DRAFT National Minimum Wage (Amendment) REGULATIONS 2017

Margot James Excerpts

Tuesday 14th March 2017 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I beg to move,

That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2017.

It is a pleasure to serve under your chairmanship, Sir Alan.

The purpose of the regulations is to increase the hourly rate of national minimum wage for all workers, including those who are entitled to the national living wage. The regulations also include an increase in the accommodation offset rate.

Our economy is fundamentally strong and it continues to grow. GDP growth was 0.6% in the last quarter of 2016, above market expectations, and the economy is now 8.7% larger than its pre-crisis peak. It is right that our economic success is shared by everyone. Through the national minimum wage and the national living wage, the Government continue to ensure that the lowest paid in our society are more fairly rewarded for their contribution to the economy. The latest employment figures are a testament to the success of this policy: our employment rate is at a record high of 74.6% and our unemployment rate remains low at 4.8%.

When the House met to debate the national minimum wage rises in September 2016, I informed hon. Members that from this April the national minimum wage and the national living wage will be uprated simultaneously. We have delivered on that commitment and the new rates will be effective from 1 April this year, to coincide with the start of the tax year. We hope that by aligning the cycles we can make it easier for employers to comply, while reducing their administrative burden.

The Government continue to be supported by the expert and independent advice of the Low Pay Commission, whose members I thank for their hard work and guidance. The LPC is asked to recommend the highest possible increase in the national minimum wage rates without damaging the employment prospects of low-paid workers, and to recommend the rate of the national living wage such that it reaches 60% of median earnings by 2020, subject to sustained economic growth. The LPC has carried out extensive research, consultation and analysis to inform its wage rate recommendations. We have considered and accepted all the recommendations as set out in the LPC’s autumn 2016 report.

I will take this opportunity to clearly set out the rates that will be effective from 1 April. The national living wage rate will increase by 30p to £7.50 per hour. It is projected that up to 2 million people will benefit from this increase, whereby a full-time worker in receipt of the national living wage will receive an annual increase of more than £500. All the national minimum wage rates will also be uprated above the rate of inflation. Those aged between 21 and 24 will be entitled to a minimum of £7.05 per hour, an annual increase of 3.2%. Those aged between 18 and 20 will be entitled to a minimum of £5.60 per hour, an annual increase of 3.1%. Those aged 16 and 17 will be entitled to a minimum of £4.05 per hour, an annual increase of 2.8%. Apprentices aged 19, or those aged 19 and over in the first year of their apprenticeship, will be entitled to £3.50 per hour, which is the largest annual increase of all the rates at 4.5%. Finally, the accommodation offset rate will be increased from £6 to £6.40 per day.

We recognise that as rates rise, the risk of non-compliance also rises. The Government will ensure that every worker in the UK who is entitled to the national minimum wage or national living wage receives it. We are actively taking steps to tackle non-compliance and sending a clear message to employers that minimum wage abuses will not go unpunished. That is why the Government continue to invest heavily in minimum wage enforcement, increasing the budget to £25.3 million for 2017-18, up from £13 million in 2015-16. In addition, the Government have invested £1.7 million in an awareness campaign to highlight the rights and responsibilities among workers and employers. The campaign was launched in January and will pick up pace as we approach 1 April.

[Julian Sturdy (York Outer) (Con)]

I welcome the proposals on the table, but will the Minister outline what representations she has had from small business, given that the increases come at the same time as auto-enrolment and other cost pressures?

[Margot James]

My hon. Friend makes a good point. I have had representations from small businesses, particularly in the retail sector, saying that they are finding it challenging to cope with the various cost increases, but they tell me that they agree that introducing the national living wage is the right thing to do. Despite the difficulties, I have not had any representations urging us to row back on the increases in the regulations.

This Government are committed to an economy that works for everyone. The ongoing success of the UK labour market proves that a rising minimum wage can go hand in hand with rising employment. I commend the regulations to the Committee.

--- Later in debate ---

[Margot James]

First, I congratulate the hon. Member for Birmingham, Erdington on all the work that he undertook to advance the concept of a national living wage, which he outlined at the beginning of his remarks. I agree with several points he made. There is more than a moral case for a living wage; it is indeed good for employers and the economy—especially local economies.

The hon. Gentleman kindly exempted me from the record of my party, which he alleged had always been against the introduction of the national minimum wage, but I gently remind him that I am not alone on the Government side of the House in being a keen supporter of a national minimum wage. We are comfortable that the Conservative party has changed in its roots. I can remember the 1990s and he is quite right that people just thought, “Well, if you have a national minimum wage, it’ll cost jobs”, and no more argument was brooked. People were wrong about that.

I turn now to the difference between what I think the hon. Gentleman was arguing for, which was a living wage more along the lines advocated by the Living Wage Foundation, and the national living wage that we have put into law. Of course, I want to see people on that sort of pay being paid more, but we have set the rate as it is, which is lower than the Living Wage Foundation supports, because we are very concerned that it does not cost jobs. [Laughter.] Hon. Members are laughing, but the living wage is set by the Government on the advice of the independent Low Pay Commission. The commission is tasked with assessing the rates of the national living wage and the national minimum wage against the performance of the economy overall, and gives its considered view about the impact of those wage rates on employment. That is why I think that setting the rates at the levels we do is justified.

My hon. Friend the Member for York Outer was quite right to make the point he did. As I have said, I have spoken to small businesses, particularly retailers, and some of them are really up against it in terms of costs, and if we were suddenly to override the advice of the Low Pay Commission and whack the minimum wage up to £10 an hour, I seriously think that a lot of people would lose their jobs.

[Peter Kyle (Hove) (Lab)]

rose—

[Stella Creasy]

rose—

[Margot James]

I will give way to the hon. Lady.

[Stella Creasy]

I thank the Minister for giving way. Does she recognise that there is also quite a bit of evidence, given that growth is increasing, that companies are making profits? So what we are seeing now is employers not passing on the benefits of the productivity of employees to the people helping them to make that money. That disconnection between wages and growth is really troubling.

[Margot James]

I am glad that the hon. Lady concedes that the economy is in good shape and that it is indeed growing; I agree with her on that. I am also heartened by the fact that lots of employers are paying people more. In fact, the recent evidence about the national minimum wage is that it has not only protected the wages—the living wage—of people over the age of 25 but hauled the average wages of people younger than that up in its wake. That is because some employers who can afford it accept the point made by the hon. Lady earlier, namely that if they can afford to pay younger people more, they would rather have parity—

[Several hon. Members rose—]

[Margot James]

I will make some progress, because I want to respond to some of the points that the hon. Member for Airdrie and Shotts made. He was concerned about the rates for the under-25s, apart from the apprenticeship rates, which have gone up significantly. Again, the Government take the advice of the Low Pay Commission.

The issue that the hon. Gentleman did not mention is the rate of unemployment among younger people, which is significantly greater than it is among the over-25s. That is really the reason that the Low Pay Commission advises that there should be a lower rate for younger people, because it recognises that younger people need to get experience in order to command the higher rates and indeed to command a job in the first place, with the obvious exception of the hon. Member for Paisley and Renfrewshire South.

I remind Members that the unemployment rate for people aged between 16 and 24 is 12.6%. That is hugely greater than the unemployment rate for the over-25s, which is 3.6%. That is why the Low Pay Commission recommends a difference in the rates.

[Peter Kyle]

My hon. Friend the Member for Walthamstow made the point about young people—actually, people of all ages—struggling to get on to the housing ladder and being able to buy property. Does the Minister accept that our economy is stacked in favour of people who have assets and that people who are talent-rich but asset-poor really struggle to get on? That is why it is so important that we have more ambition for the minimum wage, so that everybody has access to the assets that will get them all the benefits that modern 21st-century life has to offer.

[Margot James]

The hon. Gentleman makes the point very well indeed. That is why we are trying as a Government to build a more inclusive society, in order to ensure that, as he says, people who are talent-rich but asset-poor get a fairer start in life. That is also why we are investing hugely in skills and infrastructure to try to bring better-paid jobs to all. It is not just about the minimum wage; it is also about the architecture of the economy surrounding people for whom there are few opportunities at the moment or opportunities just for low-paid work.

To correct the impression given by the hon. Member for Airdrie and Shotts in his remarks, real wages have grown every month for more than two years now. The average rate of growth across the economy of real wages was 2.6% over the last 12 months.

[Owen Smith]

Will the Minister give way?

--- Later in debate ---

[Margot James]

For the last time.

[Owen Smith]

I am very grateful. The impression that the Minister is giving and the Government have given repeatedly is that wages have really bounced back. The truth is that there has been a welcome bounce back in wages for the last 18 months or so, as she points out but, as the OBR said last week—five days ago—average wages will not reach their pre-2007 height until 2022. We are living through a decade-long recession in wages.

[Margot James]

As I said, real wages have risen every single month for the last 22 months.

[Owen Smith]

It is a blip.

[Margot James]

That is a fact—I am sorry if it displeases the hon. Gentleman. I accept what he says about the future projections—I am not going to start arguing with the OBR—but I am afraid that if he has his way and brings in a national minimum wage of £10 an hour overnight, that will result in more unemployment, which would set people’s chances back.

[Stephen Kinnock (Aberavon) (Lab)]

Will the Minister give way?

[Margot James]

I am sorry; I am going to carry on.

I want to deal with the extra £2 an hour, which is the same point as the one about raising the national living wage to almost £10 an hour. The hon. Member for Walthamstow made a very powerful speech. I completely accept that £2 an hour would make a big difference to people’s lives at the lowest end of the income scale. We want to get there as quickly as we can. The UK’s lowest earners have at least received the fastest pay rise in the last 20 years and their earnings have grown faster than other people’s further up the wage scale. More than 6% is the largest increase among the low paid for the last 20 years. Those figures are independent of Government.

I fear that one of the reasons why every Labour Government in history, I think, always leaves office with unemployment higher than when they entered office is that they want to escalate the pay rates before the country has earned it. I am afraid that is a recipe for more unemployment, which is a price that this Government are not prepared to pay. We would rather listen to the independent advice of the Low Pay Commission and put in place national living wage rates that protect employment, respect economic growth and what it is capable of paying people, and give the lower paid at least the best increase that they have had in the last 20 years. I want it to be more and I hope we will get to that point in future years—it could not come soon enough for me. I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2017.