National Minimum Wage Bill

HL Deb 22 June 1998 vol 591 cc48-87

4.45 p.m.

The Solicitor-General (Lord Falconer of Thoroton)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Falconer of Thoroton.)

On Question, Motion agreed to.

House in Committee accordingly.

[The DEPUTY CHAIRMAN OF COMMITTEES (Lord Tordoff) in the Chair.]

Clause 41 [Power to apply Act to individuals who are not otherwise "workers"]:

Baroness Miller of Hendon moved Amendment No. 116:

Page 25, line 37, at beginning insert ("After a process of consultation with persons representative of industry and small business,").

The noble Baroness said: In moving Amendment No. 116, I should like to speak also to Amendment No. 117 and, in doing so, to ask the Committee: why is a self-employed person like an elephant? Because they are both impossible to describe, but you can certainly recognise one when you see it.

Let us consider a few examples. A taxi driver who owns his taxi is clearly self-employed, but a non-owner-driver who uses the same radio service, which also handles his credit bookings, and who works on some sort of commission arrangement with the vehicle owner, may very well either be self-employed or not. A jockey, even one exclusively contracted to an owner or a trainer for a season, is probably self-employed.

If a man qualifies as a solicitor, sets up in practice and acquires some partners, he is clearly self-employed. If, after some years, he decides to spend more time with his golf clubs and goes into semi-retirement, becoming a consultant in the firm that he founded, dealing with just a few special clients and continuing to provide expertise in his specialty, he ceases at a stroke to be self-employed and becomes an employee, despite the fact that he is working in the same office, sitting at the same desk and doing the same job.

Under paragraph (a) of Clause 41, which is covered by Amendment No. 116, the Secretary of State seeks to apply the provisions of this Act to any individual … who would not otherwise he a worker". That is a pretty sweeping power. I repeat that the clause refers to "any individual". The Secretary of State does not even offer to exercise that power reasonably—if I may remind the Committee of earlier discussions on other aspects of the Bill. The Bill does not give the slightest clue as to the criteria which the Secretary of State will apply when deciding whether to invoke this very wide power—yet it is a power that may very well turn the entire concept of self-employment on its head or make a mockery of the English language.

Before the Secretary of State makes regulations which, at a stroke of her pen, turn my window cleaner into my employee, we believe that she must submit to some very minor restrictions. That is precisely what Amendment No. 116 seeks to achieve. Instead of merely acting on her own preconceptions, misconceptions or, indeed, a mere whim, we ask the Secretary of State to consult employers' representatives. The Government have repeatedly told us during this stage of the Bill that the Minister will consult widely before making any regulations. This clause as drawn does not oblige her to do so. All that Amendment No. 116 seeks is that she should be obliged to do so.

I turn to Amendment No. 117. In the Notes on Clauses the DTI informs the Committee that the object of this clause is to prevent avoidance of the national minimum wage". Once again, as when this aspect has been raised in other parts of the Bill, we entirely support that objective. However, I am puzzled that in drafting this and other provisions of the Bill the left hand (the DTI) does not seem to know what the right hand (the Treasury, in the form of the Inland Revenue) is doing and has been doing successfully and efficiently over generations. Does the DTI consult the Treasury? Does the DTI even speak to the Treasury? Does the Secretary of State speak to the Chancellor of the Exchequer? According to recent reports in the press, that is a wholly different question. It is as if the DTI has arrived from another planet unaware of the existing facilities and tried and tested definitions that cover matters which this Bill attempts to address.

In Clause 2(4) the Secretary of State seeks power to define by regulations remuneration, benefits in kind and allowable deductions from pay and to change those definitions when she decides to do so. That power is sought despite the fact that the Inland Revenue has an adequate set of rules and volumes of case law to deal with all of those. I argued that point in relation to Amendments Nos. 19 and 22. I then suggested that anything that was taxable should be regarded as wages for the purposes of this Bill. The Minister rejected my argument on grounds that I found far from convincing. He said that the regimes for income tax and the national minimum wage were different. I do not agree. If they are different it is only because the Government choose to say so.

In the present clause the Secretary of State wants to rush in and define "self-employed". Bearing in mind the allegorical elephant that I mentioned in my opening remarks, frankly, that will not do. The Inland Revenue has a perfectly adequate definition and a comprehensive series of tests to decide whether or not a person is self-employed. Those regulations and tests are designed specifically to prevent tax avoidance by a person who pretends to be self-employed when he is not. That is exactly the objective of this clause. We cannot have two parallel systems so that a person who is self-employed for taxation purposes is arbitrarily expelled from that status by a contradictory order of the Minister. The fact that such an order will need to be debated is of no real help given the Government's steamroller of a majority in another place.

We also cannot have a state of affairs in which the Inland Revenue is able to decide in its own interests to rule that a person who is not recognised as self-employed by the DTI is not such for taxation purposes. Is it possible to envisage the Treasury giving up ally of its power and authority? Indeed it is, in just two words: interest rates.

I read with interest the debate in Committee in the other place. I searched hard to find an explanation of the DTI declining to accept a ready made, tried and tested definition. The Minister for Small Businesses found the following unconvincing reasons on 3rd February at col. 749. First, she said that the Government wanted to cover any loopholes which unscrupulous employers may find and exploit". We certainly support that. But it is difficult to understand how setting up a new definition and structure that will undoubtedly have to be tested in the courts item by item will help to avoid loopholes, especially in the short term. The Minister also said: The Inland Revenue has no strict definition of self-employment, but it does use certain criteria. As a result, cases are decided individually". Fancy that, my Lords! To pay attention to the individual circumstances of each case rather than try to cram them into a rigid, inapplicable and inappropriate category is what a reasonably judicial, or quasi-judicial, system demands. The "certain criteria" that the Inland Revenue use are those that we want the DTI to use in the interests of consistency.

I revert to my window cleaner. Suppose that he falls off a ladder outside my house. I say that he is self-employed and the Inland Revenue backs me up. The Secretary of State can make him my employee and possibly make me subject to a greater liability, including criminal prosecution, because of the definition that she chooses to impose. I do not know what the Government are frightened of. In the short Clause 41 they take powers to include within the definition of the Bill persons who are not workers. All we ask is that the exercise of these powers does not override a person's established status as a self-employed person.

We do not propose to inhibit the power of the Secretary of State to close loopholes and therefore we support the principles of this clause. But we want the Government to be able to construct effective anti-avoidance devices without having to return to Parliament for fresh primary legislation. We must not allow a judgment to be made by the Secretary of State or her advisers who, with no disrespect, may have no great practical experience of the real world of self-employment and may hastily overreact to an emerging problem or make a decision that is inconsistent with a person's tax status.

To sum up, Amendment No. 116 simply obliges the Secretary of State to consult the representatives of industry, particularly small businesses for they are the ones who are likely to be most affected, before she makes a decision. We want the Secretary of State to be sure of the facts and the consequences before she makes her decision. She will still be entitled to make up her mind based on her own opinion having given due consideration to the advice that she receives, unless that decision proves to be wholly irrational. Amendment No. 116 does not inhibit the powers of the Secretary of State but simply requires her to pause to consider the matter before acting. I am sure that there can be no objection to that. All that we ask in Amendment No. 117 is that logic, consistency and continuity with the Inland Revenue's tried and tested rules are applied. I beg to move.

5 p.m.

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

I apologise to the noble Baroness for missing the first few moments of her contribution this afternoon. I have been informed of her remarks by my noble friends on the Front Bench.

The noble Baroness asked a number of very pertinent questions. Does the DTI consult the Treasury? Yes. Do we speak to each other? Yes, quite a lot. Does the DTI come from another planet? I believe that the noble Baroness is a little confused and is perhaps referring to the shadow Secretary of State. It certainly does not, and that is widely recognised.

Clause 41 represents a very important part of this Bill. Its purpose is to provide the Secretary of State with a measure of flexibility. We want to be able to close any loopholes that may be opened at a future time by some employers who wish to dodge their responsibilities. We also want to be able to adjust the coverage of the Bill as necessary to deal with changing labour market practices and working arrangements. We have drafted the Bill sufficiently tightly to cover all of those who as far as we can tell should be covered at this stage. But who knows? In the light of experience, we might find it necessary to extend the Bill further. Some employers may go to great lengths to avoid their responsibilities. I hope that that is not the case. We are convinced that most employers will want to do the opposite; they will want to comply with the legislation. I put forward the reason for that to the Committee on the previous occasion. They do not want to establish bad practices in this regard. It is important that we have a level playing field and that the cowboys do not succeed.

Amendment No. 116 would require the Secretary of State to consult representatives of industry and small business before extending the Bill to further descriptions of individuals. I believe in consultation. I urged it on many occasions when I was sitting on the Benches opposite. It is right that the Opposition should probe the Government's intentions. I hope that that is what they are seeking to do.

Long before the election, and since, we have engaged in wide consultation. We did it with regard to the minimum wage policy. One of the reasons for setting up the Low Pay Commission was to ensure that we maximised the possibilities for consultation. My colleague, the Minister of State in another place, has confirmed that we will consult on the regulations under the Bill. I have said it many times in this place. It is normal and proper to consult. That is what I was told frequently by Ministers when I sat on that side of the Chamber. They said that it was not necessary to have such requirements within the framework of a Bill itself.

My problem with the amendment is that it would be over-prescriptive to require consultation to be established on the face of the Bill. The Secretary of State would of course consult before extending the Bill by using the power in the clause. Consultation will take place in normal circumstances, but there may be circumstances where consultation could make action less effective.

One of the aims of Clause 41, as I said, is to ensure that the Secretary of State can close any loopholes that might emerge. One cannot rule out the possibility that some employers, and some of their advisers, might find a loophole and seek to frustrate the legislature's intention. That might include reclassifying their entire workforce or revising all their working arrangements. If that were to happen, we would want to act rapidly to ensure that the workers concerned were not deprived of their rights. That might preclude consultation before action were taken.

There would not be much purpose in engaging in consultation in those circumstances, which may be extreme. Who knows? The amendment would also require the Secretary of State to consult one part of the social partnership only. That is not desirable. The point of consultation is to achieve an all-round perspective. We know that the previous government eschewed that possibility. They did not like consulting the social partners as a whole. Theirs was a one-sided operation. That is not my idea of consultation. I am not in the business of turning a deaf ear to important parties in consultations of this kind. We want to work together. It is a dynamic process. Both sides of industry and the Low Pay Commission provide a good example of what can be achieved by that process. The amendment is unnecessary and potentially harmful. I hope that the noble Baroness will not press it.

I turn now to Amendment No. 117. I repeat the point about covering any loopholes which unscrupulous employers might try to exploit. Self-employment is a potential area of concern. It is one of great complexity, as the noble Baroness recognised. In most cases there is no problem in distinguishing the self-employed from employees and workers, but there is a degree of uncertainty at the margins. The noble Baroness is worried about how we shall draw the distinction in such cases. The amendment seeks to tie the Bill to the definition of "self-employment" used in tax law.

There is no necessary correlation between the two. It would not be right to tie ourselves on the face of the Bill to criteria which are used in tax law as distinct from employment law. There are distinctions to be drawn. We are following an approach used in the Employment Rights Protection Act 1996 by the government of the noble Baroness. If it was right to do it then, why should we not do it in these circumstances? The noble Baroness did not seek to address that point.

In another place the Opposition pressed hard on the issue. Mr. Green, a Conservative Member, when a similar amendment was being discussed in Committee—I cannot quote him verbatim because I am not allowed to—in effect said that people who were self-employed in the assessment of one branch of government should not be regarded as employees in another. The noble Baroness must address the point raised by her honourable friend in another place. Self-employment for tax reasons is based on a number of tests designed to establish status on a case-by-case basis. In most cases it is clear whether someone is or is not self-employed for tax and minimum wage purposes. I concede that. There will be cases where the issue becomes questionable. It is not sensible to tie employment law to criteria drawn up for tax purposes where there is, in any case, no certainty.

The arguments adduced by the noble Baroness's honourable friend in another place, which I adopt, represent important answers to the case which the noble Baroness has put persuasively, but it would be wrong to take her advice. I hope that she will withdraw the amendment. If not, she will seek the opinion of the Committee, and we shall do whatever we can to reject it.

Baroness O'Cathain

I listened to the persuasive arguments on both sides, especially with regard to Amendment No. 116. If the Secretary of State will consult, why does not the Minister consider it wise to put it on the face of the Bill? The Minister described a hypothetical situation. He said that it would be crazy to consult the employers because they would be the people avoiding the payment of the minimum wage. The amendment does not refer to the employers. The amendment provides: After a process of consultation with persons representative of industry and small business". I agree with the Minister that if someone is openly flaunting the application of this law, one would want a process whereby one could stop that immediately and not consult. That is not what is stated in the amendment.

We hope that when the Bill becomes an Act it will last for a number of years. Events move on and none of us can forecast the different situations which will pertain in six months' or six years' time. In order to keep abreast of events and the changing pattern of process in industry and business, it would help the Secretary of State to have the power of consultation written on the face of the Bill.

I am ignorant as to whether the Low Pay Commission has an ongoing role which would enable the Secretary of State to consult with the commission in three or four years' time. I suspect that it has not. If it had such a role, that might be an answer. I believe that there is a risk—it may not be huge—and that in some situations it might be better if the Secretary of State were involved in the consultation process. I hope that I have made the point clearly. I would not go to the stake on it, but I believe that there is merit in putting the provision on the face of the Bill.

Lord Clinton-Davis

There is a misunderstanding about the way in which we have consulted through the Low Pay Commission. As I said when we were last in Committee, the Low Pay Commission is not drawn from representatives of industry and small business. It ensures that people of sufficient expertise in the various fields to be covered can join together in offering expertise to the work of the commission. That is very different. So the amendment is fatally flawed.

The significance of what the noble Baroness says is recognised by the Government. We say that we have already consulted widely. In the overwhelming majority of cases we would do so. But I have drawn attention to an urgent situation where the Government have to take immediate action and would not have the opportunity to consult with the Low Pay Commission, or anyone else.

I made a Statement in the House on the national minimum wage recently. I was bombarded with a large number of questions from the noble Baroness, Lady Miller, which I did not have time to answer. But we said then that the Government will be using the Low Pay Commission in order to engage in the development of proposals for, and to take forward work on, monitoring and evaluating the introduction of the national minimum wage over the next year. Clause 6 of the Bill enables the Secretary of State to refer matters to the Low Pay Commission at any future time.

Baroness O'Cathain

I thank the Minister for giving way. I am not worried about the first year. I am worried about years three, four, five, six and onwards. I believe that there will be an automatic reaction: everyone will want to behave perfectly properly under the terms of the Act. I am worried about the situation beyond the euphoria which will attach to the first 12 months' operation of the Act.

Lord Clinton-Davis

I am delighted to hear that there will be a state of euphoria after we have enacted the Bill. That is in marked contrast to the position adopted by the noble Baroness, Lady Miller. I am euphoric now even thinking about it!

The principle applies equally to a situation now or three or five years ahead. It would be unnecessarily inflexible and too rigid for the Government to tie themselves in all circumstances to the consultation that the noble Baroness wants as a matter of legislative requirement.

5.15 p.m.

Baroness Miller of Hendon

I thank the Minister for what he said. He may not be surprised to hear that I am disappointed. The point I sought to make was that Clause 41 provides the power to apply the Act to individuals who are not otherwise "workers". Clause 41(a) refers to "any individual". We sought in the amendment to ensure that the genuinely self-employed worker would not fall into that category. Amendment No. 117 deals with exactly the same point. I was not asking the Minister for a long, detailed explanation. The Secretary of State is taking sweeping powers upon herself in extending the definition of "worker". I referred to the allegorical riddle: why is a self-employed person like an elephant? The Minister was not then present. The answer is that we know what we are talking about, but it is difficult to recognise.

In discussing Clause 2(4), I sought to make the point that I have put again in Amendment No. 117 on the different regimes for income tax. The Minister commented on the numerous questions I asked when he made a Statement. I accept that this is a convenient time to mention it. I accept that the Minister could not answer all those questions. However, I hope that he and his officials will ensure that I receive written replies.

The Minister asks me not to press the amendment. I did something which I understand politicians do not do—perhaps I am not a politician. I made clear to the noble Lord, Lord Haskel, that we had no intention of dividing on any of the amendments. First, I understand from the Labour Chief Whip that there is the tug-of-war this evening; and, secondly, many noble Lords will wish to watch England play Romania. Therefore because I am a reasonable Opposition spokesman, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 117 not moved.]

Clause 41 agreed to.

Clauses 42 to 44 agreed to.

Baroness Miller of Hendon moved Amendment No. 118:

After Clause 44, insert the following new clause—

FAMILY BUSINESSES

(". A person who is employed by his spouse, parent or child, or by a private limited company of which his spouse, parent or child is a substantial (but not necessarily a controlling) shareholder, does not qualify for the national minimum wage in respect of that employment").

The noble Baroness said: Although Amendment No. 118 is not grouped with Amendment No. 119, I indicated to the noble Lord, Lord Haskel, that I would speak to the amendments together.

Clause 44 recognises the need to exempt voluntary workers and hence the organisations for which they work from the requirements of the national minimum wage. That is entirely right and proper. I declare an interest as chairman of the National Association of Leagues of Hospital Friends, an organisation which would collapse if we were required to pay our volunteers for the invaluable service that they freely give. However, there are two other categories of employees whom it is essential to exempt from the operation of the Bill. The first, referred to in Amendment No. 118, is spouses, parents and children of the owners of a business.

I used the word "owners" because some small businesses, even the corner grocery shop or newsagent, may be incorporated as a limited company. A limited company was once described as having no soul to damn and no body to kick. Neither does it have a spouse, parent or child. We are talking about the family business where sometimes, or frequently, the spouse, child or parent of the owner comes in to help at a particularly busy period, at a time of staff shortage, or even as a regular means of keeping overheads down and avoiding the need for extra paid staff. The family concerned derives its living from the business, so whether a wage is paid to the spouse, parent or child is the concern of the family and no one else. The Government have no business involving themselves in people's ordinary domestic affairs.

Are the Government really saying that if a shopkeeper's spouse comes in to help out on a Saturday afternoon or during the Christmas period some wretched greengrocer will be liable to be served with an enforcement notice under Clause 19, sued by an official under Clause 20, suffer a penalty notice under Clause 21 and, last by no means least, be prosecuted under the criminal law and be fined at the maximum rate normally reserved for the most heinous offences under Clause 31?

During the passage of the Bill, I was approached by a smallholder who told me that he had a farm shop on his land. His 70 year-old mother ran it purely to give herself something to do. She wanted no wages from her son. He said that if he were forced to pay her he would have to close his shop, damaging his business, and his mother would have to stay at home all day. Rendering a parent liable for not paying a child the minimum wage when the child is assisting in the family business would be as ludicrous as complaining that the child was not being paid for mowing the lawn or washing the car.

Lord Clinton-Davis

Does not the noble Baroness realise that that would not apply because children of the age she is contemplating are not within the provisions of the Bill?

Baroness Miller of Hendon

I thank the noble Lord for his interruption, but I do not accept what he says. There are plenty of teenagers of 18 or 19 who help their parents in a local shop on a Saturday and who would be covered by the Bill. I use the word "child" in the relationship of parent and child. I am well aware of the age because I have studied the Bill thoroughly, as I am sure the Minister knows.

We cannot rely on the possibility that the officials who are to enforce the provisions of the Bill will do so with discretion and in a reasonable manner. I regret to say that experience shows us that that is not something we can rely on. The over-enthusiastic enforcement of EC directives is a case in point. In any event, why should we have to depend on the good will of some official or risk inconsistent treatment in different parts of the country? The amendment is a common sense provision which neither damages the Bill nor the general principle of a national minimum wage.

I turn to Amendment No. 119 in respect of which I believe exactly the same principles apply. The vast majority of limited companies are family owned. Even when the directors are unrelated they are, in essence, business partners trading under what is called "the corporate veil." Such companies are often described as quasi partnerships and the directors of most companies of that kind are usually the only or the main shareholder. Once again, it is not for the Government to interfere in private arrangements freely entered into by directors and shareholders who enjoy equal bargaining power.

In connection with Amendment No. 2, the Minister claimed—indeed, he insisted—that a partnership was the same as an individual employer and not X number of separate employers, a topic to which I shall return in a later amendment to Clause 54. Before we get into another legal argument, perhaps I may draw his attention to the recent case of the Secretary of State for Trade and Industry v. Bottrill. That case involved the Minister's own department, so I am sure that he is perfectly familiar with it. The ruling was that a person who was the managing director and the holder of the sole issue share in a company was nevertheless an employee.

Perhaps I may give the Committee two examples from my own experience of the anomalies which can arise unless directors are exempt. I began my own business early in 1972 with a partner. In order to help it through its first two shaky years, we drew no salary until 1974. I was fortunate in having other sources of income, but my partner, my co-director, did not. He survived by using other assets and bank and other loans. It would have been wrong to force us to increase the company's overdraft or imperil our ability to meet our bills immediately they fell due by making us take an unwanted salary, however small—or, in our case, considering the number of hours we worked, quite substantial—and having to pay tax and national insurance on unwanted income, too.

In giving my second example, I must again declare an interest in some small family investment companies of which I am a director. We do not pay directors' salaries simply because we prefer to pay all surplus income as dividends to our shareholders who are our family members. Once again, the purpose of the amendment is to avoid an anomalous situation where the state would be interfering in private internal arrangements which are none of its concern. In both cases, why should the Government exclude members of the Armed Forces and prisoners from the operation of the Bill simply because the Treasury would have to foot the bill and not exclude the owners of private businesses in relation to what they pay themselves and their immediate family out of their own pockets? I do not suggest that either of the two omissions—family members and directors—from the exclusions contained in Clauses 43, 44 and 45 is caused by any desire to over-regulate or to indulge in "nannyism". I believe that there are incongruities caused by a drafting oversight arising from the Government's desire to achieve universality. I trust that the Government will accept that there is no breach of the principles of the national minimum wage which they are pursuing by the legislation if they accede to the moderate exclusions we are seeking. I beg to move.

Lord Monson

I am happy to support the noble Baroness's amendments. They are common sense amendments and, I imagine, would be regarded as such by the great majority of people. Can the Minister tell us what is the position of those aged, say, 18 or 19 who work part-time for their parents in return for board and lodging and perhaps other benefits in kind, with no money changing hands? Presumably there would be no contract of employment in such a case. Are they excluded from the provisions of the Bill as it stands?

Viscount Thurso

Perhaps I may ask a supplementary question in relation to Amendment No. 119 which raises some interesting issues. It relates to companies limited by guarantee. I have served as a director of a number of such companies, usually associated with charities, or quasi-charity or voluntary organisations. A considerable amount of work is carried out by the directors of such companies and no remuneration is expected. In those circumstances and under the proposed legislation, would it be appropriate for those directors to remain unremunerated?

5.30 p.m.

Lord Clinton-Davis

I thank the noble Baroness, the noble Lord, Lord Monson, and the noble Viscount, Lord Thurso, for the interesting points which they raised. I shall do my best to reply. Before I do so, I should say that I appreciate the indulgence of the noble Baroness as regards the tug-of-war because it is being held for a very worthwhile charity—the Macmillan Nurses. It is a bit late to invite other people. However, it is an important charity and Members of both Houses have before played a significant role in helping it. Secondly, I know that the noble Baroness wants to watch the football, so her remarks were rather self-serving.

Before I deal with the specific points raised by the noble Baroness and other noble Lords, I should say, again, that Amendment No. 118 deals with exclusions. This time it excludes family members from entitlement to the minimum wage.

In another place, there was a lot of discussion about the employment of spouses. Amendment No. 118 goes rather further than that because in effect it seeks to exclude anyone employed by spouse, parent or child or by a business in which the spouse, parent or child is a substantial shareholder. The noble Lord, Lord Monson, said that that is quite reasonable and will be accepted by the wide majority of the public. I am not sure how he measures that but that is a matter for him to answer. I am not in the business of trying to go about excluding as many people as possible from the operation of this Bill. But that is what the Opposition are about. What is being proposed here would go against the whole principle of the Bill.

Amendment No. 118, which was revised something like two weeks after it was first tabled, seems also to indicate a desire to over-complicate. I do not wish to become involved in a debate about the nature of shareholding control and whether a person is a substantial or controlling shareholder. Here we are talking about a Bill which is designed to deal with workers. It is founded on the basis of whether or not a person is a worker. The status of shareholders has nothing whatever to do with it.

It is a very simple principle even though the Opposition seem to be in the business of making the matter as complicated as humanly possible. A worker should be entitled to a minimum wage whoever he has as his employer. I see no reason why a person should be disenfranchised from the procedure which we are seeking to invoke for the first time just because the employer is his spouse, father or child. We are dealing with extremes all the time in this regard. An employer may quickly marry his employee in order not to pay the national minimum wage.

Baroness Miller of Hendon

I do not wish to interrupt the Minister's flow but we are not talking about ridiculous instances. We are talking about the basic small family shop, which would not survive if the wife who came in to help had to receive the national minimum wage. Such people give their services virtually free. That is what we are talking about. We are not talking about eccentric examples. The Minister should give some credence to the sensitivity of the issue. There are many small businesses in this country which will undoubtedly go out of business if there is a blanket coverage for the national minimum wage.

Lord Clinton-Davis

With respect, I believe that the noble Baroness has in the past dealt with some extreme situations. I am entitled to an occasional riposte.

I do not wish to pick holes in the amendment because my objection is fundamental. I do not question the noble Baroness's integrity for one moment and she does her duty by probing these matters. Our approach is to make the Bill inclusive and not exclusive. It is part of the whole integrity of the concept of a national minimum wage. That is the basic reason why I shall ask the Committee to reject the amendment unless the noble Baroness withdraws it.

The whole essence of this matter is whether there is an employee relationship. I listened very patiently to what the noble Baroness said and she seemed to suggest that she was talking about small children. Perhaps I misunderstood her. Of course, that would not apply. The provisions apply only where there is an employment relationship. For example, in the case of a greengrocer's wife, one must ask whether she is working under a contract for money.

The noble Baroness then sought to pray in aid an insolvency case, the details of which I am not familiar with. The answer is that, in some cases, a director would be an employee; in other cases, he would not. It depends entirely on the contractual relationship which exists. In those circumstances, each case must be decided on its own merits.

I turn now to Amendment No. 119. Again, this amendment was discussed extensively on Report in another place. Under the Bill, a person who is a director of a company, limited or otherwise, would not normally be entitled to receive a national minimum wage because the legal status of a director, whether of a small or multi-million pound business, is that of an office holder. That is the distinction which must be drawn.

There may be cases where, in addition, a director has a contract of employment with the business and that contract may be explicit or implicit. In such circumstances, he would be an employee of the company and therefore entitled to the national minimum wage. That would apply to managing directors or directors who are one-man bands in charge of their own business.

The Bill makes it very clear that directors who are simply office holders will not be entitled to the minimum wage; directors who are employees will be. That is the very simple proposition. That distinction is derived from existing employment law. Therefore, we do not need the amendment because it would add nothing useful to the Bill. The definitions in Clause 54 make it quite clear who is covered by the Bill. Directors who are not workers will not be covered, whereas directors who are workers will be so covered.

In her references to director-employees, the noble Baroness raised various points which I shall try to answer. A director who is an employee of his own company could claim the minimum wage from that company in just the same way as such a director may claim other employment protection rights as an employee. The practical reality must surely be that nothing would be gained by pursuing such a course.

I cannot envisage that that situation will arise. That is why I said it is rather fanciful. Even if it did, can one really envisage enforcement officers being inclined to take action in such circumstances? I hope that the noble Baroness will withdraw the amendment.

Baroness Miller of Hendon

I am even more disappointed with the Minister's reply to these two moderate and reasonable amendments. I believe the death knell will be sounded for many small businesses up and down the country if they realise that if they are given any assistance by a member of the family they will have to pay that person the national minimum wage. The noble Lord, Lord Haskel, shakes his head. I can tell him that I have already been approached by numerous small family businesses from all over the country on this matter. It is a brave government who think those feelings can be disregarded and that all will be well.

Lord Clinton-Davis

I do not seek to disregard the generality of the points that have been made by the noble Baroness. It is quite possible that we need to inform the public better on this matter as the noble Baroness herself misunderstood the position. Therefore it is perfectly possible that other people may misunderstand it. It is my job here to try to correct a mistaken impression. I hope that the noble Baroness will read carefully what I have said. I hope I have convinced the Committee that I have advanced a perfectly reasonable proposition. I hope that small businesses will not be misled by some of the statements which have been made tonight which need to be corrected.

Lord Monson

Before the noble Baroness decides what to do with this amendment, I hope the Minister will answer my query about 19 year-olds who, for example, work for an hour and a half each evening in their parents' shop in return for board and lodging. Will they be excluded from the provisions of this Bill?

Lord Clinton-Davis

I thought I had embraced that situation in the remarks that I made. The matter depends on whether there is a contract of employment and whether there is a consideration in money or in kind in relation to that.

Baroness Miller of Hendon

I would never pretend that the Minister is anything less than courteous when he corrects what he says is my mistaken view of the matter. However. I do not believe that I made a mistake. I believe that my interpretation of the situation is correct. However, I shall read carefully what the Minister has said. At this stage I shall withdraw the amendment but I shall probably return to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 119 not moved.]

5.45 p.m.

Baroness Miller of Hendon moved Amendment No. 120:

After Clause 44, insert the following new clause—

EXCLUSION OF INCAPACITATED PERSONS AND EMPLOYMENT FOR THERAPEUTIC PURPOSES

(" .—(1) The Secretary of State may, after consultation with the Low Pay Commission, make an order exempting incapacitated persons from the provisions of this Act.

(2) An order under subsection (1) above shall provide for the issue of permits by the Secretary of State to those persons whom he believes to be incapacitated and may make provision for—

1. (a) the procedure for applying for and issuing such permits;
2. (b) the procedure for establishing the minimum wage to which each permit holder shall be entitled (being less than the single hourly rate prescribed under section 1(3) of this Act);
3. (c) the appointment by the Secretary of State of suitably qualified persons to assess such applications; and
4. (d) the procedure for appealing against a refusal to issue such a permit.

(3) No person shall be guilty of an offence under this Act in respect of an employee who holds a permit issued in accordance with an order made under this section.

(4) For the purposes of this section, a person is incapacitated if he is so affected by physical injury or mental deficiency or infirmity due to age or any other cause as to be incapable of earning the national minimum wage.

(5) A person whose employment is primarily undertaken for the purpose of therapy and whose employer is a non-profit-making organisation does not qualify for the national minimum wage in respect of that employment.").

The noble Baroness said: Clause 44 of this Bill, which deals with voluntary workers, was numbered Clause 41 when it was discussed in Committee in another place. It was a bare 10 lines long. After debate in Committee the Minister of State properly said, It is important that the Government reflect … and that we ensure that our proposals take into account the complexities of the issue". The result of that further reflection was the present Clause 44, which is now some 47 lines long and deals more fully with voluntary workers and those persons and organisations they help. In the light of the reasonable way that the Government have dealt with this kind of problem, it seems churlish to point out that there are still two serious omissions which must he dealt with.

First, I refer to severely incapacitated persons and, secondly, to persons carrying out therapeutic work while in the employment of a non-profit-making organisation. I shall deal with the proposed exemption of severely incapacitated persons in the proposed new subsections (1) to (4) of my amendment. I believe these provisions speak for themselves and need no explanation. I should like to think they are acceptable to the Government without argument because the party opposite claims to be the party that cares, particularly for the sick and for the infirm.

These four proposed new subsections have been carefully drafted so as not to constitute a licence to unscrupulous employers to exploit vulnerable persons by paying them too little. The Committee will notice that the proposed new subsection (2) provides for the Secretary of State to lay down procedures for the exemptions that I seek. I stress that there will be no blanket exemptions. Each case will be decided on its merits after an individual application has been made and will be granted only after the approval of a suitably qualified assessor. I assume this would normally be a doctor, as is the case with regard to claims for disability allowances. But, again, the Secretary of State will have discretion here.

I have already suggested that I should have thought this part of my amendment would be acceptable to the Government without argument. However, I have been given no indication that the Government will accept it. Therefore I point out what I believe to be the implications of a refusal. We all realise that unfortunately and regrettably there are many persons whose disabilities make it difficult for them to obtain employment. These people want to work as best they are able. They do not merely wish to earn money or to have some occupation. It is even more important to them to enjoy some measure of independence and a feeling of self-reliance and self-respect.

I quote from a paper published a few weeks ago by the Joseph Rowntree Foundation, an organisation whose views the Government usually approve. The paper states, Disabled people may have been affected by a much wider and systematic shift in employment patterns. As the supply of labour has expanded faster than demand, employers have become more selective in their choice of staff. Marginal workers such as disabled people have been excluded … Preliminary evidence suggests that very few found a job". I believe this refers to those who lost incapacity benefit after the rules were tightened up.

The Low Pay Commission in table 3.1 of its report states that, 16 per cent. of the long-term disabled currently earn less than £3.50 an hour". In its evidence to the Low Pay Commission the Royal National Institute for the Blind stated, on page 39, Blind and partially sighted persons face bleak prospects in employment … Significantly, blind and partially sighted people are concentrated in lower paying, semi-skilled and routine manual occupations … Many blind and partially sighted people are therefore caught in poverty even when they are in work". I do not doubt that the same difficulties in obtaining work, discrimination in the workplace and low pay affect persons with other disabilities. It is simplistic to suggest that the solution to their problems will be to increase their pay entitlement. On the contrary, we believe that such action would increase their problems. It would make employers even less inclined to employ disabled people so long as they can employ able-bodied persons to do the same work for the same pay, possibly at a higher rate of productivity.

What are the implications of a refusal by the Government to allow such persons the opportunity to go to work and to earn their own money after the most stringent inquiry into their individual circumstances as set out in the proposed new subsection (2)(c) of my amendment? The implications are that the Government, in pursuit of their policy of universality, will tell those people, "You may not work. You must simply live on government hand-outs in the form of disability allowances". Convicts will be allowed to work for less than the national minimum wage but not honest people who have committed the crime of being disabled. I cannot believe that the Government could reject an amendment with such important social implications.

I now turn to the part of the amendment which deals with work carried out for therapeutic purposes. We are all familiar with the British Legion's poppy factory and with various forms of work carried out in workshops of the Royal National Institute for the Blind. I have no idea what these and similar organisations pay their workers but I am sure that they are as generous as they are able to be and may well already pay more than the wildest estimates of what the national minimum wage will be. The principal purpose of this kind of work is not to earn money for the organisation or necessarily to pay a living wage to the employee. It is to help the employee—who is suffering from some form of disability, including, for example, the loss of sight or of a limb, or some mental incapacity—to enjoy the dignity of following some useful occupation or simply to enable the employee gradually to recover a lost faculty.

I recently paid a visit to community housing for people of a whole range of ages with learning disabilities. They run a pottery shop producing the most amazing range of vases, bowls and so on. I was presented with a beautiful vase as a souvenir of my visit. The person who made the vase had the benefit of passing time doing a practical job while at the same time having the satisfaction of knowing that he was doing something worth while. The person concerned receives full board and lodging, nursing and training, and receives a small personal allowance. He would receive the same even if he were capable of doing only very little, or indeed nothing. It cannot be right that such work should be treated as employment for the purposes of this Bill, or that a charity, which has to scramble for every penny, should be forced to make a commercial payment for providing what is, after all, treatment for someone who is a long-term or probably permanent patient.

There are enough problems with this Bill, because the Government have a rigid, unbending desire to achieve universality. However, the Government have to make the concession that we seek simply to prevent what they see as an injustice to low-paid workers being replaced with another injustice to persons whose needs are no less important. I beg to move.

Viscount Bridgeman

In supporting my noble friend's amendment, I must apologise for not being able to be in my place at the beginning of the debate. I understand the desire of the Government to have as great a degree of universality as possible in the Bill. However, there have been exceptions. My noble friend referred to prisoners and share fishermen, and there are other special pleas. Surely this is a worthwhile exception.

My noble friend reminded the Committee that under Clause 2 there are safeguards for disabled people. Employers, however lofty their motives, will in some cases be discouraged from taking on people from whom, through no fault of theirs, they cannot achieve the same degree of profitability as from fit people. I very much hope that the Minister will give careful consideration to this very reasonable amendment.

The Viscount of Oxfuird

I, too, wish to thank my noble friend for her amendment. I also apologise for not having been in my place earlier. This amendment is possibly one of the most important. Let us take, for instance, an institution such as that at Enham Alamein near Andover, which deals with people who have cerebral palsy. They are totally incapable of profitable work except as a minimal base. The object of the institution is to encourage them, particularly for therapeutic purposes. Those people are given a small sum of money each week to make sure that they turn up. It is not a profitable organisation in the sense that its books show a profit. It exists as a total charity. There should be some consideration for that type of institution.

Lord Clinton-Davis

I thank the noble Baroness for moving, in a perfectly reasonable way, a point of very great interest. In that, she was joined by the noble Viscounts, Lord Bridgeman and Lord Oxfuird.

This is certainly a difficult issue. The Government have given it a great deal of thought. The fundamental point is that disabled people should in no way be discriminated against in the workplace. I accept immediately the intention of the amendment. In effect, the noble Baroness wants a permit system to operate allowing partial exemptions on the basis of incapacity, and to exempt those who work for therapeutic reasons.

The words in question are in subsection (1) of the amendment: exempting incapacitated persons from the provisions of this Act". That is a dangerous route to follow, as I shall seek to argue. If it were to be followed, there is a risk of discrimination. I acquit the noble Baroness of any intention in that regard; however, that would be the effect. The amendment asks us to distinguish between the able-bodied and those who are, incapable of earning the national minimum wage". It is a loose and difficult concept. In practice, it could easily lead to a totally unacceptable situation whereby some people were denied the national minimum wage when they had just as much right to it as anyone else. It could become the thin end of a very large wedge. It could deny the minimum wage to the very people who are most in need of its protection.

The Low Pay Commission gave profound consideration to this issue. The commission's report includes the views of a number of groups representing disabled workers. Nowhere in the report is any of those groups quoted as favouring an exemption of the kind proposed for disabled workers in this amendment.

What the Low Pay Commission had to say in its report is an important piece of evidence. There is no question of evading the issue. Perhaps I may ask the Committee to address paragraph 1.6 of the report, which deals with these matters. It states: A small minority who gave evidence to us suggested exempting or having a lower level of the National Minimum Wage for people with disabilities. But the vast majority, including the Government, saw no justification for this. We believe"— these are the most important words— that there are compelling arguments for treating disabled workers in the same way as other workers. To do so recognises the value of disabled workers to employers and supports a culture of social inclusion. Moreover, for those people with severe disabilities that limit their productivity, the Government funds the Supported Employment Programme which helps employers recruit and maintain these workers in jobs". That is essentially a right and proper riposte to the points made by the noble Baroness and other noble Lords who spoke on this matter. Why did the commission arrive at that conclusion? I submit that it recognised the overwhelming correctness of the case. The vast majority of people from whom it took evidence saw no justification for embarking upon the programme that the noble Baroness supports—and supports with total integrity.

That brings me to a particular point of the amendment dealing with therapeutic earnings. The commission's report points out that the Government make provision for those with severe disabilities which limit their productivity. That helps employers in recruiting and maintaining in jobs workers of the kind that we are considering. Why should we disagree with the conclusion reached by the commission after such profound consideration?

The noble Baroness seeks to dissociate her thinking from those conclusions. I think that that would be mistake. I am not saying that there is a compulsion for anyone to say that everything the commission has done is right; and, of course, the Government have chosen in one particular respect not to agree with the conclusions of the commission. However, where the commission has given such profound consideration to a matter of such sensitivity as this I believe that we should listen carefully to what it has to say. I hope that the noble Baroness will withdraw the amendment, although I have no doubt that I am right in anticipating that she will say once again, perhaps in different words, that she is disappointed. It has been an evening of disappointment for her, but I hope that she will recognise that these issues are not idly dealt with. They were dealt with, as I indicated, in the most cogent and profound way by the Low Pay Commission, and I ask the noble Baroness to accept that reasoning.

6 p.m.

Baroness Miller of Hendon

The Minister tempts me to come up with a word other than "disappointed". It is hard, when standing on one's feet, to think of a variety of words without taking too long over it or testing one's powers too much. Between 1992 and 1995 only 2 per cent. of recipients of disability benefit moved from benefit into full-time work and only 200 of those receiving the present disabled workers' allowance have been encouraged into work by the benefit. I therefore have to say to the Minister that I am disappointed because I believe that what will happen is that very severely disabled people will simply not get work.

Sometimes disabled workers will require extra facilities, such as specially adapted equipment and access and transport facilities, the cost of compliance with the Disability Discrimination Act 1995. If to that employers have to add the national minimum wage I fear that they will not do so because it will be too expensive for them. I hope that I am wrong and that the Minister is correct, but I fear that that will not be the case. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 45 to 47 agreed to.

[Amendment No. 121 had been withdrawn from the Marshalled List.]

Baroness Miller of Hendon moved Amendment No. 122:

After Clause 47, insert the following new clause—

AGRICULTURAL WAGES: REPORTS

("—(1) Within one year of the laying of the first regulations under section 1 or 2 of this Act—

1. (a) the Low Pay Commission shall make an evaluation of the impact of the national minimum wage established by regulations made under section 2 above as it affects workers covered by the relevant Agricultural Wages Order for each territory of the United Kingdom, and shall make a report thereon to the Secretary of State; and
2. (b) the Low Pay Commission and the Agricultural Wages Boards acting jointly shall make a report to the Secretary of State and the Minister for Agriculture, Fisheries and Food on the operation of section 46 of this Act and the enactments mentioned in section 47(1) and (2) of this Act, and may make recommendations for such amendment of that section and those enactments as, in the opinion of the Commission, may ensure the more effective application of this act to agricultural workers.

(2) The Secretary of State shall lay the report referred to in subsection (1)(a), and the Secretary of State and the Minister for Agriculture, Fisheries and Food shall jointly lay the report referred to in subsection (1)(b), before Parliament within 28 days of their respective receipt.").

The noble Baroness said: Amendment No. 122 is placed after Clauses 46 and 47, which deal specifically with the agricultural industry. I can deal with it briefly. The only reason why agriculture is singled out for special treatment is that Clause 16 and the whole of Schedule 2 to the Bill deal specifically with agriculture as a separate industry, as indeed it is since it is the only one still to have a wages council.

Clause 16 allows for the use of information gathered pursuant to agricultural wages legislation for some purposes of the Bill but imposes restrictions of secrecy in other directions. I would not wish any reasonable requirements of confidentiality to be breached. However, we believe that, in the interests of open government, any information in the possession of the Secretary of State for use in connection with this Bill, and any information which she has on which she may base any decision she makes in exercise of her powers under the Bill should be in the public domain, at least in general terms.

I make no prediction as to how Clause 16 will have to be amended or whether it will need to be repealed altogether if the Government eventually produce their freedom of information Bill. The new clause simply requires reports to be made to the Secretary of State and to the Minister of Agriculture, Fisheries and Food on the workings of the Bill as regards this important and special industry after the first year of effective operation. Members of the Committee will have noted that it is just one pair of reports and that neither Minister is to be burdened with annual reports. One year should be enough to give a reasonable idea of how the industry is being, and is likely to be, affected.

The Secretary of State is confident that the effects of the Bill can only be beneficial. We are sure that she will welcome an independent appraisal as regards the agricultural industry and the opportunity, if she is right, to share those excellent findings with Parliament. I beg to move.

Lord Haskel

The noble Baroness referred to the matter of secrecy. Perhaps I may respond by saying that one person's secrecy is another person's commercial confidentiality.

With regard to the amendment, it may be helpful if I explain briefly the three principles behind the Government's proposals as far as agriculture is concerned. The noble Baroness referred to the operation of the agricultural wages boards. The three principles are, first, that the minimum wage should apply in the agricultural sector as elsewhere; secondly, that we should not, through the Bill, seek to make wholesale changes to the existing agricultural wages regimes in England and Wales, Scotland and Northern Ireland, and that the agricultural wages boards will continue with their work; and, thirdly, that the same rules will apply across the board, both in agriculture and elsewhere.

The amendment would require the Low Pay Commission and the agricultural wages boards to report to the Secretary of State and the Minister of Agriculture on the operation of the clauses in the Bill which govern this kind of interface between the national minimum wage regime and the agricultural wages regimes. The main effect of the amendment would be to require the Secretary of State to set up a statutory Low Pay Commission to report on these agricultural matters, whether or not in conjunction with the agricultural wages boards, and to that extent remove the discretion of the Secretary of State with regard to what matters to refer to the Low Pay Commission, and indeed to pre-empt and supplant the planned 1999 review of the agricultural wages regimes.

I should point out that the review of the agricultural wages boards was planned for 1998 but has been postponed until 1999 to give a year to see how the two regimes—the minimum wage regime and the agricultural wages boards regimes—bed down together.

Perhaps I may assure Members of the Committee that the matters referred to in the proposed new clause will be looked at, one way or the other, as part of the review of the agricultural wages regimes. However, I believe that it is too early to speculate on what role a statutory commission might have in the process. Certainly, it is unnecessary to prescribe details of coverage, timing and procedure, as the amendment seeks to do. Therefore, while appreciating the thinking behind the amendment, I do not believe that it is necessary. I hope that the noble Baroness will accept that and withdraw her amendment.

Baroness Miller of Hendon

I said that I could be very brief; I was very brief, as was the Minister. I shall read what he said. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 48 [Application of Act to superior employers]:

Baroness Miller of Hendon moved Amendment No. 123:

Page 30, line 9, at end insert ("provided that in the circumstances it seems just and fair for him to be so deemed.").

The noble Baroness said: Amendment No. 123 may seem at first sight to be a minor drafting amendment. In fact, it is not. The Government's approach to this clause is somewhat curious. I shall explain what I mean shortly. First, I should point out that deeming is a legal draftsman's device—trick is too strong a word—to make something exist when that is not actually the case. The Oxford English Dictionary defines the word as meaning to "think of as existing". Lawyers drafting contracts, or Parliament, in its wisdom, can deem almost anything. If Parliament says, "For the purposes of this Act, Monday shall be deemed to occur after Friday", then that will be the case.

In this clause, the employee of an employee is also "deemed" to be the employee of the head employer. Why should a sub-employee be deemed to be the employee of a person who did not engage him; who may not even know him? Surely common sense tells us that the employer is the person who pays the worker's wages. However, I decided not to wrestle with that riddle because a much more important and serious issue arises from the clause.

I said that the Government's approach seemed to be somewhat curious. That is something of an understatement. In the DTI Notes on Clauses, it states, This clause closely follows the approach of Section 22 of the former Wages Act 1986". In fact, it does not; far from it. The clause follows word for word Section 22(1) of the 1986 Act. However, subsections (2) and (3) provided a defence for the head employer so that, Where the commission … of an offence … is due to the act or default of some other person, that other person shall be guilty of the offence". In subsection (3) it states, In any proceedings for an offence … it shall be a defence for the person charged to prove that he exercised all due diligence and took all reasonable precautions to secure that the provisions … were complied with".

Why were those reasonable exceptions to this identical provision omitted from the present Bill? Why did the notes claim that the clause follows "closely"— I stress the word "closely"—the precedent of the Act introduced by the previous government when it clearly and manifestly does not?

That is not all. Section 22 of the Wages Act 1986 was itself derived from Section 21 of the Wages Councils Act 1979. That contained the same provision as that proposed in Clause 48 of the present Bill, but with the same defences as are contained in the 1986 Act—defences not in the same words as in the 1986 Act, but entirely to the same effect. Those are the defences which the Government, for some reason, have seen fit to exclude from this Bill.

The Wages Councils Act 1979 was derived from the Wages Councils Act 1959 and that too, in Section 18, contained the same provisions as appear in Clause 48 of this Bill, but with the same defences as were later incorporated into the 1979 and 1986 Acts. Nineteen-fifty-nine was 39 years ago, but I am not finished yet. I can go back even further. The identical provision with an identically worded defence to that in the 1959 and 1979 Acts was contained in Section 19 of the Wages Councils Act 1945. We have a history of the proposed Section 48 going back no fewer than 53 years, but always with the two defences which the Government are surreptitiously trying to drop.

Clause 48 is a tried and tested clause, complete with two entirely proper defences going back through no fewer than five Acts of Parliament and two of those Acts were introduced under old Labour governments. When the present new Labour Government again introduce this tried and tested provision in the present Bill, they quietly deleted those long-standing defences which are intended to protect a wholly innocent person who is able to prove that any offence was not his fault but the fault of a third party.

Why have the Government sought to create an absolute offence when, for over half a century, there has been a defence in certain circumstances? We want to know who gave the instructions for the removal of those two defences. Which Minister was it? No less important a question is this: why, in the notes to the Bill, did the DTI incorrectly claim that the present clause "closely"—again I emphasise that word—follows Section 22 of the Wages Act 1986? Which Minister, after deleting the two defences, gave instructions for the word "closely" to be inserted in the notes, which clearly and obviously originally read, this clause follows the approach of section 22 of the former Wages Act 1986"? It does not remotely do so because of the omission of those two important subsections containing defences which were included in all the five Acts which directly preceded the present Bill. I should like to know the reason not only for the proposed exclusion of defences but also for the deceptive way in which the Government dealt in the notes with that major change—notes which stand the facts completely on their head—by saying that Clause 48 closely follows Section 21 of the 1986 Act when it does not.

I realise that the Minister cannot be expected to answer those questions immediately. However, they are not rhetorical questions. I trust therefore that the Minister will agree to give me a detailed written reply to both those questions before the next stage of the Bill. The noble and learned Lord, Lord Falconer, and the noble Lords, Lord Clinton-Davis and Lord Haskel, are all persons of the highest integrity and we can rely on them to give a full answer to these serious questions.

My amendment adds a simple, uncomplicated, easily understood and reasonable defence. However, the Minister need not spend too much time in commenting on the amendment because I do not intend to press it tonight. The reason for that is that I expect the Government to introduce at a later stage an amendment incorporating into the present clause the tried and tested wording of the 1986 Act and its four predecessors.

I realise that the Minister cannot give me such an undertaking today. As the noble Lord, Lord Clinton-Davis, pointed out at the beginning of the debate last Monday, at col. 1380, he is not in charge of the Bill; it is the Minister of State in the other place who is in charge. Perhaps it is to him the Minister should first direct our questions as to who altered the original section and ordered the incorrect insertion of the word "closely". I beg to move.

Lord Skelmersdale

Before the noble and learned Lord responds to the interesting and incredibly well-researched speech of my noble friend, perhaps he can respond to my question, which is much more fundamental.

I ask the noble and learned Lord to put his mind to the concept of small businesses. A small business will have an employer, could well have a foreman or supervisor and of course will have an employee. In relation to this Bill, and ultimately the Act, surely it is the employer who is responsible for paying not less than the minimum wage; the foreman or the supervisor has nothing to do with that. Therefore, if the supervisor or the foreman is "deemed" under this clause—and assuredly they would be—surely the Bill is striking at the wrong target. It is the employer who decides on the wages, not the foreman or the supervisor.

Lord Falconer of Thoroton

Perhaps I may deal first with the point made so effectively by the noble Baroness, Lady Miller of Hendon, in relation to the wording of Clause 48. The point she made with great vigour was that the Government had said through the Notes on Clauses that this is the same as Section 22 of the Wages Act 1986. She said that it is the same as Section 22(1) but that it is not the same as the remainder of that section because the remainder of that section has provision whereby, if the commission of an offence is due to the act or default of some other person, that other person is not guilty of an offence. It also says that in any proceedings for an offence under subsection (1) or (2) above it shall be a defence for the person to prove that he exercised all due diligence and took all reasonable precautions to secure that the provisions of this Act, and of any relevant regulations made under it, were complied with by himself and by any person under his control.

The structure of the Bill is that where there is a superior employer—someone above the immediate employer—he is made jointly liable as the employer with the immediate employer where certain specified circumstances are satisfied. If one then goes back to Clause 31 of the Bill, certain defences are included, including the defences which were formerly in Section 22 of the Wages Act 1986.I have not had a chance to compare precisely the defences under Section 22 of the Wages Act 1986 with the defences in Clause 31 because I did not know that this point would be raised. However, by the way the noble Baroness read them, they seem to be precisely the same defences as are included in Clause 31 of the National Minimum Wage Bill. The one that can be seen most obviously as being the same is in subsection (8) of Clause 31, which is the "I did everything I could" defence—the due diligence defence.

The noble Baroness's point would be a good one if it was good on the facts. However, fortunately from the point of view of the structure of the Bill, I think it is wrong because these defences apply to anyone, whether he be a superior employer or not. Of course I shall check that that is the position, but I think it is. So, with respect to the noble Baroness, I think that her speech was based on a fundamental misconception. In those circumstances, I think it would be inappropriate for her to persist in the allegation that there was any deception on the part of the Government in saying that Section 22 has been followed, because I think it has been. Obviously, she will need to check what I have said but I think it was a misconception.

She said in her speech that I should not bother too much with her actual amendment because this, as she saw it, better point became the fundament of her speech. If I may, I shall accept her invitation. It was accepted in another place that we had introduced this because there would have been considerable scope for abuse if we had not done so. Her amendment proposes that we should introduce a caveat to the application of the superior employer rule where the tribunal thought it was not fair and just to apply it. That is simply impracticable as a means of providing protection for people who are employed in this way in, for example, the agricultural industry, the construction industry or the textile industry.

Perhaps I may deal with the point made by the noble Lord, Lord Skelmersdale. We are doing precisely what he suggested we are doing. If one does not have this amendment, the target—and the only target—would be, in his parlance, the foreman. One would not have the man who is actually paying the wages. Without Clause 48, the employer would be the foreman. What one needs to do is to bring in the real employer, who is the one above him, in order to make sure that the person who is in reality the employer—the person who is providing the wages—is caught by the Bill. Therefore, with the greatest respect to the noble Lord, I think we are doing precisely the reverse of what he suggests we are doing. We are bringing in the person who pays so that there is the real employer before the tribunal or the court.

Lord Dixon-Smith

Before the noble and learned Lord sits down, perhaps he will consider subsections (6) and (7) of Clause 31. I am not convinced that his explanation in response to my noble friend's amendment stands up. Subsection (6) states: Where the commission by any person of an offence under subsection (1) or (2) above is due to the act or default of some other person, that other person is also guilty of the offence". That may be fine, but subsection (7) states: A person may be charged with and convicted of an offence by virtue of subsection (6) above whether or not proceedings are taken against any other person". It looks as though it does not necessarily provide a defence because one could gun for both parties whereas there might be only one guilty party.

Lord Falconer of Thoroton

I think the noble Lord is right to say that subsections (6) and (7) are not defences. I was particularly referring to subsection (8), which states: In any proceedings for an offence under subsection (1) or (2) above it shall be a defence for the person charged to prove that he exercised all due diligence and took all reasonable precautions to secure that the provisions of this Act, and of any relevant regulations made under it, were complied with by himself and by any person under his control".

Lord Dixon-Smith

I am grateful to the noble and learned Lord.

Lord Fraser of Carmyllie

The noble and learned Lord has given an interesting reply. We shall certainly want to look carefully at subsection (8) of Clause 31. However, as with all splendid answers, it tends to raise more questions than it resolves. If the head employer is to be deemed for the purposes of this Act to be the employer of the person jointly with the immediate employer, there is in subsection (2) of Clause 31 a requirement about the keeping or preservation of records in accordance with regulations to be made under Clause 9. I am not clear that I have understood the structure of this provision correctly. Does that head employer just have to make sure that the other employer with whom he is deemed to be an equal keeps records, or does he have to keep a separate set of records himself in order to comply with the provisions into which, through from that clause and into Clause 31 and Clause 9, he is drawn?

Lord Falconer of Thoroton

The effect of Clause 48 is that the head employer—the superior employer—and the immediate employer are to be treated jointly. They are both regarded as employers of the worker jointly. The effect of that is that they are both employers and both have all the obligations of the Bill placed on them. Precisely how they comply with those obligations will depend on the facts in every case. It would be wrong for me to indicate that in a particular case it would or would not be sufficient if the records were kept by one of the two but both had access to them. It would be a question of fact in every case.

Lord Fraser of Carmyllie

I think the noble and learned Lord will want to return to this point because he will appreciate that, if the outcome of the interplay of these provisions is that a head employer cannot compel the employer who is closer to the employee to keep the records and if he has to keep his own separate set of records, some quite interesting issues begin to be raised about the burdens that might be imposed on relatively small businesses. I am sure it is not the purpose of this Government, any more than it was the purpose of the previous government, to impose unnecessary burdens and red tape on small businesses.

6.30 p.m.

Lord Falconer of Thoroton

I fully accept that it is not the Government's intention to impose extra burdens on anyone. We have to remember that the immediate employer will be the employee of the superior employer. Between them one would have thought that they could make sensible arrangements for the keeping of records.

Lord Skelmersdale

I am grateful to the noble and learned Lord for his instant reaction to my perhaps inopportune question. How does the clause relate to Clause 31(1) to which the noble and learned Lord also referred in the course of his remarks? That clause speaks specifically about the employer. Therefore, does Clause 48 mean, in the noble and learned Lord's terminology, both employers; namely, the head employer and the intermediate employer?

Viscount Thurso

Before the Minister answers, perhaps I may say that I have become slightly confused between what is an employer and what is not. Is it not all defined in Clause 54 which sets out that there has to be a contract of employment and therefore a simple supervisor cannot be a subordinate? Is that not the answer?

Lord Falconer of Thoroton

Perhaps I may first deal with the question of the noble Lord, Lord Skelmersdale. It is quite a simple and clear structure. Clause 48 makes both immediate and superior employers joint employers for the purposes of Clause 31. Both can be guilty of an offence in Clause 31 subject to the defences in the clause. That legislative technique is adopted to avoid abuse where the real employer is the superior but he is using the immediate employer as a means of trying to get round this or any other provision.

As regards the question put by the noble Viscount, Lord Thurso, broadly it is as simple as he said, subject to Clause 48, except that in Clause 54 there are circumstances in which there could be a relationship which gives rise to the payment of the national minimum wage whereas in strict legal terms there was not a contract of employment. I do not believe that the attractively simple solution he suggests can quite be applied.

Baroness Miller of Hendon

I thank the noble and learned Lord for his explanation. I shall read it very carefully. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 48 agreed to.

Clause 49 agreed to.

Baroness Miller of Hendon moved Amendment No. 124:

After Clause 49, insert the following new clause—

FINANCIAL STATEMENT AND BUDGET REPORT

(". The Chancellor of the Exchequer, acting in consultation with the Secretary of State, shall include in the Financial Statement and Budget Report an assessment of the cost of the national minimum wage to Her Majesty's Government in respect of employment costs in the public sector.").

The noble Baroness said: I made clear to the noble Lord, Lord Haskel, that in moving Amendment No. 124 I would also speak to Amendment No. 125. Unnecessary secrecy in Government leads to arrogance in governance and defective decision making". Those are not my words, but the opening sentence of the Government's recent White Paper Your Right to Know: Freedom of Information. The traditional culture of secrecy will only be broken down by giving the people of the United Kingdom a legal right to know". Those are not my words, but those of the Prime Minister in his personal introduction to the White Paper.

In the spirit of those fine sounding words, Amendment No. 125 is a simple but democratically important addition to the Bill. It anticipates the legislation that the Government say they intend to introduce. It can be summarised in a few, short sentences. Subsection (1) requires the Secretary of State and the Chancellor of the Exchequer to lay an annual report before Parliament as to the workings and the effects of the national minimum wage. Subsection (2) entitles the Low Pay Commission to make a similar report to the Secretary of State. If it chooses to do so, she in turn must lay that report before Parliament unless its report is already covered by her own annual report. Subsection (3) sets out nine headings under which the Secretary of State and the Chancellor are required to report. The Low Pay Commission may report on all or any of those headings as it thinks fit. Subsection (4) makes it clear that the reports can contain any other material thought to be relevant.

The purpose of the amendment is purely in the interests of open government—a cause which the present Administration wish to espouse. It ensures that the Secretary of State keeps Parliament fully informed of those consequences—good or bad. It is information that Parliament is entitled to have—good or bad.

The Government claim that the Bill will have no adverse effect on employment; no adverse effect on industry; no adverse effect on exports; and no adverse effects on the economy generally. If their confidence is not misplaced, then no doubt they will want to trumpet to the entire population the benefits that they have secured for it.

If our predictions, unhappily, prove to be correct—and it will give us no satisfaction if they are, because of the detrimental effects—then it is only right that the Government should come to Parliament and admit their errors and say what they are going to do about them.

Apart from the fact that there is absolutely no reason why the Government should not supply the information, this is definitely one amendment that the Government cannot arbitrarily reject, as they have so many others.

The arguments for the new clause proposed in Amendment No. 124 are precisely the same as those I have just mentioned. Indeed, at one time I contemplated putting both clauses together, but I was advised that there might be different implications between the two.

Again in the interests of open government, there should be no objection to the Chancellor telling Parliament at the appropriate time of the year how much it is costing the public, both as taxpayers and as council tax payers, to implement the Government's policy. I shall be glad to discuss any constructive modifications which the Minister may wish to suggest about specific aspects of the new clauses.

Subject to that, if the Government say they are unable to agree to this very reasonable request in the interests of open government, then the information we want them to make public may have to be extracted from them rather in the manner of pulling teeth in an annual series of oral and written Questions which they will not be able to evade. I say "may have to be extracted", because the Committee will understand that I am in no position to predict what will happen in the future. I certainly have no part in tactical decisions. I can only express what is a personal opinion as to what conceivably might happen.

I do not know whether the Minister had it in mind to agree to these amendments all along. If not, and if he wants time to consider the theoretical consequences that I have suggested might—I stress "might"—follow, I would be willing to afford time for consultation and bring back an agreed amendment or amendments at another stage. I beg to move.

Lord Razzall

Before the Minister responds, perhaps I may intervene. As he is aware, we on these Benches stand four square behind the Government in their determination to ensure that the National Minimum Wage Bill goes through. However, as he well knows, there is an area on which agreement has not been reached with the Government; namely, the area which the noble Baroness has touched on. I and my colleagues have pressed the Minister on a number of occasions and each time he has avoided answering us, with incredible legal and political felicity. As a result of the events of last week we realise why his forensic skills in this area have been put to the test so much.

However, I would like to take the opportunity to press the Minister again. It is important that the report from the Low Pay Commission is permanently enshrined in our legislative and statutory structure. It is important not only for the reason which the noble Baroness gave as regards full disclosure to the public—we share that view—but, more particularly, because of the fear I expressed last week in response to the Statement. Unless the Low Pay Commission is given permanent status and clear criteria are set out in the Bill as to the form of the report we can expect regularly, then every year we shall have the kind of undignified political football passing that we witnessed last week in the Government's response to the initial report of the commission. Therefore that is why I ask the noble Lord the Minister again to confirm that the Government will give permanent status to the Low Pay Commission and will bring forward amendments at Report stage to make sure that happens.

Lord Falconer of Thoroton

If I may, I will speak to Amendment No. 125 at the same time as I speak to Amendment No. 124. Amendment No. 125 is the one which encapsulates what the noble Baroness is after, but that amendment—

Lord Razzall

I was of course referring in my remarks to the forensic skills of the noble Lord, Lord Clinton-Davis.

Lord Falconer of Thoroton

I assumed that was the position! Amendment No. 125 would require in its first subsection that the Secretary of State and the Chancellor of the Exchequer would together report to Parliament annually on the operation of the national minimum wage. The amendment proposes that they would need to take account of a host of factors: the economy and competitiveness, regional factors, comparative pay, unemployment and benefit levels, training and labour markets, small business, the disabled and age variations.

These are all factors which the Low Pay Commission has looked at in coming to its recommendations and the obligation in the new clause for Ministers to report annually on them would in effect create a permanent monitoring duty in the Bill. The Government have no argument with the need for monitoring. It is clearly important to monitor the effects of any new legislation, especially in an area as important as the minimum wage, when a country has never before had a universal statutory minimum.

As with all government policies, we will wish to evaluate the effect of producing a minimum wage in full, which is likely to include most, if not all areas listed in the proposed new clause in the amendment put forward by the noble Baroness. The amendment—this is strongly supported by the noble Lord, Lord Razzall—also sees a permanent role for the Low Pay Commission in continuing to monitor the impact of the minimum wage. The Government have made clear in publishing the report of the Low Pay Commission that they wish the commission to continue to monitor and research the impact of the minimum wage following its introduction.

The criteria listed by the new clause in the amendment look sensible enough, though perhaps not exhaustive. Doubtless, given time, we could all come up with more which could be added. That points to one of the reasons why I ask the Committee to oppose this amendment, if it is pressed, because it is unnecessary and over-rigid to prescribe in primary legislation who should monitor and report on the impact of the legislation, how they should do that and when.

Furthermore, however important the matters involved may be, it is important to recognise that producing such a report would be an extremely time-consuming exercise and its content could also overlap with other government documents, notably the competitiveness White Paper and possibly, to some extent, Budget documentation. It is therefore preferable to leave this matter open. An annual report from the Secretary of State and the Chancellor specifically on the national minimum wage could easily become seen as part of the annual pay round and lead to expectations of annual increases.

Turning now to the role of the Low Pay Commission, which was specifically referred to by the noble Lord, Lord Razzall, the amendment—and this is supported by the noble Lord—impliedly presumes that the Low Pay Commission will be a permanent body with the power to initiate its own work and make reports, rather than having to wait for matters to be referred to it by the Secretary of State.

I should start by making it quite clear that the Government fully appreciate the value of the work that the commission has carried out in making its report. I have also already indicated that the Government wish the commission to continue to monitor and report on the impact of the minimum wage following its introduction. The position envisaged by the amendment goes somewhat beyond what the commission was asked to do for its first report. The commission envisaged by this amendment would have the power, it appears, to report on anything it wanted at its own initiative, including a whole range of matters raised and debated previously both in this Chamber and another place at various times during the passage of this Bill. I can imagine that life as a commissioner in such a body would be incredible fun. It would be a job for a very long period indeed and there would be the opportunity to indulge in any particular matter of interest—and all, of course, at the public expense.

I find it strange that the noble Baroness should support such a powerful and unaccountable body. This runs counter to other amendments she has put forward which seek to constrain and limit the Low Pay Commission's powers. Your Lordships should have no fear. The Government envisage the commission as task orientated, and not unlimited. It is right that Ministers, as elected representatives accountable to Parliament, should be responsible for the setting of those tasks, and one of those tasks is that of monitoring, as I have indicated.

It is in order to maintain the task-orientated focus that the commission must be essentially reactive and not proactive. The commission must, of course, be independent in reaching its views, but the commission's ongoing activity should be within the framework set by politicians. There are good administrative and accountability reasons for this arrangement. I believe that the proposed amendment, together with the views expressed by the noble Lord, Lord Razzall, would go beyond what the Government believe is a common-sense structure for the commission's activities and in relation to reporting to Parliament. I therefore ask the Committee to reject the amendment, if it is pressed.

6.45 p.m.

Lord Fraser of Carmyllie

Before my noble friend determines whether or not to withdraw her amendment, can I say to the noble and learned Lord that I thought he glided through that answer extremely skilfully. There is one point, however, on which I should like a little further clarification. There has been some political speculation, doubtless false, in the media to the effect that the Prime Minister is not wholly enamoured of the idea of the permanent existence of this Low Pay Commission. While he certainly indicated in his answer that the Government thought it desirable that there should be a permanent evaluation of what is going on, I am not sure that I actually heard him say that indefinitely and on a permanent basis the Low Pay Commission is to be the body which will do that. I may have misunderstood the position, but if the noble and learned Lord is in a position to say that the Low Pay Commission is to be a body of permanent establishment, it would certainly help to clarify the doubtless wholly unjustified speculation there has been in the media.

Lord Falconer of Thoroton

I thought—but I was wrong—that my answer was entirely clear. The answer is this: we believe that this sort of policy is one which does require monitoring and evaluation. Secondly, we consider that the Low Pay Commission is a body to whom particular tasks—I see the noble and learned Lord laughs—can be assigned. I think that is perfectly clear.

Baroness Miller of Hendon

I thank the noble and learned Lord the Minister for his reply. When he started I got very excited and thought that perhaps at long last I was going to have one of my amendments accepted just like that. Therefore he will understand why I was slightly disappointed when we came to the end of his reply. However, I will read very carefully what he has said, and at this stage I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Clause 50 agreed to.

[Amendment No. 125 not moved.]

Clause 51 [Regulations and orders]:

Lord Clinton-Davis moved Amendment No. 126:

Page 33, line 19, after ("power") insert—

1. ("(a) of the Department of Economic Development to make an order under section 26(6) above, or
2. (b)")

The noble Lord said: I beg to move Amendment No. 126 formally.

On Question, amendment agreed to.

Lord Clinton-Davis moved Amendment No. 127:

Page 33, line 22, after ("such") insert ("order or").

On Question, amendment agreed to.

Clause 51, as amended, agreed to.

Clauses 52 and 53 agreed to.

Clause 54 [Meaning of "worker", "employee" etc.]:

Lord Fraser of Carmyllie moved Amendment No. 127A:

Page 34, line 7, after ("person") insert ("(including a partnership)").

The noble and learned Lord said: I believe that I can move this amendment briefly. The noble and learned Lord will recollect that earlier in this Committee stage we were concerned about whether or not partnerships are to be treated as employers, and, if so, about exactly what liability would be imposed on individual partners. I am very much aware that under the law of Scotland a partnership is regarded as having a separate legal persona. A brief tutorial from the noble and learned Lord might be helpful and enable me to be confident that such a partnership is a "person" in the context of Clause 54, by which I am a little baffled. I trust that the answer will be yes. If the answer is in the affirmative, I wonder whether the definition is necessary. I invite the noble and learned Lord to answer my question in one of two ways. I beg to move.

Lord Dixon-Smith

In rising to support the amendment, perhaps I may say that I am a little intrigued because we are considering definitions at the moment and the clause states that an "employer" is "the person". An employer might be a person, but it might be a company or a charity. It might even be—heaven help us!—the Government because some people who are employed by the Government are occasionally vulnerable, depending on their employment. I wonder whether for the sake of clarity the clause should not refer to "the person or organisation".

While I am on my feet, I should add that I am a little concerned by subsection (5). Perhaps I may impose on the noble and learned Lord for a moment and quote from the subsection which defines "employment" as follows:

1. "(a) in relation to an employee, means employment under a contract of employment: and
2. (b) in relation to a worker, means employment under his contract".

Apart from the tautology, is not that a totally indecent form of class distinction?

Lord Falconer of Thoroton

Perhaps I may deal, first, with the amendment which stands in the name of the noble Baroness, Lady Miller of Hendon, and which was moved by the noble and learned Lord, Lord Fraser of Carmyllie. I am glad to have the opportunity to clarify the position and status of a partnership for the purposes of this Bill. My noble friend Lord Clinton-Davis gave an initial reaction when asked about this point on an earlier occasion in Committee. I am now in a position to give a fuller explanation and shall do so.

The amendment affects Clause 54(4) as to the meaning of "employer". It makes explicit that the notion of "person"—and therefore "employer"—incorporates a partnership. I can assure the Committee that the amendment is not necessary. By virtue of the Interpretation Act 1978, the word "person", when used in statutes, includes a body of persons whether corporate or unincorporate. A partnership in England and Wales is an unincorporated body of persons that has no separate legal identity. Scottish partnerships are not corporate bodies, but they have a distinct legal personality separate from their partners. The word "person" in Clause 54(4) therefore includes partnerships in both England and Scotland. I believe that that was the fundamental point raised by the noble and learned Lord.

Partners are jointly and severally liable for the partnership's debts. In England and Wales each partner, some partners or all partners can be sued. In Scotland, only the partnership can be sued although the partners can be sued if the partnership becomes insolvent. None of that means that a worker employed to work for a partnership can recover the minimum wage more than once. There is only one debt and it follows that he can recover it only once. I hope that that fully explains the point raised by the noble and learned Lord when moving the amendment.

I turn now to the point raised by the noble Lord, Lord Dixon-Smith. Clause 54(3) states: 'worker' … means an individual who has entered into or works under …

1. (a) a contract of employment; or
2. (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services".

Subsection (5)(a) makes it clear that "employment" (in relation to an employee) relates to a contract of employment whereas, under paragraph (b) (in relation to a worker) it relates to a contract that can be wider than a contract of employment because of the provisions of Clause 54(3). It is not a class-based distinction; it is a perfectly sensible distinction based on the wording of this Bill. I could not expect anyone to pick that up, given the speed with which I gabbled through it, but I believe that that is the answer to the noble Lord's point.

Lord Fraser of Carmyllie

I am delighted that my amendment has given the noble and learned Lord an opportunity to display his learning of the law on both sides of the border. I am grateful to him. He has reassured me that partnerships are included in these provisions. I still have a small query about whether subsection (4) is necessary, but perhaps the noble and learned Lord would care to reflect on that and possibly discuss it before the next stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 agreed to.

Clause 55 agreed to.

Clause 56 [Short title, commencement and extent]:

Baroness Miller of Hendon had given notice of her intention to move Amendment No. 128:

Page 35, line 12, at end insert ("but not before one year has elapsed from the day on which the Low Pay Commission makes its report and it is laid before both Houses of Parliament, together with a report from the Secretary of State on the results of consultation undertaken by him with representatives of industry and of small business on the content of the Commission's report or, where these events take place on different days, from the latest such day.").

The noble Baroness said: I shall not be moving the amendment in view of the fact that the Low Pay Commission recommended, in paragraph 7 of its report, that the national minimum wage should commence in April 1999—that is, in 10 months, compared with the 12 months that I propose in my amendment. I do not believe that that is a difference worth arguing about. However, perhaps I may mention that I would not have been put to the trouble of having to argue the amendment—neither would the Minister nor his officials—if we had had a copy of the commission's report previously.

[Amendment No. 128 not moved.]

Amendment, by leave, withdrawn.

Clause 56 agreed to.

7 p.m.

Schedule 1 [The Low Pay Commission]:

Baroness Miller of Hendon moved Amendment No. 129:

Page 36, line 6, after ("and") insert ("at least").

The noble Baroness said: In moving Amendment No. 129, I should like to speak also to Amendments Nos. 130 and 131, which are all drafting amendments to the first schedule of the Bill. The first schedule is to be incorporated into the Act under Clause 8(9) to create a permanent Low Pay Commission to replace the so-called non-statutory one which operates at present, the non-legal functions of which—I do not mean "illegal"—will be retrospectively ratified when the Bill is passed. The schedule sets out the constitution of the Low Pay Commission, makes financial provisions and regulates its proceedings. I should like to take each of my amendments in turn and to explain their purpose.

Amendment No. 129 seeks to provide for "at least" eight members of the commission. For all I know, eight members may be more than enough—in the minds of some noble Lords, any number might be too many—but there could conceivably be a need for additional members if the complexity of the commission's operations demanded the membership of more experts. I am the last person to encourage an expanded quango such as this but, as the provision is purely permissive, it will give the Secretary of State scope to act, if necessary, without coming back to Parliament with an amending Act.

Schedule 1(2) leaves the Secretary of State with the power to construct the membership in such a way as she may consider "appropriate". What the Secretary of State may consider appropriate may seem far from appropriate to others. Amendment No. 130 requires the Secretary of State to appoint a commission with an equal balance of persons with the necessary qualifications, and not mere token members from one group while packing it with members more amenable to a particular point of view. After all, in employment tribunals consisting of three persons there is a statutory balance between employers and trade unions. Paragraph 1(2)(c), as it currently appears, calls for the inclusion of members with other relevant knowledge or experience". but what is relevant? Is it service on other quangos or membership of some purely academic think tank with no practical experience of the real world or knowledge of how to juggle a bank account to meet the payroll on a Friday?

Two of the qualifications to which the Government have committed themselves are either trade unions or employer organisations. The third qualification to which the Secretary of State has coyly refrained from committing herself is the most essential one: knowledge and experience of business.

Despite the two earlier paragraphs that require trade union and employer experience, experience of business is the key qualification that the present paragraph omits. That means that it comes in only by interpreting "other relevant knowledge or experience". Why does the Secretary of State not spell it out? Perhaps she wants an escape hatch to avoid the involvement of people from the real world of business. If I am mistaken on the point I am certain that the Minister will explain the reason for this serious omission and perhaps agree to put it right by including representatives of small businesses in any future commission.

It is as if the Secretary of State, while window dressing a balanced organisation, deliberately wishes to ignore or sideline the unrepresented small business community whose interests are not the same as those looked after by the mighty employer associations. What the CBI or the IoD think is of no interest to a business running a factory with 50 employees, much less the owner of a hairdressing salon.

That is the explanation for the point that underlies Amendment No. 130. It provides for the inclusion of at least one person who has practical knowledge and experience of running a small business. I do not in any way disparage the qualifications of any of the present members of the commission, especially Mr. Dewar. I am referring simply to the constituent members of the commission on an ongoing basis if the Secretary of State decides that it has any future. It is the small businesses that will be most affected by the national minimum wage, not the giant supermarkets who can easily cover the cost by adding one penny to a loaf of bread or a packet of salt; nor will it affect the large industrialists who already pay premium rates for skilled workers. But it will affect the local cake shop or pizza parlour.

No taxation without representation! The national minimum wage is not a tax but it is money that comes out of someone's pocket. It is only right and proper that the voice of small businesses should be heard, even if it is not to be listened to, as I fear it may not.

Clause 8(9) of the Bill gives the Secretary of State yet another permissive power which she may exercise or not as she chooses without further reference to Parliament. The power seeks to make the low pay unit an ongoing body once its initial functions on which it is currently engaged have been performed. The Committee should note that that power may be exercised at any time, not within a reasonable time. It may be exercised in a year, two years, four years, some time, never. The point is that whenever the Secretary of State in her wisdom feels the urge to have a Low Pay Commission she is stuck with it, if for whatever reason she later decides that it is redundant.

Since the Secretary of State is busily giving herself powers to legislate by statutory instrument and all kinds of optional powers while steadily refusing others, she most certainly should have the option, which once again she need never exercise, to close down the Low Pay Commission if it is no longer required without coming back to Parliament with an amending Act.

I am in some technical difficulty over Amendment No. 131. It appears in the Marshalled List as intended for the end of line 30 on page 36. I believe that it should have gone on page 7 at the end of line 5 which is Clause 8(9) to which I have just referred. The Committee has already agreed Clause 8 stand part and I do not believe that I can go back to it. If the Government accept this very reasonable amendment I believe they will be able to agree where it can be inserted at a later stage of the Bill. For the moment, I apologise to the Committee for not noticing the error until I re-read my notes earlier today. I beg to move.

Lord Clinton-Davis

The noble Baroness demonstrated once again her deep opposition to the Bill in her closing remarks. I respect her position but I cannot agree with it. She resorted to a number of shibboleths. She said that small businesses were not listened to. That is simply not correct. Small businesses were widely consulted by the Low Pay Commission. The noble Baroness said that no member of the LPC had run a small firm. That is not correct. The member to whom she referred specifically has done so and is currently chief executive of the Scottish Grocers' Federation. It is patently incorrect to say that the views of small firms have not been consulted or considered in these recommendations.

The noble Baroness disparaged the role of the CBI. I believe that members of the CBI are very knowledgeable about the interests of 190,000 small businesses, and perhaps even medium-sized enterprises. I have said many times that it is wrong to refer in this context to representatives. If the noble Baroness wants someone who has experience but is not a representative of any particular interest that is fine, but because these amendments have been drafted in this extraordinary way she has constantly ignored the position of the Government that these people are not there as representatives. Those individuals have expertise. Surely, the correct criteria should be expertise and independence.

I should like to deal briefly with the remainder of the membership of the LPC. They were appointed not only within the criteria to which I have just referred but in a way that complied fully with the Nolan procedures for public appointments. The Government have stood rigidly by those requirements. The Government stressed in their advertisement for members that they were looking for individuals with experience of a range of industries and services. They were required to display a record of high achievement in the chosen area of expertise.

We sought to achieve a balance of representation, and I believe that we have succeeded. The commission is there to try to achieve a reasonable consensus among the social partners. The noble Baroness appears to dismiss the trade unions as having no interest and no expertise in this matter. That is patently absurd. I entirely reject that philosophy. It was one of the many things that went wrong with the previous government. The previous government were deaf to many views held widely in the community because of ideology. That is not the input that we wish to make in relation to this or any other policy.

The commission is not there to act as a forum for different parts of industry to pursue their own interests. We want balance. We do not want advantage. That is the approach which the Bill reflects and which is rejected, of course, by the Opposition.

Amendment No. 129 asserts that eight should be the minimum number of members rather than the fixed number as at present. There is some advantage in flexibility. That would enable additional members to be appointed, but there is also a disadvantage. I should have thought that it would be clear to most Members of the Committee that there would be a risk of open-endedness and unwieldiness. While the choice of any particular member is, to some extent, arbitrary, we were determined to provide a group—I believe that we succeeded—of a reasonable and manageable size, including the chairman, comprised of three, identifiable, mini groups. That is the right way to achieve balance.

The fixed size of the commission would enable us to combine a core of expertise and experience with a degree of flexibility and ease of management. The commission is sufficiently comprehensive to ensure a wide spread of interests and a knowledge of the various sectors of our industrial and business life. The commission could draw on extra support from others—people who can provide advice without being appointed as full commission members. That is what the commission has done in going about its business. That is an entirely sensible approach.

The strongest argument for a group of this size may be that it seems to have worked well for the present non-statutory commission. So is it not sensible to adopt the same criteria for the statutory body?

Amendment No. 130 would lay down strict rules about the make-up of the commission requiring an equal number of members from the employers' and employees' side. It would leave open the number of members to be appointed as independent experts, but with the upper limit that the independent members could not outnumber the remainder. The effect would be that the commission could, but need not, have a membership of which half consists of independent experts. I am sure that the amendment is a probing one. However it seems to be inconsistent with the general thrust of the case made by members of the Opposition in another place when they discussed the commission's membership.

It was suggested there that once the commission had made its first report, academics could be weeded out. I do not know what would happen to them after they had been weeded out, but that was the suggestion. They would be replaced by those with direct business experience. The noble Baroness did not go as far as that this evening. By contrast, the amendment would increase substantially the number of academics on the commission.

All these are matters of judgment. It is a question of balance. I believe that we have struck the balance correctly. It has worked in practice. That surely is the essence of the matter.

I turn now to Amendment No. 131, to which the noble Baroness alluded. It would require the statutory Low Pay Commission to continue to exist once appointed—by default, as it were—until the Secretary of State is satisfied that there is no purpose in the commission continuing. I thought that I heard the noble Baroness argue that she wanted the whole thing wound up; but, there it is, she wants it to go on indefinitely.

I believe that the noble Baroness is saying that the commission should be wound up once it had no significant functions to undertake. My noble friend referred earlier to the way in which the commission would work. It would be task-oriented; it would be linked to need. That is the basis for any future appointment of a statutory commission. On completing its task, we intend that the commission be disbanded if there is nothing further for it to do. The amendment assumes that the commission will have continuing duties, beyond reporting to the Secretary of State on the matters referred to it.

Once the commission has reported on all the matters referred to it, it will have nothing further to do. There will be no point in continuing its existence. To some extent we are in unknown territory, because it is the first time that we have had a national minimum wage. So it is right to see what the impact is, and what follow-up will be necessary. We envisage the commission having a part to play in all that. We want monitoring of and reporting on the impact of a minimum wage, following its introduction. The amendment is superfluous or uncertain in its effect. I ask the Committee to reject it.

Perhaps I may mention at this stage, because I believe that it will be the last opportunity for me to do so, and it is appropriate for me to say this before we close the Committee proceedings, that there will be another small batch of government amendments on Report. I had already indicated to the noble Baroness, Lady Miller, and the noble Lord, Lord Razzall, that some further technical amendments would be coming. I can assure the Committee that the amendments are highly technical. They are nearly all linked to and relate to the bodies for which the Secretary of State may make arrangements under Clause 13 for their officers to act as minimum wage enforcement officers, and the position that could arise following devolution as a result of the Scotland Bill. There is also one purely drafting amendment.

I hope that the Committee will forgive me if I do not go into detail at this stage. I can assure the Committee that we shall be tabling the amendments shortly. I shall be writing with a detailed explanation to the noble Baroness and the noble Lord, as I did earlier for the other government amendments. Disappointed though I am sure she is, I hope that the noble Baroness will withdraw the amendment.

7.15 p.m.

Baroness Miller of Hendon

I once again thank the Minister for the courteous way in which he dealt with my amendment this afternoon. Having formerly been involved in a small business, I do not believe that small businesses are represented sufficiently. I regret that. I say that in view of the many amendments that I moved today about spouses and so forth. However, I understand what the Minister has said.

The Minister referred to Amendment No. 131. I am merely asking for a little more flexibility. I am not saying that the commission should go on for ever. I am trying to ensure that the Secretary of State has the flexibility that she requires. This is the final amendment that I move at this stage of the Bill. I thank the noble Lord, Lord Clinton-Davis, and the noble and learned Lord, Lord Falconer, for the courteous and good humoured way they rejected all of my reasonable amendments, even though I argued them—in their words—so beguilingly. Nevertheless, at the next stage, I shall be returning to some of the amendments that I withdrew or did not move, by which time I hope that the Minister will have persuaded the Secretary of State to take a more positive attitude.

Lord Clinton-Davis

Before the noble Baroness sits down, perhaps I may say that she has been most courteous and kind as she always is. I cannot call her my noble friend, although I can call her my friend, in other respects, as she knows. Both noble Baronesses and the noble and learned Lord, Lord Fraser, have been articulate—I cannot say helpful. This is not the appropriate time to thank everyone. I shall reserve that for another occasion.

Baroness Miller of Hendon

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 130 and 131 not moved.]

Schedules 1 and 2 agreed to.

Schedule 3 [Repeals and revocations]:

Lord Clinton-Davis moved Amendment No. 132:

Page 52, column 3, leave out lines 45 to 47.

On Question, amendment agreed to.

Schedule 3, as amended, agreed to.

House resumed: Bill reported with amendments.

Lord McIntosh of Haringey

My Lords, the early completion of the National Minimum Wage Bill means that the time available for this evening's Unstarred Question is no longer limited to the one-hour dinner adjournment. The debate can now run for a maximum of one and a half hours. This change does not affect the maximum time available to the noble Baroness, Lady Byford, or my noble friend Lord Williams of Mostyn. But it increases the maximum time available for other speakers from six minutes to nine minutes. On the other hand, if, as I am sure they have, noble Lords have prepared their speeches in a succinct and concise way to last six minutes, I am sure the House will be grateful if they do not pad them out.