HC Deb 24 July 1985 vol 83 cc1216-34

4.6 am

Mr. Dave Nellist (Coventry, South-East)

Later today, Thursday 25 July, the Tory Government will communicate to the International Labour Organisation the instrument of denunciation of ILO convention No. 26. Hidden in that coded medieval language, which characterises much of the workings of this place, is an insolent attack, a malevolent and spiteful class attack, on some of the poorest paid workers in Britain today. In particular, by 25 July 1986, one year from today, the Tory Government intend to remove from the inadequate legal protection of the wages councils 500,000 young workers under the age of 21, as well as making cuts in other legal minimum employment protection for adult workers. The political attitudes and intentions behind that announcement, and the effect which it would have, if brought about, I shall deal with later.

The debate, although it takes place at 4 o'clock in the morning, could not begin without a mention of how and when that announcement was made. On Monday 15 July, Tory Members of Parliament were falling over themselves, as were Cabinet Ministers, to bask in the reflected glory of the generosity of people following the Live Aid concert the previous Saturday, when a reported £50 million was raised for famine relief in Africa. Let us leave aside the hypocrisy of a Government who have cut aid in real terms, run down industries such as the bus and truck plants at Bathgate and elsewhere which, in a sane society, could have provided crucial transport, and who have co-operated in the stockpiling of massive food mountains in Coventry and throughout the country when a quarter of the world's population is hungry. Even leaving that aside, for the Government to laud the efforts of young people one weekend and, three days later, on Wednesday 17 July, to attack many of those same young people would be breathtaking if we had not understood the real nature of this capitalist Government by their actions in the previous six years.

Twenty-four hours later, on Thursday, after saying that young workers on wages as low as £29.70 per week were pricing themselves out of jobs, the Government offered the generals, the judges and the top civil servants, whose wages were already 20 or 25 times that received by young workers, an increase of 30, 40 and 50 per cent. to give them an incentive—rises which, in the words of the Prime Minister, can be regarded not only by themselves but also by Parliament and the public as fair but not generous".—[Official Report, 18 July 1985; Vol. 83, c. 219.] Although £500 a week for Sir Robert Armstrong may not be generous in his terms or those of the Government, fair is not the word that young people have used for such a rise.

The announcement on 17 July stated that the Government intended to remove all under-21s from the legal protection of minimum wages. The Government often quote in this House examples from abroad. It is worth pointing out that if that denunciation takes place later today, Britain will be the only industrialised country in the world without legal minimum wages for young workers.

During previous debates and at Question Time Labour Members have been told, "Look to Europe." I asked the Secretary of State this week to cite examples. He referred me to a document in the Library, the most recent version of which was 1983. I picked the nearest and most comparable European countries to see whether young workers in Europe are so much more badly paid than young workers in Britain that the Government's need to drive down their wages had any validity. The figures were for December 1983. In France, the minimum wage for a 16-year old was £60 per week, for a 17-year old it was £66.40 and for an 18-year old and over £74. In Luxembourg, at 16 it was £52; at 17, £60; at 18 and over £74.40. Skilled workers receive 20 per cent. higher rates. In Holland it started a little lower at 16—£36.57. At 17 it was £41.87; at 18 £48; at 21, £76.

It is interesting to note the enforcement of those minimum wage rates for young people in European countries. In France it stretches from fines on employers of £100 to £250 per worker found underpaid to a point where if that is repeated within a year of the infringement the fines rise to £500 per worker and 10 days' imprisonment for the employer. Those are the examples the Secretary of State told me to look at in the Library to prove his point that young workers in Europe were getting far less than young workers in Britain. The truth is the opposite.

The Government's claim that removing the protection of young workers' wages would reduce unemployment was never the intention. For the past six years the Government have used mass unemployment to cow the trade union movement into some form of submission, to drive down the wages, both directly and indirectly, of working people, purely to raise the rates of profit for the employers and industrialists that the Tory party represents in Parliament. In particular, they have sought to put into the bank balances of a few tens of thousands of the superrich shareholers the wealth that has and will be stolen from workers, especially young workers.

Unemployment in this country has nothing to do with the wage rates paid to workers. It is certainly not, as Tory Members and Ministers try to portray, the fault of workers on £30 or £50 a week. It is worth noting the wage rates for under-21s. The lowest rate paid to a 16-year-old under the wages councils is £29.71. It would not pay for a "decent" meal for one or two Tory Members of Parliament. The lowest wage for a 17-year-old is £34.11. That would not cover a week's gin and tonics for some hon. Members. For 18-year-olds it is £37.50, and the lowest adult rate is £47.50.

I have in front of me the rates for the largest industries covered by wages councils. For clothing, it is £59 for under 18-year olds —£41 at 16. For hairdressing it is £31.75 for first-year apprentices. The highest minimum wage is £68.50 for a worker after two years of training. For hotels, the wage is £55, or £69 for those over 18. For licensed premises which are residential, the wage is £44.16 for a 17-year-old, going up to £52, with £72 being the highest minimum rate of pay. For shops, the rate is £47 a week, £45 for non-food shops. The lowest rate, in the toy manufacturing industry, is £29.71 a week. Yet the Tories are trying to tell working people that those rates must be driven even lower if youth unemployment is to be reduced.

Why has employment not gone up in Britain, particularly in the last six years? The one most important reason is that there has been a deliberate refusal by employers and industrialists to invest, particularly in manufacturing industry. According to leading British banks, there is now an estimated gap, which needs to be bridged by new investment, between Britain and the major countries of the Common Market, Japan and America of £200 billion. That must be applied to manufacturing investment if we are to catch up with the productivity levels and competitiveness of those advanced capitalist countries.

That is 35 or 40 times as much as is invested in manufacturing industry in any one year in Britain. That is why British industry does not produce goods as quickly and as cheaply as its competitors. It has nothing to do with wages in hairdressing, hotels, shops, clothing or catering. The fault lies in the fact that under the Tories manufacturing investment has fallen. We have even reached the stage when for every £1 of a machine that wears out, only 84p of a new machine is put in its place.

The action of those who take the profits and run rather than reinvest in manufacturing industry has meant that for the first time in 400 years, Britain is importing more factory-made goods than it exports. From being the workshop of the world, this country is becoming the warehouse of the world as cookers, fridges, washing machines, TVs, cars—the products of whole sections of industry—are imported. The rate of those imports is at or over 50 per cent. of sales in Britain.

That lack of investment has nothing to do with a lack of money in Britain. Since the Tories lifted exchange controls, employers and industrialists have sent their money abroad. About £50 billion has gone to South Africa, Brazil, Argentina and other countries where, in the main, wage rates are kept low, often by military dictatorships through the barrel of a gun.

Perhaps the yardstick that Cabinet Ministers have for working people in this country is to reduce wage rates to what they determine Third world countries such as Bangladesh have already established. That is the impression that anyone would have from reading the reports of the Government's advisers. For example, when Sir John Hoskins, who now runs the Institute of Directors, was adviser to the Prime Minister, he wrote four years ago a paper that led to the establishment of the youth training scheme.

His aim for the scheme has been to increase the differential between the wages of young people and adults, and we know what has happened as a result of that aim. If the allowances for youngsters on YTS courses had gone up since April 1978 by the rate of inflation or in line with wage rates generally, they should be receiving £40 a week. Instead, they are getting £26.25. That is the bench mark that the Government have in mind for the abolition of wage protection. Their aim is to drive down wages to supplementary benefit and YTS levels.

Their argument is that that will create jobs. Where is the evidence to substantiate that claim? In the last five years, according to information supplied to me by the Department of Employment, young people's wages relative to adult wages have fallen by 12 per cent. for boys and 13 per cent. for girls, and during the same period youth unemployment has trebled. It is clear that driving down young people's wages has not increased their employment prospects.

Wages councils cover almost 3 million workers and about 90 per cent. of them work in the councils' major industries, such as hairdressing, catering, shops, clothing and hotels. They are part of an army of 9 million low-paid workers. Wages council industries offer average adult wages of £60–£70 and £40–£50 to most young workers.

The councils were established at the turn of the century in New Zealand, and in Britain in 1909, and their influence was extended during the 1920s. They were seen then, as they are seen by many employers now, as a tool to prevent or settle industrial disputes and to head off trade union organisation. Two or three months ago, the CBI—this was reflected in an editorial in the Financial Times—advanced that reason in explaining why it was not in favour of the abolition of the councils. It fears that the next Labour Government will institute a national minimum wage and that trade unions will move into the old wages council areas and recruit.

In the next 12 months before the wages councils are subject to changes, I hope that working people, through the trade unions, the Labour party and organisations such as the youth trade union rights campaign, will turn the CBI's nightmare into a reality.

I do not intend to spend the summer during the parliamentary recess on holiday, on lecture tours or writing books. Instead, I shall endeavour to identify each and every young worker in Coventry who will lose the minimum legal protection of the wages councils if they are abolished in a year's time. I shall make sure that the appropriate trade unions recruit them, such as USDAW, the TGWU and GMBATU. The youth trade union rights campaign can play a similar role nationally. In the past four years we know that thousands on the YOP and YTS schemes have joined trade unions because of our campaigns and those of trade unions.

Ministers say that although it was all right to set up wages councils in the 1920s to deal with "sweating"—the payment of extremely low wages—they are not appropriate in the 1980s. We are moving towards "sweating", but there are 8,000 millionaires in Britain, twice the number that existed when the Government took office. Over 1 million people earn more than £20,000 a year, but there are 9 million who are low-paid. Members of Parliament are on a minimum of £300 a week and many Tories have a few other jobs—some have 10 or 15 other jobs. Cabinet Ministers are on £400 or £500. How can they understand what it is like trying to eke out £40 or £50 a week?

Workers deserve decent minimum rates of pay. That is what I have tried in this Session to introduce a couple of Private Members Bills on minimum wages and conditions. In one Bill I sought to set a national minimum wage, in line with TUC and Labour party policy, of £115 for a 35-hour week with a guaranteed minimum rate of 75 per cent. for 16 year-olds and 85 per cent. for 17 year-olds. It sought minima in other areas — for example, five weeks' holiday and an hourly rate of £3.28 to protect part-timers. I sought to introduce a private Member's Bill on working conditions for Government trainees. Its purpose was to introduce trade union rates of pay and organisation rights to Government training schemes, with a minimum payment of £55 a week. Of course, Tory Members argue that such a measure would price young workers out of jobs.

I heard the Chancellor of the Exchequer say that if only we could have a 1 per cent. fall in wage rates, 150,000 new jobs could be created. Where is the evidence for that? Over the past 10 years, wages council rates as a percentage of average wages have fallen from 73 per cent. to 65 per cent., yet unemployment has rocketed. If it is true that high wages cause unemployment, why is there no condemnation from the Treasury Bench of the wages of Riachard Giordano, the highest paid director in Britain, who is on £13,000 a week as the managing director of British Oxygen? Why is there no condemnation of the pay rises of generals, judges and high-ranking civil servants over the past week? Why is there no condemnation of the bank chiefs? The head of Barclays is on £132,000 a year while the heads of Lloyds, the Midland and the Nat-West are on £113,000, £84,000 and £105,000 respectively. Why is there no condemnation of the top 100 directors who, between 1981 and 1983, took pay rises of 61 per cent.? Why is there no condemnation of the average chief executives who, according to The Guardian yesterday, have average wages of £55,000 a year— an 11.5 per cent. increase on last year? We are told that 95 per cent. of board members get company cars, that the company bears the maintenance costs of those cars for 98 per cent. of board members, that 73 per cent. of board members receive loans at preferential interest rates for house purchases, that three quarters receive free medical insurance and that 61 per cent. get free or subsidised lunches. There is no condemnation of those people that their high wages cause unemployment.

Why do not Tory Members of Parliament explain what it is like to be at the bottom of the pile in regions like the west midlands? According to a report published four or five weeks ago by the West Midlands Low Pay Unit, Sexual harassment, verbal abuse, unpaid overtime, dirty conditions and wages as low as 48p an hour have been uncovered by an investigation into the plight of working teenagers in the Midlands. A girl machinist, aged 16, complained that female staff were left in no doubt how they could find an extra £10 in their pay packet by an employer who regularly tried to touch her breast; a clerk typist, aged 19, received £25 for a 49-hour week; an employee, aged 18, with 11 0 levels, earned just £32.25 a week, while a young roofer was paid £6 for 12½ hours' overtime. Other youngsters spoke of spider-infested lavatories, no meal breaks, and getting annual holiday entitlements of 10 days after two years' service. I appreciate the fact that many of the examples in the report do not concern industries that were covered by wages council legislation. Unfortunately, for hundreds of thousands of young workers, that is the reality of the low-wage, ice cream economy which the Tory Government are attempting to introduce.

The abolition of wages council protection for the under 21-year-olds will do nothing to increase the number of jobs. The Under-Secretary of State may trawl up the favourite quote of Ministers in these debates from a pamphlet written by Henry Neuberger for the Low Pay Unit. He said that the Treasury computer estimated that the total abolition of the wages councils could create 8,000 jobs in five years. What does that mean? It means 16 jobs per constituency when the average level of official unemployment is 5,000 per constituency. That is 64 jobs in Coventry. In the last week of June 1985, there were 1,000 redundancies in Coventry. We know that 17,000 people have not had a job for more than a year and that 10,000 of them have not worked for between two and five years. According to the Chancellor, we are supposed to be in the fifth successive year of economic growth. Half a million of the 1.5 million young people out of work have not had a job since leaving school.

The last "great scheme" that the Tory Government introduced to reduce unemployment was the young workers scheme, which gave a direct subsidy to employers to reduce wages. An analysis of that scheme by a House Committee showed that three quarters of the jobs covered by that scheme were already there and that 80 per cent. of the additional jobs were jobs taken from adults to be given to young people.

That is what the abolition of the wages councils will be like. It will be about fiddling the figures, because that is the only solution that the Government come up with to reduce unemployment. They say, "Switch the unemployment among the age groups. Forget about the over-55s; they will not get a job anyway. They do not matter. Forget about most young people when they are leaving school. Just alter the statistics, either on a geographical or an age basis." That is the redefinition of unemployment that the Government come up with.

Just because I oppose the abolition of the protection of the wages councils for the under 21-year-olds, that does not mean that I am merely in favour of the retention of existing powers. I favour a campaign by the trade unions to which I referred—including the TGWU, USDAW and GMBATU—to recruit workers to the movement. Wages councils are by no means perfect. What minimal protection they have provided has been consciously obstructed over the past five or six years by the Tory Government.

Wages councils' inspections have decreased since 1979 from about 50,000 to fewer than 40,000. A quarter of inspections showed underpayment. Are there many prosecutions? Starting in 1981, the prosecutions for the past four years were eight, seven, two and two. Although there were about 9,000 illegal underpayers in 1984, there were only two prosecutions. The average fines for infringement of the wages councils' orders decreased from £466 in 1981 to £107 for the two prosecutions in 1984.

The Conservative party is supposed to stand for law and order. When it finds 9,000 employers evading the law, does it sharpen the law, increase inspectors' powers, or ensure that the law is obeyed? No, because its business friends are involved. It alters the law to let them off the hook. During the past five years the Government have cut the wages councils' budgets by £2.5 milion in real terms, that is a 36 per cent. cut. They have cut the number of ors inspectors from 158 in 1979 to 115 in 1984. Whereas in 1979 every establishment covered by a wages council order expected to be visited on average once in seven years five months, now it is once in nine years three months. In the west midlands it is once in 12 years six months. The Government have cut the number of inspectors, and even the number of miles that they are allowed to travel. All that is to let the Government's business friends off the hook.

At the beginning of the week I asked the Secretary of State some questions to provide information for the debate. I have already used some of the facts. I sought information on his statement last week to clarify some of his points. I asked how many young workers would be affected by the announcement. If the Department of Employment thought that there would be more jobs, it could at least have identified through wages councils the number of youngsters that would be affected. The Parliamentary Under-Secretary of State, the hon. Member for Eltham (Mr. Bottomley), replied, This information is not available. I asked him to estimate the costs to businesses of complying with the wages council's orders. It is said to be expensive for them to comply. He answered It is not possible to make such an estimate. I asked him to give the average level of wages of young people by region, the level of unemployment of young people by region, and whether the Department could prove that where young people received higher wages there was also higher unemployment, but that information was not available. I suggest that it is available. All the Minister must do, as I found out today, is to look in the Central Statistical Office's regional trends document, where he will find that the lowest wage areas, such as the north of England, the west midlands, northern Ireland and Wales, have the highest level of youth unemployment.

I asked the Minister how many jobs he expected to be created by the proposal, and he replied We expect the reforms to create employment opportunities, but there are obvious difficulties in forecasting the number which will eventually be created. The obvious difficulty is that the number cannot be forecast because the measure will not create new jobs.

On 17 July the Secretary of State specifically said that in a number of cases he could name the individual young people who had had to be sacked when their employers discovered what the minimum legal wages were. I asked the Minister to give examples of those cases, and he replied A number of such cases have been referred to in responses to the consultative paper, letters to Ministers and reports from wages inspectors. He ducked the question and did not provide the examples that the Secretary of State promised.

Abolition of the wages councils for the under-21s is a deliberate, calculated attack on young workers who see no future under this Tory Government in a capitalist system. This summer, just over 500,000 youngsters left school—517,000 to be precise — and they chase 12,355 vacancies at the careers offices. In England, the odds against getting a job at a careers office is 37 to 1; in Wales, 129 to 1: and in Scotland, 144 to 1. At the beginning of June, 46 per cent. of all careers offices had 10 or fewer vacancies in England. In Scotland the figure was 94 per cent., and in Wales it was 95 per cent.

A total of 51 careers offices did not have one vacancy on offer for young people in their areas, and another 36 had only one vacancy on offer. That is the reality of mass unemployment for young people in a Tory Britain. Abolition of the wages councils' legal provision of the maintenance of wages for the under-21s will not provide jobs for them. That will be done only by a Socialist Labour Government who take control of the economy and plan it in a rational way.

That can be done by sharing out what work is available; through shortening the working week to 35 hours, which could create 1.5 million jobs; through lowering the retirement age; and by bringing together the needs of working people with those whose skills are lying idle on the dole under this Tory Government.

By bringing together the needs of the 6 million people at present living in damp houses and the skills of 400,000 building workers who are denied the chance to build houses, and through the public ownership of construction and finance companies, it would be possible for a Labour Government to build 1 million houses a year. That would provide genuine training and apprenticeships for tens, if not hundreds, of thousands of young school leavers.

The Socialists and Marxists in the Labour party are often called the wreckers in society. But this Tory Government are the real Luddites of the 20th century. They have destroyed numerous steel and car plants and engineering facilities; and they have denied the chance of decent jobs to school leavers and young people. Their type of society cannot use the production that those plants generate. Their type of society wastes 30 per cent. of industrial capacity in Britain today and condemns 20 per cent. of the working population to unemployment. Their type of society puts 9 million people on low pay and 9.7 million people in a position in which they cannot afford a week's holiday away from home without staying with relatives. Millions more rely on supplementary benefit.

Their type of Government and society has turned the city of Coventry from the richest working class city in Britain 15 years ago to a city where, this month, 50 per cent. of the population must rely on state benefits. Today they are saying to hundreds of young workers in Coventry and to 500,000 young workers throughout the country that their wages of £40 to £50 a week are too high in Maggie's Britain of 1985.

Despite this debate being held at 4 o'clock in the morning, I use this time to issue a warning to the Government. Their attacks on young people, their cuts in supplementary and housing benefits, their use of YTS as industrial conscription, and their attempts to create a cheap labour, ice cream economy in Britain in 1985 will produce a new generation of Socialist class fighters.

In April this year, 250,000 15 and 16-year-old school students went on a half-day strike against the plans for compulsory YTS. Out of their ranks will come not only the new Labour voters of the next general election but the new shop stewards and union organisers of the 1980s and 1990s. They have been steeled in the harshness of Tory economic reality, and understand that the only language which this Government and the employers who back them respect is the language of industrial muscle and struggle.

Young people can see the divisions in the Tory party which we have experienced in the last day or two. They realise the desperate nature of a Government prepared to spend £6,000 million to try to crush the NUM. They watch an insane Government spending billions of pounds on useless weapons of mass destruction, on tax cuts to the super rich, and on stockpiles of food while hundreds of millions go hungry in various parts of the world.

British society over the next 10 or 15 years is approaching a crossroads, where genuine democratic Socialism will be posed as a realistic alternative to this form of government. When that happens the attempts to abolish the protection—the minimal protection—of young workers under the age of 21 of the existing wages councils orders will be seen in retrospect as one of the nails not only in the coffin of this Government but also of Conservatism, monetarism, and capitalism.

4.41 am
Ms. Clare Short (Birmingham, Ladywood)

Despite the lateness of the hour, I very much welcome this opportunity to debate the Government's proposals announced recently seriously to undermine and weaken further the wages councils that provide some protection to some of the lowest paid workers in the country. The Government's announcement, on 17 July, on the future of wages councils was publicised in a rather limited way. The impression given in publicity around the country was that young workers were the only group to suffer as a consequence of this announcement.

As my hon. Friend the Member for Coventry, South-East (Mr. Nellist) has made clear, young workers will suffer significantly, but they will not be the only ones to suffer, as I shall show. The Minister and the Government must have been very pleased that, amongst others they sought to mislead about their intentions, can be included whoever writes the leader of The Guardian. There was an extraordinary leader on this matter suggesting that the Government's climb-down on the wages council issue showed a new outbreak of consensus politics by the Government and a new form of Thatcherism. Indeed, the leader suggested that all reasonable people agreed that young people should be exempted from the protection of the wages councils. That is an amazing assertion. Also it did not seem to recognise that the Government's intention is to weaken further the protection the wages councils afford to adult workers.

Of course, not only are the young people who are currently protected to be undermined, but the definition of young people is to be extended to 21 years from the 18 years that normally applies now. Thus, a larger group will be included in the definition.

Beyond that, there is a planned significant weakening in the protection of adults. For example, in future, there will be no protection for adult workers in wages council industries in relation to their holidays; there will be no protection for piece rate workers. In my old constituency of Ladywood—and this is typical of many areas in the West Midlands—we have had a very rapid growth in textile sweat-shops employing significant numbers of Asian women workers at extraordinarily low rates of pay, almost all of whom are paid at piece rates and work in real Victorian sweat-shop conditions. Of course, the Government's announcement means that all of those who are currently protected by the provisions of wages councils will lose that protection.

There will be no protection for shift workers and no guaranteed minimum rate, so that workers can be sent home on any day at any time wthout any guaranteed minimum income in the week. There will be no differentials for skilled workers.

Therefore, this attack announced by the Government on 17 July is not just an attack on young workers, serious as that is. It is an attack on all people in this country who are currently protected by wages councils. The Guardian leader writer should really look more seriously at what the Government actually announced. All of this is only part of a further unfolding of the strategy that has been operating since 1979. As my hon. Friend the Member for Coventry, South-East made perfectly clear, the Government have adopted policies that have deliberately increased unemployment in order to restructure the labour market. They have also aimed to cut taxes for the rich and those on high levels of income, and to increase their income, the latest example of which we argued about only yesterday.

The Government tell us that somehow the well off will work harder only if they are paid more and taxed less, and those on low incomes will work harder only if they are taxed more and paid less. That is a paradox. The Government's philosophy since 1979 is that our economy will be more efficient if the rich are richer and the poor are poorer, we shall all work harder and have more incentives, so somehow greater wealth will be created. Here we are six years later and our economy is devastated, and those of us who represent constituencies in the west midlands see it before our eyes every day of the week as the closure of factories spreads throughout our region. It is clear that apart from the unacceptable nature of the Government's policy in terms of social justice, it is not working economically either.

However, the Government have been successful in their aims in bringing about the restructuring of the labour market. For example, the proportion of male manual workers earning less than the Council of Europe's decency threshold has doubled since 1979 from one in 10 to one in five. The proportion of manual women workers earning less than poverty wages is up from two in three to four in five over the same period. The number of families forced to rely on family income suplement to top up their low wages has trebled since 1979. In total in Britain today some 8 million adult workers—one third of the entire adult work force—now earn low wages, but the figure excludes young people, homeworkers and many people working in small firms who do not show up in the official statistics.

The overall result—and this is the success of the Government's strategy so far — has been a dramatic widening in inequalities. According to recently published Treasury figures, the highest paid males have enjoyed increases in their real net pay 10 times as large as those enjoyed by the poorest. As the Financial Times commented on 31 May 1985, The Government has frequently given real wage increases as one of the causes for high unemployment, and argued that lower pay was needed to price people back into jobs. However, the figures show that real take home pay of the poorest single workers fell by nearly six per cent. in the three years to April 1982, the period during which unemployment was rising most rapidly. Therefore, the Government have been enormously successful in their aim. Up to now they have managed massively to cut the income of the lowest paid and increase that of the highest paid. They now wish to go further down that road. They are currently using two instruments to attack low-paid workers. The first, privatisation, attacks low-paid workers in the public sector. The whole point of privatisation is to offer lower wages than those currently available to workers in the public sector by requiring them to reapply for their jobs at lower rates. That is proceeding quite effectively and cleverly around the land. The second instrument attacks workers in the private sector who are currently protected by wages councils. Those are the measures that the Government announced on 17 July.

In order to achieve that disreputable aim, the Government have been required to denounce the International Labour Organisation convention. They gave notice recently of their intention to do so. The original constitution of the ILO, of which the United Kingdom was a founder member, included the provision of an adequate living wage among its objectives. Member states agree to seek to ensure the payment to the employed of a wage adequate to maintain a reasonable standard of life as this is understood in their time and country. ILO convention 26, which i requires signatory Governments to maintain minimum wage machinery to protect the most vulnerable workers has become one of the most widely accepted instruments of the ILO. As the Institute of Personnel Management recently noted: No country which has ratified Convention No. 26 has denounced it. The Government's denunciation of the Convention will, as the Confederation of British Industry commented last year, embarrass the UK internationally, particularly in the context of penalising competition from less developed countries on the grounds that they are sweatshop labour. The Government have already faced some international embarrassment. The ILO has concluded that the United Kingdom is in breach of the agreement, at any rate for failing to provide adequate and properly enforced minimum wage protection. The Government have deliberately cut the number of wages inspectors, so the law is not being enforced. The ILO says that almost all countries now operate minimum wage systems. The Council of Europe has reported that the United Kingdom is in breach of the European social charter for failing to maintain a reasonable standard of remuneration for large numbers of wage earners.

The Government's intention to weaken wages councils and to exempt young people up to the age of 21 will affect—the Government will not give us the figures but those who study these matters have given us the approximate figure—about 500,000 young people. That is about one in three of all young people in their first job, or one in five of all young workers who will lose the protection of wages councils. The older workers, whose protection will be much diminished, are mostly low-paid women workers, and a significant number of them are black.

The Minister knows that all this is being done simply on the basis of dogma and ideology. There is no evidence to suggest that jobs will be produced. The Minister and others gave evidence to the Employment Select Committee which concluded that there was no evidence for the claim that the proposals which will reduce the protection and wages of some of the lowest paid workers will produce new jobs in significant numbers. Instead, we have an attack on the living conditions, rights and employment protection of some of the most vulnerable workers in the land.

We are to encourage bad employers who are unable to organise their workplaces efficiently and to invest al a significant level. The Government's inspiration is to make Britain the sweatshop of the developed world. Britain is a low-wage economy. Compared with any other developed countries, our wage levels are low and the Government want to reduce them even further.

The Labour party is utterly opposed to these proposals and we intend to make it as difficult as possible for the Government to implement them. When we are restored to power—we hope that that will be sooner rather than later—we shall reverse the thrust of this policy and go further than restoring the current level of wages council protection. It is our policy to introduce a national minimum wage because our inspiration is to have a high-wage, high skill, high tech economy in Britain rather than the sweatshop economy that the Government offer.

4.53 am
The Parliament Under-Secretary of State for Employment (Mr. Peter Bottomley)

The first time that the three hon. Members who will have spoken in this debate came together was in the debate on low pay on 15 February 1984 at column 325–26. I should like to tell the hon. Member for Coventry, South-East (Mr. Nellist) that his voice has lost nothing since then. His argument has, I suspect, gained nothing either, except that he has given nearly accurately descriptions of the answers that I have done my best to provide him with for this debate so that he could inform his speech. He has put forward a robust and loud argument for his views.

I suggest to anyone who comes to this debate on paper that they would find greatest value in some of the hon. Gentleman's concluding remarks. They should pay attention to his threat to spend the summer going around his constituency talking to young people. Leaving aside the levity that might be tempting at this time of the morning, I seriously encourage the hon. Gentleman, when talking to young people, to ensure that they consider the opportunities that may be available to them to train, to improve skills and to take jobs that are available now.

There is common agreement that it will take time for legislation to be put before the House on wages councils. No significant changes will be made to young people's pay rates for about a year. As the hon. Member for Coventry, South-East pointed out, the ILO convention prevents this country from benefiting from de-ratification, so during the next 12 months it is important that each Member of Parliament should do everything possible to help young people to find the best opportunities that are available to them. Whatever hon. Members' views about the youth training scheme may be—and I am grateful to the hon. Member for Birmingham, Ladywood (Ms. Short) for not airing, as usual, her views on YTS in this debate——

Ms. Clare Short

It is a long time since I said anything about it.

Mr. Bottomley

I was acknowledging that fact. The hon. Lady is slipping back into her usual habit of answering not only other Members' questions but even my own. I hope that hon. Members will encourage young people to consider seriously the options that are now available to them.

At the heart of the debate about low pay and young people, or wages councils and young people, is the pay and jobs link. This is not a mechanistic link. There may be a mechanistic element to it, but the greatest change in the employment opportunities for young people comes about when people set out to make it possible for more young people to be employed—when they remember the needs of young people instead of forgetting them. I do not know whether the hon. Lady can tell me how many people under the age of 18 are employed by the Labour party. I doubt whether she can, and it is unfair to ask an off-the-cuff question like that.

There is one sector that has never been attached to a wages council but that has an industrial agreement very similar to a wages council agreement. It covers the same sort of detail but goes rather further on training. If somebody were to say, "If the starting rate for a 16-yearold were to be reduced from £42 a week to £28 a week, what do you think the job impact would be? How many more job opportunities would be created?" some people would reply, "I do not think that any more jobs would be created", while others would say, "How can one tell?" If somebody gave the second answer, it would be possible for people to make the obvious comment, as the hon. Member for Coventry, South-East did in his speech, that the Government have made no big claim about precisely how many jobs they think will be created and therefore we should not believe that any more jobs will be created.

The fact is that in the only example for which we have figures, which is integrated with YTS, 850 people were taken on when the starting rate was £42 a week. Within a year the number went up to 2,500, in the following year to over 3,000 and in the year after that to over 3,000 again. In one relatively small industrial sector the number of jobs for 16-year-olds went up from 850 to over 3,000.

Mr. Nellist

That was thanks to Frank Chapple.

Mr. Bottomley

The hon. Gentleman accurately says that that was thanks to Frank Chapple. But it is not only a question of thanks to the electricians' union and to the electrical contractors. This has been of great benefit to young people. Apart from having found a welcome rung on the ladder, there was quality training and an independent future for young people, working either for a firm or as independent electricians. Nobody regards the electrical contracting training scheme as inadequate. In fact, it ought to be a model for other industries.

Mr. Nellist

The Minister is talking about "jobs". They are not jobs; they are training places. It is easy to say that, because the YTS allowance has been reduced from what its real value should have been—£40—to £26.25, about 500,000 youngsters have gone through YTS. It does not alter the fact that most of those youngsters will not find jobs when they complete their training. His argument is that more jobs will be created by reducing wages. so the example does not support his argument.

Mr. Bottomley

The assertions that I have made and the facts that I have described are slightly more limited than the hon. Gentleman believes. I was making the point that, had we been asked in 1982—we were not, because Parliament had no standing in this—what would be the training places consequence of that agreed change in the starting rate of pay or allowance for 16-year-olds, none of us could have predicted it with accuracy.

Ms. Clare Short

I am sure that the Minister does not intend to mislead anyone who might read what he is saying. It will not do to talk about replacing real, permanent jobs with a salary by a scheme financed by the Government, or to argue that that tells us anything about the consequences of cutting wages. We could debate for ever the desirability of that agreement with the EETPU and the merits or demerits of the youth training scheme, but the Minister's example does not fit the point that he is trying to argue.

Mr. Bottomley

I have no doubt that if the hon. Lady and I were on the same Standing Committee we could explore these matters at a rather more sensible hour than this. The fact remains that if, in 1982, she had been asked how many more people would be taken on, she would not have got the answer right. Nor would I. That is one reason why I told the hon. Member for Coventry, South-East in a written reply that one could not estimate some of those figures.

It is worth challenging one point made by the hon. Lady. I am sure that, on reflection, she will realise that she could have phrased her remarks differently. She claimed that the Government were setting out, through tax policy, to make the low paid worse off. I do not claim to have quoted her directly. I do not know whether she has made an estimate of the gain from the Budget announcements on tax, national insurance and family income supplement to a married man on low pay, with a non-earning wife and two children.

Ms. Clare Short

Yes.

Mr. Bottomley

Will the hon. Lady give us the figures?

Ms. Clare Short

I can tell the Minister about the effects, not only of the Budget, but of tax policy since 1979. A married couple earning about £95 a week, with two children, now pay 60 per cent. more tax than they did in 1978–79. A single person on a similar wage now pays 26.1 per cent. in income tax and national insurance—an increase of 10 per cent. on the proportion paid in 1978–79. Despite the small cuts in income tax for most people, the low paid have suffered from an increase in their overall tax burden due to greatly increased national insurance contributions and indirect taxes, such as VAT. That goes beyond the Budget, but that is the position. The Minister has nothing to boast about.

Mr. Bottomley

A great advantage of the Consolidated Fund debate is that we can have a debate. I asked the hon. Lady whether she has, or has asked for, any estimates of what the changes proposed in the 1985 Budget on tax, national insurance and FIS would mean to a married person on low pay, with a non-working wife and two children.

Mr. Nellist

The replacement of family income supplement by family credit will have a direct effect on the low paid, because it will encourage more low-paying employers to continue to pay low wages. They can be directly subsidised by the Government. It would also increase the stigma among the low paid, because that supplement will be paid through the employer. Perhaps most importantly, the provision removes money from the wife, who normally has responsibility for bringing up the family—who can claim family income supplement now—and pays it to the wage earner, who is usually the man. It removes a sizeable chunk of money from the control of the wife. There are changes in the Budget that, on that one item of family income credit, will be directly detrimental to the low-paid in Britain.

Mr. Bottomley

One of the troubles in almost any debate involving the hon. Members for Coventry, South-East and for Ladywood is that I spend my time listening carefully to what they are saying, and they spend very little time listening carefully to what I am saying. The hon. Gentlemen is talking about the social security reviews and not the Budget. The answer to the question that I put to both hon. Members is nearly £10 a week. The level of gross pay that would be needed to translate into nearly £10 a week is nearly £25 a week.

I recognise that I am talking about people with families rather than those without family responsibilities, but is one seriously going to argue for the minimum pay route along the lines suggested by the hon. Member for Coventry South-East, which will have the effect of driving many people out of work, and concentrating most of the extra funds on those who do not have family responsibilities? Both the Labour party and the Tory party will have to start thinking about that carefully.

One cannot go through life arguing, as people have, that the position of all those on low pay should be raised so that everyone at work can meet the needs of a full household with dependent children from their income. I know that the hon. Member for Ladywood would not suggest that, and perhaps in about a year's time we shall have the opportunity to debate these issues at greater length.

I prefer to stick to two or three essential points. There is a philosophical argument about legislation to forbid people to offer and take pay at anything up to two and a half times the amount of income that they could get if they were unemployed and getting unemployment pay. The Government have taken the view that it is right to keep wages councils and wages council orders on hourly rates for adults. There have been times when it was thought that we would abolish wages councils altogether. The hon. Member for Ladywood accused me of planting stories in the newspapers to that effect——

Ms. Clare Short

The hon. Gentleman did.

Mr. Bottomley

The hon. Lady did not listen to the answer that I gave her in employment questions, w hen the matter first came up, but perhaps we shall get used to each other in time.

My predecessor spelt out in the debate in February 1984 the fact that we had been looking seriously at those who are forced into greatest poverty by unemployment. Various things contribute to unemployment, one of which is being in a country where the unit costs rise when they are falling among our major competitors, many of whom have standards of living that are higher than ours. We are competing in international trade not with those whose pay rates are lower than ours, but with those whose pay rates are higher than ours, but whose unit costs are lower because of investment, working methods and the way that people work together. It is important that people recognise all the contributory factors to economic and industrial success, and that they give thought to sharing the greater benefits of prosperity more fairly.

The hon. Member for Coventry, South-East spoke about a shorter working week. That would clearly lead to work sharing, but I was not clear whether he was advocating pay sharing as well or whether, in a shorter working week, those already at work would be able to keep all the benefits and there would be extra costs on the employer, whether in the public or private sector, for the employment of other people.

I assume the hon. Gentleman is saying openly that he does not believe that one would have proper work sharing, because presumably if one is to maintain a proper standard of living, one would have to produce in 35 hours what people are now producing in, say, 39 hours. If the hon. Gentleman wants to keep unit labour costs roughly the same, that is the logical consequence.

The next point is about inadequate demand. I do not know whether the hon. Lady has calculated how much pay has gone up in this country in nominal terms in the last live or six years, but the answer is by about £50,000 million. But most of that has been eliminated by inflation and has not been a real increase. If one looks at TUC minimum pay targets over the decades, one will see they have gone up from £15 to almost £115 a week. Nearly all that increase has had a destabilising effect on the economy, helping unit labour costs in this country to rise much faster than they have risen in other countries, or to rise here when they are falling in other countries. The lower paid. and unemployed, and especially unemployed young people have not been helped at all.

Mr. Nellist

Will the Minister give his definition of unit labour costs? If he means the rate per hour, there are plenty of countries such as Sweden and America where the rate of pay per hour in manufacturing industry is far higher than in Britain. If he is talking about the output divided by the number of workers, then one of the many reasons why that equation has failed in Britain is that manufacturing output is down 20 or 30 per cent. first because Britain is losing its share of world markets and, as I said in a speech some time ago, losing its share of the domestic market. Those two losses are due to lack of investment by manufacturing industry in new technology and in factories and new tooling and so on over the past 10 or 15 years. Which of those two definitions is the hon. Gentleman using?

Mr. Bottomley

Like the hon. Gentleman, the one which happens to suit my argument at a particular time. But to be more serious about it, if one takes unit labour costs on the hon. Gentleman's first definition, one will find in the Department of Employment Gazette, which comes out today, an article about movement in unit labour costs. I doubt whether the hon. Gentleman can get a copy now. It has yet to be released. It may come out later today. The plain fact is that there are comparative cases between this country and Germany which show that Germany produces 67 per cent. more than we do, because the Germans manage to work more effectively together.

Ms. Clare Short

What about investment?

Mr. Bottomley

They are plants with similar investment. The hon. Lady cannot say, "What about investment?" because the investment is similar and the output is very different. It is the way people work. I will move on, because this is not the only occasion on which we will be able to explore some of these issues.

The hon. Gentleman referred to the low-pay unit west midlands report. The director of the unit knows I have views on some of the things he puts out, in the same way that he has views on some of the things that we put out. I shall concentrate for a moment on the west midlands study. In the conclusion, the evidence on wages refers to under 18-year-olds, and then immediately goes on to a table illustrating the unemployment increases for 18 and 19-year-olds. That may be a mistake, or it may have been an attempt at deliberate confusion. The fact is, like was not being compared with like. It is page 22.

If the evidence were to be solely devoted to those under 18 it would show that unemployment in this group has fallen as a proportion of total unemployment over the period 1979 to 1984. The report infers on page 7—although it does not actually say—that young people on young worker schemes——

Mr. Nellist

The Minister says that unemployment among young people under 18 has fallen in the past six years, but if he adds the number of registered unemployed under 18 to those on various bogus schemes such as the jobs sector of the young workers scheme and the YTS he will find that unemployment in the group has not fallen as a percentage of total unemployment in the past six years.

Mr. Bottomley

The hon. Gentleman has views on the YTS which are not shared by the trainees. If he suggests that trainee electricians are in bogus jobs — [Interruption.] If the hon. Member for Ladywood objects to taxpayers' money being used for training young people, she had better say so clearly.

Ms. Clare Short

I am making a simple point and I am sure that even at 5.15 am the hon. Gentleman can understand it if he tries. Young people who are employed on a Government scheme and are paid an allowance made available by the taxpayer are not comparable to people who are paid wages by employers to keep them in employment.

Mr. Bottomley

Why not?

Ms. Short

Because the cost of one has to be met from the production of the company involved and on the other hand the taxpayer is paying an allowance to someone who is supposed to be a trainee. It is massively different.

Mr. Bottomley

It seems to me that the hon. Lady will be in difficulties with her party. I hope that she has been re-selected.

Ms. Short

I have.

Mr. Bottomley

In that case, I can go on to say that we appear to have reversed roles. The hon. Lady is saying that a job is a real one only if no public funding is involved. Is there any significant difference between the trainee electrician who started in 1982 and the trainees electrician who started this year, except the source of the funding for the allowance and whether earnings are taxed? There is surely no significant difference. If the hon. Lady wants to make a great distinction, she is not the person I thought she was.

The essential argument is that to deny the link between pay and jobs, Labour Members, and sometimes the low pay unit, implicitly assume that wages are the only determinant of employment and unemployment. I leave aside the common recognition that aggregate levels of demand matter a great deal. The question is how to get that aggregate increase in demand. I have already mentioned the £50,000 million nominal increases in pay during the past five or six years. Is that 50 per cent. increase—about 10 per cent. a year—not enough? If it is claimed that the way to increase demand is to have such massive nominal increase in real demand, Opposition Members should start finding a different way forward.

The reason why the low pay unit and Opposition Members need to assume that wages are the only determination of employment and unemployment is that that allows any increase in unemployment at a time of pay reductions to be cited as disproving the link between pay and jobs. The description of a deterioration in youth pay and unemployment over the years 1979 to 1984—the figures that the hon. Member for Coventry, South-East kept using—is used to deny the pay and jobs link. The hon. Gentleman seems to ignore any other effects, such as the large demographic cohort passing through the age group during those years. If the hon. Gentleman were willing to split the figures from 1978 to 1982 and from 1982 onwards, which is where we see the impact of some of the Government involvement in new schemes, we should see a slight different pattern.

There is agreement on the need to ensure that there are more and better opportunities for young people. The Government approach is to say that we will not have statutory restrictions on what employers can offer. The hotel and catering trades believe that they will be able to create more opportunities for young people. When I ask trade unionists what they think will happen, their opinions vary. Some are in trades where they are rather more used to trying to get a trade-off between pay and jobs. Others in the great Labour movement, of which I regard the hon. Member for Coventry, South-East as a member, would deny any link between pay and jobs, and obviously we are not going to get far together in trying to find one. However, there are other people who regard it as part of their responsibility to add to the opportunities available to young people. The Government are going to do the best that they can to encourage people to move forward and make arrangements with freedom and flexibility on setting pay and allowance levels so that the improvement can be seen. Too often people have walked by on the other side when there was a chance and a need to create greater opportunities.

Mr. Nellist

I am sitting in seeming amazement listening to the description of training opportunities for young people described as a laudable exercise by the Government, which will lead to real jobs. I do not regard The Times newspaper as a particularly Socialist organ, but a couple of weeks before the opening of the YTS scheme, in the early part of September 1983, its editorial described YTS as a crude anti-riot device designed to keep young people out of the unemployment figures and off the streets. That was why the Government planned to change from cutting their provision on youth training by £14 million in 1979 to spending £1,000 million by 1983. It had nothing to do with training, jobs or giving young people hope. It was a knee-jerk response to Toxteth, and a way of fiddling the figures.

The Minister ought to deal with the realities of 500,000 youngsters who have not worked under this Government, and with the proper provision of jobs rather than trying to masquerade by portraying YTS as some laudable training scheme. That is no criticism of the individual instructors who are trying to make the best of those schemes. The Government's reason for setting up the schemes was to reduce the unemployment figures from the real level of nearly 5 million down to the artificially low level of 3.25 million.

Mr. Bottomley

I am glad to note that the hon. Gentleman at last has remembered that many people involved in training young people are also likely to be members of trade unions, and he has made his statutory gesture towards their dedication to the needs of young people.

In addition to joining the hon. Gentleman in praising those involved in YTS in the various modes, and recognising that over 80 per cent. of young people on YTS think that it is useful to them, and many think that it is very useful to them. I want to make the point that having flexibility to set rates of pay which are more realistic is a way not of penalising people but of helping more people.

One thing that helps young people is being able to get work. The approach of the hon. Gentleman, while we have had the wages councils structure, has been to deny many young people the opportunity of getting on the bottom rung of the employment ladder and moving upwards.

This year in Germany, 600,000 young people will get recognised qualifications. In this country, the number is a relatively small percentage of that figure. That has happened not just in the last six years. It has been developing because we have taken our eye off the needs of 40 per cent. of school leavers, and we have created a system that has perhaps given some of them the idea that they can sit back and not take one of the options that is likely to be of greatest advantage as they grow up. That is, staying on at school, going on in further or higher education, taking a traineeship and getting a job. We have allowed many of them to dc nothing and to feel that they are not needed and cannot move themselves forward. That has been changing. In this, YTS has played a major part. Having the freedom to set pay rates in the wages council sector is another part. Perhaps the most important part of all is in the 90 per cent. of the economy which has been governed—and restricted—not by wages councils, but by out of date attitudes, whereby people have turned their backs on the needs of young people.

I do not want to build too much on electrical contracting, but I think that has shown the way forward. In 1982, we did not have even that. If other industries look to their responsibilities in the way that the electrical contractors and the EETPU have, we can have this debate in three or four years with many more examples—some from the wages council sectors and some from outside, some from the private sector and, I hope, many more from the public sector. Then we can discover what happened to the young people to whom the hon. Gentleman intends to devote his summer and we shall be able to test whether my approach or his is right.

I thank the hon. Gentleman for giving us the opportunity to debate this matter this evening. I thank the hon. Member for Ladywood for providing the meat in the sandwich between us.