National Minimum Wage (Amendment) Regulations 2016 — House of Lords, 2016-01-18
Topic: Labor
Robert Stevenson (Labour, Centre-left): My Lords, I thank the Minister for introducing this statutory instrument. I also congratulate her on her brilliant sense of timing. She has clearly been having acting lessons—to be able to pause so gracefully to allow those who do not want to hear her to leave is a masterpiece in timing from which we could all learn In its 19th report of the current Session, the Secondary Legislation Scrutiny Committee chaired by the noble Lord, Lord Trefgarne, drew these draft regulations to the special attention of the House on the grounds that they give rise to issues of public policy likely to be of interest to the House. We owe a considerable debt to this hard-working committee, which has once again done your Lordships’ House a great favour in helping us hold the Government to account by drawing this SI to our attention. Therefore, the Minister should not be surprised at the Motion. She should look to the wider context within which this is placed because we are not against the principle, but we think the committee has made some important points Statutory instruments have a major impact on people’s lives so it is right that they are given proper scrutiny in Parliament. As a responsible and loyal Opposition, we take pride in doing this and intend to continue to do so. However, as was made clear by my noble friend Lady Smith in the debate in your Lordships’ House last week, it is important that the Government also act responsibly and do not abuse the trust we should place in this process by trying to slip through substantial and far-reaching changes. Just because the power exists in primary legislation is a necessary but not always sufficient reason. When she responds to this amendment, will the noble Baroness share with us whether the question of using primary legislation for this important measure was considered The SLSC’s report says: "It will fall to employers to meet the cost of the increases in employees’ pay. BIS puts the estimated total cost of the NLW’s introduction at £1,138.7 million in 2016–17" The report goes on: "BIS says that business reactions to increased labour costs can include reducing profits, reducing the number of hours worked, restructuring their workforce, increasing prices, increasing the productivity of their workers, or substituting younger workers aged less than 25" As the report highlights, this response raises a number of questions about what work has been done by BIS on whether the benefits of the national living wage to low-paid workers could be offset by any or all of these business reactions. The department’s response—I think this was the reason that the committee picked up this point—was that there were too many uncertainties for a reliable estimate of the cost to be given. The SLSC is surely right to highlight this as a major deficiency in a policy. When she responds, will the Minister give us a bit more detail about what modelling has been done on likely business responses I accept, as has the Regulatory Policy Committee, that it is difficult to monetise these options but even so it surely would not be difficult to give a broad-brush assessment of what the department thinks is likely to happen on the ground. A significant trend towards any or all of these options will materially affect the benefits anticipated and if we accept the ripple effect described in the impact assessment it will flow to some 6 million hard-working but low-paid people Secondly, the SLSC report points out, as the Minister said, that BIS accepts that non-compliance with the national minimum wage may increase. In the excellent impact assessment—I pay tribute to officials for the work they have done on this—the detail included spells out the measures that are going to be taken by BIS, some of which the Minister mentioned. There are what we might call carrots covering various allowances and tax reductions although it is fair to point out that these will not compensate either in total or in timing for the increased costs being transferred to millions of businesses, particularly those which are small or medium-sized. A very good example of this is the reference on page 29 of the impact assessment which says that, "Funding from the apprentice levy will be put in the hands of employers to support training. This will improve worker productivity". I invite the Minister to set out for me in writing how the additional cost of the apprenticeship levy, which is intended to be borne by larger employers, translates into a compensating financial benefit for the higher labour costs being transferred to the SME sector. In truth, the stick, as described by the Minister, is the proposal to double the financial penalties for companies which do not pay the new national minimum wage. BIS has confirmed that extending the coverage of the statutory wage floor and adding complexity may increase non-compliance. Will the Minister set out, in more detail than she has already, how she will comply with the SLSC’s request for the Government to publish more information in future and thus satisfy the wish expressed by the committee that Parliament can properly judge the extent to which compliance with the new rate delivers the expected benefits to employees There is a good section in the Explanatory Memorandum on the equalities impact of the new proposals and the duties of the department in this regard. It is demonstrated within the Explanatory Memorandum that low-paid work is most prevalent in some sectors, such as retail, social care, hospitality and cleaning. It also appears to be more prevalent in part-time work, shift work, and among younger and older workers. It affects women more than men, and the largest numbers of people affected live in the north-west, the Midlands and Scotland. Clearly, if the policy works as intended, things should improve in these sectors, areas and groups. It may help to reduce the gender imbalance in pay, and we can hope that a more equal society will gradually emerge However, as the SLSC points out, there are real risks that non-compliance will rise and that changes in employment practice will vitiate the policy objectives. The national living wage will have national universal coverage for workers aged 25 and above, and the forthcoming publicity and other measures contained in the SI will help. Does the Minister agree that it may be necessary, and would certainly be desirable, to design additional measures to root out poor practice and illegality in the low-paying sectors listed in Table A3 of Annexe 2, the worst regions identified in Table A4 of Annexe 2 and among the groups identified in Chart A1 of Annexe 1 of the Explanatory Memorandum I do not want to suggest or imply that there is not a majority of responsible employers who are always going to abide by minimum wage legislation, but the figures presented in the report which accompanies the regulations are cause for concern and, as I am sure the Minister will agree, more can always be done Finally, I challenge the use of the term "national living wage". As I understand it, the reason for the change from the NMW to the NLW is that: "The Government believes that the economy needs rebalancing from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society" The impact assessment goes on to say: "The UK can also do more to raise the wages of the low-paid compared to other countries—22% of UK workers are low-paid, compared to the OECD average of 16%" It explains that the OECD defines low pay as less than two-thirds of median earnings, but the initial introduction of the NLW will put those who receive it at 55% of the current UK median wage. Even if the aspirations for a £9 per hour living wage are achieved by 2020, it is estimated that that will get to only 60% of the UK median wage. In other words, this is more about raising the level of the existing national minimum wage than it is about introducing a genuine living wage. According to the Living Wage Foundation, the current UK living wage is £8.25 an hour and the current London living wage is £9.40 an hour. Will the Minister explain this anomaly? In particular, will she explain why the target for 2020 is only 60% of the median wage and why the Government are not trying to reach the OECD target of 66.7%? I beg to move.