Minimum Wage (Scotland) (Hansard, 8 March 2000)

§ Mr. Ian Davidson (Glasgow, Pollok)

I want to speak about the implementation of the national minimum wage in Scotland. The minimum wage will rank as one of the great achievements of the Labour Government. However, I come to speak not about its merits but about its implementation. While it is true that, in the past, the majority of employers paid wages that were above the present national minimum rate, and that now a majority of employers who previously paid low wages now abide by their legal responsibilities and pay that rate, there remain a minority of rogue employers. Many vulnerable employees and potential employees need our help and protection.

It is too soon for a full analysis of the scale of the problems, but we can get a glimpse of them. Citizens Advice Scotland has collected information on cases from some of its bureaux. That information raises several worrying issues. The trawl by Citizens Advice Scotland is not scientific or complete, but it gives a valuable insight, which I want to share with the Minister and the Department. I hope that it will lead to action in the not-too-distant future.

The information that I cite is from a special briefing that is based on cases from individual citizens advice bureaux in the past year. I believe that it will lead us to agree that the Government need to undertake an information campaign on the national minimum wage to tell citizens about their rights, specify who is entitled, explain the levels, and ensure that bad employers are deterred from malpractice.

The trawl gives an idea of the sort of people who have faced difficulties, and the Government might consider aiming any information campaign at them. Approximately two thirds of those who have approached the citizens advice bureaux are women. That shows not only that women have traditionally been paid less than men, but that they have been in jobs that are more vulnerable to exploitation.

The profile of clients by age also highlights the fact that a disproportionately large number of people aged between 18 and 21 have come forward. They comprise approximately 17 per cent. of those who go to citizens advice bureaux to discuss the national minimum wage. That is a much higher proportion than the 4.7 per cent. of the population that that age group makes up. It is therefore important to target any information campaign at young people.

When we consider the sort of jobs that people do, it is noticeable that the largest category of employment about which complaints have been made is hairdressing. I have some sympathy with the hairdressing industry, as it is not likely to get rich off me. I bear the industry no grudge because of that. I am sure that many good employers provide excellent wages and first-class training for their employees, but clearly there are problems and I believe that young people and women workers in that industry ought to be targeted.

I draw the Minister's attention to other industries that were highlighted by those who presented themselves to bureaux: 13 per cent. referred to the retail industry, 1163 9 per cent. to catering and bar work, 8 per cent. to farming and fishing, 6 per cent. each to hotel, cleaning and security guard work, 5 per cent. to care assistant work and 4 per cent. each to taxi work, nannying and nursery nursing. Those figures show that 82 per cent. of those who presented themselves came from a relatively small number of industries—most of us could have identified them beforehand as being from ones in which difficulties were most likely to arise—and emphasise where we need to campaign.

I want to raise with the Minister a number of issues arising specifically from the citizens advice bureaux trawl. The bureaux identified a number of employers who were failing to pay employees the national minimum wage, to which they were entitled. A 32-year-old client of a north of Scotland CAB was being paid £2.20 an hour—£1.40 below the minimum wage—for working as a nanny. An 18-year-old client of an east of Scotland bureau being paid £2.50 an hour approached his employer about increasing his wage in line with the national minimum wage. The employer simply refused. An 18-year-old client of a west of Scotland bureau working in a nursery approached her employer about the national minimum wage and the employer assured her that the law did not apply to privately run nurseries.

Individuals in those circumstances lack information and many are vulnerable. A significant number of CAB clients were aware that they were entitled to a higher rate of pay under the new legislation, but they were either dismissed or threatened with dismissal when they tried to negotiate with their employers. A south of Scotland bureau reported that a 22-year-old client was paid £3 an hour. He approached his employer about increasing his pay in line with the minimum wage, but the employer said that he could leave "if he didn't like it." A client of a south of Scotland bureau aged over 22 was dismissed when she asked her employer about increasing her wage in line with the national minimum wage and, to return to hairdressing, an east of Scotland bureau reported that a fully qualified hairdresser aged over 22 was being paid only £2 an hour, which is £1.60 below the minimum wage.

We need to ensure that information is provided as a great deal of confusion remains—among young workers in particular—about the age at which they qualify for the minimum wage, the conditions that have to be met before they qualify and when they qualify for the £3.20 and £3.60 rates. The fact that that confusion exists is borne out by the cases that are coming forward.

A north of Scotland CAB reported that an 18-year-old hairdressing apprentice was being paid £1.84 an hour—she wanted to know when she would be entitled to a higher rate under the new legislation—and an 18-year-old client of a north of Scotland CAB being paid £3.30 as an informal trainee wanted to know when he should receive the minimum rate. To be fair to hairdressers, a client who owned a salon went into a north of Scotland bureau to obtain information about the rates that should be paid to staff.

I am sure that the Minister understands those points about information, but 1 want to touch on abuses. In a number of situations an employee has been redefined as an apprentice or a trainee so that the employer does not have to pay the full rate of the national minimum wage.

1164 A 37-year-old client with 18 years experience of bar work was told that she was being paid only £3.26 an hour because she is on a trainee wage for six months. Six months' training was not mentioned when she was recruited and appointed to her present post. A west of Scotland CAB reported that an 18-year-old hairdresser, along with all the other employees of that age, had been asked by her employer to sign a contract classing them as apprentices. If they did so, they would sign away their rights to a higher rate on the national minimum wage. An east of Scotland CAB reported that a man over 50 had been taken on as a labourer on a trial basis. After he had worked 18 hours, he was told that he was unsuitable, paid the equivalent of £1.85 an hour, and when it was queried, the employer said that he did not have to pay the national minimum wage to someone under training.

There is a whole host of such examples that show the difficulties that are presently being experienced by some of our most vulnerable people in work. We need a publicity campaign on the national minimum wage to inform the public of the new legislation and of their rights. We need enforcement, and if necessary we should name and shame bad employers. I am sure that that policy would be agreed by the vast majority of my parliamentary colleagues. I am particularly glad that this issue has been taken up by my hon. Friend the Member for Hamilton, South (Mr. Tynan), who is present this evening.

The national minimum wage has been the Labour Government's great achievement. We must do as much as we can to ensure that everyone gets the benefit of it. I look forward to hearing the Minister's agreement.

§ The Minister of State, Scotland Office (Mr. Brian Wilson)

I am delighted to speak about the national minimum wage as it applies in Scotland. As my hon. Friend the Member for Glasgow, Pollok (Mr. Davidson) has recognised, it is overwhelmingly a good news story. It is historic legislation, and has benefited about 100,000 workers in Scotland. More than 1.5 million people in the United Kingdom are entitled to receive the national minimum wage.

I join my hon. Friend in paying tribute to the citizens advice bureaux for collecting the information and for gathering the cases on which action should be taken. I fully endorse the sentiment, which was central to his speech, that the more information we have and the more publicity the national minimum wage receives, the more people will benefit from it.

I shall give some statistics to put the issue in context. I acknowledge that there is a great deal of activity to ensure that the minimum wage is enforced, and to make people aware of their rights. Since February 1999, 155,000 calls have been taken by the national minimum wage telephone helpline across the United Kingdom. There have been more than 4,000 complaints of underpayment since April 1999, 312 of which have been in Scotland.

Out of the 3,300 visits by national minimum wage inspectors in the United Kingdom to employers who are suspected of underpaying, 294 have been made to employers in Scotland. As a result of those 294 visits, eight enforcement notices have been issued, out of 100 that have been issued UK-wide. Those eight enforcement notices issued in Scotland are only the tip of 1165 a significant iceberg. In the vast majority of cases, it is possible to secure compliance by negotiation and by bringing the terms of the national minimum wage legislation to the attention of employers.

There is a significant pattern of activity in response to the cases that my hon. Friend has mentioned. They are being researched and properly drawn to our attention by the citizens advice bureaux and other organisations. Let me say publicly that the more information we have, the more we can do to ensure that every worker who is entitled to benefit from the national minimum wage can do so. I urge CABs, Members of Parliament, local authorities and anyone who has contact with working people in low-paid occupations to ensure that they are aware of the terms of the legislation, and that they can add to the number of companies—which I have given—that are due to be investigated, and in regard to which, where appropriate, legislation must be enforced.

The national minimum wage is about social justice and fairness. It is about ending the exploitation of workers. I personally believe, and I think every Labour Member believes, that it is one of the historic achievements of this Labour Government. In his speech celebrating the Labour party's 100th birthday, the Prime Minister identified it as one of the party's four most significant achievements, along with the vote, the national health service and universal education.

The establishment of a national minimum wage has been talked about for most of those 100 years, but it took this Labour Government to deliver it. I think most people who understand the issue recognise that, while the level of the wage is open to discussion and dispute—and can be increased, as is now happening—it is the principle that is of historic significance, and that has been delivered by this Labour Government with no help from any other quarter of the House.

I welcome the opportunity to debate the benefits that the national minimum wage legislation has brought to low-paid workers, and to business throughout Scotland. It is now generally acknowledged that the minimum wage has been successfully introduced, and has brought substantial benefits to some 100,000 workers and their families. We are talking not just about employees, but about households. The minimum wage has been particularly important to women and part-time workers; and, contrary to the scare stories that we heard from Conservative Members before the general election, its introduction was achieved without the imposition of undue burdens on business, or an adverse impact on employment or the economy as a whole. Rogues have been brought to heel, to the benefit of employers who were already paying decent wages.

Both employers and workers have adjusted well to the introduction of the minimum wage. Small businesses have been most affected, but have managed the transition most successfully. Peter Agar, deputy director-general of the CBI, recently described the minimum wage as a model of how to introduce new regulations.

With the national minimum wage and our in-work benefit reforms, we now have the means to eradicate the worst excesses of low pay, and thereby to provide greater decency in the workplace. We are doing that in a way that ensures that there are the jobs necessary to provide the wages in the first place. Indeed, jobs are being created—especially in the service sector, to which my hon. Friend 1166 referred and in which the national minimum wage has the greatest impact. Unemployment is falling, and pay settlements are remaining moderate.

Estimates show that since the introduction of the minimum wage, employment in Scotland has increased by some 23,000, or 1 per cent. Since the March-May quarter, Scotland's employment performance in percentage terms has been better than that of the United Kingdom as a whole: in the UK, employment has increased by 0.8 per cent. over the same period.

Together with the Government's reforms of tax and benefit arrangements, the national minimum wage forms the cornerstone of our police to make work pay. It is also part of our commitment to a modern knowledge-based economy that promotes competitiveness through the introduction of minimum standards in the workplace. By setting a floor below which pay must not fall, the minimum wage prevents unscrupulous employers from paying poverty wages as a means to undercut their competitors in terms of price.

Paying very low wages is obviously a shortsighted policy, which is seldom, if ever, successful in the long term. Poverty pay inevitably leads to high staff turnover, high absenteeism, poorly trained staff, low productivity, dissatisfied customers and cancelled orders. That is a recipe for despair, which poverty pay represents, Those are very good reasons, among others, for introducing a national minimum wage.

Evidence of the widespread support for the national minimum wage can be found in the most surprising quarters. When in government, the Opposition, who, disappointingly, are unrepresented in the Chamber tonight, frequently claimed that the introduction of a minimum wage would lead to the destruction of 2 million jobs. It was fantasy, but it is not long ago that they were making such claims.

It is now 11 months since the minimum wage was introduced. With increasing employment, as opposed to the increasing unemployment that the Opposition predicted, where are those siren voices now? As we heard recently, they have belatedly joined the bandwagon, agreeing that the minimum wage has had no adverse impact.

I always said that the real significance of the national minimum wage would be to introduce the minimum standard—the floor under what people could be paid: the decency wage—and that, once it was there, no Government, even the hardest-faced Tory Government, would ever dare reverse the minimum wage legislation. That is why it will be regarded as one of the landmark pieces of legislation introduced by the Labour Government. It cannot be reversed because it is patently socially just.

As my hon. Friend will appreciate, we have decided to increase the main national minimum wage to £3.70 per hour in October and the young workers' rate to £3.20 in June. Those increases were recommended in the first report of the Low Pay Commission, alongside its recommendations for the initial rates. Remember the importance of the commission. The minimum wage is not something that the Government set and decide on internally. We rely heavily on the commission's advice. It confirmed its belief that the necessary conditions exist for the increase to be introduced. The Government agree with that assessment. 1167 The economy continues to work extremely well and we have managed to hold down inflation. The new adult rate provides fairness in terms of retaining the value of the minimum wage. However, we are exercising some caution in making the change to the adult workers' rate in October, rather than June, crucially allowing business plenty of time to adjust. The increase for young workers aged 18 to 21 has been known about for some two years and will go ahead in June.

Beyond those increases, we have made no decisions about future changes to the minimum wage rates. What we have done is to ask the commission to continue monitoring the minimum wage and to produce a further report by July 2001. The new report will include the commission's view on whether there is a case for further increasing the minimum wage and, if so, by how much. Any further decisions will be taken in the light of its report, taking account of the prevailing economic circumstances. Both the Government and the commission have said from the outset that that is a better approach than any form of automatic annual uprating mechanism.

The commission said that the Inland Revenue's national minimum wage inspectors are operating successfully. The Government wholeheartedly endorse that view, not least in Scotland. Just how effectively the inspectors are working is perhaps best illustrated by a recent well-publicised case involving a group of Thai workers at an electronics company in Greenock. The case came to light following a letter to the Department of Trade and Industry from my hon. Friend the Member for Greenock and Inverclyde (Dr. Godman), who drew attention to what was going on at that workplace.

Minimum wage inspectors ensured that the employer, who is based in Thailand, paid the £12,000 arrears of wages owed to those workers. That has been done following a tribunal case, which received a fair and welcome amount of publicity. That is all to the good. We want employers to know that our inspectors mean business.

The inspectors' influence clearly extends far beyond our shores. That was an important case, involving different subsidiaries of a large international company. Its resolution sends out a powerful message to employers and to the low paid—that there is no hiding place for an employer who acts unlawfully and fails to pay the national minimum wage to its workers. All workers in Scotland and in the rest of the United Kingdom are entitled to the minimum wage, even if they are overseas workers working here for an overseas company. I hope that that is one of the messages that will come out of this debate.

It is very important—I know that my hon. Friend the Member for Pollok and others will help to draw attention to it—that employees in low-paid industries, whether they are manufacturing or service industries, should be aware of the national minimum wage telephone helpline. The helpline provides practical advice in the application of the minimum wage, and it is a focal point for complaints of underpayment.

The Inland Revenue's inspectors have already followed up 320 complaints in Scotland and, as I said, issued eight enforcement notices there. The figures for the United Kingdom are 4,000 and 100 respectively. Scotland is certainly not at the top of the league in non-compliance. 1168 We should take some satisfaction from the negative fact that non-compliance with the minimum wage in other parts of the United Kingdom is more extensive.

The figures are important: 320 complaints, almost 300 visits by national minimum wage inspectors and eight enforcement notices. It is vital that we should realise that, although inspectors have recovered in formal action against employers more than £750,000 in underpayments to United Kingdom workers, that is only the tip of the iceberg. Many low-paid workers receive the correct money after a simple inquiry to the helpline without any formal action. We cannot, of course, calculate how much is involved.

A debate such as this one, initiated by my hon. Friend the Member for Pollok, serves the purpose of sending out to low-paid workers the very strong message that, if they are not receiving the national minimum wage, they should telephone the helpline, and that that will lead to implementation of the legislation. As I said, there is no hiding place from the national minimum wage, and—case by case, and telephone call by telephone call—we are tracking down those employers who continue, quite irrationally and improperly, to offend against the national minimum wage legislation. We are forcing them to pay up.

Our publicity campaigns, in spring and autumn 1999, have significantly raised the level of awareness of the minimum wage and resulted in many workers being paid their statutory entitlement. Prevention is better than cure. As I said, I hope that the message going out today is that we are very serious about ensuring that every employee who is entitled to the national minimum wage receives it.

Independent surveys, including those undertaken by Reed Personnel Services and Incomes Data Services, indicate that implementation has been remarkably successful and that most employers agree with the policy and are compliant. That is an important point. When we talk about the rogue employers—those whom my hon. Friend referred to as delinquent in this matter—we are talking about a very small minority. The vast majority of employers, and all sensible employers, recognise that the national minimum wage is a good provision which works in their interests as well as those of those whom they employ.

There is little or no evidence of higher costs feeding into higher prices, and there have been few signs of any demands for the restoration of pay differentials. The surveys also found little evidence of any negative employment effect. In the past year, staff levels in smaller firms have increased by 11 per cent., and staff turnover has decreased in traditionally low-paying industries, with little evidence of significant job losses.

Even the British Chambers of Commerce survey, which was reported to have found extensive adverse effects, showed that almost 80 per cent. of all respondents thought that the current rates of the national minimum wage were about right. Adair Turner, when he was director general of the Confederation of British Industry, said that the national minimum wage had been set at a prudent level that avoided pricing workers out of jobs. The CBI is also on record as finding little evidence of any negative impact on inflation.

1169 The national minimum wage legislation is a piece of legislation in which all Labour Members can take pride and satisfaction. It is working well and it is being implemented and enforced. Rogue employers are being brought to heel and every case that is reported to us is thoroughly investigated. The minimum wage is enforced as a result. All that is a cause for satisfaction.

My hon. Friend rightly drew attention to some occupations in which the national minimum wage is particularly necessary and in which additional enforcement measures are still needed. I assure him that, as a result of this debate, I will make sure that any case 1170 from those sectors that is drawn to our attention is investigated and that enforcement is carried out as necessary.

In Scotland, we recognise that, on the ground of social justice, the legislation was necessary in those areas of the economy that were subject to low pay. It is welcome as an excellent piece of Labour legislation of which we can all be proud.