National Minimum Wage (Amendment) Regulations 2011

Lord Teverson Excerpts

Tuesday 12th July 2011 Grand Committee

[Lord De Mauley]

My Lords, I am pleased to present the regulations and to speak to the National Minimum Wage (Amendment) (No. 2) Regulations 2011.

Before discussing these regulations it is important that I confirm the coalition Government’s commitment to the national minimum wage. There has been a certain amount of controversy following the recent debate in the other place on the Private Member’s Employment Opportunities Bill, in which it was suggested that people with disabilities should be able to offer themselves for work at below the minimum wage. As noble Lords know, the aim of the national minimum wage is to establish fairness in the workplace and one of its key principles is to protect the most vulnerable workers. The Government support the minimum wage, and we reject any suggestion that disabled people should be able to opt out of it.

I turn now to the two sets of regulations before us. The first regulations—the National Minimum Wage (Amendment) Regulations—do three things. First, they increase the hourly rate of the minimum wage for adults, younger workers and apprentices and increase the maximum amount for living accommodation that is allowed to count towards pay for minimum wage purposes. Secondly, they clarify the circumstances in which individuals taking part in certain government employment programmes are exempt from the minimum wage. Thirdly, they reflect the changes that have been made to the names of certain pre-apprenticeship programmes in Wales. The second set of regulations— the National Minimum Wage (Amendment) (No. 2) Regulations—exempts higher and further education institutions from the accommodation offset rules for full-time students who are employed by that institution.

I shall start with the provisions in the National Minimum Wage (Amendment) Regulations. In April, the Government announced that we had accepted the recommendations of the Low Pay Commission in its 2011 report on the minimum wage rates to come into force on 1 October 2011. These regulations implement that decision. They increase the adult minimum wage rate by 2.5 per cent from £5.93 to £6.08. We believe that this increase is appropriate in the light of the continuing economic uncertainty, while at the same time protecting the lowest-paid workers from falling further behind the average. Both the Government and the Low Pay Commission are concerned about the position of young workers in the labour market. I am sure noble Lords share that concern.

Young people are more vulnerable than they have been previously as they have been hit harder by the recession. That is why the Low Pay Commission’s remit last year specifically referred to the need to consider the position of young people in the labour market. Their position has continued to be difficult and there is evidence that in difficult economic circumstances the minimum wage level may have an impact on their ability to find employment. The commission therefore recommended lower increases for the youth rates than for the adult rate. This is because the youth minimum wage rates have increased faster than young people’s earnings generally since 2007. As a result, the minimum wage as a percentage of median earnings for young workers has increased while the adult rate has remained stable. The commission concluded that it would be imprudent for this to continue and therefore recommended lower increases than for the adult rate. We accept that conclusion. We believe that the increases in the youth minimum wage regulations are sensible and appropriate to protect the labour market position of young people.

The Low Pay Commission has also reviewed the new apprentice minimum wage that we introduced in October last year. It has found that the initial rate was cautious and recommended a higher increase in the apprentice minimum wage of 4 per cent. This will apply only to employed apprentices who are either aged under 19 or who are over 19 and in the first year of their apprenticeship. Other apprentices are eligible for the minimum wage rate according to their age.

There is currently an exemption from the national minimum wage for workers participating in certain government schemes to provide training, work experience or temporary work. At present, workers participating in government schemes provided under the Employment and Training Act 1973 are exempt from the minimum wage. However, there is no such exemption for workers participating in government schemes provided under the Jobseekers Act 1995, such as the Work Programme. Regulation 2 corrects this anomaly so that the exemption applies to all such workers.

I turn now to the third element of the regulations which is in Regulation 4. There is an exemption from the national minimum wage for a small proportion of apprentices on specified schemes who are not employed but who usually receive an allowance paid by the state instead of a wage. On 1 August, the Welsh Assembly Government will be starting two successor programmes to the Skill Build scheme that is currently specified in the regulations. We are therefore making consequential changes to reflect this.

The second set of regulations before us concerns the application of minimum wage rules on accommodation in relation to educational institutions. It is a general principle of the minimum wage that workers should be remunerated in money and not in benefits in kind. The only exception to this general principle is accommodation. However, as a safeguard to protect workers from unreasonable charges, the regulations set a maximum daily amount that an employer can deduct for the cost of accommodation, which is known as the accommodation offset.

Last year, the Government became aware that there was a potential problem with the accommodation offset where a higher education institution provides accommodation to a student who it employs, for example, as a student mentor. The problem arises because the relationship between an educational institution and its students is primarily educational, and accommodation is provided on that basis. Where an institution employs a student part-time, this does not change the basis on which the accommodation is provided. It is not analogous to the circumstances which the accommodation offset was designed to cover; namely, the protection of vulnerable workers whose employers might have sought to avoid paying the minimum wage by levying excessive rent for their accommodation.

We conducted a full public consultation on this issue earlier this year. We received 38 responses from universities, their representative groups and student representatives. There was an overwhelming consensus supporting the principle that we should address this issue. The regulations therefore exempt higher and further education institutions from the accommodation offset rules where the accommodation is provided to a worker who is enrolled on a full-time course with that institution. The overall, consistent response to our consultation was that the test for exemption should be based on the educational relationship that a student has with an institution. We have therefore based the test on whether a worker is undertaking a course with the institution. We have limited the exemption to full-time students as we consider that this approach is in line with the principle behind the exemption.

In summary, the Low Pay Commission’s minimum wage rate recommendations reflect the continued volatility of the economy, the state of the youth labour market and the uncertain prospects for the forthcoming year. I believe that the increases in the minimum wage in the first set of regulations before us balance the needs of low-paid workers against the challenges that remain for businesses. They reflect our commitment to the fair treatment of low-paid workers as well as to business. I believe it is important for the integrity of the minimum wage that the detailed rules are appropriate and, where this is not the case, that we take action to remedy the situation.

The second set of regulations addresses the unintended consequences of the accommodation offset rules as they apply to higher and further education institutions. I ask your Lordships to consider these regulations.

[Lord Teverson]

My Lords, I thank the Minister for his explanation of these regulations. The reason why I was eventually very much in favour of the minimum wage was not that given in the background papers to this. It was the fact that where we have quite a strong safety net in terms of the welfare state, it seemed to me that we were getting into a situation where companies were able to pay low wages and the state effectively subsidised the corporate sector in terms of its pay. Bringing in the minimum wage allowed us to stop that, at least to a degree. When I looked at the uprating in these areas in relation to inflation, which clearly they are well under, they probably reflect wages in the economy fairly accurately, so perhaps that is fine. I was particularly interested in some of the background notes. I learnt that almost 1 per cent of apprentices are 61 to 70 years old. I thought that was quite an interesting statistic. In fact, only 70 per cent—seven out of 10— apprentices are in the 16 to 20 year-old age group, so we learn something from the notes.