National Minimum Wage (Amendment) Regulations 2018

Lord Stoneham of Droxford Excerpts

Thursday 15th March 2018 Grand Committee

[Lord Stoneham of Droxford (LD)]

My Lords, I have two or three points to make on these regulations. We welcome the move to increase the rates and we support that policy. Obviously, evidence over the past few months has shown that the economy is slowing. We have some quite serious problems in the retail sector and cutbacks in catering, with a lot of chains in financial difficulty. The other sector I would like to mention—here I must declare an interest as the chair of Housing & Care 21, a housing association with considerable care interests—is the whole care sector, which is under huge pressure. Obviously, this is a further burden in terms of costs—and not just for the operators because, given that the health service does not protect a lot of people in this sector, those costs are coming straight out of the pockets of consumers. I hope that the Government are paying some attention to these sectors and I should like to ask the Minister what they are doing.

A key issue is the degree to which productivity will increase in order to absorb some of the significant costs that are being imposed on these low-wage sectors. What are the Government doing? We have various estimates of productivity, but what initiatives are the Government taking to encourage productivity growth in these sectors? What case studies are they implementing to judge the impact of labour costs in these sectors? What policy initiatives are being speeded up—particularly, I hope, in the care sector—to address the fact that the sector is very labour-intensive and that inevitably the costs will impact directly on some very needy people who are not catered for by the National Health Service? The Government’s delay in producing their social care policies is a major consideration as this policy of increasing the living wage continues towards the Government’s targets.

Finally, as we seek to improve to improve rates of low pay, the best scenario in which to do it is one in which the economy is growing well, living standards are increasing and we have no undue pressures. We know, however, that we are now facing a period of low growth and that, because of the movement in the exchange rate and the rise in costs—particularly those imposed by these measures—living standards will be squeezed. On top of that, the Government will impose on the economy the huge costs of Brexit. The Prime Minister has admitted that Brexit will affect jobs and standards of living, regardless. I would therefore like to know what specific measures and initiatives the Government are taking to deal with these problems, which could undermine their low-pay strategy.

[Lord Henley]

My Lords, I thank both noble Lords for their helpful contributions to this debate and their broad welcome for these regulations. I will deal with the regulations and their attached documentation, and the concerns of the noble Lord, Lord Stevenson, that they were not set out exactly as they should be. I will ask the officials to send him a more readable version. More importantly, we take note of what he said. I will make sure that we do somewhat better at setting these documents out and making them clear to the noble Lord and other noble Lords taking part.

The noble Lord was also rather worried about why I used the expression “subject to economic growth”. The important point here is that the Low Pay Commission makes its recommendations in the light of an array of matters, and—as the noble Lord will know—it includes representatives of employers, employees and others. Ultimately, it makes recommendations and it is for the Government to make the decision. Those who are somewhat higher up in the Government—the Chancellor and others—have to take into account the effect on the economy of the Low Pay Commission’s recommendations, though we hope that it will also have considered the effect its recommendations might have on increasing unemployment by making it less affordable to employ people. The matter is, therefore, considered by the Low Pay Commission but, more importantly, my right honourable friend the Chancellor and others consider what lies ahead.

I join the noble Lord, Lord Stoneham, in wishing to see greater growth, but—as my right honourable friend the Chancellor set out recently—we are seeing steady growth over the coming years and I see no particular red lights in this area. We are still on track to achieve the target that we wanted to achieve—I think the noble Lord asked about this—which is 60% of median earnings by 2020. The Low Pay Commission will take all evidence into account in trying to get there.

The noble Lord also asked about the bigger change in the disregard for accommodation. Again, the Low Pay Commission took evidence to determine that off-set and its report summarises its view that the rate is a fair balance of the employer’s and the worker’s interests. Obviously I am happy to write to the noble Lord in greater detail on that if he so wishes.

I move on to the comment of the noble Lord, Lord Stoneham, that this imposes particular pressure on certain sectors. He singled out one that he knows particularly well, the care sector, for which we accept it can be difficult, and similarly for retail and other areas where wages tend to be on the lower side. That is why we are very grateful that there are representatives of employers on the Low Pay Commission to make sure that that point is made. There is no point raising rates too far if it will increase unemployment or create difficulties for certain businesses. Obviously it means that there will be extra costs for businesses but, as I think the noble Lord will accept, we want to make sure that workers are fairly rewarded.

There are certain things that Governments can do to recognise the increased costs for businesses. We give employers up to £3,000 off their employer NICs bill through the employment allowance. Last year more than 1 million employers benefited from that, saving some £2 billion. That will apply in all sectors. We cut corporation tax, as the noble Lord will be aware, from 28% to 19%, and that again benefits a large number of firms. As the noble Lord will remember, my right honourable friend announced reductions to business rates in the Budget.

I appreciate that things can still be difficult. The point behind having the Low Pay Commission, with representatives from both sides and others, is to make sure that we try to take all factors into account and, I hope, achieve greater balance. The noble Lord would like me to discuss the Government’s care policies more generally, but I do not think I am the right person or that this is the right place for me to do that at this stage, so I shall restrain myself from being tempted to take up his offer. No doubt he will find other opportunities to raise this matter with others in due course.

With what I take to be the support of both noble Lords, I commend these regulations to the Committee.