§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Patnick.]
2.43 am§ Mr. John McAllion (Dundee, East)It is with some relief that I rise to begin the Adjournment debate at nearly 2.45 am. I am sure that that relief is shared by the Minister and your good self, Mr. Deputy Speaker.
In a written answer earlier this year the Secretary of State for Employment confirmed the Government's decision not to abolish the wages council system for the present. He announced that such was the Government's concern about the effect of the wages councils that he intended to keep their operation under close review. We know from the Secretary of State that the Department of Employment has a close working knowledge of what is happening to the wages council system, and the Under-Secretary of State is ideally placed to respond to the report published only last month and entitled "Crime without Punishment: The Story behind Wages Councils Underpayments". The Minister laughs at the notion of such a report being published, and the record will show his flippant attitude.
The report was published by the Low Pay Unit and the National Union of Civil and Public Servants and it chronicles a state of affairs which calls into question the fitness of Ministers at the Department to continue in their high office. It reveals that those who have been entrusted with administering the wages council legislation enacted by the House are turning a blind eye to a crime wave of illegal underpayment of minimum wages. It shows that they are, if nothing else, aiding and abetting those employers who commit the criminal offence of illegal underpayment. That is nothing short of a national disgrace. Those inside and outside the House are indebted to the Low Pay Unit and to the National Union of Civil and Public Servants for bringing that scandal to our attention.
Wages councils protect 2.5 million of Britain's lowest paid workers. The protection that they afford cannot be described as excessive, unreasonable or unrealistic. A few examples of current wages council rates will testify that the rates are too low rather than too high. The made-up textile sector has a basic hourly minimum of £2.22 and an overtime hourly minimum of £3.33. The equivalent figures for the hotel and restaurant sector is £2.33 and £3.50. For the hairdressing sector, it is £2.40 and £3.60. Those wage rates hardly begin to compare with the wages earned last year by Sir John Nott, which we understand from the weekend press to have been £1.5 million. The wages councils' rates show that the workers protected by them earn £90 gross for a 39-hour week, and take home considerably less.
Given that the Council of Europe's decency threshold is currently £163, it can hardly be argued that it is unreasonable to expect employers to pay wages council rates. Certainly the House does not believe it to be unreasonable. That is why legislation was enacted to set up wages councils, and why it has never been repealed. That is why illegal underpayment has been made a criminal offence. That is why Ministers have been charged with establishing a machinery—the wages inspectorate—to give effect and teeth to the wages council system.
167 Until the House decides otherwise, it is the clear and bounden duty of Ministers to make that legislation work, to bring to justice those who criminally offend by illegal underpayment, properly to resource the wages inspectorate, and to make the wages councils as effective as possible. That is why the report is so disturbing. It reveals such a record of neglect and dereliction of duty by Ministers that, if honour were the criterion, it would require the resignation of those who have failed properly to discharge their duties to this House.
The report highlights a number of areas in which the Department and its Ministers have fallen down. First, they have done so in the resourcing of the wages inspectorate which, in effect, is the police officer of the wages council system. Five years ago, in 1985, the Government proposed the abolition of wages councils but were forced to back off by the hostile response from churches, voluntary organisations, trade unions and even from the majority of employers. At that time there were 120 wages council inspectors; today there are just 71—a reduction of 41 per cent. in five years. Using the Department's latest estimates, that means that there are just 71 inspectors to oversee 379,253 establishments and to provide cover for the 2,472,400 employees—a ratio of one inspector to 35,000 employees. That represents under-resourcing on a disastrous scale, with the inevitable result that far fewer establishments are visited—a quarter fewer in 1989 than in 1986—and there is far more reliance on the less effective checks provided by questionnaires and postal inquiries.
What unscrupulous employer can seriously be expected to fill up a form admitting that he is illegally underpaying his workers? There is growing evidence of widespread disrespect for the laws passed by the House, with 11,000 workers underpaid to the tune of £1.38 million in 1989 and arrears of payment owed to workers up by £74,000 on the 1988 figure. Those are, of course, wages inspectorate estimates, and they are likely to be underestimates as they take no account of the long hours worked in wages council industries or of employers who do not register with wages councils because they are not legally obliged to do so even though those very employers are the most likely to be guilty of illegal underpayment.
The Government are fond of boasting that they are creating a climate in which free enterprise can flourish, but "Crime without Punishment" shows that the climate is one in which criminal underpayment is encouraged, along with widespread disrespect for our legislation. The so-called party of law and order seems to put on kid gloves when it comes to dealing with unscrupulous employers, and the results are there for all to see: widespread illegal underpayment, widespread illegal failure to post wages council orders, widespread failure to keep records of wages paid and hours worked—in effect, widespread exploitation of some of the poorest workers in the European Community.
A Government who were genuinely anxious to uphold the rule of law would be clamping down on such law-breaking—but not this Government. They continue to cut back on the proper policing of the wages council system. They ignore their own statistics, which point to a crime wave with nearly 23,000 offences in 1989 alone. They fail to act against those who commit those criminal 168 offences—there were just 10 prosecutions in England and Wales in 1989, and not one in Scotland. That is a lamentable record.
The Government's record on low pay contrasts starkly with their record on pursuing wrongdoers in other areas—for example, those who defraud the Department of Social Security. Every opportunity has been seized to increase the number of DSS fraud investigators to a present level of 820, while at the same time every excuse has been used to cut the number of wages inspectorate staff to the current pathetic level of 71. We cannot avoid the conclusion that the Government are prepared to crack down on lawbreakers who are poor, but equally prepared to condone lawbreaking on the part of employers who are better off.
Free-marketeers, of course, will dismiss all this, and will point to huge underlying economic changes in developed capitalist economies such as ours—the shift away from heavy industries such as shipbuilding, steel and coal which were heavily unionised and employed mostly well-paid male work forces towards the newer service industries employing mostly female part-time workers, often non-unionised and generally low paid. They will point to the example of the United States, where during the Reagan years there was a massive expansion of low-paid employment in the retail and catering sectors. They will try to tell us that there is no alternative to the low pay option, and that at least it represents a lesser evil than the mass unemployment of the early 1980s which was so plainly the creation of the present Government.
Seen in that context, the Government's policies are, at any rate, obvious and explicable. The weakening of trade union power has opened the way for the expansion of low-paid employment; the contracting out of public services is a means of promoting low pay through the lowest tender procedure; the rescinding of the fair wages resolution and the deratifying of International Labour Organisation conventions 94 and 26 has exposed Government contract workers to low pay. The threatening and bullying of social security claimants out of benefit and into whatever low-paid work is available is part of that same strategy. So, too, is the continued undermining of the wages councils which are the subject of this debate.
The Government have enthusiastically embraced low pay as part of the answer, and in so doing have failed to understand that low pay is really part of the problem. If wages councils are abolished, either officially or by the Government's current back-door strategy, Britain will be alone in Europe in not having any legislation to protect low-paid workers.
As it is, Britain falls lamentably short of European standards. The Council of Europe's decency threshold of £163 must seem like a mirage to the 10 million low-paid workers in this country who earn less than that. And Britain alone refused to sign the European social charter, with its rights for workers to be paid a sufficient amount to provide themselves and their families with a decent standard of living. Britain refuses also to adopt a civilised attitude to workers' rights and living standards.
Ministers fail to understand that, in promoting low pay, they are not helping Britain to catch up with the rest of Europe but are leaving us further behind. It is vitally important for the Government to heed the advice of those with special knowledge of low pay and who produced the report to which I have referred, and to commit themselves to the reforms that it outlines. The Government must also 169 restore, strengthen and extend the wages councils machinery to cover emerging areas of low pay such as contract cleaning and the security industries. They should also re-ratify ILO conventions Nos. 94 and 26 and introduce legally binding minimum wage protection for all citizens, as exists elsewhere in Europe.
Those are just a few of the reforms which would help to protect workers from the exploitation to which they are currently subjected. They would help also to end the obscenity whereby, at one end of the pay scale, it is not considered excessive for one man to earn £1.5 million while at the other end of the scale £2.20 per hour is regarded as too much.
The case against low pay is overwhelming, but the Government's case for abolishing the wages councils has yet to be made with any credibility. I suspect that that will remain the case even after the Minister has replied.
§ The Parliamentary Under-Secretary of State for Employment (Mr. Eric Forth)I congratulate the hon. Member for Dundee, East (Mr. McAllion) on bringing this important matter before the House even at this late hour. I listened to his arguments carefully, but they owe more to emotion than to reason. The hon. Gentleman's arguments reflect some depressingly familiar propaganda of a kind regularly produced by organisations which seem more intent on discrediting the Government than on helping the very people whose cause they purport to fight.
The irresponsible allegations made today were prompted, as the hon. Gentleman admitted, by publications such as "Crime without Punishment"—a product of co-operation between the National Union of Civil and Public Servants and the Low Pay Unit, which are scarcely unbiased or independent sources of information, analysis or conclusions.
I will deal immediately with the alleged crime wave of underpayment. The hon. Gentleman argues that one third of all the establishments visited by the wages inspectorate were found to be paying less than the minimum remuneration required by the relevant wages councils. That figure is a complete misrepresentation of the true state of affairs. First, it relates only to the results of checks in which inspectors actually visited establishments—and such visits are targeted specifically on establishments where underpayments are more likely to be found.
Secondly, the discovery of an underpayment at an establishment visited does not mean that all the workers there are underpaid. Normally, only one or two of them are found to be underpaid as a result of such visits. The only valid yardstick of compliance is the proportion of workers in the system who are found to be underpaid in all the checks—not just those carried out by visits—which are conducted by the wages inspectorate. This figure runs consistently at around 3 per cent. to 4 per cent. No one in his right mind could describe that figure as indicating "a crime wave of underpayment", which shows the extent of distortion offered by the report cited by the hon. Gentleman today. Nor is there any foundation for the suggestion that the level of underpayment is at an unprecedented high, or that it is increasing. Last year's fractional increase in the amount of underpayment discovered is attributable to the inspectorate's increased success in targeting its work on employers more likely to be underpaying. I should point out to the hon. Gentleman 170 that the inspectorate's work is now more tightly focused on discovering underpaying employers than it was in the days of the last Labour Administration.
Not only do wild allegations about the state of compliance offend those involved in running the system, but they also arguably damage the situation of those who are vulnerable to underpayment. The more that pressure groups and others mislead the public as to the state of compliance, the more likely it must be that some employers, albeit not many, will be tempted to transgress on the grounds that they will be in good company.
Not content with misrepresenting the extent to which workers are underpaid, those who wish to discredit the Government also allege that the Government are undermining enforcement in other ways and the hon. Gentleman has done that again today. They argue that changes in the numbers and grading of inspectors weaken the system, and they maintain that the inspectorate's approach to the job—the methods that it uses—encourage non-compliance. I rebut those charges entirely.
The number of inspectors is lower than in 1979, but our reasons for doing this were entirely justifiable. In 1981 we curtailed the expansion of the wages inspectorate on which the Labour Government had embarked towards the end of their term because the overriding need in Government was to reduce public spending generally to a level which would not wreck the economy. In reducing the size of the inspectorate, however, we simply brought inspection back to the level which obtained for many years prior to 1978. In 1986, we reduced the numbers for an equally good reason—it was simply not necessary to have the same number of inspectors to check compliance because checks had become easier and quicker with the simplification of the wages orders following the 1986 legislation. We also anticipated that compliance would be higher following the reforms, and our expectations in that respect have been realised.
Experience of enforcing the simpler orders has also shown us that the work of some of the higher grade inspectors can be safely regraded so that all the basic inspection work is done at executive officer level. Again, therefore, the suggestion that we are embarking on a wholesale regrading is quite inaccurate. Of the 71 posts for "on the road" inspectors, only 17 were in the higher grade. There is absolutely no intention to change the number of inspectors or the volume of work that they undertake.
The hon. Gentleman also seeks to indict the Government by implying that they encourage the inspectorate to adopt a "soft touch"—he used the term "kid gloves"—in dealing with employers. That is an entirely baseless accusation. The methods that the inspectorate uses are essentially those which have been found effective over many years, and indeed some of the devices that it uses to enable it to make the best use of its time were introduced by the last Labour Administration.
In this context, I am thinking in particular of the much misunderstood "questionnaire" procedure in which employers are asked to state the amount that they are paying their employees. This method accounts for only a minority of checks carried out and is mainly used by inspectors to help them "screen" establishments for likely underpayers. The fact is that in test checks some 95 per cent. of employers are found to be completing the questionnaires truthfully and accurately, which means that 171 the inspectorate is better able to focus its attention on those respondents whose replies indicate cause for concern.
We are also attacked for not prosecuting enough of the employers who fail to meet the requirements of the legislation. The ratio of prosecutions to establishments underpaying is higher since 1979 than it was under the last Labour Government, but that really misses the point—that under all Governments the inspectorate has pursued a policy of achieving compliance primarily through advice and persuasion and not by prosecution. Some four-fifths of all the establishments found to be underpaying are being inspected for the first time, and it is rarely appropriate in those circumstances to haul them before the courts. The vast majority of employers readily put right any deficiencies in the amount that they are paying. Nor is it sensible to run people into the courts because the notice of the current minimum rates is not pinned up or the right records have not been kept, if it is perfectly clear when the inspection takes place that no worker is being underpaid. Of course, where there are doubts about the employers' willingness to comply with the law the inspectorate will keep a tight check on the situation and take legal action if necessary.
The hon. Gentleman also made some comments about the Government's attitude to wages councils in general. He quoted—I think accurately—what the Secretary of State said earlier in the year about our position as regards wages councils, which is a matter of record. I emphasise that that is based not on an ideological stance but on a practical approach to the matter. For example, the work of virtually all independent economists supports our contention that there is a price to be paid for any attempt at minimum wage fixing and that that price is in jobs and employment. It is no argument to say that other countries are unaffected or untroubled by machinery of the kind that the hon. Gentleman cited. Some, such as the Netherlands and the United States of America, do not raise the level of their minima for years, and organisations such as the OECD and the European Community itself have commented on the need for countries with minimum wages to consider the impact of those arrangements on job levels.
172 It is worth pointing out, because it is relevant to the debate, that the United Kingdom's unemployment level is significantly below that of most of our major European partners and competitors. That is something which Opposition Members choose to ignore when it suits them, but we still regard it as very important.
Secondly, our emphasis on maintaining and improving employment levels reflects not a disregard for people's living standards but the absolute opposite as lack of employment opportunities, not low pay, is the major cause of low living standards. Only 4 per cent. of those full-time workers who are in the lowest decile of earnings are in the lowest 10 per cent. of incomes.
Thirdly, the facts simply do not support the accusation that the abolition of the wages councils would lead to what people sometimes call "poverty wages". Indeed, the whole notion that that phrase conjures up is false. As I have said, the link between low pay and low living standards is weak. Four fifths of wages council workers are contributing a second income to the home. They are not people living in households with low living standards.
The Labour party's proposals for the introduction of a national minimum wage fly in the face of logic and ignore the facts that I have outlined. The effect of introducing a minimum at the level currently envisaged would be to reduce employment very quickly by around 750,000. This estimate does not even allow for the full restoration of differentials, as supported by the recent statements of eminent trade union leaders such as Eric Hammond and Bill Jordan.
The right way to help those on low pay is to continue our policies of deregulating the labour market wherever this can reasonably be done, thus stimulating enterprise and initiative, creating more jobs and raising living standards all round. I believe that our success in freeing up the labour market is evident in the fact that more people are at work in Britain today than at any other time in our history.
I hope that I have answered some of the specific points made by the hon. Gentleman and refuted some of the unsupported and unsubstantiated allegations made in the report to which he referred. I am glad to have had this opportunity to put the facts on record.
§ Question put and agreed to.
§ Adjourned accordingly at seven minutes past Three o'clock.