National Minimum Wage (Hansard, 17 November 1998)

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness bows of Heigham)
My Lords, data from the Labour Force Survey indicate that about 900,000 people will be floated above 1123 the lower earnings limit as a result of the national minimum wage, assuming no change in the number of hours they work.
With regard to the second part of my noble friend's Question, I am afraid that it is not possible to make reliable estimates of the cost of paying contributory benefits to employees who remain below the LEL.

§ Lord McCarthy
My Lords, I thank the Minister for that Answer. If I understand her correctly, she says that something like 50 per cent. of the 2 million people who suffer from the fact that they do not receive contributory benefits will be lifted out of that position by the national minimum wage. That leaves 900,000 who will not be lifted out. What will the Government do about them? The Minister says that she does not know the cost. What is the attitude of the Government to the estimate of the cost made by the TUC recently, which, as I understand it, said that it would cost £250 million for the whole lot—that is, for the 2 million or so? Therefore, it would cost £125 million for the 900,000 who are left. Can the Minister tell me where we could do more good for less money?

§ Baroness Hollis of Heigham
My Lords, the first reason why we cannot confirm or challenge the TUC figures is that we do not have statistics on that basis. The reason why most people are below the lower earnings limit is not so much because of low pay—although that undoubtedly exists—but because some people, especially married women, work very short hours. Someone could work four hours, for example, and be paid £15 an hour, but still be below the lower earnings limit. Therefore, it is not clear to me whether my noble friend is asking that people who work only one hour, two hours, three hours or four hours should nonetheless be entitled to the full range of contributory benefits. If that were the case, they would be better off out of work on contributory benefits than in work and earning.
The second reason why it is difficult to answer my noble friend's question—I have tried to find the answer to this, but cannot—is that at the moment many people who do not qualify for contributory benefits receive income-related benefits and those are household assessed, whereas contributory benefits are individually assessed. For both of those reasons, we simply are not able to confirm my noble friend's figures, much though I would like to be able to do so.

§ Lord Goodhart
My Lords, although I welcome the fact that many people will be taken into the contributory benefit network, are the Government prepared to consider taking a further step and look at the possibility of moving from benefits which are based on contributions, in particular the state pension, to a system under which the state pension would be based on residence in the United Kingdom?

§ Baroness Hollis of Heigham
My Lords, we shall be producing a pensions Green Paper by the end of the year. A whole range of such issues will be discussed in that. In practice, one qualifies for a state pension through one's national insurance contributions or, if one is a married 1124 woman, by virtue of one's husband's contributions. Alternatively, one can qualify for income support, which is higher than the state retirement pension level now. So, in practice, we already have universal state pensions such as the noble Lord describes.

§ Baroness Turner of Camden
My Lords, is my noble friend aware that because many women tend to work part time for long periods, the laws in relation to contributory benefits discriminate against women much more than men? Is there not a possibility that that discrimination could lead to a possible future reference to the European Court of Justice?

§ Baroness Hollis of Heigham
My Lords, I understand that the UK arrangements comply with EC law. The German equivalent of the lower earnings limit was tested in the European Court recently and was upheld.

§ Baroness Miller of Hendon
My Lords, as the effect of the national minimum wage on new recipients of the national minimum wage will be an increased liability for tax and national insurance, and a loss of benefits, including housing benefit, does the Minister agree that the Treasury may very well be the main beneficiary of the national minimum wage, rather than the low paid? If the Minister does not agree with that analysis, will she find out whether the Government will be willing to publish some case studies of the net financial effect of those new recipients receiving whatever they receive as a result of the national minimum wage?

§ Baroness Hollis of Heigham
My Lords, it is certainly true that the national minimum wage should reduce people's reliance on means-tested benefits by something like £343 million a year. In other words, taxpayers will no longer subsidise the exploitative low-pay employer. That must surely be desirable.
The wider question is this. For far too long Britain has been a country of low pay, long hours and low productivity. The employers offering the lowest pay are those who also demonstrate the lowest productivity. With the national minimum wage our expectation is that for the first time there will be an incentive for employers to invest in people as well as plant, and thus raise the productivity of our economy, which is what we all need to see to face the future.