Wages Councils

HC Deb 26 March 1985 vol 76 cc377-415 3.23 am

Mr. Christopher Chope (Southampton, Itchen)

It gives me great pleasure to introduce a debate on wages councils. I welcome all my hon. Friends who have entered the Chamber to participate in it. I note that there is only one Opposition Member present, the hon. Member for St. Helens, North (Mr. Evans), to discuss with us this important subject. A debate about wages councils is one about job opportunities and employment. It is the belief of Conservative Members that unemployment levels can be reduced. It is our conviction that wages councils contribute to unemployment, and that brings us to discuss the issue this evening.

I welcome the presence of my hon. Friend the Under-Secretary of State. I congratulate him on sitting through another debate at this early hour of the morning. I hope that in about three hours time he will be able to reply with the same freshness and lightness of touch that he exhibited in the previous debate.

Last Thursday was a historic day, when the Government's consultative paper on wages councils was published. That paper is another important landmark on the road to even more employment and a freer society. I know of no Conservative Member who is other than critical of the current operation of wages councils, although there are sincere differences of opinion about whether abolition or reform is the better course. Whichever one favours, however, I am sure that all agree that the Government should have a free hand. The freedom to create new job opportunities through deregulation should be cherished by every Government and it is sad that hitherto their freedom of action has been inhibited by International Labour Organisation No. 26, to which the United Kingdom is a signatory.

The opportunity to deratify that convention comes but once in five years. In the Budget debate there was much discussion about the advantages and disadvantages of being "boxed in". In my view, the Government should avoid being boxed in any longer by that convention, and I welcome the positive statement in the consultative paper that, subject to the outcome of consultations in conformity with ILO rules, the Government propose to deratify the convention in June 1985. It should be remembered that the United States and Japan—and, indeed, the Soviet Union—are not signatories. When the convention is deratified Parliament and Government will be free to make their own decisions in the best interests of the nation.

I will try to set out some of the basic facts about wages councils. About 260,000 employers in 400,000 establishments employing 2¾ million workers are controlled by 26 wages councils. The employees affected are mainly in the service trades of retailing and catering—more than 1 million in each—plus 400,000 employees in industry, about 250,000 of whom are in the clothing manufacturing industry. Up to two thirds of the employees covered by wages councils work part time—a fact often overlooked by those who argue for retention of the wages councils—and about 80 per cent. are female. Total expenditure by the taxpayer on wages councils is £4.2 million, but the cost to the employers, although unspecified, is clearly substantial when one considers the vast bureaucratic overlay that the councils produce.

The wages councils establish minimum rates of pay for about 11 per cent. of the employed labour force. Had I been alive in 1909 I should probably have supported the establishment of the wages councils. Indeed, as one who is concerned about poverty I should probably have been on a National Anti-Sweating League rally campaigning against people working long hours in unpleasant, unhealthy and unsafe conditions for low wages. The early wages councils governed tailoring, paper and cardboard box making, chain making and the finishing and mending of man-made lace, and the people affected by them were mainly full-time workers in manufacturing. Looking back, I think it is fair to say that those people were vulnerable to exploitation if not actually exploited.

Circumstances today are completely different. Our welfare state, with unemployment and supplementary benefits, guarantees a minimum standard of living for each person according to his needs. It is no longer a matter of working in a sweatshop or starving. Today no adult is forced to go to work. He can stay at home and live on supplementary benefit if he so wishes. Indeed, the operation of the poverty trap caused by high taxation and national insurance payments often results in people opting to live on supplementary benefit because they are better off not working. Family income supplement is a valuable resource to working families in relative poverty.

Wages councils must be justified according to the cirucumstances of today rather than by a sentimental attachment to history. If they did not exist, would we wish to set them up? I think not. No Conservative or even the most hard interventionist-Socialist would want to establish anything like the present system, but would prefer a national statutory minimum wage.

There is something illogical in saying that there should be a minimum wage of £50.25 for a 40-hour week for an adult shampooist, but that for a flax and hemp worker it should be £65.10, for a boot and shoe repair bench hand it should be £77.65 and for a general assistant in the retail food trade it should be £75.50. Arbitrary distinctions are being made by these bureacratic quangos called wages councils.

Mr. Michael Fallon (Darlington)

Is my hon. Friend aware that, under the Wages Councils Act 1959 and the Employment Protection Act 1975, the Fur Wages Council (Great Britain) has made the Wages Regulations (Fur) Order 1976 (Order Z (96)) revoking the Wages Regulation (Fur) Order 1975 (Order Z (94)) which ordains that the rate paid for hand fleshing 100 skins of the American opossum shall be £2.38 but that for the Australian opossum it shall be £2.75? Does he think that the Government should be ordaining such matters?

Mr. Chope

No. I congratulate my hon. Friend on reading so clearly a document measuring about 4 ft by 2 ft, the print of which is minute.

Who would argue that an assistant in a small shop in a village where rents are low and travel-to-work costs are negligible should be assessed as requiring the same minimum wage as an assistant in a large city? The flexible market approach is the one that works in practice. Many small shopkeepers cannot afford to take on additional staff, because their customers cannot support the required minimum wages.

Those who advocate the abolition of wages councils are caricatured as hard-hearted men and women who want to do down the workers and grind their noses in the dirt. Nothing could be further from the truth. Wages councils are not concerned with poverty. There is now little overlap between poverty and low wages because of the welfare state. Single people with few dependants, or married women, tend to be in the low hourly rate of pay bracket, often working part-time. They should be paid at a rate determined by the market rather than according to a rate laid down by a wages council in the belief that such a rate will deal with poverty.

Many people believe that wages councils are pricing people out of jobs. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said that on 27 July 1981. Lord Thorneycroft said so in a debate in the other place on 17 March 1982. The National Federation of Self-Employed and Small Businesses said so in an excellent recent publication entitled "Still Priced Out". Many distinguished economists said that. On Friday a shoe repairer in my constituency said that because of the impact of wages councils he could not employ two apprentices whom he would otherwise wish to employ. A mass of anecdotal evidence supports the view that wages councils are pricing people out of jobs.

The arguments against the minimum wages policy are the same as those against wages councils. Two distinguished black American economists, Professors Sowell and Williams, said that the federal minimum wage law in the United States leads to unemployment concentrated on the young, unskilled, inexperienced, female and, even more severely, on ethnic minorities.

Mr. Fallon

Blacks.

Mr. Chope

I used the expression "ethnic minorities" which was chosen by those two economists to describe those whom my hon. Friend describes as "blacks". Their point was that despite the good intentions behind minimum wage legislation, it creates unemployment among those who are weakest in the market place.

The opponents of the abolition of wages councils suggest many arguments. One is that abolition could lead to increased trade union activity. I would not object to that if it resulted from the abolition of wages councils. It is also said that employers like councils, which is why they should be retained. My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) said during the Budget debate that he was reinforced in his view of the importance of wages councils by the fact that a large number of employers do not want the wages councils to be abolished. They believe that they do a good job for … 2.5 million … and … bring about good industrial relations."—[Official Report, 25 March 1985; Vol. 76, c. 52.] That argument must be scrutinised carefully. Insight into the reality of the position is available by reading the publication by Professor Clegg in 1972 of his book The system of industrial relations in Great Britain, He referred to what happens when there is pressure to abolish individual wages councils. He states In most instances in which abolition of a council has been under discussion, the employers have been more reluctant than the unions. This is because they feared that without legal inforcement of the rates of pay and hours of work, some of the smaller firms might resort to undercutting in both wages and prices and their organisations would not be able to put a stop to it. The unions with their membership concentrated on the large firms were confident that they could ensure that voluntary agreement would be followed there and were less worried about the small fry. The Confederation of British Industry and other employers' organisations representing the large employers—it is the larger employers who are represented on wages councils rather than small employers — benefit from the operation of wages councils because the wage councils restrict the labour market.

Mr. Robert B. Jones (Hertfordshire, West)

Could that be the reason why the hon. Member for Rochdale (Mr. Smith) said in the House on 19 March that, as an employer, he did not want the wages councils to be abolished because they protected his business from competition?

Mr. Chope

That may well be the reason. We may hear that quote in the House in future.

Most people accept that wages councils have an impact on youth employment. A possible solution that I have heard discussed is that people aged between 16 and 18 might be removed from the operation of the wages councils, so that the latter affected only the employment of those aged more than 18. But that would not be an answer to the problem, because many employers who take on youngsters aged 16 and 17 are thinking to the future. They say, "We are taking on an apprentice. Will we be able to employ him when he is 18 or 19?" A small business may be inhibited from doing so because it will say, "When he is 18 or 19, he will be subject to a wage level laid down by a wages council." The problem would not arise with a 16 or 17-year-old. The Government should consider a wider area of the impact of wages councils on employment rather than only the impact on youth employment, important though that is.

Wages councils have outlived their usefulness. They are clearly an impediment to jobs. There are two options in the discussion paper put forward by the Government: one is to recognise that wages councils are obsolete and that they should be abolished; the other amounts to a recognition that they are obsolescent, and that in their dying moments there should be an attempt to revive or reform them and bring them up to date. The latter would be a futile exercise doomed to failure, because the wages councils have outlived their usefulness and are no longer relevant to today's markets.

Next year is 1986—

Mr. John Evans (St. Helens, North)

That is the first thing the hon. Gentleman has got right tonight.

Mr. Chope

It will be the 75th aniversary of the introduction of wages councils. I hope it will also be the year of their abolition.

3.42 am

Mr. John Evans (St. Helens, North)

In his Budget speech on 19 March the Chancellor of the Exchequer said: My right hon. Friend will be issuing a consultative document about the future of the wages councils later this week. Wages councils destroy jobs by making it illegal for employers to offer work at wages they can afford and the unemployed are prepared to accept. This applies in particular to small employers and to youngsters looking for their first job. That statement so enraged me that I shouted so loudly that Hansard picked it up: The right hon. Gentleman should be ashamed of himself. The Chancellor continued: The document will cover a number of proposals for radical change, including complete abolition. My right hon. Friends the Secretaries of State for Employment and for Education and Science will be issuing press notices later today giving further details of these measures. I then intervened to say: Bring back sweatshops." —[Official Report, 19 March 1985; Vol. 75, c. 794.] I was incensed by the Chancellor's remarks for two reasons. First, there is not a shred of evidence to justify the outrageous statement that wages councils destroy jobs. The Chancellor, the Secretary of State for Employment and the hon. Member for Southampton, Itchen (Mr. Chope) have not offered any evidence to support that contention. The hon. Gentleman referred to anecdotal evidence—whatever that means. It probably means what is heard when a guy in a pub, having had two or three pints, regales his audience with stories that he is inventing in order to impress one of his listeners who he knows is a Member of Parliament.

Conservative Back Benchers have for 18 months carried on their disgraceful campaign to abolish wages councils, and I suspect that they have been egged on by the Prime Minister, but they have never offered anything like a shred of real evidence that wages councils destroy jobs. All that we have had is the big lie technique, in which Dr. Goebbels specialised during the period of the Nazi party in Germany, which is that if someone is going to tell a lie he tells a huge one, and, if he keeps on repeating it for long enough and loud enough, perhaps people will start to believe him.

The second and more important reason for my anger is that I believe that sweatshops will be brought back if wages councils are abolished. There is no doubt that sweatshops will again rear their evil head, and that leads to the most significant question that has to be asked in the continuing debate about the future of wages councils. I make it clear to the Minister and to Tory Back Benchers that we in the Labour party do not accept that a debate at 3 o'clock in the morning is the way that important matters of this nature should be considered.—[HON. MEMBERS: "Where are the Labour Members?"] Only one of my hon. Friends is present, but many of them volunteered to speak in the debate. I pointed out that there was little need for them to come to listen to the rubbish that we hear from the Tory Right-wingers—rubbish that we have heard for a long time—about wages councils.

Mr. Chope

Did I understand the hon. Gentleman to be suggesting that the constituent who came up to me was a liar? I understood him to be saying that I was wrong to believe what that person told me.

Mr. Evans

The hon. Gentleman referred to anecdotal evidence. We all know what that means. It is significant that he did not offer one shred of hard evidence that wages councils destroy jobs.

We have to ask the question which the hon. Gentleman mentioned in passing; why were wages councils created in the first instance. They were first introduced over 70 years ago to eradicate the evils of the sweatshop. I urge all those hon. Members who seek to abolish the wages councils, and I urge in particular the Secretary of State for Employment, to read and bear in mind the speech of the then President of the Board of Trade, Mr. Winston Churchill, on the Second Reading of the Trade Boards Act, which created the first wages council. In particular, they should read and digest the following passage: It is a serious national evil that any class of His Majesty's subjects should receive less than a living wage in return for their utmost exertions. It was formerly supposed"— I impress this point on Tory Members— that the workings of the laws of supply and demand would naturally regulate or eliminate that evil … where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad, and the bad employer is undercut by the worst".—[Official Report, 28 April 1909; Vol. IV, c. 388.] In fairness, I ought to read out what was said recently by the hon. Member for Rochdale (Mr. Smith): I must tell the Government, as an employer, that I do not want the wages councils to be abolished, because they protect my business from unfair competition. They ensure that my competitors are required by law to pay the same minimum wage as I do."—[Official Report. 19 March 1985; Vol. 75, c. 817.] Surely that point is germane to a debate on wages councils.

Further down column 388, Mr. Winston Churchill said: where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration. I repeat the earlier extract from Mr. Churchill's speech: It is a serious national evil that any class of His Majesty's subjects should receive less than a living wage in return for their utmost exertions."—[Official Report, 28 April 1909; Vol. IV, c. 388.]

That was the position in 1909. What is the position today? Twenty-six wages councils cover about 2.75 million workers. The wages paid to those workers are between £62 and £73, generally for a 43-hour week. I do not believe that even the most hard-hearted Conservative Member would suggest that between £62 and £73 is a king's ransom. The average statutory minimum wage paid to women in the industries covered by the wages councils is just over one half of national average earnings. The minimum wage for men is just over one third of national average earnings. In other words, the statutory minimum wage set by the wages councils is already less than the living wage which Winston Churchill described in 1909 as "a serious national evil."

It is the height of nauseating hypocrisy for well-heeled Tory Members of Parliament — barristers, lawyers, consultants and directors — to stand up and make speeches about wages councils fixing wage levels that are so high that they are ruining businesses. I suggest that those hon. Members ought to have the guts and the decency to tell the House and the country what are their average earnings in a year. I challenge every Tory Member of Parliament to disclose his earnings.

There has been no change since 1909. Mr. Churchill then said: where you have … no organisation, no parity of bargaining"— he was obviously referring to the lack of organised trade unionism— the good employer is undercut by the bad, and the bad employer is undercut by the worst. What has changed since then? The answer is virtually nothing. In the industries covered by the wages councils — predominantly the clothing and retail trades, hostelries and catering and such services as hairdressing and laundries—about two thirds of the work force are part-timers, while about four fifths of them are female. A substantial proportion are under 18 years of age, and a significant proportion of the total work force is made up of ethnic minorities. In other words, 11 or 12 per cent. of the nation's work force are not members of trade unions. Therefore, it is impossible for efficient collective bargaining to take place on their behalf.

To return to what was said by Mr. Churchill, where there is no organisation there is no parity of bargaining. So will the good employer be undercut by the bad, and will the bad employer be undercut by the worst? The evidence clearly shows that that will almost certainly happen.

Paragraph 16 of the Government's Green Paper on wages councils refers to establishments visited and establishments underpaying. In 1981, 24,399 establishments were visited and 10,074 were underpaying. That represents 42 per cent. of the establishments visited. Similar figures are given for each year. The provisional figures for 1984 are 26,545 establishments visited and 9,461 underpaying — which is 35.6 per cent. of the establishments visited. More than one-third of the establishments visited have been underpaying their work forces.

Paragraph 17 lists the totals of workers underpaid and the assessed arrears. In 1981, 25,482 workers were underpaid and the arrears were £2,301,910. In 1984, 18,043 workers were underpaid and the arrears were £2,428,991. That is when wages councils are operating and when flouting statutory awards is a criminal offence. One can imagine what will happen if and when the wages councils are abolished and the sharks who criminally underpay their workers now are free to do as they wish —as some Government Members earnestly desire.

Mr. Michael Forsyth (Stirling)

Is the hon. Gentleman seriously suggesting that a system that costs more than twice as much to administer as it recovers in wages should be continued? The scheme costs about £4 million and recovers about £2 million. Is this really a worthwhile use of taxpayers' money, and is it an efficient system?

Mr. Evans

The expenditure is worth while, as most taxpayers agree. The establishments visited comprise only a fraction of the establishments which could and should be visited. The Government have encouraged the serious shortage of wages councils inspectors.

Mr. Churchill's third major point in that splendid column 388 of 1909 was: where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration. Those words sum up precisely the state of our nation after six years of this awful Tory Government's wrecking of our economy. In excess of 4 million people in the United Kingdom are searching for employment. Our manufacturing industry is collapsing. A major engineering firm in my constituency has just announced further redundancies. Britain, once the world's workshop, is now in substantial deficit in manufactured goods. The NHS, our education system, the nation's heavily populated urban areas and the inner city areas are collapsing. The Labour party, the other Opposition parties, about one-third of the Tory party, and almost every economic commentator and serious newspaper in the land call for a major initiative to combat the evils of mass unemployment. The hierarchy of the Tory party is obsessed with wages councils and their paltry wage awards.

The debate has an international dimension. It is instructive to go back to the origins of wages councils legislation. In the debate on the Second Reading of the Trade Boards Bill, Mr. Churchill made it clear that similar legislation was being enacted in most, if not all, of the Western industrial democracies. That development, subsequently encouraged by all the Western democracies, moved on until we established the International Labour Organisation to regulate matters of this nature on an international basis. In other words, there has always been international co-operation on such industrial affairs.

Now, however, the Government are not only to set back the clock in Britain, but are seeking to set the clock back internationally by their commitment to deratify ILO convention No. 26. I am bound to ask: what will our EEC partners make of this step back into the dark ages, and what will the EEC commissioners make of this deratification in the light of the Community's competition policy? Will they allow future British sweatshops to compete unfairly against other more civilised European industries? Will not Britain be regarded as the Taiwan of Europe among our European partners and competitors? I am sure that Conservative Members wish that it was the Taiwan of Europe, with the same sort of wages and social conditions for the workers, but not for themselves. Conservative Members are something different, and the salaries that they earn are something different.

I deal next with what I understand is the Secretary of State for Employment's favoured option, that of retaining wages councils in some form or other, but removing young people from their protective cover, with the additional wheeze of altering the definition of young worker from meaning a person of the age of 18 to a person of the age of, say, 21 or even 22—an outrageous proposition, which is hinted at in paragraph 18 of the Green Paper.

Before the Secretary of State goes down that avenue, let me remind him and his hon. Friends that most parents in the country already feel that their sons and daughters have been cruelly betrayed by the Government, and that any move further to wangle the statistics relating to employment, which is a particularly nasty feature of the Government, will meet with a mountain of protest from youngsters, their parents and his own Right wing, which will not be satisfied except by complete abolition of the wages councils. The chances are that if the Secretary of State pursues that favoured option he will find few friends.

As I understand it, the main excuse for introducing such a retrograde step as removing wages council protection from young workers is that they would then be pricing themselves back into a job, something which we constantly hear from Conservative Members. The hard, unpleasant facts are that young people's earnings, expressed as a percentage of the adult rate, have fallen by more than one fifth since the Government took office. At the same time, unemployment among young people has rocketed. The proposition about pricing youngsters back into a job is eyewash, or it certainly has been up to now. If wages council protection for young workers is withdrawn, and at the same time the Government go ahead with their other heinous proposition of abolishing young people's rights to social security benefits, they might very well price young people back into a job—an unskilled, dead-end job without any prospects, for a starvation rate of pay.

Let me spell out now that if that sort of job is created for young workers it will only be at the expense of adult workers, and probably male adult unskilled married workers at that. Far from bringing down unemployment, it will merely transfer it to an even more vulnerable section of the work force.

Mr. Michael Brown (Brigg and Cleethorpes)

The hon. Gentleman made the point that if we were to denounce the ILO convention we would be out of line with our European partners, and he referred to the civilised approach which the rest of Europe would then have compared with what would prevail in this country. He went on to quote paragraph 18 of the Green Paper. Will he read the final sentence of paragraph 18, in which the Government say that in Holland the full adult minimum rate is not reached until the age of 23? How does he square that with what he said a few moments ago?

Mr. Evans

I was pointing out that the Government's latest squeeze might result in there being an increase in the age of those who come within the definition of "young worker." We cannot discuss the point that the hon. Gentleman raises without all the relevant statistics from all the European countries. I shall be happy, when we have a more wide-ranging debate, to discuss the issue in full, and on that occasion I shall have all the statistics to hand.

Apart from economic factors, moral issues must be considered when considering the future of wages councils. These councils have in the past protected the weak and the unorganised, have prevented the exploitation of some of the most vulnerable in society and have been an important bulwark against poverty wages.

The hon. Member for Itchen mentioned the statutory minimum wage and said that he did not agree with such a concept. Throughout the Labour movement, the question whether there should be a statutory minimum wage has always been a source of argument. I suspect, however, that many unions are now moving towards the acceptance of that concept. I admit, as a member of the AUEW, that I have disagreed with my union on the issue and have always believed that the measure of a civilised society is a statutory minimum wage.

Once wages councils are abolished and appalling sweatshop conditions return, as they undoubtedly will if the Conservatives continue in office, the horrors of privatisation will be visited on thousands of workers, not only in hospitals and Tory local authorities but in nationalised industries such as the United Kingdom Atomic Energy Authority at Risley, a mile and a half from where I live. Exclusive Cleaning and Maintenance has slashed the cleaners' earnings in that establishment by more than £20 a week. Workers in other sections of industry are becoming horrified as they realise what the Government are up to.

Certain good results could come from the abolition of wages councils, though they are not the sort of results that Conservative Members want. In the short term it will undoubtedly be dreadful for those who at present have some protection under the auspices of wages councils, but in the longer term more and more workers will appreciate the benefits of trade union membership and collective agreements, which can protect workers from the activities of some of the most appalling employers.

The opening sentence of the Green Paper on wages councils says: The Government attaches the highest priority to removing unnecessary obstacles to the creation of more jobs. The greatest single obstacle to the creation of more jobs in Britain is not the peripheral issue of wages councils, but the evil policies of this awful Government. My recommendation is not to sack the wages councils but to sack this incompetent Government.

4.9 am

Mrs. Angela Rumbold (Mitcham and Morden)

I must confess that I listened to the speech of the hon. Member for St. Helens, North (Mr. Evans) with mounting rage. It seemed that he was talking to a great extent about women workers. By implication he was outlining a situation where the women of this country are no better off, no better educated and no better able to fight for themselves than they were in 1909, a year in which, in spite of my not inconsiderable age, neither my mother nor my father was alive.

My interest in the subject arises unashamedly as a woman viewing an area which predominantly affects women's working conditions. It is generally accepted that some 2¾ million people are covered by wages councils; of those, 75 per cent. are women working in retailing, catering, clothing, hairdressing and related industries. The argument for retaining wages councils is plainly stated; they are seen as the only method whereby those covered by the councils are relieved of the problem that might arise from exploitation, as the hon. Member for St. Helens, North has so vividly outlined.

Since the opportunity is available under the International Labour Organisation agreement for a careful look at the situation, it would be irresponsible not to take advantage at least of the opportunity to examine what happens in this sector of the labour market and to study whether there is any truth in the allegation that the abolition of wages councils would result in a down turn in average wages from the minimum levels currently negotiated through wages councils.

I start from the point of being basically hostile to the idea of wages regulations. It has been said with demonstrable truth in another place that the foundation of all economic analyses is nothing more arcane than that prices affect quantities. If wages are increased, other things being equal, the demand for workers will be reduced at the margin.

Today what we seek is an increase in employment opportunities. My concern is all the greater since the evidence of research shows that when the costs of employment are raised artificially, the resulting unemployment affects females. I am not arguing against minimum incomes. No one could be more concerned than I am about overcoming the poverty trap, but I share with the Chancellor of the Exchequer the view that it would be much better to achieve that through the social security system than by the intervention of Government or Government-inspired bodies in price setting.

I believe that minimum wage levels are a disincentive to increasing employment opportunities. In the very areas where the wages councils operate, many of the industries which used to exist at the time of which the hon. Member for St. Helens, North spoke — the early part of the century — have disappeared, although it could well be demonstrated in a limited way that many of the skills required remain and are still marketable even today.

If we examine the female potential for job creation in small businesses, we can see immediately that the skills that many women have can, and could, be used to start new businesses. There are potential employment opportunities in all geographical areas, using the various skills currently covered by wages councils, which may well be stillborn simply because of the existence of the wages councils and the impossibility of meeting at the start of a new business minimum wage levels together with the other restrictive practices that are imposed on potential new employers in regard to premises, facilities, time off and so on.

Many women today expect to return to work — if, indeed, they ever leave it—to supplement the family income. The experience of the present structure within wages councils is not good. Many women are not able to give continuity of service if they are married or caring for other members of their families. Because of this, employers see the costs of recruiting and training, together with other special provisions, such as the necessity to hold open a job following a pregnancy, as strong disincentives and counters to employment. This is particularly true of small business men.

In other words, wages councils, linked with some provisions—alas, within the Employment Protection Act 1975 — militate against women being offered jobs. I contend that, but for those constraints, it is the experience of employers that many women who face external family pressures would, nevertheless, be readily employed by small firms and would not be disadvantaged in such employment. This applies equally to the financial rewards that the women would gain and the individual arrangements that they would be able to make with those employers. Employers frequently make those arrangements to the mutual satisfaction of the women whom they employ and of their business, without discrimination of payment or of terms and conditions of work. Frequently, women employed under such flexible arrangements prove to be of excellent worth to employers, giving unstintingly and willingly of their time if they do not feel that there is some threat to them of a watchful eye to note whether they are to be judged on the legal constraints currently imposed by, for example, the wages councils. If the Opposition genuinely wish to improve job opportunities on an equal basis, it is crucial that this factor should be openly recognised.

Women are increasingly beginning to create small businesses—this is a more recent development—some of which might be termed cottage industries. Others, such as successful businesses launched by Anita Roddick, called the Body Shops—truthfully, such an initiative is not taken by a large number of women, but, nevertheless, that instance needs to be cited—prove that women have an initiative-taking facility which is beginning to be explored and to be shown to be highly successful in enterprises such as catering, hairdressing and clothes design and clothes and furniture making.

Women not only go in for those areas covered by the wages councils but now enter the high technology area, which, fortunately, is not numbered among the industries covered by the wages councils. Where such businesses can begin—often they begin at home—the conditions that would be imposed by the wages councils are sufficient to prevent them expanding and increasing employment levels.

It is not merely a question of minimum wages. Although all women expect and seek parity — they should get parity of payment for equal work —many—

Mr. Eddie Loyden (Liverpool, Garston)

It is a scandal that the hon. Lady should argue such a case. Is the hon. Lady aware of the life led by working class women in the sense that in many ways they are protected by wages councils and in many other ways they are incapable—for reasons that will not be known to the hon. Lady—of making inroads into small businesses or employment? The hon. Lady's approach clearly shows her complete inadequacy and her lack of knowledge of working class people who are trying to make their way through life in the difficult conditions presented by her Government.

Mrs. Rumbold

That is a disgraceful slur on women, whatever their origin.

Mr. Loyden

The hon. Lady is casting the slur on women.

Mrs. Rumbold

I certainly am not casting a slur on women. I certainly would not make such a sexist remark or choose to denigrate women, whatever their origin.

Mr. Loyden

The hon. Lady is denigrating women.

Mrs. Rumbold

I ask the hon. Gentleman to—

Mr. Loyden

The hon. Lady has no experience of working class women.

Mrs. Rumbold

It is very difficult to answer the kind of intervention that the hon. Gentleman is making, since it is quite clear that he is not willing to show the decency of allowing that women of any origin have the ability to move forward for themselves. We do not need to be supported indefinitely by the opinions or views of the male sex. This is the first time in my life that I have ever been moved to make such a feminist and pro-feminist speech. But I find that increasingly in this place the number of times men wish to tell women what they are capable of doing and what they should do with their bodies and their lives is becoming quite intolerable. I do not, nor do my women colleagues in this place, tell men how they should conduct their lives or what they should do with their bodies and I wish that the hon. Gentleman would wait while I finish making the point I had embarked upon.

I was trying to explain to the hon. Gentleman that the flexibility that women require in order to achieve success in both starting enterprises and continuing them is something that can be negotiated with both male and female employers, mercifully. I think that this is something that will increasingly appeal both to women who have not so many family ties and even more to women who today, fortunately, have the advantage of a better education and improved communications and of seeing how others can get a job which it is worthwhile to pursue through their contacts and can expand those contacts and those jobs if the terms that they work under are sufficiently flexible.

The arguments that led in the early 1900s and the early part of this century to the starting of wages councils—the exploitation of the low paid, the inability of home workers to negotiate proper rates of pay—simply do not apply today. I am amazed to hear that these arguments are levelled when in particular, the whole communications system in this country and throughout the world is so totally different that it makes the points about communication, low pay and negotiation quite irrelevant. It is as though the people who are employed through the wages councils or are looked after through the wages council were being judged incapable of managing without these bodies. This is simply not so. The wages councils today seem to me to be completely irrelevant since the communications media can provide adequate information to all who work about the right rates of pay and the right amount of work to be done. Sensible arrangements can be worked out through the much more exposed system that we now have. It therefore seems to me that the wages councils have lost their relevance, in particular to those sectors of the female working population to which I have referred.

4.23 am

Mr. Tony Baldry (Banbury)

The speech of the hon. Member for St. Helens, North (Mr. Evans) would have carried a little more conviction if the Benches behind him had not been empty. I have often thought that Labour Members here have started to work a three-day week. They never seem to be here on Mondays or Fridays, and now it seems that they are not here in the middle of the week either.

The question that we have to consider is: are wages councils to be abolished, or, if they are not abolished, as everyone from the low-paid to the Institute of Directors is unhappy about how they operate at present, how should they be reformed?

There are three questions that need to be asked and answered about wages councils. First, do they in fact protect the weak, and would their abolition remove such protection? Secondly, do wages councils inhibit the creation of new jobs? Do they, as Professor Marsland argues provide a haven we cannot afford for incompetent managers, inefficient employees and people in industry with the least capacity for innovation and enterprise? Do wages councils seek to give job security but in fact just end up leading more people to social security? Thirdly, if wages councils protect the weak but also inhibit the creation of new jobs, what is the correct balance?

Conservatives favour the view that wages are a matter for employers and employees to negotiate according to the circumstances of the industry, with the minimum outside interference. Hence the repeal of schedule 2 to the Employment Protection Act 1975 by the Employment Act 1980 and the rescinding of the Fair Wages Resolution in 1983. However, until now, minimum outside interference has none the less presumed a duty on the state to seek to protect those who, for one reason or another, are in a weak bargaining position when offering their labour.

As Winston Churchill said: But where you have … no organisation, no parity of bargaining, the good employer is undercut by the bad, and the bad employer is undercut by the worst … where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration."—[Official Report, 28 April 1909; Vol. IV, c. 388.] Of course, there have been substantial changes since Winston Churchill was at the Board of Trade. The balance of bargaining power as between employers and employees was very different then, and there was no social security system as it is understood today. Many employees in the "sweated trades" then faced the alternative of either working at extremely low rates of pay or starving. Today, that situation has completely changed. The system of social security benefits ensures a floor below which no one need fall. Indeed, today often the two main problems affecting the low-paid are either the poverty trap, whereby a pay increase may, in certain circumstances, lead to a lower standard of living as a result either of having to pay more tax or of the loss of social security benefits, or the unemployment trap, where in certain circumstances people are better off unemployed than in work. The question today is whether a better safety net than social security benefit levels is still needed for low-paid workers.

Before attempting to answer those three questions I should like to refer to a substantial misconception, which has to be cleared out of the way. It is the suggestion that wages councils and minimum pay levels are necessary to tackle poverty. There is in fact little correlation between low pay and poverty. The Royal Commission on the distribution of income and wealth — the Diamond commission — initiated research by Richard Layard, described recently by The Sunday Times as a leading Government critic, who concluded: Of workers in the bottom 10 per cent. of income relative to supplementary benefit only one fifth were in the bottom 10 per cent. of hourly earnings. The reason is that the poorest workers are men with large families, many of whom earn a reasonably high wage, while most of those on the lowest pay are married women where earnings ensure that the family are not amongst the poorest … a substantial proportion of low paid employees are not in poor households, and a substantial proportion of the poor are not low paid.

The most recent available evidence, "Low Income Families", published by the Department of Health and Social Security, shows that, taking into account the effect of state benefits, only about 1.5 per cent. of families, the head of which was in full-time work, had a family income below the supplementary benefit level, whereas 14 per cent. of families, the head of which had been unemployed for three or more months, were below supplementary benefit level. In short, poverty is a problem not so much of low pay as of no pay. For example, pensioners and single-parent families with no pay are in the group with the highest incidence of poverty.

The misconception of the need for minimum pay legislation to combat poverty is further exaggerated by the insistence of the low-pay lobby to talk of low pay as a percentage of the average. The Trades Union Congress talks of a low-pay target of two-thirds of the average male earnings, and the Council of Europe seeks a minimum "decency threshold" of 68 per cent. of average adult pay.

The Parliamentary Under-Secretary of State for Employment (Mr. Peter Bottomley)

This Council of Europe problem keeps coming up, and I am sure that my hon. Friend does not need me to remind him that the Council of Europe has adopted no such thing.

Mr. Baldry

I am grateful to my hon. Friend for that intervention.

The substantive point is that it is ridiculous to talk of low pay as a percentage of the average, because if everyone were, for example, 10 times better off, the problem would be as intractable as ever. To make low pay a percentage problem simply means that it is just a matter of trying to keep up with the Jones's and, as even the Low Pay Unit is forced to admit, a target based on the average represents an unobtainable goal".

It is also important to remember that since 1948 real pay has increased considerably. Average weekly earnings of the male manual worker have increased at about 2 per cent. per year faster than the rate of inflation, and have doubled in real terms.

Indeed, ever since the start of the recession in the first quarter of 1979 average earnings in Britain have risen faster than retail prices, and real earnings are still increasing at just over 2 per cent. per annum. Therefore, it is not helpful to see low pay as a relative problem, and it is misconceived to link low pay and poverty.

As the National Board for Prices and Incomes commented when charged with identifying pay levels which were too low to maintain a reasonable standard of living: the fixing of the minimum standard of need cannot be exact. The only yardstick which we can appropriately use is that laid down by practice by Parliament, in that Parliament has approved scales of supplementary benefit and made other provision with the result that it has de facto expressed a view as to the level of income below which families are in need. In short, the most efficient way of relieving poverty consists in targeting social security assistance where it is most needed. Minimum wage legislation will not help here.

In so far as there is any overlap between those who are poor and those on low wages, it is much more because of post-tax wages than pre-tax wages. In 1956, a married man with three children did not become liable for tax at the standard rate until he was earning nearly twice the average wage. Today, the basic rate liability of a man with three children starts at 40 per cent. of the average wage. Indeed, DHSS figures show that in almost every case means-tested benefits payable to employed people are necessary, not because of low pay, but because gross earnings have been whittled away by income tax, national insurance contributions and local authority rates. Therefore, wages councils and minimum pay levels are not necessary to tackle poverty.

Having dealt with that misconception, I return to my original three questions. First, do wages councils protect the weak? Successive Governments have abolished wages councils when it was felt that they were no longer necessary because sufficient potential existed to protect the interests of employees. Indeed, 17 have been abolished since 1960, many of them by a Labour Government.

After the abolition of the cutlery wages council in 1969, the Department of Employment commissioned research on the impact of its abolition. Research paper No. 18 of 1980, "Abolition and After — the Cutlery Wages Council", concluded: There was no significant improvement in wage determination in cutlery after abolition, no catching up with rates in voluntary collective bargaining agreements in similar industries and sufficient evidence of under-payment of female workers to suggest that the degree of protection has deteriorated. A further report on the impact of six other wages councils which were abolished concluded: The overall picture to emerge from the survey of six ex-wages councils was that low pay and inadequate system of collective bargaining had persisted … thus the most important effect of abolition was to increase the size of the unregulated sector and therefore the potential for low pay. It is also right to observe that those were all wages councils covering areas where, as a precondition of their abolition, it was thought that sufficient potential for fair collective bargaining existed to protect the interests of employees.

In dealing with wages councils one is dealing with the small firm, the average employing seven people. About half of the employees covered are part time and there is generally a low level of trade union activity. Undoubtedly, wages councils at present cover many of the lower paid in the community who can justifiably be described as weak — weak in the skills that they have to offer in the market place and weak in their bargaining power.

Wages councils can fairly be described as protecting the weak, but do they assist in the creation of new jobs? There can be no doubt that there is a clear link between pay levels and jobs. As the right hon. Member for Leeds, East (Mr. Healey) once said: the number of people who have a job will depend directly on the level of pay received by those in work."—Official Report, 6 April 1976; Vol. 909, c. 271.] Wages that are not earned by productivity can only cause greater inflation and result in the loss of jobs and fewer jobs.

There are those who argue cogently that any minimum pay legislation costs jobs. While giving full weight to such arguments, which of their nature are theoretical, and appreciating that often the marginal product of workers in industries covered at present by wages councils is low so that little added value may necessarily be created by their work, one none the less has to have full regard to the facts of how wages councils actually do impact in practice before making a judgment on whether they inhibit the creation of new jobs or help accelerate the destruction of present jobs.

Minimum rates of pay for full-time adult workers covered by wages councils range from about £45 a week for a hairdresser and shampooist to about £67 for shop assistants. Most wages councils set a minimum basic rate between £55 and £65. Is further depressing the pay of such low-paid workers a valid way to create jobs? Let there be no illusions. Even if all wages councils were abolished tomorrow, many would still be out of work. There might just be some more people in work, but they would receive very low rates of pay.

It does not appear that the activities of wages councils have led to higher earnings or rates of increases in earnings than in other sectors of the economy, or that wages council industries pay higher than average earnings. However, some organisations, such as the Association of Small Firms, argue that during the 1970s wages councils increased wages faster than inflation. It should be remembered that during the 1970s all wages rose faster than inflation. ACAS concluded in its annual report of 1981 by saying that minimum rates set by wages councils have been relatively very low and have often increased at a slower rate than pay rates in industry generally. Wages paid to male manual workers in the wages council sector are consequently lower than those paid to the same group in the economy as a whole. They were 77 per cent. of all-economy average earnings in 1982, a lower percentage than in the mid-1970s. However, it has to be recognised that generally speaking the skill content of the great majority of jobs in the wages council sector is low and that the composition of the sector has changed with the exclusion of certain high-paying industries, such as road haulage.

Further, the minimum rates of pay set by wages councils are consistently lower than those set in national agreements. The unweighted average of wages councils minima was equivalent to 43 per cent. of average earnings of all workers aged 18 years and over in April 1980, and it was 42 per cent. in April 1983.

One group for whom wages council rates have almost certainly created barriers to employment by setting too high pay rates is that of 16 and 17-year-olds. The figures show that the average minimum rate for young people under wages council cover is significantly higher relative to adult rates than the relative minimum rates under national collective agreements. Indeed, no fewer than 22 of the 26 councils pay 16-year-olds a higher proportion of the adult rate than the average proportion paid to this age group under national agreements. In some instances the youth minimum set by the councils is exceptionally high. Furthermore, this has to be set against the background that starting pay for school leavers in Britain is now averaging about 60 per cent. of adult rates, while in the rest of Europe it is averaging below 20 per cent.

Youth wages as a proportion of adult wages are higher in the United Kingdom than in any other Western country. Given the higher proportional minimum rate and the higher level of earnings relative to adults, it is reasonable to conclude that wages councils have reduced, and continue to reduce, the employment opportunities of young people. There is, therefore, a clear case for removing young people from the provisions of the councils. Such a move would certainly help price young people back into employment.

There is insufficient evidence to suggest that the abolition of wages councils would lead to the creation of a sufficiently larger number of new jobs so as to make acceptable the loss of the protection that they offer to those who are in a weak bargaining position with low pay—

Mr. Peter Thurnham (Bolton, North-East)

Will my hon. Friend give way?

Mr. Baldry

I am aware that a number of my hon. Friends wish to participate in the debate, including my hon. Friend the Member for Darlington (Mr. Fallon), so I shall not give way.

The Select Committee on Employment has received direct evidence from two bodies urging the complete abolition of wages councils. The Institute of Directors had 120 replies to a survey on wages councils that was sent out to its members. All the replies came from those who had had direct experience of wages councils, of whom 54 per cent. said that they would employ more people if they did not have to follow wages council directions. As the institute fairly observes.

it is not possible to draw detailed conclusions from a limited survey of this type. It is interesting to note, however, that the principal concern of those members of the institute who responded to the survey was not wages rates but the plethora of other terms and conditions which wages councils are presently able to set.

The Association of Small Firms had 206 replies to a similar survey, 66 per cent. saying that minimum wage legislation encouraged them to reduce the number of employees. Again, however, it was not a large survey and there was no evidence of how many of the respondents actually had reduced the number of employees because of wages councils or would actually employ more people if they were abolished, and at what rates of pay.

In short, even from those bodies calling directly for all wages councils to be abolished there is little hard statistical evidence to support the suggestion that, with the exception of young people, the rates of pay set by wages councils have of themselves resulted in the loss of jobs or that there abolition would of itself result in many more adults being in employment.

Mr. Fallon

Will my hon. Friend give way?

Mr. Baldry

No, I have already been told that I am taking too long and I am conscious that there are some strong abolitionists around me waiting to speak.

Against such evidence as there is, we have to balance the fact that wages councils have had a role in preventing the competitive undercutting of labour and that a number of companies, particularly smaller ones, have benefited from multi-employer bargaining.

Furthermore, industrial relations have generally been good in those areas of employment covered by wages councils. To abolish wages councils completely would inevitably mean a considerable growth of trade union activity and a possible consequent deterioration in industrial relations. Moreover, if total abolition of wages councils led to continuous allegations of low-paid workers apparently suffering because of the absence of any minimum pay legislation it might be an excuse for a future Labour Government to introduce a national minimum wage. That would be economically disastrous, as such a move would be bound to inflate wage costs even further throughout the economy, leading to bankruptcy of businesses and loss of jobs.

It should also not be ignored that the overwhelming consensus of both the CBI and the Association of British Chambers of Commerce, who between them represent a substantial proportion of British employers — not just large firms but many smaller businesses as well—is for radical reform rather than outright abolition.

Mr. Fallon

Did the CBI not testify in evidence to the Select Committee that if it could not achieve radical reform of the wages councils it would prefer complete abolition?

Mr. Baldry

If my hon. Friend were less keen to intervene and actually listened to what I was saying, he would realise that my argument was directed entirely to radical reform of the present position.

In the absence of any substantive evidence that the abolition of wages councils would lead, in practice, to the creation of a significant number of new adult jobs, one has to ask what real benefit can be obtained by abolition which cannot equally be achieved by reform of wages councils. Wages councils should be reformed, not abolished, so that they can set only a single adult rate and a related rate for those aged 18 to 21 and not any other terms or conditions such as those at present covering hours of work, holidays, overtime rates, and so on.

The Department of Employment consultative paper correctly sets out a number of problems faced by employers in coping with the wages council orders and my hon. Friend the Member for Darlington has illustrated the situation graphically by reference to the fur trade. The consultative paper states: All these burdens can inhibit the growth of small businesses in the wages council trades and thus damage employment.

Substantially simplifying the wages councils system by removing the council's ability to set detailed statutory terms and conditions would also greatly assist compliance with wages council orders. The director of personnel for John Lewis has commented: In their present form wages council orders are self defeating.

Such overall reform should also be accompanied by a full review of each and every wages council, with a view to seeing whether some councils might be merged—and, indeed, where appropriate, whether individual councils should be abolished, using the criteria adopted by successive Governments, Labour as well as Conservative, in recent years.

The question that I put to my hon. Friends is simply this. Is there any real benefit to be derived from abolition which cannot be obtained by reforms such as these? I submit that wages councils should be reformed and not abolished. Young people should be taken out of the control of wages councils. Wages councils should be able to set only a single minimum adult rate and a related rate for those aged between 18 and 21, and such reforms should be accompanied by a full review of each and every wages council.

4.44 am

Mr. Robert B. Jones (Hertfordshire, West)

We all ought to be grateful to my hon. Friend the Member for Southampton, Itchen (Mr. Chope) for raising this subject because of its happy timing in view of my right hon. Friend the Chancellor's Budget and because it marks an achievement of the National Federation of Self-Employed and Small Businesses. It started campaigning on this issue in 1981 with its admirable publication "Priced Out", which has been updated in "Still Priced Out". The title is appropriate as, from 1981 to 1985, yet more youngsters have been deprived of jobs because of the existence of wages councils.

We are in a climate of high unemployment, especially among young people, but that fact should not distract our attention from the plight of other groups whose employment is also affected by wages councils. I refer to the disabled, ethnic minorities and the educationally subnormal, all of whom suffer greater than average unemployment because, when wages councils set a minimum rate, it is all too easy for an employer to get someone who suits him, reflects his prejudices or has the highest possible educational qualifications. He might well take on a different type of person if the pay rates were lower.

There is also a growing awareness that the balance between capital and labour has been out of kilter for some time. That led to a change in the basis of capital allowances in the Budget before last. It was recognised that they often led to the unloading of labour precisely where unemployment was highest. With wages councils, there is too much encouragement to employers to bring in automation rather than to employ youngsters or the groups I have mentioned.

The wages bill as a whole affects unemployment. My right hon. Friend the Chancellor said that every 1 per cent. extra in wage settlements costs approximately 200,000 jobs. I need only to compare the United States, where unit labour costs have risen by about 36 per cent. in the past five years, Japan, where they have risen by 31 per cent. and West Germany, where they have risen by 64 per cent., with the United Kingdom's whacking 104 per cent. for people to realise the close link between our unemployment and the pattern of wage increases.

In his extremely long and detailed speech, my hon. Friend the Member for Banbury (Mr. Baldry) referred to pay rises and said that the pattern of the past decade is that they have increased faster than prices. He was right to observe that that was true of the economy as a whole, but the creation of large-scale unemployment is merely an example of wages councils writ large. The increase in wages in the wages council sector has been especially large among young employees. That has led me to the conclusion that they should not be covered by wages councils. The hon. Member for St. Helens, North (Mr. Evans) referred to the lack of evidence in the speech of my hon. Friend the Member for Itchen. I hope to rectify that. In 1984, H. Neuberger, in a publication of the Low Pay Unit, related the abolition of wages councils to the creation of 8,000 jobs. Therefore, even someone from that sector was prepared to admit that there was a relationship between the number of employees and the level of wages imposed by councils.

To be fair to Mr. or perhaps Mrs. Neuburger—

Mr. Evans

Mr. Neuburger.

Mr. Jones

Mr. Neuburger would have argued that wages councils were worth it for the standard of living enjoyed by workers covered by them, but he nevertheless accepted that 8,000 more jobs would exist if wages councils did not. Robert Meyer and David Wise, in a learned article in Econometrica, showed that 7 per cent. more people would be employed if wages councils did not exist in the sectors covered.

Mr. Evans

The hon. Gentleman will accept that Henry Neuburger said: According to our simulation of the Treasury model, the abolition of Wages Councils would result after five years in the creation of just 8,000 jobs—the rise in unemployment in June—one of the best months this year.

Mr. Jones

I am not disputing whether the figure should be small or large. I am pointing out that even on all of Mr. Neuburger's assumptions, which would not be mine, he recognised that extra jobs would be created. We can go on to talk about whether his assumptions are right and whether more jobs would be created, but he accepts that 8,000 more jobs would be created over that period.

Lasyard, in his "Youth Labour Market Problem", published in Chicago, said that a 1 per cent. increase in wages would have destroyed 15,000 jobs. Although the hon. Member for St. Helens, North does not like anecdotal evidence, I shall cite an example from my constituency of the relationship between youth unemployment and the existence of wages councils. A mother told me that she had approached a local hairdresser to ask whether he would train her daughter, and offered to pay him to look after the daughter while she was not contributing economically to the well-being of the business.

Mr. Evans

That would be a novel solution to unemployment. People will pay to work.

Mr. Jones

If the mother was willing, I see no objection to her offer being accepted, but sadly, because of the existence of wages councils it is against the law.

My final comments relate to a more technical matter—the existence of the independent members on wages councils. That has led to a general impression that wages councils are biased against employers. I would not necessarily go so far as to say that, but independent members are far from familiar with the workings of the industries that they hope to influence. They serve on a wide range of wages councils, for example, Sir John Wardie, who is a barrister—I mean no disrespect to my hon. Friend the Member for Itchen in saying that — serves on councils which deal with everything from hairdressing to cafes. No doubt he has built up expertise in those subjects, but I wonder whether he is familiar with the detailed workings of those varied industries.

Mrs. P. Fea, who is a former teacher—an excellent qualification for something like this — is on wages councils for button manufacturing and unlicensed places of refreshment. The notorious Sir John Wood, who still serves on many councils, including licensed residential establishments and licensed restaurants, and the boot and shoe wages councils, — I hope that the Minister will notice that broad range — chaired the road haulage wages council and, by some coincidence, chaired the commission of inquiry into the future of the road haulage wages council. That fact did not come to light until my hon. Friend the Member for Gedling (Sir P. Holland) pointed it out in his excellent work together with my hon. Friend the Member for Darlington (Mr. Fallon) on quangoes. Curiously, that issue was resolved, and Sir John departed. There are far too many academics. Of the 70 independent members of wages counsil in December, no fewer than 38 were academics — lecturers, professors, university administrators, or people who had retired from those professions. The Government must reconsider the existence of independent members.

Wages councils are extremely rigid. They do not differentiate between the prevailing economic costs and wage rates in different parts of the country. How can it be right to pay people the same wage in the same industry in an area with low costs, such as the east midlands and Yorkshire, and in an area such as mine, which has extremely high costs? That is a weakness of the wages councils system, and of national wage bargaining generally.

My hon. Friend the Member for Banbury mentioned the working conditions that are set by the councils. They can set holiday requirements, the number of hours that people may work, and sick leave. It is possible that a wages council could set a low minimum wage per hour and an employer could pay three or four times that wage; but if he asks an employee to work more than the set hours, he could be in breach of the law. That becomes especially stupid when, at the request of the employee concerned, the employer has allowed him to work on a Saturday or Sunday, when he is entitled to considerably enhanced wages. That may not be the wish of the employer; he may do it out of courtesy and kindness to the employee.

In conclusion, either wages councils increase wages to above the rate at which we would start to reduce unemployment—whatever that level may be—or they have no effect on wages at all, in which case they are useless and we should not spend £4 million a year on the edifice that creates them. In either case, the time has come for them to be abolished. I hope that sufficient attention has been paid during the debate to the unemployment that wages councils create to persuade my hon. Friend the Under-Secretary of State to recommend their abolition to the Government.

4.57 am

Mr. Eddie Loyden (Liverpool, Garston)

I am not surprised by the contributions that we have heard tonight from Conservative Members, because it is the Government's clear intention to deregulate almost everything in sight. As a long-standing trade unionist, I must say that trade unions have had differing opinions about wages councils. At the time of full employment, many of us argued about the restrictions placed on some sections of workers by the wages councils. But now the Government are intent on deregulation, which is aimed at the most vulnerable sections of society — at the categories of workers who are protected by the wages councils. There is some difference of opinion about the direction in which the Government are moving. My view is that the Government do not intend to abolish the wages councils but that they will so draw their teeth that they will become ineffective.

There may be a valid criticism of the trade union movement for not drawing those areas which are now covered by wages councils into collective bargaining. That is a historical fact. Certain industries were difficult to organise because of their nature and have a history of low wages, poor conditions and part-time work.

I was somewhat amazed by the contribution of the hon. Member for Mitcham and Morden (Mrs. Rumbold), who raised the issue of women in employment. What she said was contrary to the reality of women in factory work, many of whom are under the protection of the Wages Councils. As the hon. Lady will know, many of the people employed in such work are female and on part-time employment. The exploitation of those people is greater than in industries where women are organised and capable of asserting their position as women in the industry, and can argue for parity with their male counterparts.

The Government's intention has been shown by Tory Back Benchers. It is about the philosophy of cutting the living standards of ordinary working people to maximise the profits of those who employ them. We should not lose sight of the fact that that is the Government's intention. Facts and figures about the value of the Wages Councils can be argued, but below the surface the argument comes through from the Tory party that it is in the process of whipping back all the rights that have been established by workers.

My hon. Friend the Member for St. Helens, North (Mr. Evans) made a good case showing that the Conservative party's greatest leader was of the opinion that there should be protection for those who worked in industry but, for whatever reason, had not joined trade unions and therefore had not become part of the collective wages bargaining system, but should still be protected.

The Tory party is saying that that protection, little and inadequate though it be, should be removed. It is arguing that that will create more jobs, but in reality that argument is nonsense. Today, 45 young people from Merseyside came down to the House of Commons to meet the Prime Minister. Anybody who heard what they said after that meeting would have no illusions about the attitude of the Government to the job seeking generation, and the chance of the young ever having jobs.

Since 1979, the Government have set their course clearly in one direction. In the economic crisis which we, and the rest of the world, have been in, they argue that it has been necessary for the Government to take a radical Right-wing line to attempt — I underline that word attempt—to stabilise our economy. Their line is that they should challenge all the things that have been achieved by negotiation and trade union activity, and, in particular what has happened since the war, when the working class has been able to gain some more of the wealth that they create and increase their living standard.

This Government have adopted a radical, Right-wing line. They are prepared to reduce the negotiating powers of the trade unions and to abolish regulations that have provided some measure of protection for the real creators of wealth. I was surprised to hear the Prime Minister refer during the weekend to the wealth creators. Those who create wealth do not sit in City boardrooms. They are to be found in the coalfields, docks, factories and commerce. By hand or by brain they are the creators of wealth and it is right that their living standards should be protected by means of wages councils. They were established to protect the weakest workers in industry and commerce and prevent their exploitation.

I am surprised that Conservative Members do not recognise that the wages councils have been able to stabilise the very low demands regarding pay and conditions of this part of the industrial sector. Instead, the Government are seeking to abolish the wages councils and are attempting to remove all protection relating to pay and conditions. Therefore, the Labour party is quite right to stand up and object strongly to the attempts that are being made by the most reactionary section of the Conservative party. They say that now that the trade union movement has been weakened the process ought to be taken one stage further by attacking the very inadequate provision that is made for such workers by the wages councils.

Conservative Members have made it clear in this debate that they believe that the only way to achieve the maximisation of profits, which they say is the essential ingredient for creating a prosperous economy and full employment, is to adopt this course. Nothing that the wages councils abolition can offer will increase the employment opportunities of those who live in the north-west and other industrial areas. The Government completely fail to recognise that those who are seeking work today are completely different from those who sought work in the 1920s and 1930s. They have a higher level of aspiration and objectiveness. Our society is not providing the right kind of work for them. They are becoming increasingly alienated against society. Society cannot now offer young people work when they want and need it. Many young people in my area leave school at 18 or 19, marry and start a family without ever having had a job. 'That is a condemnation of our society and it will cause major problems.

Government Members look for ways to maximise profit and say that the revival of British industry depends upon small businesses which employ only a few people. They are trying to recycle the capitalist system.

I have no doubt that if we rely on small businesses we shall have to wait for at least three decades before we begin to solve the unemployment problem. I do not think that Government Members really believe that the abolition of wages councils will create employment. However, abolition will allow the hyperexploitation of young people who are already working and of female employees. The maximisation of profit can be gained only at the expense of cutting the already abysmal wages offered under the wages councils' protection.

I am not surprised at the Government's approach. In some senses we should welcome it. Some workers who have not so far been organised by trade unions have had to seek help elsewhere. Because of changes in the pattern of industry, unemployment, and changes in technology, people have had to turn elsewhere. If the wages councils were abolished, we might welcome the opportunity to move into other areas. The trade union movement is already aware of the opportunities.

If the limited protection of the wages councils is removed, workers will seek protection from the trade union movement. We would welcome that. That will be an inevitable consequence of the abolition of the wages councils. The argument might seem contradictory, but I have never had a full regard for wages councils. However, they protect workers in some industries who are not able, or who do not want, to belong to a trade union. Wages councils have provided some minimum protection so that workers are able to achieve a certain standard of living.

The Government might decide to draw the teeth of the wages councils rather than to abolish them. They might retain the structure but remove the effectiveness. That might be of benefit to the multitude of people who at present rely upon the protection of the wages councils. It will be a new recruitment field for the trade union movement which I would welcome. In those circumstances, in spite of the fact that the Government are in the process of attempting to weaken the basis of trade union collective bargaining, there will be a short-term advantage for the Government, and in the longer term the trade unions will be able to establish new areas of recruitment which will bring people who hitherto have not been organised under the protection of the trade union movement so that they can advance their living standards and wages and conditions.

The Labour party, in my view, is right to argue that there is no logical reason why those people who are at least minimally protected by the wages councils should be deprived of that protection. The proposed removal of wages councils can be seen only as a blatant political attempt by the Government to weaken the power of working people by denying them this protection.

The retention of wages councils should be viewed in two ways. First, we see a need for the retention of wages councils to protect those who are most vulnerable from exploitation by certain categories of employer. Secondly, they open up the possibility of a wider recruitment of people into the trade union movement, and will reassert the position of working people.

I believe that in abolishing the wages councils the Government are going in the wrong direction. I hope that at the end of the day sense will prevail and that there will be no drawing of the teeth, particularly with regard to the inspectors. As has been said by my hon. Friend the Member for St. Helens, North, the number of cases in which inspectors have found employers paying below the level demanded by statute is an indication of their value.

A Government who go in the direction of abolishing wages councils will be exposed outside the House as a Government who do not care for those who work in industry because working people would be deprived of the protection that trade union organised industries have. They will be seen as a Government who are not concerned about people or about employment.

5.20 am

Mr. Michael Brown (Brigg and Cleethorpes)

The hon. Member for Liverpool, Garston (Mr. Loyden) spoke at considerable length, hoping, no doubt, to make up for the lack of troops on the Labour Benches. This debate is important and, in essence, has been conducted by Conservative Members. Opposition Members, who made such a fuss about the issue when the Chancellor presented the Budget, have opted out of the debate, both in the Chamber and in the nation.

It is clear that the main debate on the subject will be conducted by my hon. Friends. My hon. Friend the Member for Banbury (Mr. Baldry) dealt with the issue in a restrained and considered way, as did my hon. Friend the Member for Hertfordshire, West (Mr. Jones), who called for total abolition. The Green Paper reflects the Government's misgivings about the way in which wages councils have contributed to unemployment in recent years. It is an excellent document which contains a number of alternatives. Indeed, the Green Paper provides the answers to those who argue for abolition or reform, for it contains two paragraphs devoted to abolition and four devoted to the need for radical reform.

Mr. Peter Bottomley

My hon. Friend will appreciate that it was possible to put the abolition proposal in one paragraph — indeed, it could have been put in one sentence—whereas with reform it takes more words to describe some of the problems.

Mr. Brown

My hon. Friend makes a valid point, and I was about to congratulate him and his colleagues who prepared the Green Paper, because, as I say, it answers the questions that hon. Members have asked. For example, my hon. Friend the Member for Banbury wondered whether it should be abolition or radical reform. Paragraph 20 says: Reforms of the kind outlined in paragraph 16–19 would remove many of the detailed inflexibilities of the system and greatly reduce the bureaucratic burdens on employers, and above all help to promote job opportunities particularly for young people. That proposition was supported by my hon. Friend. The paragraph goes on: But compared with the abolition option they are unlikely to have as much effect on the overall level of employment and risk maintaining artifically high rates of pay for adults, damaging to employment. Thus, the Green Paper answers the debate. If the option of radical reform is chosen by the Minister, then, according to that document, it would be unlikely to have as much effect on the overall level of employment and risk maintaining artifically high rates of pay for adults, damaging to employment. That is the importance of what we are seeking to do. The Government are seeking to address themselves seriously to the problem of unemployment. They have recognised the contribution which wages councils have made to unemployment.

Mr. Loyden

rose—

Mr. Brown

The hon. Gentleman had a long innings. If he had not spoken for so long I might have given way, but I will not give way because I know that other hon. Members wish to speak.

The main purpose of the debate is to consider the two alternatives put forward in the Green Paper. The answer is in the Green Paper itself. If we are determined to do something about the level of unemployment and if we recognise that wages councils have contributed to unemployment, then by going down the route of radical reform we will not address the central question in the Green Paper.

I want to draw the attention of the House to what was said last year by my hon. Friend the Paymaster General, who was then the Minister of State at the Department of Employment. I seem to have an incredible ability to quote things said by my hon. Friend. Last time he was not happy about something he had said which I placed on the record. I think he will be more relaxed when I draw to public attention something which he put on the record last year in his capacity as Minister of State. In reply to the right hon. and learned Member for Monklands, East (Mr. Smith), he said in regard to wages councils: if the operation of such councils leads … to fewer jobs and less opportunities, it would be quite wrong for any Government concerned about unemployment not to consider carefully the way in which those wages councils work."—[Official Report, 15 February 1984; Vol. 54, c. 285.]

He and his successors have honoured that commitment. The Government have recognised that wages councils lead to fewer jobs and opportunities. Even on the bleakest analysis by the Low Pay Unit, it acknowledges that more jobs will result from the abolition of wages councils. I take the point of the Low Pay Unit that over a five-year period it will be only 8,000 jobs and that the number of unemployed is 3½ million. The Low Pay Unit recognised that against a backcloth of 3½ million unemployed the likely effect of abolishing wages councils would be more and not fewer jobs. Even if it was only one single job that would be created as a result of the abolition of wages councils I would say that it was worth doing.

Mr. Evans

rose—

Mr. Brown

I am quoting the Low Pay Unit. The hon. Gentleman has got from the Library the research brief which he quoted. I have it here too. I will give way briefly.

Mr. Evans

Will the hon. Gentleman give the rest of the quote from Mr. Neuburger? After his reference to 8,000 jobs he said: Moreover, because the Treasury model tends to overstate the effects of changes in wages on employment levels, the number of extra jobs likely to be created by abolishing the wages councils is probably less than half the number estimated by the market. That was over five years. Now we have over 4 million unemployed.

Mr. Brown

I am not in any way seeking to suggest that the Low Pay Unit wants the wages councils to be abolished. The Low Pay Unit is defending the status quo and, in doing so, it must acknowledge in the final sentence that more jobs—the hon. Member for St. Helens, North (Mr. Evans) has suggested 4,000 more—will be created because of the abolition of the wages councils.

Let us leave on one side that rather biased and prejudiced analysis, which still acknowledges that there will be more rather than fewer jobs without the abolition of the wages councils, and discuss the analysis by the research institute of the university of Chicago. The analysis suggested that a 1 per cent. wage increase levied by wages councils in this country would adversely affect the employment of 15,000 young people.

Although the hon. Member for St. Helens, North may not suggest that the abolition of wages councils will create jobs, their existence certainly loses jobs. That fact cannot be denied. Even if we examine the terms of reference of the hon. Gentleman's argument—looking at the impact of the wages councils on the negative side, rather than considering, as Conservative Members are doing, the positive side of their abolition — we find that wages councils have a negative impact on jobs and, indeed, lose jobs. No hon. Member would deny the impact of job losses that have occurred because of wages councils' wage increases.

Mr. Evans

Nonsense.

Mr. Brown

It is not nonsense. The former Secretary of State for Employment, Mr. Albert Booth, who had responsibility for defending the expansion of the wages councils following the Employment Protection Act 1975, had some embarrassing moments during the late 1970s as a result of the existence of the wages councils. A number of Opposition Members will recall those days.

Mr. Evans

Put the evidence.

Mr. Brown

There is no doubt that the abolition of the wages councils will create more jobs. By whatever test one cares to apply and however bleak the analysis, the fact is that more jobs will be created.

The Green Paper acknowledges that radical reform will not lead to as many jobs being created as would be created with total abolition. I hope my hon. Friend the Under-Secretary of State will have regard to the paragraph in the Green Paper to which I referred when the Government make their final decision.

5.32 am

Mr. Peter Thurnham (Bolton, North-East)

I congratulate my hon. Friend the Member for Southampton, Itchen (Mr. Chope) on gaining this debate. If we are to have wages councils, I wish that my hon. Friend could get them to fix more sensible hours for beginning and finishing the debate.

When I look at the attendance in the Chamber, it is obvious who is concerned about unemployment. The Opposition are concerned only with their union membership and protecting their union rates. Government Members are concerned with unemployment. The hon. Member for St. Helens, North (Mr. Evans) wanted to see the evidence. I should have said that the evidence of 3 million unemployed after 75 years of wages councils was sufficient evidence for anyone.

We are debating more than the economics of workers pricing themselves out of jobs. We are debating something greater—our compassion for those on the lowest wages on the ladder of earnings and for those who are not yet on the ladder, who are without a job. We have compassion for the dignity of man.

I originally felt that wages councils were no more and no less than a great restrictive practice, a giant conspiracy between employers and the employed against the unemployed. That is the evidence for the hon. Member for St. Helens, North.

Our concern is greater than that. It is for all those whose lot is the lowest. How do we improve their lot? Is the best way to increase their low earnings by taking away the bottom rung of the ladder, or is it better for them to earn more by learning how to climb the ladder of earnings from the bottom rung?

Conditions were very different when Charles Kingsley wrote "Cheap Clothes and Nasty" and when the House first started deliberating legislation for minimum wages. Today's world is one in which average earnings are far greater than they ever were in the past, in which job mobility carries people up the ladder of earnings and in which the welfare state has taken over the social need for a minimum income; a world in which this country is no longer the richest, with a dominant share of world trade, in which industry could be given the task of carrying the social can. Today we have lost our premier position. We no longer have the largest financial reserves in the world. Our share of world trade has dwindled. We have squeezed the lemon and there is no juice left.

If Charles Kingsley were alive today he would not be worrying about the return of Victorian sweatshops; he would not want to be writing "Cheap Clothes and Nasty" today; he would be worrying about why the bottom rung of the ladder has been taken away, so that those who want to work cannot find jobs. Today he would be writing about "Closed Shops and the Nash"—as national assistance is known to those who have to live on it, people who cannot get a job because the bottom rung has been taken away, in a world in which unions thought that they could dictate the terms.

I believe that the dignity of man requires that every man has a rung on the ladder of opportunity so that however low he starts—and I started work at £4 5s. a week—he can look up to the next step and the step above that.

By setting minimum wage levels, wages councils have taken away the bottom rung. By artificially lifting some people up they have taken away the incentive for them to climb by their own efforts. They have taken away the first rung for those without a job.

By doing away with wages councils we are not going back to the sweatshops of Charles Kingsley's days but are going to the wealthshops of our competitors today. Germany and Japan recovered after the war by running their countries like one big sweatshop, and now they have a higher standard of living than we do. The most telling example of all is Hong Kong—the world's archetypal sweatshop; the place where, if someone does not work, he starves. Hong Kong now has a higher average income per head than we do.

If we want to increase our standard of living faster than our competitors, we are going to have to work, not in Government-created jobs, not in infrastructure schemes, but in jobs which will win back our share of world markets. There is plenty of demand in world markets; the problem is our ability to compete.

If sweatshops are synonymous with wealthshops, I am all in favour of this country becoming a wealthshop where by the sweat of our brow we can once again become the workshop of the world; where our compassion for the dignity of man allows every one of our fellow citizens to climb the ladder of earnings and where no one in government wants to take away the most vital of all rungs of the ladder, the first rung.

5.38 am

Mr. Michael Forsyth (Stirling)

I am grateful for the opportunity to participate in this debate, and I join in congratulating my hon. Friend the Member for Southampton, Itchen (Mr. Chope) on the timeliness of the subject he has chosen.

It seems to me that the arguments are absolutely clear. The wages councils are an anachronism. They have failed in their purpose. They have been defended with fairly colourful rhetoric by the hon. Member for St. Helens, North (Mr. Evans) and the hon. Member for Liverpool, Garston (Mr. Loyden), who seem to be the entire representation that the Labour party has been able to muster on this important matter. It has been the rhetoric of sweated labour and exploitation that we have heard, and precious little else. But the reality is that of protecting the interests of Britain's poorest paid. The reality is that these wages councils have destroyed jobs for young people and have rewarded the semi-skilled at the expense of the unskilled, the ethnic minorities and the most vulnerable section of the work force.

I do not want to go, into all the absurdities in the make-up of the wages councils; there is not time for that. But progress has been made and I am delighted to see that we have got rid of the hair, bass and fibre trade wages council and that the wholesale mantle and costume manufacturers wages council has gone. I see that we still have the ostrich, fancy feather and artificial flower wages council and apparently it is necessary to have a wages council for the 200 people who are employed in making coffins.

However, despite the fact that the members of those wages councils are appointed by Government and that they and the inspectorate to enforce them are financed by the taxpayers, they are apparently independent. They can and do impose wage levels that they think right, and the efforts of the present Government and of their predecessors to restrain pay levels have at times been freely ignored. Ignored, too, have been the interests of the small business man and smaller employers. Wages awards are written in complicated and quite incomprehensible language, leading to frequent mistakes.

While Opposition Members have tried to argue that the success of wages councils lies in the inspectors having identified cases of underpayment, all too often the fault lies in the misreading of difficult and detailed documents by overworked bosses rather than any deliberate or malicious attempt to hold down wages. Indeed, in some cases, inspectors have treated as underpayment private arrangements made to suit an employee's special needs. If the hon. Member for St. Helens, North says that there is no evidence, I can only imagine that he has not bothered to read the welter of particular cases produced by the National Federation of Self-Employed and Small Businesses, and other bodies.

One case that struck a chord with me was that of a small business—a restaurant owner who had decided to close his restaurant. The manageress said that she would take a pay cut if he would keep it going for another year, which he agreed to do. Shortly afterwards, the inspector arrived, and subsequently fined him for failing to pay the laid-down rate. The low-paid were protected and looked after because the restaurant closed down and the manageress lost her job.

Mr. Evans

Name the restaurant.

Mr. Forsyth

The hon. Gentleman proves my point. He has not bothered to read the material from the National Federation of Self-Employed and Small Businesses. If he would like to borrow mine, he can read it for what remains of the debate. He makes a cheap point by trying to get me to name the individuals concerned, and he can find the case for himself.

It is significant that the arrears that are paid following visits by inspectors are generally small, covering relatively few workers, and lead to only a handful of prosecutions. At £4 million a year, it costs substantially more to operate the system than the £2 million or so that it recovers for underpaid workers.

Further criticisms that need to be made concern the attitudes — my hon. Friend the Member for Hertfordshire, West (Mr. Jones) made this point vividly —of the so-called independent members of the councils. They are usually academics, they seem to have little understanding of the real world in which businesses have to operate, and they have insufficient sympathy with the problems of making an enterprise pay. There is a tendency to appoint the same people to the councils, as with all quangos, and the number of individuals sitting on more than one is staggering.

However, it is the effect of wages councils on pay and employment that is the fundamental criticism. Research carried out in 1979–80 for the Department of Employment suggests that the wages councils have had little effect on levels of pay, employment or trade union membership. Other evidence suggests that in some areas, particularly in the employment of young people, wages have been raised above market levels, leading to a loss of jobs.

I do not understand the argument of my hon. Friend the Member for Banbury (Mr. Baldry). If it is true that raising wage costs in a business will result in fewer young people being employed, why.is it not also true of older people? Why is it not true of people who represent particular groups in society who find it difficult to find employment? The logic of his position seems unsustainable. I cannot help thinking that in trying to justify a pragmatic solution, he has got himself into difficulties.

In 1945 wages councils set youth pay at 30 per cent. of adult levels. Today it is 62 per cent., despite several studies that have concluded that that increase in young people's pay leads to disproportionate increases in youth unemployment. In April 1970 only 12 per cent. of those aged 18 were receiving adult rates of pay, but by April 1980 the figure had risen to 53 per cent.

Low pay is not something that should be denigrated in itself—it is often a road to high pay. The patronising attitude of the Opposition to those with low pay must be heard to be believed. They want to see a pool of people who are permanently low paid being looked after by some regulatory body, whereas we want an opportunity for people to be brought into employment, to be given the opportunity to learn new skills and to be able to advance their role within the labour market — a constantly changing group of people who are taking jobs at low levels of pay rather than a permanent group who remain at that level and are looked after by some apparatus of the state.

Even the TUC has admitted that there must be some truth in the proposition that, all other things being equal, an individual employer will tend to employ more people if wages are lower and fewer people if wages are higher. In addition, every extra complication that is imposed on small businesses reduces their willingness to take on permanent employees. Not only are the regulations complicated and the attention of the inspectors a further time-consuming nuisance, but the awards themselves are often backdated, which makes financial control and discipline extremely difficult.

In fairness, it was suggested that wages councils had a role to play in preventing unfair competition. It is competition that actually creates jobs and wealth. Unfair competition and the role that wages councils play in that means keeping inefficient managers in their jobs; keeping down the flexibility and the innovation in firms and preventing businesses from being able to win new markets and create further employment.

I believe that wages councils have survived because of what people believe they do rather than because of any objective assessment of their benefits. They may have been an understandable response to the sweat workshops of the 19th century; they may have made some sense in a society with poor communications which left workers unaware of wage levels elsewhere, let alone able to move to better locations; but in today's world they are an unnecessary nuisance. At best they do little more than reflect the market and at worst they distort it to the detriment of the weakest members of society, creating unemployment where none need exist.

One thing is certain: wages councils have failed utterly in their task of eliminating low pay. The Low Pay Unit recently produced figures that show that 100 years ago 10 per cent. of the British work force earned only 68.6 per cent. of the then average wage—today the bottom tenth earn only 68.3 per cent.

If we are to rid ourselves of these relics of an Edwardian era, we must give the International Labour Organisation a year's notice of our intentions. The case for abolishing wages councils is clear and has been repeated over the years. This Government have in the past prided themselves on taking decisions that were unpopular because they believed that they were right. The time is fast approaching —I hope that tonight's debate will have helped—when the same courageous stand will need to be taken over wages councils.

5.50 am

Mr. Neil Hamilton (Tatton)

It is all too often that debates take place in which all the arguments are deployed by Conservative Members and we hear nothing from Opposition Members. The hon. Member for Liverpool, Garston (Mr. Loyden), realising the inadequacy of his argument, took refuge in incoherence. It was an occasion when one had the greatest sympathy for those who compile the Official Report. They have the unenviable task of trying to make head or tail of such speeches.

There can be no greater contrast between the speeches in this debate than that of the hon. Member for Garston and that of my hon. Friend the Member for Banbury (Mr. Baldry). We look forward to reading the latter in Hansard the day after tomorrow. I am sure that we shall find the contents of my hon. Friend's speech rather more digestible in print than it is possible to find them in a debate of this sort.

I share the astonishment of my hon. Friend the Member for Stirling (Mr. Forsyth) about one part of the argument of my hon. Friend the Member for Banbury, which I believe I understand correctly. If the fixing of a minimum wage creates youth unemployment, why does that not have the same result for adults? I suppose that part of the reason for this is that youth wages are fixed at a higher than market clearing level than the level for adults. There is a differential between the two, but in principle there is the same fixing of minimum wages. Unemployment, albeit to a greater or lesser proportion or extent, is nevertheless created. If we are against unemployment, as all my right hon. and hon. Friends are, the logic of my hon. Friend's argument is that wages councils should be abolished and not merely radically reformed.

Mr. Peter Bottomley

Will my hon. Friend give way?

Mr. Hamilton

Yes, but there is not much time remaining to us.

Mr. Bottomley

I shall take the duration of my intervention from my time to reply to the debate. It seems that my hon. Friends the Members for Tatton (Mr. Hamilton) and for Stirling (Mr. Forsyth) have confused themselves over proportionality. If the relationship of youth pay to adult pay has moved from 30 per cent. to 60 per cent., it might be halved. My hon. Friends have not suggested that the adult minimum rate should be halved.

Mr. Hamilton

These relationships are not necessarily absolutely proportional. I have no idea of the elasticities that are involved. Surely the principle is the same if wages are fixed above market clearing levels, whether for youth employment or adult employment. Logic suggests abolition and not merely reform.

Mr. Robert B. Jones

My hon. Friend the Under-Secretary of State seemed to be asking my hon. Friend the Member for Tatton (Mr. Hamilton) to quantify the relationship between youth wages and adult wages in the wages council area and outside. In wages council industries, youngsters earn 66 per cent. of the adult wage whereas in the non-wages council sector they earn only 53 per cent. That is the gap that we are discussing.

Mr. Hamilton

I am grateful to my hon. Friend for that information. The labour market is like any other market and it responds to the price mechanism. If the price of labour is fixed at an artificially high level, the demand for it will fall. That is something that Keynes well understood. In the "General Theory of Employment Interest and Money" he stated: With a given organisation, equipment and technique, real wages and the volume of output (and hence of employment) are uniquely correlated so that, in general, any increase in employment can only occur to the accompaniment of a decline in the rate of real wages. Thus I am not disputing this vital fact which the classical economists have (rightly) asserted as indefeasible. All the so-called Keynesian guff that we hear about expanding the economy and investing in infrastructure as a means of reducing unemployment seems to miss the fundamental reality that the main cause of unemployment is micro-economic and nothing to do with the failure of demand. The situation is different from that which prevailed in the 1930s when unemployment was a monetary phenomenon. If we are to make inroads into unemployment, we must concentrate on the micro-economic causes, one of which is the existence of wages councils.

The effect of the activities of the wages councils has been to discriminate against those who are the least skilled and the least productive in society. Their effect has been to institutionalise the benefits to those who are employed at the expense of those who are unemployed. That is fundamentally unacceptable and, indeed, immoral. That is why we should opt for the abolition of the wages councils and not for fundamental reform.

Wages councils have effects upon employment because they affect wages and influence a host of other matters as well. In particular, they have substantially increased youth unemployment because the qualifying age for the adult rate has been reduced as a result of wages council activity over the years. The evidence for that is clearly set out in the booklet from the National Federation of Self-Employed and Small Businesses, to which reference has been made several times in the debate.

Wages councils have also affected entitlement to holidays. That, too, affects the costs of a business and thus the number of jobs that it can provide. It also greatly adds to the complexities facing small business men. I could cite many examples. The hon. Member for St. Helens, North (Mr. Evans) would no doubt describe them as anecdotal, but they are none the less real and substantiated. For example, a stationer in Liverpool, says: After a visit by the wages inspector I have discovered that, due to my incomprehension of the Retail Wages Council publications, I have underpaid two employees. They have contracts for 37½ hours per week and have been paid for that time. But in the 'definition' section, a 'full-time worker' is one employed for at least 36 hours a week. Under the 'guaranteed weekly remuneration' provisions, however, the weekly remuneration is based on workers' entitlement for 40 hours. Consequently, they have been 'underpaid' for 2½ hours per week which they did not work. That is absurd and cannot possibly be justified. No fundamental reform of the wages councils will get rid of those anomalies. The only way to get rid of them is to abolish the whole institution.

There are other equally absurd anomalies. For example, it almost beggars belief that a part-time employee in a hotel working Monday, Wednesday and Friday is entitled to pay on most bank holidays whereas one who works Tuesday, Thursday and Saturday is not. What on earth is the justification for that ridiculous state of affairs?

The only way to do away with that catalogue of absurdities is to do away with the institution itself. In so doing, we shall be recognising that the whole institution is based on an unreality which has very damaging effects on those in society least able to look after themselves. That is the paradox of the institution. The intention behind the setting up of wages councils was, of course, benign—to try to increase artificially the income levels of employees in certain industries and trades. In so far as they have achieved that—and it is doubtful whether there has been any substantial effect in that respect—it has been at the expense of those who are even worse off. That being so, I find it difficult to understand how Socialists can support such an institution.

The hon. Member for St. Helens, North said that there was no empirical evidence to prove the case against wages councils. In fact, there is a wealth of evidence, much of it in a document on "The Case for Abolition" published by the Institute of Directors. I commend that document to the hon. Gentleman, as it considers the academic evidence published in learned journals throughout the world. There is no time to go into the details, as we are all anxious to here my hon. Friend the Minister reply to the debate, but there is a considerable body of evidence from the United States and from other countries with minimum wage legislation showing the damaging effects of wages councils and that minimum wage regulations actually institutionalise unemployment.

If we are, as a party, to recover our respect, which in many parts of society has been damaged by unacceptably high unemployment which, alas, has grown upon us in the past 20 years, we must accept that we can begin to reduce unemployment only if we look to the root causes. The root causes are labour market regulations and institutions which prevent people from putting into effect their desire to employ other people. That is why the Government's opportunity to denonouce the ILO convention is important for us as a party, no less than as a country. I counsel my hon. Friend the Minister and his colleagues to take the radical course, which is right for a Conservative Government in this difficult economic climate, to abolish wages councils and not to mess around with any unacceptable compromise which would only reduce the beneficial effects that the Government wish to achieve.

6 am

Mr. Michael Fallon (Darlington)

I am a little surprised at your sums, Mr. Deputy Speaker. That is probably because I have sat here longer than any Back Bencher and applied for this debate. I have been in the Chamber since the middle of the previous debate and have still not been called. I wonder—

Mr. Deputy Speaker (Mr. Harold Walker)

Order. I hope that the hon. Gentleman is not reflecting on the Chair. If he is, I must ask him to withdraw such a reflection.

Mr. Fallon

It is the Chair which selects the order of hon. Members who speak. I wonder whether you—

Mr. Deputy Speaker

Order. The matter is entirely at the discretion of the Chair. There are many factors that the Chair has to take into account. The hon. Gentleman must not reflect on whom the Chair calls to speak.

Mr. Fallon

I am simply emphasising that it is a matter for the Chair. That is no reflection on the occupant of the Chair. It is obviously a matter for the discretion of Mr. Deputy Speaker. I wonder whether you were surprised that the Opposition could not draw more than 0.5 per cent. of their parliamentary strength for this debate or that we could muster only my hon. Friend the Member for Banbury (Mr. Baldry) to question abolition.

I am not ashamed to speak in favour of the abolition of wages councils, partly as a matter of principle but certainly not in opposition to trade unionism. I often wonder why the Labour party does not see the potential for some unionisation after abolition. I favour abolition only because I want more people to be in work especially young people in depressed areas of the country. The whole and sole effect of wages councils is to price people out of work.

Wages councils fail to give workers more money, and jobs that we might have expected have not been created. It is no part of the abolitionist's duty to prove that a given number of jobs might have ceased to exist because of wages councils. The numbers out of work should prove the case, as should the ratio of young people out of work. In the late 1960's it was similar to the national average, but it is now almost double the national average.

Others have emphasised the irrelevance of the low pay argument in this debate. Those who argue that the abolition of wages councils is linked to low pay ignore the fact that what matters to the average family is not low pay but low income. The draft Council of Europe definition is a definition of low income. It is vulnerable because it is a definition of an average. There will always be low pay—under 66 per cent. of the average—so that definition should not affect what we say.

If we want to tackle poverty, low pay or whatever the Opposition want to call it, we should improve job prospects rather than raise pay levels. Where jobs are not relevant, other things can be done, such as providing proper benefit for those who are retired, for single parent families, and so on.

My major objection to wages councils is that they are discriminatory. It is not that they price people generally out of work, but that they particularly exclude from work the most disadvantaged people — the youngest, the unskilled and the poorest. Retail trades would most easily take on young people in the north of England. The unskilled do not normally enrol on Government training schemes, they need work experience and they are being denied the chance to acquire disciplines and skills by the wages council system. The poorest are effectively thrown out of work each time that the councils' minimum wage is raised.

Of those three categories, I am most worried about the youngsters. It is said that youngsters will not work for a particular wage. That is not true when one considers the number of youngsters who enrol willingly on the young workers scheme, and who are prepared to accept a wage of £26 a week on the youth training scheme. It is nonsense for hon. Members to say what youngsters will or will not work for.

The youngsters have not been free to say what they will do. Whatever system we believe in, our one duty to them is to give them the chance to decide for themselves. If they are not willing to work for £40 a week and prefer to stay on the dole for £26 a week, they have nothing to lose, but if they are, they can price themselves into work.

Secondly, by ending the wages council system, we would end a limit on growth. About 86 per cent. of employees covered by wages councils are in the services sector. Those are the services that are expanding and creating new jobs—catering, retailing, hairdressing and so on. In ending that limit on growth, we would be freeing business. Just as important as the nearly 3 million workers covered by the councils are the 400,000 establishments and the 260,000 employers who would by abolition be freed from interference, such as the regulation of overtime, rest days, holiday entitlement and hours of work. It is enormously important to sweep that away.

The consultative paper has a further importance. Although it is flimsy—a mere 24 paragraphs covering five pages of typescript—it represents a change in the approach of the Department of Employment, away from the head counting and macro-economic approach to industrial relations. I hope to see a change in attitude and approach towards a framework of labour market policies, which genuinely free employment in the labour markets and which will lead us on to tackle the restrictive practices in the labour markets, to relax rent controls, to recapture the jobs in the black economy and to make a reality of the right to work in our society. I hope that it would go some small way towards tackling the paradox that there is plenty of work, but remarkably few jobs.

6.9 am

The Parliamentary Under-Secretary of State for Employment (Mr. Peter Bottomley)

rose—

Mr. Deputy Speaker

Does the Minister have the leave of the House to speak again?

Hon. Members

Yes.

Mr. Bottomley

What a pity!

One of the advantages that I share with my hon. Friend the Member for Darlington (Mr. Fallon) and with the hon. Member for St. Helens, North (Mr. Evans) is that discussing the statutory minimum wage rates set by wages councils of about £60 or £70 a week makes a fair contrast with what we discussed earlier in relation to the printing industry, when we were told that some people earned £700 a week for half a week's attendance. But I do not wish to use my time discussing that. Although we shall no doubt return to the subject of wages councils, low pay, low incomes, and the overlap between the two, I wish to try to deal with some issues today.

Without the interventions of the hon. Members for St. Helens, North and for Liverpool, Garston (Mr. Loyden), at one stage in the debate it may have been thought that Conservative Members were a pale imitation of the Labour party in one of its friendlier moods. That would be an error. It is important to recognise, as most hon. Members who have spoken do, that there are serious issues underlying the Government's determination to create job opportunities and to ensure that unmet needs and resources are put together by voluntary association — between customer and supplier or between employer and employee.

Any of my hon. Friends who believe that their eloquence or oratory will persuade me to announce tonight that the Government have taken a decision on the consultative paper will be disappointed. We expect to receive comments on the paper by 31 May, and after we have gone through the consultation process, we shall announce decisions. But for those who may have been misled by some newspaper reports about possible differences within the Government, perhaps I could refer the House to column 107 of the Official Report for 25 March, where my right hon. Friend the Chancellor of the Exchequer talks about, the proposal radically to reform the wages councils." —[Official Report, 25 March 1985; Vol. 76, c. 107.] I should tell the House that, had he had more time to reply to the debate, he would have said that another option is to abolish them. The Government stand four-square behind what we see as the two proper options facing the House and the country.

Last year or the year before, I spoke in a debate about low pay. When I re-read my speech after I took responsibility for answering questions on low pay, I discovered that I was not embarrassed by what I said before I became a Minister.

Mr. Evans

The hon. Gentleman must be unique in the Tory party.

Mr. Bottomley

There are those who say that I got this position as a reward for bad behaviour and consistency.

Mr. Michael Brown

What did my hon. Friend say about fluoride?

Mr. Bottomley

I am sure that my hon. Friend would have quoted anything that I had said on fluoride. But having listened to him at this hour of the morning on the subject of fluoride, I am tempted to pay less attention to some of his remarks, knowing that he can speak at great length about matters in which I am sure he does not really believe. Most Members of Parliament have been shown to have said one thing on one occasion and another thing on another occasion, as my hon. Friend has demonstrated.

My hon. Friend the Member for Tatton (Mr. Hamilton) said that he did not believe it was possible to get rid of the anomalies without wholesale abolition. If we chose the option of keeping an adult minimum hourly rate, all anomalies would disappear. All that would be left would be possibly a market distorting or matching adult rate. My hon. Friend the Member for Banbury (Mr. Baldry) put forward a rather more balanced description of the issues facing the Government. Although there were accusations of "planting" to him and to those of my hon. Friends who advocate wholesale abolition, anyone who reads this debate in the context of the Budget debates, especially Monday's debate when some of my hon. Friends gave their views on the options, will discover that they came down not especially in favour of wholesale abolition.

There is an area to be debated, but it must be debated not just in one party or only in Parliament, because nearly 3 million people are, or might be, directly affected by wages councils as they work full or part-time in wages council industries. But there are also more opportunities for more people to get jobs, if we make the right decision and if the right consequences follow. The latter are not just market forces, because effective market operation requires information and something that could be called enterprise, confidence or risk-taking. People need to believe that if there is a change in the law, it is likely to stick, which means trying to avoid some of the issues in rent control, to which hon. Members have referred. Measures in that sector have not had the impact that they should have had because people have not had the confidence that they would stick.

The hon. Member for Garston said that he almost relished the idea of the abolition of the wages councils. If he is right, perhaps there will not be too much opposition from the Labour party. We are in the slightly paradoxical situation in which the trade unions and the Labour party believe that the Government want to abolish the wages councils wholesale, and many of my hon. Friends believe that we do not. Perhaps both sides are right, and what I say about us making up our mind after we have had the responses is what matter.

A good deal of attention has been concentrated on the wages councils issues. I recommend to those who will read our debates various documents that they should also read. One is the consultative paper itself, which, although it is brief, could not be described, except in the physical sense, as flimsy. It is one of the best papers that the Government have produced, and I recommend it to anyone who is interested in the subject.

I also recommend the research note from the House of Commons Library, which is up to the Library's usual standard, and covers the ground well. For those who want to go a little further, there is a book by F. J. Bayliss, called "British Wages Councils", which is unfortunately out of print and was produced in 1962. It is interesting to see that at that time the country was facing the problem of over employment. If we managed to go from 1962 to 1985 and change the situation in a dramatically harmful way for many people who want to go to work but cannot, we should, within the same period of time or less, be able to reverse the process. I know that the House will expect the Government to show a little more of their thinking, during the next few days and weeks.

A good booklet, which has been mentioned once or twice is called "Still Priced Out! Wages councils versus economic recovery", which is by the National Federation of Self-Employed and Small Businesses. I caution some of its readers and my hon. Friends that the underlying issue, in terms of dividing up nominal demand into growth and inflation, depends not just on what happens in wages council sectors but, more crucially, on the majority of people who are paid more than most of those in wages council sectors.

Three other articles are relevant. One is an article in The Observer on 24 March by Peter Kellner, talking about how my right hon. Friend the Chancellor's proposals on national insurance contributions can add to the expectations for extra jobs and lower unemployment, especially with the impact on younger people in full-time work. He singles out retail business, hotel and catering, textiles, clothing and footwear among others. All these industries are in wages council sectors, and if one can give a double boost to employment opportunities in the sectors covered by wages councils, the insurance contribution changes, both for the employer and the employee, and the possible changes in the wages councils will make a good deal of difference.

For those who still doubt the impact of pay and jobs, especially among young people, there is an article in The Financial Times of 26 March, by Philip Bassett, describing what has happened in the electrical contracting industry.

I am sure that my hon. Friends will not mind if I do not pick up every point that they have made. Some of my hon. Friends as total abolitioners have put their case across in a way that is likely to attract the support of unemployed people looking for the bottom rung of the ladder. My hon. Friend the Member for Bolton, North-East (Mr. Thurnham) made that good point. Some have put a case that would convince the Conservative activists at a party conference, but that may be going down the line already set out by the Labour party, which is how it gets its approach to the country wrong, not to mention its approach to economic problems wrong. If the wages councils were to be totally abolished, I have no doubt that some people would find themselves, at least temporarily, in circumstances which it would be difficult to defend.

One needs to consider the conditions when the trade boards were originally set up. Towards the end of the last century, a House of Lords Select Committee characterised the "sweat" industries as those with unhygienic and unsafe conditions, very long hours and extremely low pay. Two-thirds of those who are covered by wages council orders now are part-time workers. The conditions in which people work are covered not by wages councils legislation but by other legislation. Those protections would remain, even if the Government were to propose the total abolition of the wages councils.

May I go on to point out that it is incredible that businesses are still covered by every single detail of wages council orders which can amount to 30 pages. The point was made very well by my hon. Friend the Member for Darlington that, although three times a wages council statutory minimum rate may be paid, if any single condition is worse than that laid down under a wages council order, that employee would appear in the information which has been made available to the House as under-paid, and his employer would appear as one who under-paid.

There is clearly common ground about trying to improve the job prospects of young people. It is also quite clear that there are anomalies, confusions and complications that need to be tackled. Furthermore, there is the underlying problem of whether to implement radical reforms or total abolition. I hope that the debate will go wider than the one that has taken place during the last two hours and 59 minutes, but I should be grateful if my hon. Friends could arrange for future debates on this subject to take place at a rather better time of the night.

Whatever decision we eventually take, I should like to pay a big tribute to those who serve on the wages councils, especially the independent members, and to the wages inspectorate which does a very difficult job in a sensitive way. Both have served the country well. It is up to the House to decide what their future roles should be, but for the work that they do I thank them.