§ 12.34 p.m.
§ Mr. J. W. Rooker (Birmingham, Perry Barr)
In opening today's second Adjournment debate, I chose the title "The enforcement process of the Wages Inspectorate" with care. The debate is not about wages councils or the insultingly low wages paid to 3.5 million workers covered by the wages councils and spread around 458,000 different firms and establishments.
The fat cats of the City and show business are celebrating their knighthoods and 802 peerages this weekend, but the debate is about the will of Parliament being frustrated by the apparent indifference of the Department of Employment and the Government, through the Wages Inspectorate which is supposed to see that the statutory minimum wages laid down by Parliament are paid to workers covered by the wages councils. The 40 wages councils cover many industries, including toy making, corset making, laundry, the retail trade, and licensed premises and hotels. The number of employees varies from 500 in over 40 different firms making coffin furniture, to 440,000 in 55,000 firms in retail, drapery and footwear.
The average unit is small, involving between three and five people, unlike large factories and offices, and effective trade union organisation is almost impossible. According to the latest figures, which I was given yesterday, the statutory minimum laid down by Parliament for adult males over 21 in the coffin furniture industry is £19.60 for a 40-hour week, rising to the princely sum of £25.60 for those employed in the retail drapery, outfitting and footwear wages council industries. Those were the minimum rates in 1975, but even those measly rates are not being paid by many thousands of firms.
There is clearly a problem, because there are only 127 wages inspectors to cover 458,000 firms, employing 3½ million workers. In 1975, less than 10 per cent. of those firms were visited by wages inspectors. Expressed another way, over 419,000 firms did not receive a visit. The really terrifying situation starts to come to light when one considers that of the 39,000 firms visited, about 12,000 were found to be illegally underpaying 15,000 workers. In 1975 those 15,000 workers were illegally underpaid to the tune of over £580,000. That sum was recovered by the Wages Inspectorate and paid back to the workers.
In 1974 I asked the Minister whether he was satisfied with the effectiveness of the Wages Inspectorate, and I received a standard reply. He said:Yes. The Inspectorate meets its obligations to investigate all complaints alleging breaches of the Wages Council Regulations and inspects each year a proportion of establishments in each of the wages council trades."—[Official Report. 26th May 1974; Vol. 874, c. 76.]803 Taking the second of those points first —the proportion of firms that are randomly inspected is 7½per cent. each year, a target set by the Tory Government in the mid-1950s. Since 1963, the percentage of random checks has always been above 8 per cent., and in 1970 it was nearly 10 per cent. But it has fallen every year since 1970. Inspections due to complaints by workers total 1.4 per cent. of the 460,000 firms. That percentage varies from less than 0.25 per cent. in some industries to 6 per cent. in the hotel and restaurant industry. Therein lies a story, which I have no doubt my hon. Friend the Member for Walsall, South (Mr. George) will tell later.
Any examination of the results of these types of inspection—complaints from the workers and the policy of random inspections—shows an apparent indifference towards the plight of workers in the low-paid sector. The policy of investigating all complaints sounds all very well. The implication is that we are not visiting too many firms and therefore we do not need to worry, but a prerequisite of such a policy is that the workers should know that they have something to complain about, and where to complain.
The results of the 7½ –8 per cent. random inspections show that that is not so. If the self-enforcement of the workers complaining was working, I should not be standing here today. How do we know that it is not working? We know from answers to Questions and the recent report of the Low Pay Unit. Questions to try to identify areas of weakness have been asked by many hon. Members on both sides of the House, over many years.
The unit expressed many of the problems succinctly in a small document that was compiled with the co-operation of the inspectorate. It highlights the problem arising from the fact that the present system is not working satisfactorily. My hon. Friend the Member for Walsall, South has horrifying practical examples to give.
We must concentrate on the failure of the enforcement processes of the inspectorate shown in the results in the 39,000 firms inspected. It was found that more than one in five were failing to post the notices required by law, which tell the workers in the back-street factory or shop 804 what their minimum rates of pay should be. This week we have heard a great deal about the rule of law. Under Section 17(2) of the Wages Councils Act 1959 it is illegal not to post such a notice, yet how many prosecutions for that offence were there in 1975? The answer is "Nil". The self-enforcement system of workers making a complaint cannot work in such firms because they do not know the basic minimum rate laid down by Parliament. Extrapolating on a national basis, we come to the conclusion that if 90 per cent. of firms are not inspected, and if the situation in those is as bad, 750,000 low-paid workers are not even in the position of knowing what their statutory rights are in respect of their low wages.
Not only the workers but the inspectors are kept in the dark. Under Section 17(1) employers are required to keep proper wage and time records for an inspector to see when he visits a firm. The percentage found to be failing to keep satisfactory wage records in 1975 was over 11 per cent. That means a national total of more than 56,000 companies, shops and small premises.
Even more worrying is the proportion of firms failing to keep time records. In 1974, according to answers to Questions and the report of the Low Pay Unit, these totalled 41 per cent. Nationally, that is 220,000 firms. It may appear that a firm does not need to keep proper time records. However, the wages inspector may think from the wages records alone that the firm is paying more than the statutory minimum rate, but that rate is laid down for 40 hours for nearly all companies, and if the inspector does not know how many hours were worked, how can he carry out a competent inspection?
I was told yesterday, in answers to Questions, that the Department of Employment has no knowledge of the numbers of workers in wages council industries earning the minimum rates or thereabouts. A well-documented piece of research by Mr. J. A. Greenwood, of the University of Sussex, published in the Winter 1972 edition of the Industrial Relations Journal made the point that the discrepancies between minimum rates and gross earnings arose not so much because the basic rates at plant level were above the minimum but, by implication, because of other elements in the wage packet, such 805 as bonuses and payment by results. If proper time records are not kept, it is not possible to know how the earnings are arrived at. We know that 41 per cent. of the firms concerned were breaking the law in 1974 alone, but since 1959, prosecutions for failing to keep proper wage and time records came to a grand total of 11.
The Low Pay Unit believes that the £580,000 recovered by the inspectors in 1974 was part of a larger illegal underpayment of £2.6 million to workers in the wages councils industries in that year. Its assessment of the total of wages that were not paid or not recovered in the past five years comes to £8.6 million. In addition, the unit highlighted the fact that the illegal underpayment extends to holiday pay, and that 10 per cent. of all the firms inspected in 1975 were paying less than the proper minimum rate for holiday pay. Needless to say, the position of home workers is even worse than that of workers at proper factories or premises—but we cannot go into that matter today.
In its reports the unit has claimed more than once that the inspectors have a policy of co-operation with wayward employers who are illegally underpaying. That may or may not be refuted by my hon. Friend the Minister, but he will have to come up with more concrete evidence than has been available so far in answers to Questions that such a policy is not being followed. Over the years there has been only a slight impact on infringements by employers. The piddling number of prosecutions makes it obvious that the policy has not been driven home by either Labour or Tory Governments.
The great wages robbery referred to by the unit is concentrated in a very few of the trades covered by the 40-plus wages councils. The worst were in the retail food industry where £66,000 was recovered for workers in 1974; the licensed non-residential trade, £48,000; and the retail furnishing trade, £36,000, as far as we were able to discover. The evidence of the lack of enforcement suggests that the national figures are between five and six times those amounts.
The Daily Telegraph had a very good article on the Low Pay Unit's recent report. I must exclude its industrial correspondent, Mr. Gerald Bartlett, from the comments that I am about to make, 806 because on 26th April the Telegraph published one of the best articles in Fleet Street on that report. But the next day the real hacks were at work in the Telegraph's leader column, arguing that many low-paid workers did not deserve the wages that they were not even getting. It said:"Many' low-paid' workers are without much skill or ability; the real value of their labour is low. And many employers, particularly those in these trades, live on very narrow profit margins, relying on relatively cheap labour and large turnovers.The article went on to advocate getting rid of the wages inspectors, who ensure that the wages laid down by Parliament are paid and also getting rid of the system under which a floor is placed under those workers who cannot effectively organise themselves into trade unions.
That sort of comment comes from the well-heeled fat cats of Fleet Street and the hacks working for the Berry family newsletter, who know nothing whatsoever about ordinary working people and those on very low wages.
We are talking here of sums such as £30 a week for an adult male worker—a sum of money on which he has to try to survive and cope with family responsibilities. Many of these wage rates, paid for 40 hours, where there is no chance of overtime, are lower than the supplementary rates for families with two child-rent. These are the wages of people working 40 hours a week, yet the hacks on the Daily Telegraph have the nerve to say that the labour of these workers is not worthy even of the minimum rate laid down by Parliament.
What is disturbing is that the Government seem unable to answer questions asking how many workers are actually earning wages at or near the statutory minimum rate. According to national statistics, one in five adult male workers in this country over 21 earns less than £40 a week. That is his actual earnings, not his basic rate. Many of these workers are covered by wages councils, but there is a good chance that many more are not. If the Government are not in a position to answer questions put by hon. Members how can they positively enforce the will of Parliament and ensure that these wage rates are paid?
The picture that I have sought to paint is a sorry one. I am ashamed to be 807 standing here in 1976, having to say these things, particularly when we have a Labour Government of two years' standing. In the past few years we have done far more than the previous Government did to lift the levels of the low-paid worker, but we still have to make sure that the proper rates are actually paid.
What is to be done? I submit that we first have to get the Wages Inspectorate up to the full strength. Even with its present low numbers, it is 10 short. There are 1.2 million workers unemployed in this country, so there ought not to be any difficulty in recruiting another 10 wages inspectors.
Secondly, we need more female wages inspectors. At present there are only 19 out of the existing staff of 127. This suggestion has nothing whatsoever to do with sex equality; it is based on my experience of manufacturing industry and of factory inspectors. In my experience, females make better factory inspectors, because they are more vigilant in making sure that the minutiae of the laws laid down by Parliament are enforced. Most production and engineering managers are terrified of moving into an area in which there is a female factory inspector. The female inspectors keep people on their toes. Certainly this has been the feeling in the factories in which I have worked in the Midlands, the South-East and East Anglia. I feel that the same principle would apply in the case of female wages inspectors.
Next, there should be compulsory registration of firms. It is ludicrous that before a firm can open up it needs a certificate from the factory inspector, whereas if it is in an industry covered by a wages council, it does not need to register itself with that wages council.
The forms for wage and time records need to be looked at. Official forms laid down by the Department should be used, so that we do not have a position in which 41 per cent. of firms are not keeping records.
The 7½ per cent. inspection level needs to be raised. I know that the situation is difficult in the Midlands, where 19 inspectors have to cover 66,000 establishments, but with better back-up facilities more inspections could be made.
808 Certainly the policy concerning prosecution or non-prosecution needs to be examined. We have seen what has happened since we reorganised the health and safety situation. The new executive has increased the number of prosecutions for flagrant breaches of the safety laws. We should ensure that existing laws designed to protect the low-paid workers are carried out to the full, and that people offending against those laws are procuted. That is the cheapest form of education process, without having to use a great army of inspectors.
Finally, my plea to my right hon. and hon. Friends is that we should operate the laws that we already have.
§ 12.57 p.m.
§ Mr. Bruce George (Walsall, South)
Bearing in mind the fracas last night, had I known that there would be no Opposition Members here for the debate, I would not have come in early for a training session. The fact that there are no Conservative Members present for the debate is an indication that interest in wages councils and the problems of the low paid does not extend to the other side of the House.
I am pleased to follow my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker). A year ago, in an Adjournment debate, I dealt with low pay in the catering industry, and I have had very close contact with the Low Pay Unit, as has my hon. Friend. I am glad of the opportunity to thank Steve Winyard for letting me look at his report and at his dissertation on the Wages Council Inspectorate.
We are very concerned at the low rates of pay in the industries covered by the wages councils. That is not to say that the councils are responsible for the conditions in the industries concerned. Without the inspectors, the wages and conditions would be infinitely worse than they are. I do not criticise them personally. They are very hard pressed and they have an onerous job to do. They have to be part-time accountants, part-time policemen and part-time lawyers. But I feel that there has been some neglect, in that the size of the inspectorate has been kept much too low for the enormous job the inspectors have to do.
The wages councils were set up in 1909 to protect low-paid workers in certain 809 sweated trades. A Council was created when the Government were satisfied that the wage rate in a trade was exceptionally low compared with other employment.
Sixty-seven years afterwards, how can we assess the effectiveness of the wages councils and the inspectorate? The new earnings survey shows that workers in industries covered by wages councils are still among the lowest paid in the country. It is appalling that within the area covered by the wages councils, despite their 67 years existence, there is little sign of improvement. The condition and salaries of workers within these industries continues to be generally unacceptable. Therefore, we must call for improvements.
One recognises the constraints on the Government in terms of public expenditure, and in consequence on staffing. Nevertheless, even within the existing staffing requirements of the Wages Council Inspectorate, much more could be done, in my view, to improve the situation. There should be more staff employed—inspectors and back-up personnel—but as I shall point out later, much more could be done even with the existing staff structure.
Even before the First World War. doubts were expressed as to the effectiveness of the wages councils. There were criticisms by people such as R. H. Tawney. His criticisms are as valid today as they were over half a century ago. This indicates that we have not progressed as far as we should.
Many of the rates paid are abysmally low. The wages council rates dealing with licensed places of refreshment is to come into effect next month. A waiter or waitress over 21 years of age, working between 7.0 a.m. and 7.0 p.m., gets the princely sum of 53.9p an hour.
I had a group of women come to see me last week in my weekly surgery who told me that they are paid 44p an hour and that they had just had an increase! They pleaded with me not to publicise it or to contact their employer because they were terrified that they would lose their jobs. It is important to note that still, in 1976, workers employed in many small companies express a degree of fright about reporting their position to wages councils for fear of what they perceive to be the consequences of their action.
810 When we talk about low pay, I would comment on the case brought to my attention of a man who formerly worked as a waiter—he has now got "the boot" for a large firm of steak houses in London. He receive no wages at all. He had to pay £3 a week for the privilege of working for the company. When he got the sack, obligingly the company provided him with his P.45. It says against the entry "Total pay to date: Nil". It goes on to say "Tax to date: Nil" This gentleman tells me that if he wrote down all the illegalities committeed by the company, he would not have sufficient money to buy the necessary paper and ink. This is a matter for considerable concern. I shall pass the information to the Minister shortly.
I want to reiterate some of the statistical points made by the Low Pay Unit and quoted by my hon. Friend the Member for Perry Barr. They show the extent of underpayment in industries covered by wages councils. I am pleased to see that, in 1975, more than 11,000 firms were obliged to pay arrears totalling some £600,000. But, bearing in mind the small inspection rate, the real total must be very much higher. In other words, the phrase used by the Low Pay Unit about "the great pay robbery" is true. Far more money has been lost by the work force, as a result often of deliberate underpayment by employers, than ever was lost to society as a result of the Great Train Robbery more than a decade ago.
Enforcement is demonstrably quite inadequate. It is clear that in the past the inspectorate has decided to use the carrot rather than the stick. I appreciate some of the advantages of education and persuasion, but I suspect that we have gone too far in the wrong direction. We have gone too far from prosecution and the stick and too much towards the idea of gentle persuasion.
As far back as 1926, a writer named Burns pointed out:…the success of enforcement by legal proceedings, either civil or criminal, depends upon the actual extent to which non-complying employers will be prosecuted.In the 1930s, there were more than 100 annual prosecutions. Now there are hardly any. As my hon. Friend said, of those who fail to keep adequate wage records, 11 per cent. of those visited did not keep records at all and 22 per cent. 811 of the establishments inspected in 1975 failed to post the prescribed notices. How many of those were fined? The answer is None." In 1973, some 10,000 employers were found on inspection to be liable to successful prosecution under criminal legislation. Not one was taken to court.
I can see the virtues of education of employers and persuasion. Nevertheless we must stress the incidence of crime amongst the so-called "lower orders" compared with that amongst the middle classes. I refer to the work carried out by Sutherland into white collar crime. He observed thatThe behaviour of respectable middle and upper class people frequently displays all the essential attributes of crime but it is often not dealt with as such.One should contrast the punishment meted out to those at the lower end of the social scale who do not comply with, say supplementary benefit regulations. They are quickly brought to book. Unfortunately many employers often deliberately underpay their staff, and wages inspectors bend over backwards to encourage them to pay the resulting arrears. Very few of them—men who are committing criminal acts—are punished by the courts, even after second offences. If we are not to prosecute after the first offence, I urge that we should prosecute automatically for second and subsequent offences.
The inspectors are doing a difficult job, but there are far too few of them. If they cannot perform their function adequately, the result is that 91 per cent. of establishments known to be affected by wages orders are not inspected. What is more, they are the establishments about which we know. I suspect that there are some companies that the wages inspectors do not even know exist. There is a very rapid turnover of companies in some industries.
The inspection rate can be as high as12 per cent., but it can be as low as 2 per cent. As a result, it follows that in some cases 13 years might elapse before an investigation. I suspect that, if an employer knows of the possibility of a 13 year gap, it will have some effect on the way in which he goes about his business.
812 It means that workers must be made aware of their rights. I understand that Mr. Speaker gave a ruling yesterday to the effect that hon. Members can show photographs as evidence to support their arguments. I now produce a poster which is supposed to be displayed on notice boards. It concerns the Corset Wages Council, and I promise not to make any puns about the squeeze in that industry. The notice should be posted on every notice board. However, we see from the researches that more than one in five companies do not display such notices. If the notices were displayed, assuming that people could understand them, which is by no means automatic, it would mean that workers could remonstrate with their employers without having to resort to the Wages Inspectorate. There would be a degree of self-regulation, which would be to their advantage. The wages council also produces booklets and, usefully, put a hole in the corner of each copy so that it can be stuck on a notice board. Unfortunately it is not done by sufficient establishments.
I move on to one industry in which I have a special interest—not, I hasten to add, a financial interest. I refer to the hotel and catering industry. There are 1,300,000 workers covered by four wages councils. The wage level set is low, and there are many companies which do not pay even the minimum rate. People work hard, long, unsocial hours, and their pay is very low.
Recently, I was taken to task by the Catering Times after I had made what it considered to be "an emotional outburst". The criticism appears under the headline,Slaves? Not so, Mr. George.It says:Mr. George is not speaking with much evident personal experience of the industry and his suggestion that hotel workers are 'one short step removed from slave labour' will be greeted with some surprise by those who know the industry a little better than this new-found champion of its employees.I disagree with its analysis. There are, of course, many good employers. A number of companies pay above the minimum and many pay the minimum rates, but too many pay below the minimum and that I deplore.
I wish to reinforce what my hon. Friend the Member for Perry Barr said. There 813 must be far more inspectors appointed and more punishment to fit the crime. In other words, we must have sanctions against deliberate law breakers. There must be better advertising in the Press to inform workers of their rights. We must advise everyone working in the wages council sector to join a trade union. Only by joining trade unions can they surmount many of their obstacles, financial and other.
This Government have done a great deal to help the low paid. I hope that a more coherent strategy can be devised to increase the powers of wages councils, to increase the size of the Wages Inspectorate and to give more hope to all those who suffer intolerably low wages.
§ 1.9 p.m.
§ The Under-Secretary of State for Employment (Mr. John Grant)
My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) criticised the Department of Employment for what he described as its "apparent indifference". I hope that he will note the presence on the Treasury Bench of all the Ministers from the Department, because that may in some way allay his fears. I assure him that we are not indifferent to the problem.
Although my hon. Friend will not expect me to agree with him in all that he said, I am grateful to him for raising this subject. I know of his long-standing interest in it and of that of my hon. Friend the Member for Walsall, South (Mr. George). I should say straight away that I share my hon. Friend's view about the importance of the issues he has raised —the position of low-paid workers covered by wages councils and the need to ensure that they are not paid less than the appropriate statutory minimum rate.
Before turning to the points made about enforcement I will spend a few moments on the Government's general policy towards wages councils because this provides the context for the questions of enforcement policy which have been raised.
The Government's general industrial relations policy is to encourage the development of collective bargaining machinery wherever possible, which we believe to be the best way of fixing pay and conditions of employment. In the wages 814 council sphere our policy, therefore, is to abolish councils where it can be shown that statutory protection is no longer necessary. Rapid progress has been made over the last two years. In 1975 four wages councils, covering about 120,000 workers, were abolished, and so far this year we have issued proposals for the abolition of the Milk Distributive (Scotland) Wages Council and we are abolishing the Industrial Staff Canteens Council. A proposal for the abolition of the Road Haulage Wages Council is now under consideration by the Advisory, Conciliation and Arbitration Service, and so are proposals made by the Secretary of State to abolish the nine retail trade councils and to replace them by two councils for the food and non-food trades.
We shall continue to take every opportunity to abolish wages councils where we are satisfied that this can be done without detriment to the low-paid workers concerned. But, because of the nature of some trades—especially the retail and catering trades—it is likely that wages council machinery will be needed for the forseeable future. And where wages councils continue to exist, it is our duty to ensure that the councils are best equipped to protect the workers they cover and that at least the statutory minimum rates they lay down are paid.
As my hon. Friend will know, we made a number of major reforms in the Employment Protection Act designed to make wages councils more efficient, more independent of Government, and closer in their methods of working to normal collective bargaining arrangements. The major changes, which came into effect on 1st January this year, are that wages councils now make their own orders and decide the operative dates thus being no longer dependent on the Secretary of State for implementation of their proposals, and wages councils are empowered for the first time to fix other terms and conditions of employment, as well as minimum pay, holidays and holiday pay.
Also, as a result of the changes, trade unions and employers organisations, and not the Secretary of State, appoint representative members direct to the councils, and wages councils may be converted into statutory joint industrial councils to ease the transition to normal collective bargaining.
815 I make no apology for dealing first with these more general issues when criticisms are made that we are neglecting wages councils. In fact, in terms of replacing councils with normal collective bargaining arrangements and of reforming the powers and procedures of wages councils we have probably seen more developments over the past two years than in any similar period in the history of statutory minimum legislation. This is something which is not generally appreciated, either inside or outside the House.
I turn to my hon. Friend's comments about the present levels of statutory minimum pay. I accept that the pay levels are relatively low. My hon. Friend said "measly"—I think we could agree with that.
But of course the real test of the effectiveness of councils is what would the pay levels of the workers concerned be in the absence of the wages council machinery. This is a difficult question to answer, but over the last two years or so there has been an unprecedented increase in statutory minimum rates, of about 50 per cent. in many cases, and over the last year the relative position of workers in the wages council sector has significantly improved as a result of the flat-rate £6 pay limit which was specially designed to help the low paid. The great majority of wages council settlements made under the present policy have been at the full £6 limit, and the few exceptions have been within £1 of the limit.
As the majority of statutory minimum rates were between £24 and £30 before the increase, the £6 supplement involved a 20 to 25 per cent. increase—far higher than that which most workers have received under the pay policy. The TUC's proposals for the next round again involve a flat-rate element to afford protection to low-paid workers such as those in the wages council sector, and, of course, no workers stand to gain more from the success of our attack on inflation than low-paid workers, who are hardest hit by rising prices.
In addition, the Equal Pay Act, introduced by the Labour Government in 1970, has made a considerable impact in the wages councils trades where large numbers of women workers are employed. Looking to the future, the £30 TUC target and the reference on low incomes made by the Government last week to 816 the Royal Commission on the Distribution of Income and Wealth will be bound to cover the wages councils sector where many low-paid workers are concentrated. While we must never be complacent about low pay levels, significant progress is being made within, and indeed because of, the present pay policy.
As my hon. Friend has said, however, once the rates have been established by the councils, it becomes important to ensure that all the workers concerned receive their statutory entitlement. This brings me to the role of the Wages Inspectorate. I shall have one or two critical comments to make about some of the analysis in the Low Pay Unit's report, which was reflected in my hon. Friend's speech, but let me first say that we welcome the publicity and contribution to debate which the report has produced. Naturally, we share the concern about the increase in the number of breaches of the minimum rates and conditions. We are certainly not blinkered in our approach to solving these problems. I accept that it is the task of the Department, and the Wages Inspectorate in particular, to ensure that, within the resources available to us, we make the maximum impact to bring down the deplorably high level of infringements.
I will not repeat the depressing statistics quoted by my hon. Friend about the infringement and inspection rates. Figures published by the Department yesterday showed that in 1975, for the establishments visited by the inspectorate, 28.9 per cent, of employers were required to pay arrears, and 11.4 per cent. of the workers concerned were found to be receiving less than the appropriate pay or holiday requirements. Last year the inspectorate required employers to pay over £500,000 in arrears for the workers concerned. Over the last four years, the number of workers found by the inspectorate to have been underpaid has increased by approximately 50 per cent. The amount of arrears collected obviously varies between individuals, but in 1975 the average amount of arrears collected per underpaid worker was £25.74. It is an unhappy story.
It is misleading, however, to gross up the figures arising from the visits made by inspectors, as the Low Pay Unit attempt in their report, to arrive at a national figure. The fact is that the Wages 817 Inspectorate, as well as following up all complaints, concentrates its routine visits on establishments where it is most likely to find infringements. The Low Pay Unit report itself states:The sample of establishments will tend to contain a higher proportion of non-complying firms than would a random sample.For example, large firms with agreements that grant workers substantially better terms and conditions than those laid down by the wages councils are rarely selected for routine inspection. For this reason we regard the Low Pay Unit's estimate of total underpayment in 1974 of £2.5 million as exaggerating the scale of the problems.
I am not, however, seeking in any way to play down the real problem. I entirely accept that the present infringement rate found on visits is deplorable. Of course, what has happened is tantamount to robbery. Not that we are talking about the robber barons, but rather, about the pickpockets of industry—the sneak thieves and the back-street brigade who are pinching from the pay packets of those who can least afford to be done down in this way. Of course these people must be condemned. I have already made our attitude clear to employers in the hotel and catering industry—one of the industries with high infringement rates—whom I addressed recently.
We shall do all we can to improve the position, but there is obviously a limit to what the Department can do. It must be for employers to put their house in order in the first place and to recognise that they are law-breakers. The Wages Inspectorate tries to make the best use of its resources to enforce statutory minimum pay levels. Because of the increase in the infringement rate in recent years, the percentage of establishments visited fell to the target of 7.5 per cent. in 1974 and below the target in 1975. Naturally, the more infringements that are found on visits the longer the time that has to be spent on each visit. That follows inevitably.
The obvious answer is an increase in the number of inspectors to reach a higher target figure, as the Low Pay Unit recommends and as my hon. Friend has urged. I cannot give any undertaking about this. My hon. Friend knows of the exercise in which the Government are 818 engaged, in dealing with Civil Service manpower. Against this background we cannot meet the problem simply by large increases in staff. My hon. Friend knows well enough the public spending constraints that exist. This is not just Treasury parsimony but economic necessity. I would be misleading the House if I suggested that we could significantly increase the size of the inspectorate, despite the heavy work load which I know it has to shoulder and which is undoubtedly appreciated.
This is not to say, however, that there is nothing we can do to tackle the problem. I will do my best to focus attention and publicity upon it. Within the inspectorate, suggestions for improving present procedures will continue to be considered and acted on wherever appropriate. A review is now being completed on the use of resources within the inspectorate. New powers were taken in the Employment Protection Act to obtain information in writing from employers so that more effective use can be made of the time of inspectors. Other suggestions, such as those made by the Low Pay Unit, are under consideration. We shall be having talks with the unit on its recommendations.
In advance of those talks I will say a few words about the Low Pay Unit's recommendations. dealing first with prosecutions. The unit calls for a more vigorous prosecution policy and so, again, did both my hon. Friends. It is the case that on the first inspection, provided that the employer is not obstructive, the inspector assesses and claims the arrears due and issues a warning about future compliance. There is no prosecution. At a second inspection, if similar faults are found, the case is regarded as a potential prosecution. This policy over the years has led the inspectorate to gain the confidence of workers and employers and has produced results.
There is no question, as the unit alleges, ofco-operating with employers who fail to comply with the Act".It is not a question of co-operation in that sense. The main object is to put the situation right for the worker concerned as quickly as possible so that he immediately receives the appropriate pay and conditions and any arrears due to him. 819 In this way the inspectorate claimed over £500,000 in 1975 on behalf of workers. We are looking carefully at prosecution procedures within the inspectorate to ensure that prosecutions do take place where justified.
Related to prosecutions is the question of sanctions. The unit calls for increased penalties. Under the provisions of the Employment Protection Act, which came into effect only at the beginning of the year, the maximum fine for under-payment was increased five times, from £20 to £100 for each offence. If maximum fines were imposed—and I hope that is noted outside the House—they could be a severe deterrent. There has not yet been time to see the effect of the change which came about in January. Employers would be foolish not to take note of this, bearing in mind that courts, in addition to fines, can order arrears to be paid for the past two years. In those circumstances employers can face a tidy bill on any specific occasion.
My hon. Friend also urged that we should take steps to increase knowledge among workers of the wages council system. The increasing number of complaints from workers now being received and investigated by the inspectorate suggests that workers may not be as ignorant of their statutory rights as some surveys have suggested. I am not complacent. I believe that we should consider the case for making available more publicity about the wages council system, remembering once again the high cost of advertising and our spending constraints. I agree that the simplication of wages orders would assist self-enforcement. There is a limit to what can be done in legal documents and the content of the orders is largely a matter for the councils.
The Low Pay Unit also commented on the problems of home-workers. The inspectorate finds that the infringements relating to home-workers are no worse than for comparable factory workers. I recognise, however, that there is concern about the low earnings of home-workers. We intend to include, in our programme of references of wages councils to ACAS, two councils covering industries in which significant numbers of home-workers are employed so as to provide more information the problem.
820 Let me summarise briefly our position on the points that have been raised by my hon. Friend. We have already made much progress in abolishing wages councils and reforming the wages council machinery and procedures. We share my hon. Friend's concern that in the wages council sector so many employers are found to be paying below the statutory minimum level. We cannot commit ourselves to a large increase in the inspectorate, as we are told is necessary, but we are, none the less, as concerned as is my hon. Friend to tackle the problem. We shall continue to seek the best use of the resources we have in the inspectorate and we shall be discussing with the Low Pay Unit the suggestions it has made, together with the points raised by my hon. Friends, one or two of which I have not had the time to deal with. I hope there will be no doubt after the debate that we deplore the present degree of under-payment in the wages council sector and that we shall do all we can to improve the position.