Nick Smith
Main Page: Nick Smith (Labour - Blaenau Gwent and Rhymney)Employment Opportunities Bill
Nick Smith Excerpts
Mr Chope
A Division puts people’s positions on the record. For example, the hon. Member for Manchester Central (Tony Lloyd), who says that he supports the Bill—certainly clause 1, if not all of it—might be forced into the position of voting against it, but that would then be on the record. If he wants to vote against the Bill, I hope that he will have the opportunity to do so. I cannot remember how many Bills of mine have gone to a Division this Session—my hon. Friend might know the exact number—but quite a lot of them have. I assure the hon. Member for Harrow West that there is no deal between me and the Government to discuss the Bill and for me then tamely to withdraw it, but obviously I am conscious of the fact that we can have a Division on the Bill only if it is not talked out beyond 2.30 pm. We would also need to take into account the other, equally meritorious Bills seeking debate this morning.
Nick Smith (Blaenau Gwent) (Lab)
I would encourage the hon. Gentleman to have a Division on his Bill, which I see as a bob-a-job wages plan. In Blaenau Gwent we would definitely be against his plans to allow, as he put it previously,
“freely consenting adults”
to
“opt out of the minimum wage”.—[Official Report, 10 February 2009; Vol. 487, c. 1258-59.]
I see this Bill as a miserable attempt to gouge down the wages of workers across our country. We should have a Division, and we should vote against this miserable Bill.
Mr Chope
I do not have time to look up the unemployment figures in the hon. Gentleman’s constituency, but I am sure that all those without jobs who are seeking them will be really pleased to know that they have his full-hearted support for opening up the labour market and giving them better employment prospects.
This Bill is about the fundamental freedom, liberty and right to work. It also has consequential benefits for the competitiveness of our economy. Clause 1 would save quite a lot of money for the taxpayer, and the other clauses would generate more employment and less dependency on benefits. This is a really good Bill, and I commend it to the House.
Tony Lloyd
That is a genuine issue for debate. It is obvious that it is much easier for someone to live on the minimum wage in, for instance, the north-west of England than in central London. That is why the Mayor of London has begun to advocate strongly—I think I agree with him on this—the introduction of a living wage, which does not simply enable people to operate at or below some notional national level, but recognises such factors as housing costs. However, we must still maintain a national floor through which people cannot fall.
Nick Smith
I congratulate my hon. Friend on what I consider to be a sensible defence of the minimum wage. Does he agree that the Bill’s “bob a job” wages plan would dramatically undermine it, particularly in areas such as mine in south Wales, where it helps to boost local economies?
Tony Lloyd
That is the point that I was making about the word “national”. It ought to be recognised that, in one nation—whether we measure it from the tip of Scotland to the far south or from the west to the east—we are all in this together. We cannot have an economy that is dislocated. Although the last Labour Government got some things right and introduced some valuable measures, they failed to wrestle successfully with the regional impact of economic decisions. The dash for the City over-emphasised the needs of a particular region of the south-east at the expense of the rest of the economy. The level of the pound proved disadvantageous to manufacturing industries: it hurt south Wales, parts of the north of England, and even parts of the traditionally industrial midlands. There are significant reasons for our failure to operate entirely effectively in relation to the national economy, and, as my hon. Friend suggests, we should not lose sight of the important role of the national minimum wage in that context.
Let me say something about the training opt-out. The hon. Member for Christchurch did not mention the fact that when the minimum wage was first introduced in 1999, there was also a six-month training discount called the development rate. In 2005, the Low Pay Commission recommended that it should be discontinued, because it had become totally discredited. Not only was there no evidence that employers claiming the discount were training employees; there was evidence that they were not training. As my hon. Friend the Member for Harrow West (Mr Thomas) pointed out to the hon. Member for Christchurch, the Bill contains no provision guaranteeing the quality of even the quantity of training.
There are important issues that the House should debate in relation to how we train in our society. I have strong views with which even my party’s Front Benchers may not always agree. For instance, I still believe that we should consider imposing a training levy on those who will not train. As things stand, a freeloading bad employer can undercut a good employer by refusing to train, and can then poach the product of the good employer’s training. We ought to think about those issues, but I do not think that we should do so in the way proposed by the hon. Gentleman. I do not believe that the Bill will produce different results from the old development rate. There were good reasons for getting rid of that, and I think that he should think carefully about what he has advocated in his Bill. It simply would not work. It would operate as a perverse incentive for rogue employers, and I do not think that we should give them incentives.
This has been an interesting debate, and I shall now draw my remarks to a conclusion as I know that other Members wish to contribute to it. In a way, I hope the hon. Gentleman does press the Bill to a Division, as it will be interesting to count Members through the Lobbies, although I suspect that there will not be enough of us around today for that to be a defining moment in the political history of our Parliament and the economic history of our society.
I do not think the hon. Gentleman is a mean-spirited human being; I say that genuinely, although I cannot say it of all the people who advocate effective gouging of the minimum wage structures. I think his view of how the modern economy works is profoundly wrong, however. It is important that we debate this matter from time to time because although some Conservative Members do not believe this, it is a tough, tough world out there for those at the bottom. We should not return to a tough world in which young kids are paid less than £1 an hour, and adults are paid between £1 and £2 an hour, because that kind of society is both irresponsible and, at best, amoral. We want a society that has basic social standards for all our citizens, and where we can say to our young people, “Get into the world of work because you will be paid well.” We want a society where the “regular plodders” to whom the hon. Gentleman referred are not forced to work hour after hour to take home an unacceptable level of pay, but can be paid a dignified wage because they contribute in the best way they can. That is the kind of society to which we ought to be aspiring, and it is not so very difficult to achieve, but it would be a lot more difficult if we were to accept the premise of the Bill.
Mr Thomas
It is for the hon. Member for Christchurch to press his Bill to a Division or not. We are ready to vote, and we will vote to oppose it. I look forward to finding out whether the hon. Member for Wellingborough (Mr Bone) intends to encourage the hon. Member for Christchurch to force a vote.
Nick Smith
One of the good things about being here for this debate is that it has reinvigorated my interest in politics, because it is an opportunity to argue against the pile it high, sell it cheap attitude that Government Members have towards working families in this country.
Mr Thomas
I welcome my hon. Friend’s attendance at and participation in this debate. If I am able to secure your indulgence, Mr Deputy Speaker, I hope to set out at greater length what the Opposition think would be a proper way to help working families, as opposed to this legislation.
Crucially, the Bill would enable the minimum wage to be lowered in areas of relatively high unemployment. It would undermine the national nature of the minimum wage, enabling rogue employers to compete on the basis of lower and lower wage rates. I recognise that the hon. Member for Christchurch, as he set out, has always been an unreconciled opponent of the minimum wage—he has been commendably consistent in his views. He must know, however, that with unemployment rising, the Bill would make it easier for minimum wage protection to be eroded.
As I hinted in an intervention on the hon. Gentleman, under clause 3, on the training wage, there would always be ways for employers to claim that training was being undertaken. There would be absolutely no quality control, and there would be a risk of lower wages as a result. Given the Government’s acceptance of the Low Pay Commission’s recommendation of an apprentice rate of £2.50 an hour, there is even less need for the training rate for which he argues. The apprentice rate recognises that someone is not yet up to maximum productivity, but the apprenticeship ensures that proper training is being undertaken, with the employer showing a genuine commitment to quality training.
The Bill would leave low-paid workers even more vulnerable to in-work poverty, and we certainly cannot support that. I gently suggest to Government Members that the minimum wage has been a huge success. It helped to raise pay for more than 2 million people when it was introduced, and some 50,000 low-paid teenagers received a boost in income when a minimum wage for 16 and 17-year-olds was introduced in 2004. When the Conservative party opposed the minimum wage back in 1997, it claimed that it would cost some 2 million jobs. In practice, 3 million extra jobs were created in the following 10 years.
Members may be interested to know how many people benefit from the minimum wage at the moment. Some 1,080,000 individuals were benefiting from it as of last October. In the south-east, where the hon. Gentleman’s constituency sits, there were some 110,000 individuals benefiting from it. In Yorkshire and the Humber, where the constituency of the hon. Member for Shipley is, there were some 100,000.
Mr Bone
I am not sure I really understand the hon. Gentleman’s point, but “nasty Tory” is clearly an oxymoron.
I plan, at the moment, to support the Bill, but of course we have not heard from the most important person in the House, the Minister. Many people would say that the Minister is one of the best in Parliament, and I would entirely agree with that. In fact, others would say that he is the Jim Hacker of Parliament. His Ministry is the closest to the Department for Administrative Affairs in “Yes Minister”, and he is responsible for getting rid of regulation and red tape, which is in part what this Bill would do. Everybody thinks that “Yes Minister” shows what really happens in this place, but of course, Jim Hacker went on to become Prime Minister, so I hope that the Minister will not forget me in future.
I refer Members to my entry in the register and the fact that I am a fellow of the Institute of Chartered Accountants in England and Wales. I want to take the politics out of this debate, or at least out of my speech. I have never doubted Opposition Members’ sincere concern about low-paid people and the unemployed; I just think that the policies that they propose do the opposite of what they want. Every Labour Government have left power with unemployment higher than when they came to power. That is not because Opposition Members set out to do that or because they did not care passionately about unemployment; it is because their policies lead to unemployment.
I happen to have with me the Library figures for the constituency of the hon. Member for Blaenau Gwent (Nick Smith). In April 2006, unemployment in his constituency was 1,917, but in April 2010, when Labour left power, it was 3,202, which is an enormous increase. After a year of this successful coalition Government, the figure has dropped to 2,955. I do not say that in any way to make a political point; I just think that the policies that the Opposition pursue sound good, but result in more unemployment.
Nick Smith
I fundamentally disagree with the hon. Gentleman’s point. Unemployment has gone up in Blaenau Gwent because of the recession and the banking crisis. Until then, the Labour Government did a very good job of boosting employment in my area, and I am proud of their policies.
Mr Bone
For many years I lived close to the hon. Gentleman’s constituency. It is a very nice constituency, made up of fine, hard-working people; there are just not enough jobs there at the moment, and I take a different view from him on how they might be created.
I thought that I could add most to this debate by not talking from within the Westminster bubble. I spent many years before I came to this place as an employer. I employed hundreds of people in both the manufacturing industry, and the service and travel industries. What particularly attracts me to this Bill is clause 3, which deals with the training wage. One thing that has been a problem for both parties for many years is this idea that we must get more and more people going on to university, because that is the way forward and the way we must progress. However, there are many young people who do not want to go to university. They want to leave education as soon as possible, get a job, work hard and progress in a career.
In the 1990s, when I was running a travel company, I was known as the meanest boss in Britain, because I made some points at a party conference that were translated into the claim that I was paying people less than £1 an hour. That is the level of debate that really frustrates me. We are talking about the kind of young people who used to come into my office. They were really bright young people, but they just did not like school. They wanted to get out of school as soon as possible, they wanted a job, they wanted training and they wanted a career. At that time, the travel industry had a good scheme in place whereby people were taken on and paid a nationally agreed wage—at that time it was, I think, £30 a week, although we are going back to the 1990s. For part of the time that they were working, they received on-the-job training, but they also went away to be trained in a classroom, which was paid for by my professional body, which I subscribed to through fees.
What we finished up with after two years were young people with national vocational qualifications who knew everything about the travel industry first hand. Furthermore—I can say this now, but I could not say it then—those young people have progressed and are now in senior positions across the country. One of the people I employed went on to become a director of my company.
We seem to have forgotten those young people who are not necessarily wealthy and who do not want to go on to university, but who want proper training and a proper career. The problem is that, if I were an employer now, I could not take on such people without paying them the minimum wage. I could not then afford to give them on-the-job training or to let them go off to college. I would also not be able to afford to let them travel to America to see how the operation worked there, as I used to do. That is a real problem, but it is addressed totally by the Bill. I freely accept, however, that there are many things in the Bill that might need to be changed.
Mr Prisk
Absolutely; we will be careful to ensure that the recommendations we receive from the Low Pay Commission take that point into account. It should consider not only the conventional measures of inflation, but the costs that affect businesses, who are also the employers. This is a year-on-year process because flexibility is needed as the market changes.
In 1999, the commission set the rate at £3.60 an hour, which was pretty cautious. In the early years of the minimum wage, the commission continued to take that cautious approach. I do not propose to go through each and every year, although it is tempting. Since 1999, we have seen good times and bad, and I think it is worth considering how the commission has responded in those different contexts.
In 2001, the commission recommended that in 2001 and 2002 the adult minimum wage should increase to the level that it would have reached if it had always been raised in line with average earnings. In other words, at the start when things were challenging, the commission did not want to raise it too early. However, as the market improved and became more robust in labour terms, it was able to add to the minimum wage in a way that related to the costs of businesses.
In 2007, the commission came to the conclusion that a more cautious approach was again required. It looked at the pay differentials, particularly in the retail and hospitality sectors, both of which were progressing. That was coupled with concerns about price inflation feeding into wage inflation. The commission reported for the first time that it was concerned that the minimum wage was biting in that way.
In the most recent reports in 2009 and 2011, the commission was clearly dealing with a very different economic environment. By the time of the 2009 report, the UK was clearly in significant economic decline and recession, accompanied by sharp increases in unemployment and a fall in total employment. The decline in economic activity was much sharper than had been anticipated by most economists, never mind those working for the commission. That is why the commission recommended that the adult minimum wage should increase by only 1.2%—much less than in previous years.
The report published in April 2011 reflects the fact that the UK economy is recovering following the recession. The labour market has continued to show the resilience it had in the recession and unemployment remains below the median levels forecast at the time of the 2009 recommendations. The commission concluded that its approach needed to recognise the continued economic uncertainty, while protecting the lowest-paid workers from falling further behind—hence the recommended increase in the adult minimum wage of 2.5% to £6.08, which is broadly in line with average earnings and pay.
Those points in time—1999, 2001, 2007, 2009 and 2011—were all at different points in the economic cycle. The review that I have undertaken in preparing for this debate has demonstrated that the commission has been sensitive to the different market conditions. Sometimes it was able to be more generous and sometimes it had to be more restrictive. That is the right balance.
Many Members have raised the impact of the minimum wage. I will deal first with its impact on earnings and labour costs. Businesses react in different ways to labour costs. If they rise, some businesses absorb them by reducing non-wage benefits or adjusting their pay structures, as we have heard from several hon. Members. However, the employment picture is a little different from the one that has concerned several Members. In fact, I say in particular to my hon. Friend the Member for Shipley (Philip Davies) that since the minimum wage was introduced in April 1999, aggregate employment has grown. Despite the recession, it was still higher last September than it was prior to the introduction of the minimum wage. That occurred through the boom, through the Labour bust and back into the new coalition Government’s recovery. During that period, the number of employee jobs has increased by 1.1 million and the number of employees by 1.4 million. The number of hours worked has increased by 3.1%.
My hon. Friend—I do not see him in his place at the moment, but I will continue my point for the benefit of the House—asked the eminently sensible question whether the impact of the minimum wage on those on lower incomes had been adverse by comparison with the rest of the economy. I have sought the answer to that question. In the same period, from the introduction of the minimum wage in 1999 to the first quarter of 2011, the number of employee jobs in the low-paying sectors has actually increased by 366,000, which is 4.8%.
Nick Smith
Does the Minister agree with the suggestion of the hon. Member for Shipley (Philip Davies) of a drop in the minimum wage of £1 an hour, or nearly 20%?
Mr Prisk
Of course not. I hope that my reference to the figures on the employment impact will make people reconsider what I suppose is the natural suspicion that if all wages rise, people will be squeezed out of the labour market. The evidence suggests otherwise. The size of the labour market has changed since the minimum wage was introduced, and a series of factors have changed its character, but I take some comfort from the fact that the figures are heading in the right direction. However, we need to be continuously careful that the minimum wage does not start having a negative impact.
The consensus of the research on the impact of the national minimum wage is that it has greatly affected the distribution of earnings but not had a significantly adverse impact on employment, including of those on lower income.