HL Deb 22 March 1982 vol 428 cc866-93

5.9 p.m.

Lord Spens

My Lords, I beg leave to move that this Bill be now read a second time. First I want to thank the noble Earl, Lord Ferrers, for giving me such a detailed Written Answer on 4th March to my Question about awards made or proposed by some wages councils during the lifetime of this Government; it appeared at columns 1449 and 1450 of the Official Report. My interest in this subject arises from my attempts to suggest ways in which to alleviate unemployment through the creation and expansion of small businesses. Wages councils are quangos which not only cost more than £3½ million annually to run but are also highly inflationary, are increasing unemployment, and are pricing young persons out of their first jobs. I have received many letters from retail trade associations and from their members throughout England, Scotland and Wales, but two which arrived only this morning illustrate very clearly what is wrong. A retail tobacconist and confectioner says: I am taking the liberty of informing you that my business is bleeding to death, owing to the enormous increase in wage levels for counter assistants over the past three and a half to four years. When the latest increase takes effect next month the hourly rate will have risen from 75p to £1.55 an hour—this being an increase of 107 per cent. in approximately four years. During the same period, owing to the combined influences of inflation, the approximate doubling of VAT and the punitive increases in tobacco tax, the shop is taking more money but the effective turnover is 10 per cent. less. To survive, each time the Wages Council increases the rate of pay, we have to reduce the staff or their hours. The so-called minimum rate of pay has become the impossible maximum. I hope you may be able to help reinstate our basic human right to negotiate the terms of our own survival". I think that that is a very telling letter. As I said, it arrived with me only this morning. The second letter comes from a fashion shop for women, which employs several staff. I will quote just one sentence: I could take on a teenager if the wages council adopted a more realistic approach—but further, the levels of awards inhibits me from taking on staff in general". That is my chief complaint about wages councils; they are inhibiting the small shopkeeper from increasing his staff and are certainly preventing teenagers from getting their first jobs.

A little history. Most wages councils came into being in the 1920s, some taking over from trade boards created under the Trade Boards Acts of 1909 and 1918. In 1945 the Wages Councils Act started to bring the various councils together. They were consolidated further by the Wages Councils Act 1959 and by the Employment Protection Act 1975. Now the Wages Councils Act 1979, which is the Act I want to see abolished, has consolidated, the enactments relating to wages councils and statutory joint industrial councils". The power to establish a wages council or to vary its jurisdiction lies with the Secretary of State, but he has no power to control its activities once it is established. Abolition is the only remedy. Incidentally, the 1979 Act does not cover agricultural workers or butchers but it does affect some 2¾ million employees. The functions of wages councils are laid down in the Act. Section 14 provides that councils may make orders fixing the remuneration, requiring holidays to be allowed, and fixing any other terms and conditions for all or any of the workers in relation to whom the council operates. Subsection (7) gives a wages council the power to make its orders retrospective to the date on which the council agreed to the new order, irrespective of whether its proposals have been circulated for comment by employers or employees.

I asked a question last year about that, and the answer I got was that in the 12 months to 31st March 1981, 36 orders were made, of which 25 were issued after their effective dates of operation. So 25 out of 36 orders were made retrospectively. Section 15 gives wages councils the power to enforce their orders and makes failure to operate conditions at least as good as those laid down in the orders a criminal offence. Section 22 allows the Secretary of State to appoint inspectors to help carry out enforcement.

Schedule 2 to the Act deals with the constitution and appointment of members of the board. It states that a wages council shall consist of not more than three persons appointed by the Secretary of State as being independent persons and such number of persons appointed to represent the employers and workers as the Secretary of State shall fix. He has power to make up numbers if necessary. The Secretary of State appoints the chairman and the deputy chairman from the three independent members. The schedule is not absolutely clear about voting, but I understand that there are generally only three votes cast—one from each side of the trade and one from the independent members. Members can be appointed for up to five years without prejudice to reappointment, and remuneration and expenses may be paid to members as the Secretary of State thinks fit; that is a subject I have not gone into.

The Act also deals with statutory joint industrial councils, which allows the Secretary of State to convert wages councils into them in certain circumstances. They have a far less damaging effect because there are no independent members and disputes between employers and employees which cannot be settled in such a council go to arbitration in the normal manner. My Bill would also abolish these councils, but I am quite prepared to have the Bill amended to allow them to continue functioning.

There is one more piece of background information which we must consider, and that is the ILO convention from the League of Nations of 1928; a convention concerning the creation of minimum wage fixing machinery. It was accepted by the United Kingdom and ratified by us in 1929. Article 1 states: Each member undertakes to create or maintain machinery whereby minimum rates of wages can be fixed for workers employed in certain of the trades in which no arrangements exist for the effective regulation of wages by collective agreement or otherwise and wages are exceptionally low". Article 3 states: Each member shall be free to decide the nature and form of the minimum wage fixing machinery … provided that the employers and workers associated with operating the machinery do so in equal numbers and terms". Article 9 states: A member may denounce ratification every five years". Our next chance, I believe, is in June 1985, but neither the USA, Japan, South Korea, Singapore nor any of the Russian soviet republics have ratified that convention.

So much for the background; now for some facts and comments. Again, on 31st March last year, I asked a Question about the number of wages councils. There were 33 wages councils then, using, on 31st December 1980, 148 outdoor inspectors, 122 other staff, costing, for 1980–81, £3.68 million. A year later, now, there are 27 councils. This reduction has been achieved by the winding up of one council, the Pin, Hook and Eye and Snap Fastener Council, and by the merging of seven councils to form the Clothing Manufacturing Wages Council for Great Britain. In July 1979 there were two other mergers. Six councils had been merged to form the Retail Food and Allied Trades Wages Council, and three councils had been merged to form the Retail Trades (Non-Food) Wages Council. So there are now 27 councils, each having three independent members, a total of 81 posts.

According to a very interesting Written Answer given by the right honourable lady the Prime Minister in another place on 19th February this year, those 81 places are held as follows: by 39 persons of whom 30 are academics; 18 lecturers hold 50 posts between them, 5 professors hold 8 posts, 7 other academics hold 9 posts; the other 14 posts are held by 4 barristers with 9 posts, and one each by a retired civil servant, a retired industrial manager, a director, an administrator and a chartered accountant. So 67 of the posts are held by 30 academics and only 14 by 9 persons with possible commercial experience. When we look at this membership in relation to particular councils, we find for clothing manufacture a barrister, a dean of faculty and a senior lecturer; for hairdressing, a barrister, a senior lecturer and a lecturer; for retail food and allied trades, 3 senior lecturers; for retail non-food a principal lecturer, a senior lecturer and a lecturer.

My Lords, I intend to confine the rest of my comments to those two retail trades wages councils, because they affect the livelihood of more than 1 million employees spread all over the country, and, of course, their employers, in such businesses as bakeries, confectioners, greeengrocers, grocers, newsagencies and tobacconists, under the retail food wages council; and booksellers, stationers, drapers, boot and shoe shops, outfitters, furnishers, fancy good shops, do-it-yourself shops, under the non-food retail wages council. As I said, both of these wages councils are, as it were, controlled entirely by lecturers—admittedly lecturers with experience of wages councils, because one member sits on four other wages councils boards, one member sits on three boards, three members sit on two other wages councils boards, and the last member sits on one other wages council board, but not on the other retail council.

Can these lecturers be completely impartial? However eminent, and however knowledgeable of industrial affairs they are, they probably have never had any experience as employers in commerce. But all have experience as employees because they are themselves employees. Even Lord McCarthy's tribunal has as one of its members an employer. In the two councils I am now looking at, I have heard criticisms about this situation, and also criticisms about inconsiderateness, or at least casualness, because one of the independent members did not bother to turn up. in one case there was an adjournment of a meeting to another date when the gap between the two sides was only 50p. It probably costs the country £1,000 for each meeting of that wages council. Finally, no employers' representatives, as far as I know, have ever been consulted about the appointments of these independent members.

These councils are quangos of the worst kind. would like to quote, if I may, from the excellent speech made last Wednesday by the noble Lord, Lord Thorneycroft, which reads: I do not think that we ought to let people like Professor Clegg wander around too much. I was in the shadow Cabinet before the last election, and I think I can honestly say that I begged my colleagues to dump Professor Clegg before the election: to say that we would have nothing to do with him. I thought he was a public danger and I was right. …my colleagues …felt that they could not follow my advice. But the results have been disastrous—in loss of jobs, in increase in interest rates. This profession of the professional negotiator, conciliator, arbitrator, and the rest is one of the biggest dangers we have in this world. I am not referring to Members of your Lordships' House. Members of your Lordships' House rise to the head of every profession, including this one. But there are others, throughout the country—wages councils, for instance—who are all pricing people steadily out of jobs".—[Official Report, 17/3/82; col. 680.] I agree entirely with those remarks by the noble Lord, Lord Thorneycroft.

My Lords, are there 30 little Cleggs sitting upon the wages councils, sitting on 67 seats of the 81? I do not know. But I suspect that there may be six sitting on the two retail wages councils. I am assuming that the awards made in the autumn of 1979 which were shown in the Written Answer of the noble Earl, Lord Ferrers, to me were consolidatory rather than increases, and I use those awards as my base. Since the autumn of 1979 one of those councils has made two further awards and the other has made three, and both now have further awards due to come into effect next month. Just taking sales assistants in the two councils, the percentages increase on the 1979 level of their pay for those over 20, in the non-food council, 31½ per cent.; in the food council, 27.8 per cent;. for 19 year-olds, 53.9 per cent.; and 47 per cent., because the adult age had been brought down to 19 years old. That is straight arithmetic, and it does not take account of the various accessories, which also happened.

Lord Wedderburn of Charlton

My Lords, if the noble Lord would allow me, would the noble Lord like to tell the House the actual amounts of earnings those percentages relate to, whether or not the workers got them?

Lord Spens

My Lords, I have not worked that out. I have no doubt the noble Lord himself will do so if he wants to speak. I am now going on to the accessories which happened with the wages councils awards. I think the best one to look at is the non-food proposal which is due to come into effect on 5th April. There are 11 points intended to take effect from 5th April; increases in minimum rates for all workers; reduction in the number of separate categories of workers to four; the establishment of common rates for workers outside London by merging provincial areas A and B; an increase in the differential to £2.50 per week for all workers in London; no deduction specified for the provision of meals and/or accommodation; four weeks' annual holiday for workers with at least 12 months' service with a proportionately increased holiday entitlement for workers with less than 12 months' service; the additional day of customary holiday provided for in the Christmas and New Year period to be taken between 23rd December and 2nd January; and other changes which have resulted from the harmonisation of the three wages orders whereby certain conditions already applicable to workers in one or more of the three trades have been extended to the others—and of course, they have always been extended upwards.

In addition to that, and intended to take effect from 4th October this year, are the following. The working week is to be reduced to 39 hours for all workers, but weekly overtime is still to be based on hours worked in excess of 40. The hourly rate for part-time workers is to be calculated on the basis of a 39-hour working week and there is to be increased payment for Saturday work for those full-time workers who are currently excluded from this provision because they do not work on a rota system. I have not been able to calculate the total effect of that proposal but it is enormous and most of my correspondents say that this proposal alone works out at about 11½ per cent. over the last one—11½ per cent. at a time when the Government norm is 4 per cent. That must be inflationary.

We have not only got an inflationary situation which is damaging the small shopkeepers. Why should my fashion shop in Lincolnshire be made to pay the same wages as Debenhams in Southampton or Birmingham? Why should my tobacconist from Kent or my baker from Suffolk have to pay the same wages as the multiples like Tesco in Manchester or Leeds? This is not only a horribly inflationary set of quangos—it is far worse than that. We have a closed shop, or rather 27 closed shops, backed up not by union management agreements, but by the whole force of the law. I defy anyone to argue that these are not closed shops. The wages councils fix all the terms and conditions for these 2¾ million employees and no employee may take a job except under terms and conditions as good as, or better than, those promulgated by the councils. If an employee is prepared to accept something less than that set down, he or she becomes a party to a criminal offence and is not allowed to do so—not even to give up a holiday or work extra hours without claiming overtime. That, to my mind, is the worst of closed shops. I know that Her Majesty's Government are very "anti" closed shops and I hope that they will make that another reason for abolishing wages councils.

In normal wage bargaining, even within a closed shop, the employer and employee have to reach an agreement which could, in certain circumstances, even lead to lower rates being paid temporarily, or a standstill for a period. But such an agreement for the employer and employee within wages councils is a criminal offence. It is not collective bargaining as we know it. It is the relentless creation of further unemployment by persons out of touch with reality, and the Government can do nothing about it unless they abolish those councils.

It will, of course, be argued that there are 2¾ million people who will become liable to harsh treatment from hard-hearted employers if these councils are abolished. That was certainly the case in the 1920s and may even have been so in the 1950s. But now that we have had a welfare state for more than 30 years it is no longer a serious danger. The poor employees are protected by the rates of unemployment benefit and supplementary benefit. Unless an employer offers more, he will be most unlikely to find anyone to take his job.

I have with me the latest claim of the employees' side of one of these two councils. I do not think that I shall follow that point because it is rather late. But that claim does show that the claimants—the union—are not interested in the small shopkeeper. I believe that the Government are sympathetic to these arguments, but feel constrained by the International Labour Organisation convention to keep these councils going, at any rate until the next date of termination of our ratification of that convention which will be 1985. But why should they consider that they cannot abolish wages councils ahead of that date? I quoted from Article 1 of the convention, which qualifies the need to set up this machinery for trades or parts of trades in which no effective arrangements exist for collective bargaining and where wages are exceptionally low. I do not believe that there are any places where wages are exceptionally low today. I, therefore, see no need to keep wages councils. I believe that they could be abolished straight away without breaking the convention. What I would like to see is the union come to its own collective bargaining arrangements with employers who employ its members, and let the small employer and employee go their own way—make their own bargains in different parts of the country to suit each other. I beg to move.

Moved, That the Bill be now read a second time.—(Lord Spens.)

5.37 p.m.

Baroness Seear

My Lords, before considering the merits or otherwise of the Bill before your Lordships' House, I should like, with your Lordships' permission, to take up one or two points which the noble Lord, Lord Spens, has made. First, I think that it is a pity—and it is becoming something of a practice in certain parts of your Lordships' House—to use the term "quango" as a term of abuse. There have been many quangos which have done extremely useful jobs. A quango is, in fact—despite its rather unfortunate name—a way in which jobs can be done in a more expert way and often a great deal more cheaply than if they were done through ordinary bureaucratic machinery. All the quangos that I happen to sit on are unpaid, but that does not make them any less useful. I am a great supporter of the quango in its proper place. So every time anybody uses "quangos" in that way I intend to defend them.

The second point that I should like to take up—and here I must declare an interest—was the curious attack which the noble Lord, Lord Spens, made on academics as independent members of wages councils. It appeared to be a great argument against the existence of wages councils that they had a number of academics on them in an independent role. I never sat on a wages council while I was an academic—and neither before, nor since—but I know a great many people who have done so and if we are to have independent members—and the constitution of the wages councils requires that we should, and it is necessary at the present time that we should for reasons that I shall refer to later—it seems to me that appropriately selected academics are very appropriate people for doing the job.

The noble Lord, Lord Spens, seems to have a picture of an academic as someone who has never emerged from a cloistered university town, who does not know anything about what is going on inside industry, and who is quite incapable of making independent judgments. The fact of the matter is that a number of the people who sit as academics on wages councils come not only from universities, but from polytechnics, which work very closely indeed with industry. A number of the people who take posts of this kind have, in fact, come from industry; a number of them, as part of their academic duties, take part in consultations in industry and, in both research work and in consultation, are very closely associated with the work in industry. So why they should be regarded as so totally unsuitable for the task of the independent member I find very difficult indeed to understand.

The third point that I should like to raise is the rather curious use by the noble Lord, Lord Spens, of the term "closed shop". I am no particular admirer of the closed shop, but by no conceivable stretch of the imagination can the definition of a "closed shop" be used to include a wages council. So far as I can see the only way in which he was using that term, is that the wages council prohibits people from taking employment below a particular level of pay. I can see no possible link between that and a closed shop, which, as we all know, requires the membership of a particular trade union. Indeed, it is one of the problems of a wages council that a great many people inside industries concerned are not, and are extremely unlikely to be, members of trade unions. Therefore, what the closed shop has to do with the whole argument about wages councils I am afraid completely escapes me.

I turn now to the matter of the Bill as it stands. We, on these Benches, do not support this Bill. In saying this, I am not saying that we have any great enthusiasm for wages councils as such. A great many people who have looked at wages councils believe that by no manner of means are they the ideal instrument for doing the job that needs to be done. I will go along with the noble Lord, Lord Spens, in agreeing that in some cases the pay of youngsters is higher than is appropriate, and that in certain cases it prices people out of a job. As a matter of fact, I doubt whether this is true of very many of the wages councils. It happens in certain other areas of industry, I think largely because, for quite different reasons, the age at which young persons reach the adult rate was reduced to 19 and in some cases to 18. This has narrowed the differential between the adult rate and the starting rate, and in some cases has made youngsters too expensive. I accept that.

I also accept that wages councils are not a very efficient instrument for doing the job that they are supposed to do. Contrary to what the noble Lord, Lord Spens, seems to believe, it has been shown that in a considerable number of cases wages council requirements are not met and that, in fact, people are being employed below the level to which they are entitled under the wages council for a number of reasons: partly because there is great ignorance among many people as to what, in fact, they are entitled to; secondly, because in bad times people are unlikely to take up complaints of this kind; and, thirdly, because where wages councils cover people in outwork—a notoriously difficult kind of employment to control in any way—and where in outwork there is a considerable amount of sub-contracting, as happens quite frequently in certain trades, a great many people are being paid (I do not know how many; by definition, one does not know how many) below the required level laid down by the wages council. Therefore, for the job that they are supposed to do, it is true that they are not, in fact, doing it very efficiently.

I agree of course, with the noble Lord, Lord Spens—this is inherent in the whole idea or wages councils as it was in the trade boards when they were originally set up in the first decade of this century—that it would be very much better if we had properly organised collective bargaining between employers and employed for determining pay and conditions of employment for people covered by that particular industry The whole point is that wages councils were set up because such organisation was lacking, and it is generally agreed by all concerned with these questions that the sooner people get round to being organised as employers and as trade unions, so that they can negotiate effectively—as in the major areas of industry—the better.

It is built into the legislation that when this happens and when it is agreed by the two sides that they are now ready to negotiate in the normal way, the wages councils will he folded up after a request by the Minister. I agree that the sooner that happens, the better. However, the point of the matter is that it has not happened in a great many concerns and in a great many industries, and there are whole areas—especially areas where women are concerned, who, although they are now more inclined to join trade unions than they were in the past, tend to be under-represented in trade unions—and whole tracts of employment in which organisation is not sufficiently strong to enable proper collective bargaining to be set up. As long as that continues, the case for a wages council continues.

I should like to see much more effort put into getting the kind of organisation that is needed, and perhaps the burden of the noble Lord's criticism might lead the Government or other appropriate persons to attempt to stimulate once again proper organisation in the industries concerned. However, although it is easy to criticise wages councils, this is not the time when they should be abolished. With 3 million unemployed, and with levels of school-leaver unemployment in some parts of the country running to 40 per cent. of school leavers, surely to withdraw the only protection about minimum levels of pay would be to ask for exploitation of a pretty crude kind.

The noble Lord, Lord Spens, said that with the modern welfare state it would not be possible, or that it would be highly improbable, for people to be employed at what used to be called "sweated" wages. But, after all, adult unemployment benefit is only £25 a week, and I imagine that one is not suggesting that pay levels should get anywhere near that figure. In the case which the noble Lord quoted in the retail trade, where, to his horror, over a short period of years the rate had gone from 75p an hour to £1.55 on a 39-hour week, it works out at only about £60 a week. Noble Lords will agree that to live on £60 a week with modern transport costs, modern rents, not to mention modern rates, does not leave very much spending money in anyone's pocket. If that is the kind of figure that wages councils are giving, they can hardly be regarded as a dangerous instrument of inflation. Therefore, although we need to move away from this system in due course, when we have unemployment levels of the kind we have at the moment, surely now is not the time to do it.

Is it likely that collective bargaining will be strengthened at the present time? I said a few moments ago that what is needed is, of course, proper organisation on both sides so that free collective bargaining can take place. But, again, with over three million unemployed, it is patently clear that trade unions are in a much weaker position than they are under conditions of full or near-full employment. Is it in the least realistic to imagine that this is a time when trade unions will be able effectively to organise those who they have failed to organise through so many decades? We only have to state the position to realise that this is the last time when collective bargaining will effectively take over.

If we want to do something about the, I agree, in some cases, too high rates for youngsters, we need a comprehensive policy to show what we can do for the employment of young people. If we had agreed that we would move to a position in which youngsters between the ages of 16 and 18 were virtually trainees and we had a proper programme for ensuring that they were treated as trainees rather than as young workers, then their position in relation to wages councils could well be reviewed. But we are not in that position yet.

There are signs in some of the policies coming through from the Manpower Services Commission, which we understand, to some extent at any rate, have the support of the Government, that the time may come when a programme of this sort will come into being. When it does, then of course the position of young people, school-leavers and under-18s, in relation to wages councils would have to be totally reviewed. But until we have a position in which we have not got such high unemployment, until we have a comprehensive policy for dealing with the 16s to 18s, until trade unions are in a position to organise effectively in these difficult areas for organisation, until there is evidence that the levels of pay being given by the wages council are in fact, instead of being still really very low, dangerously inflationary, then I submit that this is not the time to get rid of the wages councils.

5.51 p.m.

Lord Mottistone

My Lords, we must thank the noble Lord, Lord Spens, for producing this Bill and asking us to debate it for a Second Reading in order to study this problem. Unlike the noble Baroness, Lady Seear, I think it is pejorative to describe all bodies of that sort as quangos, and automatically assume they are wrong as a result. What is important is that when we have a system or structure which was first set up in the 1920s, it is almost essential that we should have a good look at it. In many cases it is fair to say that it may well have expended its usefulness and no longer be relevant to the affairs of today. Things have changed, and we need to look at it from that basis.

My experience is more with joint industrial councils. As your Lordships may know, I was an employer member of a joint industrial council for some four years until last year. I know that the noble Lord, Lord Spens, has said in his rather sweeping Bill which is going to sweep away the 1979 Act that the joint industrial councils would go too, but he generously said that he might keep them if we put amendments down to that effect. I shall disclose in due course what I think about joint industrial councils, but I mention them at this point only to say that that is where my knowledge of the matter mainly lies. I have not had the privilege of sitting on a wages council, though a lot of what I have to say has relationship to both types of council.

The first thing I would say, which I think the noble Lord, Lord Spens, said, is that surely in the 1920s and 1930s there was every justification for these bodies to be set up in the first instance. At that time it was perfectly natural that we should sign the ILO Convention to which the noble Lord referred. But once again I am not sure that one need automatically therefore think that they are the right thing for the present day. The noble Baroness, Lady Seear, rather said this, but said, on the other hand, that this is not the right moment to sweep them away. Maybe she is right. We shall come to that.

Joint industrial councils have a great advantage in that they are voluntary, and to a greater extent in that not to comply with the minimum earnings levels which they strike is not a punishable offence as it appears to be for a wages council. I should have thought that maybe a way through this is not to sweep away the wages councils, or to sweep away bodies which look after the minimum earnings levels of people, but to sweep away the wages councils and make them all joint industrial councils and all voluntary, because I rather suspect that the threat of a criminal punishment is not particularly justified in this area.

There are one or two basic points which apply—and always have—to all companies and employees in this general area. It has been my experience, in getting to know small companies and large ones very well indeed, that there are people who would rather go to work for a small company for a lesser wage because the small company is more friendly, everybody knows each other—I am talking about companies employing fewer than 100 people; in fact, in the main companies that employ more like 20 or 30 people—and people will enjoy that because they can get to know each other, and they will accept a lower wage accordingly.

Dare I say it?—in some cases people would rather go to a company like that because it is unlikely to have a trade union, and in many cases people definitely dislike what I would describe as the bossiness of trades unions. Sometimes the bossiness has a rather nasty, harsh note to it, and that is disliked even more. You must accept, therefore, that there are some people who will accept a lower wage; but the question is what should that be.

Large firms, on the other hand, have to pay relatively more (certainly this is my experience) because they are paying, if you like, for anonymity; for the fact that people do have a less interesting job, and quite often a less interesting task within the firm. But, of course, the larger firms on the whole can afford the extra wages because they have the economies of scale which go with the capital expenditure of the larger firm, and they can economise on that side and then afford to pay more to the workforce that they have to employ. Therefore, there is a difference of attitude, and it is important to accept this.

Another basic factor which comes back to something I said earlier is that I have found that on the whole trades unions lack the resources to service small companies, so even if they would like the membership of those companies they really cannot do it because they have not got enough officials to get around and see all the small companies and bother with the interests of the people who work within them. That is another basic factor.

Another factor on the contrary side is that unquestionably unfair competition develops in small firms where one firm will pay a wages council, or joint industrial council, rate and another will not. So far as I can tell, though it is difficult to get these things pinned down, where this happens it tends to have a local reason. If one firm is in a particular part of the country, it will find that the going rate for that part of the country is higher than it is in another, and therefore it will pay more and pay the wages council rate, and in the other part of the country where the general wage level is lower they will pay less.

When this happens there is unfair competition because the firm that is paying less in wages, particularly a small firm, can retail its goods at a lesser price. This then leads to people grumbling. I have had people ring me up and say, "What can I do about this?" I say, "You can report them". They say, "I could not possibly do that. That would be sneaking, and we don't want to report people to officialdom". I have described all that because it is a useful background point. One wonders—I think that the noble Baroness, Lady Seear, mentioned this, and certainly the noble Lord, Lord Spens, did—whether in fact the wages councils are being effective even though they are there. Perhaps it is better not to have something that is not being effective.

There are three changes since 1950 which I should like to call to your Lordships' attention which have accentuated the differences to which I have referred. have been associated with the biscuit industry for the last five years. In 1950 there were about 400 different company members of the Cake and Biscuit Alliance and there are now fewer than 40. Whereas when there were 400 they represented a total range, from the very large companies right down to the very small, today the structure has changed completely. We have very few really big companies, a moderate number of medium-sized firms which are subsidiaries of large conglomerates—both of which have the same attitude to the employment of people and the same sort of resources with which to conduct their businesses, so they have the same way of doing things—very few medium-sized companies and only one totally independent medium-sized company.

As for small companies—the Bolton Report described a small manufacturing company as one employing fewer than 200 people—there are very few of those, and the vast majority of the remaining companies employ fewer than 30 people, and there are a lot of those. They are the people who are particularly affected by joint industrial council rates because all the other companies—that is, those employing 200 and more—all pay more than the JIC rates. The whole point of the gap represented by firms in the middle is that the difference between the attitudes and needs of the bigger companies compared with the smaller ones are more accentuated now than they were, say, 30 years ago. That means that the sort of results produced by the JICs are not necessarily entirely suited to the smaller companies.

Another relatively recent happening—I suspect it has been going on all the time but it has got worse in the last year or so—is that there is always a tendency on the part of the trade unions to seek to reflect wages council and joint industrial council increases in the negotiations they are having with individual companies. One must try to resist that because the wages councils and JICs are dealing with very small firms and the amount of increase they obtain, in real terms as well as in percentage terms, may be very different from that which has been struck by the bigger company, for whatever reason. The pay-off, as it were, from that is that increasingly the people in the bigger companies are beginning to say, "Why should we serve on these councils? It is a waste of our time. All we find is that the trade union members are using what we negotiate for the smaller companies, which are not our companies, against us and sometimes they are extremely rude to us because they say, 'We are paying lots of money. Why don't we force the little chaps to pay a lot of money as well?'".

There is, therefore, an attitude growing in the area in which I am operating by which the people in the bigger companies do not want to serve on the joint industrial councils—and I suspect the same applies to the wages councils; the membership statistics produced by the noble Lord, Lord Spens, seemed to endorse that—and the present situation is resulting in the councils being second-rate. I do not want to run down the academics, but Lord Spens made the point that there were more academics than perhaps were needed, out of proportion to the total membership of the councils, and that there should be more independents generally. I support that. If the councils are getting a second-rate membership, they will not do their job so well, and that is another reason to wonder whether they should be swept away.

I must mention the important topic, to which several noble Lords have referred, of the threat to young people. I am absolutely sure that trying to narrow the gap between the adult worker and the 16 and 17 year-old, a movement which has been going on consistently, has been to the detriment of young people. It might be a good thing if, as the noble Baroness said, we had a system more akin to the German one—in effect of compulsory further education for everybody up to the age of 18—and that may be so, but in the meantime, small firms with juvenile rates established for them by their councils are not so inclined to employ young people as they used to be. The multiplicity of small firms in various districts which can take on a youngster for a relatively low salary which they can afford was one of the beneficial ways in which people got on a friendly basis and could see what business and industrial life were all about.

I am, of course, referring to tendencies rather than cut-and-dried results. On the whole, the sort of wage levels being struck for young people are pricing them out of the market, and in my view that is disgraceful. If we did not have such regulated procedures, maybe there would be a greater opportunity for people to be employed at an acceptable rate. As the noble Lord, Lord Spens, pointed out, the unemployment rate and the supplementary benefit rate between them provide a yardstick which did not exist in the same way in the 1920s. I am not for one moment saying it is the yardstick we want as the working wage. I am simply saying that because it is relatively high compared with the 1920s, even the poorest firms have to pay more, so it gives us a better yardstick than we had before.

Taking all those points together, probably the wages councils have expended their usefulness, as have many other bodies of that type. I should like to see joint industrial councils retained on a wholly voluntary basis as between one side of industry and another, and I hope that in Committee the noble Lord, Lord Spens, as he indicated, will encourage an amendment allowing for that provision, along with anything else that goes with it in the 1979 Act to be retained, and I should have thought that would provide all the basis we needed to justify ourselves before the ILO. We should probably find that we would not have so many wages councils as at present, and there might be larger groupings. Perhaps the Government would do what they have done with the training boards, and say, "You can wind up your wages council if you will have a voluntary joint industrial council", which effectively is what they have said over the training boards.

I hope something will be retained, because an aspect, which has nothing to do with wage rates or training, which is gradually becoming eroded by the winding up of all these bodies is that the areas in which representatives of trade unions and employers can meet in an atmosphere which is not one of direct wage negotiation affecting their own companies are being narrowed down. The training boards are being swept away—on a previous occasion I spoke to your Lordships about that—and perhaps we shall now lose the wages councils. Let us hope we keep the JICs, for that reason alone, for all we shall be left with will be Neddo. The trouble with Neddo is that although it has subsidiary bodies, it tends to operate at such high levels, talking only to top businessmen and very grand trade unionists, that people at the ordinary working level do not get to meet each other in an atmosphere in which they are not directly negotiating. So I should like to see saved out of this something that allows that kind of dialogue. But, on the whole, let us sweep away the wages councils.

6.10 p.m.

Lord Roberthall

My Lords, I join the noble Lord, Lord Mottistone, in welcoming the initiative of the noble Lord, Lord Spens, in introducing the Bill, and even if your Lordships do not give it a Second Reading, I think we should nevertheless be very glad of an opportunity to discuss this subject, because I believe that the whole attitude represented by the wages councils needs looking at again. I should make it clear that I am speaking only for myself. The Social Democratic Party has not, I think, reached so precise a view as the noble Baroness, Lady Seear, seems to have done. As your Lordships will know, the SDP is committed to an incomes policy when it comes to power, and it will then have to decide whether or not it will need something like wages councils. But in my view it is quite certain that a new incomes policy will be one in which in all wage bargaining the public interest is much more closely represented than it is at present. So, even if there are wages councils, they will be different from what they are today. But, as I say, I am not able to use the term, "We on these Benches".

The very first job I ever had when I was an engineering student was in a railway workshop. I worked with a fitter. I do not know whether the IWW was then represented in Australia, but if it was not, that fitter was a corresponding member of it. I was indebted to him for a little book of songs for the use of militants. One of them began: There is a factory over the way, Where 80 wage slaves toil all through the day". Looking through the songs, I found that the term "wage slave" kept coming up, and I think that we need to concentrate on that when thinking about the history and the present use of the wages councils. Of course the term "wage slave" implied that the worker was not in a much better position, if any better at all, than the slave, The slave had to choose between obedience or death. The boss could not actually kill the worker, but the alternative to disobeying was that, if he did not get his wage, he would starve to death. So the wage slave had the choice between obedience and starvation.

It was recognised that the unions were able to exercise some countervailing power on behalf of their members, but, in the trades or occupations where there were small units scattered all over the place, it was very hard to organise them. It was even more difficult, if there were an agreement, to see that it was carried out. So the whole attitude towards the classes of workers who were covered was that the state had to step in and behave in a paternal manner towards them. That is expressed in the great detail in which the wages councils today are empowered to set out all the conditions of work. Furthermore, as the noble Lord, Lord Spens, has pointed out, the worker is not at all free to make a bargain with the employer, unless it is on the same, or more favourable, terms. There is a degree of rigidity about the councils which is not, I think, found anywhere else.

The mentality that we meet when dealing with wage slaves does not take any account of the changes that have taken place in the last 30 years or so—the changes brought about by full employment and by the welfare state. I appreciate that we do not now have full employment, but we had it for 30 years, and in my view it did much more for the workers than the trade unions or wages councils could do. In those conditions it is impossible to think about anything like that is meant by wage slaves. If a man with a reasonable degree of health and capacity wants a job, the state creates the conditions in which he can get one, and the market processes in fact are the great safeguard. So, that makes the thinking behind the wages councils something of an anachronism. That is my attitude towards them—that they are anachronistic. I mentioned the welfare state, and it has already been mentioned by the noble Lord, Lord Mottistone. That is the other side of the situation. Now the choice is not between obedience or starvation; it is between obedience or social security, which is a very different thing.

The councils do not take any account of public policy and are on the whole inflationary in their impact; and here I should like for a moment to come back to the question of full employment and mention a point that I meant to make earlier. When we had full employment, there was always a residue of unemployed of about 200,000 or 300,000. Some of them were people moving from one job to another, but some were people who could not quite fit in to the ordinary structure. They could not work regular hours, or could not do a full day's work, or were living in a difficult part of the country.

When one operates a full employment policy—on which I was for many years responsible for advising the Government—one cannot push the management of demand to the point where it would reduce the unemployment to nil. That would be very inflationary. The people who say, "Oh, there are still 200,000 unemployed, and therefore you must expand more", are quite wrong. What is needed is a degree of flexibility so that those who cannot quite fit into the ordinary system can find places for themselves. It happens that those places arise most of all in regard to small businesses, for people in special circumstances, and, due to the extreme rigidity of the limits that the councils set, their existence is actually militating against the absorption of those who are somewhat excluded from the system. Of course it is certainly the case that today a great many people would be employed if there were more latitude, if there were at least the ability to strike a bargain between the individual and the employer, which is precluded.

I have been talking as if we were back in full employment, and we have not got full employment today. The noble Baroness, Lady Seear, raised an awkward point when she said that this is not the time to get rid of the councils; but the reason why I think we have not got full employment is that the Government of the day have put the defeat of inflation ahead of maintaining high levels of employment. They have rejected the idea of an incomes policy, and so they have adopted a monetary policy in some way. The purpose of that is clearly to have some control over wage settlements and to say to workers, as they do say, "If you insist on inflationary wage settlements you will price yourselves out of a job". Of course, there has been some success in that policy. A great many workers now, when they find that their employers are on the verge of bankruptcy, accept lower levels of wage.

I do not agree with that Government policy: I think the price we are paying in terms of wasted resources is much too high a price, and that, whatever the difficulties of an incomes policy in the past, if we are to get back to full employment and some sort of wage stability, we shall have to have an incomes policy. But I wonder whether the Government can explain why, if they are adopting this particular method of dealing with inflation, they still have the wages councils. If the policy is to let the existence of surplus labour press down on wage bargains, why do you have, in the area where this is most likely to have some effect, this very rigid system? I hope the noble Earl will deal with that point when he winds up.

To sum up, my Lords, I think that at least in conditions of full employment the wages councils are an anachronism. I think that if we are to keep them we ought to ensure that the public interest is represented on them, and that the extreme rigidity which entirely prevents people from striking an individual bargain needs to be looked at.

6.23 p.m.

Lord Harris of High Cross

My Lords, I am glad to join other noble Lords in thanking the noble Lord, Lord Spens, for bringing this Bill before us. I particularly want to congratulate him for his perseverance in moving from asking polite Questions about wages councils to proposing their outright abolition. In this he has the support of the informal group known as the Repeal Group, whose efforts I referred to when the noble Baroness, Lady Trumpington, moved her Bill to repeal the Shops Act on 9th February. I am delighted to follow, for the first time, the noble Lord, Lord Roberthall, and I hope to demonstrate that economists are not obliged to disagree on these matters. I urge him to keep on raising his voice in the Alliance, because he may help to lead the noble Baroness, Lady Seear, back into the paths of true Liberalism.

It seems to me, my Lords, that the case for this Bill is a good deal stronger than that for the Shops Bill, to which your Lordships gave an unopposed Second Reading in February. As we have heard, wages councils had their origins in 1909, when four trade boards were set up to fix minimum wages in the sweated trades of tailoring, lace, box and chain-making. The Act was extended in 1918, and the boards were renamed wages councils in 1945. Although they have declined in number, that bears testimony rather to the merging of small councils than to the abolition of many very significant councils. Certainly since 1938 the tally of workers covered has increased from 1½ million to 2¾ million.

A number of noble Lords, including the noble Lord, Lord Mottistone, have raised the question that what was fitting in 1909, when workers lacked the bargaining power that comes from education, from knowledge, from employment exchanges, from greater mobility and from generous social benefits, bears no relation whatsoever to the conditions of the 1980s. The noble Baroness, Lady Seear, might ponder the transformation in conditions of domestic servants before telling us these stories about the likelihood of workers being greatly exploited in the absence of minimum wages. It seems to me that what started as benevolent welfare policy has come to exert a malevolent economic effect, and it has done this at a time when low pay has much less to do with poverty because the low paid are preponderantly young people or women who live in households with two or more earners. What is worse, from prescribing bare minimum wages, which the least efficient employer was compelled to pay, wages councils have come to set what they regard as "reasonable" wages, especially for young people, at levels that even the most profitable firms find it difficult to improve upon.

The report Priced Out by the National Federation of Self-employed and Small Businesses shows that during the 1970s the dubious independents and employers' representatives on these councils did not prevent the more single-minded trade union representatives from pushing up wages much faster than inflation. The figures there show that the six largest councils increased adult wages 4-fold and juvenile wages 4½-fold, compared with a 3-fold rise in prices over that decade. At the same time, in retailing the age at which the adult wage was paid has been lowered from 21 to 19. So that where, 10 years ago, a school-leaver would start at a little over half the adult wage, he must now be paid 60 per cent., and by the age of 18 he must be paid 85 per cent. of the wage of an adult with, perhaps, a lifetime of working experience.

The wages orders issued by the councils are often of the most baffling complexity. They deal with holidays, hours, regions, meal and rest breaks and unsocial hours, and they prescribe different rates of pay at varying times. An LSE study in 1980 identified in one wages council 166 minimum rates that were prescribed. The personnel director of a leading retail chain told me last week that he could not be sure of understanding the annual changes even when he had expert legal advice at his elbow. Nor are wage costs the end of the matter. At least 30 per cent. must be added for national insurance and other employment expenses, without allowing for what are called compliance costs and for such benefits in kind as staff buying discounts and meals, which are totally ignored by these jolly quango men on the wages councils.

There can be no doubt that the escalation of total wage costs has reduced employment opportunities. The foundation of all economic analysis is nothing more arcane than that prices affect quantities. If wages are increased, other things being equal, the demand for workers will be reduced at the margin. All the empirical evidence of the operation of minimum wages, particularly in the United States of America over a very long period, shows that they cause unemployment especially among the most vulnerable. Two leading black American economists, Professor Sowell and Professor Williams, have recently shown that when the cost of employing people is artificially raised under the federal minimum wage law, the resulting unemployment is concentrated on the young, unskilled, inexperienced, female and, even more severely, on the ethnic minorities.

Nowhere—except perhaps in rent control—has well-intentioned policy produced more perversely damaging results than in raising wages without regard for market realities. Thus, in Britain the pace has been set by the Low Pay Unit, which would today be more accurately branded the "No Pay Unit". Why could they not learn from the evil experience of South Africa, where minimum wages were deliberately supported by white trade unionists to reduce the job opportunities of unskilled black workers by pricing them out of the labour market?

It is no use opponents of this Bill taking refuge behind their undoubted good intentions. In economics—as in much well meant private conduct—good intentions are no guarantee of good results. In Britain the bleak road to higher unemployment has been paved by good intentions. Indeed, all our most grievous economic and social disorders have been caused not by malevolent design but by the amiable confusions of misnamed "do-gooders", who undoubtedly meant well but who have inadvertently caused much of the havoc that we see around us.

I hope that we shall avoid verbal competition in compassion. There is no important difference between us in all parts of the House on the principle of a minimum income. But whether that is provided through supplementary benefits or, as I would prefer, through a reverse income tax, it is the province of social policy and should not be attempted by manipulating prices, such as wages, rents or interest rates which must lead to costly distortions throughout the economy.

Whatever the sceptics may say—including the noble Baroness, Lady Seear—we know that wages can be too high for the good of employment. That is why Labour and Conservative Governments have been driven to multiply job subsidies—especially for the young—simply to undo the damage of the trade union wage push. It is also why some workers have voluntarily settled for wage standstills or even for wage reductions to save jobs—an option that is rendered illegal by the Government's stubborn enforcement of the Act which we are now seeking to repeal.

My Lords, I urge all who care more for reducing unemployment than for preserving their emotional purity to join in supporting this Bill, if necessary through the Lobby.

6.34 p.m.

Lord Bruce of Donington

My Lords, when we on this side of the House first saw the Bill that has been introduced by the noble Lord this evening we thought that he must be joking and that his main purpose in bringing forward the Bill was to secure an adequate parliamentary opportunity to discuss the whole question of the operation of wages councils in a constructive way. Instead of that, what we find tonight is that the noble Lord has followed the true precept of his Bill and wants the abolition of wages councils.

There has been much discussion this evening about the percentages in which the various awards of wages councils have moved over the past few years. Of course, as is inevitable when any question of econometrics arises, we have had the learned observations of noble Lord, Lord Harris of High Cross, who certainly cannot be accused of compassion, but who nevertheless makes some claim—albeit modestly—to intellectual purity.

However, I am afraid that his reputation in this regard has become somewhat devalued since many of us recall his speech of 13th February, 1980—two years ago—when he was supporting Lord Cockfield's contention that the rate of inflation would automatically go up with the increase in the money supply after two years. I invite the noble Lord to contemplate his own speech, which is at col. 247 of Hansard for that day, so that before he makes any further observations on economic matters he can go through a piece of intellectual refurbishing.

The reason why wages councils were originally established—and indeed they were pioneered by the Liberal Party—was in order that those who were very low paid could be protected from exploitation. Oddly enough, in times of full employment it could possibly be argued that their existence would have less justification than in times of unemployment, because of course it is precisely in times of unemployment that the protection of the weak—if that indeed be a valid political objective—ought to be safeguarded.

What we have had so far this evening—with the notable exception of the noble Baroness, Lady Seear—has been nothing more nor less than a desire, quite overtly expressed and precisely because of the existence of large-scale unemployment at the present time, to go back to the law of the jungle and have the weakest to the wall and the devil take the hindmost. This has been the argument, with the notable exception of the noble Lord, Lord Roberthall, whose speech ought to be printed and circulated immediately in the Hillhead division of Glasgow so that the electors there would know precisely what is the policy of the Social Democratic Party.

Lord Roberthall

My Lords, will the noble Lord give way for a moment? I made it perfectly clear that I was speaking for myself and not for the Social Democratic Party.

Lord Bruce of Donington

My Lords, I quote the noble Lord's words—I took a note of them: The SDP will need to decide whether it needs wages councils or not". Those are the noble Lord's words. It has not made a decision yet. The noble Lord reminds me of the story about the late President Hoover when on an election campaign. He invariably answered questions: Well, yes; and then again, no", and thereby of course he pleased both parties.

For the real truth of the present position, so that we can assess it not so much in terms of percentages but in terms of actualities, I venture to draw your Lordships' attention to a feature in The Times of 3rd March. It says: … official figures show that 4,750,000 people earn less than £85 per week. Perhaps a quarter of this group earn less than £60 a week and many are unquestionably at or near subsistence level". The article goes on to give an individual example which I venture to give to your Lordships this afternoon, because behind all the percentages and other statistical calculations there does lie the personal position of people who are in receipt of very low wages indeed.

I shall quote only one example. Mrs. Doreen Marriott, who is 51, and has to look after her disabled husband, her unemployed son and an 18-year-old daughter, lost her job last week. As one of the better paid home workers—she sewed pants and T-shirts for a local firm in Hinckley, Leicestershire—she used to earn about £45 a week. It was a vital addition to the £70 a week the state provides. With half that £70 going on rent and fuel, the loss of her job has forced her to rethink her family budget—"We are just living from day to day".

Your Lordships will observe that the earning figure there was £45 a week. From some of the statements made this afternoon one would imagine that the wages councils have been making wage awards in double figures and indeed, in the case of younger people, have been making wage awards on adult scales. I have in front of me the statutory minimum rates in respect of the hairdressing industry. First-year apprentices are paid £27.50 a week, second-year apprentices £31, third-year £42; hairdresser, first year, £49, hairdresser, second year, £53, hairdresser, third year £57, chargehand £61 and manageress £73. Those are the statutory rates. I venture to suggest to your Lordships that sums on this scale do not add anything to the inflationary pressure in the country at all, bearing in mind the extraordinary rates they now have to pay. In fact, these statutory minimums in most cases are below those paid by firms negotiating agreements with the trade unions. If it is suggested that all these areas of activity should be covered by trade unions, I could not agree more; but it is fair to say that in the food industry in particular, the Co-operative Society, Sainsbury and Tesco, all pay wages which are substantially above the statutory minimum. The point has been made that this means that there is unfair competition between the smaller and the larger firms; but the real principle behind that argument is that precisely because a firm is small, perhaps inefficient or does not do its buying correctly, it is the workers in those industries who should pay. That is the real argument.

I very much doubt whether this evening Her Majesty's Government would argue for the abolition of the Wages Councils Act, which would take these provisions away: at least, I sincerely hope they would not, because at the moment there are 27 wages councils responsible for laying down minimum pay for over 2½ million workers in this country. That is accomplished through the Wages Councils Act 1979.

The gravamen of my argument is this: it is absolutely vital for the interests of nearly 3 million people and their families that this minimum protection is retained.

I shall argue further that it is not only important that it should be retained, but that in fact it should be enforced, because one finds that in a very large percentage of the cases that are investigated at least one-third of those cases reveal under-payment to the workers concerned. If the noble Lord will refer to a Written Answer given by his right honourable friend the Secretary of State on 17th March to a Question raised by Mr. John Grant, he will find that of the establishments inspected where under-payments were expected, no less than 41 per cent. of the cases investigated revealed under-payment by employers.

The real question is: Why is it that so few cases were investigated? Why is it that, bearing in mind the fact that there are some 390,000 firms involved, we have only 119 inspectors to be able to supervise the enactment?—because if every firm were visited it would be about once every 10 or 20 years. Quite clearly, the existing inspectorate is inadequate to carry out the task. Indeed, where the investigations have ultimately resulted in some discovery of the facts, no less than £2 million has already been paid to the under-paid workers concerned.

I do not like to lecture the party opposite too much on law and order, which I believe ranks fairly high in their philosophy, but the Wages Councils Act 1979 is part of the law, and it is the duty of the state to enforce the law. Therefore, if I may quote— (3) If an employer fails—

  1. (a) to pay a worker to whom an order under section 14 above applies remuneration not less than the statutory minimum remuneration; or
  2. (b) to pay him arrears of remuneration before the expiration of the period specified in the order; or
  3. (c) to pay him holiday remuneration at the times and subject to the conditions specified in the order; or
  4. (d) to allow to any such worker the holidays fixed by the order;
he shall for each offence be liable on summary conviction to a fine not exceeding £100". In this case, in the year 1981 which we are now discussing, there were a very large number of cases indeed in which the Act was infringed: nine prosecutions only were taken. One wonders why. When we come, as the noble Lord will recall, to defrauding the Department of Health and Social Security, which is disobeying the law—and I would not in any way defend it—we find that when there is the merest suspicion of that 1,000 extra staff are employed, bringing their total to 5,000, in order to detect alleged frauds among the people in receipt of social security. On that principle, the person concerned has been found guilty of stealing from the state.

What then happens to these people who are known to have broken the law and, in effect, have stolen from the workers whom they employ, by paying under the amount which the law prescribes under Section 14 of the Act? We find nine prosecutions, in spite of the fact that extending the percentage that has been detected so far to cover a full investigation shows that the amount involved, so far as the underpaid in this country are concerned, is in the region of £28 million. It looks very much as though there is another kind of law for a person who has been found guilty of defrauding the state by claiming excess social benefits, even though it could be argued—and I think that noble Lords opposite have argued it from time to time— that any amount involved is greatly exceeded by the amount not taken up by people who do not claim their benefits.

So the gravamen of my charge is that this Act is not being enforced and that where offences are detected prosecutions are obviously undertaken with reluctance. I do not think that this is a satisfactory state of affairs. As I have already shown, the minimum wages fixed by the—

Lord Mottistone

My Lords, would the noble Lord allow me to intervene?

Lord Bruce of Donington

My Lords, I shall be finishing in a moment, if the noble Lord will forgive me. The minimum wages fixed by these wages councils are, at the most, in the region of £50 or £60 a week, which in this day and age, with the prices and the rents now existing, is a very poor wage indeed. The poorer section of the community, including the people who ought to receive some benefit from the operations of the Wages Councils Act, do not get very much support at all in the popular press. They get no organised help from those great leaders of the media who occupy editorial chairs or other positions of media responsibility, by drawing the attention of the public to their plight. They have very few champions. They have a lot of attackers, some of them snide, and most of the attackers living in very comfortable circumstances, with very considerably in excess of the £50 to £60 a week which constitutes the top level of the awards by the wages councils.

Members of your Lordships' House will have to make up their minds as to what they think about this. Noble Lords will have to make up their minds whether they really want this residual protection—however badly applied, however patchily administered and however much abuse and disobeying of the Act there is—taken away. It is not our custom to deny a Private Member's Bill a Second Reading. Many of us would like to introduce Bills from time to time, and we should always like to feel that when our Private Bills are introduced they will get a Second Reading. But I have to tell the House that if this Bill is not withdrawn tonight, we shall have to oppose it—and oppose it very vigorously—in any remaining stages that the House might decide to accord to it.

Lord Mottistone

My Lords, before the noble Lord sits down, was he arguing that he sees the Government as spending lots of money employing many more inspectors, so that more of these firms which are not quite paying the minimum earnings levels declared by the wages councils should be taken to court and punished for their offences? Is he therefore saying that he would like those firms to employ fewer people or to go into liquidation, and thereby increase the unemployment of the country at large?

Lord Bruce of Donington

My Lords, I do not concede the inference which was contained in the noble Lord's question. The purport of my remarks was very clear. The law is set out in the Wages Councils Act 1979. It is up to the Government of the day to enforce it by the best means that they know. Otherwise, they run the risk of not being even-handed in bringing people before the law.

6.57 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers)

My Lords, we have had an interesting debate this afternoon, partially because it was not wholly unanimous. I congratulate the noble Lord, Lord Spens, on the enormity of his Bill. In about eight words of Clause 1, he would succeed in sweeping away all the wages councils. Some may say that that would be a very very profitable use of eight words, but of course life is not quite so simple as that. I thought that the noble Lord put his case in a very moderate, persuasive and engaging manner and I congratulate him on—to use a colloquial term—his in-depth research which he has clearly carried out on wages councils.

The noble Lord, Lord Bruce of Donington, somewhat churlishly, I thought, criticised the intellectual purity of the noble Lord, Lord Harris of High Cross. He said that it had been tarnished, and the reason why it had been tarnished was that the noble Lord, Lord Harris, had agreed with my noble friend Lord Cock-field. Far be it from me, a mere non-intellectual, to comment on the intellectual purity of other people, other than to say that if the crime of the noble Lord, Lord Harris, was to agree with my noble friend Lord Cockfield, then his intellectual purity, which in my mind was never in doubt, might assume an even greater pristine clarity.

The wages council system is not, of course, an unchanged creation of the early decades of the century and it has reacted to change circumstances. My noble friend Lord Mottistone said that, as wages councils were set up in the 1920s—although, as the noble Lord, Lord Harris, said, they started in 1909—it might not necessarily be inappropriate to consider whether they are correct for today. They have not remained the same. In 1969, there were 57 councils and since then 16 councils have been abolished and others have been merged, with the result that there are now only 27 wages councils. Those councils which form the major part of the system today—those covering retailing and creating—came into being only after 1940, and not in 1920. These councils exist only where there is shown to be no adequate alternative collective bargaining machinery to replace them. The need for them is kept constantly under review.

The councils are independent of Government. It is for them to decide what minimum rates should be set for the 2¾ million workers, the majority of whom are women, who are estimated to come within the system. The councils are made up essentially of representatives of employers and trade unions. These representatives are appointed by the trade and not by the Government. But the Government do appoint three independent members to each council, as the noble Lord, Lord Spens, quite correctly pointed out, whose job it is to assist the parties to reach agreement. For this, the Government pick people who can be seen clearly to be independent of the two sides and, indeed, of the Government—as they must be if they are to carry out their role under the legislation. The noble Lord, Lord Spens, was somewhat derogatory about academics and got, if I may so describe it, a political thick ear from the noble Baroness, Lady Spens.

Noble Lords

Lady Seear.

Earl Ferrers

I am so sorry. It is perfectly terrible that I should have even begun to confuse the noble Baroness, Lady Seear, with the noble Lord, Lord Spens. They are two totally different—I was going to say "objects" but I will say people. However that may he, I enjoyed the way in which the noble Baroness came to the spirited defence of the academics and of the quangos. The noble Lord, Lord Roberthall, reminded us of a little bit of poetry. I am bound to say that while the noble Baroness, Lady Seear, was referring to quangos I could not help recalling the little jingle which I saw one person write that began: You should see me dance the quango". I accept that there is very real concern about the operation of the system. Many criticisms are currently made and they demonstrate a very great deal of feeling, which the Government readily recognise. The fact that councils are independent of Government does not of course mean that the way in which they function should not be a proper concern of Government, and I can assure your Lordships that we take most seriously the many comments and criticisms which have been made to us of late about what people see as the defects of the system.

The most worrying accusation is that the existence of the councils has adverse effects on inflation and employment. Those views have been mentioned tonight. I am bound to tell your Lordships that we have received many letters about recent proposals for increases in minimum rates in the retail trades and I have no hesitation in telling your Lordships that the Government have been concerned about the volume of protest which has arisen therefrom. Indeed, my right honourable friend the Minister of State for Employment has written to those councils drawing their attention to the weight of feeling which has been expressed directly to Ministers.

We have on very many occasions emphasised to all negotiators, whether in the wages council sector or in the economy at large, the need to consider the effects of their decisions on inflation and employment levels. It is right to point out, though, that over the years the rates which have actually been paid by many employers in industries which are affected by wages councils have been above the minimum which have been set by the councils, although it is arguable that the difference is at present diminishing. Clearly increases in the statutory minimum rate are bound to have an effect, although not necessarily a uniform one, on the rates which are actually paid. Smaller companies in particular may well be paying close to minimum rates. That is one of the reasons why we ensure that small businesses are fully represented on the councils. But to keep it in perspective, overall earnings, excluding overtime, are, on the latest figures, still substantially above the minimum rates which are set by the councils. This suggests that a large proportion of those wage-earners who are affected are in businesses which, probably for perfectly sound reasons, are content to pay above the minimum. This may well not apply to the many very small businesses which, although large in number, may each employ relatively few people and who may well not be able to pay above the minimum. I accept that these are the ones which are the most hardly affected by a council's determinations.

When the noble Lord, Lord Spens, said that he is wanting by his Bill to help small businesses—that this is what his Bill is about—I accept that the Bill would have that effect. But of course there are other facets to the problem. Inevitably, at times when people are worried about the state of their businesses and are aggrieved at increases in costs which may be forced upon them, some of the criticisms must centre on the way in which decisions are finally reached in councils when there is no agreement between the two sides. I have to tell your Lordships that while the Government are not privy to the proceedings of the councils, we have ascertained that over the years there is no evidence of any bias on the part of the independent members towards one side or the other. But the effect of wages councils' determinations is bound to have an effect on the employment of young people. The Government are concerned that all negotiators, including those on wages councils, should take particular care in setting rates for young people.

One particular concern which has been put to us, although I do not think that it has been very much in evidence this evening, is about the present minimum rates for those under 18, in so far as they might prevent employers applying under the recently introduced Young Workers Scheme. The aim of the scheme is to encourage employers to pay more realistic wages to young people and thereby to improve job prospects.

Employers within the scope of wages councils must of course pay at least the minimum rate which is set by the wages councils. At present, most wages councils have minimum rates for those under 17 which lie between £30 and £40. The rates for 17-year-olds are between £40 and £45. Therefore, the majority of 16- and 7-year-olds would attract grants under the Young Workers Scheme. It would of course defeat the object of the Young Workers Scheme if we were to set the earnings limit at such a level as would accommodate all young people, even those whose minimum rates of pay were relatively high. The point is that negotiators on wages councils should keep the Young Workers Scheme in mind when fixing minimum rates for young people and, as soon as details of the scheme were announced, the Government wrote to all members of wages councils so that they might be fully aware of the scheme's provisions. I hope that they will take these into account in their negotiations.

There are also worries, which I accept, about the burdens which are placed upon employers by the sheer mechanics of the wages council system. They often focus on the complexity of the wages orders themselves and the requirements on employers to supply information and to deal with the wages inspectorate whose task is to enforce the wages orders. The noble Lord, Lord Harris of High Cross, described the orders as being sometimes of baffling complexity. The Government are concerned to help councils to simplify their wages orders, and for some time now we have been ready to assist councils in their work. I am glad to be able to tell the noble Lord, Lord Harris of High Cross, that considerable progress has been made: eleven councils have now issued simplified orders and several more are expected to do so shortly.

It is right that the law should be enforced, and the wages inspectorate has an important job to do. I am glad that the noble Lord, Lord Bruce of Donington, accepted that. We have, however, made reductions in the number of inspectors by reverting to a level of inspection which operated satisfactorily for many years up to 1978. There will, therefore, be a consequential reduction in the burdens which the system of inspection imposes on employers.

The noble Lord, Lord Bruce of Donington, complained that there are not enough checks on employers. He said, I think, that the schemes are badly applied and inadequately enforced. I can tell him that in 1978 the Labour Government increased the number of staff to 320.5, including 177 outdoor inspectors. The new level is, according to the statistics, not 320.5 but 221.5—quite a reduction, including 119 outdoor inspectors. Using the modified methods, the reduced level of staffing should enable one employer in 10 to be contacted each year, which is the same proportion of checks on pay rates as was carried out prior to 1978. But the figures for 1981 show that pay checks were made on 37,800 establishments during the year. This total is above the 36,000 achieved in 1977 and the 36,800 achieved in 1976 under the terms which existed when the party to which the noble Lord, Lord Bruce of Donington, belongs was in Government. The protection which is currently afforded to workers in wages councils' trades is therefore no less and is numerically somewhat more than that afforded in the years preceding 1978.

I thought it right to put the generality of the picture; in view of the many criticisms which have been made, I thought it only right to make the position clear on major matters. If I have appeared somewhat defensive of the present system, this is not because the Government accept it unquestioningly but in order to put it in balance. I accept the force of the view that wages councils can in theory do just what they like in setting wage rates which then have the force of law; that by so doing they can force employers to pay more and therefore force up costs, prices, and inflation; or that they can reduce profits margins, which at a time of recession are already slender, and thereby create unemployment. In any of these circumstances, such action does not create employment, which is what the Government wish to see done.

On the other hand, to do away with wages councils, which is what the Bill in the name of the noble Lord, Lord Spens, would provide, when there was no other wage bargaining procedure at all would result in a free-for-all in wages in those industries which by their nature tend to be small and diverse. This could undoubtedly lead to exploitation by some employers. It could result in those people who are already in employment actually finding their wages cut or finding themselves put out of work by the employment of young people at very much lower rates of pay. At a time of high unemployment, we do not wish to see (and nor does any other noble Lord) employment prospects curtailed. At the same time, no one wishes to see others who are in work being summarily displaced by those who would be paid less or being themselves paid less.

It is a difficult balance to keep. It is not just an economic argument—there are also social factors to consider. Whatever views one may have, there would be one overriding problem if this Bill were to go through, and that is our commitment to the International Labour Organisation Convention No. 26, to which the noble Lord, Lord Spens, quite rightly referred. This convention binds us to provide a minimum wage-fixing machinery where there are no other arrangements for the effective regulation of wages and where wages are exceptionally low. The noble Lord, Lord Spens, said that the United States, Singapore and Russia have not ratified this agreement. He may be right but we have, and our signature on the convention inhibits our freedom of action. To take any dramatic action before 1985, to which year the noble Lord also quite rightly referred, when we may denounce the convention, if that seems appropriate, would leave us in clear breach of our obligations. This is something that we could not easily contemplate.

This Bill is, of course, a Private Member's Bill and it is not for the Government to dictate its future. I will only ask the noble Lord, Lord Spens, to consider whether, in view of this, he thinks it appropriate to proceed with his Bill and if so, how. As I have explained to your Lordships, there are fairly far-reaching considerations here. We must have regard to binding international commitments which presently inhibit our freedom of action. I will only add that, whatever your Lordships decide to do with this Bill, the noble Lord, Lord Spens, has provoked a most timely debate on an issue which we know concerns and worries a great many people. I can assure your Lordships that the Government will be looking closely at the arguments which have been put forward today. We share the belief of the noble Lord, Lord Spens, in the need to do whatever we can to free the labour market from any unnecessary and artificial restraints which may affect business performance, competitiveness and jobs. I can assure your Lordships that we will continue our efforts to slim down the system where it has outlived it usefulness.

Lord Spens

My Lords, I am most grateful to all noble Lords and to the noble Baroness, Lady Seear—whom I see departing—for their contributions this afternoon. We have had a very interesting debate. I do not propose to summarise the debate again, because the noble Earl, Lord Ferrers, has done that very well for me. I want to make just two points. The first point is that which the noble Earl, Lord Ferrers, finished up with; our international obligation. It seems to me that there is no reason why we cannot continue or ratification of this convention yet abolish wages councils. The provision in Article 1 of the convention says only that there is the need to make these arrangements for collective agreements where wages are exceptionally low. I do not believe that wages are exceptionally low any longer. We now have welfare state benefits which protect member employees from such a situation. Therefore, I do not see why the Government cannot just say that wages are no longer exceptionally low—"exceptionally", remember—and go ahead with abolishing the councils without incurring the wrath of others who have ratified the convention.

The other point is that which was raised by the noble Lord, Lord Bruce of Donington, when he said that the protection of the weak ought be to safeguarded. Of course it ought to be safeguarded. I do not believe that wages councils' awards are doing that job. The awards are now such that the ordinary small retailer is unable to continue paying them. Therefore, he has either to put up his prices or get rid of some of his staff. He cannot put up his prices because he is in competition with larger stores who are able to accept such increases; he is left with no alternative but to sack some of his staff. Would not the noble Lord, Lord Bruce of Donington, consider that it is better to allow member employees to negotiate something less than the full increase from a wages council award in order to keep their jobs? I believe that that is the way in which we can protect the weak; following the rigidity and inflexibility of wages councils is not the way to do it. I should like to see this Bill go further because I should like to see whether we can amend it in Committee to take account of the joint industrial councils.

Lord Bruce of Donington

My Lords, before the noble Lord, Lord Spens, sits down I ought perhaps to inform him, in the light of what I said before, that, if he does press his Second Reading we shall—in view of what he has had to say—have to divide against him.

Lord Spens

My Lords, I am sorry to hear that. I thought that the noble Lord had said that he was not going to divide against me at Second Reading, but at any further stage. I feel that I should like to go ahead and so, my Lords, I beg to press the Motion.

7.20 p.m.

On Question, Whether the said Bill shall be now read a second time?

Their Lordships divided: Contents, 25; Not-Contents, 42.

Brougham and Vaux, L. Masham of Ilton, B.
Cork and Orrery, E. Mersey, V.
Craigavon, V. Monson, L. [Teller.]
Feversham, L. Mottistone, L.
Glasgow, E. Orkney, E.
Harmar-Nicholls, L. Orr-Ewing, L.
Harris of High Cross, L. Renton, L.
Hylton-Foster, B. Robbins, L.
Kilmany, L. Roberthall, L.
Kinnoull, E. St. Just, L.
Lauderdale, E. Spens, L. [Teller.]
Loudoun, C. Tweeddale, M.
Mancroft, L.
Ardwick, L. Cledwyn of Penrhos, L.
Aylestone, L. Collison, L.
Bishopston, L. [Teller.] Davies of Leek, L.
Briginshaw, L. Davies of Penrhys, L.
Bruce of Donington, L. Denbigh, E.
Elystan-Morgan, L. Northfield, L.
Ewart-Biggs, B. Peart, L.
Gladwyn, L. Pitt of Hampstead, L.
Greenwood of Rossendale, Ponsonby of Shulbrede, L.
L. Seear, B.
Hampton, L. Stedman, B.
Houghton of Sowerby, L. Stone, L.
Jacques, L. Strabolgi, L.
Jeger, B. Taylor of Mansfield, L.
Jenkins of Putney, L. Tordoff, L.
John-Mackie, L. Underhill, L.
Kilmarnock, L. Wedderburn of Charlton, L.
Llewelyn-Davies of Hastoe, Whaddon, L.
B. [Teller.] White, B.
Longford, E. Wilson of Radcliffe, L.
McGregor of Durris, L. Winstanley, L.
MacLeod of Fuinary, L. Wynne-Jones, L.

Resolved in the negative, and Motion for Second Reading disagreed to accordingly.