HL Deb 17 July 1985 vol 466 cc773-81

5.8 p.m.

Lord Young of Graffham

My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Employment. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement concerning the Government's intentions on the future of wages councils and on International Labour Convention No. 26.

"As the House will know, I published in March a consultation paper on the future of wages councils. This canvassed two main options: either total abolition or reform of the sytem, including particularly the limitation of their powers and duties and the removal of young people from the scope of wages councils.

"In addition to the report from the Select Committee on Employment, more than 700 organisations and individuals responded to the consultation paper. While the TUC and individual trade unions favoured retention, the consultations confirmed that there is a widespread dissatisfaction among employers with the present wages council system. The majority of them favoured a range of substantial reforms to meet these concerns. I promised to inform the House as soon as the Government had taken decisions on these matters following the ending of the consultative period.

"The Government's overriding concern is to promote employment and to remove any excessive burdens on employers. The present system inhibits the creation of more jobs and this is especially true in the case of young people. The present powers of wages councils also undoubtedly impose complex and unnecessary burdens on business. The Government believe that the case for radical reform is clearly made and propose to introduce early legislation which will, first, remove all young people under 21 from any regulation by wages councils; secondly, confine wages councils to setting only a single minimum hourly rate and a single overtime rate for those 21 and over.

"I shall also be proposing new powers which will significantly simplify the procedures under which the Secretary of State may modify or abolish individual councils.

"Following consultation the Government have decided to deratify International Labour Convention No. 26 and we shall be informing the International Labour Organisation of our decision within the next few days. The window for denunciation opened in June and it is necessary to give 12 months' notice before the convention ceases to apply. This will therefore mean that, subject to the progress of the necessary legislation in this House, it should be possible to bring into effect changes approved by Parliament as soon as they become law.

"My right honourable friend the Minister Without Portfolio, supported by my right honourable friends and myself, published yesterday the White Paper Lifting the Burden. This set out clearly the Government's determination to reduce burdens on business and to seek in every way to improve the prospects for jobs. This Statement today of a major package of reforms is directed precisely to those objectives and I commend it to the House".

My Lords, that concludes the Statement.

Lord Dean of Beswick

My Lords, I am grateful to the Minister for repeating the Statement which has been made in another place. It is on a subject which has been the cause of a number of questions recently. I have one or two questions to ask the Minister.

First, the Statement refers to the number of organisations which submitted consultation papers in support of these proposals. Does not that evidence graphically conflict with the substantial list of organisations, read out by the noble Lord, Lord Sainsbury, last week, which wished to see the status quo retained? I believe that the noble Lord quoted the Low Pay Unit, the TUC, the CBI, the Institute of Personnel Management, the Co-op, and the Retail Consortium, which represents 90 per cent. of the retail trade in this country. If the noble Lord, Lord Sainsbury, is correct—and one assumes that he is—then he was accurate in his remarks. Is it not being suggested that 10 per cent. of the people asked were against maintaining the status quo, but that 90 per cent. were in favour? I should like to know what measure of support there was for this change.

Lord Sainsbury

My Lords, if I may intervene for a moment, the list that I read out last week was of organisations which were against abolition. They were not necessarily against reform. That is the distinction that I should like to make clear.

Lord Dean of Beswick

My Lords, that is correct. I hope noble Lords do not imagine that I was trying to mislead the House in saying that the noble Lord, Lord Sainsbury, was not against retaining the full status quo—but he did say that he was against abolition.

One or two points need clarification. First, to remove all young people under the age of 21 from any kind of regulation by wages councils would open the door to exploitation of a kind of which we rid ourselves long ago. I would want to be convinced by the Minister and the Government that that particular feature of the proposals will not result in exploitation. Secondly, it is proposed to, confine wages councils to setting only a single minimum hourly rate and a single overtime rate for those 21 and over". What does that mean? Will they have any say in minimum holidays or overtime rates for additional hours of work? What will be the council's responsibilities? It is ambiguous to declare that the councils will be setting only a single minimum hourly rate and a single overtime rate for those aged 21 and over.

The Minister made clear that the proposals are part of the package which includes the White Paper published yesterday, which is entitled Lifting the Burden, to create jobs. I believe that is the main reason given for the package. But nobody has provided any concrete proof that such will happen. I spent 22 years in a job in which I was responsible for some people controlled by wages councils. The councils were the one weapon that allowed people earning very low wages and working under very poor conditions to earn for the first time anything like a living wage. I am speaking in the main about people working in the catering trade.

Until wages councils were established, such people were seriously exploited by hotels and similar kinds of businesses. I believe that we may be opening the door again to such exploitation. I should like to hear the Minister's response, to learn whether he can put my mind at rest on that issue. I certainly believe that in the Statement there are some serious dangers that we shall live to regret.

5.15 p.m.

Lord Rochester

My Lords, from these Benches I should like to thank the noble Lord, Lord Young, for repeating the Statement in this House. We share the Government's concern, in the words of the Statement, to promote employment and to remove excessive burdens on employers". I may first say how glad we are that the Government have resisted the blandishments of those who sought to persuade them to abolish wages councils altogether. As to the substance of the Government's main proposals, we are sorry that they have decided to remove people under 21 from any regulations at all. Speaking on behalf of my noble friends, I have previously put the case for effecting a reduction in the percentage of the adult rate payable to young people, but we fear that to leave them altogether without protection in that regard would be to go too far.

In the case of adults, we welcome of course any reasonable move to avoid duplication and differences between one set of wages regulations and another. We shall need to consider very carefully the implications of setting only a single minimum hourly overtime rate.

As regards the proposed new powers significantly to simplify the procedures under which the Secretary of State may modify or even abolish individual councils, can the Minister give the House any indication of the nature of the powers—the very considerable powers—which the Secretary of State is apparently to reserve to himself? Above all, what part will Parliament play in this matter?

Finally, on the question of the possible abolition of wages councils, will the Minister heed the wise words of the Institute of Personal Management, that a slower rise in real pay for those in work would help to create jobs? That cannot be achieved by unilateral cuts in pay but, in the long run, only by educating negotiators into an awareness of the consequences on employment of their actions, rather than by placing the power for determining wages in perpetuity solely in the hands of employers.

Lord Young of Graffham

My Lords, I thank the noble Lord, Lord Dean, for his comments. I can assure him at the outset of my remarks that the overwhelming majority of employers who responded during the consultation period were for either abolition or reform. This is a Government that consults and listens to what is said in consultations. Reform was clearly in the minds of most employers, and many others, and so reform has been decided upon. But so indeed was the desire to release those under 21 of any inhibitions in order to make this what I believe it really is—a charter for jobs for young people.

It is imperative that we take all possible steps to ensure that young people get the right start in life; and the right start in life is a job. To the extent that this will help (and I believe it will) and experience we have seen in the operation of the Youth Training Scheme over the past year or two has demonstrated that for those under 18 rates of pay for young people on first entry into the labour market are indeed very important for them.

Perhaps I may say to the noble Lord, Lord Rochester, that in view of the considerable public interest, my right honourable friend the Secretary of State for Employment was anxious to let the House know at the earliest possible moment of the decision he had taken. In those circumstances, he has come to the House and made a Statement. We must wait until the Bill comes through for the details of how it will operate. I hope that at that time the fears of the noble Lord will be found not to have substance.

It is important to accept that education on the cost of high wages—and the cost is, once again, often paid with someone else's job—comes through and is understood. Of course, abolishing wages councils for those aged under 21, or reforming wages councils merely to set a standard rate and an overtime rate, will not complete that education, but it is part of the process and I hope that the result of that process will soon be apparent.

Lord Boyd-Carpenter

My Lords, I welcome my noble friend's announcement both in regard to the action taken under the Convention and in regard to younger people. Perhaps I may ask him to clarify two points. First, will it be possible in the Government's further consideration of this matter to take any particular industry now in the wages council system out of it altogether? Secondly, will the great simplification resulting from the decision to go only for a single rate and a single overtime rate enable some economies to be achieved in the high cost of the present substantial bureaucracy which supports the wages council system?

Lord Young of Graffham

My Lords, the Statement from my right honourable friend the Secretary of State for Employment says that he will, be proposing new powers which will significantly simplify the procedures under which the Secretary of State may modify or abolish individual councils". Once again I ask my noble friend to wait for the actual wording of the Bill to see the powers that the Secretary of State may take.

However, I assure the House that as of today no decision has been made, or is contemplated, about abolishing the wages councils. It is still too soon, since this is a very early intimation of the Secretary of State's conclusions, to say what will happen to the wages inspectorate. There may be some redundancies, but it is too soon to say. Again, as soon as the position is clearer I have no doubt that my right honourable friend will inform the House.

Baroness Birk

My Lords, if wages councils are being abolished for the under-21s, does that mean that there will be no minimum wage? If so, how will that prevent wages dropping below the level of unemployment benefit, and then supplementary benefit, to which the young people would be entitled if not in work?

Lord Young of Graffham

My Lords, there will be nothing to stop wages dropping below the level of benefit save for one factor—they will not attract people to take them. Already we have difficulty with many young people in that over the years we have been tempting them out of jobs and into benefit. I hope that that will not continue. I do not see the slightest prospect in the real world that the situation envisaged by the noble Baroness will obtain.

Baroness Seear

My Lords, will the noble Lord confirm, in regard to a single rate and a single overtime rate, that it is a single rate industry by industry, and that each industry will continue to be looked at on its own merits? I take it that it is not an overall single rate and overtime rate.

Lord Young of Graffham

My Lords, my understanding is that each wages council will continue for its particular industry and set rates for that industry.

Lord Bottomley

My Lords, is the noble Lord aware that a previous Secretary of State—James Prior—said that interference with wages councils would not ease the unemployment position? Is he further aware that with the ever-increasing number of low-paid workers there is a need for strengthening the wages councils, not weakening them? Does the noble Lord accept that if Sir Winston Churchill, who introduced the wages councils in 1909, were alive today he would share my view that there should be a statutory minimum wage to replace whatever action the Government take, either now or in the future?

Lord Young of Graffham

My Lords, I am aware that there is an ever-increasing number of jobs in this country. Last year in the United Kingdom alone we created more jobs than the whole of the rest of Europe. I am aware also that although Winston Churchill introduced wages councils in 1909 he also, in 1942, asked a predecessor of mine—the then Minister Without Portfolio—to ask Sir William Beveridge to prepare a report on social security. As a result we have the social security system today, which has greatly transformed the situation. I am aware also that while this Government have abolished 11 wages councils, their predecessor Government abolished 15. There is nothing sacrosanct or sacred about wages councils as such. The real priority of this Government and, I submit, of the Opposition, is that we all take steps to ensure that employment increases so that young people, and older people, all have jobs.

Lord Shinwell

My Lords, reference has been made—I did not expect it—to what happened in 1909 when Winston Churchill decided, as President of the Board of Trade, to introduce what was called, not wages councils but protection against the possibility of employers using slave labour, cheap labour. I was appointed by Winston Churchill himself (although why he appointed me I am unable to say; it was a long time ago) when I was President of the Glasgow Trades Council.

For two or three years I had to visit London frequently, along with other independent members. One of them was J. J. Mallon, a social reformer of distinction, and the other was the famous Mary McArthur, the daughter of an Ayrshire draper. They were independent members along with myself. We operated for several years, although in my case only for two years until I left to join the Seafarers Union. During that period we prevented workers accepting wages which were not sufficient to enable them to provide for the necessities of life.

The Minister has just mentioned a point which refers to this matter. I intended to ask a question before reference was made to 1909. If wages councils or something like them are abolished it will be possible for young people to accept employment at wages which are not sufficient to provide the bare necessities of life. What will be the consequence? They will apply for social security. Therefore, there will be far more people applying for social security and you cannot deny them the need for some relief to ameliorate the bad conditions that may exist for them. The result is that it will cost the Government much more money. Has that been considered? What will be the effect on social security outgoings, financial and other, if this is put into operation?

Lord Young of Graffham

My Lords, I was delighted this afternoon when I saw the noble Lord, Lord Shinwell, in his accustomed place because I knew that when we discussed wages councils he would remind the House how they came into being. However, I wonder whether the noble Lord's memory goes back far enough to remember the time when people walked with red flags in front of cars; because the world changes, and restrictions and regulations which seemed appropriate at one time are subsequently found to be not so necessary.

5.30 p.m.

The important thing about today's world and about the system of social security which we have built up for ourselves is that it ensures that people do not have to accept wages below minimum standards. However, I would remind the noble Lord, Lord Shinwell, that this Statement is about more jobs for young people and that the best way to create unemployment in this country is to set across the board a high minimum wage that employers cannot possibly afford to pay and that will destroy productivity. This Statement is about ensuring that young people have a start in life by getting a job and that those over 21 have a set minimum rate according to the industry and an overtime rate according to the industry. We believe that after all the consultations we have had we are providing what the bulk of people want.

Lord Kilmarnock

My Lords, I think everyone agrees that something needs to be done about the use of wage rates, but as my noble friend has indicated, the removal of all young people under 21 from any regulation is an extremely draconian measure. The noble Lord will recall that in paragraph 17 of the Government's White Paper an alternative to the complete exclusion of young people was advanced; this was to put an upper limit on the rate that the councils could set for them.

Does the noble Lord agree that the real question is the ratio of the youth wage to the adult rate and that this could be adjusted as was suggested in that paragraph in the White Paper? Will the Government, before drafting legislation in the autumn, perhaps think again about this and possibly come forward with something along the lines of the suggestion in paragraph 17 of the White Paper?

Lord Young of Graffham

My Lords, I think it is very difficult to settle on a rate, but I hear every word that is said in this House and I have no doubt at all that my right honourable friend the Secretary of State for Employment will read today's discussion and will take that into account.

Baroness Carnegy of Lour

My Lords, the regulations of the wages councils as I saw them recently were something over an inch thick, and small employers who employ people under the conditions of those councils find this extremely difficult to cope with. Can the noble Lord assure the House that reducing the minimum wage and the overtime rate to one for each industry will mean an enormous reduction in those regulations? Perhaps he can tell us to how many pages they will be reduced.

Lord Young of Graffham

My Lords, I can assure the noble Baroness that I shall speak to my right honourable friend the Secretary of State for Employment. I have no doubt that when the new regulations come out they will be simpler. I hope that they will be more comprehensible to those who wish to consult them.

Lord Graham of Edmonton

My Lords, perhaps I may ask the noble Lord to relate what he has said to the recommendations of the Auld Committee. Does the noble Lord recall that the Auld Committee recommended the retention of the two wages councils which operate primarily in the retailing and distribution sector? Does the noble Lord recognise that—if I understand rightly what he has said—the minimum protection for juniors will be abolished? I understood him to say in respect of overtime that in effect shopworkers would be very seriously affected. Does the noble Lord recognise that if the Government wish to see progress in their legislative programme in respect of the Auld Report, what is recommended this afternoon is a damaging piece of legislation?

Lord Young of Graffham

No, my Lords. What is recommended this afternoon fits with the spirit of the Auld recommendations. The retention of councils is consistent with the basic concern of the Auld Committee. I should perhaps remind the House that my right honourable friend the Home Secretary has said that he will look sympathetically at the best way of ensuring that established shopworkers cannot be compelled to work on Sundays.

Lord Montagu of Beaulieu

My Lords, is my noble friend aware how warmly this will be welcomed by all those concerned in the tourist industry, as it will at last give the opportunity of employing a lot more young people, particularly vocationally in giving work training which will be of great benefit to them in the future?

Lord Young of Graffham

My Lords, I am very grateful indeed to my noble friend.

Lord Diamond

My Lords, perhaps the noble Lord will clear up one confusion that remains in my mind, after listening carefully to what he has said. He mentioned that the present regulations tended to reduce the possibilities of employment. Can the noble Lord explain why all the well-intentioned citizens who are members of wages councils take the view that they have no responsibility whatever for seeing that the wage levels which they set permit youth employment at its fullest possible level?

Lord Young of Graffham

No, my Lords. I am afraid that there are times when I completely fail to fathom the workings of some of the wages councils. This happened particularly before I came to this House, when I was in the Manpower Services Commission and saw wages councils set minimum levels for young people which ensured their continued unemployment.

The Earl of Selkirk

My Lords, I should like to ask my noble friend what effect this will have on apprenticeships. One of the most serious problems today is that self-employed people very rarely have apprentices, and this will raise serious difficulties in the future. The reason that they give is that apprentice wages are demanded which are higher than they can afford to pay. I should like to know whether the noble Lord can say whether this would have any effect on this aspect of our work.

Lord Young of Graffham

My Lords, the levels of apprentice wages in those areas of engineering and other industries in which apprenticeship exists are by and large covered by union agreements. But the Government have introduced, if you like, a form of national apprenticeship in the sense that the Youth Training Scheme which will last for two years from next year onwards will certainly cover all those in the distributive industries and all those in areas which are at present covered by wages councils.