HC Deb 18 June 1998 vol 314 cc507-19 3.30 pm
The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett)

Today, the Government publish the report of the Low Pay Commission and spell out how, in our response to that report, we shall begin to end the scandal of poverty pay.

In the labour market that we inherited just over a year ago, many workers received such excessively low rates of pay that they were driven to work long hours simply to make ends meet. We all know the examples: a homeworker paid as little as 35p an hour, a cleaner paid £1.30 an hour or a security guard paid £2.35 an hour—and bring your own dog!

In addition, such low levels of pay mean that taxpayers provide massive sums of income subsidy and businesses, large and small, which are striving to compete, as Britain must, on quality and value for money, see their position undermined, not by fair competition, but by cut-throat cowboys.

With the lack of any fair and basic minimum standards at work, the gap between real hourly earnings of the lowest and highest-paid almost doubled in the past 20 years. That was the outcome of the strategy of the previous Government—Britain aimed to be merely the cheapest rather than the best, and was no longer the workshop of the world, but the sweatshop of western Europe.

This Government believe in decent minimum standards, as a spur to competing sustainably on quality, to tackle social exclusion and to make work pay. We have already made substantial progress. The working families tax credit will guarantee an income of at least £180 a week for families working full time. No family with weekly earnings of less than £220 will pay tax. Reform of national insurance contributions will reduce barriers to work. The new deal will help the young and the long-term unemployed to move from welfare to work. The "Fairness at Work" White Paper and the work of the social exclusion unit are all part of the wider strategy to reshape Britain.

The national minimum wage is a key element in that range of policies. It will help to create a better rewarded and more committed work force, itself a force for driving up standards and helping competitiveness. Experience elsewhere shows, too, the likelihood that staff turnover will be reduced and investment in training encouraged, which itself improves productivity.

We were determined from the outset that the national minimum wage must be introduced sensibly and in accordance with prevailing economic conditions. That is why we set up the Low Pay Commission, with George Bain in the chair, after only 90 days in office. The commissioners were publicly recruited following Nolan principles and drawn from among employers, employees and independents, each serving in an individual capacity.

Their work is impressive. I pay tribute to George Bain and the other commissioners, who have done a quite remarkable job. As well as studying 500 written submissions, they took oral evidence from a wide range of organisations, and held more than 200 meetings throughout the United Kingdom.

The commissioners heard from large and small employers, trade unions, individual employees including homeworkers, and a range of other interested organisations. I whole-heartedly commend their immense hard work, energy and willingness to give so freely of their time for this important task.

As we made clear in our evidence to the Low Pay Commission, the Government were particularly concerned to ensure that our national minimum wage should be set at a level that avoided the risk of adverse effects on employment, inflation and the PSBR.

We have been particularly mindful of the need to protect the position of young people. It is, in our view, essential that we avoid reducing the relative attractiveness to young people of staying on in education and training, and avoid discouraging employers from providing training for those in work. Those concerns have guided our judgment on the decisions in response to the commission's recommendations.

The Government welcome the report, and support all the commission's key recommendations, subject to consultation on some of the practical details. In particular, we accept a main rate of £3.60 per hour before deductions, with effect from April 1999. When combined with the working families tax credit and other benefits, for a one-earner couple with two children, that means an effective wage of more than £7 per hour. We accept that all those aged 16 and 17, or on formal apprenticeships, should be exempt, and we also accept the proposal to institute a development rate.

The commission proposes that that minimum rate should apply at £3.20 to all 18 to 20-year-olds, and to all workers starting a new job with a new employer and receiving accredited training. We are, however, at a critical point in the economic cycle. The Government are determined to proceed with all due caution with the introduction of that rate, especially for the crucial group of those aged 18 to 21.

We have therefore decided, for this group, to phase in the rate in two stages, with an initial transitional rate of £3 from April 1999, which will increase to £3.20 in June 2000. However, we are asking the commission to review the position of 21-year-olds again in 1999, following the implementation of the £3 transitional rate, and then to provide a further report on whether, in the light of experience to that date, the commission reconfirms its advice that 21-year-olds should be covered by the main adult rate.

I am pleased also to announce that we shall be asking the commission to continue its work monitoring and evaluating the introduction and impact of the minimum wage.

Introducing the minimum wage at the levels that I have announced today will help some 2 million workers escape from poverty pay, without adverse effects on jobs or inflation. That will include 1.4 million women; more than 1.3 million part-time workers; some 200,000 young people; about 110,000 homeworkers; approximately 175,000 lone parents who work; and some 130,000 ethnic minority workers.

The remaining Low Pay Commission recommendations deal with such technical matters as the composition and reference period for calculating the minimum wage, the handling of benefits in kind and its application to homeworkers and pieceworkers. We fully and carefully considered those recommendations and accept them in principle, subject to consultation on the practicalities and detail of their implementation when formulating the regulations implementing the national minimum wage.

Today marks a further milestone in implementing the Government's manifesto commitments. The introduction of a national minimum wage would never have taken place under a Conservative Administration.

Several hon. Members

indicated assent.

Mrs. Beckett

I am glad to see Conservative Members nodding.

From the outset, the Government's approach to the minimum wage has been that it must be approached in an atmosphere and a framework of partnership. The Low Pay Commission has shown that that approach was the right one. It is clear from its work that there is now an overwhelming welcome for the principle of the minimum wage. Among the few people out of step appears to be the Conservative party. I challenge the Conservatives today, on behalf of the 2 million people benefiting from these proposals, to say whether, if returned to office, they will seek to reverse the steps that we take today.

The minimum wage, with our other policies such as the working families tax credit, will help to remove the worst cases of exploitation in the workplace—cases which had a place under the Conservative party, but which have no place in a modern Britain. I commend the report to the House.

Mr. John Redwood (Wokingham)

This week, we have seen prices up, mortgages up, wage inflation up—and now the Government wish to throw more petrol on those inflationary fires. If one employee gets a pay rise, others, including well-paid ones, will want one, too.

No wonder the Chancellor of the Exchequer has been out to sabotage this wages policy, because he at least knows that inflationary pay awards make no one better off. They are fool's gold. As the Government take us back to the strikes and the inflation of the 1960s, they give us a mods and rockers Government. The mods, led by the Prime Minister, believe that you can do it all with soundbites. It is as effective as putting go-faster stripes on a scooter. The rockers, led by the Chancellor, spend their time trying to break up the manifesto promises. For this statement is an act of betrayal by the Government. In the election—[Interruption.] Labour Members ought to listen to this, because they know that it is true. In the election campaign, Labour psromised—[Interruption.]

Madam Speaker


Mr. Redwood

I am grateful, Madam Speaker.

In the election campaign, Labour promised a decent minimum wage for all. Today, the Labour Government tell us that no one under 18 will benefit from these proposals. They tell us that 18 to 21-year-olds will receive only a lower rate. They tell us that their idea of a decent rate is as little as £3 an hour. They even tell us that the tips put on to credit card payments will be included in the calculation. Perhaps they intend to give yet more encouragement to the black economy, outside the clutches of both the tax man and the soon-to-arrive minimum wage inspector.

We have warned the Government throughout that a minimum wage policy will not work. We have consistently argued for a minimum income rather than a minimum wage—with benefit top-ups for families that need the extra. Will the President now confirm, as I think she implied, that she agrees with our approach? Does she agree that benefits will still be needed for many people to top up these minimum wages, and will she confirm to all those people that their benefits will still be paid? Is not the beneficiary of this proposal the Government, not the person on a low income?

We told the President that she would be forced to exempt young people—otherwise, she would destroy their jobs, or their chances of a job. Will she confirm that young people are being left out of her proposals, or offered less money, because the Government now agree with us that their jobs are at risk?

Will the President tell us what forecast the Government have made of how many jobs would be lost if everyone was given the promise of £3.60 an hour, and how many jobs will be saved by treating 16 to 21-year-olds differently? She must know the figures. The report of the Low Pay Commission confirms that jobs will be lost, and prices will go up. She should tell the House and the nation how many jobs are now at risk.

Does the President agree with her right hon. Friend—at least, I thought he was her right hon. Friend—the Chancellor of the Exchequer, that wage increases destroy jobs? Does she now understand that her Low Pay Commission is a complete waste of time and money, as the Chancellor of the Exchequer takes the decisions whatever the commission may say? Will she, for once, accept my sympathy that she has been forced to eat her words and break her promise of the same minimum wage for all? Indeed, would she not be better off taking a holiday, or praying for an easier job in the reshuffle, given the way that the Chancellor interferes with the present one?

We left the Government a golden economic legacy. Today, the Government are doing their best to destroy it. The Bank of England has warned them against this policy. The Government blunder on. In their nostalgia for the 1960s and 1970s, they are taking us back to the strikes; back to the inflation; back to the bad old ways; back to the bad old days.

Mrs. Beckett

I challenged the right hon. Gentleman and the Conservative party to tell us whether they would repeal the minimum wage, but the right hon. Gentleman seemed to be torn between complaining that it did not apply at the full rate to everyone from age 16 and complaining that it applies at all. He did not tell us anything about the Opposition's proposals.

The fact of the matter is that the minimum wage is a hugely important step. As I said in the statement, it will benefit 2 million people. I should be very surprised if the right hon. Gentleman or anyone else expected that such a wage would apply to 16 and 17-year-olds. In any event, the Low Pay Commission spent a great deal of time studying those matters and it firmly believes that 16 and 17-year-olds should be exempt, as should people on formal apprenticeships. It is interesting that the right hon. Gentleman apparently disagrees, and we shall certainly bear that in mind when he talks about the impact on inflation. [Interruption.] The right hon. Gentleman still asks why, so clearly that is a fruitful topic to pursue. The simple fact is that, because we have a Labour Government, 2 million people will begin to be released from poverty pay. The fact is that the Low Pay Commission will continue its work and continue to monitor the implementation of the steps. The minimum wage will not cost jobs or lead to high inflation: it will give the most exploited people in this country some relief from exploitation that clearly would have continued in perpetuity under the Conservatives.

Mr. Derek Foster (Bishop Auckland)

Is my right hon. Friend aware that every Labour Member will regard the introduction of the minimum wage as a huge leap forward in the Labour party's historic crusade against unemployment and poverty? She deserves the congratulations of the whole House. Is it not ironic that the arguments for minimum pay were recognised by Churchill in 1909? Is it not obvious what an uphill task the Tories face in modernising their party?

Mrs. Beckett

My right hon. Friend is entirely correct. A sad feature of recent years is that the Conservatives have lost all sight of the principles of fairness and social justice. That is part of what put them on the Opposition Benches, and will no doubt help to keep them there.

Mr. David Chidgey (Eastleigh)

It is nice to hear Sir Winston Churchill's name again mentioned with reverence from the Government Benches. Times have not changed too much.

The President of the Board of Trade will know that we support many aspects of the Low Pay Commission's work, and we welcome its report in that regard. However, I wish to raise some differences with the right hon. Lady. Does she accept the concept of the longer-term linking of the development rate for 18 to 21-year-olds only with formal education and training? What are her views on that subject? In talking about the continuing role of the Low Pay Commission, does she mean that it will be a permanent body? Will its duties include not just monitoring but recommending on future rates?

Is it not true that the Low Pay Commission has discovered that there is a need for flexibility in the national minimum wage and has used the development rate as a means of achieving that? Would it not have been better if the Low Pay Commission had been permitted in the first place to look at the variations that exist in the economies of the south-east of England and London, and the rest of the country, and examine and report on that phenomenon—the President knows that that is in the report—rather than simply concentrating on a development rate for young people?

Mrs. Beckett

The hon. Gentleman asked me a number of questions. He asked initially about linking the development rate only with accredited training. I am afraid that I could not tell from his phrasing of the question whether he was for or against it. However, that is certainly the view of the commission. [Interruption.] I see that the hon. Gentleman is for it. We accept the commission's view and take it very seriously. We shall continue to explore those issues.

The hon. Gentleman also asked about the continuing role of the commission. That body will continue to monitor the implementation of the minimum wage and we shall continue to seek its advice. I know that it is difficult to follow all the details when statements are made quickly, and the hon. Gentleman may not have taken on board the fact that we have already sought further advice from the Low Pay Commission about the rate for 21-year-olds in June 2000.

Finally, the hon. Gentleman asked me about allowing the commission to pursue the issue of variations between regions. The Government set their face for a national rate because of the complications of defining regional boundaries, what happens to benefit rates, and so on. Clearly, the hon. Gentleman will not have had much opportunity to study the detail of the report, but it is interesting to see from the commission's conclusions that it found in its hearings that there were far greater variations within regions than between regions. That shows just how difficult it would be to have rates that vary according to geographical location. It is partly why we share the view that there needs to be a national rate.

Mr. Dennis Skinner (Bolsover)

Does my right hon. Friend agree that nobody can deny that on a day like today the political high ground is on Goverment Benches? That is more than evidenced by the response from the shadow President of the Board of Trade. Will she have another look at the 20p difference for young people? Will she also bear it in mind that every group of workers receives payments in kind of some sort? Will payments such as tips and the rest be taken into account? If such payments were taken into account for everyone, Ministers would be in serious trouble.

Mrs. Beckett

I must confess that my hon. Friend has taken me slightly by surprise—I have no recollection of being tipped, but I look forward to it.

The Low Pay Commission has recommended that payments based on output, productivity or performance should count, and that payments based on results, bonuses, tips and gratuities and so on should be taken into account if they are paid through the payroll, but not otherwise. That should reassure not only my hon. Friend but many who are slightly puzzled about the details of those matters. Obviously, there is no intention that the ordinary tip that someone leaves in, say, a restaurant will be taken into account.

Mr. Peter Bottomley (Worthing, West)

Can the right hon. Lady answer questions to which many of those who may be affected want to know the answers?

First, if, in a year's time, the underlying rate of inflation remains at 3 per cent., will the extra 10p an hour be added to the £3.60 rate?

Secondly, if the rate is £3.60 or £3.70, can the right hon. Lady confirm what the Chancellor knew last night when he spoke at Great George street on the 60th anniversary of the National Institute of Economic and Social Research: that the proposed rate will have the effect of losing some 1 per cent. of employment–250,000 jobs? How is that compatible with the right hon. Lady's assertion that it will have no impact on jobs?

Finally, if someone receives an increase in pay of 30p an hour—the right hon. Lady said that basic earnings may be £7 an hour, with the extra £3.40 from benefits—how much of that 30p will be lost in terms of lost benefit? How much will the person gain from the extra 30p?

Mrs. Beckett

The hon. Gentleman has asked a number of detailed questions, which will arise during discussions on the proposals and in the consultation. I shall simply pick out two of the major points. He asked what will happen to the rates in, say, the year 2000. The Government will take that into account as we approach that time, but we shall not make a decision about those matters now. I did not quite catch the hon. Gentleman's description, but he quoted some supposed calculations about the effect on employment. The Government do not believe that the proposals will have a disadvantageous effect. Indeed, we very much believe that they will be beneficial in stimulating productivity and stability in the work force.

I am interested and slightly surprised by the hon. Gentleman' s comments, as he has always claimed to be a friend of people on low pay.

Mr. David Borrow (South Ribble)

May I welcome my right hon. Friend's statement? The 2,700 constituents of mine who will benefit from her announcement will also welcome it, and will note the comments of the Conservatives—the party of poverty pay.

Can my right hon. Friend assure me that when the Low Pay Commission reviews the implementation of the minimum wage, all aspects will be reviewed, including whether there needs to be a lower rate for young workers, what that should be in relation to the adult workers' rate, the effect on industry as a whole and whether there should be a rate for young workers under the age of 18?

Mrs. Beckett

1 thank my hon. Friend for his comments and for identifying the fact that many people in his constituency, as in all our constituencies, will benefit from these proposals. I can certainly assure him that when the Low Pay Commission undertakes its review, it will, of course, review all aspects of the implementation and handling of the minimum wage, including wage rates and the handling of the development rate. By then, it will have the benefit of practical experience of how the introduction of the rates has worked.

Mrs. Jacqui Lait (Beckenham)

Can the right hon. Lady tell us whether she plans an audit of the burden of red tape that will be put on small and medium-sized enterprises by the national minimum wage? What advice has she received from the better regulation unit on that subject?

Mrs. Beckett

The hon. Lady seems not to be aware that, as I understand it, the better regulation task force has congratulated the Government. As for red tape, when the hon. Lady has had the opportunity to study the Low Pay Commission's report in more depth—something which I quite understand she will not have had—she will see that it makes several proposals that should greatly simplify the administration of the national minimum wage and make it easy for people to see clearly how it works and what the impact will be in their place of work.

Dr. Lynne Jones (Birmingham, Selly Oak)

Having been elected to the House in 1992 on a promise of a £3.40-an-hour minimum wage, and having seen what has happened to the salary of Members of Parliament since then, I have to say that I find today's proposals—and even more so, the failure to implement the Low Pay Commission's proposals in full—bitterly disappointing. I notice that my right hon. Friend said that today's measures would be the beginning of the end of poverty pay. When does she expect that we will end it for good?

Mrs. Beckett

Anybody who tried to answer that question would be treading in very dangerous waters indeed. Of course I understand my hon. Friend's concern and her disappointment, but I am sure that she recognises the need to introduce the minimum wage at a level that will minimise the impact on employment and— [HON. MEMBERS: "Ah!"] I do not know why Conservative Members are making so much noise. When the Low Pay Commission was set up, the Government recommended that it should take these issues into account. We have always recognised that it would be possible to set the minimum wage at a level that could have an impact on employment. That is why we are confident that that is not what we are doing today.

The figure to which my hon. Friend refers was a figure reached by the deployment of a particular formula. The Government have long since come to the conclusion that it was better to proceed by means of social partnership and by practical discussions between representatives of employers of varying sizes and of the work force, and to come to an agreed view about the most practical and sensible way to implement the national minimum wage. The Government decided long ago that that was the right path to pursue. With deep respect to my hon. Friend, she fought the last election on that policy.

Mr. Eric Forth (Bromley and Chislehurst)

If the work of the Low Pay Commission was as wonderful as the Secretary of State said, why did she reject some of its key recommendations?

Mrs. Beckett

The right hon. Gentleman has clearly not been paying attention. We have accepted the commission's key recommendations.

Mr. Chris Mullin (Sunderland, South)

Will my right hon. Friend accept that this is a good day for those of us who believe in the redistribution of wealth and that the proposals will make a big difference to many of the people I represent? In Sunderland, many people struggle on a wage rate of £2 an hour, and the lowest rate of which I am aware is 89p an hour. Will she confirm that the most important issue is not the rate that is set, but the vigour with which it is enforced? Will she give the House an assurance that the rate that she has announced will be vigorously enforced?

Mrs. Beckett

I can certainly give my hon. Friend that assurance. I thank him for his remarks and the information that he has given the House. I notice that, for once, he silenced Conservative Members—although no doubt not for long. The national minimum wage will be implemented with vigour. As I told the hon. Member for Beckenham (Mrs. Lait), the Low Pay Commission has already turned its attention to how to ensure that everyone is clear about what the national minimum wage means for them and how they can judge whether they are receiving the proper rate of pay. The Government certainly have that in mind.

Mr. Roy Beggs (East Antrim)

While I support the principle of decent minimum standards and the desire to end poverty pay, I ask the President of the Board of Trade to take account of the fact that Northern Ireland, which has been identified as a low-wage economy for too long, has had increasing employment opportunities. Will she assure me that her proposals will not damage those continuing employment opportunities, and that areas of high unemployment throughout the United Kingdom, including Northern Ireland, will be closely monitored to determine the impact of the proposals?

Mrs. Beckett

I can certainly assure the hon. Gentleman that the commission took fully into account the circumstances of areas such as Northern Ireland. The commission visited Northern Ireland and took evidence. The commission is confident, as are we, that its proposals, which we have accepted, can be implemented to the considerable benefit of people in the Province and throughout the United Kingdom.

Mr. David Winnick (Walsall, North)

I have some reservations about the rate for young people. No doubt there will be opportunities to pursue that. Is it not sickening that Members of Parliament with substantial incomes in addition to their parliamentary salaries should be so passionate in favour of starvation wages? Should we not take every opportunity to tell the electorate that Tory Members were willing for us to stay up all night on 9 March to fight for a principle that they believe in so passionately—that people in this country should continue to have starvation wages?

Mrs. Beckett

My hon. Friend is right. It was difficult to detect a consistent theme from the right hon. Member for Wokingham (Mr. Redwood) or from Conservative Back Benchers, but it is clear that, at the next election, the Conservative party intends to threaten 2 million of our poorest fellow citizens with wage cuts.

Mr. Philip Hammond (Runnymede and Weybridge)

The right hon. Lady is not the only person to have had to eat a good portion of humble pie in these proceedings. The Minister of State, Department of Trade and Industry, the hon. Member for Makerfield (Mr. McCartney), launched a scathing attack on Conservative Members in Committee when we suggested that tips should be taken into account in calculating whether the minimum wage had been paid. The right hon. Lady has told the House that tips will be taken into account when they are paid through the payroll. Has her hon. Friend offered his resignation? Now that the rate and the details of the applicability of the minimum wage are known, what figure has the Treasury model given her for the number of jobs that will be lost as a result of its introduction?

Mrs. Beckett

I have already dealt with the issue of tips. My hon. Friend was right to say that tips will not be included. They will not be included unless they are part of proper remuneration, not a random figure. The hon. Gentleman says that I should feel humble today. I strive always to feel humble, because that is better than suffering from the conceit and arrogance of the Conservatives. Despite my efforts toward humility, what I feel today, standing at the Dispatch Box to advance and defend the national minimum wage, is pride.

Mr. Huw Edwards (Monmouth)

May I welcome my right hon. Friend's statement? It represents the most important advance in employment rights since the Equal Pay Act 1970, which was also systematically opposed by the Conservative party. Will she join me in congratulating all those who campaigned for a national minimum wage—trade unions and organisations such as the Low Pay Unit—and the Ministers who took the legislation through Committee in the face of the Conservative party's continual opposition?

Mrs. Beckett

I am extremely grateful to my hon. Friend, who is entirely right. He is probably too young to remember the introduction of the Equal Pay Act, but I vividly remember it, I remember what the Conservative party said about how it would harm employment and how people would lose their jobs. I also remember that, at that time, I was living in the household of a lone parent who did not receive equal pay. The introduction of the Act by a Labour Government made a big difference to our standard of living.

Mr. Cynog Dafis (Ceredigion)

Can the President of the Board of Trade tell us whether the party Whips have identified the Minister who was quoted in today's edition of The Guardian, who said that the Government's proposals were unacceptable because they failed to protect those who have least, while allowing very high rates of pay and increases in pay at the top level? Would it not be easier to stomach some of the Government's arguments if they were prepared to increase the higher rate of tax to bring greater resources into the public sector to provide the quality services and social investment that we desperately need? Is not it astonishing that a Labour Government are not prepared to bite that bullet?

Mrs. Beckett

The hon. Gentleman has strayed rather far from the issue of the minimum wage; he is talking about the general issue of taxation policy. I hope that he, like all of us on the Labour Benches, very much welcomes, for example, the proposals of my right hon. Friend the Chancellor of the Exchequer to introduce the working families tax credit. The hon. Gentleman is talking primarily about the public sector. He must surely have observed that large numbers of the 2 million people who will benefit from the introduction of a national minimum wage work in the private sector. That is where the worst exploitation takes place.

Mr. John McAllion (Dundee, East)

Everyone accepts that young people undergoing training cannot expect to be paid the rate for the job, but few would accept that young people should be discriminated against simply because they are young people. Already, under-25s are paid a low rate of income support and are subjected to the injustice of the single-room rent allowance simply because of their age. Now, 18 to 21-year-olds will be paid a lower national minimum wage simply because of their age. How can young people take seriously our talk of trying to tackle social exclusion when we exclude them from the rights of every adult citizen simply because of their age?

Mrs. Beckett

Of course, I have every sympathy with my hon. Friend's concern to draw young people into the community and to avoid social exclusion. In a variety of ways, the Government are seeking to offer young people good training opportunities to try to ensure that they can secure jobs. That is very much the key to their prosperity. I do not share my hon. Friend's view that it is particularly damaging to young people to be offered a development rate of the national minimum wage. As I said earlier, the Low Pay Commission looked very carefully at the area. I am confident that, despite his concerns, he has not overlooked the fact that very many young people—some 200,000—will benefit from today's announcement even at the rates that we are proposing.

Mr. Nicholas Soames (Mid-Sussex)

Will the minimum wage be index-linked to inflation?

Mrs. Beckett

That has not been proposed by the Low Pay Commission; nor, indeed, is it proposed by the Government. Despite having, as I understand from the Register of Members' Interests, some seven paid jobs, I am glad that the hon. Gentleman is showing concern for the low-paid.

Mrs. Maria Fyfe (Glasgow, Maryhill)

May I ask my right hon. Friend to have another look at tipping? Does she agree that when a customer tips for service, that customer does not expect the employer to skim off money for costs that ought to be paid from the profits of the business; and that if the employer is doing that, he is robbing the employee of money that the employee should have? If so, are we not getting into dangerous waters to count tips at all? Should they not be considered a top-up to a basic wage, whatever that basic wage happens to be?

Mrs. Beckett

I understand and sympathise with my hon. Friend's concern, and I can tell her that that is what is going to happen. It is intended that commissions, tips and gratuities paid through the payroll will be taken into account in assessing the national minimum wage, in the same way that they are now taken into account for taxation. That is the way these issues are handled at present, and they will continue to be handled in that way in the application of the national minimum wage.

Mr. James Paice (South-East Cambridgeshire)

Will the President publish and tell the House now of any assessment that she or the Chancellor has made in respect of the restoration of differentials and the impact of her proposals on other pay?

Mrs. Beckett

The Low Pay Commission looked at the issue of the restoration of differentials and, from its careful assessment and its deep, detailed studies in the labour market, it believes that the impact on differentials would be minimal. I remind the House that, with great respect to those who are theoretical economists, the commission was not making a theoretical assessment, but was operating and taking evidence from those who have practical experience in the marketplace. It is on that basis that the commission made its observations.

Mr. John Cryer (Hornchurch)

What guarantee can my right hon. Friend give that 16 to 18-year-olds will not be exploited?

Mrs. Beckett

There is a whole range of other measures that apply to 16 to 18-year-olds, including rights to training, which we believe will be beneficial to them. I can only say that we do not take the view—nor, if I may remind my hon. Friend, did the Low Pay Commission—that 16 and 17-year-olds should be included in the structures of the minimum wage.

Gillian Merron (Lincoln)

In welcoming my right hon. Friend's announcement, Labour Members share her pride in seeing the arrival of the first ever national minimum wage in this country; it has been consistently opposed by the Conservatives. Can my right hon. Friend tell the House about anticipated savings in the welfare benefits bill? We have heard about the benefits to the 2 million low-paid people and the benefits resulting from the boost to the economy, but the taxpayers of this country and others will also benefit. Can my right hon. Friend give us an estimate?

Mrs. Beckett

My hon. Friend is entirely right. I know that she is one of those who, night after night, valiantly bore the heat and the burden in the Standing Committee on the Bill to get the legislation on the statute book. She is right to say that one of the beneficial effects of the legislation will be substantial savings to the taxpayer. I noticed that the shadow Secretary of State chose to dress up, in references to an overall minimum income, a call for substantial taxpayer subsidies to people who exploit by paying poverty wages. We do not share that view.

I have to tell my hon. Friend that I am not in a position to give the estimates for which she calls. It may be possible over time for people to do some calculations, but 1 have no figure before me for savings on the tax bill. However, we all know that, at the present time, the subsidy from taxpayers for low pay is about £1.5 billion, and we expect that substantially to reduce.

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

Are the Government slightly embarrassed that the Government of the Republic of Ireland have recently proposed a minimum wage there of £4.40 per hour?

The Low Pay Commission's recommendation that the national minimum wage should be £3.70 in 2000 is the very first recommendation in its report, which seems to signify that it is seen as a key recommendation. How does the right hon. Lady square her non-acceptance of that with the fact that she says that the Government are accepting all the key recommendations?

Mrs. Beckett

First, the Republic of Ireland has different structures and different pay rates, but, if its Government were having to introduce a minimum wage today, cold, on the basis of a labour market that had been exploited and neglected as ours was under the Conservatives, I am not at all sure whether they would choose to introduce it at that rate. It is the Government's concern to get the right rate and level of introduction.

The hon. Gentleman also asked about the recommendation on the development rate. I repeat that the Low Pay Commission made a small number of key recommendations, which we have accepted. We have said that we will phase in that recommendation for that group in the first year.

Mr. Tony Baldry (Banbury)

Will the President of the Board of Trade accept that if the minimum wage rate is set at or below the market rate, it will simply be otiose and, if it is set above the market rate, it will simply lead to a loss of jobs? Has the right hon. Lady estimated how many jobs will be lost, has she simply not estimated that, or has she done so but is not prepared to share the estimation with the House?

Mrs. Beckett

If the hon. Gentleman is worried about employment levels, he could give up one of the six jobs that he has. He has made that point before ad nauseam and there is nothing more nauseous than listening to well-paid Conservative Members defending a system in which, as my hon. Friend the Member for Sunderland, South (Mr. Mullin) pointed out a few moments ago, some people receive sums as low as 89p an hour. I am disgusted that the Conservative party defends that.

Mr. Chris Pond (Gravesham)

While not wishing to undersell my hon. Friend the Member for Sunderland, South (Mr. Mullin), may I point out that cases of 49p an hour are not uncommon? That is why Labour Members welcome my right hon. Friend's statement. Is she aware that her pride in it will be reflected in the welcome that it will receive throughout the country? Many people will think that the statement by the shadow President of the Board of Trade that the minimum wage is fool's gold is adding insult to the injury that the Conservative party created for the low-paid for so many years. Will my right hon. Friend confirm that when the Low-Pay Commission is asked to reconsider the appropriate rate for 21-year-olds, it will also be asked to consider the appropriate rate for 18 to 20-year-olds in relation to the adult rate?

Mrs. Beckett

I thank my hon. Friend for his remarks. Of course, all hon. Members—certainly those on the Labour Benches—are aware of the long and honourable record that my hon. Friend has in campaigning on the issue. I am sure that he is as pleased as we are that we are so close to achieving the introduction of a national minimum wage. He asked about the proceedings when the Low Pay Commission reconsiders the rate for 21-year-olds. We are anxious for it to begin that reconsideration during 1999, and to make early recommendations. Of course, it will be its role in general to monitor, keep under review and, from time to time, advise on rates and, indeed, the process and pattern of what is happening as we introduce the national minimum wage across the board.

Several hon. Members


Madam Speaker

Order. Thank you, Mrs. Beckett. I am bringing this statement to a close.