enforce this issue given its role and responsibility, the limitations on its budget and the job cuts it has suffered. Interns can meet the requirements of the national minimum wage if they meet the definition of “worker”. This depends on contracts, arrangements and a whole series of things which are so easy to get over, eliminate and not to have to deal with. It is a ridiculous test. It is, frankly, disappointing that while the Taylor review on modern employment practices accepted that internships are an abuse of power by employers, extremely damaging to social mobility and should be stamped out, it did nothing to follow through to its logical conclusion and propose sufficient action to do so. This was, incidentally, an unfortunate characteristic of the entire report, which made some astute observations but ultimately failed to recognise the inherent unfairness in new iterations of what are, in fact, very old exploitative business practices. I am not sure when the Government are planning to respond to the report but I caution against hastily accepting too many of the recommendations that fell far short of the actions required.

This Bill draws a clear line in the sand. It allows for legitimate work experience and volunteering, which is vital, but provides greatly needed clarity for businesses and other organisations on when work experience needs to be paid—after four weeks. This is clarity that they are actively calling out for. As my noble friend Lord Haskel said, the law is not working and needs to change. The noble Baroness, Lady Stowell, went even further, saying that the law and regulations are not working. There is no practical, meaningful or serious evidential case to do this and there is no moral case to do this. We need not wait any longer. We on these Benches are very grateful to the noble Lord, Lord Holmes, for bringing this Bill to the House. I urge the Government to look beyond the failed approach of recent years and lend their support to this Bill. It truly deserves the cross-party support that it has been shown today.

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[Viscount Younger of Leckie (Con)]

My Lords, I congratulate my noble friend Lord Holmes of Richmond on securing a Second Reading for his Private Member’s Bill. I commend him also for all the work he is doing to encourage a fairer and more balanced society for everyone, regardless of an individual’s background.

I start by declaring an interest in that I come to this topic with a business background, both in the City and financial services, and with over 30 years’ experience in HR, including recruitment. I wholeheartedly share in the spirit of this debate. It is not right that in 2017 people are being held back from realising their full potential because they are unable to access opportunities that are kept for the privileged few. I have listened carefully to some disturbing anecdotes this afternoon, not least from my noble friend Lady Stowell and the noble Lord, Lord Mitchell. As I am sure my noble friend Lord Holmes is aware, the Government are committed to giving everyone a fair start in our economy. This includes people from socially disadvantaged backgrounds; black, Asian and minority-ethnic groups; women; and of course young people.

I touch now on the great progress that the Government have made in creating a stronger labour market for younger workers. This group has seen a growth in median earnings which has been stronger than average. The unemployment rate for this group fell by 1.4 percentage points between quarter 2 2016 and quarter 2 2017. The employment rate for 21 to 24 year-olds is now at a record high of 80%. We have clearly demonstrated that an increasing minimum wage can go hand in hand with increasing labour market participation.

The principles of the national minimum wage remain the same today as when they were introduced by the Labour Party back in 1999. It was introduced and designed to protect the employment prospects of the lowest-paid workers while ensuring that they received fair pay for each hour they worked. In April 2016, this Conservative Government went one step further by introducing the national living wage, which gave over 1.7 million people aged 25 and over a pay rise, leaving them with more money in their pockets. It is right that we continue to seek independent and expert advice from the Low Pay Commission when setting these minimum wage rates. The Government will continue to set an hourly minimum threshold which employers must adhere to, while commending those employers who pay more when they can afford to do so.

I turn now to the essence of my noble friend’s Bill. I am supportive of the good intentions that underpin the Bill and agree that it is right to stop the exploitation of workers. Let me be clear that by “exploitation” I am referring specifically to individuals who are working and should be paid the minimum wage but instead receive less than the minimum or even nothing—and we have heard some stories this afternoon to that effect. The Bill is right also in its adherence to the principle of giving everyone equal access to opportunities. It is right that this Government champion diversity.

I acknowledge the words of my noble friend Lady Wyld, who stated that unpaid internships are an open secret. The Government recognise that unpaid work experience is an issue and are committed to stamping out this exploitation when an individual falls within the definition of a “worker” for minimum wage purposes. However, I hate to disappoint the noble Lords, Lord Mitchell and Lord Haskel—and there is a “however” to this. The current legislation already sets out that all workers are legally entitled to the minimum wage; and most importantly, as my noble friend Lord Flight said in citing the excellent example of Metro Bank, that entitlement applies from day one. The entitlement applies regardless of how the employer or worker describes the relationship in a contract, which can be verbal or written.

Most employment protections in the UK apply to individuals who are defined as an employee or worker. There is no statutory definition of work experience or indeed internships. However, if it were to be defined, it is likely that a new employment status would need to be created, which in itself would open the debate about whether we extend further protections to this new category, such as holiday pay and sick pay. A new employment status is likely to create unintended consequences, such as businesses not offering any work experience opportunities or, at worst, encouraging rogue employers to seek loopholes by offering work experience for less than four weeks—funnily enough, for three weeks and six days, as my noble friend Lord Flight hinted—which would mean that individuals were not entitled to the minimum wage from day one.

I took note of the interesting speech from the noble Lord, Lord Winston, but I agree on this occasion with the noble Lord, Lord Mendelsohn. On the one hand, I understand the point that the noble Lord, Lord Winston, made about his particular sector and its highly technical area, and I take into account what he said about the opportunities in the NHS leading to further time being needed. But I was disappointed not to hear—unless he chose not to say—whether the workers were paid any expenses at all. The noble Lord may like to clarify that later. I understand his angle and where he was coming from.

As my noble friend Lord Holmes mentioned, the voluntary sector has existing legislation that covers volunteers and voluntary workers. The noble Lord, Lord Mendelsohn, also raised that. The key for volunteers, who are not legally entitled to the minimum wage, is that they have the flexibility to come and go as they please and they do not have any employment contract to perform work or provide services.

This Government will continue to encourage work experience, internships and voluntary opportunities. We want to encourage initiatives that provide individuals with an opportunity to watch and learn, to try their hand at particular tasks or give something back to their community. These opportunities are vital to so many individuals up and down the country. Their scope is so varied. This flexibility is beneficial for individuals and employers.

I am keen to focus also on the issue of social mobility, which featured heavily in today’s debate. Increasing social mobility is a top priority for the Government. Social mobility is essential to make our country one that works for everyone, not just the privileged few. We want to create a society that is fair and rewards talent and hard work. The education system and employers must be part of the answer to that. It is important for employers to increase the diversity of their workforce. The best employers are already taking some important steps, including engaging and supporting young people in schools, introducing fairer recruitment practices, removing barriers, opening up alternative routes to entry and monitoring progress. But there is more to do to ensure that background is not a barrier to a good career, and this Government are taking that challenge seriously.

The Department for Education is committed to working alongside the Social Mobility Commission to tackle the barriers that can hold people back from fulfilling their ambitions. We value the wide-ranging work carried out by the commission, including its work on a Social Mobility Employer Index. The index is a joint initiative between the Social Mobility Foundation and the Social Mobility Commission, in partnership with the City of London Corporation. It ranks Britain’s employers for the first time on the actions that they are taking to ensure they are open to accessing and progressing talent from all backgrounds and it showcases progress towards improving social mobility.

My noble friend Lord Holmes asked about Whitehall’s record on unpaid internships. I reassure him that we are taking the opportunity to enable social mobility in Whitehall. The Summer Diversity Internship Programme is a multi-award-winning programme that gives individuals from diverse backgrounds the opportunity to see what a career in the Civil Service is like, and 100% of those surveyed would recommend it. I reassure the House that it is paid.

My noble friend Lady Brady raised the important point about careers advice. The Government are taking steps to improve careers education and guidance for all ages. We are investing more than £70 million this year to support young people and adults to get high-quality careers provision.

Activities involving employers such as careers insights, mentoring, work tasters and work experience are crucial to giving young people the skills they need to succeed. The careers statutory guidance makes it clear that schools should offer work placements, work experience and other employer-based activities as part of their careers strategy for years eight to 13 pupils. We are providing valuable support for schools through the Careers & Enterprise Company, which has been tasked with increasing the level of employer input into schools and colleges.

Part of the issue is enforcement. It is about enforcing the existing legislation to enable social mobility. To be clear: it is against the law for employers not to pay at least the minimum wage to workers. We want work to pay and to have zero tolerance for employers opting out of their legal responsibilities. This is part of the reason that we have increased HMRC’s enforcement budget to a record level of £25.3 million for 2017-18. These two points were raised by my noble friend Lord Holmes. We want to stamp out any temptation to pursue non-compliance, so we have increased the maximum penalty imposed on an employer. Last year the penalty doubled to 200% of arrears owed to workers up to a maximum of £20,000 per worker. We have also continued the Government’s naming scheme, which has become increasingly effective as a deterrent. We have named more than 1,200 employers to date and we can see its effectiveness from the number of representations we get from employers seeking to be exempt from the naming process. There is a growing realisation among employers that naming can damage brands.

We also recognise that we have a responsibility to make sure that individuals and businesses—

[Lord Mendelsohn]

I am sorry for interrupting the Minister, but in reciting those numbers about the budgets and enforcement measures that are available, can he state whether they relate to HMRC’s activities in general? Which part of the budget of those sums relates to interns?

[Viscount Younger of Leckie]

I will write to the noble Lord about the specific figures relating to interns. I sought to make the point in general that in having the naming scheme, when the names go up on the board or when they are broadcast, particularly in local newspapers, it is damaging in itself. It is perceived as being more damaging and obviously can sully the reputation of employers in terms of both recruitment and the products that they are selling.

We also recognise that we have a responsibility to make sure—

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[Viscount Younger of Leckie]

Two or three Peers have said that there are flaws in the Bill. I would not necessarily go that far, but the tenet of my argument is that it is enforcement that counts. As I said earlier, we are making great efforts to improve enforcement in this area. The point is that there has to be a distinction between the different types of work. If somebody is defined as a worker, they are doing work for which they should receive remuneration from day one; otherwise, we could be led to form a new definition of, say, a work experience worker, but I have made it clear that we believe there would be some unintended consequences in so doing.

[Lord Mendelsohn]

Will the Minister clarify—because, like Matthew Taylor, he mentioned making sure that the law is clear on this—and describe the difference between an internship as work experience and an internship as work?

[Viscount Younger of Leckie]

The description is that any complaint goes to HMRC and, if a complaint has been made, a distinction has to be made and HMRC has to take a view on whether meaningful work is being carried out—in other words, a nine-to-five day is being done, not just work experience where somebody is looking over somebody’s shoulder. That distinction has to be made. Again, I make the point that we could go down the route of having a new definition under the heading, “Work Experience”, but that would lead to all kinds of unintended consequences.