HL Deb 24 July 2002 vol 638 cc511-3

11.24 p.m.

Lord McIntosh of Haringey rose to move, That the draft regulations laid before the House on 25th June be approved [34th Report from the Joint Committee].

The noble Lord said: My Lords, I am pleased to present these amending regulations to the House. They are concerned with increasing the main and development rates of the national minimum wage.

The minimum wage is now recognised as an outstanding success. The Government have helped about 1.5 million low paid workers without causing any significant problems for the economy. Businesses cannot now pay the poverty wages of £2 and £2.50 per hour that were so widespread five years ago, and the vast majority of employers are complying with the minimum wage.

The minimum wage has been successful because the Government have adopted a partnership approach, which involved setting up the independent Low Pay Commission with a membership drawn from both sides of industry as well as academic members. This has ensured that its recommendations have been well judged to make a substantial difference for the low paid while remaining affordable for business.

The commission last year made recommendations on rate increases for 2001 and 2002. The Government implemented the first part of the recommendations by increasing the main and development rates to £4.10 and £3.50 in October 2001. We are now proposing to implement the second part of the recommendation by further increasing the rates as recommended by the commission to £4.20 and £3.60 in October 2002.

Is it safe to increase the minimum wage at present? The Government looked in April at the latest evidence across the overall economy and in the sectors most affected by the minimum wage. We did not see any significant rise in general unemployment and the indications were that employment in low-paying sectors is holding up. Our judgment is that economic conditions in the autumn of 2002 will support these increases.

Are these increases too small? We need to remember that the recommendations in 2001 and 2001 came as a pair. Under our proposals, the main rate will have increased by 50 pence an hour since September 2001. That is equivalent to an extra £900 a year before tax for someone working 35 hours a week. Over the same period the development rate, which is for younger people, will have increased by 40 pence an hour, equal to an extra £725 a year before tax. These amounts will make a real difference for the low paid.

The minimum wage is only one way in which the Government are helping low income workers. We are providing additional assistance through tax credits. In April 2003 we will be introducing the working tax credit which will, on its introduction, guarantee a family with one child and one earner working full time a minimum income of £237 a week.

Finally, I want to address two concerns that have been raised in the House of Commons. First, some noble Lords may recall that the Government did not accept the commission's advice last year to extend the adult rate to 21 year-olds because of the uncertainty surrounding the possible impact on their employment prospects. The commission is free to look at this issue again if it wishes, but if it does we will want to look closely at the point about employment prospects.

We are also aware of the concerns expressed by those in the care sector. The real interest issue here appears to be funding. The Chancellor has made it clear that resources for social services will increase on an average by a further 6 per cent per annum in real terms over the next three years. The Secretary of State for Health said yesterday that an extra £1 billion would be spent on social services for older people by 2006, including additional resources to cover higher care home fees. I commend the regulations to the House.

Moved, That the draft regulations laid before the House on 25th June be approved [34th Report from the Joint Committee].—(Lord McIntosh of Haringey.)

Lord Rotherwick

My Lords, we do not oppose the rise which increases the main and development rates of the national minimum wage. The main rate increases are broadly in line with the rate of wage increases and the economy as a whole. The impact of the national minimum wage will not change significantly over time. There will not be a further step-change impact.

While considering the increase, one must bear in mind that nothing must be done to damage businesses, jobs and the economy. The national minimum wage was controversial when it was first introduced. However, time has seen it work well. We hope that that will be the case if there is a serious downturn in the economy.

Lord Roper

My Lords, we agree with the Minister that the national minimum wage has proved itself. It was pleasing to hear from the Conservative Front Bench that it shares that view on a matter which was, at the time of introduction, controversial.

It would be possible to have a longer debate today on some of the current issues of low pay and the fact that the national minimum wage is seen by some of the trade unions in the public sector as being unsatisfactory. However, in view of the hour I do not intend to distract the House too long on that matter.

I was pleased that the Minister referred to the impact on the care sector and drew attention to the statements made by the Chancellor of the Exchequer in the spending review and yesterday by the Secretary of State in his Statement. Clearly, there has been a serious problem and it would be more serious if it were aggravated by any increase, however small.

Lord McIntosh of Haringey

My Lords, I hope that the noble Lord, Lord Roper, will not be offended if I extend a particular note of thanks to the noble Lord, Lord Rotherwick, for his support. I know that the Liberal Democrats have supported these policies since the beginning, but it is fair to say that there were those who said when we first introduced the minimum wage that there would be—I shall not say "mass unemployment"—considerable economic problems.

It is a tribute to the Low Pay Commission and those who worked on this over the period before and during the introduction of a national minimum wage that there have not been those problems. The national minimum wage is now a non-party issue. After all, a national minimum wage exists in almost all European countries and has existed for many years in the United States. It is an accepted part of public policy. We propose a logical and rational extension and updating of that accepted public policy. I commend the regulations to the House.

On Question, Motion agreed to.