National Minimum Wage Bill

HL Deb 20 July 1998 vol 592 cc584-604

3.22 p.m.

Report received.

Baroness Miller of Hendon moved Amendment No. 1: After Clause 1, insert the following new clause—

EXCLUSIONS

(" .—(1) If it appears expedient to the Secretary of State, he may, by order made by statutory instrument, provide for the total or partial exemption from the provisions of this Act of—

1. (a) any area, sector of employment, trade or industry;
2. (b) undertakings of different sizes;
3. (c) persons of different ages; or
4. (d) occupations or categories of persons.

(2) The power conferred by subsection (1) includes power to make such incidental, supplemental or transitional provision as appears to the Secretary of State to be appropriate.

(3) The power of the Secretary of State to make an order under this section includes the power to vary or to revoke its provisions or to limit its operation for a specified period of time by means of a further such order.").

The noble Baroness said: My Lords, in moving this amendment I shall speak to Amendments Nos. 6, 8 and 10. I find myself in the strange, and possibly unique, situation of proposing, as an Opposition spokesman, that the Secretary of State should have more powers than she is asking for in the Bill—indeed, powers that she is positively trying to deny herself. In Clauses 2(7), 3(3) and 4(2), she absolutely declines the discretionary power to make exceptions to the national minimum wage in cases of different areas, sectors of employment, undertakings of different sizes, persons of different ages and persons of different occupations.

In fact, the whole of the Government's philosophy is contained in the Title, the National Minimum Wages Bill. The Minister confirmed that to me in reply to a question I posed when he made a Statement about the report of the Low Pay Commission on 18th June. That is because of what they said in their party manifesto. What it amounts to is that, in the interests of political dogmatism, the Government are denying themselves a safety net in case anything goes wrong with their theories. The trouble is that it will not be the Government who actually need to use the safety net, but the people whose jobs and businesses may be ruined by the national minimum wage as it applies to them.

As I pointed out in the debate on Second Reading, the United States of America, which is held up by the Government as the vanguard of the minimum wage, allows many exceptions which, so far, the Government have refused to agree to. Again, in his reply to another of my questions, the Minister conceded that there were exceptions to the national minimum wage in the United States of America for small businesses whose annual turnover was less than 500,000 dollars. He said that this exception did not apply to businesses engaged in, "interstate commerce". He claimed that it meant the exemption is much narrower than it may appear. Much narrower? I wonder how many flower shops or hairdressing salons are engaged in interstate commerce. In any case, a narrow exemption is undoubtedly better than no exemption at all. European countries also allow exceptions depending on their national circumstances and, as I understand it, they are frequently lobbied to allow derogations, sometimes not just unilaterally by employers.

As regards this country the concept of a national minimum wage is a new one, being far removed from the old Wages Council orders. During the passage of this Bill through the other place the Government made concessions from their original concept of absolute universality with no exceptions. Share fishermen have been excepted before what is left of our fishing industry sets sail for more congenial waters. The Armed Forces have been excepted, not only because it would be impossible to define how long, say, a soldier was actually working, but more importantly, the Treasury discovered that the wages bill for the Armed Forces was likely to double.

Lastly, the Secretary of State has, somewhat grudgingly, taken a discretionary power to exempt persons under the age of 26. I say "grudgingly" because instead of biting the bullet and simply making the exception, she has merely given herself the power to do so and even then it is hedged around with the unnecessarily restrictive conditions contained in Clause 4(2), which is one of the provisions I am now seeking to remove.

The minimum wage being a new concept, it is possible that the Government may come to realise that in some respect or another they have made a mistake. I realise that with the atmosphere of omniscience, coupled with the mantra of "We have a mandate" that currently pervades the Government, this is something that they may not yet realise. Indeed, the noble Lord, Lord Clinton-Davis, at Committee stage said, in replying to Amendment No. 48 that he spoke, as a Member of a Government with unshakeable confidence in its own infallibility".—[Official Report, 11/6/98;col. 1270.] Before the noble Lord rises, I hasten to acknowledge that this was as a result of some provocation from me and was intended, of course, to be a joke. But I really do believe that it was one of those jests in which many a true word is spoken. I really believe that the Government's obstinate refusal to consider many of our amendments is based purely on the same "We-know-best" attitude which has led to the complaint that they are trying to create a nanny state.

The fact is that, so far as the Opposition are concerned, the whole Bill is a mistake. However, since we accept that the Government are entitled to have their Bill, my present amendments seek to protect the Government and, more importantly, employers, employees and the economy alike from the folly of not having a discretion should unforeseen circumstances require it.

I am not going to take up time at this moment by giving hypothetical examples. However, when I speak to Amendment No. 4 I shall tell your Lordships about a whole industry, employing some 3,000 staff and providing important facilities for 200,000 children every year, and at the same time making an important contribution to the deprived communities in which those businesses are situated. That industry and all its facilities will be totally destroyed unless the Secretary of State agrees to adjust some of the administrative provisions in the Bill. It is not for me to argue that industry's case—and certainly not during the passage of this Bill.

Let us assume for the sake of argument that an unanswerable case is presented to the Secretary of State for some exception of some sort to the comprehensive, sweeping and universal rule that is currently proposed. That case might be in favour of any of the categories covered by this amendment. What will happen?

The Secretary of State will say to her postulants, "Yes, I entirely agree with you, something should be done, but unfortunately my hands are tied, because the Act does not give me powers to do what we both agree is right in this case. It will take an amending Act of Parliament, and unfortunately the legislative calendar is full up for years to come". In other words, the Secretary of State has a perfect get-out from doing anything, even if she conceded that something needs to be done. In fact, she is erecting a sign saying, "Don't bother me with your problems because I can't help you".

I do not know the philosophical reasons that motivate the Secretary of State declining to give herself the power to adjust the working of the Act in the light of future experience or changing circumstances. It cannot be that she believes that what she is proposing is so perfect that, like the Laws of the Medes and Persians, it is to be unalterable. It cannot be that she believes that she is possessed of power to see into the future, and knows that there will never be a need to modify the parameters of the national minimum wage. It surely cannot be that her attitude is that, no matter how cogent the arguments may be for introducing some flexibility, no matter how much she agrees that there should be a variation—permanent or temporary—in a particular case or cases, she positively does not want the power or discretion to act.

The Opposition feel that the Secretary of State should have the power to correct anomalous or harmful situations should they arise at any time in the future, despite all the Government's confidence that they cannot and will not. The discretionary power—it is only a discretionary power—that we wish the Secretary of State to have is to make exceptions, not by new primary legislation, but by statutory instrument. The power we propose is so flexible that it can be limited in time, or be subject to further amendment or, indeed, revocation by the Secretary of State.

More important than all of this is the fact that this is simply an enabling power. It means that the Secretary of State will actually have to take the time to listen to those who wish to present a case to her, but that duty goes with the red boxes and the ministerial car. You do actually have to listen to what people are saying to you. You do have to listen to points of view that do not emanate just from Transport House.

Perhaps the Secretary of State might consider, for example, the articles that appeared in the Sunday Times on 31st May, reporting that research by the Forum of Private Business showed that a national minimum wage of £3.60 an hour would have a severe effect on small businesses. I quote: Worst hit would be sectors such as retail, catering and care homes, and regions such as the North, Northwest and Southwest. It will affect the ability of 63% of small firms in the north to take on workers, compared with 15% in London. It is bound to affect small firms whether by reducing the number of new jobs that would be created or by shedding jobs".

Small firms are the engine for the creation of new jobs. Small and medium-sized companies, employing fewer than 250 people are estimated to provide 10 million jobs and to generate 40 per cent. of the national total of sales. Large firms, including many members of the CBI, have been shedding jobs for years.

The Secretary of State may not agree with one word of that survey. She may also not agree with the report published in June by the House of Commons Select Committee on Trade and Industry, which has severely criticised the Government's failure to give proper support for small businesses. In fact, her spokesman arrogantly dismissed the all-party report by saying, the Committee is entitled to its views".

Nevertheless, in case the Secretary of State is wrong about the need for exemptions to be made from the national minimum wage and the Forum of Private Business' survey is right, she needs the power to correct the mistake that we feel she is making.

The Secretary of State does not have to exercise her discretion if she does not choose to do so. We find it inexplicable that she is adamantly against having the right to adjust the national minimum wage if circumstances demand it as, indeed, happens in other countries where there is a minimum wage. There is no reason except, as some people might suspect, a deal with the TUC that there will never, never, never be any exceptions, no matter what the circumstances.

There is, however, no justifiable reason why the Secretary of State should impose this self-denying ordinance on herself, by declining the power to think again without having to come back with an amending Act.

Finally, before leaving this amendment, I would like to remind the Minister that throughout the Committee stage he and his noble and learned friend the Solicitor-General repeatedly professed the Government's desire for what they called "flexibility" in the operation of the Act. In fact, in rejecting no fewer than six amendments, they did so on the grounds that the Bill as drafted provided greater flexibility. The noble Lord, Lord Clinton-Davis, actually used the word "flexibility" on five occasions; and the noble and learned Lord the Solicitor-General used it twice.

In this amendment, which must be the mother of all Henry VIII clauses, we propose that the Secretary of State shall have the power to amend the Act by order in no fewer than five separate ways—one for each of the flexibilities sought by the noble Lord, Lord Clinton-Davis, if, but only if, she chooses to avail herself of it. That is real flexibility. So much flexibility, in fact, that as well as being the Ministers' "right honourable friend", in the words of a well known credit card advert, she will also be their "flexible friend".

I now turn briefly to the other amendments in this group, Amendments Nos. 6, 8 and 10, which seek to delete the provisions of Clauses 2(7), 3(3) and 4(2) respectively. Those are the provisions which inhibit the Secretary of State from exercising any discretion over the application of this legislation. If the proposed new clause to which I have just spoken—that is, Amendment No. 1—is accepted by your Lordships, each of the subsections to which I have just referred will be inconsistent with it and will need to be removed. I beg to move.

3.30 p.m.

The Chairman of Committees

My Lords, as Amendment No. 6 has also been spoken to, I must point out to your Lordships that if that amendment is agreed to, I cannot call Amendment No. 7.

Baroness Turner of Camden

My Lords, the noble Baroness referred to "flexibility". Is she seeking flexibility for employers simply to employ vulnerable people as sweated labour? Is that what the noble Baroness is seeking? This is a human rights issue.

Baroness Miller of Hendon

My Lords, the noble Baroness should know me better than that and should know that I am seeking flexibility—

Baroness Turner of Camden

I hope so!

Baroness Miller of Hendon

My Lords, the noble Baroness says that she hopes so. We are seeking some flexibility for certain circumstances that may arise in the future. At the moment, for example, it seems that the manufacturing sector of the economy is suffering badly as a result of the high value of the pound. I am not saying that that in any way relates specifically to what we are considering now, but it could be that within two or three years the small business sector is suffering equally badly although perhaps in a different way.

The Secretary of State—the President of the Board of Trade—does not have to exercise the discretion. It is up to her. It is not up to the employers. Indeed, that is exactly what we are seeking. We are seeking to give the Secretary of State the power and the discretion, if she thinks it fit—not if the employers think it fit. The noble Baroness, Lady Turner, shakes her head, but we are seeking to give the Secretary of State a discretionary power which the Secretary of State may exercise, should she decide that she needs it. Nobody else could apply to use the discretion because nobody else has the power.

Lord Razzall

My Lords, as the Minister is well aware, the Liberal Democrat Benches have taken a fundamentally different approach to this Bill from the Opposition. We believe, in common with the Government, that it is time for the cowboy practices of many employers to be put to an end by the operation and implementation of minimum wage legislation. We have disagreed with the Government on one or two areas. We have consistently disagreed with the Government about the possibility of allowing regional variations to the national minimum wage, as happens in a number of other countries. I accept that as to the first stage of the minimum wage the fox has been shot. The Government were elected on a manifesto which committed them to a national minimum wage. Regional variation has been examined to some extent by the Low Pay Commission. The report of the Low Pay Commission—I commend it to noble Lords, if they have not already read it—deals in considerable detail with the arguments for and against regional variation. I accept that the case for regional variation has not been made out. However, I support the noble Baroness, Lady Miller of Hendon, in that I am not entirely certain why the Government wish to restrict themselves in future.

We part company with the Government on the question of what happens if, for example, in the year 2000, 2004 or 2008 the economic circumstances of this country change, bearing in mind the significant alteration in the economic structure of this country that may result from our entry into European Monetary Union. Is it to be said that if the Low Pay Commission in future recommends a regional or sector variation the Government must promote primary legislation to achieve that? Do the Government have to have a new Bill to obtain a minimum wage with the variations that are contemplated? I do not believe that it is in the interests of any party in government in favour of the concept of a minimum wage to constrict themselves to such an extent that they are forced to seek primary legislation to introduce what at that stage will be regarded as a detail. For the reason that we do not want the Bill to be prescriptive but want to give it the widest possible powers in future. Although not for the arguments advanced by the noble Baroness, we support this amendment.

Lord Davies of Coity

My Lords, I believe that in tabling this amendment which effectively introduces an exemption, the noble Baroness poses the wrong question. Only a minority of workers in this country suffer low pay to the extent that they require a national minimum wage. The Low Pay Commission has examined all the circumstances and made recommendations.

It is not a question of ensuring that small businesses are propped up by low wages. The exercise is to ensure that those in employment who are the most vulnerable are protected. To a very great extent, though not invariably, those workers are already subsidised by state benefits because of their low wages. We should not continue to tolerate that. Firms, whether they be small, medium or large, are in business to make profits, which is perfectly sound. Those profits can be made in a number of different ways: increasing productivity or re-arranging business operations. Perhaps they can sell more goods or charge higher prices for them, but profits should not be as a result of paying sweated labour rates which subsequently become subsidised.

If it is said that by this amendment we give the Secretary of State power to make exemptions it sends out the wrong message. We have been arguing about this matter since the abolition of the wages councils. Not only would the amendment send out the wrong message but it would mean that Parliament did not determine the terms on which the national minimum wage should be paid. There is no need to provide the Secretary of State with an opportunity to change it. The national minimum wage has not been set so high that it will damage jobs. The unanimous recommendation of the Low Pay Commission composed of representatives of small businesses and workers has reached a conclusion and by and large, the Government have accepted it. To accept this amendment would send out the wrong message.

3.45 p.m.

The Minister of State, Department of Trade and Industry (Lord Clinton-Davis)

My Lords, before I turn to the new clause and the other amendments to which the noble Baroness has referred, perhaps I may comment briefly on the remarks just made by my noble friend Lord Davies of Coity and the noble Lord, Lord Razzall. The noble Lord has tabled his own amendment with which I shall deal in more detail later. I believe that my noble friend has put his finger on it. This is not a tremendously revolutionary Bill, or it should not be. It is a radical Bill which represents an important change.

The Bill is all about ensuring that those who are in employment and are most vulnerable are protected, and that is absolutely right. It is also about improving morale in the workplace and ensuring that people feel that they are not being exploited but have a role to play in an enterprise.

The noble Baroness, Lady Miller, in her Second Reading speech this afternoon reiterated her root and branch opposition to the concept of a national minimum wage, and she has not been chary of saying so. Her comments about election commitments were a little wide of the mark. When she referred to political dogmatism, perhaps she was referring to the dark days of the poll tax. The fact is that this was a very clear manifesto commitment on which we were elected. It does not mean that we have got everything right as a consequence. But this is such a fundamental part of our election platform that we are entitled to say that this is something that the electorate accepted. I understand perfectly well that the Opposition are unlikely ever to accept it. Despite that we are proceeding with the fundamentals of this Bill.

I remind the noble Baroness that the Labour Party has not resided at Transport House for many years. I recommend that she looks in the telephone directory to see where we are. Maybe the noble Baroness will come over to us. Lots of people are joining. She puts forward a rather ramshackle case. Our approach is diametrically opposed to the direction that she takes. We want an inclusive policy whereas she wants exception after exception to the point of neutering the Bill altogether. Therefore, we have here a whole series of wrecking amendments, which is essentially what Amendment No. 1 is all about. This amendment is not concerned with providing a limited range of exemptions or modifications. We want a single national minimum wage which is universal in its application. There have been some minor exceptions to it, but the fact is that we are not in the business of excluding whole swathes of people which is what the noble Baroness seeks to do.

We want to get rid of poverty pay and have a level playing field so that companies can compete fairly on the basis of quality, not excessively low wages. I have made that position clear over and over again in the course of these debates and in the responses to the Statement that I made in this House not very long ago about the report of the Low Pay Commission.

The Bill has been designed in such a way that the possibility of exemptions according to sector, region, size of firm or occupation is excluded. It permits in specific circumstances exemptions or modifications according to age. The limitations we placed in Clauses 3 and 4, which this new clause would effectively remove, are in our judgment necessary limitations. What they do is to defend the integrity of the national minimum wage. That is something which the noble Baroness rejects entirely. We made clear in previous debates, when the noble Baroness moved somewhat similar clauses, that those amendments or new clauses fail, not only on conceptual grounds but on the grounds that they are wholly impractical.

I shall give an example of the exemptions that the noble Baroness has in mind. Why should it be possible to exempt a firm in Surrey rather than a firm in Cheshire? Why should a hairdresser at one end of the street be exempt rather than its competitor at the other end of the street, perhaps in a different county? Why should these low paid workers, likely to benefit from a minimum wage, be exempt? The noble Baroness has not come within a mile of answering those points which have been raised on previous occasions.

I move to Amendment No. 6, to which the noble Baroness also spoke. The amendment would remove all the limitations, which we have deliberately provided, on the powers of the Secretary of State to make key regulations on the way in which a worker's hourly rate of pay is to be calculated for minimum wage purposes. These amendments would not allow the Secretary of State to set more than one rate. Clause 1, rather than Clause 2, prescribes that the national minimum wage shall be a single hourly rate and thus establishes this fundamental principle. Clause 2 is concerned with how an hourly rate of pay is to be calculated; what will count towards the worker's pay for minimum wage purposes; what will be excluded; and how benefits in kind and one-off bonuses will be treated. Clause 2 gives the Secretary of State the power to determine matters within that category.

This is a complex matter. That is why we asked the Low Pay Commission to make recommendations on it. We have indicated that we are accepting those recommendations subject to consultation on the detail.

Subsection (7) of Clause 2 prevents the minimum wage calculation being applied differently in certain circumstances. That is what the noble Baroness seeks to amend, as attempted previously on several occasions in this place and elsewhere. The amendment proposes to do away with all the limitations in Clause 2 in one fell swoop so that we could have variations by region, sector, size of firm, age or occupation. It seeks to remove all such restrictions for the purpose of calculating if the rate has been paid. I think on further reflection that the noble Baroness might agree that we would end up with an absurd position, completely negating the purpose of the Bill, unless, as I indicated, that is the purpose of the actions being taken by the noble Baroness and her colleagues. I shall not go into the detail of the point made by the noble Lord, Lord Razzall, until later unless he wishes me to deal with it at this stage. He indicates to the negative.

I believe that what is proposed is not the right way to proceed. What is more, if we were to go down this route it would be a heavy vote of no confidence in our belief in the way in which the Bill will work out when enacted. I do not think that that is right. We have confidence in the Bill. We thought a lot about it before the election and since the election. We have had the help of the Low Pay Commission. It turned down the idea of regional variation. That was a sound conclusion.

I turn to Amendment No. 8, also touched on by the noble Baroness. Although we have not discussed the amendment previously, we have gone over similar ground at great length. This is an important area. I listened carefully, as I have done on previous occasions, to the noble Baroness. Clause 3 is drafted to permit us to take account, within certain limitations, of whatever the report from the Low Pay Commission recommended. I made clear when I repeated the statement in this House on publication of the report that we propose to use the Clause 3 power in a limited way by setting a modified rate for those aged from 18 to 21 and also to provide a modified rate for workers starting a new job with a new employer and where there is an accredited training scheme in operation and being applied.

Each of these outcomes reflects the importance that we attach to young people and trainees. The amendment seeks to alter the way in which the whole clause operates. It would provide the Secretary of State with a wide-ranging power to make exemptions whenever he or she felt it expedient so to do. It would remove all the limitations which currently prevent differentiation by region, sector, size of firm or occupation for persons below 26 provided for under Clause 3. It would undermine, in my submission, the whole purpose of the Bill as it relates to the category of workers below 26. I know that the noble Baroness is extremely persistent. I admire her for that, but I think she is wrong.

I turn to Amendment No. 10. The effect of this amendment is to remove all the limitations currently preventing differentiation by region, sector, size of firm or occupation for persons aged 26 and over who might potentially be added by regulations under Clause 4 to the candidates for exemption under Clause 3. The amendment constitutes, once again, a direct attack on the principles of the Bill. We have all along made clear our commitment to the principles which I have adumbrated today. While I understand that it is difficult for the noble Baroness and her colleagues to accept those principles, they are essential as far as this Bill is concerned. For those reasons I would ask the noble Baroness to withdraw the amendment.

There is one other matter to which I should refer. It concerns small firms. I shall quote, for the benefit of the noble Baroness, two passages from the report of the Low Pay Commission. The noble Baroness expressed the view that small businesses were opposed to the national minimum wage. I refer to the comment at page 106, paragraph 6.41: We made great efforts to canvass their [the small firms] opinion and held many meetings with employers in small firms and their representatives. There were differences between such firms, but we recognise that many do not have the same margins or management resources as larger competitors. We were sensitive to this in making our recommendations". The report continues at page 135, paragraph 7.11: Written evidence from trade associations representing small stores indicates that although there will be some substantial increases in wage bills for some companies, the majority of stores will be able to cope with our recommendations". The issues were firmly and comprehensively dealt with by the Low Pay Commission. I think that those are relevant quotations.

Viscount Thurso

My Lords, before the Minister sits down perhaps I could ask one specific question which follows on from the points made by my noble friend Lord Razzall. It is in relation to areas. He chose the example of shops at each end of a street in Surrey. However, if my memory is correct, and perhaps he can confirm this, the Scotland Bill makes the national minimum wage a reserved matter. Consequently, in future, on a larger scale, as between England and Scotland, if Scotland wish to have a different rate or a different application of the Bill—and if I were lucky enough to be elected to the Scottish parliament it might be a higher rate than the one proposed but it might equally be a lower rate—would Scotland have to return, under those circumstances, to England, to primary legislation, to achieve its objective? In that circumstance, would it not be possible for some exception to be available to the Secretary of State so that she might at least be able to act by order for Scotland?

Lord Clinton-Davis

My Lords, I believe that primary legislation would be required. But this would not be the only situation of that kind. We are dealing with the Low Pay Commission report; and with the text of this Bill as drafted at present. The philosophy underlying that is as I have indicated.

I do not believe that there is reason to deal with the matter on the regional basis that the noble Lord implies he supports. However, we shall come to that on a later amendment.

4 p.m.

Baroness Miller of Hendon

My Lords, I was disappointed with the Minister's remarks on two counts. First, it is a pity that between Committee and Report stages the compliments I received from the other side of the Chamber about the eloquent way in which I presented the amendments have now become references to a ramshackle Second Reading speech. I found that disappointing.

Lord Clinton-Davis

My Lords, it was the case presented, not the speech.

Baroness Miller of Hendon

My Lords, clearly it was not effective, as the noble Lord described my speeches in Committee. However, that is a mild comment which caused me disappointment.

My second disappointment is that the Minister's mind is closed to what I have been saying. It is true—I accept it—that we do not like the national minimum wage but we accept that we shall have it. My amendment attempted to save the Government from trouble in the years to come if parts of the legislation for the national minimum wage do not work properly. The Minister's first few words indicated that the Government had not got everything right. I know that politicians do not like to have their words quoted to them but that was said only a moment or two ago.

The fact is that other countries have a minimum wage, and they have exceptions. I do not suggest, as the noble Baroness, Lady Turner, may have thought, that we require all the exemptions provided in the amendment. The President of the Board of Trade may find that she needs certain exemptions. If so, she should be able to deal with the matter by statutory instrument and not have to come back to the House for primary legislation when there clearly would not be time for it. She does not have to exercise that power; it does not wreck the Bill. The Minster referred to a wrecking amendment. It is not a wrecking provision. It need never be used.

The President of the Board of Trade may agree with the statement from the Sunday Times that the provision might be more harmful in certain parts of the country. The Minister referred to a hairdresser in Surrey and somewhere else that I cannot recall. There are certain deprived areas in the country. She may well need the power. I believe that that was the intention of the amendments brought forward by noble Lords on the Liberal Democrat Benches. They agree with the national minimum wage but understand that there may be a need for exemptions.

The Minister states that they may not have got everything right. While countries such as the United States of America and in Europe have exemptions, I cannot understand why the Government nevertheless believe that this country does not need them. I believe that that is totally inappropriate. I was trying to save the Government, not the employers, from making a horrendous mistake. I am not satisfied with the reply and feel it only right to test the opinion of the House.

4.5 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 161; Not-Contents, 103.

Division No. 1
CONTENTS
Abercorn, D.	Halsbury, E.
Aberdare, L.	Hamwee, B.
Addington, L.	Harding of Petherton, L.
Ailsa, M.	Harmsworth, L.
Aldington, L.	Harris of Greenwich, L.
Anelay of St. Johns, B.	Hayhoe, L.
Ashbourne, L.	Higgins, L.
Astor of Hever, L.	Holderness, L.
Attlee, E.	HolmPatrick, L.
Baker of Dorking, L.	Home, E.
Balfour, E.	Hothfield, L.
Beaumont of Whitley, L.	Hunt of Wirral, L.
Belhaven and Stenton, L.	Hylton-Foster, B.
Beloff, L.	Ilchester, E.
Belstead, L.	Jenkin of Roding, L.
Biddulph, L.	Kimball, L.
Biffen, L.	Kingsland, L.
Birdwood, L.	Kinnoull, E.
Blatch, B.	Lauderdale, E.
Brabazon of Tara, L.	Lloyd-George of Dwyfor, E.
Braine of Wheatley, L.	Long, V.
Brentford, V.	Lucas of Chilworth, L.
Bridgeman, V.	Ludford, B.
Brougham and Vaux, L.	Luke, L.
Bruntisfield, L.	Lyell, L.
Burnham, L. [Teller.]	McColl of Dulwich, L.
Cadman, L.	MacFarlane of Bearsden, L.
Calverley, L.	Macleod of Borve, B.
Campbell of Alloway, L.	McNair, L.
Campbell of Croy, L.	McNally, L.
Carew, L.	Masham of Ilton, B.
Carlisle, E.	Mayhew of Twysden, L.
Carnegy of Lour, B.	Mersey, V.
Charteris of Amisfield, L.	Miller of Hendon, B.
Chelmsford, V.	Monson, L.
Clanwilliam, E.	Monteagle of Brandon, L.
Clark of Kempston, L.	Mowbray and Stourton, L.
Clement-Jones, L	Moyne, L.
Cockfield, L.	Munster, E.
Courtown, E.	Naseby, L.
Cowdrey of Tonbridge, L.	Newall, L.
Craig of Radley, L.	Newby, L.
Cranborne, V.	Newton of Braintree, L.
Cullen of Ashbourne, L.	Nicholson of Winterbourne, B.
Davidson, V.	Norfolk, D.
Dean of Harptree, L.	Northesk, E.
Denton of Wakefield, B.	Oppenheim-Barnes, B.
Dholakia, L.	Orr-Ewing, L.
Dilhorne, V.	Palmer, L.
Dixon-Smith, L.	Pender, L.
Elibank, L.	Perry of Southwark, B.
Elles, B.	Peyton of Yeovil, L.
Elton, L.	Pilkington of Oxenford, L.
Exmouth, V.	Porter of Luddenham, L.
Ezra, L.	Rankeillour, L.
Ferrers, E.	Rawlings, B.
Fookes, B.	Razzall, L.
Fraser of Carmyllie, L.	Redesdale, L.
Gainford, L.	Renwick, L.
Gardner of Parkes, B.	Richardson, L.
Glentoran, L.	Roberts of Conwy, L.
Gormanston, V.	Rodgers of Quarry Bank, L.
Gray of Contin, L.	Saltoun of Abernethy, Ly.
Grey, E.	Sandberg, L.

Savile, L.	Thomson of Monifieth, L.
Seccombe, B.	Thurso, V.
Selkirk of Douglas, L.	Tope, L.
Sharples, B.	Tordoff, L.
Skelmersdale, L.	Trefgarne, L.
Soulsby of Swaffham Prior, L.	Trumpington, B.
Steel of Aikwood, L.	Vivian, L.
Strange, B.	Waddington, L.
Strathcarron, L.	Wallace of Saltaire, L.
Strathclyde, L.[Teller.]	Westbury, L.
	Whitelaw, V.
Sudeley, L.	Wigoder, L.
Swinfen, L.	Wilcox, B.
Tebbit, L.	Winchilsea and Nottingham, E.
Teviot, L.	Wise, L.
Thomas of Gresford, L.	Wynford, L.
Thomas of Walliswood, B.	Young, B.

NOT-CONTENTS
Allenby of Megiddo, V.	Irvine of Lairg, L. [Lord Chancellor.]
Archer of Sandwell, L.
Barnett, L.	Jakobovits, L.
Bassam of Brighton, L.	Janner of Braunstone, L.
Berkeley, L.	Jay of Paddington, B.
Blackstone, B.	Jeger, B.
Blease, L.	Jenkins of Putney, L.
Borrie, L.	Kennet, L.
Brooks of Tremorfa, L.	Kilbracken, L.
Bruce of Donington, L.	Lockwood, B.
Burlison, L.	Longford, E.
	Lovell-Davis, L.
Carmichael of Kelvingrove, L.	McCarthy, L.
Carter, L. [Teller.]	McIntosh of Haringey, L. [Teller.]
Castle of Blackburn, B.
Cledwyn of Penrhos, L.	Mackenzie of Framwellgate, L.
Clinton-Davis, L.	Mason of Barnsley, L.
Cocks of Hartcliffe, L.	Merlyn-Rees, L.
Currie of Marylebone, L.	Milner of Leeds, L.
David, B.	Molloy, L.
Davies of Coity, L.	Monkswell, L.
Dean of Beswick, L.	Morris of Manchester, L.
Dean of Thornton-le-Fylde, B.	Murray of Epping Forest, L.
Desai, L.	Nathan, L.
Dixon, L.	Orme, L.
Donoughue, L.	Peston, L.
Dormand of Easington, L.	Plant of Highfield, L.
Dubs, L.	Ponsonby of Shulbrede, L.
Evans of Parkside, L.	Ramsay of Cartvale, B.
Ewing of Kirkford, L.	Randall of St. Budeaux, L.
	Rea, L.
Falconer of Thoroton, L.	Rendell of Babergh, B.
Farrington of Ribbleton, B.	Richard, L. [Lord Privy Seal.]
Gallacher, L.	Rogers of Riverside, L.
Gilbert, L.	Scotland of Asthal, B.
Gilmour of Craigmillar, L.	Sefton of Garston, L.
Gladwin of Clee, L.	Serota, B.
Gould of Potternewton, B.	Sewel, L.
Graham of Edmonton, L.	Shepherd, L.
Gregson, L.	Shore of Stepney, L.
Grenfell, L.	Simon, V.
Hacking, L.	Smith of Gilmorehill, B.
Hardie, L.	Stallard, L.
Hardy of Wath, L.	Stoddart of Swindon, L.
Haskel, L.	Stone of Blackheath, L.
Hayman, B.	Strabolgi, L.
	Symons of Vernham Dean, B.
Henderson of Brompton, L.	Taylor of Blackburn, L
Hilton of Eggardon, B.	Thomas of Macclesfield, L.
Hogg of Cumbernauld, L.	Turner of Camden, B.
Hollis of Heigham, B.	Whitty, L.
Hoyle, L.	Williams of Elvel, L.
Hughes of Woodside, L.	Williams of Mostyn, L.
Hunt of Kings Heath, L.	Young of Old Scone, B.

Resolved in the affirmative, and amendment agreed to accordingly.

4.15 p.m.

Clause 2 [Determination of hourly rate of remuneration]:

Lord Clinton-Davis moved Amendment No. 2: Page 2, line 11, leave out ("and times at which,") and insert ("times at which, or the time for which,").

The noble Lord said: My Lords, I shall speak also to Amendments Nos. 3 and 5. The amendments address a specific troublesome technicality which has only just become apparent. I have written to the noble Baroness, Lady Miller, and the noble Lord, Lord Razzall, on this matter.

The general effect of the three amendments is to extend slightly the flexibility of the power to calculate the rate. We want to be confident that the clause provides us with the power we need to deliver through the regulations what the Low Pay Commission has recommended regarding the treatment of homeworkers who are paid by the piece.

Let me remind the House how Clause 2 operates. Clause 2 deals with the determination of the hourly rate of remuneration. This clause was drafted flexibly to enable us to reflect, as far as could be envisaged, whatever the Low Pay Commission might recommend in its report regarding the calculation of the hourly rate for national minimum wage purposes.

It is essentially a technical clause but one which is important to the flexible operation of the Bill. It provides for a wide range of possible permutations in determining what elements of pay can be included or excluded; for example, overtime, bonuses, benefits, holiday pay and so forth. It enables a wide range of working situations to be taken into account, including piece-work, payment of standard wages at a regular rate, and payments on commission or at different rates over different periods of time.

Since receiving the report, we have been considering the practicalities of putting into effect the Low Pay Commission's recommendations. In particular we have been looking at those workers who work away from the office and are paid by output rather than time worked. For this particular case, it has become apparent that the clause may not be flexible enough. In particular, the LPC recommendations suggest that piece-workers should be entitled to the hourly minimum wage of every hour worked regardless of the piece rate, and that employers of homeworkers should be able to demonstrate that piece rates have been evaluated to confirm compliance.

The fairest and least bureaucratic way to do that is to ensure that there can be agreement between worker and employer over the maximum hours to be worked and the output expected. We need to ensure we have the powers to do that under Clause 2. We are therefore proposing three amendments to the clause, the third of which is purely consequential.

Amendment No. 2 addresses subsection (3), which relates to how working time is to be treated for minimum wage purposes. The amendment ensures that the regulations can prescribe those times for which a worker may be treated as working. The amendment is a technical rewording to ensure that we have the powers to prescribe in regulations that, where piece-workers work at home with no agreed hours, the worker and employer may together agree the maximum hours which are to be worked and to be claimed.

Amendment No. 3 addresses the same subsection and makes explicit the power to prescribe that an agreement may be reached regarding the maximum or minimum time that a person shall be treated as working. As with Amendment No. 2, this change is necessary in the particular case of the piece-worker working at home with no present limit on the hours to be worked.

In the interests of legal certainty, it ensures that we have sufficient flexibility to implement the Low Pay Commission's recommendations regarding piece-workers and homeworkers through the regulations. I beg to move.

On Question, amendment agreed to.

Lord Clinton-Davis moved Amendment No. 3:

Page 2, line 15, at end insert—

("(3A) The provision that may be made by virtue of paragraph (a) of subsection (3) above includes provision for or in connection with

1. (a) treating a person as, or as not, working for a maximum or minimum time, or for a proportion of the time, in any period;
2. (b) determining any matter to which that paragraph relates by reference to the terms of an agreement.").

On Question, amendment agreed to.

Baroness Miller of Hendon moved Amendment No. 4: Page 2, line 19, at end insert ("and such valuation in relation to food or accommodation shall stipulate a maximum amount determined by the Secretary of State that may be added to wages paid in cash, taking into account any information that is reasonably available to him of the average cost of food and the average value of staff accommodation (including Council Tax and the cost of utilities) in different areas of the United Kingdom").

The noble Baroness said: My Lords, I regret having to move this amendment at this stage of the Bill, but it arises from a recommendation contained in the report of the Low Pay Commission. As your Lordships are aware, although the report was in the hands of some trade union leaders several days before its official publication, it was not available to Parliament until two of the three sessions of the Committee stage had taken place. At the Committee stage, the matter of yet another leak of the document was raised and subsequently inquiries were made by my noble and learned friend Lord Fraser of Carmyllie. I regret to say that he has received a far from satisfactory reply from the Minister.

However, having had the opportunity to read the report, I am concerned by the recommendation of the Low Pay Commission as regards benefits in kind. The recommendation is contained in paragraphs 4.27 and 4.30, commencing on page 59. It provides that with the exception of accommodation, benefits in kind shall be excluded from the calculation of the national minimum wage. The Low Pay Commission concedes that: Benefits include a wide range of cash and non-cash items, including paid holidays, occupational sick pay, paid maternity leave, pensions, life assurance, company cars, private health insurance, shares and share option schemes, and subsidised restaurants, free meals and luncheon vouchers". That is a formidable list and a costly one to employers. The Low Pay Commission contends that: Few low-paid workers receive much in the way of benefits", apart from retail discounts. I certainly believe that to be true. But we are concerned about those low-paid employees who receive benefits in kind from their employers as part of their remuneration package. Although it may cost the employer a considerable sum to provide those valuable benefits, the Low Pay Commission proposes that all but one of them—the cost of accommodation—should be ignored. It also goes on to put an arbitrary and totally inadequate figure on the maximum to be allowed as the cost of that accommodation.

I shall return to that point, but, first, I wish to tell your Lordships about the industry which, as I mentioned when I spoke to Amendment No. 1, is in danger of total destruction if the provisions of the Bill are not modified, in particular the provisions concerning benefits in kind. This industry employs more people than there are share fishermen, whom the Government have made a special case under Clause 43. Yet I am not pleading for a special exemption for this industry alone. There are other types of businesses in similar circumstances which are affected in the same way by the provisions concerning the valuation of board and lodging provided by the employer. The commission recommends that nothing should be allowed for the value of board and a derisory £20 a week for the lodging. Even that is to be phased out in the longer term.

In order to explain the problem in relation to various industries, perhaps I may first tell your Lordships about the activity holiday trade. It runs what are commonly called "summer schools". In the United States of America they are called "countrywide summer schools". In this country, there are 30 activity holiday centres affiliated to one trade federation. There may be other similar unaffiliated concerns in the country, but, between them, those 30 businesses employ some 3,000 staff at any one time. They provide activity holidays for some 200,000 children a year, most of them sent on package visits by their schools. The children have to pay their own fees, or the schools raise the money by appeals, jumble sales and similar means for those children whose parents cannot pay for them to go.

This means that the charges must be kept to the barest minimum, otherwise the schools could not afford to participate. The charges are limited, despite the fact that apart from the facilities which the activity centres have to provide they also supply board and lodging for the pupils and any of their own teachers who accompany school groups. The activity centres must also, rightly, comply with the stringent safety requirements imposed by the Activity Centres (Young Persons' Safety) Act 1996.

The staff of these centres are involved in work experience towards National Vocational Qualifications in catering, leisure activities, sports training and customer care. They receive pocket money and full board and lodging as well as their work experience, to say nothing of having, in effect, a working holiday. And your Lordships should bear in mind that there are far more applicants for staff places than there are vacancies. With the training they receive and the benefits they enjoy, I am not at all surprised.

If the value of their board and other fringe benefits is totally disregarded, as the Low Pay Commission recommends, and the value of the living accommodation is limited to £20 a week, none of these businesses will be able to stay in business. I stress that I am not pleading a special case either for this industry or one firm within it, but merely trying to illustrate the problem. As an example, I should like to show your Lordships what the effect of the Low Pay Commission's proposals would have on an activity centre in Bude, Cornwall.

Apart from pocket money of between £50 and £75 a week, and the value of training for nationally recognised qualifications, the staff also receive a package including full board, uniforms, laundry, equipment and other benefits worth at least another £44 a week. To supplement the cash paid to the employees because of the items that the Low Pay Commission recommends should now be disregarded will cost the centre an extra £120,000 a year. But its profits, which it would normally expect to plough back into the facilities, amount to only £80,000. Despite the fact that this centre operates only seasonally from April to October, it contributes £1¼ million a year to the struggling and hard-pressed local economy.

In the United States, the originator of the summer camp, the exception where applicable is given to small businesses with a turnover of less than 500,000 dollars a year. That is one exemption, refused by the Government, which at a stroke would solve many of the problems created by the Bill. But another exemption in the United States applies to the seasonal camps, which are also exempted from the national minimum wage; another example of how the national minimum wage is adapted to the needs of particular trades. That is the flexibility to which the Government pay lip service, but refuse to concede.

I refer again to the recommended ceiling for accommodation. It is £20 a week—what a ridiculous figure! If the employee uses it only for five days or nights a week it works out at £4 a night. If he is there for seven nights a week—for example, a resident caretaker—it is under £3. Where can anyone find accommodation at that price? A night's stay in the city of Bath YMCA costs £11 a night in a dormitory and at least £14 in a single room, breakfast included. The YMCA could hardly be called a profiteering organisation. The Youth Hostels Association, depending where its facility is situated, charges about £9.75. My recollection of the YHA is that the facilities were pretty spartan.

I am not suggesting that the value of the accommodation should be equated to the cost of staying at the Ritz. But the information which I have given to your Lordships was obtained in fewer than 10 minutes as a result of two simple telephone calls. I have to wonder what kind of research the Low Pay Commission conducted before coming to its extraordinary recommendations about the items of benefits in kind to be excluded from the calculation of the national minimum wage.

The Low Pay Commission conducted a painstaking inquiry before it wrote its report. I do not agree with many of its conclusions or recommendations, but I cannot fault its methodology on most aspects. However, in respect of benefits in kind, particularly over the value of accommodation, its work has been perfunctory and slapdash. Hence, I believe that its recommendations are neither credible nor acceptable. I quote from its report: It is difficult to estimate and monitor the value of many benefits … On grounds of simplicity and enforceability, therefore, we recommend that, with the exception of accommodation, benefits should be excluded from the calculation of the National Minimum Wage".

There are two reasons why the Low Pay Commission is wrong to suggest that the value of the benefits is difficult to calculate or to monitor. The first is that the Inland Revenue has considerable expertise, built up over generations of defeating tax evaders and closing up tax loopholes, in valuing benefits in kind and enforcing the payment of tax on them.

In its report, the Low Pay Commission actually recommends that enforcement of the national minimum wage should be left in the hands of "an existing Government agency". The commission particularly and enthusiastically recommended the Contributions Agency, which is to combine with the Inland Revenue just as this Act will come into force because, and again I quote: It analyses payroll data, and for benefit fraud reasons checks for apparently abnormally low wages. It has compliance investigation teams, allied to fraud teams". I submit that the Contributions Agency, combined with the Inland Revenue, will have absolutely no problem in valuing the benefits in kind and preventing fraud by employers. In addition, the Low Pay Commission has recommended that, employers should be required to display on pay slips both the national Minimum Wage and details to enable workers to claim readily whether they have received the statutory minimum". The model pay slip that is shown as an example in the 12th schedule to the report could just as easily require the employer to state the value of the benefits that he or she is claiming should be taken into account. The onus of proving their value in case of dispute will of course be on the employer. It should be noted that the Secretary of State has taken powers under Clause 12 to prescribe by regulations the contents of an employee's wages statement.

The second reason that the Low Pay Commission is wrong to say that the value of benefits is too difficult to calculate is that it was the commission's responsibility and duty to recommend a framework to do so. I have never heard of a commission of inquiry such as this abdicating its responsibilities and saying, in effect, "It is much too hard. We just can't do it. Instead, we will allow employers who may be providing benefits that are costing them hundreds of pounds a year to bear the expense without being given a single pennyworth of credit for it". I believe that that is a monstrous and totally unacceptable concept.

What I expect to hear from the Government in reply to my amendment is that, when the Secretary of State makes the regulations under Clause 2, particularly under subsection (4), she will not arbitrarily ignore and disregard benefits which have a real value to the employee and a real cost to the employer—that is to say, a value in cost which can both be measured and verified by the tax or other enforcement authorities, and which the employer will have to declare in writing under other regulations which the Secretary of State is going to make—a value and cost which it will be up to the employer to prove if challenged.

This amendment is not about the problems of the activities centres' industry; indeed, it is just an example of the problems that will afflict every employer who provides benefits in kind as part of the remuneration of his workers. Simple justice demands that they should get credit for them and that they should not be ignored just because the commission and the Government find it difficult to check them. I beg to move.

4.30 p.m.

Lord Haskel

My Lords, this amendment raises the issue of what benefits should count towards pay for the purpose of the national minimum wage; and how they should be valued. The noble Baroness prayed in aid a quotation from the report of the Low Pay Commission, which states: with the exception of accommodation, benefits should be excluded from the calculation of the National Minimum Wage". However, what the noble Baroness did not mention was that the commission then went on to say: An offset should be allowed where accommodation is provided as a benefit-in-kind. In order to protect workers from unreasonable charges, however, a maximum figure of £20 per week should be set for any deduction for the cost of the accommodation. The operation of this offset should be monitored and consideration given to phasing it out in the longer term". So the Low Pay Commission did take the matter most seriously and, indeed, gave it serious consideration. The Government have said that they accept these recommendations in principle, subject to consultation on the detailed regulations. Those regulations are of course important. The point is that the primary legislation—that is, the Bill—already provides the flexibility to allow particular benefits in kind either to be included or excluded. It is the secondary legislation which will determine the details. As I indicated, we envisage that this will be done in line with the recommendations of the Low Pay Commission.

In my view, if the amendment of the noble Baroness were accepted, it would mean a degree of considerable complication. It would require the Secretary of State to set a maximum amount for the value of food or accommodation; and, in setting that maximum, to take account of the different cost of food, accommodation and other living costs in different areas of the United Kingdom. So we are back to the argument that arose when we discussed the first group of amendments; namely, that the cost will vary in different parts of the country.

The amendment therefore goes beyond the Low Pay Commission's recommendation which excludes all benefits from the calculation of pay for national minimum wage purposes, except accommodation, on which, as the noble Baroness said, it puts a maximum of £20 a week. If the amendment is intended to provide an offset for food, I do not see why we need to depart from the commission's recommendation in the way suggested. As I have said, the Bill enables the regulations to provide for offsets for any kind of benefit in kind and, if it is right, to impose a maximum on the amount that may be offset in respect of the benefit in question. Therefore, by regulation, the Minister has the flexibility to deal with it. Thus I believe the amendment to be unnecessarily prescriptive.

The whole point of the amendment is that it would overcome the feeling that the Low Pay Commission has that we should discourage payments in kind. The whole purpose of the National Minimum Wage Bill is to set a fair and reasonable minimum wage; indeed, it is not to set a wages policy.

The noble Baroness raised a question about activity centres. I cannot deal with individual cases, but I would refer the noble Baroness to Clause 44 which deals with the question of volunteers. There may or may not be a contract of employment between people who work in such activity centres and those who run them. That may be a matter for an employment tribunal, but it is not one for the Inland Revenue. I cannot deal with that particular case. Nevertheless, if the noble Baroness were to look at Clause 44, I believe that she would find some part of an answer.

The noble Baroness was rather critical of the Low Pay Commission and said that it was really not very diligent and had not carried out its work properly. Perhaps I may remind her that the commission visited 61 cities, towns and villages around the country. Members of the commission spoke to many people; they consulted existing studies and carried out their own research. In the view of the Government, the work of the commission was very well carried out and I do not accept the noble Baroness's criticism of its work. I believe that what we have put in the Bill is a sensible approach at the start of the minimum pay legislation. There is some flexibility there to review it if necessary, so I hope that the noble Baroness will feel able to withdraw her amendment.

Lord Monson

My Lords, before the Minister sits down, can he tell us whether he knows of anywhere in London or in the south-east of England where a single person could rent a room for as little as £40 a week, let alone £20?

Lord Haskel

My Lords, this is not about the price of accommodation; it is about what a minimum wage should be. If one was discussing the benefit in kind in a wages policy as to what the maxima should be, then of course that would enter into the argument. However, it does not enter into the argument when we are deciding what a fair and decent minimum wage should be.

Baroness Miller of Hendon

My Lords, I have to confess that I did not exactly understand everything that the Minister said in his response. He quoted certain parts of the report by the Low Pay Commission, but they were exactly the same quotes as I used in my opening remarks to promote my amendment. It seems to me that the noble Lord read out exactly the same quotes in order to counteract my argument. I find that quite extraordinary.

As far as concerns the Low Pay Commission, I actually complimented it on the methodology that it used in every other part of the report and on the very careful work that it accomplished. In no way did I suggest that the commission was not careful and meticulous in its work, except in this particular instance. I read out the part of the report which says: It is difficult to estimate and monitor the value of many benefits … On grounds of simplicity and enforceability we therefore recommend that, with the exception of accommodation, benefits should be excluded". The grounds the commission gave was that it was difficult to work out and enforce. The point I was making is that it was asked to look into the matter and in my view it ought to have come up with a formula. However, I shall read again what the Minister has said because, as I said, I found it extraordinarily difficult to understand. At a quick glance I cannot see that Clause 44 has any benefits at all in this regard but I shall examine it again. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 5:

Page 2, line 32, after ("(2)") insert (", (3) and 3A)").

On Question, amendment agreed to.