National Minimum Wage (Amendment) Regulations 2016 — House of Lords, 2016-01-18
Topic: Labor
Lucy Neville-Rolfe (Conservative, Centre-right): My Lords, I thank the noble Lord, Lord Stevenson, for his comments. I endorse his comments about the great work done by the Secondary Legislation Scrutiny Committee; year in, year out, it does us a great service. I thank him for his kind words about the impact assessment and I shall pass them on I sympathise with noble Lords opposite, who were clearly wrong-footed by the most recent Budget, especially the living wage aspect, but then disappointment is part of political life. The strength of the economy means that we can afford to take this important step towards a higher-wage, lower-tax and lower-welfare society. The measures support the Government’s commitment to deliver fairness on pay for working people while being sensitive to the needs of business. By 2020, the national living wage will benefit 2.75 million low-wage workers directly, with up to 6 million in total expected to see their wages rise as a result of the ripple effects further up the distribution chain. I think that this is good news, and the House seems to recognise that The noble Lord, Lord Stevenson, asked whether we had considered the use of primary legislation. Of course we considered all legislative options, but the powers are available to do this through secondary legislation and it will ensure that workers get their pay rise much more quickly. That is the reason why we have adopted this approach. I also took note of some of his questions on apprenticeships. I will need to have a look at Hansard, and perhaps he and I can have a word at one of our many meetings on other matters The rationale for 60% is that the 2014 Resolution Foundation review of the national minimum wage, More Than a Minimum—chaired by the excellent Professor Sir George Bain, who, as some will remember, was the founding chair of the LPC—recommended a national minimum wage at 60% of median earnings as "a reasonable lodestar"—a great word. The report’s expert panel also included Professor Alan Manning, Professor Paul Gregg and Professor Karen Mumford I accept that there was no consultation on setting the original rate at £7.20. The background work existed, and of course this was a Budget measure and its announcement was treated as such. I am afraid that that is the nature of Budget measures, but I hope that I have already given some reassurance in my opening remarks on the process in future in relation to consultation. Future national living wage rates will be recommended by the independent Low Pay Commission, which will continue to provide the invaluable advice that it has been giving for many years, firmly grounded in evidence and with public consultation. It seems right that it should have a pivotal role in this The noble Lord asked about the double impact of the national living wage and the apprenticeship levy. This will of course mean extra costs for some businesses, but it is right that workers are fairly rewarded for the work that they do. The economy is growing and profits and wages are rising, and we have given businesses some help, as I said in my opening remarks. The apprenticeship levy is equally necessary. It will support the development of a higher-skilled, more productive workforce, supporting greater economic growth in future and the creation of new jobs right across the UK. Employers will of course be able to get back the levy for the training that they are doing The noble Lord, Lord Stoneham, asked about how the LPC will seek advice when it is uprating the national minimum wage. It will continue to adopt the sort of process that we have seen operating successfully under the coalition: it will make recommendations to the Government by the end of October 2016, setting out its ideas for rates for the new national minimum wage from April 2017 and looking at indicative rates from April 2018 Productivity growth is one of the key economic challenges for this Parliament and a route to raising living standards for everyone in the UK in a long-term, sustainable way. Our ambitious plan for this is set out in Fixing the Foundations and includes the introduction of the national living wage. There is a fair amount of research that shows that increasing wages to the national living wage should result in an increase in productivity in many areas, as people use labour more carefully and capital more efficiently As the noble Lords, Lord Stoneham and Lord Stevenson, mentioned, some parts of the economy—for example, the social care sector and retail—will be impacted more than others when the living wage is introduced. I reassure noble Lords that this Government recognise the particular position of these sectors. In response we are, for example, giving local authorities access to up to £3.5 billion in new support for social care by 2019-20. Equally important will be enforcement in these sectors. I have already outlined some of the changes that we are making, such as the extra funding and work on bringing the new rights to the attention of workers, and HMRC is taking action against those employers who break the law and underpay their staff. It currently has 155 investigations open with social care employers. These include acting on complaints and extensive targeted enforcement. I know from having worked in business that HMRC is also very keen to make sure that the national minimum wage—and in future the national living wage—is paid in low-paid service sectors The noble Lord, Lord Stoneham, and the noble Earl, Lord Listowel, asked about early years provision and employing under-25s. It is for the Low Pay Commission to use its consultations and expert judgment to advise on appropriate rates for under 25 year-olds and those aged 25 and over. As with all of its recommendations, should it recommend a change to the differential in the national minimum wage or living wage rates, the Government will want to understand why it thought this was appropriate to ensure that the minimum rates of pay continue to support low-paid working people as well as the economy. The substitution effect will depend on future LPC recommendations. Of course, the underlying reason for the difference between the national living wage and that for under 25 year-olds is that we are extremely keen to ensure that early years provision is employed provision—we really want to make sure that we do not hit employers and that we encourage people to give jobs to the youngsters I hope that the comments I made in my introduction and the points that I have been able to make in summing up will go some way to reassuring noble Lords who have put down this regret Motion both in respect of our plans and in respect of stronger enforcement. In the light of that, I recommend these regulations to the House.