POWER OF SECRETARY OF STATE TO SUSPEND THE NATIONAL MINIMUM WAGE IN THE CASE OF NATIONAL OR LOCAL ECONOMIC EMERGENCIES

HC Deb 09 March 1998 vol 308 cc121-49

'—.(1) The Secretary of State, after such consultation with the Low Pay Commission as may be reasonably practicable, may by order suspend the operation of this Act if he is satisfied that such suspension is required in the public interest by extreme economic circumstances.

(2) An order under subsection (1) may provide for the operation of this Act to be suspended in whole or in part and, in particular, may provide for the provisions of this Act to be suspended in respect of—

1. (a) any area or description of area; or
2. (b) any individual employer.

(3) No order shall be made under subsection (2)(b) above unless the employer has given the Secretary of State not less than 30 days' notice in such form as may be prescribed that, in the opinion of the employer, such an order is necessary in order to prevent the loss of jobs.

(4) A statutory instrument containing an order under this section shall be laid before Parliament after being made.

(5) Unless an order under this section is approved by resolution of each House of Parliament before the end of the period of 28 days beginning with the day on which it is made, it shall cease to have effect at the end of that period.

(6) In reckoning the period of 28 days for the purposes of subsection (3), no account shall be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than 4 days.

(7) An order under this section which does not cease to have effect before the end of the period of 3 months beginning with the day on which it is made shall cease to have effect at the end of that period.'—.[Mr. Boswell.]

Brought up, and read the First time.

Mr. Boswell

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

The new clause provides for the suspension of the national minimum wage in the event of national or local economic emergencies. It is, perhaps, rather better drafted than one or two—[Interruption.]

Madam Speaker

Order. The House must come to order.

Mr. Boswell

The new clause is, perhaps, rather better drafted than some Opposition new clauses have been over the years, not just because of the admirable assistance of the Clerks' Department but because there is a clear precedent in legislation that is being considered even now. We owe the reference to "extreme economic circumstances" to the Bank of England Bill. I am not sure that I would have used that phrase in drafting legislation, but the Government seem comfortable with it and use it as a legal base, so we have copied it.

In offering the Government new clause 8, I hope that the Minister of State will accept our bona fides. He has consistently suggested—in Standing Committee and subsequently—that we are seeking to belittle his Bill, subvert it or denude it of content. In fact, we are providing for the Secretary of State an enhanced set of powers to use in particular circumstances. They are precedented, and the ability to make use of them would be beneficial to any Secretary of State of whatever party.

10.15 pm

I mentioned that the powers provided under the new clause are based on those in the Bank of England Bill, but they differ in a number of particulars. First, because they have a separate application, subsection (1) suggests that the Secretary of State should hold such consultation with the Low Pay Commission as may be reasonably practical". I suppose that is a lawyer's term of art—not that I am a lawyer—but it is the nearest we can get to recommending to the Secretary of State to take the advice of her or his Low Pay Commission, even in difficult circumstances and at short notice, and, if it is possible, not to go ahead without having done that.

Secondly, the new clause provides not merely for a global suspension of the entire concept of a national minimum wage under the emergency powers, but for partial suspension in particular circumstances.

It is clear that the exact circumstances under which emergency powers should be invoked to suspend the national minimum wage were not clear at the time of our drafting the new clause; nor could they be—an argument which the Government used to their advantage or to convince the Standing Committee considering the Bank of England Bill, by saying that it would be unreasonable to specify the circumstances in which emergency powers would be invoked.

I should like to offer the House two examples—one is historic and the other is by analogy. Dealing first with the historic one, it will be in the memory of a number of right hon. and hon. Members—and in my memory as, at the time, I was a researcher for the Conservative party—that when Lord Healey was Chancellor of the Exchequer, he was about to go to Heathrow airport to fly to an international meeting when he was summoned back because, sadly for him and perhaps less sadly for the economy in the disturbed circumstances of 1976, the International Monetary Fund was summoned in. The boys in blue—the bailiffs—arrived to sort out the British economy. I realise that it is a painful memory for Labour Members, and I would not wish to claim that they have a monopoly on economic difficulties, although it sometimes seems that way.

Mr. Clive Betts (Sheffield, Attercliffe)

What about the exchange rate mechanism?

Mr. Boswell

I wondered whether the hon. Gentleman would be alert enough to refer to that; in a sense, he makes my point for me. Any economic difficulty may arise, and although I anticipate—perhaps sooner than we expect—the early return of a Conservative Government, nevertheless I would not wish to say that any future Government would be insulated from the laws of economics. That shows that Governments get into economic difficulties, which might include pressure on resources and for a restraint in wages to retain the competitiveness of the UK economy.

Mr. Eric Forth (Bromley and Chislehurst)

When my hon. Friend expands further, as I hope he will, on the possible circumstances in which his excellent provision may be invoked, will he dwell on the possibility of our joining a single European currency and perhaps a version of the exchange rate mechanism before that? Does he believe that the economic pressures involved could bring about an invocation of the measure to protect elements of our domestic economy, particularly our employment?

Mr. Boswell

My right hon. Friend is incredibly perceptive. The next part of my speech addresses that point. He and I may not always agree in every particular on matters European—although we often find ourselves on the same side of the argument. I was about to share with the House my concern that our complete adoption of the single European currency could result in turbulence across the exchanges. That could also be a repercussive effect of the adoption of the euro by other member states. Both situations could have a disturbing effect.

After the Monetary Policy Committee's decision last week—to the surprise of some—not to put interest rates up, the pound broke through the DM3 barrier again. As the likelihood of the euro among the eleven firms up between now and May and as we continue with an apparently restrictive monetary policy, particularly if it is not buttressed with other measures in the Budget—I leave those for the consideration of my Treasury colleagues—there could be a runaway escalation in British exchange rates, which would be highly damaging for our competitiveness. Conversely, if we joined a single currency in due course, we might find it difficult to sustain our exchange rate. We would have to take the strain through higher unemployment, because there would be no exchange rate mechanism to correct the situation as we lost competitiveness.

The analogy with the forced monetary union of East Germany with the federal republic in 1990, after the fall of the wall, makes the point of my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) eloquently. It is an awful warning to those who advocate exchange rate unity by fiat, assuming that the problems can be blown away by uniting currencies, that, almost overnight, East Germany lost even those parts of its productive industry that were relatively competitive. It has had a high, sustained and rising unemployment rate, buttressed by huge monetary and budgetary transfers. Unemployment is still rising, and is currently hovering around 20 per cent.

That is not satisfactory, and I do not advocate it. We are proposing that, in extreme economic circumstances—within the euro or outwith it—it should be possible, after consultation, to suspend the operation of the national minimum wage.

Mr. Rowe

Does the definition of extreme economic circumstances include going to war? The likelihood of such an activity seems to be growing rather than diminishing.

Mr. Boswell

Having strayed into matters related to economic policy, I am not sure that I also wish to dilate on matters relating to foreign policy, except to say that I share some of my hon. Friend's concerns. The news tonight about the Balkans was particularly disturbing. Historically, the outbreak of widespread war has led to rapid changes in bank rates and might be exactly the extreme economic circumstances which would be addressed by the new clause.

I repeat that there is no blueprint for the kind of emergency which is envisaged. We are arguing that a wise and prudent Government, of whatever colour, should equip themselves with a mechanism that could handle such changes. I am genuinely frightened that the national minimum wage, at whatever rate it is set, may impose a cost structure in which a shock would render our economy uncompetitive, and our unemployment would soar through the roof. Nobody wants that; the Government do not intend it. We are trying to provide a bottom line which would avoid it.

I turn to the other element of the new clause which differs from the analogous situation under the Bank of England Bill, to which I have referred. Given that, according to the Government, there is to be a national minimum wage, applicable, without discrimination, by area, by sector of employment, by undertakings of different size, by persons of different ages or by classes of different occupations, the minimum wage—at least when it started out on Second Reading—was to be a universal national minimum wage, with the possibility of different rates for persons under 26, to which we shall return.

Given that that is what the Government intended, we have been arguing—in a way which I know the Minister thinks is subversive to the whole principle—that Governments, in due humility, should be prepared to consider exceptions if those are appropriate. The Government should think long and hard if there is to be a trade-off between their amour propre, in saying that there should be a single universal national minimum wage, and the consequence of a high and rising systematic rate of unemployment in a particular area or industry.

New clause 8(2) considers the possibility of a suspension in part. There are two possible tests for that. One is by area, and I shall deal with that first. As we said in Committee—I do not say this as a prediction, because, as the Minister and the Under-Secretary know, the facts show the following comparison is the greatest economic divergence—the economy of Northern Ireland has a very different costs and wage structure from other parts of the United Kingdom. It is not unique in that; it is only a little behind the north-east of England, but it is an extreme in comparison with Greater London.

The extreme is so apparent: on average, wages in Northern Ireland are 60 per cent. of those in Greater London. The bottom decile of employment in Northern Ireland yields a rate of £3.50 an hour. In London, the figure is £4.72. That marks not only the metropolitan centres of Belfast and London, which have highly capitalised industries. It also includes the impact in rural areas where there is much higher unemployment, greater seasonality of employment, and certain trades, such as hospitality and agriculture, which, historically, tend to pay lower rates.

Suspension should be provided for in case the Government find that, in the end, a single national minimum rate causes high unemployment because the rate will have been bid up in sensitive areas such as Northern Ireland and the north-east of England.

The area need not be as big as a province or a region. We might debate—and, in a different context, we have debated extensively—the concept of regional development agencies. I find it a little distasteful that my regional capital, if I may call it that, of Nottingham, a city which I like, is 100 miles from my home—the journey does not require me to leave the east midlands region significantly, if at all—whereas I live much nearer to the centre of London, and to this place, than I do to Nottingham. Perhaps economic regions are too wide for the purposes of the new clause.

10.30 pm

However, if we were considering areas, which are not specified in detail in new clause 8, we might consider development areas, assisted areas, objective 1 areas, objective 2 areas or objective 5b areas. By definition, those areas are likely to be subject to the greatest economic pressure.

I was disturbed, but not wholly surprised, to read in today's newspaper that Mrs. Wulf-Mathies, the European Commissioner who deals with the structural funds, has outlined a rather dusty scenario for our future regional assistance. If we are to lose European funds, we may well find the pressures on employment in some parts of the country even more intense.

The second provision in subsection (2) of the new clause allows for a suspension in respect of "any individual employer." I emphasise that this is not simply a matter of an employer waking up in the morning and saying, "I do not like the national minimum wage. I do not feel like paying it to my staff." It would be clearly linked by subsection (3) to a formal notice in an approved form to the Secretary of State, prescribing that, in the opinion of the employer, such an order was necessary to prevent the loss of jobs. The concept would bear a close similarity to the idea of the statutory notification of impending redundancies, and although I have an open mind on the subject, I believe that it might be appropriate to combine the two into one process.

Ministers continue to say, without telling us what the national minimum wage will be, that there will be no problem if the national minimum wage is sensibly struck. That is a circular argument, if ever I heard one. While they continue to say that everything will be all right in this new economic Britain to which we are all pointed, and to which the Bill points us, in the real world some employers will feel the pinch. There will be employers whose businesses may be destroyed by the national minimum wage. Not only will their businesses go, but the employment opportunities that they offer their staff will go.

Mr. Forth

I confess that, although I am impressed by my hon. Friend's argument, I am slightly surprised that he has not included in new clause 8 a reference to a business sector. He has covered the concept of area and is now discussing the possibility of individual employers being affected by the national minimum wage. Has he considered that a whole sector may be appropriate for such treatment? I have in mind, for example, a heavily export-oriented sector, especially adversely affected by an exchange rate movement, or perhaps a sector that has been affected by a change in the competitive environment—in a competitive trading nation, or another such factor. Did my hon. Friend consider that as a possibility, and did he consciously decide not to include it in the provisions of his new clause?

Mr. Boswell

Not for the first time, my right hon. Friend almost anticipates me. I could have done as he suggests, but I was conscious of the Government's doctrine that there is to be no differentiation by sector or area generally. Therefore, I was conscious that it might be appropriate, particularly as we should like to help the Government and we want them to adopt our new clause or something like it, to provide for only a limited power—one that would be keyed either to defined areas or to particular firms experiencing difficulty.

If a sector—motor cars, for example—were experiencing difficulties, one would not need to go through many manufacturers. If the component industry were added in, there would be more, and it would be possible to specify a group of manufacturers by listing them, provided that they were prepared to produce the sort of certificate that the clause would require.

My right hon. Friend is on a good point, which is that changing economic circumstances and an economic shock could have a disproportionate effect on a particular industry. His example is better than the one that I would have cited, because he is considering the shock effects of, for example, a change in exchange rates. I might also have added the possibilities of pressure on a whole industry, had I wanted to go for a sectoral solution. For example, certain industries will experience pressure under the national minimum wage, including catering and hospitality, hairdressing, aspects of horticulture and so forth.

Mr. John Hayes (South Holland and The Deepings)

As my hon. Friend mentioned agriculture in his response to my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth), may I draw his attention to the double effect on horticulture of pressure from the strong pound on exports coupled with the need for labour flexibility? I am thinking of seasonal work, part-time work and occasional work—all things with which he will be familiar as an expert in that field. In my constituency, the minimum wage in horticulture could have a damaging effect because of that dual threat.

Mr. Boswell

My hon. Friend is a formidable advocate for his constituency, with its huge and significant horticultural interests. He is right to point to the fact that horticulture is already under one severe threat from exchange rates, which would be compounded to a double whammy with a second threat from a national minimum wage. I am not giving him the whole solution in the new clause, because the suspension would have to happen ex-post in the case of an immediate threat to jobs. However, it would provide a mechanism if the scenario that the Government do not believe could happen did occur. It would be appropriate for such a situation.

Mr. Lansley

My hon. Friend is kind in giving way. He amply answered my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth). Before he moves on, will he recognise that it is possible to think in terms of a number of employers in an industry together, and that that sort of example fits well with the concept in the European Community of an industry being in manifest crisis? From the view of managing those economic circumstances, is it not more advantageous to enable those employers temporarily to reduce costs rather than require the Exchequer to engage temporarily in an additional subsidy?

Mr. Boswell

My hon. Friend makes two valuable points. First, he reminds the House of the concept of a manifest crisis as a term of art for an industry that is facing severe problems, probably internationally. Secondly, he makes the appropriate point that it is better to keep people in work and out of benefit—I believe that new Labour is supposed to favour that—and to keep businesses flourishing, rather than let them break down, go bust and have to be bailed out, or effectively compensated, by the Exchequer for what has happened. He is right.

The new clause envisages an emergency, when time will be short. A Government could—perhaps the Government would want to do this if any such circumstance were to arise—publish draft regulations that would be subject to the affirmative resolution procedure. They may even be able to consult the Low Pay Commission before doing so. The new clause, however, would provide for a negative procedure: an order would be made, it would be laid before Parliament, and if it was not approved within 28 days it would be void. Under the emergency provisions set out in the new clause, the order could not continue for more than three months, in any case, even if it was approved by the House.

Mr. David Maclean (Penrith and The Border)

Will my hon. Friend say whether there is anything in the new clause that would compel the Government to use the order-making power? Given that the Bill already contains order-making powers—in clauses 39 and 49, for example—and that most of the Government's legislation is littered with powers for Secretaries of State to make orders in certain circumstances, can he think of a good reason why the Government should reject a further order-making power, which they can use at their discretion when they determine?

Mr. Boswell

My right hon. Friend makes a seductive case. We are offering the new clause to the Government on a plate, as an appropriate ancillary to the powers that they have already included in the Bill. I could not agree more on his general point—frankly, if there were no orders in the Bill, there would be no Bill at all. The Bill depends entirely on regulations, and we do not know what will be in them, as we do not know what the Low Pay Commission will say—and the Government will not tell us. When the Government tell us, we shall know and we shall be able to debate the matter, which is an odd way in which to go on.

Mr. Rowe

I have not had the opportunity to study the Bill in as much detail as my hon. Friend has, and I am not absolutely clear about this issue. On occasions, individual firms and, indeed, sectors of industry have come together and asked whether they could take a cut in wages to tide them over a particular problem.

Mr. Maclean

Like the Cabinet.

Mr. Rowe

Am I right in thinking that that would be illegal under the Bill?

Mr. Boswell

I am not sure that I would use the word "illegal"—it would depend whether an order was made or an offence was created. I think that, ultimately, such actions probably would be illegal if they were persisted in. I heard my right hon. Friend the Member for Penrith and The Border (Mr. Maclean) commenting, as an aside, on the activities of the members of the Cabinet, who recently clubbed together in not taking their salary increases. Such actions would also be inconsistent with the power that is set out later in the Bill, under which it will be possible, as part of bailing out a dispute in a conciliation agreement, to allow for a lower rate to have been paid.

My hon. Friend the Member for Faversham and Mid-Kent (Mr. Rowe) makes a valuable point. If trade unions, for example, are faced with the stark choice between jobs and high pay leading to no jobs, they may settle for lower pay to retain their jobs.

The most flexible labour markets, such as the one in the United States which, I concede immediately, has a modest national minimum wage—[Interruption.] It is very much lower than what the Low Pay Commission or the Government are likely to propose. In the United States, which has a flexible labour market, such trade-off bargaining between job possibilities and wages happens extensively.

Mr. Forth

I want to press my hon. Friend on the point that our hon. Friend the Member for Faversham and Mid-Kent (Mr. Rowe) made. It strikes me as distinctly possible that a company—or indeed an industry or a sector—could find that the only way in which it could protect its work force was to negotiate a voluntary pay reduction that could take the lower-paid below the minimum rate.

I well recall that, many years ago when I worked in industry, a Swiss firm that supplied my company did exactly that. It negotiated a pay reduction across the board, to protect all the jobs. That successful strategy made a great impression on me. If the new clause is not accepted, there will be a distinct danger of denying that sensible course not only to employers but, more important, to employees. Does my hon. Friend share my interpretation and my worry?

10.45 pm

Mr. Boswell

Yes, and yes.

Mr. Bercow

Will my hon. Friend give way?

Mr. Boswell

I will, but for the very last time.

Mr. Bercow

I am most grateful to my hon. Friend, whose forbearance under provocation is always admirable.

Further to the point made by our right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth), does my hon. Friend agree that it would be especially extraordinary if the Government were to decline to agree to a suspension of the terms of the legislation in a case in which a public sector employer and a public sector union agreed that that eventuality was desirable? The Government would be punishing themselves and failing to afford themselves the opportunity offered by both the employer and the employees' representative.

Mr. Boswell

My hon. Friend piles Pelion on Ossa, as they say. He merely intensifies the point. The Government will probably want to say that there is absolutely no question of the Chancellor of the Exchequer so ordering the nation's finances as to require any part of the public sector to pay poverty wages, as they would define them, but such a situation could easily arise given the large proportion of people in the care sector who are either directly or indirectly influenced by public sector settlements.

I might have got on a little better if, instead of simply describing a circumstance in which there had to be a redundancy notification to the Secretary of State, we had further provided for a trade union seal of good housekeeping in the new clause. Perhaps we should have added a provision saying, "as a result of a collective agreement between a recognised trade union and employers' organisation to take a lower rate than the national minimum wage". That might have got the new clause past the Government.

In all humility—the humility that they claim for themselves and deny to us—the Government should admit that, from time to time, Governments will run into difficulties nationally, and that, if that happens, there should be a mechanism for suspending the minimum wage, if Ministers consider, after taking advice, that that is the sensible course. That is even more likely to happen locally, or in relation to one or two firms or industries.

I am happy for any necessary safeguards to be put in place—if it makes it more palatable for the Government to put in a reference to trade unions, I would go along with that—but it would be wise to provide a safety valve, as was done in the Bank of England Bill. If the Government are not prepared to accept the new clause, they must explain why.

Mr. Forth

My hon. Friend seems to be coming to the end of his speech. I hope that he is not, because he has not—it must be an oversight on his part—covered subsection (7) of the new clause. I hoped that he would say a few words about that provision, because it caught my eye. If I read it correctly, it appears to say that an automaticity is built into the provision, whereby it will cease to have an effect after only three months, regardless of the circumstances. That seems to be an unnecessarily harsh restriction, because we do not know the duration of the circumstances that might invoke the use of the provision. I seek clarification from my hon. Friend. Is such automaticity built into the provision? Can he explain his reasoning and reassure me on that point?

Mr. Boswell

I briefly adverted to the fact that the power, being an emergency power, would automatically come to an end. I suspect that the House is familiar with the economic variation of the Gertrude Stein saying—"A trend is a trend is a trend." The question is always whether a trend will end through some unforeseen force. We do not know what might happen in three months, but that is the key to an emergency situation. It would be open to Ministers, in the three-month period, to come to a more acceptable long-term arrangement and, given the circumstances that my hon. Friends have adumbrated, it might be sensible to do so.

Mr. Lansley

In so far as my hon. Friend has followed the construction of the provisions in the Bank of England Bill for similar extreme economic circumstances, is it not logical that if, 28 days before the end of the three-month period, it was clear that the extreme economic circumstances were persisting, it would be open to the Government to bring forward a new order to extend the period of suspension of the national minimum wage? The Government would, of course, need to secure Parliament's agreement that exceptional circumstances applied.

Mr. Boswell

That is a helpful comment, and I shall close on it. It would be possible for the Government to come back to Parliament. The Government should not use a power and then abuse it to pull a fast one on the House. New clause 8 is an emergency provision, but an emergency could extend over longer than merely the three months prescribed, even if parliamentary approval were secured for the initial order. We cannot foresee the future, and we do not know what might go wrong. The Government would be wise to concede that events do not always turn out as they anticipate, and that it would be sensible to have a flexible provision such as new clause 8 to cater for such eventualities.

Mr. Maclean

I wish to comment reasonably briefly on new clause 8.

I cannot remember an occasion during my time in the House on which a Government rejected an order-making power that it would not cause them any grief to accept. I have looked at a few Bills tonight, and, as my hon. Friend the Member for Daventry (Mr. Boswell) pointed out, this Bill is littered with order-making powers. The Fireworks Bill, a private Member's Bill, has 16 clauses, and all 16 would introduce a regulation-making power so that the relevant Minister could regulate every aspect of fireworks. Other Bills have a similar content.

What do the Government have to lose by including in the Bill an order-making power, the use of which is at the sole discretion of the Government? The Government would determine whether serious economic circumstances prevailed. If they decided that economic circumstances did not satisfy the criteria in new clause 8, they would not have to use the power.

Mr. Forth

May I try to help my right hon. Friend? Is it not possible that the Government fear that, if they accepted the new clause and invoked it in the way described by my hon. Friend the Member for Daventry (Mr. Boswell), and it was seen to be successful in protecting employment, it would demonstrate, as we have argued all along, that the Bill's broader provisions are disadvantageous to employment? Might that not explain their reluctance?

Mr. Maclean

My right hon. Friend is right. If the Government reject the new clause, it will be out of pure political dogma. It is sheer political dogma to reject an order-making power that they do not have to use. They fear that it will be regarded as a tacit admission that they may have difficulties that could necessitate its use. If it was used, and saved a certain employment, region or individual employer from the consequences of the minimum wage, people would point to the general failings of the Bill. For the Government to reject it out of political dogma would show how much faith they have in their legislation.

I hope that my hon. Friend the Member for Daventry (Mr. Boswell) intends to press new clause 8 to a vote. After hearing my hon. Friends and the Minister's reply, I look forward to pushing it to a vote personally. An important principle is at stake, and it reflects ill on a Government who put regulation-making powers into almost every clause of their legislation to reject this one.

The other reason we need new clause 8 is that I think the country is heading into recession. The Chancellor bungled his first Budget, and failed to damp down the level of the pound. We have had five interest rate increases and our manufacturing sector is suffering. Dire economic circumstances could occur much more quickly than the Government or commentators expect.

The first area heading for recession is the countryside and our rural economy. I see the effects of the Government's attack on the countryside in my constituency and in other parts of the country. We have had petrol price increases in the past 10 months, and we shall probably have a vicious increase next Tuesday. Coupled with their other measures on the rural economy, such as abolition of the Rural Development Commission—

Mr. Deputy Speaker (Mr. Michael Lord)

Order. The right hon. Gentleman is going rather wide of the mark. Will he return to new clause 8?

Mr. Maclean

Of course, Mr. Deputy Speaker. I was doing that by noting that the abolition of the Rural Development Commission means that job prospects in rural areas will be diminished. With effects of the minimum wage, we may get a rather rapid recession in the countryside—greater than we have had for 40 or 50 years, greater than between the wars.

Mr. Rowe

Is not my right hon. Friend pointing to the fact that extreme economic circumstances can arise in a sector very swiftly, whether through the influence of something over which Governments have no control, such as BSE, through some temporary cessation of supply, or through a severe frost in the fruit industry? In such circumstances, many people would rather keep their work force together by agreement with them than be forced to lay them off.

Mr. Maclean

My hon. Friend is right. Many of us in rural areas recall the severe frost last May that destroyed a huge part of our plum crop. That damaged that sector of the economy.

When you, Mr. Deputy Speaker, reminded me to stay within the terms of the new clause, I was giving some examples of circumstances which might result in dire economic conditions, and in which it might be appropriate to use the order-making power in new clause 8. I shall return shortly to the subject of how essential that power is in relation to the countryside, but first I shall give another example of exceptional circumstances.

I was a member of the Government when Kuwait was invaded—I think it was 2 August 1992. During the build-up to the Gulf war, there was a severe downturn in the tourist industry, because many people were afraid to use airlines. Our tourist business was severely affected, and I remember statements being made by my colleagues in the Government and by the British Tourist Authority trying to reassure people around the world that it was safe to fly and to come to Britain. There was a huge downturn in the number of American visitors to this country. Thankfully, that effect was short-lived, but it had severe consequences for a rather fragile sector of our economy—the tourist industry.

That is a textbook case in which, for a period—for three months, perhaps extended for a further three months—it would have made sense to use the power in the new clause to lift the consequences of the minimum wage from that sector, where there had been a huge fall in employment. Tourism employs people seasonally or part time. People in that industry would have preferred to hang on to their jobs and take a pay cut while waiting for the war to end and the economy to pick up, rather than be dismissed because companies did not have the business to sustain their employment.

Mr. Bercow

Tourism is an apposite case, because, for much of the past few years, the industry has objected to the very idea of a national minimum wage, fearing that it will produce economic calamities for the industry. The circumstances of a particular downturn that my right hon. Friend describes make the application of a suspension that much more appropriate. Is it not a case of either being able to remain afloat in such circumstances or sinking altogether?

Mr. Maclean

My hon. Friend is absolutely right. Tourism is a textbook case, and it is an entirely apposite example of an industry in which the minimum wage could be suspended because of short-term economic problems.

We might have another oil crisis. I know that we have a convention requirement to stock 79 or 80 days' supply of oil to stave off such a crisis, but who can tell what form the next crisis may take? Events in the middle east or the Balkans may lead to another crisis, whether or not it is genuine. It does not require a genuine crisis to bring about a lack of confidence in the markets and among economic commentators, and, in those circumstances, particular sectors or areas of the country could be severely affected.

The Government would then be in a bit of a panic. They could do all the spin-doctoring they liked, but spin-doctoring would not remove the problem that the national minimum wage might severely affect workers in a specific area or sector. The Government would be powerless to do anything about it. However, if they could use the order-making power contained in new clause 8, they would be able to overcome a short-term crisis.

One of the main points of contention is the economic crisis that will affect rural areas and all types of employment there—not only agricultural workers, who are covered by the Agricultural Wages Board, but all other workers, such as those working in tourism or in agricultural supply. The dire economic circumstances envisaged in the new clause are coming about rather more quickly in rural areas than any of us would like.

The Government might ask what point there would be in suspending the minimum wage for three months, but the power would be extendable. In much the same way as we extend the Prevention of Terrorism Act annually, provision could be built into new clause 8 to allow the Government to extend the three-month period as they saw fit. The new clause would allow the Government to suspend the impact of the minimum wage in objective 5b areas, where people are suffering because of the economic crisis caused by the Government's bungling of policies for the countryside.

Mr. Boswell

My right hon. Friend may remember that I had ministerial responsibility for objective 5b areas, as he had in the early days of the scheme. I confirm that the economies of areas that are likely to benefit from an objective 5b scheme are highly marginal, and would be severely affected by a national minimum wage at anything like the indicated rate.

Mr. Maclean

When we refer to geographical areas, we tend to think of counties or regions, but I am quite clear in my mind that the areas that would benefit most from the power exempting them from the requirements of the minimum wage are those such as objective 5b areas. Large parts of the west country and of the north Pennines will suffer abominably in the next few years, unless the Government take positive action to help them. So far, the Government have shown that they do not understand how rural areas tick.

If we cannot teach the Government how rural areas work, we can at least give them the power to help those areas when they get into severe trouble as a result of more Government bungling, or of a minimum wage set at an inappropriate level. Such a level may work in a booming economy, but it would seriously impinge on rural areas whose economy is suffering.

I urge the Government to accept the new clause. They may not agree with my analysis of the downturn in our economy, or of the severe economic crisis that many rural areas face, but they must recognise that the new clause gives them a power they can use if they wish: the Opposition parties cannot make it happen; the Low Pay Commission is not in the driving seat, and cannot initiate these powers. The Government would decide whether to use this power. If they reject the new clause, it will be purely out of economic and political dogma, and not because they have great belief in the minimum wage.

Mr. Tim Collins (Westmorland and Lonsdale)

It is appropriate for us to debate this new clause 10 months into a Labour Government, because it makes provision for economic emergencies, which are synonymous with Labour Governments. Had we had a minimum wage in 1924, new clause 8 would have been needed within 10 months of the first Labour Government taking office, because they had collapsed in the face of rising unemployment. Had we had a minimum wage at the time of the second Labour Government in 1929, new clause 8 would have been needed, because by 1931 we had been forced off the gold standard, which triggered the worst recession this century.

We would have needed new clause 8 had we had a minimum wage at the time of the third Labour Government, from 1945 to 1951, when there were acute shortages and rationing was continuing after the war. We would have needed new clause 8 had we had a minimum wage during the 1964–70 Labour Government, who had persistent balance of payments crises. As my hon. Friend the Member for Daventry (Mr. Boswell) said, had we had a minimum wage, we would undoubtedly have needed new clause 8 at multiple points during the 1974–79 Labour Government, when the International Monetary Fund had to intervene, and we had the winter of discontent.

Mr. Lansley

In the Standing Committee considering the Bank of England Bill, my hon. Friend the Member for Daventry questioned the Economic Secretary to the Treasury on whether this power would have been used in those circumstances. She avoided answering him by saying that the question did not apply, because a different method of managing interest rates is being used: it is now by reference to an inflation target rather than by direct Government control.

Mr. Collins

My hon. Friend makes an excellent point, which enables me to refer to the excellent speech by my right hon. Friend the Member for Penrith and The Border (Mr. Maclean).

In choosing to hand over control of interest rates to the Bank of England, the Government have made more likely the need for new clause 8. There will be substantial economic emergencies because of rapid rises in interest rates and the fact that the Bank of England is not required to pay attention to the wider needs of the economy but simply to aim at an inflation target.

The chances of the new clause needing to be triggered, if it were in the legislation, have increased as a result of some of the Government's decisions in their early months in office. There is clearly a need for such a provision, and the strength of the new clause is that it enables the emergency provision to be triggered in one of several circumstances. We have heard how it could be triggered by difficulties in a specific area. My constituency in Cumbria in the lake district adjoins that of my right hon. Friend the Member for Penrith and The Border. As he and other hon. Members have said, among the sectors that will be most affected by the minimum wage are tourism and agriculture.

Let us imagine doomsday or worst case scenarios in my part of the world, which depends heavily on tourism. A repetition of the 1986 Chernobyl disaster, which resulted in the dumping over large areas of Cumbria of dangerous radioactive substances could cause severe economic difficulties for agriculture and tourism. Imagine—heaven forfend—what would happen if there were an outbreak of rabies in Cumbria. That would be an immense deterrent to visitors, and would trigger emergency action. New clause 8 would be relevant, because many people in my constituency and elsewhere who were coping with such disasters would much prefer to have, temporarily or on a prolonged basis, a lower-paid job than no job at all.

Mr. Forth

One thing which puzzled me in the early part of the debate, but which will probably emerge as the debate proceeds, is that there has been no mention of the differential impact on small enterprises, and especially those that are labour-intensive. I suspect that such companies predominate in my hon. Friend's constituency and that of my right hon. Friend the Member for Penrith and The Border (Mr. Maclean). Does my hon. Friend agree that one of the main aims of the new clause is to seek to provide easement or protection for such small labour-intensive companies? Does he agree about the significance of that?

Mr. Collins

My right hon. Friend is right, and his intervention is helpful. He mentions exactly the sort of factor that sensible legislation should take into account. The new clause would enable the easement of economic difficulties that could be ridden out by a large multinational. ICI is likely to survive anything. It has survived 70 or 80 years of depressions and recessions, and even successive Labour Governments, which testifies to the longevity of any company.

The small firms that provide only one, two or three jobs are likely to be the engines for future jobs. They are currently being assailed by advertisements to join the Government's new deal to help the young unemployed, and they are the firms most likely to find themselves in the economic firing line. Without the protection of new clause 8, they will not be able to deal with some of the problems that arise.

I think of the difficulties that might prevail in my county of Cumbria if there were an incident at the nuclear installation at Sellafield. That could cause severe economic problems throughout the north-west and north of England. There would undoubtedly be an emergency, and it would be imperative to maintain the economic fabric by keeping some jobs and enterprises going.

Imagine, for example, what might happen in our part of the world if, as my right hon. Friend the Member for Penrith and The Border said, there were a recurrence of the oil crisis. In current circumstances, that is a distinct possibility. It is barely two or three weeks since the House was seriously conducting a debate on the general expectation—I think that it was shared by hon. Members on both sides of the House—that, by the time we reached this point in March, British, American and other forces would be engaged in combat in the middle east and in Iraq.

My right hon. Friend reminded us of the economic consequences of the Gulf war in 1990. We remember the oil crisis in 1973–74 and the immense effect that the sudden, overnight and unexpected acceleration of the oil price had throughout the economy.

Mr. Boswell

I do not know whether my hon. Friend has noticed the answer that I secured to a written question the other day about petroleum stock levels. It showed that they were only two days over the indicated level, which reflects several things, including oil companies' reluctance to continue with heavy inventories. Does he agree that, although it is important not to alarm people unnecessarily, that shows the vulnerability of any modern economy to economic shocks?

11.15 pm

Mr. Collins

I agree with my hon. Friend. The other reason that new clause 8 is so important is that it reflects the fact that, since 1974, there has been substantial structural change in the modern industrialised economies. We have moved to what is called the "just in time" philosophy. That means that companies no longer have large stocks of equipment, supplies or other things in their factories. They are used to being able to call instantly on the resources they need, which will include labour resources as well as imported and domestic raw materials.

If an economy is so dependent on transport and on the idea that an order can be placed today and raw materials will be in place tomorrow, and if that network were impeded in any one of the ways we hear about—the impact of the millennium bug when we reach the new millennium, or of a terrorist attack on major installations of power complexes—the consequences could be terrible. 1 have referred my hon. Friends to a report earlier this evening on "Channel 4 News", which showed the desperate circumstances of businesses in Auckland, New Zealand, which face the prospect of months of power cuts.

By any definition, those are economic crises that would make it next to impossible for some businesses to stay viable and to pay a national statutory minimum wage, which might have been determined in circumstances where any of those things seemed completely remote: power cuts, computers failing, a massive oil crisis or international developments leading to war. All those might not have been taken into account by the Low Pay Commission in setting the national statutory minimum wage level, but all would amount to a clear and present economic emergency for many businesses in a geographical area, business sector or particular part of the country. In those circumstances, new clause 8 would afford them valuable and absolutely vital protection.

New clause 8 has several other merits. It allows for the Low Pay Commission to be consulted, if it is reasonably practicable. There is no question of it being sidelined by the new clause. However, it is intended to be triggered in circumstances of emergency, where there is likely to be urgency, so the Secretary of State is given flexibility. If the Secretary of State is confident that he or she has the power and time to consult the commission, they may do so. If not, that does not prevent them from acting.

Mr. Boswell

Does my hon. Friend agree that, if push came to shove, a telephone call to the Low Pay Commission chairman would be better than nothing?

Mr. Collins

I entirely agree with my hon. Friend, who again demonstrates the essential reasonableness, rationality and moderation of new clause 8, which is, sadly, a little lost on the Government Front-Bench team. It may deeply regret not having accepted the new clause.

Mr. Syms

Will my hon. Friend consider this aspect? Would not consulting the Low Pay Commission be vital to politicians, who, faced with a crisis, could lean on a commission of experts to give advice on the matter, rather than take arbitrary political decisions?

Mr. Collins

I agree with my hon. Friend, who once again points to one of the great strengths of new clause 8. It would write into the Bill something that would be welcome in any legislation introduced since 1 May 1997—Wa requirement that Parliament be consulted and that the House takes the final decision on the fate of any orders brought in under new clause 8. Throughout the Bill, order-making powers are given to the Secretary of State, in very general terms, without any reference to this House.

A common pattern across the Government's legislation is the giving of immense discretion to Secretaries of State, other Ministers, new assemblies or parliaments or other quangos that the Government are creating or amending. New clause 8 would directly give Parliament the power to approve or disapprove an order. Of course the Secretary of State could act with immediacy and urgency in a pressing economic crisis, but equally it would be for Parliament to take a view on whether the Secretary of State had acted properly and whether he should continue with any action he had taken.

Mr. Bercow

In view of the evident reasonableness of new clause 8, does my hon. Friend agree that the only possible explanation for the Government's refusal to contemplate accepting it is that they have so often gone on the record insisting that a national minimum wage could not contribute to an economic downturn, and that they now feel unable to do an about-turn and admit that they might have been wrong? Is it not an example of what the late and distinguished economist and political philosopher Friedrich von Hayek described as the "fatal conceit"?

Mr. Collins

I agree with my hon. Friend, as I am sure he would agree with me that the Government are guilty of any number of fatal conceits, which will no doubt lead to their imminent demise.

I disagree with one small part of what my hon. Friend said, in that he advanced only one possible theory for the Government opposing new clause 8. There is another theory, which is that they are already beginning to hear the flapping wings of the chickens presently stacked over Heathrow but ready to come down to roost over Downing street. They fear that the powers given in new clause 8 to a Secretary of State would soon be powers exercised not by a Labour Secretary of State but by a Conservative Secretary of State. That is part of the reason why they are not sympathetic to new clause 8.

My hon. Friend the Member for Buckingham rightly points me in a new direction, which is the Government's stance on this matter. Is it their contention—which would be the logical consequence of them opposing such a reasonable, modest and mild provision—that there are no circumstances whatsoever in which a minimum wage could deter employment, impede enterprise or restrict the ability of those who are working for another group of people to do so effectively and efficiently? If that is the case, we can only wonder why they propose to exempt the self-employed, the armed forces and those under the age of 26.

Why did the Deputy Prime Minister, in a famous Sunday television interview, observe, "Of course the minimum wage will cost jobs; any silly fool knows that"? That was a rather welcome outburst of candour from the Government, yet their attitude to new clause 8 is inconsistent with that.

If the Government believe that, even in normal economic circumstances, members of the armed forces should not be subject to the Bill's provisions; if they believe that, even in normal economic circumstances, people under the age of 26 would be difficult to employ if they were subject to a normal statutory national minimum wage; if they believe that, even in normal economic circumstances, self-employed people would find it excessively onerous, bureaucratic and a deterrent to their ability to create wealth and jobs to fulfil their commitments under a statutory national minimum wage, surely they recognise the powerful argument of my hon. Friend the Member for Daventry, that, in circumstances of acute economic crisis and distress of the sort that we have discussed this evening, the whole economy or, alternatively, some parts of it, either geographical or according to particular businesses, might require some assistance.

New clause 8 is something of a test for the Government—a test of logic. The logic of Ministers' position on a series of other issues is that they should accept new clause 8. The new clause is a test also of their commitment to democracy, as it would include in the Bill new powers that would be clearly constrained by requiring reference back to the House. It is a test of their commitment to recognising potentially serious economic circumstances. It is a test also of their flexibility.

Earlier in the debate, we heard the Minister say, in a most extraordinary remark on a different clause, that an amendment was excessively prescriptive. If ever a Bill was prescriptive, it is this one: it gives the Secretary of State power to dictate by order the amount that people may be paid for performing jobs. New clause 8 is anything but prescriptive. It would give the Secretary of State power to intervene to suspend the Act; it does not require intervention. It does not say that, in certain circumstances, a Secretary of State might find himself or herself hauled up before a court or other body for not invoking it. Discretion is left to the Secretary of State.

Time after time, we have seen in the history of Labour Governments how often it has been necessary for provisions to be in place enabling emergency measures to be taken. How many previous Labour Chancellors of the Exchequer or Prime Ministers would have liked to have some means of getting themselves out of the holes into which they had dug themselves?

In passing new clause 8, the Government would get something for nothing—an additional discretionary power—which they should not fear. The new clause's provisions are consistent with what Ministers have said before. They can oppose it only if they are out of kilter with their previous statements and not as confident as they pretend to be of being in office for perpetuity.

Mr. Ian McCartney

For almost an hour and a half, we have been treated to one of the most extraordinary debates so far on the minimum wage legislation. Conservative Members have repeatedly attempted, both in Committee and outside the House, not only to construct the most bizarre reasons why we should not establish a minimum wage but to justify their role as apologists for low pay. However, tonight's debate has surpassed all the previous debates and statements, setting an absolute record of contempt and showing an absolute lack of concern for poverty in rural areas and poverty in general. We have seen in this debate Conservative Members' apparent denial of the reasons why they lost the general election—leaving the Government with a massive inheritance to clear up.

Conservative Members who have spoken in this debate have been no more than a smokescreen for a dubious campaign to prove how well the previous Government represented rural areas. Let us consider their record. The previous Government's bus deregulation destroyed almost every public transport system in the countryside—but not a single Conservative Member uttered a single word of opposition to the closure of rural transport links. The previous Government—not once, not twice, but three times—tried to destroy the rural post office network by privatising it.

What of the closure of rural railways? The hon. Member for Daventry (Mr. Boswell) was a member of a Government who destroyed rural railways—against which destruction not a single word was uttered by Conservative Members. Conservative Members campaigned to abandon the Agricultural Wages Board, although thousands of constituents of at least two hon. Members who have spoken in this debate are covered by the Agricultural Wages Board and by minimum wages. Those poor rural farm workers are still covered by minimum wages because farmers and farm workers joined together and revolted against the previous Government's attempts to abolish minimum wages in rural areas. What about the sale of housing association homes in small villages, which has led to a collapse in the supply of affordable homes in rural communities?

What about the BSE crisis? The right hon. Member for Penrith and The Border (Mr. Maclean) spoke so piously, but he was a Minister in a Department that denied—not for months, but for years—that BSE caused damage, posed dangers or formed a link in the food chain. He bears heavy responsibility—by his inactivity, because he could have done something about it—for what has happened to United Kingdom agricultural interests. His abysmal failure—both personally and collectively—to do so something about it has left us with a legacy of job losses, of billions of pounds of losses to the British economy and of damage overseas to our industry. He stood at this very Dispatch Box and denied that a problem even existed. He had better not give Labour Members any lessons, or lectures, about the rural economy and the effects of Government policies on rural areas.

Mr. Maclean

Will the hon. Gentleman give way?

Mr. McCartney

In a moment.

I have never thought of the hon. Member for Daventry as subversive, in any circumstances. I think I told him in Committee that I thought of him more as a Captain Mainwaring—the leader of a Dad's Army. Certainly, he has come into battle tonight with something of a battered shield in trying to stop the onward march of the national minimum wage.

The hon. Gentleman normally puts up a substantial argument in Committee, intellectually. My hon. Friends and I have to think carefully about most of the points that he makes, and on occasion he has made points that I have been prepared to concede, both because of the rightness of what he has said and because of the way in which he has said it. The new clause, however, is no more and no less than an opportunity for Conservative Members, in a completely undisguised way, to attack the whole concept and principle of the minimum wage.

11.30 pm

Let us consider some of the arguments that we have heard. We have heard arguments about the single currency. Can the hon. Gentleman name any country in Europe which has signed up to the first wave that has decided to suspend the national minimum wage legislation, or has given any reason to do so? Then there is the argument about BSE. Interestingly, the new clause does not refer to the Agricultural Wages Board or to the suspension of agricultural wages legislation. It is possible that, if workers in rural areas were covered by the board, there would be no suspension, despite what has been said by the right hon. Member for Penrith and The Border (Mr. Maclean) about the crisis caused by BSE. Rural workers who have no interest in agricultural activities will have their wages arbitrarily cut, while agricultural workers involved with BSE will not be covered by the new clause.

The whole thing is a shambles, for one simple reason. There has been no intention of thinking this through; it was just another hook on which to hang the prejudices on which opposition to the minimum wage is based.

Mr. Maclean

Will the hon. Gentleman give way?

Mr. McCartney

The right hon. Gentleman need not worry. Before the end of the day I will give way.

The issue of rabies was raised. Here is a sound reason why the poorest people in Britain should not have a minimum wage: someone might be rabid. The only people I know of so far who may be rabid are Conservative Members: they become rabid as soon as we mention the minimum wage. The same is true of the issue of Chernobyl or Sellafield. There is a possibility that at least a million people in Britain earning under £2.50 will immediately have their wages cut on the grounds of a crisis in Sellafield.

Mr. Maclean

The hon. Gentleman made a strong attack on my handling of the BSE crisis when I was a Minister. Can he give a single example of any official advice that I ignored, or did not put into effect? Has he brought any of his allegations to the attention of Lord Justice Phillips?

Mr. Deputy Speaker

Order. If the Minister replied, he would stray rather far from the terms of the new clause.

Mr. McCartney

I accept that, Mr. Deputy Speaker, but you obviously decided that it was in order for the right hon. Gentleman to raise the issue of BSE as a reason for cutting low-paid workers' wages. My point was that the BSE debacle happened because the right hon. Gentleman, as a Minister in the last Government, allowed the situation to develop as it did. I withdraw nothing that I said about that.

The next item on the agenda is the possibility of suspending the minimum wage—in fact, cutting wages—for workers on the basis of the millennium bug. Were Opposition Members suggesting that if people were paid a minimum wage there might be power cuts and a further oil crisis? Quite frankly, it beggars belief that they ask us to take the new clause seriously as a genuine attempt to improve the Bill.

Mr. Lansley

It appears that the Minister cannot accept that it would be right to suspend the national minimum wage in any of the circumstances that have been described. Does he believe that, because he cannot envisage any circumstances in which it should be used, such a power should not be included in the Bill?

Mr. McCartney

I shall come to what powers should be on the face of the Bill in a moment, but may I ask Opposition Members one question that they have never answered? In envisaging a crisis that was so real and of such consequence that it was necessary to cut the minimum wage, why have they remained silent about everyone who is paid more than the minimum wage? If, in the event of a national crisis, the very poorest—because no one will be paid less than the minimum wage—are to bear the entire brunt of that crisis, which is surely the intellectual argument that Opposition Members are making, what will happen to those who are better off or well off? Are people with huge resources to be excluded from the consequences of any financial or economic crisis that may arise while the lowest-paid workers in Britain bear the full weight of that crisis? It is economic illiteracy.

The Opposition are using the new clause for one simple purpose: to make a further attack on the principle and concept of establishing a national minimum wage and dealing with the inheritance that they left the United Kingdom. There are large areas of low pay in Cumbria, Scotland, Northern Ireland, Wales—in the north, south, east and west. Huge numbers of families who work full time are paid so little at the end of the week that they have to rely on state benefits. That is the legacy of the Conservative Government. We are addressing the real national emergency—their legacy of poverty pay, not their spurious arguments that we have heard so far in support of the new clause.

Mr. Maclean

To return to the subject of economic illiteracy, does the Minister not understand that it is not necessary to have such an order-making power in respect of those who are paid more than the minimum wage because there will be no statutory bar to their accepting lower wages? Those who are covered by a minimum wage provision, however, would require such an order-making power to take them outside the statutory provisions in an emergency. The new clause is not putting the burden purely on the poor; people who are paid more can have their wages reduced more easily.

Mr. McCartney

That is more absolute nonsense. Under the new clause, the low-paid can have their wages cut, but the better-off and the very wealthy can think about it. They will think about it for exactly one second and get on with the rest of their lives.

Mr. Ian Bruce

On a point of order, Mr. Deputy Speaker. I wonder whether the House authorities can check whether the speakers are working on the other side of the Chamber? The Minister is obviously not listening to what is being said or not hearing it.

Mr. Deputy Speaker

That is not a sensible point of order.

Mr. McCartney

Your comment about the hon. Gentleman not making sensible remarks is probably the most sensible observation that I have heard in 11 years in the House, Mr. Deputy Speaker.

The hon. Member for Daventry mentioned the Bank of England Bill which deals with the macro-economy and allows the economic levers controlled by the Bank of England to return to the Treasury under certain circumstances. The National Minimum Wage Bill is about individual rights and covers a relatively small part of the economy. It is a matter of proportion. Even the Tory Government did not provide a mechanism for removing unfair dismissal rights in a national economic emergency.

Suppose that I had taken as genuine what the hon. Member for Daventry said—that the new clause sought to assist. It would quickly have become quite clear from Back Benchers' speeches that their arguments had nothing to do with assisting the Bill and everything to do with the continuation of low pay among large sectors of British society and with protecting employers who are quite prepared to continue paying £1.20, £1.30, £1.50 or £1.60 per hour. Perhaps Conservative Members will answer a question that they have never answered: do they intend to fight the next general election on a promise to scrap the national minimum wage? If the Conservatives press the new clause, I ask my hon. Friends to vote against it.

Mrs. Theresa May (Maidenhead)

I shall speak only briefly on the new clause. I do not intend to go into the various extreme economic circumstances that might lead to the necessity of operating the provisions of the new clause.

I was astounded by the Minister's reaction to our sensible proposal. I admit that I was not on the Standing Committee that debated the detail of the Bill, so I had not hitherto had an opportunity to see the Minister in full flight on the Bill. Having heard several of his responses so far, I am disappointed that he is not able or willing to address the issues that are raised. He merely talks about the dogma of whether there should be a national minimum wage. The Bill is about a national minimum wage. Our new clauses are about the practicalities of the operation of the Bill.

Mr. Ian McCartney

The hon. Lady is right—she was not in Committee. She obviously did not listen to the hon. Member for Daventry when he moved the new clause. The new clause would not provide for a national minimum wage; it would get rid of it. The purpose of the new clause is to suspend it or cut it.

Mrs. May

The Minister obviously was not listening to what I just said. I listened to my hon. Friend the Member for Daventry (Mr. Boswell). The Minister's responses are all about whether there should be a national minimum wage. He has not addressed the practicalities of how it should be operated. The new clauses that the Conservatives have proposed have all addressed practical issues about the operation of the national minimum wage in certain circumstances. New clause 8 is a good example of that.

Mr. Desmond Swayne (New Forest, West)

Can my hon. Friend somehow get it through to the Minister that the purpose of the new clause is to allow those who would otherwise lose their job in extreme circumstances to hold on to it and have a wage at all?

Mrs. May

I am grateful to my hon. Friend for that very valid point. He makes it with rather more force than I could. In extreme economic circumstances, when the choice is between people losing their job or keeping it at a lower wage, the Minister is saying that people should lose it and have no wage. He does not want the flexibility of allowing employers to step aside from the provisions of the national minimum wage for a limited period in extreme economic circumstances.

We are extending a generous helping hand to the Government. We are giving them the means of saving them from themselves. [Laughter.]

Mr. Ian Bruce

My hon. Friend is getting guffaws from Labour Members. They seem not to appreciate that, despite the many hours that the Bill spent in Standing Committee, seven of the groups of amendments are Government amendments because they did not get it right before. Madam Speaker is keen to ensure that amendments that have already been well debated are not selected, yet there are 16 groups on the selection list. That shows what a mess the Bill is in. Labour Members should listen to my hon. Friend rather than laughing at what she is saying.

Mrs. May

My hon. Friend is absolutely right. It is extremely disappointing that, despite the fact that the Government have had to table a whole series of amendments because they failed to get the Bill right first time round, they will not spend time listening to the practical points that we are raising in a spirit of generosity. We are trying to help the Government out of the problems that they are causing.

There are two types of circumstances in which it could be necessary for the new clause to operate. The first is where extreme economic circumstances have been caused by some external shock to the system. A variety of such examples have been given by my right hon. and hon. Friends. I seem to recall that, in moving the new clause, my hon. Friend the Member for Daventry referred to a circumstance in the 1970s, when the then Chancellor of the Exchequer, now Lord Healey, had to be turned back at the airport. I recall that, at the time, Lord Healey made the famous remark, "Crisis? What crisis?" It is therefore not surprising that the Government are not taking any notice of the issue. It is obvious that the Labour Government would not see an extreme economic circumstance if it came up and hit them.

Mr. Boswell

My hon. Friend is making an interesting argument. Does she agree that, although the Labour Government could not recognise an economic crisis, and would be powerless, unable or unwilling to do anything about one, we would suffer?

11.45 pm

Mrs. May

My hon. Friend is exactly right. The people who would suffer particularly are those who lost their jobs because the Government had not taken unto themselves the power to set aside the national minimum wage provisions for a limited period.

The Government are creating the other set of extreme circumstances themselves. That is precisely why I say that we would be saving them from themselves in pressing the new clause. My right hon. and hon. Friends have referred to circumstances that are being created at the moment. Given the strength of the pound, the five interest rate rises and the impact of the Chancellor's first Budget, many firms are in extreme difficulty.

Mr. Syms

Does my hon. Friend agree that it is not just a question of suspending the national minimum wage to help companies? A company that stays in business is one that can pay its debts to other companies. In a crisis, a number of companies may go out of business. The temporary provisions could well provide a structure that would enable many businesses to remain in the industry.

Mrs. May

My hon. Friend's point is extremely well made. Given the Minister's interest in payment of debt, I trust that the Government have listened to that point and will take it on board.

It is absolutely clear from the Minister's response that he simply does not understand the impact of his own legislation. I repeat—it bears repeating, because I fear that the Minister has not understood the point—that, in extreme economic circumstances, where it is necessary to relieve pressure placed on firms as a result of the national minimum wage, the choice will be between unemployment and employment at a reduced wage. If there has been economic illiteracy in the debate, it has been the Minister's response, "Oh, well: only the poor will have their wages reduced".

As my right hon. Friend the Member for Penrith and The Border (Mr. Maclean) said, the wages of people not on the national minimum wage could be cut easily because there is no statutory backing for the level of their wage. If circumstances made it necessary to cut the wages of those on a national minimum wage, but it could not be done because of statutory provisions, those people would lose their jobs.

Mr. Bercow

I am following the logic of hon. Friend's argument closely. Does she agree that the Government's rejection of new clause 8 is not only wrong but illogical? It is illogical for Ministers to argue that, in economic good times, it is prudent to raise the level of the national minimum wage, but to reject the notion that, in economic bad times, it is somehow not prudent to suspend, disapply or lower the national minimum wage.

Mrs. May

My hon. Friend is entirely right. The illogicality is more evidence of the fact that, although the Government consistently talk these days about flexibility of labour markets, they do not understand what that means.

Mr. McCartney

The hon. Lady has almost made my point for me, so perhaps she will confirm it. Does the Conservative party advocate general wage cuts in all economic circumstances? Is that what the hon. Lady is advocating? Is it true that the Conservative party stands for general wage cuts throughout the economy?

Mrs. May

No, that is not what I am advocating, and that was not what I said. Perhaps the Minister would care to listen more carefully to what I say in future.

I said that I would speak briefly on this matter, but the Minister has proved, by his response and his continual interventions, that he has completely failed to understand the impact of the Bill or the necessity for the provisions in new clause 8.

The Government fail to take on board the reserve power that is proposed in new clause 8. I find that illogical in another sense. I sat through the Committee that considered the School Standards and Framework Bill, in which the Government were constantly incorporating provisions for reserve powers, saying, "Trust us; don't worry; they are there in case of emergency circumstances." Yet now, suddenly, the Government are completely unwilling to incorporate in this Bill powers that would enable them to cope with emergencies.

We are not suggesting that new clause 8 is about a general wage cut. We are saying that, in certain economic circumstances, in certain areas, if people are to keep their jobs, the national minimum wage provisions must be set aside. As my right hon. Friend the Member for Penrith and The Border said in his excellent contribution, one can only assume that the Government are driven purely by dogma rather than by concern for the low-paid or for those on low pay scales whose jobs may be affected in difficult economic circumstances. The Government are only interested in their own dogma.

Mr. Oliver Letwin (West Dorset)

I have listened with great interest to the illuminating contributions of my right hon. and hon. Friends and the Minister. I believe that my hon. Friend the Member for Daventry (Mr. Boswell) and my right hon. and hon. Friends who spoke subsequently have significantly undersold the merits of new clause 8, for two reasons in particular. I hope that the Minister finds my argument sympathetic; I believe that it accords with the logic of the Bill.

First, I believe that, in Opposition contributions to the debate, a somewhat loose use has been made of the very precise wording of new clause 8, which refers not to economic crisis—which might be regarded as unlikely to occur frequently—but to "extreme economic circumstances". This takes us to the heart of the issue of the minimum wage and its effects on employment.

As the Minister will no doubt agree, the principal feature of the minimum wage is that it works if it is set at a level where the marginal utility of labour exceeds the minimum wage—where the employer finds that an extra employee earns more for the firm than the minimum wage that must be paid, taking account of the social costs of labour, national insurance contributions and so on. Therefore, the phrase "extreme economic circumstances" has a specific meaning in the context of the Bill, because it does not necessarily refer to a generalised catastrophe in the economy. It could also refer to any set of circumstances that alters the marginal utility of labour.

In some circumstances, companies could survive quite nicely using capital assets, perhaps making large profits, but those same circumstances might mean that the additional employee, who was well able to find a job a little earlier in the economic cycle because he was able to earn for his employer, as an extra employee, slightly more than the minimum wage, finds, later in the cycle, that, governed by the same minimum wage, set, perfectly reasonably, by the Low Pay Commission or the Minister on its advice, he can no longer earn enough for the firm to justify that minimum wage.

Currently, such extreme economic circumstances are easy to imagine. My right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) mentioned economic and monetary union. In all probability, the Minister and the Labour party are determined to take this country into that mechanism at a certain point. In those circumstances, it is easy to imagine a concatenation of interest rates and fiscal policies which for this element of the European Union would result in a significant adjustment of the marginal utility of labour.

The policies may provide for perfectly reasonable distribution of labour costs and profits around the continent as a whole, but leave us and perhaps one or two other countries in a position where the additional employee no longer earns as much for the firm as the minimum wage would force the employer to pay. Under those circumstances, only powers of the sort that new clause 8 provides could allow a Government to adjust without disrupting the entirety of the minimum wage legislation.

My hon. Friend the Member for Maidenhead (Mrs. May) clearly spoke the truth, which is that new clause 8 would help the Government to save themselves from themselves; or, to put it more generously, it would assist the Government to make the Bill workable.

A second reason for the Government to accept new clause 8, which is even more important to the Government's case and their logic, springs from the first reason. Hon. Members on both sides of the House will agree that circumstances may arise in which the minimum wage is set at a level in a given year or set of years that is in practice acceptable to employers in the sense that they would want to employ additional labourers. However, they may fear that there might come a time thereafter when those circumstances will no longer obtain and so, in advance of extreme economic circumstances, they might be unwilling to take on additional labour simply because of the fear of the inflexibility of the legislation that would obtain in the absence of new clause 8. The presence of the new clause would act as a signal to those employers that under such circumstances the Government could alleviate the situation by using the reserve powers.

Mr. Ian Bruce

Has my hon. Friend read into the clause the intention that I would attribute to my hon. Friend the Member for Daventry (Mr. Boswell)? For instance, if there were a natural disaster, local low-paid workers might volunteer to do additional work—they are usually the first to do so—for their employers, for the public good or whatever. The employer might suddenly say, "Hang on. I can't pay you." The worker might say, "It's all right." However, the employer would answer, "No, I'll get prosecuted under the minimum wage legislation." Surely then the Government could say that, given the snow or the floods—whatever the catastrophe—they would temporarily suspend the minimum wage order.

Mr. Letwin

Such circumstances are a possibility, but I was trying to point out that the new clause would rescue the Government and the Bill from a wider danger—the danger that, across the economy as a whole, employers would be reluctant to take on additional labour that might be justified even with the minimum wage set at whatever level it had been set at simply because they feared that at some later stage in the economic cycle some relatively unforeseen and extreme economic circumstance—extreme only in the sense of adjusting the marginal utility of labour—might make that the wrong decision.

I am not speculating—that has happened. Under previous Administrations, before certain reforms of the labour market and of employment law, employers were more willing to take on additional labour. There was a time when employment protection—the legislation was well intentioned—was so restrictive and made dismissing an employee so costly that employers were unwilling to take on people. The loosening of those employment laws was heavily responsible for the change in our labour market and the difference between unemployment in this country and in our European counterparts at every stage of the economic cycle.

The same structure of argument applies to the new clause. [Interruption.] If the Minister wants to intervene, I am more than willing to give way. The new clause would permit the Government to make an exception and therefore would enable employers to employ people without worrying that they would later face the twin constraints of a decrease in the marginal utility of labour and the minimum wage.

12 midnight

Mr. Swayne

Will my hon. Friend answer two questions? First, to what extent would such a power have to be used to create the environment of reassurance that employers would require to continue to take on employees rather than to replace them with capital? Secondly, in what ways does he envisage the power in new clause 8 being used? As I understood his remarks, it is likely that the power would regularly be appropriate during a particular phase of the economic cycle and that it would not be a severe shock.

Mr. Letwin

My hon. Friend asks characteristically acute questions. I do not envisage—this is made clear in the new clause—that the power would be invoked regularly at a particular point in the economic cycle. My argument is that the fact that it could be invoked at a given point in the cycle would have an effect—I think that this is undeniable—on the behaviour of employers before that point. There is an asymmetry between likely reality and fear, which the Government ignore at their peril and, more important, at the peril of those who are employed or would like to be employed.

On my hon. Friend's other point, the powers in the new clause would typically be used only in "extreme economic circumstances". The definition of extremity relates to the marginal utility of labour. If the Government took that argument seriously—manifestly, from the Minister's guffaws and amused expression, that is far from likely—it would be to the benefit of the Bill.

I offer a mild prophecy: a year or two from now, the Government will return to the House seeking precisely such an order-making power because some minute and unforeseen circumstance will have arisen in which such a power is required to prevent what would be, from the Government's point of view, although not from that of Conservative Members, a much greater calamity—the need substantially to revise the whole Bill in order simply to avoid a particular, local problem.

Mr. Boswell

This has been an interesting, lively and well-attended debate. I do not intend to speak at length. It is good to see at this late—or early—hour the attendance of so many hon. Members, although there has been a deficiency, now modestly repaired, on the Liberal Democrat Benches.

I shall respond first to the remarks of the Minister, whose metier may lie outside the House as a fairground barker or something similar. He made some unwarranted comments about my right hon. Friend the Member for Penrith and The Border (Mr. Maclean) in respect of BSE. It is rather silly and injudicious to set up an inquiry under Lord Justice Phillips and not to wait for its conclusions, which will be of more interest than the Minister's remarks tonight.

The Minister asked why no other European country among the 11 who are likely to join the first stage of economic and monetary union had a suspensory power. First, those countries are unwise not to have such a power. Secondly, I think that their unemployment record would suggest that, in general, their labour market policies are not of the wisest.

The Minister asked why I had not tabled any amendments concerning the Agricultural Wages Board. That is not the subject of the Bill, and Ministers have been, at pains to say that any changes that they are proposing to the operation of agricultural wages legislation are confined solely to matters relating to the implementation of the national minimum wage. Had I tabled any such amendments, they would have gone wider and would probably have been outside the long title of the Bill.

If the Government were to accept the new clause, which is modest and well intentioned, they would effectively be letting their cat out of the bag, because they would be giving themselves powers to do something about the consequences that will inevitably follow from their decision to implement the minimum wage broadly universally and at a single rate. There will be industrial consequences, and the economy may not be able to respond competitively to international shocks.

There is an essential ambiguity in the Government's attitude. The Bank of England Bill implements one of their treasured policies, about which I have grave reservations: to introduce a Monetary Policy Committee, independent of the Chancellor, to run our monetary policy. In that Bill, they provided for a way out in cases of external economic shocks.

We have copied that provision into our new clause, but because of their political commitment, given regardless of the economic consequences, the Government are not prepared to provide for themselves the powers to take action to meet any such shocks. What is sauce for the goose should be sauce for the gander. A clause in one Government Bill should be a new clause added to this Bill.

Question put and negatived.