National Minimum Wage (Amendment) (No. 2) Regulations 2016 — House of Lords, 2016-09-08
Topic: Labor
Lucy Neville-Rolfe (Conservative, Centre-right): My Lords, the purpose of these regulations is to increase the hourly rate of the national minimum wage and increase the maximum amount for living accommodation that counts towards minimum wage pay to ensure the provision of higher-quality accommodation by employers, in line with the recommendations from the Low Pay Commission The national minimum wage is designed to protect low-income workers and provides an incentive to work by ensuring that all workers receive at least the hourly minimum rates set. It helps to deter unscrupulous employers from competing on very low pay Following advice from the Low Pay Commission, the Government are uprating the minimum wage from 1 October, so that the main rate for 21 to 24 year-olds will be £6.95 per hour. This represents an increase of 3.7%, despite CPI inflation currently being 0.6%. Younger people aged between 18 and 20 years-old will be entitled to a minimum of £5.55, a 4.7% increase on the rate currently in force, and those between 16 and 17 years old will have a minimum wage rate of £4 an hour. For apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, we are increasing the minimum wage by 3% to £3.40. This follows the 57% increase to the apprenticeship minimum wage last year, the largest increase to date For 21 to 24 year-olds, this is the largest increase in the main rate of the national minimum wage since 2008. It will mean that someone working full time on the national minimum wage will see their earnings increase by around £450 per year. The new main rate of the national minimum wage is expected to be at its highest level ever when accounting for the general increases in prices, surpassing its pre-recession peak. In all, we estimate that around 500,000 workers are expected to benefit from the national minimum wage increases being debated today The accommodation offset was introduced in 1999. It limits the amount that employers can recoup through accommodation charges. This year we followed advice from the Low Pay Commission and increased it significantly by 12% to £6 a day from October 2016. This is intended to ensure the provision of higher-quality accommodation by employers Since its introduction in 1999, the national minimum wage has been a success in supporting the lowest-paid UK workers. Over that period it has increased faster than average wages and inflation without an adverse effect on employment. It has continued to rise each year during the worst recession in living memory and the new main rate is expected to be at its highest-ever real value These increases to minimum wage rates are of course in addition to the national living wage for those aged 25 and over, which we implemented in April. It is the Government’s ambition for the national living wage to reach 60% of median earnings by 2020. In addition, the national minimum wage cycle will be aligned with the national living wage cycle from April 2017. This will reduce the burden on businesses that have to update their workforce’s pay more than once a year and will mean that the statutory pay floor for all ages is uprated simultaneously I note the findings of the recent research conducted by the Federation of Small Businesses and understand that some concerns have been raised about the impact on businesses’ profitability. Let me address this point specifically. The Government are committed to ensuring that the new rates work for businesses of all sizes and we continue to work closely with the LPC to consider the wider economic and business impact when recommending and setting national minimum wage rates. We have already introduced measures to mitigate the cost to business of our ambition to move to a higher-wage economy, including increasing the employment allowance from £2,000 to £3,000 this year. This measure will benefit up to 500,000 employers and take 90,000 employers out of NIC payments altogether For smaller businesses we have extended the doubling of the small business rate relief for a further year until April 2017. Around 600,000 small businesses benefit from the small business rate relief and about 405,000 businesses will pay no rates at all as a result of the extension The most recent employment statistics show that the employment rate is at a record high, with almost 32 million people in work and the unemployment rate at its lowest level in more than 10 years, with fewer than 1.7 million people unemployed and wages up 2.4% on a year earlier, while inflation has, of course, remained low. While the referendum result may have introduced uncertainty over forecasts and assessments made before June, we should remember that the UK labour market was remarkably resilient during the worst recession in living memory The new rates are recommended by the independent Low Pay Commission, which consulted extensively with stakeholders representing both business and workers, as well as conducting comprehensive research and analysis. Crucially, the Low Pay Commission has proven that a rising minimum wage can go hand in hand with rising employment. The carefully considered independent advice from the Low Pay Commission is central to maintaining this balance. In particular, its remit is clear that, when considering the pace of increased minimum wage rates, the state of the economy should be taken into account. The LPC has stated that the labour market has continued to perform well, with robust employment growth in low-paying sectors.