HC Deb 09 March 1998 vol 308 cc83-121

'.—A person who is a director of a limited company does not qualify for the national minimum wage in respect of that employment.'.—[Mr. Lansley.]

Brought up, and read the First time.

Mr. Lansley

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this, it will be convenient to discuss the following: New clause 5—Directors of companies— '.—A person who is a director of a company is not entitled to the national minimum wage in respect of his or her employment by that company.'.

New clause 10—Exclusion of severely incapacitated persons—

  1. '.—(1) The Secretary of State may, after consultation with the Low Pay Commission, make an order exempting incapacitated persons from the provisions of this Act.
  2. (2) An order under subsection (1) above shall provide for the issue of permits by the Secretary of State to those persons whom he believes to be incapacitated and may make provision for—
    1. (a) the procedure for applying for and issuing such permits;
    2. (b) the procedure for establishing the minimum wage to which each permit holder shall be entitled (being less than the single hourly rate prescribed under section 1(3) of this Act);
    3. (c) the appointment by the Secretary of State of suitably qualified persons to assess such applications; and
    4. (d) the procedure for appealing against a refusal to issue such a permit
  3. (3) No person shall be guilty of an offence under this Act in respect of an employee who holds a permit issued in accordance with an order made under this section.
  4. (4) For the purposes of this section, a person is incapacitated if he is so affected by physical injury or mental deficiency or infirmity due to age or any other cause as to be incapable of earning the national minimum wage.'.

Amendment No. 70, in clause 1, page 1, line 14, leave out from `(c)' to end of line and add 'is over the age of 18 years'.

Amendment No. 79, in clause 3, page 2, line 42, leave out '26' and insert '18'

Government amendment No. 21.

Amendment No. 53, in clause 4, page 3, line 10 after `State', insert `acting on the advice of the Low Pay Commission'.

Government amendment No. 22.

Amendment No. 54, in page 3, line 11 after `descriptions', insert 'or deleting existing descriptions.'

Government amendment No. 23.

Mr. Lansley

Hon. Members will note that the group includes some amendments and new clauses relating to different issues. New clause 4 directly reflects the substance of new clause 5, but is expressed slightly differently. I am sure that hon. Members will wish to elaborate on the new clause and the amendments.

The new clause seeks to exclude from qualifying for the national minimum wage those who are employed by companies of which they are directors. Its purpose is straightforward. It became abundantly clear in Committee that, elsewhere in the legislation, the Government took pains to assure the Committee that the Bill did not intend to treat as qualifying for the minimum wage people who were genuinely self-employed. I shall not enter into the debate about what constitutes genuine self-employment, because we have had several debates on that.

If it is agreed that the Government are right in their intention that self-employed people should not qualify for the minimum wage, it would serve us well to understand why. If people are employed, or are workers who have a contract with another person, the Government say that that person should be constrained to pay the national minimum wage. However, the Bill does not intend to constrain people to pay themselves the national minimum wage. There would be all kinds of absurdities and perversities if that were so. Self-employed people would have to pay themselves the minimum wage, although that might cause the business to fail or, in some curious way, they would have to treat the resources of the business as separate from their own resources. Those are strange outcomes, and in the context of the Bill it is right to exclude the self-employed from the national minimum wage.

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The argument proceeds directly to those who are directors of companies, in that, acting corporately, such people have the ability to determine their own pay. The new clause has been introduced with that in mind.

Speaking not legally but substantively, there are two kinds of directors, and we all recognise them in practice. There are directors of large companies and directors of small companies, and it may be argued that the former do not necessarily determine their own pay. It may be determined by a remuneration committee of the board of directors, which may include non-executive directors, and it could be said that executive directors might somehow run the risk of the corporate board paying them less than the national minimum wage. We should treat that as technically correct but substantively pointless, because the majority of directors of large companies will be paid well in excess of the national minimum wage, and no benefit is served by seeking to ensure their inclusion in qualifying status.

Quite a different practice applies to the directors of smaller companies, who are much more numerous. They will determine what they are to be paid by the business of which they are directors.

Mr. Ian Bruce

I do not want to nit-pick, but I think that my hon. Friend is wrong in excluding that group. In a company in which a body of people decides a director's pay, the director may, because the company is doing badly, volunteer to take no pay that year. In that event, his company could be prosecuted because he was doing what Labour Members say fat cats should do when they do not make a profit, which is not to take any pay.

Mr. Lansley

In practice I do not think that we disagree on that. Whether the company is large or small, its directors have a responsibility to it. It is not simply that they may choose not to take a salary that is equivalent to the national minimum wage—which might apply in a small company in straitened circumstances—because, as directors, they may have a legal responsibility not to do so. For maintaining the company's business, it may be necessary for them not to extract profits and pay themselves salaries above a certain level in pursuance of their wider responsibility to the company as a corporate body.

Mr. Bercow

My hon. Friend's comments about the directors of small companies are especially pertinent in the light of the information that we discussed in Committee. My hon. Friend will recall that that information related to the evidence that the take-home pay of many small business men is lower than that of many of their staff.

Mr. Lansley

That is right, but I shall not replay the Committee debate on small businesses in general. Many of the arguments in that debate apply a fortiori to directors of small companies who determine their own pay. By incorporation and by becoming directors, they are often seeking to create a growing business. Often in those early years—I am reasonably familiar with it; I know that my right hon. and hon. Friends are at least as familiar with the process as I am—withdrawals from the business are necessarily very modest, and may at certain points fall below the national minimum wage level.

That is one reason why low-income statistics are often distorted to an extent by people who draw apparently very low incomes. They may, for example—I know this well from constituency experience, as other hon. Members will—have been in reasonably well-paid employment and have left it to start up their own business; they are either self-employed or they form their own company and are directors of that company. For some period, perhaps two or three years, they take virtually no income from that business, because they are establishing it.

Of course, perversely, those people appear in income statistics to have little income, but they have a certain amount of expenditure. Of course, that is because they are maintaining their expenditure out of assets—their personal assets, as it were—while the business is building up by virtue of theirdesire to turn it into a growing company.

The perversity of the Bill is that, at that moment, as directors of the company, their intentions may be frustrated by a legal obligation—regardless of their desire as directors—to withdraw money from the business to pay it to themselves as individuals. I will not elaborate, but I know from discussions with my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), who will explain it better than I, that tax consequences may flow from an obligation to withdraw money out of a loss-making business to pay wages. From the tax point of view, it may be perverse to force directors to do that.

New clause 4 has been tabled in pursuance of the Government's aim in relation to the self-employed. [Interruption.] It is desirable in relation to small businesses, and it is particularly apposite in relation to company directors.

Mr. Ian Bruce

As my hon. Friend is concentrating so hard on his speech—and the examples that he has given have all applied to me personally—I wonder whether he heard Labour Members mutter and say that he was completely wrong. If the hon. Member for Chorley (Mr. Hoyle) does not believe us, I shall show him the accounts.

Mr. Lansley

My hon. Friend helps me, because I was concentrating on addressing my remarks to you, Mr. Deputy Speaker, and I was not able to pay attention to what was said by Labour Members, but everything that I have said has been directly borne out by the personal experience, if not my own, then that of persons I have met in my constituency or in my time as deputy director-general of the Association of British Chambers of Commerce, where I had the privilege to serve directly many people who had started a business, and had gone through precisely the processes that I have described, often deriding in the process the cosy analyses of Government Departments, of whatever political persuasion—before I am chided by Labour Members—for which the risk of failure is often measured in terms of being moved sideways to a different job. For a small business, the risk of failure is measured in terms of the loss of one's home, all one's security and much for which one might have worked for many years.

Mr. Syms

I am following my hon. Friend's arguments carefully, and he makes a persuasive point. Often a husband and wife start a small business. Both may be committed to it. One of them, sometimes the wife, who may do the book-keeping, may not derive a full salary, and that may cause a problem.

Mr. Lansley

My hon. Friend makes an interesting point. By virtue of an earlier new clause, the spouse of someone who is, let us say, the more active director in a small business that is starting up could hardly be treated as a volunteer in that business; the new clause would not allow such a thing. That person could not contract out of the national minimum wage, because a later clause in the Bill forbids it, so, although a company is required to have two directors, the second director may of necessity be treated as an employee or worker for the purposes of the legislation, and be paid a national minimum wage.

Then it becomes a question of record keeping and all that goes with it, even if the hours worked are deemed to be relatively few. Many people who are starting up small businesses already feel that the burden of record-keeping to which they are required to pay attention is great. There will be a serious difficulty in terms of the constraints to pay those persons who are involved a particular withdrawal from the business and in terms of record keeping. However, incorporation itself brings all the disadvantages that are associated with having to make withdrawals from the business, to pay a certain wage, to keep records, which is perhaps at least as difficult, and to make returns on those records to an enforcement officer, who acts on behalf of the Secretary of State.

All that acts as a perverse disincentive to incorporation, when in recent years so much effort has gone into ensuring that business decisions are as much as possible taken for reasons associated with that business itself, rather than by virtue simply of the Government's actions. However, this is another set of actions by Government which may lead to an obstacle falling between a self-employed person or a sole trader acting in that capacity and someone who seeks corporate status.

Before others speak to it more expertly than I do, may I say that new clause 10 is well constructed, reflecting as it does the structure of the parallel provision within the agricultural wages board legislation. As I said only obliquely and briefly during the Standing Committee, I am aware of exactly the type of circumstances in which people with severe disabilities are encouraged to enter the workplace.

Absolutely nothing in new clause 10 is designed to frustrate that, but it makes different provisions—I know this from the Papworth hospital NHS trust in my constituency—about the mechanism by which remuneration is given to persons with severe disabilities, learning disabilities or incapacities, often of a physical nature, so that those persons still have a full incentive to enter work, rather than to remain wholly on benefits, and an incentive remains for the employer.

It would be disadvantageous if the Bill had no provision for permits of that type, acted as a disincentive to that happening, or interfered with the mechanism by which some of those arrangements to support disabled people into work occur. It may not necessarily be advantageous for the payments to be routed to the employer and then back to the individual through wages. It may sometimes be better for them to be made directly by a supporting body to the individual, while the employer pays a wage that is discounted by some factor in relation to an individual's incapacity.

In Standing Committee, Ministers were often at pains to emphasise the desire to have additional flexibility. Amendment No. 54 is designed to achieve exactly that purpose: to give Ministers the flexibility, using their power under clause 4, to add descriptions of persons who might be treated as not qualifying or for whom a different rate might be prescribed, and to delete descriptions of persons. I do not think that there is any particular agenda in mind in tabling amendment No. 54, but it is entirely laudable that the amendment gives Administrations, including futur Administrations, that flexibility.

Amendment No. 79 needs to be debated at some length. It seeks to remove the flexibility within the legislation to prescribe a different rate for persons aged over 18 and under 26. If one considers the Government's evidence to the Low Pay Commission, one can see the direction in which the Government are moving. Clearly, they are looking towards treating those under the age of 26 as a reasonable proxy for those who are in training in one form or another.

The Government do not want a separate training rate, which is much sought by business, for good reason. They hope that, instead of having all the difficulties of defining who is a trainee and what they may assert as the potential subsequent disincentive of having a lower training rate—which might cause people to take jobs without rather than with training—they have a young person's national minimum wage rate. All the evidence suggests that, whether that is right or wrong, the Government are likely to mitigate thereby the adverse economic and job consequences of the national minimum wage.

I recall a study in Spain that concluded that young persons were far more likely to be adversely affected in their job prospects by the imposition of a national minimum wage at a uniform rate, so it is right to have regard to young persons, and to recognise the conclusions of that study.

Several hon. Members


Mr. Lansley

I will give way to the hon. Member for Birmingham, Selly Oak (Dr. Jones), who has sat through all the proceedings today.

Dr. Lynne Jones (Birmingham, Selly Oak)

Does the hon. Gentleman recall the experience in this country after the Wages Act 1986? The minimum rate set by wages councils was abolished for the under-21s, and there was no increase in employment for young people—in fact, exactly the opposite.

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Mr. Lansley

This is not a criticism, but the hon. Lady does not have the benefit of having sat through our discussions in Committee. If she had, she would know that it is extraordinarily difficult to assess the impact of a minimum wage in a growing economy. The growth in the United Kingdom economy after 1981 and the growth in employment after 1986 were such that it was difficult subsequently to draw conclusions.

The academic evidence shows that it is better to study the inter-war years and the impact of minimum wages in agriculture. Within one overall economy—we can assume that, broadly speaking, the broader economic movements were the same—the minimum wage was varied even by county. Where the minimum wage was higher, there were adverse job consequences. Within one economic area, a variation in one parameter—the minimum wage—led to positive or negative job consequences.

Mr. Bercow

Does my hon. Friend agree that the problem for Labour Members is that they always look for a mechanistic relationship, but almost invariably the relationship is not mechanistic? There is no greater logic in what the hon. Member for Birmingham, Selly Oak (Dr. Jones) said than in the statement in Committee by a number of Labour Back Benchers that there were low wages in particular parts of the country in the early 1980s, but unemployment rose nevertheless. If there were low wages but unemployment rose, the implication is that therefore there is never a case for low wages. There is no logic in that—there might be in the minds of Labour Back Benchers, but not in the minds of more sagacious people.

Mr. Lansley

I am grateful to my hon. Friend, who made his point well.

Mr. Ian Bruce


Mr. Lansley

I will give way to my hon. Friend one final time.

Mr. Bruce

I hope that it is not the final time. My hon. Friend is missing one point. The effect of wages councils setting particular wages for particular age groups was very effective in my business. I ran an employment agency, and usually the companies I supplied were not affected by wages councils. If someone was doing a job, whether aged 16, 17, 18, 20 or 80, he got the same rate of pay. It was only when dealing with the Aerated Waters Wages Council, which set lower rates of pay for 16, 17 and 18-year-olds, that I was forced by employers to pay them less money, because that was required by the wages council.

Mr. Lansley

My hon. Friend initiates consideration of an issue that might well repay being examined at greater length, but it is better that he should do so than that I should attempt to do so.

Hon. Members seem to want to draw implications from the experience of the wages councils, so we could look at the relatively closed circumstances of the Agricultural Wages Board. The structure of the wages council is to be jettisoned in favour of a uniform structure. That raises the question why, if Labour Members want to replicate, through the national minimum wage, what they perceive, perhaps erroneously, to be the benefits of past wages; councils structures, they do not replicate the structure of wages councils in their variations in respect of, for example, casual workers and the Agricultural Wages Board.

I rose to move new clause 4 and to make only brief comments on the new clauses and amendments grouped with it, so I shall leave it to others to refer more specifically to them.

Audrey Wise (Preston)

The only phrase that unites the new clauses and amendments is that they refer to "persons who do not qualify." I want to distinguish my amendment No. 79 from the other new clauses and amendments in this group. There is a clear distinction. Conservative Members want to increase the number of people who do not qualify; my hon. Friends and I want to protect the position of those aged under 26. We want them to qualify for the minimum wage.

I am obliged to the hon. Member for South Cambridgeshire (Mr. Lansley), who did me the favour of attacking my amendment. That was both helpful and convenient. Before coming to the meat of my amendment, I want to commiserate with my hon. Friends on the Front Bench and those who served in Committee. I have had four and a half hours of Conservative Members wasting time; I dread to think how I would have felt had I suffered the many hours suffered by my hon. Friends—

Mr. John Healey (Wentworth)


Audrey Wise

I double my commiserations. Concerned as I am about those under 26, there have been times when I have thought that some of the arguments in the previous debates were put by those under six.

Clause 3 says of those who have not reached the age of 26: The Secretary of State may by regulations prevent them from being persons who qualify for the national minimum wage. That is of great concern to us. As an alternative, the clause says that there could be a different rate for those under 26. Clearly that means a lower rate.

Those under 26 are certainly persons—they are adult persons. My amendment would replace the age of 26 with the age of 18. When someone becomes 18, he can vote for the Government or fight for his country. In many jobs, especially those likely to benefit from the minimum wage, those over 18 get the adult rate—especially if they are lucky enough to work somewhere that is trade union organised. Trade unions have fought for the adult rate at the age of 18 in exactly those jobs that would benefit from the minimum wage, and for many years they have succeeded.

Under-26s are certainly adults. Many will have children. I had been married for more than seven years, and had two children by the time I was 26. I would have been deeply offended, affronted and horrified, and would have thought it bizarre if anyone had suggested that I was not an adult until I was 26. Some of those who might not qualify for the minimum wage are lone parents, about whom we have had much discussion. Many under-26s, including lone parents, will certainly have many heavy responsibilities.

The school-leaving age is 16. By the age of 26, many people will have left school for 10 years, and they will have been working, hopefully, for most or all of that time. I was therefore surprised—to say the least—to note that the Government felt it necessary to include clause 3 in the Bill.

I very much welcome the Bill, and I admire the tenacity with which my hon. Friends on the Front Bench have stuck to a single national rate and fought off all the blandishments suggesting all types of other complicated arrangements. They have been quite right in doing so. However, while there is a possibility of excluding those under 26, we must continue to feel alarm about the Bill's universality.

Mr. Hammond

Has the hon. Lady also noticed that, in clause 4, the Secretary of State will have powers to exclude persons over the age of 26?

Audrey Wise

We are debating clause 3. As we are debating clause 3, I shall speak to that. The hon. Gentleman's intervention does not encourage me in giving way to Conservative Members.

Mr. John Redwood (Wokingham)

I quite understand where the hon. Lady is coming from with amendment No. 79. Were I a socialist, I am sure that I would want to do the thing properly, which would mean a comprehensive minimum wage. Can she explain to the House why the Government are letting down her and other Labour Members in such a manner? Can she account for Ministers' conduct in leaving out what a socialist would consider the guts of the Bill?

Audrey Wise

The right hon. Gentleman says that he knows where I am coming from—of course he does: I am coming from Preston, where many people are sorely in need of a minimum wage. I need no lessons from Conservative Members, who have tried as much as they possibly can to obstruct the Bill's passage and resorted to the most childish arguments—because there are no good arguments against the Bill. Although this debate is being held on the Floor of the House, I am afraid that our conversation and the controversy will have to be rather more exclusive.

Mr. Bercow

Will the hon. Lady give way?

Audrey Wise

No, I will not give way to the hon. Gentleman. I have already had to endure his efforts for all too long. Let us keep to the matter, which is between me and my hon. Friend the Minister, who I know will be listening seriously to our arguments.

People are adults long before they are 26, and many people under 26 will have heavy responsibilities. They will certainly be responsible for their own upkeep. From the age of 18, it is quite clear that no one else will have responsibility for them. It is not difficult to establish their needs. I should be very interested to hear whether an argument could be made that one has to wait until 26 before accumulating adult income requirements.

People might ask, "Can those under 26 do the job? Do they do the job?" Some jobs are more complex than others. However, as I have already said, and as my hon. Friend the Minister will know very well—as he understands these matters very well and has a similar background to my own—many trade unions have established the adult rate at 18, and it would be very divisive if working people over 26 were afraid that they would lose their jobs because employers preferred to use cheap labour. Those working people over 26 would therefore be aggrieved. Those under 26 would be equally aggrieved, because they do not want to be cheap labour. Therefore, neither those over 26 nor those under 26 would be happy if the clause were activated.

Clause 3 is an empowering clause. My main objective in tabling my amendment and in speaking to it is to make it quite clear that a substantial number of people who are loyal supporters of the Government would be deeply dismayed if the clause were ever activated. I am very sorry that the clause—which hangs there, like a rain cloud—is in the Bill. However, it does not have to be activated.

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I therefore ask the Minister for some assurances. I have read the Committee's proceedings on clause 3, and was very pleased to see that he said that he did not want people under 26 to be used as "skivvy labour", as they had been in the past, and as some of them still are. I very much welcome that assurance.

My hon. Friend also said of clause 3: The proposals are consistent with the concept of the universality of the Bill."—[Official Report, Standing Committee D, 27 January 1998; c. 367.] I do not understand that. Universal application of a national minimum wage should mean that it was applicable to all adults. I listened to our earlier debate on the voluntary sector, and I well understand those provisions in the Bill and have no quarrel with them. However, we are talking now about employees who earn a living by selling their labour, and the national minimum wage should apply to them from the age of 18.

I should like clarification from my hon. Friend on a specific matter. In Committee, he said: the recommendations, whatever they are, will be brought to the House for decisions to be made on regulations. This debate is being held in the dark, as we do not yet know the Low Pay Commission's recommendations or how the Government will react to them. There is therefore an element of "just in case" about our debate. However, if anyone thinks that it will be easy to pass clause 3 and to have it accepted with equanimity or approval, they are wrong. If it is in the Bill just in case it can be got away with, many of my hon. Friends and I will do our level best to ensure that it is not got away with.

I should like to be as helpful as I possibly can to my hon. Friend the Minister, because Ministers really have done a very good job in the other parts of the Bill. It would be very helpful if he can assure me that his statement in Committee means what I think it means—that the recommendations, whatever they are, will be brought to the House for decisions to be made on regulations."—[Official Report, Standing Committee D, 27 January 1998; c. 370.] Does "the House" mean the Floor of the House—this Chamber? Will we be able to debate any regulations here? I am sure that many hon. Members would very much welcome such an opportunity, if that is what it is.

We do not want to feel that establishing the terms of a minimum wage is a matter of now or never—which it should not be, as there are many contingencies of which we are not yet aware. I hope that the Minister will be able to reassure me on that matter.

Much has been said about Ministers wanting to hear the Low Pay Commission's recommendations. I regret that the age issue was even referred to the Low Pay Commission, as such a referral gives the impression that the matter is somehow technical.

I hope I have made it clear that I do not regard this as a technical matter. I regard it as a matter of adults doing adult jobs and having adult responsibilities, who may yet find themselves excluded from the national minimum wage. I hope that that will never happen: I hope that the Low Pay Commission will not recommend it, and I hope that, if it does, the Government will not accept its recommendations.

Mr. Bercow

Will the hon. Lady give way?

Audrey Wise

No. I referred to the under-sixes, and I had the hon. Gentleman in mind more than any of his hon. Friends. [HoN. MEMBERS: "Some under-sixes are very bright."' There are arguments that are childish, with which it is not wise to delay the House. There are other arguments that relate to whether real people will be able to buy real food for real children, have a decent standard of living and not have to wait for that to happen until they reach the age of 26. It is because I share my hon. Friend the Minister's commitment to the Bill that I want to ensure that it is not undermined by this proposal, with all the divisiveness that that would entail.

I hope that my hon. Friend will accept my remarks in the spirit in which I have made them. He will not be surprised to hear that they were made in a spirit not only of helpfulness, but of determination. I also hope that he will give me the assurance about procedure that I sought.

Mr. John Redwood (Wokingham)

I wish to speak to new clause 10, and also to comment on new clauses 4 and 5, which concern directors; on amendments Nos. 70 and 79, which relate to age-specific matters; on the Government amendments, which also cover the issue of age; and on amendments Nos. 53 and 54, which comes under the general heading "Persons who do not qualify".

I pay tribute to my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) for his excellent speech, and for all the hard work and common sense that he put into the Committee stage. I also congratulate other members of the Committee who have done a great deal to probe and test the legislation. As we are seeing this evening, however, much remains to be done.

We enter the Report stage, as we entered the Committee stage, in the spirit of wishing to offer constructive amendments in an attempt to deal with some of the more obvious pitfalls that the original legislation was likely to create. We welcome some of the Government amendments that we have seen so far, and my hon. Friend the Member for Daventry (Mr. Boswell)—who has done so much good work—has already welcomed the move that has been made in the right direction in a couple of instances. Nevertheless, we feel that Ministers should reconsider before the Bill's passage is completed, in order to avoid some obvious difficulties—difficulties that could rebound to hurt the very people whom I think the Minister and some of his hon. Friends intend to help. We wish those people no ill, and we want the Minister to think again.

It is difficult to discuss the range of exemptions from the Bill without knowing the level at which the minimum wage is likely to be set. The main worry that anyone has about the Bill is the worry that it could destroy jobs—the fear that it could cost people their jobs if the minimum wage is too far above their current level of pay. That could happen if employers were forced to pay the national minimum, and chose to cut the numbers that they employed at the same time.

That is our main worry about the Bill. It is not that we want low pay. My hon. Friends and I have often stressed that we want the highest possible pay for people, earned in the normal way in the marketplace. We want policies that promote high pay by creating the conditions for success. Nor do we think that people should have to live on some of the low wages that are still unfortunately paid. We have always supported—and I think this is bipartisan—a minimum income with top-ups from benefit. Of course we would like Ministers to succeed in ensuring that more of people's money comes from employment and less from benefit—that, too, is common ground—but the issues concerning exemptions relate to a central question: would jobs be lost if the minimum level were set too high, and if too many people were included in the proposals?

What is surprising is the way in which the Government began. They began with the pure doctrine that it is possible for a Government to legislate for any level of wages that they choose without any consequences for jobs, but we have seen them slip and slide closer to our position, which is that to legislate for too many people at too high a level is to undermine job opportunities.

When the President of the Board of Trade launched the Bill on its tortuous journey on Second Reading, she offered minimum wage protection for all workers. In Committee, we saw the armed forces exempted from that promise. Tonight, we shall see whether all those under 26 will be exempted, or whether they will be given a lower rate or rates as a result of a powerful provision which, understandably, upsets the hon. Member for Preston (Audrey Wise) and some of her hon. Friends.

Mr. Ian McCartney

I intervene on a point of information. Clauses 3 and 4 were in the Bill on Second Reading, and the Government made no amendments to them in Committee. The Government amendments that we are discussing now are intended to clarify that position; they are not related to principle. We shall deal with the armed forces later, but the Armed Forces Pay Review Body will take care of armed forces personnel, and civilians in the armed forces will be covered by the national minimum wage.

Mr. Redwood

That was a brave effort, but the Minister protests too much. The armed forces proposal was made in Committee, after a period of sustained pressure on the part of the Opposition. Opposition Members said that the Bill was capturing too many people, and that problems were likely to result from such a wide coverage.

The Minister is right to say that certain clauses were in the Bill at the outset, but I am right to remind him about the strong statements—from him, as Minister of State responsible for this important policy, and from his boss, the President of the Board of Trade—that there would be minimum wage protection for all workers. There was no qualification in those original statements suggesting that those under 26 might be left out.

It so happens that people under 26 are the most likely category to be affected by a statutory minimum wage. It is probable that more people under 26 are below any likely minimum wage level than people above that age. The Minister is misrepresenting the history of the legislation. The promise began as a very general promise made by him and by the President of the Board of Trade. We have seen them gradually strengthen the rhetoric in favour of making a series of exemptions, and—in, for example, their evidence to the Low Pay Commission—putting more stress on the idea that perhaps all young people should, after all, be left out of the legislation.

Mr. Ian McCartney

The right hon. Gentleman entirely misrepresents the Government's evidence to the Low Pay Commission. It was completely neutral. We made no recommendation to the commission on any aspect, other than asking the commission to consider the legislation and present proposals. Neither in the public nor in the private domain have we put pressure on the commission to do anything other than that.

Mr. Redwood

To draft clauses as the Government have, and then to write to the Low Pay Commission saying that the one group it should consider is those under 26, clearly implies that the Government think there is a serious argument for exempting all those under 26, or for giving them a lower rate. Otherwise the Government would not have put the clause in, and would not have written to the Low Pay Commission as they did.

Mr. Ian Bruce

Surely the truth of the matter must be that the Government know quite well what they are about to do. They could have asked the Low Pay Commission to make a prior determination. Basically, they are setting out to get through a Bill with which Labour Back Benchers disagree.

Mr. Redwood

I imagine that we share that worry with Labour Members. They may be conned by the measure in terms of the rates not being stated and who will be covered.

Audrey Wise

Will the right hon. Gentleman advise his hon. Friends that my hon. Friends and I are quite capable of telling the Government when we agree or disagree with them? I have not forgotten the many occasions when we were in opposition when I asked Ministers how low was too low in terms of pay, and the answer was never forthcoming. During all those years in opposition, it was crystal clear that no pay was too low to satisfy the Conservatives.

8.30 pm
Mr. Redwood

That is not the position of the Opposition, nor was it the position of the Conservative Government.

Audrey Wise

The right hon. Gentleman should read Hansard.

Mr. Redwood

Until May 1997, the Government made it clear what they considered to be a minimum income for different groups of people, depending on their family circumstances and their outgoings. There was a strong and long record of Conservative measures to boost incomes through family credit, housing benefit and income support for those who were not in employment. Some of them were bipartisan measures that mirrored the policies of previous Labour Governments. It is quite wrong for the hon. Lady to say that Conservative Members have any wish for people to live on inadequate incomes; we believe that in certain cases there should be a mixture of benefit and wages.

Mr. Jeremy Corbyn (Islington, North)

The right hon. Gentleman has not answered the point raised by my hon. Friend the Member for Preston (Audrey Wise). He is correct in saying that the Conservative Government introduced and used family credit as a tool to prop up low wages and subsidise employers. The Conservatives were always very keen on propping up low wages and subsidising employers, but I do not recall any Conservative Minister ever condemning a low wage. However low it was—£1 an hour or 50p an hour—it was never low enough for the Conservative Government to criticise.

Will the right hon. Gentleman briefly say what he thinks the minimum wage should be? I would love to hear the answer—and so would an awful lot of other people. The Conservative Government never condemned any employer for using bargain-basement tactics to force young people into disgracefully low-paid jobs.

Mr. Redwood

I have made it clear that we concentrated on the income going to the individual or family. We set out what we considered to be the minimum levels of income. If it could not all come from employment income, it was topped up by state benefits. The one matter on which the hon. Gentleman and I agree is that we would like those levels to rise and more to come from employment and less from the taxpayer.

The debate between the two sides of the House is not about that but about how it should be achieved. Will we create more jobs by allowing employers to offer jobs and employees to accept them, or by telling employers that they cannot offer certain jobs at certain levels of pay? I submit that, on reflection, the hon. Gentleman will agree that the former position would result in more jobs. If we achieve success in education, training and promoting an enterprise economy, all wages will go up, and that will be good news.

Mr. Bercow

The inane ramblings of the hon. Member for Islington, North (Mr. Corbyn) notwithstanding, does my right hon. Friend agree that the real point that emerges from recent exchanges is that no minimum wage is too high and no loss of jobs is too great to cause the hon. Member for Preston (Audrey Wise) to abandon her ideological enthusiasm for a minimum wage? The realities, the consequences and the net effects are not exactly at the forefront of her mind.

Mr. Redwood

I think my hon. Friend is gently chiding me for expressing any sympathy for the hon. Member for Preston. I am sympathetic to her—I know she does not want my sympathy—because she fought the election in the belief that there would be a fairly high national minimum wage applying to everyone. She could have deduced that also from the early statements of the Minister and the President of the Board of Trade. The Bill, with its ragbag of exemptions, some of which we welcome, must be a terrible disappointment to her.

I sympathise with the hon. Lady, but my hon. Friend the Member for Buckingham (Mr. Bercow) and I disagree with her judgment, and that is why we are not socialists. We do not believe that it is possible legislate to create prosperity in that way. If it were, we would have done it and we would have been more popular, but the Government are in danger of legislating people's jobs away rather than legislating for higher pay for a lot of people.

Mrs. Maria Fyfe (Glasgow, Maryhill)

For the record, and for the sake of clarity, I can recall Conservative Ministers and Back Benchers being asked whether any pay was too low. Although they never gave a figure, they often replied that people should price themselves into work. They repeated that phrase time and again. Is that still their position, or have their views changed?

Mr. Redwood

I shall try to explain again. Ministers said then, and shadow spokesmen say now, that there are levels of pay that are too low to support the family life of the individuals concerned, and that something should be done about it. In government, we introduced ways of topping up those incomes. We also adopted a series of policies that promoted a more successful economy in many years under the Conservatives. During those periods, wages generally rose. The Labour Government are trying to achieve through legislation what we did by economic success. The best way of getting people into jobs that pay well is economic success, enterprise and growth—which is what I trust both parties wish to see. The argument is about how to achieve them.

Mr. Lansley

Before my right hon. Friend moves away from this point, does he recall that, in October 1996, the Organisation for Economic Co-operation and Development produced a report on the possibilities of different forms of welfare for those on low wages or in low-skilled jobs? It stated: This calls for a new income supplement for low-wage jobs, possibly accompanied by a lower minimum wage, to reduce employer costs while retaining a minimum income guarantee. The OECD called for a direct employer subsidy in Europe, but in the United Kingdom we had a rather better system that supported the individual in work.

Mr. Redwood

My hon. Friend is quite right. He makes an extremely powerful point, which leads me to remind the House that there is a contradiction at the heart of the Government's policy of welfare to work. We hope that it remains welfare to work and does not become work to welfare, but one wonders, given some of their measures.

Some of the steps that the Government are taking are designed to lower the costs of employing people in order to produce more jobs. That is the idea behind some of the Chancellor's measures. He may reduce tax on the lower-paid for the same reason—that he wants to increase their net take-home pay to produce a given level of employment income. That is a sensible idea, but how does it square with trying to increase wages by Act of Parliament, running the risk of pricing some jobs out of existence? It is the opposite of what the Chancellor is trying to achieve by other policies.

If we ran the numbers through a computer, we might discover that, after all the twisting and turning, we would be worse rather than better off as the job-destroying effects of measures that increased employer costs—the tax measures and those in the Bill—more than offset the advantages that the Chancellor is trying to offer by means of other parts of his strategy.

Mr. Michael Jabez Foster (Hastings and Rye)

Can the right hon. Gentleman explain the problem in my constituency? Hastings and Rye has the lowest wages in the south-east—something like two thirds of the national average, or a little lower. We also have the highest unemployment rate in the south-east. The problem cannot be blamed on the Labour party, since, until the general election, the constituency had been represented by a Conservative Member of Parliament since 1902 and until recent years there was a Conservative council. Can the right hon. Gentleman explain how there can be areas of low wages and high unemployment if there is some relationship between the two?

Mr. Redwood

I thought that Labour had a solution to that. The Government came to power saying that they would tackle such pockets of persistently and unpleasantly high unemployment in their early days. It is interesting that the hon. Gentleman is seeking the expertise and advice of the Conservatives. He clearly has no confidence in the ability of the Government he supports to solve the problems.

The decline of traditional activities in seaside towns has often been too steep for the creation of new jobs and new opportunities to keep pace. I trust that the hon. Gentleman will work to help to raise school standards, to broaden the horizons of young people leaving school, to ensure that the training offered is of the highest quality and to promote that training to businesses. He is likely to attract more jobs and more businesses by supporting the successful enterprise policies that we followed in the 1980s and the mid-1990s than by following the over-prescriptive and over-regulatory policy that the Minister would like. Countries that have followed such regulatory policies have higher unemployment than Britain—including his constituency.

Sir Teddy Taylor (Rochford and Southend, East)

Does my right hon. Friend accept that, in Hastings, Southend-on-Sea and other seaside towns, one of the problems is not the level of wages, but the fact that, although we have high levels of unemployment, some of our travel-to-work areas have much lower unemployment, depriving us of the grants that many other areas have? Is that not a result of European bureaucracy, which insists that the Government have to take travel-to-work areas into account? Would it not be better if the Government—Conservative or Labour—were free to give help to such areas of high unemployment without the restrictions imposed by foolish Euro-regulations?

Mr. Deputy Speaker

Order. That really is going much wider than the group of amendments allows. I hope that the right hon. Member for Wokingham (Mr. Redwood) will be able to keep within the group.

Mr. Redwood

I shall not be wandering off. My hon. Friend has made his point. I had thought that some Labour Members were tempting me a little wide of the group, although it contains some general issues that relate to how many exemptions there should be, which needed some general exposition.

My hon. Friend the Member for South Cambridgeshire has pointed out that directors are caught by the Bill. He made an important point, saying that a director who wanted his business to grow might find it tax-disadvantageous to pay himself any or much salary. It might be better for him to use the cash coming in to invest in the future of the business and not have to pay himself an income. That powerful consideration persuaded me that his new clause has a great deal of merit, as does new clause 5, which is similar.

I noticed an interesting story in The Times on Thursday 5 March about James McSporran, from a Hebridean island. Mr. McSporran has just retired from one of his 13 jobs. He has been, or is, postman, rent collector, shopkeeper, ambulance man, taxi driver, school bus driver, pier master, registrar, insurance collector, petrol pump attendant, undertaker and proprietor of the guest house. Until five years ago, he was also fire master and coastguard. He may well be a director of one or more of those businesses. If he is not, there may be another Mr. McSporran with a similar portfolio of activities that includes a number of directorships.

Mr. Corbyn

How many directorships does the right hon. Gentleman have?

Mr. Redwood

I have no directorships. My work is cut out keeping up with all the extraordinary schemes coming out of the Department of Trade and Industry and the very badly drafted legislation that it brings before us. The hon. Gentleman is making me deviate from the important subject under discussion.

Mr. McSporran and those like him will have to pay themselves—or be paid—the minimum wage for each of their activities. That is extraordinary. If Mr. McSporran or someone like him is a director of two or three small businesses that provide a community service—doing that work partly for normal business reasons and partly to make a contribution to their community—they are the best judges of whether they need to pay themselves a lot, a little or nothing. With such a portfolio of interests, presumably they have money coming into the family to meet their requirements.

Mr. Corbyn

Before the right hon. Gentleman continues with his extraordinary argument about one person holding 13 jobs, I remind him that the Bill relates to an hourly minimum rate. People can be paid more than that minimum. Is the right hon. Gentleman suggesting that such a person will get 13 times the hourly rate for each job he does? If so, he has clearly not read the Bill.

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Mr. Redwood

The hon. Gentleman is getting confused. My point is that, for someone with 13 jobs—or even four or five jobs—including directorships, it is reasonable that they should be free to be paid a lot or a little depending on their circumstances and the circumstances of the business, rather than having to be paid the statutory minimum for the hours they are working, or say they are working, in that role. The hon. Gentleman should reflect on that.

Mr. Hammond

Does my right hon. Friend agree that it is extraordinary for Labour Members, who are so fond of talking about fat cat directors paying themselves too much out of profits, to want to prohibit directors of companies that might be in trouble and might be faced with the possibility of having to lay off workers from agreeing to take no pay to save the business?

Mr. Redwood

It is extraordinary. My hon. Friend has pre-empted a point that I was about to make. Not only is there the case set out by my hon. Friend the Member for South Cambridgeshire of a director of a business that wishes to grow deciding that that is a higher priority than paying himself a lot—or anything at all—in the early days. There is also the case of the ailing or failing business.

Let us suppose that a failing business has a senior director, a chairman or a chief executive who is also a director who has made—

Mr. Ian McCartney

What about Asil Nadir?

Mr. Redwood

Perhaps the Minister would like to think about the Paymaster General, who has had a lot of experience in business matters. One of the companies that he was involved with got into cash-flow difficulties—I think that that is the polite way of saying it. If such a director had some savings from past financial success to enable him to look after his family, would it not be a public-spirited gesture for him to cut his pay to below the national minimum? Why should he have to pay himself the national minimum if he seriously believes that one way to get the company out of trouble is to cut the costs that he is imposing on it? It would be altruistic for him to forgo money so that some of the staff could be maintained and paid their wages while the company got out of trouble.

Mr. Ian Bruce

My right hon. Friend has missed the obvious point that Lord Simon works for the Government for nothing—or so we are told. Under the Bill, he would not be allowed to do so.

Mr. Redwood

We are not sure how the legislation will treat benefits in kind, of which Ministers get rather a lot. Would they have to attribute as remuneration the diary secretary, the personal secretary, the car, the chauffeur and all the other benefits, which I believe that Ministers without a salary still enjoy? If that was not part of remuneration, the problem that my hon. Friend mentions would become a difficulty. Many businesses are struggling or in difficulty and need to cut their costs. It is rather good if directors offer the lead and cut the costs that they are imposing on the business. As I understand the legislation, it would, to some extent, prevent that.

I do not know whether the Minister and his colleagues at the Department have thought through the consequences in relation to insolvency law. Directors must not knowingly trade while a company is insolvent, and they are under a duty to take all necessary steps to keep a company solvent. The Bill would remove one of the steps that directors could take, particularly if there were an expensive board. Minimum pay requirements would limit the reductions that they could make in board remuneration.

I hope that the Minister will take that matter seriously and try to explain how the legislation relates to directors' duties. What does he imagine would happen if a company were in danger of going into administration? Some directors or former directors of companies have offshore trusts, for example, which can provide them and their families with money to keep them going, and as a result enable them to make the necessary reductions in the charge that they represent on the company.

Another related issue—unfortunately, new clause 9 has not been selected for debate, but new clauses 4 and 5 relate to the same issue—is the employment of a spouse. I hope that I can raise the matter on the hypothesis that a spouse could be employed as a co-director of a small family firm. As one hon. Member has pointed out, a family—a husband and wife team—sometimes wishes to arrange remuneration in such a way that one member earns most of it and the other does not see the need to draw an income but wants to make a contribution to the family concern. The Bill would make that difficult or impossible. Our proposals on directors would at least help where the employment of a spouse took the form of a directorship of the family company or small company. I would have liked more general exceptions, but amendments that would have achieved that have not been selected.

New clause 10, which I tabled, is designed to tackle a very serious and sensitive issue: the question of employment of severely handicapped persons. All of us in the House wish to see disabled people leading the best of lives, and want everything for them that helps them to fulfil their potential. I am sure that hon. Members on both sides of the House are united in wanting disabled people to work where they can and in wishing to see everything done to make that possible. In that spirit, we hope that the Minister will think again about the position of the most severely handicapped people for whom some light work is available.

We have drafted new clause 10 very carefully and cautiously to show that we are not in favour of depressing the pay of disabled people. We have drafted it so as to leave much discretion to the holder of the office of President of the Board of Trade, showing that the proposal is made in the right spirit. We have proposed that the President of the Board of Trade should have a power to make an order under the Act, which would allow the issuing of permits to any groups or individuals who wanted to work and were able to work for less than the minimum wage, where special circumstances made it unlikely that they would be able to command the minimum wage for what they were capable of doing and wished to do.

We have left the power very general. We have not thought out all the details. We would want the matter to be handled with a great deal of sensitivity. For example, it could be a requirement of the issuing of any permit that the individual, and/or his or her carer, would have to want the provision to be implemented before it could be implemented. Otherwise, they could come under the legislation in the normal way wherever possible. I hope that the Minister will look very carefully at the new clause and reflect on whether he may have inadvertently done more damage than he intended to a group whose members need all the help they can get from us all.

Mr. Ian McCartney

I ask the right hon. Gentleman, in the same spirit, to withdraw that last remark. I have never intended any damage to anybody who has a physical or mental disability. I have spent a great deal of my life as a voluntary advocate on those people's behalf. I am sure that it was not the right hon. Gentleman's intention to suggest otherwise.

Mr. Redwood

I did not think that I had made such a suggestion. I thought that I said that the Minister intended well for the disabled, as I do. I hope that the record shows that. If it does not, this is a correction for the record.

I turn to amendment No. 79, to which the hon. Member for Preston (Audrey Wise) spoke interestingly. She combined a fairly ferocious attack on her Front-Bench team with a reluctance to press the matter fully, fearing that she had perhaps gone too far with the new Labour team. She was clearly trying to shame the Government. Having driven a coach and horses through the Government's majestic but ill-conceived proposals, she looked towards the end of her speech as if she might settle for rather less than she originally intended.

I liked the choice of words of the hon. Member for Preston in describing clause 3 as a "rain cloud" over the legislation. We on the Opposition Benches see just a great sky of clouds, and fear that the rain will wet those least able to withstand it. The hon. Lady sees it the other way round; she feels that "the cloud" is that people whom she would like to be included in the legislation will be left out.

I had a lot of sympathy with the hon. Member for Preston when she asked why the age of 26 should be stipulated. I hope that the Minister will give us some thoughts on that. I could understand stipulating the age of 18, because that is the legal age of majority. I could understand the age of 21, because that is when many young people complete university, college or other tertiary education, and it is the old age of majority. I could certainly understand the age of 16, because that is the traditional school-leaving age. I could even understand the age of 25, because that is a quarter of a century, a nice round number and the type of anniversary that people celebrate. But 26 seems a very odd age.

As the hon. Member for Preston told us, she already had substantial family responsibilities by the age of 26. Most people would not only have completed their training by that age but would have had several years' experience in work, and may have moved jobs two or three times. By then, one would expect people to be making progress in their chosen careers or activities. So, it is very difficult to understand why the Government should create the only age break at 26, when they could have chosen so many different ages or, indeed, chosen a variety of age breaks, both high and low, for different purposes with different rates.

Mr. Bruce

The one guide is that the Agricultural Wages Board uses the age of 19 or over. I cannot understand why one should have to wait another six or seven years before one qualifies under the Bill.

Mr. Redwood

My hon. Friend reminds me of another legislative age limit. The age of 19 does not relate neatly to school leaving or college departure, but as he says, it is important to an important sector of our economy, and embedded in legislation. Perhaps the Government thought about it but rejected it for some reason or other. I hope that the Minister will offer some explanation when he addresses the Government amendments, which seek to change the wording concerning the age break. Amendment No. 79 would ensure that all young people are included under the legislation, while amendment No. 70 would ensure that no one under the age of 18 would qualify for the national minimum wage in the interests of preserving employment for the youngest members of the work force.

Since the Bill's inception as a manifesto promise before the general election, during early ministerial statements and in Committee, we have seen a perpetual muddle over the treatment of young people. We thought at the beginning that young people were to be treated like anybody else—hence all the statements about equality and the national minimum wage applying to all. If the then shadow spokesmen were challenged before the election about the job consequences, they either said that there would be no job consequences—they believed that they could legislate for a national minimum wage without destroying any jobs for young people—or they implied that the single uniform rate of a minimum wage would be set low enough to avoid the worst consequences for young people.

It is necessary to return to the issue of the rate. In its 1992 general election manifesto, Labour told the public that £3.40 was the minimum acceptable wage for all the people that they wished the legislation to cover. I think the Labour party assumed at the time that everyone would be covered by the legislation; there was no mention in the manifesto of leaving out the armed services and so on. The Labour party then said that £3.40 was the rate, and that it thought that that would provide the best balance of advantage over disadvantage.

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Now the Labour Government are smuggling the Bill through the House without naming the rate. I assume that they are doing so because they can no longer live up to the promise that the Labour party made to its supporters in 1992. They do not intend to set a minimum wage of £4.61 an hour, which—in terms of relationship to average earnings—I believe is the modern equivalent of the £3.40 that Labour suggested in 1992. If the Minister wishes to disagree and say that £4.61 is a serious runner, I should be very interested to hear it because it would be germane to the issue of where to set the break point of age for young people and for older people; but his expression tells me that he does not have in mind anything like £4.61, so the Government are planning a lower wage rate than the one that the Labour party was planning in 1992.

Mr. Ian McCartney

I know it seems as though the right hon. Gentleman is provoking me, but let us be clear from the outset. During and since the general election campaign, the Government have made it clear that the Low Pay Commission would be asked to consider this matter and come up with proposals, following which the Government would take decisions, and that subsequent to that, any decision that the Government made would be subject to secondary legislation before the House.

Mr. Redwood

I agree that we have heard that repeatedly. We are not sure, however, whether the Minister has a rate in mind and the Low Pay Commission exists simply as a fig leaf whose view he will ultimately overturn if he does not agree with it; or whether the Low Pay Commission will recommend the rate and Ministers, in all but extreme circumstances, will accept its recommended rate.

Mr. Bercow

Does my right hon. Friend agree that the Government's self-denying ordinance on the subject of the rate of the national minimum wage would seem a little more credible if it were accompanied by a silence to the newspapers? Given that the situation—

Mr. Deputy Speaker

Order. This has absolutely nothing to do with the group of amendments that we are discussing.

Mr. Redwood

I think that my hon. Friend just wished to develop the point about the level of the remuneration, which is central to the choice of age break in the Bill. If the national minimum wage is to be very low, we should choose a different age break from the one that we would choose if it was to be very high.

That is our difficulty tonight. We are asked to settle the age breaks tonight, in the Chamber, when the Minister remains unwilling or unable tell us not only what the rate will be but whether he will decide it, in practice, or whether the Low Pay Commission really knows all the answers.

Nevertheless, it appears increasingly likely that the national minimum wage will be about £3.60, rather than the £4-plus that people originally intended. That means that the Bill will not do as much damage to young people's jobs as if the Government were setting the national minimum wage at a higher level, but it will be a bigger disappointment for people like the hon. Member for Preston, who had hoped that it would be set higher, for the reasons that she gave. I hope that the House, will keep in mind the question whether 26 is the right break point, given what we might be able to deduce concerning the level at which the national minimum wage will be introduced.

Amendment No. 53 requires the President of the Board of Trade to take the advice of the Low Pay Commission before amending the descriptions of people covered by the Bill. The amendment is designed to try to discover what are the relative powers of the Low Pay Commission and the Minister, over this important range of issues of exemption. The Minister has been unwilling to explain the balance of power in relation to the level, which is central to the amendments before us. We are trying to persuade the Minister to say whether he and his right hon. Friend the President of the Board of Trade are in charge, or whether the Low Pay Commission will retain a great deal of influence and power in the early stages of the establishment of the minimum wage.

As someone who believes in ministerial control and ministerial accountability through the House, I hope that the Minister will be brave enough to take decisions and come to the House to defend them. Obviously, he will use the Low Pay Commission's advice, because he has gone to much time, trouble and expense to establish it and it would be silly to ignore it, but it would be better, for the House and for our democracy, if he and his colleagues took the decisions in the light of the advice that they received, and came to the House to defend them.

Amendment No. 53 would oblige the Secretary of State to take the advice of the Low Pay Commission before amending the descriptions of persons to whom clause 3 applies. Having established the commission, it would be foolish not to listen to what it says or to draw on its expertise, but I hope that the Department of Trade and Industry will not make further progress towards quango government—a trend that is visible in too many Departments of State under this Administration. We have a quango to run our monetary policy, a quango to run our food policy and a quango to run our development policy—and now, perhaps, subject to what the Minister says, we shall have a quango to run the wages policy. There is a huge expansion of the quango state, at the instigation of the people who, in opposition, delighted in criticising the range and powers of quangos that were then in existence. I always preferred a little less to a little more quango. We now have a Government who say that they would like a little less quango but are busily creating quangos on a huge scale, which dwarfs anything that the previous Administration did.

Amendment No. 54 would allow the deletion of descriptions from the exemption list as well as permitting exemptions to be added under the other powers in the clauses that we are discussing. It is a useful amendment, as I hope the Minister agrees.

I had the impression that the Minister wanted as few exemptions as possible. I may be wrong, but I have the impression that the Minister is ending up with more exemptions than he would have liked or originally had in mind. I do not think that he was terribly keen on the exemption of the armed services, and he may not be keen on the exemption of young people. By tabling the amendment, we are offering him an opportunity to have another go with his colleagues in government later, to persuade them that there are too many exemptions and that those exemptions should be removed.

Mr. Bercow

Does not our support for the amendment show that we are prepared to have our judgments influenced over a period by objectively observable economic facts and outcomes that flow from the national minimum wage? If only Government Back Benchers were prepared to have their judgments similarly influenced instead of sticking to abstract, ideological dogma, they might do a little bit better.

Mr. Redwood

Indeed, I am beginning to wonder whether offering Opposition support for the amendment is too generous; but it is important to find out where the Minister stands on this issue. As the hon. Gentleman should be aware, my colleagues and I fear that, even now, there will not be enough exemptions in the legislation—that many more hard cases will come to light and he will have to rush back to the House to add to the list in one way or another. That is why he should spend a little more time studying what has happened overseas in countries that have introduced minimum wage legislation.

Many of those countries have established minimum wages that are considerably below the level of the 1992 Labour manifesto, and even below the level that the Government will eventually recommend following this agonising study process. In those jurisdictions abroad, even those with low national minimums—well below the level that some Labour Members would like here—they have had to amend and amend again their legislation to exempt more and more groups of people and hard cases.

In Committee and during these relatively brief exchanges on the Floor of the House, we have identified various groups that the Minister may regret having included so comprehensively. If he is not thinking of using the powers in the Bill to exempt all people under 26, he will discover that it will considerably damage youth employment opportunities if he sets too high a level of minimum wage. I trust that he has seen the way in which the continent of Europe is disfigured by high youth unemployment, which is in part related to minimum wage legislation and other labour market restrictions in those countries, which have made it more difficult for young people to get the jobs that we want them to enjoy. So, when it comes to young people, I hope that the Minister will study those situations carefully and decide that he needs to use the power in the Bill.

I also hope that the Minister has thought again about directors. I trust that the Opposition are making a sufficiently powerful case that they should be in a different category. They are responsible for their businesses in a very real way and should be offered the freedom and flexibility to provide the sort of leadership that is sometimes needed. It would be most welcome if Labour Members would occasionally recognise that there are some intentionally thin cats in the corporate world—directors who have offered a lead because they want to save their businesses by reducing the costs that they impose on them.

I hope that the Minister will think again about the position of spouses and about the flexibility of the legislation in adding to and reducing the number of exemptions required. Above all, I hope that this discussion and the debate both in Committee and here tonight will have made him aware that well-intentioned legislation could go horribly astray if the Government set the wrong rate, persevere with too few exemptions and do not understand the threat to people in training or with different types of remuneration—if they do not understand the enormous flexibility of the marketplace, which has generated jobs with all types and styles of remuneration, benefits in kind and the like, that need careful analysis before the somewhat crude injection of legislation into the equation.

I urge the House to support the new clauses and amendments standing in my name and those of my hon. Friends, and I urge the Minister to think again about these issues.

Dr. Lynne Jones (Birmingham, Selly Oak)

On that glorious day in May 1997, Labour Members were elected on a pledge to introduce a minimum wage, and to abolish poverty pay and worker exploitation. I for one was not aware that that wage was not to apply to young adults in their 20s. Indeed, the Labour party in opposition opposed measures that reduced the rights of that age group—for example, the Tory reductions in benefit for the under-25s. We argued that that age group were adults and had the same expenses as their older colleagues. That must remain the case.

The majority of young people in the under-26 age group have left home—the average age for leaving home is 20—have their own households and have the same expenses as older people. There is no justification for paying them a lower rate. Indeed, it would be discriminatory. Young women in particular are more likely to have left the parental home and to have the expense of running their own home. It would be very worrying if a Labour Government introduced this long-awaited legislation in such a way as to give less protection than was afforded to 3.5 million workers in the 1970s and early 1980s by wages councils.

In 1986, the Labour party opposed the Wages Act that was introduced by the Tories. The Act removed people aged under 21 from the protection of wages councils. As has been said, that did not lead to an increase in the number of jobs for people in that age group—quite the contrary. Nevertheless, between 1986 and 1993, when the wages councils were abolished, adult rates of pay applied to people over 21. I should hate to think that a minimum wage that was introduced by a Labour Government would not apply to that age group. Even today, agricultural workers enjoy a minimum wage: 18-year-olds have a minimum wage of £3.51 an hour, and all those over 19 receive a minimum wage of £4.12 an hour.

9.15 pm
Mr. Ian Bruce

The hon. Lady cites the figures—which I have in front of me—correctly as they relate to people who are permanently employed. Temporary workers—those people who are employed for specific jobs—receive respectively not £4.12 but £3.06 an hour, and not £3.51 but £2.60 an hour. A 16-year-old receives £2.47 in a permanent job and £1.84 an hour in a casual job. Those rates were introduced by the Government last July.

Dr. Jones

I cannot comment on that. I had hoped that we would want rates of pay to apply to all workers, regardless of whether they are temporary or permanent. I am disappointed to hear that information. I hope that the Bill—as I think my hon. Friend the Minister has made clear—will establish a universal minimum wage that will apply to the workers whom the hon. Member for South Dorset (Mr. Bruce) has mentioned.

Mr. Ian McCartney

The hon. Member for South Dorset (Mr. Bruce) is being disingenuous. The agricultural wages council report was drawn up by the Agricultural Wages Board, which is made up of employers and trade unions. The purpose of the Bill is to ensure that, where an Agricultural Wages Board payment is less than the declared minimum wage, the minimum wage will apply, and that, where the agricultural wage is higher than the minimum wage, the agricultural wage will apply. The Bill will improve the system for all agricultural workers.

Dr. Jones

I thank my hon. Friend for that clarification—that is what I hoped to be the case.

The purpose of clause 3 was to allow the Government to take into account the recommendations of the Low Pay Commission, whose remit was to make recommendations on low rates or exemptions for those aged between 16 and 25. I am disappointed that the commission was given that remit. We can all accept that there are grounds for 16 and 17-year-olds—even perhaps 18-year-olds, as in the case of the agricultural wages council—being paid a young person's rate, but I cannot see any justification, especially in the light of experience, for introducing such measures relating to people who are older than that. I certainly hope that the Low Pay Commission will not make such recommendations—I do not think that it would want to do so if it examined the evidence logically.

Mr. Redwood

Does the hon. Lady think that, if the Low Pay Commission recommends the exemptions she fears, the Minister should overturn them and stick to his guns?

Dr. Jones

If the right hon. Gentleman had allowed me to finish, we could have saved the House valuable moments, because that is precisely the point that I was about to make. I hope that the Low Pay Commission will not make those recommendations—if it considers the arguments sensibly, it will not do so—but, if it does, I hope that the Government will reject them. I hope that my hon. Friend the Minister will give us an assurance that, before any such decision is taken, we shall be able to debate it on the Floor of the House.

Mr. Ian Bruce

I should first declare two interests—they are already registered—in that I am a director of Ian Bruce Associates Ltd. and an unpaid director of EURIM, the European Informatics Market group, which is a not-for-profit organisation that acts in a similar way to an all-party parliamentary group.

I have been amazed by Labour Members finding great humour in the idea of directors not paying themselves as much as the minimum wage. I have not had much involvement in the Bill, but I almost idly asked one of the Clerks in the Table Office whether the self-employed were exempt, and he told me that they were, so I asked whether the same applied to company directors, and he said no. Apparently, the matter was not discussed in Committee.

I know that the Minister does not have a great deal of respect for my views, but I ask him honestly to listen carefully to what I have to say about the way in which directors operate. I understand what he is trying to do—although I do not think that he is going the right way about it—to help low-paid individuals, but the legislation will catch a lot of directors whom he has no intention of catching, and will cause an awful lot of problems for the courts.

The Government have rightly taken the view that genuinely self-employed people who contract to do work for an agreed price will make their best efforts to make a profit, but may not do so on every job. It would be ridiculous if a tradesman who had agreed to do a job for a particular price—£500, say—were to come back afterwards and say, "I'm sorry, Guy, but I've just worked out that I didn't get the minimum wage on this job, so you'll have to pay me more."

When we had the recession in the building industry, people were simply trying to keep in work and were not looking for a good return. The same often applies to directors. I know that, because I started my own company. I did not start it so that I could work for poverty wages, or to make a loss; I am a qualified work study engineer, and I had worked everything out and made all the plans.

I freely admit that I dared not show my bank manager how much I was losing, because he would have pulled the plug. When my first set of accounts was drawn up for 18 months of trading, I had not paid myself £1 an hour, or 50p an hour, or even worked for nothing: it had cost me £9,000—a lot of money in those days—to work for myself for 18 months.

Many people find themselves in such a situation when they start companies. I do not seek sympathy from Labour Members—and I would certainly not get any—but I am trying to show that, when inspectors walk into a facility and try to find out whether the directors are paying themselves the minimum wage, they will get a terrible shock. I know that some Labour Members believe that people should not run companies and pay themselves less than the minimum wage, because they would be doing someone else out of a job. I am sure that some Labour Members would like the self-employed to be covered by the legislation for the same reason.

When someone sets up a business—it is difficult to understand until one does it oneself—it is very hard to find work and to make a profit. Often, one works long hours for no return. Labour Members are smiling, but they must have seen examples in their constituencies of people starting limited companies, a high proportion of which do not survive the first two or three years. That is not because the directors are paying themselves large sums.

Mr. Ian Stewart

They could go to an industrial tribunal.

Mr. Bruce

The hon. Gentleman is wrong about that. I shall describe how directors can get into difficulties when they do not pay themselves minimum wages. Companies have to have two directors and, in many cases, an individual who starts his own business also employs his wife. A couple might not want to tell people that they are earning low wages and that is not a problem, but what happens if the marriage breaks down, as often happens when people go into business together? The wife would be able to claim back from her husband minimum wages for working 40, 50 or 60 hours a week to get the business going.

The new clause on whether people who paid themselves wages were covered was not selected, but it is relevant to people who are directors. The industrial tribunal can be used as a debt collection agency between two people in a business, whether husband and wife or two separate directors. That happens in many limited companies.

Mr. Hammond

Does my hon. Friend agree that the greatest cause of concern is the lack of symmetry between the treatment of the self-employed and the directors of very small companies? To all practical intents, those two groups are in exactly the same position. Someone who is self-employed can pay himself as little or as much as he can afford, but someone who is a company director would be required by the Bill to pay himself the minimum wage. He would also be required to pay tax and national insurance on that salary and, if his business needed the cash flow, he would have to reinject that money as a net amount back into his business. That seems grossly unfair.

Mr. Bruce

That is unfair, and my hon. Friend's point goes to the nub of one of the additional problems that one faces when one runs a company. I shall come to that point later.

I have started several limited companies, some with people who were little known to me. We went into business together to try to make a profit. I do not wish to identify the particular company because of what I am about to say, but in one instance, the director—who was working in partnership with me—and I decided to work for nothing to get the business up and running. That director spent large sums on expenses that should not have been spent and I took him to the small claims court. The business was wound up and I won the money back, which was paid in dribs and drabs.

Under the Bill, that director could have said that he had worked long hours—as he had—in a company that was not making any money. The deal was that we all shared in the profits and in the losses, and that company was making losses. That director would have been able to say that our agreement to set up and run the business meant that he must be paid by the business whatever the minimum wage was.

Mr. Frank Cook (Stockton, North)

The hon. Gentleman is throwing an interesting hypothesis at the House, but if his erstwhile colleague had made such a proposition, could he not have countered with a similar one on his behalf?

Mr. Bruce

That is possible, but such situations often involve one working director, who earns an agreed amount. I am familiar with such a case—I do not want to give too much detail—where one director worked in the company for 40 hours a week while the other came in to check what was happening. They fell out, and that case certainly got to the courts. The non-working director, who had no agreement to receive funds, could have argued that he was a director for at least 40 hours a week, checking and supervising, and could have claimed the minimum wage. The Minister never wanted to catch such people or get into this complication. It would be sensible to exclude such directors.

9.30 pm

I am a little concerned about my unpaid directorship of an all-party group of this House. If I took any income from the group, I would not be able to comment in the House about information technology; I do that free of charge, with no thought of anything coming to me. However, under the proposals, any expenses that I might claim as a director—a director cannot get away from his duties to a limited company—could mean that I was caught. I would have to charge a fee and would not be able to carry on with what I am doing.

I know that the House wants to move on, so I shall briefly consider amendment No. 70.

Mr. Hammond

Before my hon. Friend leaves the subject of company directors, has his study of the matter uncovered any reason why the Minister should not be prepared to exclude directors? The Minister has consistently rejected amendments that he considers would undermine the principle of the Bill, but directors of small companies are essentially self-employed.

Mr. Bruce

I have not found such a reason, but there is always a loophole. If some people were willing to work for lower wages, they could all be made directors of the company. I give the Minister that loophole. I had other examples involving problems with the redundancy payments legislation whereby directors were able, in closing down companies, to claim from redundancy funds. A director who had not been paying himself money could, if his company went bust, argue that he was entitled to claim the minimum wage, put an invoice into the company for it and rely on the industrial courts to get it. He would create a debt that would be counted ahead of all the company's other debts.

Mr. Hammond

To add to my hon. Friend's point, I think that I am right to say that, if such a company went into receivership or liquidation, the Government would pick up the bill for unpaid wages. The directors' wages would be wages.

Mr. Bruce

I hope that the Minister is taking this on board, because we are trying to be helpful.

Briefly, I shall discuss the effect of wages councils and how we can learn from that in respect of the Bill. It is quite extraordinary that, when we mentioned the wages councils, the Minister dashed to the Dispatch Box and said that the reason why the Agricultural Wages Board was perfectly acceptable was that employers and employees had negotiated to come up with those minimum wages. The minimum wage for 16-year-olds is £1.84, for 18-year-olds £2.60 and for 19-year-olds £3.06.

The Government are telling us that they have put employers and employees on to a wages council, which will make recommendations to the Government, but why does the Minister—who defended wages councils up hill and down dale whenever the previous Government decided to remove them—believe that the group of people who have been charged with examining the minimum wage will not come up with exactly the same sort of figures? The reason why he does not want that to happen while the Bill is passing through the House is obvious: it is that Labour Back Benchers will be very upset.

This group contains many extremely sensible amendments, which have been wisely selected by Madam Speaker. The Minister would do well to look at our proposals and I hope that he will accept the amendments, or say that he will table amendments in the other place for consideration there.

Mr. Ian McCartney

We have had what I can only describe as a generally unfocused tour around what was basically a Second Reading debate so as to allow the right hon. Member for Wokingham (Mr. Redwood) to try to make a better speech than he made on Second Reading. Unfortunately, he was unable to do so.

I shall explain first the Government amendments to clauses 3 and 4 and then deal with the new clauses tabled by the hon. Member for South Cambridgeshire (Mr. Lansley) and the amendment tabled by my hon. Friend the Member for Preston (Audrey Wise) and her colleagues. By the end of my explanation, I hope to have gained the support of the House in what I am trying to achieve.

Amendments Nos. 21 to 23 do not alter the powers in clauses 3 and 4; instead, they clarify the relationship between the two clauses. In Committee, I explained exactly how the two clauses interact, but in the interests of absolute clarity we have tabled the amendments to explain how they work.

Clause 3 allows the Secretary of State to treat different persons differently by age if they are under 26. That is necessary to allow for a range of rates for different age groups below that age; for example, 16 to 18-year-olds, 19 to 21-year-olds and so on, if—I emphasise the word "if'—that is what is decided in the light of the Low Pay Commission's recommendations.

Clause 4 allows the Secretary of State to add further descriptions of persons to clause 3—for example, trainees, who may be 26 or over—again, in the light of the commission's recommendations. However, under clause 4, the Secretary of State may not differentiate by age. The reason for that is to ensure that the power in clause 4 is not used to set a number of different rates for those aged 26 and above; rather, the clause is intended to allow for a different rate, or an exemption, regardless of age.

The amendments remove any potential ambiguity and work in the following ways. Amendment No. 21 prevents any differentiation by age among those who are aged 26 or older by specifically ruling out such differentiation in clause 3. That is necessary for the sake of clarity, because clause 3 does not otherwise prevent different treatments for those of different ages. Amendments Nos. 22 and 23 make it clear that clause 4 refers only to those who have already attained the age of 26. That is simply good housekeeping. Clause 3 already allows different rates and exemptions for all or any of those under 26—subject, of course, to limitations on differentiating by reference to area, sector, size of company and so on. It follows that there is no point in allowing clause 4 to add descriptions of persons aged under 26 to clause 3, because they are already within clause 3.

Those are not difficult amendments. I hope that I made it clear in Committee how the Bill is constructed. It is entirely logical and recognises the need to allow for a number of possibilities, depending on what the commission has to say. In case any confusion remains, the amendments remove all doubt as to how the clauses relate to each other, and I urge the House to accept them.

New clauses 4 and 5 need not detain us for too long. A person who is a director of a company, limited or otherwise, will not be entitled to the national minimum wage. The Bill does not need to be so amended. The definitions in clause 52 make it quite clear who is covered by the Bill: directors are not workers and so are not covered. Of course, where a director is also an employee of the company, as some managing directors may be, he or she will be entitled to the national minimum wage owing to that contract of employment. The question of Ministers of the Crown was raised by, I think, the hon. Member for South Dorset (Mr. Bruce). He or she is an office holder, not an employee or worker, so is not covered.

New clause 10 deals with a complex area, and I have shown a great deal of sympathy towards it, but I shall explain why it is unacceptable and why I urge the House to oppose it. We discussed the difficult issue of severely incapacitated people and therapeutic earnings in Committee, and we reached some consensus. There is no case for exemption from, or modification of, the national minimum wage for disabled workers simply on the grounds of disability. We are awaiting the recommendations of the Low Pay Commission. If any recommendations were made on the grounds of disability, it would be possible for them to be considered under the powers in clauses 3 and 4. We shall wait to see the Low Pay Commission's report.

The Government's position has always been one of principle: there should be no grounds for not paying someone a minimum wage simply on the grounds of his or her incapacity. In addition, the Government are already taking measures, under the Disability Discrimination Act 1995, the access to work scheme and the supported employment programme to bridge the gap between what people with severe disabilities may be capable of earning and what they are, in practice, paid.

The Opposition's new clause 10 is overly bureaucratic and, through subsection (4), opens a loophole that could undermine the whole principle of the minimum wage. It refers to a person who is…so affected…due to age or any other cause as to be incapable of earning the national minimum wage. That is a potentially serious loophole that would invite unscrupulous employers to plead that their workers are incapable of earning a minimum wage and so should be exempted. That is unacceptable.

We have the flexibility that we need to deal with any issues that the Low Pay Commission raises in that context, so the new clause is unnecessary. Moreover, even if it is considered that there should be special provision for the disabled, the new clause goes about providing it in a way that is both wrong-headed and potentially damaging. I urge the House to oppose new clause 10.

Amendments Nos. 70 and 79 relate in some way to the minimum wage and young people. Before dealing with each amendment, I shall place them in the context of the Government's approach to encouraging young people into work. The national minimum wage is only one plank, albeit an important one, of the Government's overall strategy of encouraging people back to work and making work pay, and especially providing help for young people.

We have put together a raft of measures. The welfare-to-work programme addresses the problems faced by those without a job. Changes to the benefits system will help to build a sensible system of in-work benefits, where the taxpayer will not have to subsidise employers who are paying excessively low wages. The new deal for the young unemployed will give young people a number of routes to help them escape long-term unemployment. The Government are delivering on all of those measures.

Over and above that, my Department will consider fairness-at-work issues and employment status. All the initiatives are aimed at the same thing: getting young people into the work place, ending their exploitation and ensuring that they are trained for the challenges of the 21st century.

The Government have made it clear on a number of occasions why they have asked the Low Pay Commission to consider the subject of young people below the age of 26. Most countries with a minimum wage have some sort of special treatment for young people. The old wages councils used to have different rate for young people. Those entering the labour market for the first time are in a different position from other workers; the average wages paid to younger workers tend to be lower than those paid to older workers.

Some economic studies have found that, while a sensibly set minimum wage does not have an adverse effect on jobs as a whole, it may have an impact on jobs for young people. That is why we asked the Low Pay Commission to consider the issue and why we cannot accept amendment No. 70.

Amendment No. 79 would narrow the scope of clause 3 so that the Secretary of State would have the power to determine a different rate or even exemption, but only for workers who have not attained the age of 18.

I should emphasise one point that should be perfectly clear, but is sometimes overlooked. Clause 3 exists because we may need to use it. It is a reflection of the remit given to the Low Pay Commission. I have already explained why I have asked the commission to consider the issue of young people and the minimum wage.

I say to my hon. Friends the Members for Preston and for Birmingham, Selly Oak (Dr. Jones) that we made it clear throughout the process that we undertook in opposition, in public debate and discussions, and in our consultations with trade unions and employers that the Low Pay Commission's remit would allow it to consider as widely as possible issues surrounding the application of the minimum wage—no less and no more than that. We have not attempted, privately or publicly, to put the Low Pay Commission in a straitjacket over recommendations about the rate of the national minimum wage or issues to do with training and young people. Before the general election, we gave a commitment that it would consider those matters and make recommendations.

Alongside our election manifesto, we published our minimum wage pledge to business, which made clear that our proposals for the national minimum wage would take account of the needs of young trainees and would not penalise occupational training activity. Before the election and since, our objectives have been to ensure that the Low Pay Commission has the flexibility to consider evidence on a range of issues and the capacity to make proposals to the Government.

9.45 pm

My hon. Friend the Member for Preston and her colleagues know of my long-standing commitment to the minimum wage and to ensuring that those in the workplace, whatever their age, do not suffer detriment at the hands of unscrupulous employers. The Bill's universality will maximise the number of workers who will be entitled to the national minimum wage: full-time, part-time, temporary, casual, agency and homeworkers and people who work for sub-contractors will be covered by the national minimum wage provisions.

After listening to what I have said about her amendment, I hope that my hon. Friend the Member for Preston will realise that my right hon. Friends and I are serious about passing legislation that will deal effectively with low pay issues. The legislation must be based on the Low Pay Commission's recommendations and on the Government's consideration of them. I repeat to my hon. Friend the absolute commitment that I gave in Committee: the Government will quickly make proposals based on the recommendations of the Low Pay Commission and put them to the House under the affirmative resolution procedure which will allow proper debate and accountability for those decisions. The Secretary of State will be required to explain a decision that is not completely in line with Low Pay Commission recommendations to the House.

I hope that my hon. Friend appreciates the strength of feeling with which I have made my remarks. The Government do not intend, as the right hon. Member for Wokingham suggested, to sneak measures past the House. Our view, in opposition and in government, has been that there should be the fullest debate on and accountability for the minimum wage, and that the House should take decisions on the rate and on other issues before the minimum wage rate is set.

Mr. Ian Bruce

I do not want the Minister to leave his dismissal of new clauses 4 and 5 where he did. Would a director who undertook no other work have a contract of employment under clause 52? That case could also be argued the other way. Surely the Minister is not saying that a company director will be excluded from the Bill's provisions if he is not also doing work for that company. We are trying to discover whether a person who decides to pay himself a lower rate under a contract of employment while a director will be excluded. Is the Minister saying that all directors will be excluded under clause 52?

Mr. McCartney

I thought that I had made it absolutely clear to the hon. Gentleman that, if directors are not workers they are not covered, except where they are an employee of the company as some managing directors are. They would be entitled to the minimum wage because they have contracts of employment. I cannot make it any clearer. The hon. Gentleman may not like the National Minimum Wage Bill, but we have been absolutely clear about where we stand on the issue of directors and definitions under clause 52.

The edifice that the hon. Gentleman has built up over the past hour and a half is a smokescreen for an attack on the national minimum wage. He has given no evidence this evening, and none was given in Committee, that demonstrate that clause 52 is defective in respect of directors. It is not defective. It is well targeted and gives rights to workers. In that context, a director is excluded.

Mr. Hammond

Does the Minister agree that most directors have a contract of service and that such people are specifically included in clause 52(3)(b)?

Mr. McCartney

That is a spurious point. Clause 52 does not cover directors because they are not designated as workers for the purposes of the Bill unless they are employees with a contract of employment. That is the clear position and I cannot make it any clearer.

Amendment No. 53 is another over-prescriptive measure of the type that we encountered many times in Committee. It would require the Secretary of State always to consult the Low Pay Commission and to follow its advice before adding any new categories of persons to clause 3. They would include, for example, potential candidates for exclusion or a modified rate of minimum wage.

The amendment is unnecessary. Before making the first regulations to set the minimum wage, the Secretary of State is required by clause 5(2)(e) to consult the Low Pay Commission on whether further classes of persons should be added to those in clause 3 who may be exempted or subjected to a different rate. That is what we are already doing. I look forward to the Commission's report on this matter.

Under clause 6, there is nothing to prevent the Secretary of State from consulting the Low Pay Commission again on this issue in future. I would not find it surprising if the Secretary of State reconvened the commission to consider the possibility of further exemptions if that was what she had in mind. However, in some cases a full-scale consultation would be unnecessary: for example, if the commission had already covered similar ground in a previous report without reaching a firm recommendation. In such cases, why force a further consultation?

These issues are all rather abstract. The Government do not intend to scurry around trying to rake up every possible candidate for exemption, which is what the Opposition have been doing in Committee for the past few months. Our starting point is that the Bill should be universal and apply to all workers. I ask the House to reject the amendment.

Amendment No. 54 would enable the Secretary of State to make regulations to add not only new classes of persons to potential candidates for exemption or a modified rate in clause 3, but to take persons who had been added to clause 3 out of that clause so that they would no longer be potential candidates for exemption or a modified rate. For two reasons, such a power is unnecessary. The first is legal. Under the Interpretation Act 1978, anything that can be done can be undone, and there is no need to spell that out. The power in clause 4 to add persons to clause 3 encapsulates the power to take them out again.

The second reason is pragmatic. Putting a person in clause 3 simply makes him or her a potential candidate for exemption or for a different rate. To achieve that, new regulations would have to be made by the Secretary of State. It remains open to the Secretary of State never to make such regulations. That means that people in clause 3 would not need to be formally removed from the clause. The Secretary of State could simply choose not to make regulations exempting them or subjecting them to a different rate. For those reasons, amendment No. 54 is unnecessary, and I ask the House to reject it.

I hope that the debate so far has led to recognition by my right hon. and hon. Friends that the one simple thread running through the speeches of Conservative Members has been a desire to find any way to undermine the Bill. Once again they have been discredited beyond belief.

The former Secretary of State for Wales, the right hon. Member for' Wokingham, who has just returned to the Chamber, spent more than 20 minutes in spurious argument talking about why people in Britain should receive poverty pay and why there should be no floor to pay. He refused to say whether £1, 50p or 30p an hour was too little. Conservative Members would like people to work for nothing if that could be got away with, and that is why there will be a national minimum wage.

Mr. Redwood

Will the Minister tell the House what is too little in his judgment and in the Government's judgment? Perhaps he can answer his own question.

Mr. McCartney

The difference between the right hon. Gentleman and me is that I favour a national minimum wage and will implement it and he favours the continuation of low pay. That is why we set up the Low Pay Commission and why he has opposed its establishment tooth and nail. He has a record as long as his arm in support of low-paying employers but, after tonight, the introduction of the national minimum wage will be a little nearer. A huge number of people in Britain will be thankful when, at last, a Labour Government implement a national minimum wage.

Mr. Lansley

I am grateful for the opportunity to respond to the debate. I am afraid that the Minister has signally failed to answer the debate in relation to new clause 4, which aims to exclude directors from the scope of the national minimum wage. His assertions that Conservative Members are trying to exclude people from the minimum wage have no bearing on new clause 4, because he himself says that he believes that the Bill already excludes directors from the national minimum wage. However, he has failed to answer points that were put forcefully by my hon. Friends. They have shown that clause 52 relates to people who either have a contract of employment or a contract of service. It is clear that company directors often have either of those.

Mr. Ian Bruce

My hon. Friend is not reading this completely. There is an implied contract of service. He is as familiar as I am with the Contracts of Employment Act 1963. People do not have to have a contract; it is implied by the fact that they are doing work for people.

Mr. Lansley

My hon. Friend is right. It is possible for the contract to be not only implied, but oral and implied. The intention of Ministers in clause 52 was to make the national minimum wage universal in its application. The notes on clauses that were supplied to the Standing Committee say that the clause is intended to be universal in its application. They explain that that does not include people who are described as "genuinely self-employed", but they do not refer to the fact that directors are excluded. The logic of the new clause is either to give effect to the Government's intentions or, if the Minister is wrong about clause 52, to give effect to what should be the Government's intentions.

Mr. Redwood

Can my hon. Friend explain why the Minister says Conservative Members have to answer what will be a satisfactory minimum wage when we have said that we favour a minimum income and we set out rates of that minimum income in office, yet the Minister, who believes in a minimum wage, is unable to tell us what minimum wage he finds acceptable? I find that difficult to understand. Has my hon. Friend worked it out?

Mr. Lansley

My right hon. Friend is absolutely right. The Minister has been hiding behind the polite fiction that this is all going to be left to the Low Pay Commission. If it were all left to the commission, clauses 3 and 4 would be written differently; they would allow the commission to vary the minimum wage by reference to area, occupation or otherwise, but that is not what Ministers want. The Minister has said that he has not led the commission at all, but anyone who reads paragraph 66 of the Government's evidence to the commission will know that the Government want it to specify a lower national minimum wage rate for people under the age of 26 and not to specify a training rate.

The Government have signally failed to answer the points that have been made about new clause 4, which would give effect to what the Minister says are his intentions—although he has not explained how the Bill currently achieves them. For that reason, I invite my colleagues to join me in pressing new clause 4 to a Division.

Question put, That the clause be read a Second time:—

The House divided: Ayes 126, Noes 325.

Division No. 193] [9.57 pm
Ainsworth, Peter (E Surrey) Key, Robert
Arbuthnot, James Kirkbride, Miss Julie
Baldry, Tony Laing, Mrs Eleanor
Bercow, John Lait, Mrs Jacqui
Beresford, Sir Paul Lansley, Andrew
Boswell, Tim Leigh, Edward
Bottomley, Peter (Worthing W) Letwin, Oliver
Brady Graham Lewis, Dr Julian (New Forest E)
Brazier, Julian Lidington, David
Brooke Rt Hon Peter Lloyd, Rt Hon Sir Peter (Fareham)
Browning, Mrs Angela Luff, Peter
Bruce Ian (S Dorset) MacGregor, Rt Hon John
McIntosh, Miss Anne
Burns, Simon MacKay, Andrew
Cash. William Maclean, Rt Hon David
Chapman, Sir Sydney McLoughlin, Patrick
(Chipping Barnet) Malins, Humfrey
Chope, Christopher Maples, John
Clappison, James Mawhinney, Rt Hon Sir Brian
Clark, Rt Hon Alan (Kensington) May, Mrs Theresa
Clark, Dr Michael (Rayleigh) Moss, Malcolm
Clarke, Rt Hon Kenneth Nicholls, Patrick
(Rushcliffe) Norman, Archie
Clifton-Brown, Geoffrey Page, Richard
Collins, Tim Paice, James
Colvin, Michael Pickles, Eric
Cormack, Sir Patrick Prior, David
Cran, James Randall, John
Curry, Rt Hon David Redwood, Rt Hon John
Davies, Quentin (Grantham) Robathan, Andrew
Robertson, Laurence (Tewk'b'ry)
Davis, Rt Hon David (Haltemprice)
Day, Stephen Roe, Mrs Marion (Broxbourne)
Rowe, Andrew (Faversham)
Duncan, Alan David, Ruffley
Duncan Smith, lain St Aubyn, Nick
Evans, Nigel Sayeed, Jonathan
Faber, David Shephard, Rt Hon Mrs Gillian
Fallon, Michael Shepherd, Richard
Flight, Howard Simpson, Keith (Mid-Norfolk)
Forth, Rt Hon Eric Soames, Nicholas
Fowler, Rt Hon Sir Norman Spelman, Mrs Caroline
Garnier, Edward Spicer, Sir Michael
Gibb, Nick Spring, Richard
Gill, Christopher Steen, Anthony
Gillan, Mrs Cheryl Streeter, Gary
Gorman, Mrs Teresa Swayne, Desmond
Gray, James Syms, Robert
Greenway, John Tapsell, Sir Peter
Grieve, Dominic Taylor, Ian (Esher & Walton)
Gummer, Rt Hon John Taylor, Sir Teddy
Hague, Rt Hon William Townend, John
Hamilton, Rt Hon Sir Archie Trend, Michael
Tyrie, Andrew Ty
Hammond, Philip Viggers, Peter
Hayes, John Walter, Robert
Heald, Oliver Wardle, Charles
Heathcoat-Amory, Rt Hon David Waterson, Nigel
Hogg, Rt Hon Douglas Wells, Bowen
Horam, John Whitney, Sir Raymond
Hunter, Andrew Whittingdale, John
Jackson, Robert (Wantage) Widdecombe, Rt Hon Miss Ann
Jenkin, Bemard Wilkinson, John
Johnson Smith, Willetts, David
Rt Hon Sir Geoffrey Winterton, Mrs Ann (Congleton)
Winterton, Nicholas (Macclesfield) Tellers for the Ayes:
Woodward, Shaun Sir David Madel and
Yeo, Tim Mr. John M. Taylor.
Young, Rt Hon Sir George
Adams, Mrs Irene (Paisley N) Corbyn, Jeremy
Ainger, Nick Corston, Ms Jean
Ainsworth, Robert (Cov'try NE) Coffer, Brian
Allan, Richard Cox, Tom
Allen, Graham Crausby, David
Anderson, Janet (Rossendale) Cryer, Mrs Ann (Keighley)
Ashdown, Rt Hon Paddy Cryer, John (Hornchurch)
Ashton, Joe Cunningham, Jim (Cov'try S)
Atkins, Charlotte Dalyell, Tam
Baker, Norman Davey, Valerie (Bristol W)
Banks, Tony Davidson, Ian
Barnes, Harry Davies, Rt Hon Denzil (Llanelli)
Battle, John Davies, Geraint (Croydon C)
Bayley, Hugh Davies, Rt Hon Ron (Caerphilly)
Beard, Nigel Davis, Terry (B'ham Hodge H)
Beckett, Rt Hon Mrs Margaret Dawson, Hilton
Begg, Miss Anne Denham, John
Bell, Martin (Tatton) Dismore, Andrew
Bell, Stuart (Middlesbrough) Dobbin, Jim
Benn, Rt Hon Tony Dobson, Rt Hon Frank
Benton, Joe Donohoe, Brian H
Bermingham, Gerald Doran, Frank
Berry, Roger Drew, David
Best, Harold Eagle, Angela (Wallasey)
Betts, Clive Eagle, Maria (L'pool Garston)
Blears, Ms Hazel Efford, Clive
Blizzard, Bob Ennis, Jeff
Bradley, Keith (Withington) Etherington, Bill
Bradshaw, Ben Field, Rt Hon Frank
Brake, Tom Fisher, Mark
Brand, Dr Peter Fitzpatrick, Jim
Breed, Colin Fitzsimons, Lorna
Brinton, Mrs Helen Flint, Caroline
Brown, Rt Hon Nick (Newcastle E) Flynn, Paul
Brown, Russell (Dumfries) Follett, Barbara
Browne, Desmond Foster, Don (Bath)
Bruce, Malcolm (Gordon) Foster, Michael Jabez (Hastings)
Burden, Richard Foster, Michael J (Worcester)
Burgon, Colin Foulkes, George
Burnett, John Fyfe, Maria
Butler, Mrs Christine Gardiner, Barry
Byers, Stephen George, Bruce (Walsall S)
Caborn, Richard Gerrard, Neil
Campbell, Mrs Anne (C'bridge) Gibson, Dr Ian
Campbell, Menzies (NE Fife) Gilroy, Mrs Linda
Campbell, Ronnie (Blyth V) Godsiff, Roger
Canavan, Dennis Goggins, Paul
Caplin, Ivor Gordon, Mrs Eileen
Casale, Roger Gorrie, Donald
Caton, Martin Griffiths, Jane (Reading E)
Cawsey, Ian Griffiths, Nigel (Edinburgh S)
Chapman, Ben (Wirral S) Griffiths, Win (Bridgend)
Chaytor, David Grocott, Bruce
Chidgey, David Gunnell, John
Church, Ms Judith Hain, Peter
Clapham, Michael Hall, Mike (Weaver Vale)
Clark, Paul (Gillingham) Hamilton, Fabian (Leeds NE)
Clarke, Eric (Midlothian) Hanson, David
Clarke, Rt Hon Tom (Coatbridge) Healey, John
Clarke, Tony (Northampton S) Henderson, Doug (Newcastle N)
Clelland, David Hepburn, Stephen
Clwyd, Ann Heppell, John
Coaker, Vernon Hesford, Stephen
Coffey, Ms Ann Hewitt, Ms Patricia
Cohen, Harry Hill, Keith
Coleman, Iain Hinchliffe, David
Colman, Tony Hoey, Kate
Connarty, Michael Home Robertson, John
Cook, Frank (Stockton N) Hoon, Geoffrey
Corbett, Robin Hope, Phil
Hopkins, Kelvin Morris, Ms Estelle (B'ham Yardley)
Howarth, George (Knowsley N) Morris, Rt Hon John (Aberavon)
Howells, Dr Kim Mountford, Kali
Hoyle, Lindsay Mudie, George
Hughes, Ms Beverley (Stretford) Mullin, Chris
Hughes, Kevin (Doncaster N) Murphy, Denis (Wansbeck)
Hughes, Simon (Southwark N) Murphy, Jim (Eastwood)
Humble, Mrs Joan Naysmith, Dr Doug
Hutton, John Norris, Dan
Iddon, Dr Brian Oaten, Mark
Jackson, Ms Glenda (Hampstead) O'Brien, Bill (Normanton)
Jackson, Helen (Hillsborough) O'Brien, Mike (N Warks)
Jamieson, David O'Hara, Eddie
Jenkins, Brian Olner, Bill
Johnson, Alan (Hull W & Hessle) O'Neill, Martin
Johnson, Miss Melanie (Welwyn Hatfield) Öpik, Lembit
Jones, Helen (Warrington N) Organ, Mrs Diana
Jones, leuan Wyn (Ynys Môn) Osborne, Ms Sandra
Jones, Jon Owen (Cardiff C) Pearson, Ian
Jones, Dr Lynne (Selly Oak) Pendry, Tom
Jones, Nigel (Cheltenham) Perham, Ms Linda
Jowell, Ms Tessa Pickthall, Colin
Keeble, Ms Sally Pike, Peter L
Keen, Ann (Brentford & lsleworth) Plaskitt, James
Keetch, Paul Pond, Chris
Kelly, Ms Ruth Pound, Stephen
Kennedy, Charles (Ross Skye) Prentice, Ms Bridget (Lewisham E)
Kennedy, Jane (Wavertree) Prentice, Gordon (Pendle)
Khabra, Piara S Prescott, Rt Hon John
King, Andy (Rugby & Kenilworth) Primarolo, Dawn
King, Ms Oona (Bethnal Green) Prosser, Gwyn
Kumar, Dr Ashok Purchase, Ken
Lawrence, Ms Jackie Quin, Ms Joyce
Laxton, Bob Quinn, Lawrie
Leslie, Christopher Radice, Giles
Lewis, Ivan (Bury S) Rammell, Bill
Linton, Martin Rapson, Syd
Livingstone, Ken Raynsford, Nick
Livsey, Richard Reed, Andrew (Loughborough)
Lloyd, Tony (Manchester C) Reid, Dr John (Hamilton N)
Llwyd, Elfyn Rendel, David
Lock, David Robertson, Rt Hon George (Hamilton S)
Love, Andrew Roche, Mrs Barbara
McAllion, John Rooker, Jeff
McAvoy, Thomas Rooney, Terry
McCabe, Steve Rowlands, Ted
McCafferty, Ms Chris Ruane, Chris
McCartney, Ian (Makerfield) Ruddock, Ms Joan
McDonagh, Siobhain Russell, Bob (Colchester)
Macdonald, Calum Russell, Ms Christine (Chester)
McDonnell, John Ryan, Ms Joan
McFall, John Sanders, Adrian
McGuire, Mrs Anne Sarwar, Mohammad
McIsaac, Shona Savidge, Malcolm
McLeish, Henry Sawford, Phil
McNamara, Kevin Sedgemore, Brian
McNulty, Tony Sheerman, Barry
Mactaggart, Fiona Sheldon, Rt Hon Robert
McWalter, Tony Singh, Marsha
Mallaber, Judy Skinner, Dennis
Marek, Dr John Smith, Rt Hon Andrew (Oxford E)
Marsden, Paul (Shrewsbury) Smith, Angela (Basildon)
Marshall—Andrews, Robert Smith, Rt Hon Chris (Islington S)
Meacher, Rt Hon Michael Smith, Miss Geraldine (Morecambe & Lunesdale)
Merron, Gillian Smith, Jacqui (Redditch)
Michael, Alun Smith, John (Glamorgan)
Michie, Bill (Shef'ld Heeley) Snape, Peter
Michie, Mrs Ray (Argyll & Bute) Soley, Clive
Milburn, Alan Southworth, Ms Helen
Miller, Andrew Spellar, John
Mitchell, Austin Squire, Ms Rachel
Moonie, Dr Lewis Starkey, Dr Phyllis
Moran, Ms Margaret Steinberg, Gerry
Morgan, Rhodri (Cardiff W) Stewart, David (Invemess E)
Morley, Elliot
Stewart, Ian (Eccles) Walley, Ms Joan
Stinchcombe, Paul Wareing, Robert N
Stoate, Dr Howard Webb, Steve
Strang, Rt Hon Dr Gavin White, Brian
Straw, Rt Hon Jack Wicks, Malcolm
Stringer, Graham Wigley, Rt Hon Dafydd
Stuart, Ms Gisela Williams, Rt Hon Alan (Swansea W)
Sutcliffe, Gerry Williams, Alan W (E Carmarthen)
Taylor, Rt Hon Mrs Ann (Dewsbury) Williams, Mrs Betty (Conwy)
Thomas, Gareth (Clwyd W) Wills, Michael
Todd, Mark Winnick, David
Touhig, Don Winterton, Ms Rosie (Doncaster C)
Truswell, Paul Wise, Audrey
Turner, Dennis (Wolverh'ton SE) Wood, Mike
Turner, Dr Desmond (Kemptown) Woolas, Phil
Turner, Dr George (NW Norfolk) Wright, Anthony D (Gt Yarmouth)
Twigg, Stephen (Enfield)
Tyler, Paul Tellers for the Noes:
Vis, Dr Rudi Mr. Greg Pope and
Wallace, James Mr. Jim Dowd.

Question accordingly negatived.