National Minimum Wage (Amendment) Regulations 2011

Lord Young of Norwood Green Excerpts

Tuesday 12th July 2011 Grand Committee

I would like to ask the Minister about one of the areas of abuse of minimum wage legislation that has been highlighted recently, which is interns. Are the Government considering that area of non-employment at the moment? What might happen in that area? However, in general, I welcome these amending regulations.

[Lord Young of Norwood Green]

My Lords, I am pleased to support this important piece of legislation which makes the necessary amendments to ensure that the annual rises are made to the national minimum wage and that they will come into force on 1 October 2011, raising the wages of something like 900,000 workers.

The national minimum wage was introduced by the Labour Government in 1999 in spite of all manner of scaremongering, particularly from some sections of the right-wing press and, as I recall, it was opposed by the Conservative Party at the time. When it was introduced, it raised pay for more than 2 million people, and thereafter the Labour Government ensured that there were regular, above-inflation increases, so that in the first 10 years of its existence, the national minimum wage rose by 59 per cent. There is no doubt that those increases have raised the living standards of the lowest paid and have helped to close the gap between men and women's pay.

I agree with the noble Lord, Lord Teverson, that it did away with what was in effect a state subsidy for those parts of the corporate sector that paid significantly less than the minimum wage. As we know, when those investigations took place, a wage of £1 an hour was not uncommon in certain parts of industry. In 2004, some 50,000 low-paid teenagers received a boost in income when a minimum wage for 16 and 17-year-olds was introduced. When the Conservative Party was opposing the introduction of the minimum wage before 1999, there were claims that it would cost some 2 million jobs. In practice, 3 million extra jobs were created in the following 10 years.

Despite the initial and determined opposition to the national minimum wage, it appears that it is now accepted by the main political parties. I was pleased to hear the Minister state that the Government disagree very strongly with the remarks made by the honourable Member for Shipley two weeks ago when he suggested that disabled people should be required to work for less than the national minimum wage. I welcome that assurance.

During the first 10 years of the national minimum wage, the level of the annual increases in the national minimum wage meant that overall it rose above the level of inflation. In the past couple of years, it has risen more or less in line with average earnings. However, it worries me that we are now seeing some very rapid rises in the price of basic foodstuffs, domestic fuel bills and vehicle fuel, which has a knock-on effect on public transport and many other products. If you are on a low income, food and fuel make up a higher percentage of your expenditure, and therefore you are particularly hard hit by these rises. We have seen some very steep rises in food prices and fuel prices in the past few months, and we may well see further increases in the next few months between now and 1 October 2011, the date when the increases in the national minimum wage that we are discussing today will be implemented. If these trends continue, the additional 15p per hour on the adult minimum wage, bringing it up to £6.08 an hour, which amounts to a 2.5 per cent increase, will soon be eliminated by price rises.

Put another way, this increase of 15p per hour amounts to an increase of £6 per week for a 40-hour week, while we are seeing price rises which will soon invalidate that. If these trends continue, clearly the Low Pay Commission will be taking into account these additional costs as it does its complex analysis and consultation before making its next recommendation. Once it has made its recommendation, it will of course be up to the Government of the day to decide whether to accept it. I urge the Government to accept that proportionately high increases in the national minimum wage may well be needed to ensure that it keeps pace with inflation, given the costs faced by low-income families. If we are to make work pay, which I know is an objective of this Government, it is particularly important that the national minimum wage reflects the reality of price increases that people are encountering.

I very much hope that the coalition Government will continue the policy we had in government of increasing the national minimum wage at or above the level of inflation and that there is no intention on their part to allow its real purchasing value to be eroded by a failure to increase it in line with the actual prices people have to pay to meet their basic needs. I express those fears because we have already seen the coalition Government decide to use the consumer prices index instead of the RPI to calculate rises in pensions and benefits. I note the increase in the apprentice rate from £2.50 to £2.60. I also note the valid points the Minister made about the accommodation offset and the consultation that took place.

The success of the national minimum wage depends in part on the ability to ensure successful enforcement as a deterrent to those employers who attempt to flout the legislation. Can the Minister give us the latest statistics from the Revenue on enforcement and the number of national minimum wage enquiries raised on the employee rights helpline? I understand that since I did not give notice of those questions, the Minister or his team may not have those statistics to hand. I would be happy if he would let me have those answers in writing. They are important to give us an understanding of where we are going on the national minimum wage. That said, the work of today's Committee is to pass the statutory instruments before us, and I am pleased to support them.

[Lord De Mauley]

My Lords, this has been an interesting short debate and I thank noble Lords for their contributions. The regulations concern important issues that support the Government’s commitment to delivering fairness and supporting business. I believe that the provisions are fair and appropriate.

A number of points have been raised, so let me attempt to address them. My noble friend Lord Teverson commented on the use of the national minimum wage to ensure in the past that employers did not use the welfare state to subsidise their business, and I accept that. He also asked about interns and the Government recognise concerns about the risks of their exploitation. We are working to improve our guidance to clarify when individuals performing work experience, including interns, are entitled to the minimum wage. We will ensure that enforcement of the national minimum wage continues to be effective and that resources are focused where they will have maximum impact. HM Revenue & Customs will conduct a targeted enforcement campaign this year in sectors where internships are commonplace. Work experience as an intern, paid or unpaid, can be a valuable way for young people to gain the experience, skills and confidence that they need to get started in a career, thus improving their prospects. We want as many internship opportunities as possible to be made available to talented young people from all backgrounds, but we are clear that those who are entitled to the national minimum wage should receive it.

The noble Lord, Lord Young of Norwood Green, enjoyed pointing out that the Conservative Party originally opposed the minimum wage. While that is true, the implementation of the minimum wage has shown that it provides a valuable safety net for low-paid employees but that it has not had an adverse effect on their employment. The Conservative Party has therefore supported the minimum wage in recent years. I have sat in the chair opposite, where the noble Lord sits today, and supported the national minimum wage from that Dispatch Box. This support is continued in the coalition commitment I referred to in my opening speech.

The noble Lord also referred to inflation. The aim of the minimum wage is to help as many low-paid workers as possible without having any significant adverse impact on their employment prospects. It is for the Low Pay Commission to consider this in the first instance, as it makes recommendations to Government on the appropriate rate. It would be rash to speculate now on future recommendations. The Low Pay Commission considers a number of issues, including RPI, CPI, average earnings growth, GDP growth, employment and unemployment, and details its findings and the rationale for its recommendations in the reports that it makes to us. We also take these issues into account when deciding whether to agree with the commission’s judgment.

The noble Lord kindly said that he would accept a letter on his final question, and I will write to him.

I commend these regulations to the Committee.