National Minimum Wage (Amendment) Regulations 2023

Lord Palmer of Childs Hill Excerpts

Monday 6th March 2023 Grand Committee

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, the purpose of these regulations, which were laid before the House on 30 January 2023, is to raise the national living wage and the national minimum wage rates on 1 April 2023.

The strength of the UK labour market remains something to be proud of. Unemployment is low, the number of employees on payrolls is 1 million above pre-pandemic levels and demand for workers remains close to record levels. The Government’s overarching priority is to achieve sustained economic growth. Our commitment to a high-skilled, high-productivity, high-wage economy will further address cost of living pressures, as well as levelling up every part of the UK and hastening the transition to net zero.

However, we recognise the impact of inflation for people right across the country, which is why this Government have continued to take robust action. This year sees the largest cash increase in the history of the minimum wage, and, once these measures come into force, the national living wage will have risen more than twice as fast as inflation since its introduction in 2015. Furthermore, benefit payments and the state pension will increase by 10.1% in April, in line with September’s CPI inflation rate. We have also delivered a package of measures, including the energy price guarantee, which has saved a typical UK household around £900 across the winter, and hundreds of pounds-worth of support in the form of cost of living payments targeted towards the vulnerable households that need it most.

I turn to the detail of the national living wage and national minimum wage regulations, which will come into force on 1 April. Following a comprehensive impact assessment prepared and published by the Government, we estimate that 2.9 million workers will receive a pay rise across the United Kingdom. I am pleased to confirm that the Government have accepted all the rate recommendations made by the Low Pay Commission in October 2022. The Low Pay Commission is an independent body which conducts expert research and analysis and brings together input from representatives of business and workers. I thank it for its tireless efforts.

The Government remain committed to their ambitious target for the national living wage to equal two-thirds of median earnings by 2024, provided that economic conditions allow. This will have the effect of ending low pay in the UK in line with the OECD definition, and this year’s increases keep us on course to achieve that target. Under the new regulations, the national living wage, which applies to those aged 23 and over, will increase to £10.42 an hour. This is an increase of 9.7% or 92p. As a result, a full-time worker on the national living wage will see their annual pay before tax rise from £17,300 to over £18,900—an increase in excess of £1,600. This also ensures our national living wage rate remains one of the highest in the world. According to the Low Pay Commission, as of the start of 2022 the UK had the fourth highest minimum wage rate in Europe.

These regulations will also increase the national minimum wage rates for younger workers and apprentices, as well as the accommodation offset. Workers aged 21 and 22 will be entitled to a minimum hourly rate of £10.18, representing an increase of £1 or 10.9%. This narrows the gap with the 23 and over rate and keeps this group on course to receive the full entitlement to the full national living wage by 2024—another ambitious target set by this Government. Those aged between 18 and 20 will be entitled to a minimum rate of £7.49 an hour, an extra 66p, while those aged under 18 will be entitled to a minimum rate of £5.28 an hour, an extra 47p. Both these changes represent an increase of 9.7%. Apprentices under 19 or those in the first year of their apprenticeship will also receive an increase of 9.7%, as their rate rises from £4.81 to £5.28.

Finally, on the detail of the regulations, the accommodation offset will also be increasing. This is the maximum daily amount that an employer can charge a worker for accommodation without it affecting their pay for minimum wage purposes; it will be rising by 4.6% from £8.70 to £9.10. The Low Pay Commission has made recommendations about the future of the accommodation offset in its recent report. The Government are continuing to consider them carefully and will issue a full response in due course.

These regulations aim to reward the lowest paid workers in every sector and in every part of the country for their contribution to our economy. We are aware of cost of living pressures and will continue to closely monitor all the impacts of increases to the national living wage and national minimum wage rates. To that end, the Government will shortly publish this year’s remit to the Low Pay Commission and ask it to provide recommendations for the rates which will apply from April 2024.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for the report on this statutory instrument. I note that, only a few minutes ago in the Chamber, the Minister answered an Oral Question and gave a lot of information related to what we are discussing here. I thank him for that information as well. He said that we do things in bits to get them through. In a sense, it is not very clear when you are doing it “in bits” what the whole picture is.

The increases in minimum wage must be welcomed; of course, we welcome them. But they are not that generous, as £10.42 per hour times, say, 35 hours over a seven-day week is only £364. I wonder if we really consider that anybody can manage on that sort of sum in our large conurbations—£364, if you manage to do 35 hours. It should be more.

The Minister kindly gave us the detail that in October 2022, five months ago, these were considered to be the increases that ought to happen. The question I ask him to consider, because we are doing this five months later, is how up to date those figures are. Should they be more generous? As a start, perhaps we should consider an independent review to consult on how to set a genuine living wage across all sectors. For instance, we could pay the living wage in all central government departments and their agencies and encourage other public sector bodies to do likewise. It is important to set minimum wages at appropriate levels, including setting a 20% higher minimum wage for those on zero-hours contracts at a time of normal demand to compensate for the fluctuations in their hours of work. This statutory instrument takes no account of that.