HL Deb 14 July 2000 vol 615 cc521-8

3.31 p.m.

Lord Sainsbury of Turville rose to move, That the draft regulations laid before the House on 26th June be approved [23rd Report from the Joint Committee].

The noble Lord said: My Lords, I am pleased to present to your Lordships a number of significant changes to the National Minimum Wage Regulations which give effect to the National Minimum Wage Act.

As the House knows, we asked the independent Low Pay Commission to monitor the effect of the introduction of the national minimum wage during its first few months in operation and to report its findings to us. The commission undertook a comprehensive consultation exercise. Its report, along with the Government's responses to it, was published on 15th February.

Your Lordships will remember from our consideration of the regulations in May that the minimum wage policy has benefited well over 1.5 million workers and their families throughout the United Kingdom without any detrimental effect on the economy, prices or employment. In fact, we have seen more people than ever before in employment since the minimum wage took effect. Jobs are being created, especially in the service sector where the national minimum wage has most impact.

The House will be aware that both of the Low Pay Commission's main reports made a number of recommendations. In our response to the first report, published in 1998, we introduced the youth rate at a lower rate than that recommended by the commission but said that we would increase the rate to the recommended rate of £3.20 per hour in June 2000. We debated this increase earlier and the new hourly rate took effect on 1st June. Today we are debating the increase to the main minimum wage rate which applies to workers aged 22 or over, as well as the recommendations of the second report and the changes to the regulations that are needed to implement them.

In its first report the commission recommended that the main minimum wage should be introduced at a level of £3.60 per hour on 1st April 1999 and advised that it should be raised to £3.70 in June 2000. The Government introduced the minimum wage at the £3.60 rate but decided it would be prudent to wait for the commission's second report to be published to judge what impact the new legislation was having before making a decision on the £3.70 rate.

When we published the second report on 15th February, we announced that, in view of its positive findings and the fact that the economy was working well, we would increase the main rate of the minimum wage from £3.60 to £3.70 per hour on 1st October 2000—an increase of 2.8 per cent.

We have delayed the timing of the increase to allow businesses sufficient time to prepare for the change. The Government's continued awareness of the needs of business has been a key reason why the minimum wage was brought in so smoothly and successfully, and we intend to retain that approach.

The announcement of the increase to the national minimum wage rate was made in February and received wide coverage in the media, Since then, we have included information about the increase in the Inland Revenue's April newsletter which was sent to each of the 1.2 million tax-registered employers, and we have also written to workers' and employers' representative bodies. We shall provide more information about that increase in the Inland Revenue's September newsletter. The publicity campaign in May and June on the youth rate also mentioned the increase in the main rate. A substantial publicity campaign, including coverage on television, will be launched in September or October to ensure that workers are aware of their rights and that employers know their obligations under the law.

The Low Pay Commission's second report was extremely positive and found that the national minimum wage was introduced successfully. The commission's recommendations covered publicity, enforcement, guidance and some clarification of regulations in certain specific areas, which I shall come to in a moment.

The Government accepted all 16 of the Low Pay Commission's operational recommendations and suggestions, subject to the usual detailed consideration of practicality and resources. However, we were not entirely convinced by the argument for changing the treatment of 21 year-olds so that they received the main adult rate for the minimum wage. We have asked the commission to continue to look at this and return to it in its next report.

Today we are debating the increase in the main rate of the national minimum wage and several other regulatory changes recommended in the Low Pay Commission's report. There were three specific recommendations: to extend the modern apprenticeship one-year exemption to cover national traineeships; to extend the sandwich student exemption beyond undergraduates to cover postgraduates who are required to take a work placement as part of their course; and to tidy tip the regulations on travel time and stand-by time to ensure they meet the policy objectives.

I shall briefly explain to the House how the regulations will work. Regulation 3 fulfils the Government's commitment to raise the main rate of the minimum wage from £3.60 to £3.70 an hour. We now believe that it is right to go ahead with this increase.

Regulation 4 deals with people in training and education. The first part addresses an anomaly identified by the Low Pay Commission. It concerns young people in England and Wales engaged on national traineeships schemes and people in Scotland and Northern Ireland on equivalent schemes. As the commission noted in its report, such training is, in essence, the same as the modern apprenticeship except that it leads to a National Vocational Qualification at level 2 rather than level 3. Modern apprentices under 26 years of age are already exempt from the minimum wage in their first year, and the difference in treatment came about only because the national traineeships were too new for the commission to consider for its first report. We are also applying the exemption to people on similar schemes in Scotland and Northern Ireland; such schemes are known as SkillSeekers and JobSkills respectively.

The regulatory impact assessment estimates that some 20,000 trainees will be directly affected by this change. Some trainees who currently receive the minimum wage will no longer be entitled to it under this legislation. However, they will continue to be entitled to whatever pay is provided by their contracts of employment, which should be changed only with the agreement of both parties.

The second part of Regulation 4 applies an exemption for sandwich students. The current regulations provide that undergraduate students and trainee teachers do not have to be paid the national minimum wage for any work they do when placed with an employer as part of their course. The commission recommended extending the exemption to postgraduates; otherwise their prospects of finding suitable placements would be reduced. There is some evidence to suggest that employers have opted to provide placements to undergraduates rather than postgraduates. This change in the regulations is likely to affect only a few hundred people.

The commission also recommended that, if feasible, we should provide a similar exemption for students who work in this country but study at universities in the rest of Europe. We have now considered the practicalities of trying to do this but our lawyers have advised that such an exemption would be highly impractical and virtually impossible to define and verify. The exemption is therefore limited to students studying in the United Kingdom.

These provisions underscore the Government's commitment to training and education. We want to see the right training targeted at the right people and to correct any small anomalies that are caused by the way in which the regulations were first drafted.

Regulations 6, 7 and 9 concern a number of more detailed and esoteric issues that have come to the attention of the Low Pay Commission and the Government since the introduction of the national minimum wage last year. Regulation 6 is important because it concerns the way in which the rules operate as regards travel time for those required to travel between assignments during the working day. Some employers felt that the existing provisions were ambiguous, so we are making the position absolutely clear: such travel time counts as work and the national minimum wage rates must, therefore, be paid.

Another amendment improves the way that the rules operate for those on so-called zero-hours contracts—such workers are permitted to go home while on call, but may instead choose to go elsewhere—and for those who are allowed to sleep at work while on call. The next change concerns a minor difficulty with the application of the regulations to those workers who are responsible for submitting their own timesheets. There are also one or two purely technical regulations designed to ensure that the amendments are placed correctly into the law.

Finally, I wish to inform the House of a technical difficulty with these amending regulations which has come to our attention since they were debated in Committee in the other place. The point is a particularly complex one which results from a potential mismatch between the wide definition of "worker" used in the national minimum wage and the reference to a certain kind of trainee, known as a "national trainee", in these new regulations. The way that the new regulation is drafted means that there could be a situation where a young trainee who is not employed by the employer with whom he is training may nevertheless be held to be an agency worker as defined in the primary legislation and therefore entitled to the national minimum for any work done in the course of training.

I should stress that such a reading of the law would rest on an obscure legal technicality and be counter to a common-sense understanding of what the law intends. The point does not impinge on the main intention of these regulations and there is therefore no reason to prevent my asking the House to support them in their present form. But, of course, it is my duty to make your Lordships aware of the point. I can give noble Lords a commitment that the Government will be returning with a slightly amended version of the relevant regulation as soon as possible in the next Parliament to clarify the situation once and for all.

In the meantime, it will help if I clarify for the House the purpose of Section 34 of the National Minimum Wage Act 1998, which entitles agency workers to the minimum wage. The reason we needed the section was because some people who are supplied by agencies to do work for others sometimes do so under peculiar and often deliberately obscure arrangements such that they would not have counted as workers under the standard definition in Section 54 of the Act. Section 34 was never intended to apply to those who are supplied by a training organisation to business for the purpose of receiving training rather than performing work and should not be taken to do so.

The Government are keen to build on the success of the first year of the minimum wage. We shall ensure that it continues to provide adequate protection for lower-paid workers in future years. As your Lordships will know, the Government have asked the Low Pay Commission to prepare a third report by July 2001. We are asking the commission to continue to monitor and evaluate the impact of the minimum wage and to make further recommendations on the rate. In particular, we have asked it to consider movements in earnings this time round. That does not mean that we are proposing an automatic link between earnings and the minimum wage. We have always been against any formulaic approach to setting the level of the minimum wage.

We believe that to use earnings or the cost-of-living indices alone would be to take far too narrow a perspective. Before arriving at its conclusions, the commission will also take account of such factors as competitiveness, employment and the impact on particular groups of people, such as young workers and women, and on different sectors of the economy, especially small firms.

We expect that any increase in the minimum wage that the Low Pay Commission recommends can be put into effect in the autumn of 2001. It will take several years to assess the full impact of the national minimum wage. In the meantime, we have every intention of proceeding with caution. Despite its very successful introduction, we need to remember that the minimum wage is still in its infancy. It is a powerful instrument of policy that affects millions of people's jobs and livelihoods. Caution and the avoidance of risk are therefore crucial. We must not put at risk the jobs of those whom we are seeking to protect, nor place unnecessary burdens on business.

The national minimum wage, which many of us believe should have been introduced many years ago, was introduced in the United Kingdom only just in time for the 21st century. We shall not put at risk its continued success and general acceptance by employers and employees alike by abandoning the careful approach that has been tried and tested.

These amendments make sound, sensible and necessary improvements to the law. I commend the regulations to the House.

Moved, That the draft regulations laid before the House on 26th June be approved [23rd Report from tile Joint Committee].—(Lord Sainsbury of Turville.)

3.45 p.m.

Lord Northbrook

My Lords, we are discussing the National Minimum Wage Regulations 1999 (Amendment) Regulations 2000. I am grateful to the Minister for pointing out to me yesterday that a problem has arisen with the regulations since they were passed in the other place. On these Benches we find it extraordinary that regulations are passed that subsequently are found to be faulty. That reflects a government problem to which I shall return later.

Of course we shall be approving these draft regulations. But I do not believe that we should just "nod them through" without comment. The Explanatory Note tells us that their object is to increase the national minimum wage by 10p an hour. Regulation 3 devotes 18 words to doing that. The note also tells us that the regulations are to make, a number of other amendments to the National Minimum Wage Regulations 1999". Those amendments take up no fewer than four pages. They include such gems as: Subject to paragraph (1A), time work includes time when a worker is available at or near a place of work for the purpose of doing time work and is required to be available for such work except where—

  1. (a) the worker's home is at or near the place of work; and
  2. (b) the time is time the worker is entitled to spend at home".
That regulation relates to the situation where employees are not working all the time but are required to be on standby in case of sudden rushes of work; for example, lunchtime in a fast food takeaway restaurant.

These amendments are typical of the legislative state the Government find themselves in. Bills and regulations are introduced in the other place and reach us in a totally different state. While they are here, further swathes of amendments, sometimes whole new schedules, are brought in. That has been the experience of my noble friend Lady Miller on the four major Bills with which she has dealt in the past three years. The Government are now making amendments to the regulations which they brought in only last year to apply the National Minimum Wage Act. That is another example of the legislation on the hoof about which we on these Benches repeatedly have to complain. "Legislate in haste, amend at leisure".

But there is more than that. The Act is complicated enough on its own, but then there are the regulations and now the amended regulations. It is all very well for large companies or the unions with plenty of professional advisers. But what of the employees trying to discover their rights and small employers, who are the ones most affected, trying to discover their duties? There are at least three pieces of primary and secondary legislation to plough through. On these Benches, we hope that the burden of regulation will be eased in the future.

Lord Razzall

My Lords, perhaps I may follow the remarks made by the other Opposition party in this House by changing the tone. Not only do I welcome these regulations but, contrary to the noble Lord who has spoken before me, I also welcome the approach the Government have adopted here. When the minimum wage legislation was first introduced, I understood that a continuing consultation process would take place. That was done because no one knew what would be the exact impact of the minimum wage legislation. Indeed, from these Benches we argued quite strongly a number of points to which the Government responded by saying, "Let us give that task to the Low Pay Commission. It will look at the implications of the minimum wage and bring forward recommendations. We shall then implement those by way of regulation".

I did not agree with the Government on many of the detailed points of the legislation, but I recognise the approach. Indeed, I think that we should welcome the fact that, after consultation and the publication of a report from the Low Pay Commission, the Government feel that the regulations need to be altered. I hope that the process will continue. If we are to establish an appropriate dialogue between business and government, the way not to go about it is for the Government to legislate in these august halls and then to tell business that it will have to put up with that legislation. The Government should not say, "We do not care about the implications here. You can put up with it. We shall not change anything".

As I said earlier, although I agree with the fundamental principles underlying the introduction of a minimum wage, I disagreed with one or two detailed points as regards the minimum wage legislation. However, I did not disagree with the Government taking recommendations from the Low Pay Commission, holding extensive consultations and then bringing in amendments by way of regulation to amend regulations and then to amend further regulations. I hope that the process will continue.

Last year I listened for many days to the comments of the Conservative Opposition as regards the national minimum wage. Several speakers spoke of how the temples of Sodom and Gomorrah would descend on industry in this country if a minimum wage was introduced. However, we have seen absolutely no evidence whatever that the introduction of the minimum wage has had even the remotest adverse effect on employment. However, the noble Lord did not see fit to congratulate the Government in any way or to admit that he was wrong and that the Government and the Liberal Democrats were right in their view that the introduction of the national minimum wage would have no effect on employment levels in this country. That has been very adequately demonstrated. I look forward to the next occasion on which the Minister brings forward regulations. I hope that the Conservative Party will then make that apology, which is long overdue.

Having made those comments by way of introduction, perhaps I may ask the Minister a question as regards a comment he made towards the end of his remarks about the next stage. It will not have gone unnoticed that the press has been seriously contemplating the contents of the Labour Party manifesto for the next election. Word has it that, first, a commitment will be made to remove the distinction between the minimum wage for young people and that for everyone else. Secondly, in return for the financial backing of the trades union movement for the Labour Party during the next election, a significant commitment will be made in the election manifesto to a substantial uprating of the minimum wage. In the light of the Minister's remarks on behalf of the Government, can he confirm his statement that no change will be made to the rates of the minimum wage until the Low Pay Commission reports in September 2001? If, as anticipated, the election takes place during the spring of 2001, nowhere in the Government manifesto will we see a commitment to changing the fundamental structure of the minimum wage until the Low Pay Commission reports in the following September of that year.

Lord Sainsbury of Turville

My Lords, perhaps I may say, first, in relation to the regulations, that the technical changes we have made have sprung largely from the recommendations of the Low Pay Commission. I think that it would be extremely unwise to introduce such a piece of legislation and then pay no attention to any problems which may arise which, in this area as in many other areas of employment law, reflect the complexity of industrial life in this country.

The issue of the zero hours contract is a real and important problem. The fact that situations can arise where employers put people in a back-room and say, "We shall not pay you, except for those brief moments when you come out and flip the hamburgers during the lunch hour", is not entirely in keeping with the spirit of the legislation.

As regards the noble Lord's point about the future election manifesto, I am sure that he does not expect me, even on a Friday afternoon, to make such a simple mistake as to suggest what the content will be. The Low Pay Commission is starting to gather evidence. It is due to report by July 2001. When the report is produced, we shall give it due attention. I commend the regulations to the House.

On Question, Motion agreed to.