Draft National Minimum Wage Regulations 1999 (Amendment) Regulations 2002

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Mr. Mole: I am sorry to keep interrupting the hon. Gentleman, but he is not being clear about what he believes the solution to be—whether it is for the Government and local authorities to make a greater investment to allow pay to care home sectors to increase, as the Chancellor's Budget suggested that they would. The Budget uprated the investment in social care by 6 per cent. per annum over the forthcoming years. Is the hon. Gentleman suggesting, on the other hand, that the national minimum wage should be held back for the care sector? If that happened, we would return to the bad old days of low levels of pay in care homes, when we could not feel confident about the quality of employees being recruited to care for the vulnerable and the elderly. Is he also suggesting that the only factor relevant to the static levels of employment in the care home sector is the national minimum wage, rather than the record levels of employment to which my hon. Friend the Minister referred?

Mr. Hammond: No, it is not only the national minimum wage, but the Government's totally misguided imposition of a largely irrelevant set of statutory regulations on the operation of care homes under the Care Standards Act 2000, which has compounded the problem of the national minimum wage.

The Chairman: Order. The hon. Gentleman has been shrewd and responsible and not strayed beyond the strict terms of the debate, but I think that he is straying now.

Mr. Hammond: Thank you, Mr. O'Hara. I was merely attempting to respond to the question put by the hon. Member for Ipswich. To take the other part of his question, I am trying to draw attention to the different responses of the public and private sector to the insertion of an artificial wage floor. In the private sector, businesses will go under, dive into the black economy, or be forced to move up the value curve. In the public sector, those options or imperatives do not exist.

The hon. Gentleman says that the Government have announced a massive increase in funding for social care, so he may have been asleep yesterday when the

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announcement was made about the new formula for local government finance. [Interruption.] Well, perhaps he should get on and read the rest of it. Care home provision is financed through local government and, as long as local authorities are being squeezed, at least in those areas of the country not privileged to be granted the Government's largesse, they will not be able to finance the increased costs of care home operators and providers.

We shall be left with the stark choice—more the inevitability—of refusing to finance the increased costs and watching care homes close, which will result in a lower volume of provision, or financing the increased costs and being able to support a smaller number of placements. In either case, the result will be less social care delivered and a greater burden on our hospitals. If I were a conspiracy theorist, I would think that someone at the top of the Government was deliberately trying to force local authorities in the home counties and south-east England to squeeze the national health service in their areas, while siphoning off funding for those areas that the Government regard as more deserving.

Will the Minister give an assurance that the Low Pay Commission will be asked to assess the cost impact on the care sector of future upratings of the national minimum wage? Will the Government analyse whether the costs imposed by the national minimum wage are effectively reflected in payments made by local authorities? Will they ensure that funding is available to deal with the consequences of their actions in uprating the national minimum wage, and that the funding flows through to the sharp end and reflects the increased costs incurred by that sector?

Several hon. Members rose—

The Chairman: Order. I see a number of hon. Members rising to catch my eye. I remind the Committee that the debate must conclude by 12 o'clock and that I must call the Minister not later than 11.50 am. Hon. Members may want to tailor their remarks accordingly.

11.24 am

Mr. Connarty: Thank you, Mr. O'Hara. You are certainly one of the most lenient of Chairs under whom I have had the pleasure to speak. The omnibus contribution by the hon. Member for Runnymede and Weybridge (Mr. Hammond) was clearly meant to be sliced up and sent out as a number of press releases on the Conservative party's position on several matters. His remarks did not focus only on the statutory instrument but covered all the Government's policies.

The Chairman: Order. I assure the hon. Gentleman that I was listening carefully to the remarks of the hon. Member for Runnymede and Weybridge, and he was fairly shrewd in not straying too far.

Mr. Connarty: I did not say that he was not subtle or shrewd; I said that I know of Chairmen who would have stopped him several times because his shrewdness was so obvious.

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The Chairman: Order. I remind the hon. Gentleman that it is for the Chairman to determine what is within and what is not within the terms of debate.

Mr. Connarty: I do not remember having challenged any of your rulings, Mr. O'Hara, but I take your point.

I was not one of the lucky Members who served on the Standing Committee that considered the National Minimum Wage Bill, but that may have been because of what I said at the time. I shall say it again. I shall support the statutory instrument, but only because it is all that is on the table. I agree with the Opposition who said that we are creating a dependency culture among the working population, but that has no relevance to the elderly or pensioners. I accuse the Opposition of creating pensioner poverty over their 18 years, although the Government are now addressing the problem.

I do not know which fraction I would be caught in if one were to divide the Labour party; it would have to be cut a number of ways to find out in what sector I was to be found on particular issues. On this issue, however, it is a great disappointment that we have not come forward with a recommendation for a minimum wage of £5 an hour. The Government have been slow to accept the fact that the minimum wage does not destroy the economy. Indeed, Churchill warned us of that if the Government do not set a minimum wage, bad employers will be undermined by worse employers. All good employers would be undermined by those who do not pay an adequate wage.

We do not have that problem; we have a minimum wage that will be increased by 2.4 per cent. to £4.20. I am quite depressed by that, because such a small rise does nothing to lift those on low wages out of poverty. I am an economist by training, and I know that the basic rises in costs fall much more heavily on the low-paid and the poor. In other words, the cost of keeping a household on a very low wage cannot be matched by a 2.4 per cent. rise, because most fundamental costs have increased by much more than that during the past year—and they continue to rise at a rate that keeps people dependent on the state.

I praise the Government for the working families tax credit incentive, because even with a £4.10 or £4.20 hourly wage rate, and even by working long hours, many people will still be at a high level of dependency and poverty.

Dr. Murrison: The hon. Gentleman is bandying figures about. To avoid confusion, will he tell us at what level he would set the national minimum wage?

Mr. Connarty: I must have said it rather quickly—or, because of my Scots accent, the hon. Gentleman could not translate what I said. I said that it should be £5 an hour. That is the recommendation of many trade unions and other organisations, including the Labour Research Department, which says that it is the only way to break what it calls the serfdom that exists.

Many people have been locked into low wages, and companies have no incentive to raise wages or to gain substantial rises in productivity because they can count on the fact that their employees are applying for

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the working families tax credit to supplement their income. If we paid £5 an hour, it would immediately break that dependency. That would save the taxpayer a lot of money, because the working families tax credit is becoming another benefit.

I do not speak for the Government. I speak as an objective economist. It would be wrong for that tax credit to become another benefit because people will get locked into a cycle of dependency. It is not good for the economy or the taxpayer because it is not good for productivity. If companies had an incentive to drive up productivity, it would drive up earnings and they would therefore be able to pay higher wages.

The 2.4 per cent. increase is a great disappointment to those of us who believed that the case had been proven, despite all the warnings of the Conservatives—repeated by innuendo today—that circumstances were not so good, the economy was not so good, the Chancellor was not so good and we were not doing so well. I note dissent on the question of the ability of the Chancellor, but those who look at the economies of the world realise that Britain probably has its best Chancellor for 50 years.

We should not lose sight of the Conservatives' gut instincts and the logic of their existence—although they might not present them today—which are to allow the management and capitalist classes to exploit the labouring classes, to make more profits to pay more dividends, to keep the fat cats fat and not to worry about the poor. All their pretences do not go down with my constituents. That is why the Conservatives come fourth in the elections in my constituency, and in most parts of Scotland. We have seen what they can do.

The fact that the Government have not accepted the Low Pay Commission's recommendation on 21-year-olds is unforgivable. The Minister knows in what high esteem I hold him personally. It must be a great burden for him, as a trade unionist of long standing, to see his Government receive a recommendation from an organisation that was set up to give it objective recommendations and advice and throw it back. There is no justification today for a 21-year-old not to have the same minimum wage as any other worker. It is a great disappointment to me that we have come to this.

When I studied economics, my professor, Andrew Bain, was a life-long Conservative, a gold medal winner at Cambridge and the youngest professor with his own department. When the Government of the time, under Lady Thatcher, rejected a recommendation that he and his colleagues made on the Monopolies and Mergers Commission, he resigned from the Conservative party on the basis that if one sets up an objective organisation to give advice in a particular field, one is duty bound to take that advice unless there are overwhelming arguments against it. It cannot be argued that if 21-year-olds received the minimum wage at the same date as everybody else, it would distort the economic model so badly that the measure should not appear in this legislation.

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Prepared 9 July 2002