National Minimum Wage Bill

HL Deb 11 June 1998 vol 590 cc1237-68

House again in Committee on Clause 1.

Baroness Seccombe moved Amendment No. 6:

Page 1, line 15, leave out ("single").

The noble Baroness said: Before I speak to the amendment, I wish to refer to the fact that we had Second Reading before Easter. Some of the amendments were tabled, and, once again, I have to say how sad and unhelpful it has been not to have had the details of the Low Pay Unit Report.

This evening I wish to speak to Amendments Nos. 6, 7, 14, 15 and 16. The purpose of Amendments Nos. 6, 7, 15 and 16 is to explore whether there should be more than one wage rate. We on these Benches have serious reservations as to whether a single rate is appropriate in every case.

Areas of the UK differ widely. One national wage would have varying effects on large and small firms. Of course it is simpler to have only one wage rate, but, as we know, the cost of living varies in different parts of the country. My honourable friend the Member for Daventry in another place quoted from the evidence that the CBI gave to the Low Pay Commission when he said that in Greater London 15 per cent. of employees earn under £4 an hour, while in South Yorkshire the figure is 35 per cent. I am sure that many noble Lords appreciate the higher cost of living, especially commuting, in London.

Many other areas could be taken into account under the amendment; for example, those who work in the catering industry and who receive non-monetary benefits in kind. It is always the smaller business employer who is hit by this type of legislation. As he builds up a business an employer often takes for himself less than the minimum wage. Small businesses have been the fastest growing sector. That is a fact which, I understand, has been much welcomed by new Labour, but, sadly, in the Bill we see the hand of old Labour as it proposes to price jobs out of the market in the very areas in which we need them.

The rigidity of one national minimum wage will be detrimental to one group or another. If it is fixed at a level which will not damage the economy of, say, the south-west, it will be so low that it will be of no benefit to the south-east. If, however, it is levied at a rate that lifts low wages in the south-east, it will result in significant and probably unsustainable costs on small firms in the less prosperous regions. I hope that the Minister will accept the conundrum and have an encouraging answer.

I move now to Amendment No. 14 which is a probing amendment. It relates to the two words "what is". I cannot understand why those words are included, because they do not seem to add anything, unless there is some special significance in them which is not apparent. Perhaps the Minister will tell us, or for the purpose of any future litigation disclaim, the significance. The words add nothing to the clause which reads equally well either with or without them. "Equally well" is not correct, because the clause reads badly. It is a convoluted piece of legalese. It would be easier to read the clause if it used the same words but in a different order; for example: The Secretary of State may by regulations make provision for determining for the purposes of this Act the hourly rate at which a person is to be regarded as being remunerated by his employer in respect of his work in any pay reference period".

In that way, the words "regarded" and "remunerated" which are the objectives of the clause are close to each other, and not separated by unnecessary parenthesis. However, I suppose that we are not here to discuss grammar. As I have already said, we need to know the significance of the two words, if they are not mere tautology. I beg to move.

Lord Newby

We on these Benches have associated ourselves with Amendments Nos. 6 and 7. Logically, we might have associated ourselves with Amendments Nos. 15 and 16 because such amendments are required if more than a single minimum wage is to apply in all circumstances. Some noble Lords will be aware that in another place and elsewhere we have argued that the issue of regional variations in the rate should be looked at seriously. As it stands, the Bill appears to rule out any such variation, not as a matter of policy, but just because the legislation is in the singular rather than in the plural.

In the light of the stories which have appeared about the Low Pay Unit proposing two minimum wages—one applying to those over 21 and one applying to those aged between 18 and 21—the Government will need to make a similar amendment to allow for two minimum wages to come into force.

Lord Monson

Although I agree with all the amendments in the group, I commend, particularly, Amendment No. 14. Alas, Lord Airedale, is no longer with us to swoop like a hawk from the Liberal Democrat Benches upon bad grammar or sloppy drafting in Bills. I agree strongly with the noble Baroness that the words "what is" are inelegant and redundant. I hope that the Government will at least agree to remove those two words.

The Solicitor-General (Lord Falconer of Thoroton)

This grouping brings together a set of amendments which attack the principle of the minimum wage being a single rate. As the noble Baroness and the noble Lord, Lord Monson, made clear, it draws attention to what may be a drafting point rather than anything else. I refer to the words "what is" to which I shall come in a moment.

First, perhaps I may deal with the noble Baroness's preliminary observations about the absence of the Low Pay Unit's report. As the noble Baroness, Lady Seccombe, will be aware, the effect of the Bill is to permit the Government, after receiving the report of the Low Pay Commission, to fix a national minimum wage. It also permits the Government in the future by secondary legislation to change the national minimum wage. We are dealing here therefore with a Bill which provides a framework in which the national minimum wage is to be set now and in the future.

I should have thought—I could be wrong—that if it is a framework for the future, the examination of the Bill by this House would require examination, in effect, of the framework, and that that is what the process of examination would concentrate on. Although certain advice will be given by the Low Pay Commission, it might not be the same advice that it would give on a subsequent occasion.

At present I am somewhat surprised by the number of times noble Lords opposite have made the point about the absence of the Low Pay Commission's report. I am not entirely clear at the moment about the extent to which that has affected the amount of examination that they think the Bill requires. No doubt when the noble Baroness determines what to do about the amendment she will say what effect she believes it has in relation to the examination of the Bill.

I return to the substance of the amendment. I am glad to be given the opportunity of defending the principle of a national minimum wage, and a single national minimum wage. As has been made clear in another place, and was made clear during the course of the Second Reading debate, a single national minimum wage is a fundamental principle of the Bill. A single rate is easier to understand, and fairer and easier to enforce. The Bill provides some limited flexibility to take account of the recommendations of the Low Pay Commission. For example, the Bill provides for the possibility of a youth rate or a rate for trainees. But the flexibility is strictly limited.

I believe that there is great virtue in simplicity. The simpler we can make the provision, the simpler and more effective the Bill will be. People will know what their rights are. There will be no difficulty in understanding their minimum wage entitlement; and there will be no over-complexity which might lessen the effect of the Bill.

I do not think that I need to refer to the detail of Amendments Nos. 6 and 7. They are intended to remove the reference to a single rate in Clause 1. The noble Baroness made absolutely clear why she wished to remove that reference. She believes that there should be the ability to have differential rates. As I have indicated, the Government do not believe that a multitude of regional, sectoral or other minimum wages is the right approach. It is neither sensible nor justifiable intellectually.

I deal with examples that the noble Baroness gave. First, on variation by region or sector we need to establish a general floor under all wages, not different floors for different types of workers in different places. If we had different regional rates, there would be advantages to being in some parts of the country rather than others. There would be disadvantages for the employees in some parts of the country. Those people would be stuck on lower pay than others in other parts of the country. The proposal gives power to set a number of different rates. There could be different rates in Wales from those in Northumberland. Regional rates, quite simply, would be unfair and would not work. They would be unfair because they would not discriminate purely by where you live or work. What would one use to determine it? Is it where a worker lives or where he works? The potential for complication and bureaucracy is enormous.

Regional rates throw up anomalies for employers as well as workers. Employers in low minimum wage areas could gain a competitive advantage over those in higher areas—in the extreme case, this could encourage clustering of low paid employment in certain areas.

The noble Baroness, Lady Seccombe, referred to the fact that the cost of living is different in different parts of the country. Of course it is. But that is a factor that the Low Pay Commission can take into account in determining the national minimum wage and the Government can take into account in determining the level at which they set the rate.

Having put forward her case in relation to regional differentials, the noble Baroness then moved to sectoral differentials. I suppose we would have to have rules for deciding which sector each worker's job was in. The labour market is developing rapidly, as we all know. One has only to look at the sectoral divisions drawn up in former years to see how quickly they can lose much of their relevance.

Defining the sectors would not be easy and many workers and their employers would inevitably be uncertain about which sector their job is actually in. Many jobs will seem to be in more than one sector. Some may seem not to fall into any particular sector. Again—I say with respect to the noble Baroness—this is a recipe for bureaucracy, confusion and complication.

There are further difficult questions. How would a regional or sectoral rate be enforced? For businesses with employees who live or work in more than one region, there would be huge complications in knowing whether they were complying with the statutory minimum for each employee.

The same goes for those businesses—and there are an enormous number of them—whose activities and workers cover more than one sector of employment. Is that really what the noble Baroness wants—a great bureaucracy placing burdens on employers and providing uncertainty and a lack of simplicity for the employee?

The noble Baroness then turned to the variation of the size of the business. We have heard that smaller businesses should be exempt from the national minimum wage or be allowed to pay lower rates than their larger rivals. Why should large firms be vulnerable to undercutting by a small minority who by paying poverty wages may be able to keep costs artificially low?

Of course we are aware of the situation of small firms and their importance to the economy. We value that contribution and understand the importance of it to the economy. That is why we asked the Low Pay Commission to have regard to the position of small firms in coming to its recommendations on the national minimum wage. I do not, therefore, believe that there is any reason to distinguish on the grounds of size of firm in the Bill or under the regulations.

On a wider level, differentiation according to size of business could be unfair and could potentially distort the structure of competition. It might even lead to fragmentation of businesses into smaller units simply to avoid paying the national minimum wage. There would be less incentive to achieve economies of scale through growth.

I come back to the point I started with. We believe that a single national rate is the fairest, simplest and most easily enforceable approach. It keeps things clear cut and cuts out unnecessary complications.

That deals with Amendments Nos. 6 and 7. I hope we have made our position clear in relation to those. I now turn to Amendments Nos. 14 to 16 with which I can deal more shortly.

These amendments are similar in their effect to Amendments Nos. 6 and 7. They are all linked or consequential amendments to do with replacing references to a single rate with references to more than one rate. Taken singly or together, the amendments would fundamentally alter the effect of Clause 2. By removing references to a single national minimum wage, the amendments attack the fundamental principle behind the Bill. I have covered that in what I said in relation to Amendments Nos 6 and 7.

My main point in relation to Amendments Nos. 14, 15 and 16 is simply to make clear that their effect would be rather different from the effect of Amendments Nos. 6 and 7. While the latter are to do with the setting of the rate, Amendments Nos. 14, 15 and 16 are aimed at the calculation of pay for minimum wage purposes—that is to say, the subject of Clause 2. However, they would lead to a similarly odd result by providing in principle for different rates of pay to be calculated—for example, according to region, sector or size of firm.

I hope that I have explained sufficiently why we need a single rate of minimum wage. For the same reasons, we need to ensure that there are no variations in the calculation of pay. That is to say, if a particular benefit can count as payment towards the minimum wage in East Anglia, it should also be able to count towards payment of the minimum in Wales. Any other approach is unfair and would lead to absurdity's.

That covers every point except for the point made by both the noble Baroness and the noble Lord, Lord Monson, concerning the words "what is". The general view expressed by the two people who spoke is that this is not a very elegant form of drafting.

When I looked at it, after the point was made, I thought that the words "what is" probably did not have much effect on the meaning of the Bill. That was my impression. I am glad to say that those in the Box take the same view. It probably means nothing different without those words, but it could hardly be said to be ungrammatical. The advantage is that, taken with the words "is to be regarded" they emphasise that the calculation contemplated concerns what is to count in determining whether the single hourly rate has been paid. Obviously, it is a matter of opinion, but there is a good case that the sub-section is clearer with those words than without them.

I shall certainly undertake to consider carefully the points made about the elegance of the drafting. To be honest, I do not think that there is any point of principle on this matter.

I hope that, in the light of the rather laborious explanation which I have given, the noble Baroness will feel minded to withdraw her amendments.

Viscount Thurso

I did not realise that we would embark on a debate about regional variation this early on. We have an amendment coming up later, Amendment No. 51, which addresses this issue. It may be, for the convenience of the House, if I deal with it briefly at this point, which would enable my noble friend, therefore, not to move that amendment when we come to it.

In looking at regional variation, we have, on these Benches, long advocated that that is the way to approach the minimum wage. However, I fully accept the arguments which the Minister has put forward. It may well be that intellectually and logically it is more appropriate to have one single minimum wage for the whole country. Equally, there may come a time in the future when views change and it is thought desirable that some variation may be necessary between different regions. It may be between Scotland and England and it may be between greater regions than that. Therefore, it seems to me quite logical that if we put into the Bill at this stage the ability for that power to be exercised by the Secretary of State at a later stage, it does not mean that he has to exercise that power immediately, and if the Low Pay Commission chooses to recommend that it is not a good idea, then he certainly does not have to exercise that power.

In order to avoid the kind of enabling legislation, which so often comes to your Lordships' House, such as one in which I was involved recently that I call the mollusc Bill, which is in fact the Sea Fisheries (Shellfish) (Amendment) Bill, would it not be sensible at least to provide the power at this stage and then, if it is not exercised, it is not exercised; but if the Government wish to exercise it they have that power?

Lord Falconer of Thoroton

I am sorry to rise again, but I do so in order to answer the points skilfully made by the noble Viscount. As regards the principle, I made the Government's position clear. We take the view that there is, as a matter of policy, a balance of advantage strongly in favour of not having regional rates. The Low Pay Commission and the Minister setting the rates can take into account the differences throughout the regions. It is a strongly held view, and it is a view that is fundamental to the Bill, that a simple, single national rate is the appropriate way forward in relation to that. That being the principle, I submit that it is entirely right that the principle is reflected in a Bill which specifically states that there cannot be regional variations.

9.15 p.m.

Baroness Seccombe

One of our problems is that we have a different attitude to the whole issue. We believe in a minimum income and the Government believe in a minimum wage. We understand that the Bill is a manifesto commitment and that it will go onto the statute book.

The noble and learned Lord mentioned the report from the Low Pay Commission. Our difficulty is that we are working in a vacuum. It is difficult to say what our reaction would have been if we had known the facts. We agree that the proposal is easier, but the Government say that it is fairer. I wonder if people with small businesses in the south-west, who may have to close those businesses, will see it as being fairer. There will be the demise of many rural shops and the Government must take responsibility for that. We believe that the minimum wage will price many people out of work in that area.

We know that wages vary in different areas. We hope that at some stage there will be regional differences to reflect the different wages that are paid. I shall read what the Minister has said, discuss it with my colleagues and perhaps return at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 7 not moved.]

Baroness Miller of Hendon moved Amendment No. 8:

Page 1, line 16, at end insert (", being at a rate not in excess of £3.00 per hour (at September 1997 prices) or its equivalent uprated in line with inflation").

The noble Baroness said: In moving Amendment No. 8, I shall speak also to Amendments Nos. 9 and 10. They are probing amendments and they were probing amendments in another place. We need to probe because we are working entirely in the dark as to the amount that the national minimum wage will be. It is bad enough that in the other place the Bill went through all its stages without honourable Members on either side being able to extract a figure from the Government. Here we are at what is probably the most important stage of a Bill, still being asked to consider major complex matters without having that vital piece of information. That information might well affect our attitude to some of the Bill's provisions.

We were told that there might be a Statement on the report of the Low Pay Commission early this week. What do we have? We have not had that and it could be said that we have had nothing. That is not absolutely true because we have had a heavy and, one assumes, an authoritative leak from the Department of Trade and Industry that the rate is to be £3.60 an hour, with a variation for under-21 year-olds. That is countered by leaks hinting at conflicts with the Chancellor of the Exchequer who apparently wants a lower rate. The Chancellor of the Exchequer has already hit out against wage inflation, backed by the Bank of England's Monetary Policy Committee whose increase in interest rates last week was on the grounds that it was concerned with the increasing size of wage settlements. During this bizarre Dutch auction between the Treasury and the DTI—which if rumours are correct, and they usually are, is conducted by what is often called "a full and frank exchange of views"—the Government paymasters—the trade unions—are also exerting pressure. Just like Oliver Twist, they are saying, "Please, sir, I want some more".

Rodney Bickerstaffe, the Secretary General of Unison, said in a television interview last Sunday that there was a lot of pressure on the Low Pay Commission from the Treasury to keep down the national minimum wage. Perhaps we should be told what other pressures were put on the Low Pay Commission by the DTI in respect of the other aspects of its deliberations, bearing in mind that the Low Pay Commission was supposed to be conducting an independent and impartial inquiry.

Mr. Bickerstaffe, in that same interview, predicted that the Bank of England's latest interest rise would result in yet another rise in mortgage rates and that his members would then want increased wages. In other words, the Bank of England is generating its own wages inflation spiral.

Is the reason why the Government have been so coy about releasing the report of the Low Pay Commission and announcing, in accordance with Clause 5(4), what their intentions are that they are split on the matter; or is it that they hope they can spin out the announcement until the Bill has made further progress through your Lordships' House—perhaps until the Recess?

If the Minister will not tell us what the minimum wage is to be, will he tell us when he will tell us? If he will not tell us even that, will he tell us why he will not tell us that? Will he at least tell us what is the cause of the hold up? The Bill's passage through the other place included several all-night sittings in Committee. It has had its Second Reading in your Lordships' House. Will the Minister not accept that the fundamental principles and theoretical issues have been debated almost to the point of exhaustion? I say "almost" because in the absence of satisfactory answers to some of those fundamental points, and with an obstinate refusal by the Government to pay any attention to valid and constructive arguments, we shall have to go through some of them again, plus some new ones, in this place.

The amendments and this discussion would have been totally unnecessary if the Government had treated Parliament with the minimum of courtesy and provided it with the facts on which this Committee could base its judgment. The Government are not merely expecting Parliament to rubberstamp whatever they decide to do and are not merely asking us to sign a blank cheque. They will not even let us see how much the cheque is made out for. I beg to move.

Lord Falconer of Thoroton

Those Members of the Committee who did not have the amendment in front of them would be surprised to hear that the speech that the noble Baroness has just delivered was to amendments that recommended that £3.60 should be the upper limit for the minimum wage and £3.20 the lower rate for 18 to 20 year-olds.

I appreciate that the procedures of this House are quite lax, but I imagine that there must be some talking to the amendment itself rather than to any issue of a more general nature. The noble Baroness made the point that there has been no publication of the report of the Low Pay Commission. As I am sure the noble Baroness is aware, the Bill sets out the framework within which, by means of secondary legislation, the Minister can determine what the national minimum wage shall be.

In order to establish a national minimum wage, regulations must be laid before both Houses of Parliament and affirmed. So both Houses of Parliament will have the opportunity to debate the level at which the national minimum wage is set. Noble Lords opposite and Members in another place will have a full opportunity to debate the level at which it is set and make such points as they regard appropriate in relation to that.

The whole of the speech by the noble Baroness was devoted to the issue of why we have not published the report of the Low Pay Commission rather than to her particular amendments. As I said when the noble Baroness, Lady Seccombe, moved the previous amendment, I should have thought that, when scrutinising the Bill at the Committee stage, those opposite would want to concentrate on the structure of the Bill rather than on something that would occur at a later stage.

I feel slightly diffident in talking about the details of the amendment because that is not something that the noble Baroness has done in the course of her speech. However, perhaps I may just say that it is not appropriate at this stage to talk about what the level is. It would be wholly inappropriate in the Bill to set minimum or maximum rates for the national minimum wage. That is something much more appropriately done in the procedure laid down in the Bill. It is obviously appropriate as well that a body such as the Low Pay Commission should give advice to the Government before such a conclusion is reached. That is what the structure of the Bill lays down.

I hope that in the light of what I have said the noble Baroness will withdraw her amendment.

Baroness Miller of Hendon

In the first place, I did not speak about one amendment setting a rate of £3.60, to which the Minister referred. I spoke to three amendments which suggested different rates. The point I made to the noble and learned Lord was that had we known what might be the recommendation, we could have forestalled the whole of this conversation and discussion at this stage. We should not be probing as to which is the appropriate salary level. It was done in the same way in the other place when my honourable friends and honourable Members were discussing matters in the dark, without any guidelines as to the rate.

We made the point very early on, I believe on the first amendment that we discussed today, that we are finding it extremely difficult to discuss these matters because nobody has any idea of any of the recommendations. The Minister shakes his head, but the fact remains that it happens to be a habit of this Government not to come back to the House and make statements about matters. Instead, we read about those matters in newspapers or hear about them on the radio. These debates could be much shorter if we had more information and the Government gave the courtesy to the House which it deserves by making available that information.

If the Government are not in a position to give more detail, it is extremely unfortunate that we are having leak after leak after leak because some journalists are certainly obtaining that information. This is not the only Bill on which that has happened. I know that my noble friend Lady Blatch had similar experiences when she found it practically impossible to debate matters on an education Bill because certain information which she required was not made available to her, although it was made available widely to other people.

I know that that is nothing to do with the noble and learned Lord. But I say that with regard to the way in which I moved the amendment because that is the difficulty that we are having. I still believe that this is an important matter which we must get to the bottom of. However, at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 9 and 10 not moved.]

Lord Newby moved Amendment No. 11:

Page 1, line 16, at end insert— ("( ) The single hourly rate shall, at the end of one year, be increased by—

1. (a) the rate of inflation; or
2. (b) the percentage rise in the median of full-time hourly earnings during the preceding year,

whichever is the greater.").

The noble Lord said: The purpose of this amendment is to take out of the political arena the question of operating the minimum wage. Quite clearly, even if the Government are successful to the most ambitious extent in relation to inflation targets, we shall see wages rising both as a result of the rise in prices and as real incomes grow.

In those circumstances, it would be wholly inappropriate for the level of the minimum wage to be eroded in relation to both the overall level of prices and the earnings of the rest of the population. Our amendment suggests one way in which automatic provision could be made to uprate the minimum wage. We have suggested that it should be an annual uprating and that it should be either by, the rate of inflation; or … the percentage rise in the median of full-time hourly earnings during the preceding year, whichever is the greater". It is fair to say that we are not wedded to that precise formula but we believe that by having an automatic uplifting provision it will save a tremendous amount of political debate and argument later which foreign experience suggests has been to the detriment of the low paid because it has tended to delay uprating.

Therefore, in large measure this amendment is a probing amendment to seek the Government's view on how they intend to deal with uprating and whether they accept the principle that taking uprating out of the political arena is an acceptable and sensible way forward, rather than having a dog fight every time the Government are suggesting putting 10p or 20p on the minimum wage.

9.30 p.m.

Lord Clinton-Davis

The noble Lord moved the amendment in a characteristically fair way. The Liberal Democrats have been very consistent in arguing this particular point. The amendment has some superficial attraction but I do not find the noble Lord's reasoned argument very compelling. I shall explain why. We do not believe that an automatic uprating system is the right way to proceed as regards the hourly rate. The amendment would take out of the method of calculation that element of judgment and flexibility which we believe to be important. Indeed, that is linked with the reasons why we asked the Low Pay Commission to recommend a rate in the first instance. We need that flexibility in order to judge what will be a sensible rate in all the circumstances, taking into account the wider factors. That is why we asked the commission to consider the matter initially. I believe that the noble Lord is familiar with those considerations, so I shall not go into them. They are well established.

After setting the rate for the first time, I do not believe that we can assume confidently that all we have to do is sit back and let the thing run on mechanically over future years. Unquestionably, circumstances change; indeed, they often change in a way that is fairly unpredictable. I believe that it was Mark Twain who said that he was prepared to forecast anything but future events. He put it quite rightly.

In a situation where we have never had a statutory national minimum wage in this country, surely we should wait to see how the situation works out. We need to monitor and evaluate the impact and then we need to come to a considered judgment on the action required. Our position is that automatic uprating is rigid and unnecessarily prescriptive. I do not believe that it would be right to tie the Government to an automatic and fixed annual uprating of the national minimum wage or to a particular percentage increase.

Moreover, it is not necessary because such matters can be dealt with, taking into account intervening events, through the surveillance by this Chamber of the relevant secondary legislation. We could deal with the matter in that way without imposing a straitjacket whereby the Government are required to take such matters into account. I hope that I have given the noble Lord a reasonably compelling argument.

Lord Newby

The Minister advanced a reasonable argument, but I do not find it wholly compelling. I see a danger. There are some marvellous phrases about changing circumstances and the exercise of judgment. But if circumstances changed, I suspect that everyone earning a wage would be affected in the same way. Either there would be a big increase in wages across the economy for some reason, or there would be higher or lower levels of inflation. Therefore, the Minister's argument is not wholly compelling.

However, as I made clear, we are not necessarily wedded to every last word of the amendment. I am not completely persuaded that our arguments are misguided in principle. We shall obviously consider carefully what the Minister said and may return to the matter at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Hendon moved Amendment No. 12:

Page 1, line 17, after ("such") insert ("reasonable").

The noble Baroness said: In moving the amendment, I shall speak also to Amendment No. 13. These two amendments were discussed together in Committee in another place in a debate which lasted one hour and a quarter. It was a good humoured debate, described by my honourable friend the Member for Daventry as being of a very high quality. He complimented the Minister on having responded "sensitively" to the debate. The amendments were withdrawn in the other place to give time for reflection on the arguments. That time has now come.

The difficulties caused by Clause 1(4) arise not from the principle of the provision, which we accept, but from the way it is drafted. Amendment No. 12 requires the Secretary of State to act reasonably in fixing what is called a "pay reference period". Frankly I cannot understand why there should be any resistance to requiring the Secretary of State to be reasonable in everything that she does. The implication of a refusal of this requirement is that she reserves the right to act unreasonably, capriciously and arbitrarily. I readily acquit her of any such intention. I hope that, having now had time to reflect on the issue, the Government will accept this harmless and—if I may put it this way—reasonable little amendment. After all, it does no more than to state that the Minister will comply with the common law and the Wednesbury Rules.

Amendment No. 13 is much more complex. Part of the problem is that we do not know what pay reference period or periods the Low Pay Commission will recommend or whether the Secretary of State will accept those recommendations. This is the difficulty I raised in the Second Reading debate. I hasten to add that I do not want to rehash old arguments—I know that the Minister will be pleased about that—or to introduce any political arguments into what is essentially an administrative provision. However, the fixing of a pay reference period is a horribly complex matter. Whatever is decided is almost bound to raise as many problems as it solves and could cause injustices to employers as well as protecting employees' rights. This is because the national minimum wage will be based on some arbitrary hourly rate. However, the pay of many employees is not calculated hourly. The selection of a week for weekly paid workers and a month for monthly paid workers is a simplistic solution which is attractive on the face of it but which of itself gives rise to difficulties. That is why we have proposed that the pay reference period should be not less than a week or month, as the case may be.

I give the Committee an example of the kind of difficulty I am talking about. Let us take the case of a highly seasonal occupation, the tourist trade. Employees are required to work extremely long hours at some times in the year but have much less to do at other times. An employer may pay his staff, especially key skilled staff such as chefs, housekeepers and head waiters, an annual salary with pay averaged out over the whole year. The system operates on the basis of swings and roundabouts. Other less skilled staff may receive a bare retainer during the off season. If the pay reference period is in every case and in every occupation fixed by reference to a week or a month, an employer may find himself penalised when the busy season arrives, despite the fact that he has kept the employee on the books during the slack season. The consequence is that there may be a great deal more defensive casualisation of seasonal occupations, with some domestic staff being laid off during the off season. That is something that I believe already happens. That is why, as there has to be some pay reference period, we have suggested that it shall be not less than a week or month, as the case may be, but should be a reasonable period to be fixed by the Secretary of State, taking into account all relevant considerations which may vary from trade to trade.

The amendments enable the Secretary of State to act in a flexible manner and not cause an injustice to one kind of business by imposing a uniform solution or standard on many different trades where different considerations may apply. Although some minimum pay reference period is required, the Minister must have the power to differentiate between those different trades. At the same time, by not taking the easy route of an arbitrary universal pay reference period, the Secretary of State will need to give consideration to representations made to her about the needs of those different trades.

These two amendments are not intended to derogate in any way from the principles of the Bill, and nor do they. They simply clarify aspects which are far from clear and impose a minimum standard where there is not one, and above all they require the Secretary of State to act reasonably. I feel sure she is only too willing to do that. I hope that the Government have made use of the time to reflect given by my honourable friend in another place and will agree that what is proposed improves the Bill and that they will accept the amendments. I beg to move.

Lord Falconer of Thoroton

The amendment was beguilingly moved by the noble Baroness. She made the amendments sound so attractive. However, we have had time to think about them and we do not, for the reasons I shall indicate, believe that they would be an improvement to the Bill. They would be a detriment to it.

Perhaps I may deal first with Amendment No. 12. That amendment, as was accurately stated by the noble Baroness, requires the Secretary of State to be reasonable in determining the pay reference period. I do not imagine for one moment that the Secretary of State would wish to be unreasonable in determining that period. Indeed, the noble Baroness accepted that that was the position. The Secretary of State will make her decision in the light of the recommendations of the Low Pay Commission: an entirely reasonable approach.

The Government are currently considering the detailed application of the commission's recommendations, including this one in relation to the pay reference period. We are keen to ensure that the nitty-gritty of the legislation gets this right. The Bill provides, of course, for the Secretary of State to prescribe what the reference period should be, by means of regulations subject to affirmative resolution. Those regulations will, of course, be debated by Parliament.

Prior to that, the Government will consult on the draft regulations particularly with a view to ensuring that we get the details right. The consultation will give those affected a further opportunity to comment on the length of the reference period. So there is the advice of the Low Pay Commission; the consideration of the Secretary of State; the consultation on the detail by the Secretary of State; and the placing before Parliament of the regulations. That gives rise to a huge range of views to be taken into account.

It is difficult to envisage a process that could be more reasonable than that. There is no need to inject a reasonable requirement explicitly into the Bill itself, as the amendment proposes. To do so would be counter-productive. If the amendment were accepted, speaking as a lawyer myself, I am sure that the lawyers will have a field day. I can imagine all kinds of lengthy disputes and debates on whether any particular decision was reasonable.

The effect of the amendment would be that, even if the Secretary of State chose a period which she considered reasonable, others would have the right to challenge it and substitute their view for hers. I do not think that would be right. I do not believe this is a matter for lawyers to debate. It is a matter for government to decide after proper consultation and after taking proper advice in relation to it.

It is always difficult to argue against the inclusion of the word "reasonable" in legislation—because it seems unreasonable so to argue. But surprisingly, often the word achieves nothing, as in this case, and causes difficulties—again, as in this case.

It would be unusual, and unduly and unnecessarily prescriptive, to include an explicit test of "reasonableness" in this legislation. We expect our elected representatives to act in a reasonable way. If someone considers that a decision of the Secretary of State has been made on wholly unreasonable grounds, there is already scope to challenge it.

I hope that I have assured the Committee that the way in which we are proceeding is entirely reasonable. We have the Low Pay Commission's recommendations; we are consulting further; and we shall come back to this House with the detailed regulations. I am equally confident that the outcome will also be a reasonable one. I hope that deals in detail with the attractively put but, I respectfully submit, flawed proposal that the noble Baroness made in this amendment.

I now turn to Amendment No. 13. This in effect proposes to put limitations on what the Secretary of State may prescribe as a pay reference period. I can reassure the Committee that before we bring regulations on this matter before the House—namely, setting out what the pay reference period shall be—we shall be consulting on the draft regulations, particularly with a view to ensuring that we get the details right.

The consultation will give those affected a further opportunity to comment on the length of the reference period. There is no need to prescribe the reference period on the face of the Bill. There is no need to place limitations on what the pay reference period should be. Clause 1(4), as presently drafted, provides a power to set and adjust the pay reference period. It will be a matter of judgment as to what the pay reference period should be; and there can be different pay reference periods for different kinds of workers. Surely the right course in relation to this is to give maximum flexibility in order to avoid the kinds of anomalies to which the noble Baroness referred. I do not think the proposal she makes is of value to the Bill; I think it is positively detrimental and could give rise to the kinds of anomalies that she mentioned. With the greatest of respect to her, I suggest that she withdraws both of these amendments.

Baroness Miller of Hendon

In the other place my honourable friend complimented the Minister on having responded sensitively; here in this Committee, the noble Lord the Minister said that I asked the question attractively; but we do not seem to have got very far. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 13 not moved.]

Clause 1 agreed to.

Clause 2 [Determination of hourly rate of remuneration]:

[Amendments Nos. 14, 15 and 16 not moved.]

Baroness Miller of Hendon moved Amendment No. 17:

Page 2, line 8, at end insert (", including remuneration by the piece rather than the hourly rate").

The noble Baroness said: Piecework is not another name for sweated labour. It is an incentive method whereby more able and faster workers can earn more by their own efforts. It is a system where those working from home can do as little or as much as they wish and can work at whatever pace suits them. The days are long gone since the notorious speed-up of the production line inaugurated by the late Henry Ford.

It is true that there are some unacceptable cases of vulnerable home workers and some factory workers still being ruthlessly exploited by unscrupulous employers. We join in the condemnation of such conduct.

The fact is that piecework is an essential part of some industries, including, for example, farming, horticulture and packing goods for mail order. Unless the Government intend to outlaw and prohibit this method of remuneration—which they do not—piecework and piecework rates are factors which have to be taken into account when calculating the minimum wage to which an employee is entitled.

There are, however, complicating factors affecting the amount that an employee may receive. Some employees may work more slowly than the average on which the piece rate is calculated. Machinery may break down during the course of a working day, with no contingency to make up for the resulting lost pay. The problem is, once again, that trying to reduce pay calculated on some other basis into an hourly rate causes a major complication.

Our amendment to Clause 2(2)(c) does not alter or detract from the provisions of that clause. It supplements it by emphasising one of the factors to be taken into account. Maybe the clause as drafted already requires the Secretary of State to take piecework remuneration into account. Certainly paragraph 2(c) of the DTI's Notes on Clause 2, Part 31–1 Detailed Provisions, claims that the regulatory powers include: wages … paid on a "non-time" basis eg piece work". The amendment underlines that point that is in the notes. It is belt and braces, if you wish.

The Secretary of State will be required to frame the regulations so as to produce a viable formula to correlate the piece-rate remuneration to the hourly rate, a formula that will not allow employers to use creative accounting or for pieceworkers to fall through the cracks in the system.

The amendment is intended to concentrate the Secretary of State's mind on the problem. I suggest that there can be no harm in this modest amendment, which simply emphasises what the Government claim the clause already does. The amendment simply removes any ambiguity. I beg to move.

Lord Falconer of Thoroton

I think we are completely at one in relation to this matter. As far as we are concerned, it is vital that the Bill covers pieceworkers. We know from having read the debates in the other place that it is in relation to piecework that some of the most appalling exploitation goes on. There are horrible examples, such as people being paid 8p for sewing a pair of trousers. There is no doubt that piecework should be covered. I genuinely pay tribute to the noble Baroness for raising this point.

The Bill was specifically drafted to cover that point. Subsection (2)(c)—the one that the noble Baroness wishes to amend—says: That the regulations may make provision for determining the hourly rate in cases where … the remuneration is, in whole or in part, otherwise than at a periodic rate or rates". That is specifically drafted to deal with the piece-rate position. I sympathise entirely with the desire of the noble Baroness that it should be underlined. However, we do not believe that it is necessary; we honestly believe that that is the Bill's intention. We applaud the sentiment, but take issue with the drafting. In the light of those comments, I hope that the noble Baroness will be minded to withdraw her amendment.

Baroness Miller of Hendon

That was a satisfactory answer. I accept what the noble and learned Lord said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Viscount Thurso moved Amendment No. 18:

Page 2, line 9, at end insert— ("( ) the employee is, by the terms of the contract of employment, required to live in for the proper performance of their duties").

The noble Viscount said: This is a probing amendment. Before I probe, perhaps I should declare an interest for the sake of good order. I am an employer and have a number of live-in staff. It may therefore be construed that I have an interest in this matter although a number of employers to whom I have spoken believe me to be speaking against my interests. I leave that to one side.

This is a straightforward question. I have no intention of pressing the amendment; I simply want to know a little about the Government's thinking. The amendment relates to live-in staff. The ones of whom I have knowledge are the harbourmaster at Scrabster harbour where I am the chairman and where he is obliged to live in the harbour house, and at Champneys where a number of staff, for example, head green-keepers, are often obliged to live on the premises.

Essentially, there are two kinds of live-in staff. There are those for whom the employer provides accommodation, largely because it may be difficult to find accommodation in the area. The staff often pay a rental contribution and the accommodation arrangements are largely of an administrative nature. If there is any difference between the cost of the accommodation provided and the rate the employer charges the employee for it, the Inland Revenue considers that to be a benefit in kind and taxes it as such. I am not concerned with those employees.

The amendment seeks to find out how the Government feel about the other kind of employee; that is, those who fall into a category which satisfies two Inland Revenue tests. The first test is that they are required by their contract, for the better performance of their duty, to live in. The second test usually applied is that it is the custom and habit of that specific trade.

In circumstances where the employees may not live out, where they are absolutely required to live in, it is accepted that living in is not a benefit in kind. There is usually a differential in the rate paid. Clearly, if an employee lives in a tied house or flat, there are costs to the employer. In that circumstance, the rate for the job may be less than for a similar occupation where someone is permitted to live out. There is also clearly an exchange of values. Some value is received by the employee and some value is given by the employer.

When the old Hotel Catering Wages Council was in existence, it dealt with the matter quite simply by setting two rates; that is, a live-in rate and a live-out rate for jobs. I am concerned that employees will lose out if some sort of similar provision is not made. If the value of their live-in accommodation is not taken into account, it will become easier or perhaps make more financial sense for the employer to pay the live-out wage and then charge a deduction. The actual net pay packet that the employee receives will then be less than otherwise. It is a very straightforward point. I fully accept that the drafting of this amendment may be hopelessly bad and I have probably got it in the wrong place. As I said, I simply wanted to ask the Government their views on this question. I beg to move.

Lord Clinton-Davis

I am grateful to the noble Viscount for addressing an issue that was worth being addressed. It is, of course, a probing amendment. We have drafted Clause 2 in such a way that it enables ensuing regulations to cover a wide array of topics affecting pay and working arrangements. Clause 2(2)(d) covers the situation envisaged because it stipulates that the regulations may make provision for cases where, the remuneration consists, in whole or in part, of benefits in kind", while subsection (4)(a) and (b) enable the regulations to treat accommodation as, forming part of a person's remuneration". and to say what its value is. I believe that that is the point that the noble Viscount has addressed.

We shall look carefully at the recommendations that the Low Pay Commission makes in that regard and in other areas. We shall make a decision on that. These are issues that will come before the House in its consideration of regulations.

The noble Viscount mentioned a tax regime in the same context as the minimum wage regime. There are different considerations which apply. We shall be looking at those in the next amendment.

Viscount Thurso

I am most grateful to the Minister for that reply which addresses all of the points I wished to raise. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Hendon moved Amendment No. 19:

Page 2, line 16, at beginning insert—

("Subject to subsection (4A) below,").

The noble Baroness said: In moving this amendment I shall speak also to Amendment No. 22. They are to incorporate a new subsection temporarily numbered (4A). Amendment No. 19 is purely a paving amendment. The plain and simple effect of the main amendment, Amendment No. 22, is to define "remuneration". It is defined as being anything which the Inland Revenue would treat as taxable. In other words, if it is subject to income tax then it is income. It is as simple as that.

The Inland Revenue has spent several generations defining the meaning of "income" and "benefits in kind". It has, item by item, closed one loophole after another. There is a vast body of statute, case law and Inland Revenue practice notes covering both phrases. By the same token, Acts governing income tax have defined that expenses personally incurred by an employee himself should be regarded as deductions from his gross pay; for example, for a telephone and the nominal rent of an office at the home of the employee working from there.

The PAYE system also has the advantage of anticipating one of the requirements of this Bill. Each employee receives an annual certificate called Form P60 showing the amount of his gross pay and benefits. In other words, we have a method of defining income which has stood the test of time and which would doubtless continue to be refined with successive Finance Acts.

What we do not need is a second system defining income and benefits. We do not need a second system which may possibly be in conflict or inconsistent with the existing main system. We do not need a confusing system where income for one set of purposes is different from the income for another; a system which may mean that employer and employee alike will not be absolutely and consistently clear about how and where they stand.

Who, I ask, is going to draft the regulations defining pay and benefits? Are experts to be seconded from the Inland Revenue, or is it to be done by dedicated amateurs on the subject in the DTI? However able officials undoubtedly are, they may find themselves overwhelmed by the amount that they have to learn about a highly complex and specialised subject. How often will the Secretary of State have to come back to Parliament with amending regulations to rectify errors and omissions and to close loopholes?

I cannot conceive of any valid reasons why the Secretary of State should want to take on the onerous burden of defining "income" for the purposes of this Bill and then shepherding that definition through both Houses of Parliament when the work has already been done for her very competently by the Inland Revenue. I am sure that the Secretary of State and her officials at the DTI have more than enough to do without reinventing the wheel. When I was in the mail order business, advertising agencies would come to me with suggested new adverts to replace my already successful ones. That was due to something called the "not invented here" syndrome. As the Americans say, "If it ain't broke, don't fix it".

What we need in the operation of this legislation are fewer regulations, fewer possible contradictions between the Inland Revenue and the DTI, and less expensive bureaucracy, not more. I do not accuse the Secretary of State of having empire-building ambitions. However, if it is good enough for the Inland Revenue, it ought to be good enough for the DTI. I beg to move.

10 p.m.

Viscount Bridgeman

I should very much like to support my noble friend Lady Miller on this amendment, to which I referred briefly when we were considering an earlier amendment. As my noble friend said, the Inland Revenue has vast experience of, and case law and practice on, the question of tips, to which the noble Viscount, Lord Thurso, spoke with his considerable experience. The amendment sets out clearly and concisely a summary of Revenue practices. I very much hope that the Minister will reconsider his rather inflexible attitude to the definition of the "hourly rate" in the context of this amendment.

Lord Clinton-Davis

I thought that the noble Baroness indulged in some dangerous doctrine when she said that what is good enough for the Inland Revenue must be good enough for the DTI. I am not sure that her government would have accepted that doctrine. I believe that it was Winston Churchill who once said of the Treasury that it is like an inverted Micawber, waiting for something to turn down—

Noble Lords

Oh!

Lord Clinton-Davis

No, I did not say that!

Perhaps I had better use the word "beguiling" again because it seems to persuade the noble Baroness to withdraw her amendments more readily. Although the noble Baroness moved her amendment so beguilingly, I am afraid that it encounters certain difficulties. The definition of "remuneration" for tax purposes is not the same as that for minimum wage purposes. I shall try to explain why. The natures of the tax regime and of the minimum wage regime are very different. The tax regime examines all forms of income. It is not concerned simply with remuneration as such. It examines the whole range of remuneration and income at all levels. It operates according to a general set of criteria which individuals use to assess their own tax liability. Then, a tax inspector will test the situation periodically. What is taxable remuneration in one person's case may turn out not to be taxable in another case or to be taxable at a different rate.

On the other hand, the minimum wage regime will focus purely on remuneration. The intent is to provide a floor; it is not to intervene at all levels of pay. The composition of what will constitute remuneration will be a standard package. I am talking here of it consisting of gross pay or of net pay. Whatever the case, the same rules will apply to all. We are considering the detailed application of the minimum wage in this and other areas in the light of the commission's report.

The amendment would be very prescriptive and require the regulations under Clause 2 to deal with the calculation of remuneration for national minimum wage purposes in a very particular and direct way. As I and my noble and learned friend have said on a number of occasions, we shall consult on draft regulations to be laid before the House in the light of the commission's report. We are dealing here with a very technical matter but a very important one that affects everyone in the low-paying sectors. Employers and employees will want to know precisely what does and does not count as payments for determining compliance with the minimum wage.

We would be very chary of defining "remuneration" in the way suggested in the amendment. We believe that it is inappropriate and that it would lead to the definition of remuneration being changed every time the income tax rules changed. Those rules change frequently. Employers and individuals are obliged to adjust to those changes—sometimes they even become reconciled to them—but it is entirely different to have adjustments of this kind that create uncertainty in the context of the minimum wage, which imposes duties and obligations on employers and creates rights for workers. That unnecessary uncertainty prevents this amendment being helpful. I ask the noble Baroness to consider withdrawing her amendment.

Lord Lyell

Before the Minister sits down, perhaps I may be very naughty. I did not detect much more than a hair's breadth between what he said about remuneration and what was said by my noble friend. He spoke about differing rates of tax and remuneration. I am just an accountant. I am not a lawyer like the noble and learned Lord opposite or my noble and learned friend who has just sat down, let alone an expert like my noble friend on the Front Bench. To me, "remuneration" is "remuneration". Everything that the Minister has said covers remuneration and is perfectly clear. He may have referred to differing rates but he has said nothing about forms of income, whatever they may be called, that do not come within "remuneration" for tax or minimum wage purposes. He spoke of differing rates of remuneration and changes in tax rates but it is still remuneration. I did not detect much between the excellent case argued by the Minister and the pretty good case argued by my noble friend.

Lord Clinton-Davis

The noble Lord is the first accountant I have ever heard to describe himself as "just an accountant". I do not believe that he is being naughty. He is perfectly entitled to make a bogus point. I believed that I had categorically set out the substantive differences between my argument and that of the noble Baroness. I do not complain that she makes this point. It is a point which superficially is attractive. But I hope that the noble Lord will do me the honour of reading what I have said and comparing it with the speech of the noble Baroness.

Lord Lyell

I concentrated with all the attention that I could muster. I apologise to the Committee. I rose at three o'clock this morning and I have just flown back from Cyprus. I hope that my faculties are undiminished. I concentrated very hard on what the noble Lord said. I hope that it will be as attractive in writing as his mellifluous way of putting it, even at this late hour and even for me. He put it beautifully. I hope that my point is not a bogus one. I did not detect an awful lot—perhaps it was a little wider than a hair's breadth—between the Minister's case and that put by my noble friend in relation to remuneration. As an accountant, layman or a mere Angus lad I always make a naughty dig at the lawyers, but I shall desist and read what the noble Lord has said. No doubt I shall learn. I hasten to assure the noble Lord that mine was not a bogus point. I may be an accountant but I hope that I am reasonably serious, even this evening.

Lord Clinton-Davis

The noble Lord will not have received what I have said by 3 o'clock tomorrow morning. It will have to be a little later. I am sorry if I have not persuaded him that there was a substantial difference between my approach and that of the noble Baroness. I leave it to him to detect further when he has read my contribution.

Baroness Miller of Hendon

The Minister is in extraordinarily good form this evening. He tempts fate somewhat when he says that I present my amendments in a beguiling way. The more that he says that I am beguiling, the quicker I am to withdraw the amendment. I listened carefully to what the Minister said. I do not agree, but then I am neither a lawyer nor an accountant. The best thing for me to do is to read carefully what he said. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Hendon moved Amendment No. 20:

Page 2, line 22, at end insert— ("except that expenditure made by an employer in respect of training that is wholly or partly attributable to a person shall not be treated as part of that person's remuneration for the purposes of this Act").

The noble Baroness said: This is a probing amendment intended to elicit an answer to a problem raised in the other place on Third Reading. No answer came on that occasion. Now that the Government have had a chance to reflect upon the problem perhaps we can have a clear response.

As is well known, we are opposed to the principle of a national minimum wage because of the burdens that it will place on industry, with consequential adverse effects on employment. It may therefore seem strange that we propose an amendment, the effect of which will be to add to the costs of employers who provide training for individuals by not permitting those training costs to be treated as part of that employee's wage, despite the fact that the training an employee receives will, it is hoped, benefit him for the rest of his working life.

We have had to ask this question because of the Government's coyness in revealing their intentions as regards the amount and the administrative details of a national minimum wage. Parliament is being forced to legislate on the national minimum wage on the basis of a largely skeleton Bill, when most of the important details will be filled in at some later date in the form of a ministerial order.

Like a stone thrown into a pond, the ripples caused by the Bill will spread into many unexpected quarters for which the Government have not provided any contingency provisions. Training costs, and the consequences of including or excluding them, are such a contingency. The problems regarding training costs are contradictory. They begin with the failure to say whether they will impose a training rate of a national minimum wage on genuine trainees. Presumably it will be a rate lower than the universal rate that the Government will impose elsewhere.

There are two sides to the problem. If the training costs are not counted as part of the national minimum wage, and if there is not a lower training rate of pay, there will be an incentive to potential employees to take up the benefits of a training place. On the other hand, if employers cannot get credit for the cost of training, or even a percentage of the cost of providing the training, against their labour costs, it will be the employers who may be discouraged from incurring the expense.

In the end, employers may find it cheaper to let someone else do the training and to poach the employee as soon as he is qualified. The Government have expended a great deal of rhetoric on the need for a well-trained workforce. Now is the time to come off the fence and to tell us what they mean.

I can speak to Amendment No. 21 briefly as it is a simple amendment. I am sorry for my hesitation but I am having a slight problem because I have had a bit of a nose bleed which has made a bit of a mess on my paper. The amendment is simple in content and in terms of reasonableness and fairness. It provides that if the employer makes a contribution for an employee into a recognised pension fund, and hence for the employee's benefit, then such contribution shall be treated as additional wages enjoyed by that employee.

It is such a logical and obvious provision that it defies any necessity to explain it. One simple fact will serve to illustrate the point. The CBI's evidence to the Low Pay Commission says that pension payments are often worth as much as 10 per cent. of pay. Encouraging private pension arrangements is an important part of the Government's avowed plans to establish a second pension to supplement the state retirement pension. Acceptance of the amendment would be evidence of the genuineness of the Government's well publicised utterances on this topic.

However, what is difficult to explain is why the Government have wrapped up all the potential ingredients of what is pay in the mysterious wide-ranging regulatory powers in Clause 2(4). Instead of making their thinking clear and embodying it in this primary legislation, they want power to create a major piece of law by ministerial fiat.

The Government's attitude is that, as with the actual minimum wage, we shall have to wait for the pronouncement of this currently non-statutory body when all will be revealed. At that point, we shall presumably be presented with a fait accompli by the Secretary of State unless she happens to dislike the findings and decides to alter them. In the meantime, we are supposed to discuss this important Act on the basis of abstract principles. I say that because in the debate on Second Reading in another place, my honourable friend the Member for South Cambridgeshire specifically invited Ministers to say whether they wished the Low Pay Commission to treat pension payments by employers as remuneration for the purposes of the national minimum wage. That invitation was not replied to. Therefore we are still none the wiser. I repeat the question to the Minister now. If the Minister cannot or will not answer it at this stage, perhaps he can tell us why not. I beg to move.

10.15 p.m.

Lord Clinton-Davis

I hope that the noble Baroness is now all right. Of course if she requires a short adjournment, we shall certainly accommodate that.

Baroness Miller of Hendon

I thank the Minister. However, I think that I am now all right.

Lord Clinton-Davis

Amendment No. 20 seeks to ensure on the face of the Bill that an employer's expenditure attributable to training should not count towards remuneration for the purposes of the national minimum wage. If translated into practice, the effect of the amendment would work in favour of the worker. So I am delighted that the noble Baroness is confronting us with the vivid portrayal of herself as the workers' champion. I am delighted to see it. To that end, we are on the same side.

I do not think that it is necessary to change the Bill in the way proposed by Amendment No. 20. The function of Clause 2—we have said it over and again in debates—is to provide the necessary flexibility to reflect recommendations which are made now, but also recommendations and changes which might be made in the light of future experience. The amendment would be very prescriptive.

The purpose of Amendment No. 21 is to ensure that an employer's contributions to pension funds on behalf of the employee will count towards remuneration for national minimum wage purposes. In such cases this would have the effect of reducing the cash value of the minimum wage.

The Government aim to widen pension provision. The noble Baroness has said that she understands that to be the objective of the Government. Occupational pension schemes are an important part of this framework. I understand by the amendment that she would wish not to provide a disincentive to employers who might be considering such schemes. There is merit in that.

On the other hand, the amendment would have the undesirable effect of reducing the cash value of the minimum wage that a worker would receive. I beg the noble Baroness to appreciate that that is the side of the amendment which we find unacceptable.

The noble Baroness says that there will be a ministerial fiat to deal with all this. That is not right. We have said repeatedly during the course of the debates that we shall be consulting about the regulations. The regulations will come before the House. They will be subject to the approval of the House in implementing the minimum wage. Indeed, the affirmative procedure would apply in this particular case, so the House would have ample opportunities to look at these matters.

In the light of the amendment and the argument—I had better not use the word beguiling or anything of that kind—which the noble Baroness has attractively put forward, I am not persuaded that we should change the Bill. I hope that the noble Baroness will withdraw the amendment.

Baroness Miller of Hendon

I listened carefully again to what the Minister said. I shall certainly read his remarks with great care in Hansard tomorrow. I am not sure whether it is beguilingly or attractively put, but whichever way it is put from over there, it is rejected. I have to say that the Ministers are definitely tempting me not to be so generous. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 21 and 22 not moved.]

The Deputy Chairman of Committees (Lord Murton of Lindisfarne)

Before calling Amendment No. 23, I should inform the Committee that if this amendment is agreed to, I cannot call Amendments Nos. 24 to 28 inclusive.

Baroness Miller of Hendon moved Amendment No. 23:

Page 2, line 34, leave out subsection (7).

The noble Baroness said: Amendments Nos. 23, 31 and 40 are to delete the whole of Clause 2(7), Clause 3(3) and Clause 4(2) respectively. These are the provisions which inhibit the Secretary of State from exercising any discretion over the application of the Bill.

If the proposed new clause, Amendment No. 29, to which I shall be speaking later, is accepted, then each of these subsections is inconsistent with it and would need to be removed in any case. I am afraid that the sequence in which the amendments are called is not the chronological order I would have preferred. There are also line by line objections which we have been told could not be moved if this amendment were to be agreed to.

I believe that it is more important to concentrate on the principle of ensuring that the Secretary of State does not build a barrier preventing herself from adapting the Act in case of need. In each of the subsections I wish to delete, the Secretary of State is seeking to prohibit herself from making any exemptions or variations in the case of any of the very important factors that might call for just that. I have in mind variations for different areas of the country, different sectors of employment or undertakings of different sizes, as happens in the United States of America, which is one of Government's role models for the minimum wage, or for persons of different ages, which could have an adverse effect on older persons getting part-time jobs for which they are suited on grounds of health or family commitments.

I do not wish to anticipate the arguments that I shall be advancing in support of the new clause that I shall shortly be proposing, which is to give the Secretary of State the widest possible discretion to make exemptions. Although those arguments do bear repeating, if only in the hope that they will eventually percolate through the barrier of deafness that I think the Government have erected against the concept of giving themselves a safety net, I am well aware of the time.

The minimum wage is a new concept in this country. The Government are not following the experience of other countries, particularly the United States of America, but also other European countries. It is possible—I repeat, it is possible—that the Government may discover, when the Bill has been in force for some time, that they have made a mistake. I agree that at the moment, with their faint omniscience, they, and they alone, believe they know what is good for the country in every possible field and subject. Suppose, even with the crystal ball which the Secretary of State possesses, there is a change in circumstances and one of the parameters of these three subsections, what then will happen?

The Secretary of State will be unable to do anything without coming back to Parliament and begging for time out of a heavy legislative programme to put the matter right and to rectify her present refusal to consider the possibility that she might be wrong. In the meantime, any damage caused by the absence of discretion may go on and on, and may possibly become irrevocable.

The reason for the Government's present adamant refusal to allow any exceptions to the national minimum wage, apart from those very special ones which were wrung out of them in the other place, seems obvious. The Labour Party pledged to the unions that there would be a universal national minimum wage and Labour claims that it always keeps its promises. That is not true, as events of the past year have proved, but we need not go into that now.

So far as the unions are concerned, the Secretary of State is determined to keep that pledge, no matter what the cost to the country, the economy or individuals which may prove to be prejudicial. The power to create exemption in case of need is a matter of common sense and it is a matter of justice. The attitude of the Government in tying themselves hand and foot is the height of folly. These amendments will mean that the Government will be compelled to put the interests of the country before doctrinaire considerations. I beg to move.

Lord Haskel

These amendments are exactly the reverse of Amendments Nos. 6 and 7. Those amendments concerned multiple rates by region, size of firm and so forth. In this group of amendments the noble Baroness is suggesting that the Secretary of State should have the right to make such exceptions.

My noble and learned friend Lord Falconer carefully explained that these exceptions are impractical and against the principles of the Bill. At this late hour, I do not wish to go over all the points which he made in explaining why they are impractical, but the same arguments apply in this case. The universality of the Bill is a source of its strength and we wish to maintain that. I do not see any pragmatic justification for sectoral exemptions, which is what the noble Baroness suggests. The amendments might be a recipe for confusion and uncertainty and there would not be the safety net which she suggests.

New sectors constantly emerge or combine with old sectors. Modern firms now encompass multi-sectoral activities, so how would it be possible for employers and workers to cope with a range of different sectoral rates? That is why we do not believe that it is right for the Secretary of State to have these powers.

I hope that with that explanation in mind, the noble Baroness will withdraw her amendment.

Baroness Miller of Hendon

I do not agree with the Minister, but I shall withdraw the amendments. We might well return to them at a later stage.

Amendment, by leave, withdrawn.

[Amendments Nos. 24 and 25 not moved.]

10.30 p.m.

Baroness Miller of Hendon moved Amendment No. 26:

Page 2, leave out line 38.

The noble Baroness said: In moving Amendment No. 26, I shall speak also to Amendments Nos. 34 and 44. They relate to Clause 2(7)(c), Clause 3(3)(c) and Clause 4(2)(c). The Secretary of State declines to give herself powers to make regulations distinguishing between undertakings of different sizes. This is the most inexplicable of all the proscriptions which the Secretary of State is imposing on herself. It brings me back to the question of why the Government are so adamantly trying to impose a regime of absolute invariable universality.

The Labour Party, in its argument in favour of the whole concept of a minimum wage, pointed to the United States of America which has had a minimum wage since 1938. Indeed it has. However, it has also had an exemption in favour of small businesses. A small business is currently defined as one with an annual turnover of less than 500,000 dollars. At current rates of exchange, that is about £309,000. Why will not the Government follow the example of their model regime, the United States of America, and grant the same exemption to our own small businesses? I refer to the corner grocery shops, the little newsagents, the bakeries, the greengrocers, the village stores and other businesses which struggle to survive against the onslaught of the giant superstores. Are all those to go the same way as the high street fishmonger? Perhaps noble Lords have not noticed that they have largely disappeared from the shopping scene. And what about the new businesses just starting up? There can be no reason, except for politics, for this obstacle being placed in the way of the most vulnerable but vital sector of the community. I beg to move.

Lord Haskel

The noble Baroness referred to the minimum wage in the United States. What she did not tell us is that exemption from the minimum wage applies only to small companies which do not engage in inter-state trade. I have been an employer in the United States for many years and I am quite familiar with that.

The noble Baroness's amendment would allow the Secretary of State to differentiate the calculation of a worker's pay according to the size of the business in which the employee works. Again, the same arguments apply about differentiation as my noble and learned friend Lord Falconer made when we were discussing some of the earlier amendments. To take a random example, in the situation where one size of hotel could be allowed to use accommodation as an offset and another size of hotel could not, those companies would be paying different wages. It would be confusing and unfair and would distort competition. The whole principle of the minimum wage is that it is a minimum wage. It is not the wage that people are being paid; it is the minimum wage that they are being paid. If firms can afford to pay more, they will pay more. So we do not see any justification for allowing such variations in the calculation of the rate.

I would ask the noble Baroness to reconsider her amendment. If she is not feeling well we can certainly have an adjournment for a few minutes.

Baroness Miller of Hendon

I thank the Minister. I am feeling well.

I do not agree with his argument. My understanding is that under the fair labour standards legislation of 1938, firms whose annual turnover is less than 500,000 dollars are exempted from the national minimum wage. I am perfectly happy to look into that again, but I believe my information is correct. That is the very point that I was making.

There are all kinds of other exemptions that happen in America for small businesses. That is the one area that we are particularly concerned about. My noble friend at Second Reading gave a good example of a small shop which would be caused enormous difficulties if the minimum wage were to come in. But that is another matter.

I shall certainly look into that, but I think that the Minister might also be advised to do the same. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Razzall moved Amendment No. 27:

Page 2, line 40, at end insert— ("(f) different hours of work; or (g) different patterns of work.").

The noble Lord said: This is a probing amendment designed to test the Government's attitude on this particular point. As various Members of the Committee and Ministers have indicated, the way that Clause 2 works, and in particular Clause 2(7), is that it reflects the Government's determination to have only one national minimum wage and to remove from the Secretary of State the power to have anything other than one single minimum wage.

As the Committee will be aware, in particular we disagree with regional variation. On the other hand, the Government are determined to press on. The structure of the clause in subsection (7) confirms that there is to be a single minimum wage and that certain areas may not be excluded. Concern has been expressed that there is a problem of potential discrimination in setting the minimum wage in relation to employees who are not simply nine-to-five employees. Therefore, it should be made clear in the Bill that the minimum cannot be either recommended or fixed by the Secretary of State to deal separately with people who, for example, are doing night work or whose job is not a continuous nine-to-five job. There is a concern that there is insufficient protection in any anti-discrimination procedures. I should like to probe the Government's attitude in that regard. I beg to move.

Lord Falconer of Thoroton

The noble Lord has made absolutely clear the purpose of the amendment. He wants us to tell the Committee our attitude to workers who work, in effect, non-standard hours of work or patterns of work. He wants us to make it clear that such people are covered by the Bill and no distinction will be made in their case. I have absolutely no hesitation in giving him the assurance that he seeks in that respect.

We share the concerns of the noble Lord and those on his Benches. Indeed, we have always emphasised that workers who are marginalised and not typical—for example, part-time workers, home workers, agency workers, workers who are forced to work unsocial hours or who choose to work hours in an abnormal pattern—are often the workers most in need of protection. That is why we have clauses later in the Bill dealing specifically with them. I draw the attention of the Committee to Clauses 34 and 35.

As I said, we are happy to give the Committee the assurance that workers will not be discriminated against because of the hours they work or because they have an unusual pattern of work. After all, Clause 1 applies the minimum wage to all—and I emphasise "all" workers.

The noble Lord's amendments apply the same protection to three different clauses—Clauses 2, 3 and 4. The effect of the amendment is slightly different in the context of Clause 2, where it would prevent the Secretary of State treating workers with different hours or patterns of work differently when making regulations concerning the calculation of the workers' hourly rates of pay. If one looks at Clause 2(2), one sees that the Secretary of State must have power to reflect different patterns of work in working out various ancillary aspects to the minimum wage. We believe that the effect of the noble Lord's amendment would be to make that more difficult rather than easier.

The purpose of Clause 2(2) is to give the Secretary of State the flexibility to reflect in the regulations the many and varied types of working and pay arrangements which exist. The amendments proposed would prevent that. For that reason, I urge the noble Lord to withdraw Amendment No. 27.

The amendments he proposes to Clauses 3 and 4 would not have that detrimental effect, but we say that they are simply unnecessary. The Government have absolutely no intention of applying different youth or training rates to people on the basis of the hours or patterns of work they follow. The Bill applies universally, as Clause 1 makes clear.

Therefore, while the Government are entirely in sympathy with the points made by the noble Lord, we are keen to leave Clauses 3 and 4 as drafted. They are sufficiently restrictive to ensure that the clauses cannot be misused, and sufficiently flexible to allow for any unforeseen situations in the future where the Low Pay Commission, for example, may recommend some specific use for the powers in either clause. I urge the noble Lord to accept my assurances and withdraw the amendment.

Lord Razzall

On the basis of the Minister's assurances, I beg leave to withdraw the amendment. In the circumstances, I give notice that I shall not move Amendments Nos. 35 and 47 in due course.

Amendment, by leave, withdrawn.

[Amendment No. 28 not moved.]

Clause 2 agreed to.

[Amendment No. 29 not moved.]

Clause 3 [Exclusion of and modifications for, certain classes of person]:

Lord Newby moved Amendment No. 30:

Page 2, leave out line 42 and insert ("18.").

The noble Lord said: This amendment deals with the question of the minimum wage payable to workers under the age of 26. In a sense, I suspect that the amendment has been, or is about to be, overtaken by events. When we looked at the Bill as it first appeared before us, it was unclear what the Government's intention was in respect of workers under the age of 26. At that stage there was at least a theoretical possibility that they would not be subject to minimum wage protection. Therefore, we wished to put down a marker to show that we thought that that was unfair.

As a general principle, we support the concept of equal pay for equal work. There is clearly a whole raft of occupations in which someone undertaking work at the age of 18 is doing so on the same basis and with the same degree of output as someone who is considerably older. For that reason, we thought it appropriate to bring the coverage of the minimum wage down to the age of 18. Of course, the question then arises as to why we did not propose bringing it down to 16, so that it would cover everyone who might have left school. Our reasoning in that respect is quite simple.

Our view is that the period in a young person's life between the ages of 16 and 18 should essentially be a period for education and training. A large majority of young people are, indeed, undertaking formal education and training during that period. Under our proposals for education and training, we would make that the universal position. In those circumstances, therefore, it would be inappropriate for us to go below the age of 18.

As regards this amendment and those grouped with it, given the fact that we understand that the Low Pay Commission is, in a sense, dealing with the matter along the lines that we propose—namely, that young people aged between 18 and 26 will be covered by the Bill's provisions and by the low pay minimum wage legislation—and bearing in mind that we have been slightly overtaken by events, I move the amendment simply to see whether we can flush out anything further from the Minister on the matter this evening. I move the amendment on that basis. I beg to move.

Lord Clinton-Davis

I shall attempt to answer the noble Lord's request to be flushed out. The noble Lord will appreciate that Clause 3 is an enabling provision. It will allow us the flexibility to reflect the recommendations of the Low Pay Commission; but, at the same time, it will limit the scope of the clause to be misused, as we would see it, by differentiation by region, size of business, and so on.

We chose to invite the commission to consider any exemptions or variations for young people up to the age of 26. My honourable friend the Minister of State made it very clear in the discussions which took place in Committee in another place that the Government are not seeking to steer the commission to exempt all those under the age of 26. We needed to draw a line somewhere; and we drew it at 26 because that was where the New Deal drew its line.

The noble Lord has recognised that his amendments are, to some extent, deficient; indeed, he chose to use the phrase, "overtaken by events". They would result in a full adult rate for all those over 17. That is not consistent with evidence we have received from other countries and from academic studies showing that there are particular circumstances in the youth labour market which point towards some different treatment for young people. These are matters that remain to be dealt with later when the Low Pay Commission report is before us and we have tendered our reply in relation to its recommendations. I urge the noble Lord to withdraw the amendment.

10.45 p.m.

Lord Newby

I am grateful to the Minister for his explanation. I shall obviously withdraw the amendment but before I do so I reiterate the point that we believe that the principle of equal pay for equal work is a valid principle. When the detailed provisions for the minimum wage are brought forward we shall consider the extent to which that principle has been accepted by the Low Pay Commission and the Government. With that caveat I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Viscount Allenby of Megiddo)

Before calling Amendment No. 31, I inform the Committee that if this amendment were to be agreed I cannot call Amendments Nos. 32 to 35.

[Amendments Nos. 31 to 37 not moved.]

Clause 3 agreed to.

Clause 4 [Power to add to the persons to whom section 3 applies]:

[Amendments Nos. 38 to 47 not moved.]

Clause 4 agreed to.

Baroness Miller of Hendon moved Amendment No. 48:

After Clause 4, insert the following new clause—