§ 7.54 p.m.
§ Lord Triesman
rose to move, That the draft regulations laid before the House on 17 June be approved [23rd Report from the Joint Committee].
The noble Lord said:
My Lords, I beg to move the Motion standing in the name of my noble friend Lord Sainsbury. I am pleased today to present these regulations to the House. The national minimum wage remains without doubt one of the Government's finest achievements. It has made a substantial difference for at least 1 million low-paid workers in the United Kingdom every year for the past five years.
In July last year, the Government asked the independent Low Pay Commission to report on two issues connected with the minimum wage by February 2004. We asked it to review the rates that it had previously proposed for October 2004 in the light of the latest economic position. We also asked it to look at the possible introduction of a new minimum wage rate for 16 and 17 year-olds. The commission reported in February 2004, and the Government announced in March that we accepted their recommendations. In particular, the regulations that we are debating today implement the increases recommended by the commission to the adult and development rates of the minimum wage. They also, as recommended by the commission, introduce a new rate payable to those aged below 18.
It may be helpful if I briefly explain the regulations. Regulation provides for the regulations to come into force on 1 October 2004. That will give employers sufficient time to prepare and plan for the rate increases, which were, of course, announced by the Government in March. Regulations 2, 4(a) and 4(c) deal with increases to the minimum wage rates. Having laid firm foundations to the minimum wage in the first four years, the Government were able to accept the commission's recommendation last year that the adult rate should be increased by around 7 per cent. This year, the commission has recommended further increases of around 8 per cent in the case of the adult 1207 rate, increasing that rate to £4.85 an hour, and 5 per cent for the development rate, taking that to £4.10 an hour.
The commission concluded that these increases were justified, as the overall economic outlook remains favourable, with continuing high employment and very low unemployment levels. In addition, employment across low-paying sectors as a whole is continuing to grow, and there is little or no evidence that the minimum wage is having any adverse impact on these sectors. The increases would extend the coverage of the minimum wage substantially, so that 1.6 to 1.9 million low-paid workers stand to benefit. That can only be good for the United Kingdom.
Regulation 3(a) has the effect of providing that workers under 18 and who are over school-leaving age now qualify for the minimum wage. Regulation 4(b) sets a minimum wage rate of £3 an hour for such workers. The Government agreed last year that the commission should consider that issue, following the findings in its 2003 report that some full-time jobs were offering extremely low levels of pay and minimal training to young workers. The commission has found continued evidence that some jobs in this age group offer very low rates of pay and little or no training. The commission concluded that it is important to introduce a minimum wage for 16 and 17 year-old workers in order to stop exploitative rates of pay. The Government agree.
However, it is clearly important to set any rate for this group cautiously. Unemployment and employment levels for 16 and 17 year-old workers are substantially worse than for those aged 18 to 21, and the Government's main priority for people in this age group is for them to remain in education or training, which would be in their long-term interest, rather than to take up low-paying jobs. The commission concluded that a rate of around £3 per hour would have little impact on young people's decisions on whether to remain in education. The implementation of education maintenance allowances this autumn also seems likely to encourage young people to stay in education rather than opt for low-paying jobs. The Government therefore accepted a rate of £3 an hour. The National Minimum Wage Act 1998 only covers people,who have ceased to be of compulsory school age".Therefore, the new £3 rate will apply only to those under 18s who have ceased to be of "compulsory school age". We believe that is right that youngsters who are still at school should be encouraged to focus attention on their education and educational development.
Under regulation 3(b), noble Lords may know that apprentices aged between 19 and 25 are presently exempt from the minimum wage for the first 12 months of their apprenticeship or participation in such schemes. We have left that position unchanged. Regulation 3(b) simply updates the titles of the government schemes treated like apprenticeships operating in England and Wales. The titles of those schemes are unchanged in Scotland and Northern Ireland. 1208 A key issue that needs to be considered is the position of very young apprentices. We know that many 16 and 17 year-old apprentices earn less than the new rate of £3 an hour and that many 18 year-old apprentices earn less than the new 18 year-old rate of £4.10 an hour. We are very concerned to ensure that employers continue to offer apprenticeships and, recognising that they are breaking new ground and will feel the need for caution, the commission recommended that apprentices aged under 18 should not be entitled to the new rate. The Government have accepted the commission's recommendation.
The Low Pay Commission also recommended that people aged under-18 who are on schemes at a pre-apprenticeship level should be exempt from the new rate. The Government think it is sensible that workers on these schemes should be exempt from the minimum wage, bearing in mind that, as I mentioned earlier, they would be exempt from the minimum wage for at least the first 12 months if they progressed on to an apprenticeship. Regulation 3(c) lists the pre-apprenticeship schemes.
Regulation 5 increases the value of the accommodation outset. That is the amount that may be taken into account when determining whether the minimum wage has been paid in situations where a worker is provided with living accommodation by the employer. The amount—again, the recommendation of the commission—is increased from £3.50 to £3.75 per day.
Regulation 6 makes some minor amendments as a consequence of the fair piece rate regulations that were passed by this House in the spring. It requires businesses employing output workers—people who are paid per piece produced or task performed—to, where relevant, keep copies of the written notices that they have provided to their workers and details of how they have set a fair piece rate paid to those workers.
Regulation 7 contains some minor technical transitional provisions. I hope that I have given a fair account of these regulations. I commend these regulations to the House.
Moved, That the draft regulations laid before the House on 17 June be approved [23rd Report from the Joint Committee].—(Lord Triesman.)
§ Baroness Miller of Hendon
My Lords, I thank the Minister for his explanation of this Motion and, as usual, for his department's explanatory note. As the Minister has told us, these regulations increase the basic hourly national minimum wage from £4.50 to £4.85 and the lower hourly rate is increased from £3.80 to £4.10.
Of course, we accept the principle of the national minimum wage, but those increases are substantially above inflation. We are a little concerned that that might impact on competitiveness. My honourable friend the Member for South Suffolk said that this adds to the cost of business at a time when the outlook for both jobs and investment in the private sector look poor. 1209 The regulations also introduce a national minimum wage in favour of those below the age of 18, which could have an impact on employment opportunities for such young people, especially as Brendan Barber predicts that it,should mean that more significant increases can take place in future years".
I should like to remind the Government that in the economic situation in the world, of course it is very important that the Government focus on the need to improve Britain's competitive position by cutting rather than increasing the burdens that they place on British business. But with that very small caveat, I can tell your Lordships that we shall not oppose the Motion.
§ Lord Shutt of Greetland
My Lords, I, too, thank the Minister for explaining the Motion, which I support. However, I should like to make a couple of comments based on personal experience. For some years, I have been a non-executive director of a not-for-profit guesthouse. In circumstances where people are being paid above these rates, one knows that when the rates are changed the people just above also change. If the increase is above the rate of inflation, one has to think very carefully about its effect. If one is running a not-for-profit organisation, which is a tight ship, these things have to be worked out.
There is a great deal of perception that people will not pay certain prices, particularly when they have to be increased above the rate of inflation. It is therefore very important that when changes like this have to be made maximum notice is given. In the guest house and catering industries, particularly when looking at tariffs, which have to be planned in advance, maximum notice of changes is necessary.
It is my belief that people are prepared to pay proper prices and not exploit people for accommodation, services, catering and so forth. But the people who run such business need to know when changes are to be made and they need the maximum amount of notice. With that contribution about being given maximum notice in terms of changes that may take place in the future, I am happy to support the Motion.
§ Lord Triesman
My Lords, I thank the noble Baroness, Lady Miller, and the noble Lord, Lord Shutt, for the important and interesting points that they made. It is right that we are eager to ensure that regulatory and other burdens are kept within close limits for the good conduct of business and to encourage competitiveness.
The decisions to make awards above the rate of inflation or to introduce a scheme for those under the age of 18 were the subject of very detailed discussions in the commission. Over the history of the commission, both under George Bain and now under Adair Turner, the potential risks of taking that kind of course of action have been dealt with in considerable detail—not just in themselves, but also because there are knock-on 1210 consequences in other parts of the reward systems that apply in firms. I think that they have always come to a judgment very carefully in those circumstances.
The regulations are important. More than 1.6 million workers stand to benefit from the increases. I think that they will have the impact of ensuring that young workers are also not exploited through excessively low wages. In all of those cases, having good notice so that we can all plan properly is extremely important. All those points are very well taken.
On Question, Motion agreed to.