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Session 1999-2000
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Delegated Legislation Committee Debates

Draft National Minimum Wage (Amendment) Regulations 2000

Sixth Standing Committee on Delegated Legislation

Tuesday 4 July 2000

[Mr. O'Brien in the Chair]

Draft National Minimum Wage (Amendment) Regulations 2000

10.30 am

The Minister for Competitiveness (Mr. Alan Johnson): I beg to move,

    That the Committee has considered the draft National Minimum Wage Regulations 1999 (Amendment) Regulations 2000.

Let me say, Mr. O'Brien, how pleased I am to be on my first Standing Committee under your chairmanship. I am happy to appear before hon. Members again to present further important changes to national minimum wage regulations. It is only a few weeks since I debated the increase in the rate for young people in Committee.

As hon. Members will know, we asked the independent Low Pay Commission to monitor the effect of introducing the national minimum wage during its first few months in operation and to report its findings to us. The report and the Government's responses to it were published on 15 February.

It is only a short time since I was pontificating on the youth rate, and we have a lot to get through, so I shall resist the temptation to repeat myself. However, I hope that hon. Members will forgive me if I mention once more that the minimum wage policy has benefited more than 1.5 million workers and their families—with no detrimental effect on the economy, jobs or employment. Indeed, there have been more people in employment than ever before since the minimum wage took effect.

Hon. Members will be aware that both the Low Pay Commission's main reports made a number of recommendations. In our response to the first report, which was published back in 1998, we introduced the youth rate at a lower level than that recommended by the commission, but said that we would increase it to the recommended £3.20 an hour in June 2000. We debated that increase in May, and the new hourly rate took effect on 1 June. Today, we are debating the increase to the main minimum wage rate, the recommendations of the second report and the changes that are needed to implement them.

In its first report, the commission advised that the main rate of the minimum wage should be raised from £3.60 to £3.70 an hour in June 2000. The Government duly introduced the rate at £3.60, but decided that it would be prudent to wait for the Low Pay Commission's second report to be published and to see the effects of the new law once it had been established before deciding on the 10p increase.

When we published the Low Pay Commission's second report in February, we announced that, in view of its positive findings and the fact that the economy was operating well, we would indeed increase the main minimum wage rate from £3.60 to £3.70 an hour. We delayed the timing of the change to allow businesses plenty of time to prepare. Awareness of the needs of business has been a key reason why the minimum wage has been brought in so smoothly and successfully, and we intend to stick to that approach.

The announcement that we would increase the national minimum wage rate was made on 15 February and received wide coverage in the media. Since then, we have included information about the increase in the Inland Revenue's April newsletter, which went to all 1.2 million tax-registered employers, and we have written to bodies that represent both workers and employers. We will provide more information about the increase in the Inland Revenue's September newsletter. The May and June newspaper campaign on the youth rate also mentioned the pending increase in the adult rate. A substantial publicity campaign will be launched in September or October, including coverage on television, to ensure that workers are aware of their rights and that employers know their obligations under the law.

The Low Pay Commission's second report was positive. Its recommendations covered publicity, enforcement, guidance and clarification of regulations in specific areas, with which I will deal in a moment. The Government accepted all 16 of the Low Pay Commission's operational recommendations and suggestions, subject to the usual detailed consideration of practicality and resources. We were not entirely convinced by the argument for changing the treatment of 21-year-olds so that they received the main adult rate for the minimum wage. We have asked the Low Pay Commission to reconsider the matter and to refer to it in its next report.

Today, we are debating the increase in the main rate of the national minimum wage and several other regulatory changes recommended in the Low Pay Commission report. There were three specific recommendations: to extend the modern apprenticeship one-year exemption to cover national traineeships; to extend the sandwich student exemption beyond undergraduates to cover postgraduates who are required to take a work placement as part of their course; and to tidy up regulations on travel time and stand-by time to ensure that they meet the policy objectives.

I will briefly explain to the Committee how the regulations will work. Regulation 3 fulfils the Government's commitment to raising the main rate of the minimum wage from £3.60 to £3.70 an hour. I have explained our reasons for making that change, and going ahead with the increase shows our determination not to allow this important policy to wither on the vine.

Regulation 4 deals with people in training and education. The first part addresses an anomaly identified by the Low Pay Commission. It relates to young people in England and Wales on national traineeship schemes and to people in Scotland and Northern Ireland on equivalent schemes. As the commission noted in its report, such training is in essence the same as the modern apprenticeship, except that it leads to a national vocational qualification at level 2 rather than level 3. Modern apprentices under 26 are already exempt from the minimum wage in their first year, and the difference in treatment came about only because national traineeships were too new for the commission to consider properly in its first report. We are also applying the exemption to people on similar schemes in Scotland and Northern Ireland; such schemes are known as skillseekers and jobskills respectively.

The regulatory impact assessment identifies 20,000 trainees who will be affected by the change. Some trainees who currently receive the minimum wage will no longer be entitled to it under this legislation. However, they will continue to be entitled to whatever pay is set out in their contracts, which should be changed only with the agreement of both parties.

The second part of regulation 4 applies an exemption for sandwich students—a magnificent name for them. Current regulations provide that undergraduate students and trainee teachers do not have to be paid the minimum wage for any work that they do when placed with an employer as part of their course. The commission recommended extending the exemption to postgraduates; otherwise, their prospects of finding suitable placements would be reduced. There is some evidence to suggest that employers have opted to provide placements to undergraduates rather than postgraduates. The change is likely to affect only a few hundred people.

The commission also recommended that, if feasible, we should provide a similar exemption for students who work in this country but study at universities in the rest of Europe. We have carefully considered the practicalities, but our lawyers have advised us that such an exemption would be highly impractical and virtually impossible to define and qualify. The exemption is therefore limited to students studying at United Kingdom universities.

Those provisions underscore the Government's commitment to training and education. We want the right training targeted at the right people and to correct any small anomalies that are caused by the way in which the regulations were first drafted.

Regulations 6, 7 and 9 concern several more detailed and esoteric issues that have come to the attention of the LPC and Government during the first year of the national minimum wage. Regulation 6 is important because it concerns the way in which the rules operate as regards travel time for those required to move between assignments during the working day. Some employers felt that the existing provisions were ambiguous, so we are making the position absolutely clear: such travel time counts as work and must be paid at minimum wage rates.

Another amendment improves the way that the rules operate for those on so-called zero-hours contracts, who are permitted to go home while on call, but may instead choose to go elsewhere, and for those who are allowed to sleep at work while on call.

The final change deals with a minor difficulty with the application of the regulations to those who are responsible for submitting their own time sheets for some of their work.

Finally, there are one or two purely technical regulations designed to ensure that the amendments are placed correctly into the law.

The Government are keen to build on the success of the minimum wage's first year. We will ensure that it continues to provide adequate protection for lower-paid workers. As hon. Members will know, the Government have asked the Low Pay Commission to prepare a third report by July 2001. We are asking it to continue to monitor and evaluate the impact of the minimum wage, and to make further recommendations on the rate. In particular, we have asked it to consider movements in earnings this time round. That does not mean that we are proposing an automatic link between earnings and the national minimum wage; we have always seen great problems with any formulaic approach to setting the level of the minimum wage. We believe that to use earnings or cost-of-living indices alone would be to take far too narrow a perspective. Before arriving at its conclusions, the commission will also take account of such factors as competitiveness, employment and the impact on particular groups of people such as young people and women, and on different sectors of the economy, especially small firms.

We expect that any increase in the minimum wage that the Low Pay Commission recommends can be put into effect in autumn 2001. It will take several years to assess the full impact of the national minimum wage, and in the meantime we have every intention of proceeding with caution. Despite its very successful introduction, we need to remember that the minimum wage is still in its infancy. It is a very powerful instrument of policy that affects millions of people's jobs and livelihoods. Caution and the avoidance of risk are therefore crucial. We must not put at risk the jobs of those whom we seek to protect, nor place unnecessary burdens on business.

The minimum wage, which many of us believed should have been introduced much earlier, was introduced in this country only just in time for the 21st century. We are not going to put at risk its continued success and general acceptance by employers and employees alike by abandoning our careful approach. The amendments make sound and sensible improvements to the law. I hope that they will not be the cause of dissent among hon. Members this morning.

10.42 am


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