Draft National Minimum Wage Regulations 1999 (Amendment) (No. 2) Regulations 2001

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Alan Johnson: I welcome the comments of Her Majesty's official Opposition, but they try to have their cake and eat it, too. The hon. Member for Rutland and Melton mentioned that the economy is strong and that we must go through bad times and good times. I presume that he was asking what would happen if we did not have a strong economy. As I do not think that there is any prospect of the country returning a Conservative Government for a long, long time, we will not have to face that prospect for quite some time.

The hon. Gentleman asked whether the rates could be reduced. I answered that question in the debate when we up-rated the minimum wage last year. The answer is no. That is why the very careful approach of the Low Pay Commission is the right way forward. As President Nixon said, once the toothpaste is out of the tube, it cannot be put back in again. If one increases the minimum wage rate and then decides that it should go down to a lower rate, confusion is created—not least for those who enforce the minimum wage. Therefore, we are taking a careful and balanced approach.

The number of workers who will be covered by the 1 October increase is the same as the number of workers who were originally due to be covered by the minimum wage when it was introduced in April 1999. However, the Low Pay Commission found that that number was based on dodgy figures, and fewer people were covered than was intended. So, in that sense, the 10.8 per cent. increase in October, taken from the time that the minimum wage was introduced, is a careful progression to ensure that we reach the correct rate. The original rate was too low.

We must be aware of the effects on particular sectors. The textiles and care industries that the hon. Gentleman mentioned were pointed up by the Low Pay Commission, which has spent a great deal of time considering the effects on those sectors.

The Liberal Democrat spokesman, the hon. Member for Weston-super-Mare (Brian Cotter) has probably been the most consistent participant in such debates. He spoke about the official Opposition's view on the national minimum wage, but skirted around the Liberal Democrats' deplorable record in that regard. When we introduced the minimum wage, they argued for a regional rate—a different rate in the north-east from that in the south-west. Eventually, however, they decided that that policy was ``politically illiterate'', as indeed it was. Having read the Liberal Democrat manifesto, which does not take long, I see that they now advocate a national rate, but one that is paid across the board, including to 16-year-olds.

All the evidence from the LPC suggests that if a minimum wage can affect jobs, it affects jobs held by young workers. Some people, including the Trades Union Congress, have argued that there should be a lower rate for 16 and 17-year-olds. The LPC disagrees with that, but it will keep the matter under review. The Liberal Democrat argument, however, is that the adult rate of £4.10 should also apply to 16 and 17-year-olds. Given that young people in that age group now have a right to training, accepting that argument would make training so expensive for employers that young people could not compete in the labour market. If employers had to pay all workers at the same rate, they would take on more-experienced workers. A great deal of evidence shows that if people do not get a job at the beginning of their working life, their whole future is affected. I welcome the comments of the hon. Member for Weston-super-Mare, but it was the Labour Government who got the national minimum wage right from day one.

The hon. Gentleman also asked about transparency and how the process would work. We have accepted the commission's recommendation 10. The Government agree that the LPC should move on to a permanent footing, having been a temporary arrangement, and that a strategic longer-term research programme needs to be established before the next report. Initially, the LPC will work under a new remit to enable it to continue to monitor and evaluate the impact of the national minimum wage and especially to commission longer-term research. We have also said that when we publish our terms of reference, we will take into account the recommendation of a biannual review. The LPC and its reports, therefore, provide transparency in relation to our decisions.

Brian Cotter: I am stung by the Minister's use of the word ``deplorable''. Until now, I thought that he was quite a decent guy. I was going to let him get away with it, but he has gone on and on since then.

In Committee on the National Minimum Wage Bill, we talked initially about regional variations, and we were right to examine that issue. Subsequently we took on board many of the recommendations that were made during our deliberations. Before the end of our consideration in Committee, we were wholeheartedly behind the measure, and since then we have taken a lead. The Minister says that the Government implemented the minimum wage, but he will recognise that it was introduced at a very low rate and they have had to increase it. The fact that the Liberal Democrats looked into alternative ways of implementing the minimum wage does not mean that we were not behind it. In fact, we have taken a leading role since its introduction, particularly in terms of having a statutory uprating every year.

Alan Johnson: We shall leave that matter. There has been an attempt to rewrite history, but I shall not go into Liberal Democrat policy making or we shall be here all day.

The regulations deserve the support of the whole House. It is good to have cross-party consensus in favour of the national minimum wage at last, because that gives low-paid workers the confidence to believe that the measure will survive, regardless of which party is in government in 20 years' time. The minimum wage is essential to protect low-paid workers. Evidence from the LPC shows that it also lifts morale and is good for productivity.

Dr. Vincent Cable (Twickenham): I want to ask the Minister about the age structure, which is probably the only controversial matter left to discuss. The Minister is right; when we are talking about younger workers—the 16 and 17-year-olds—the training entitlement is relevant. However, I do not understand the logic of the Government's thinking about the importance of maintaining the age differential. If it is the case that the minimum wage has had almost no effect on the demand for labour and does not have the disincentive effect that many people feared, and which many on the Opposition Benches expressed, why should it work in a negative way in respect of young adults?

Why do the Government insist on retaining the differential for 21-year-olds against the recommendation of the LPC? It is the only time that the Government have rejected its recommendations. Why do they cling so tenaciously to the idea that the minimum wage has a major deterrent effect on the demand for workers in the young adult group but not in general?

Alan Johnson: There are two separate issues. I was referring to 16 and 17-year-olds—there may be another policy review among Liberal Democrat Members—and there is no argument about that. However, in the case of 18 to 21-year-olds, the Government have accepted the LPC's recommendations. The commission had another look at that age group—I leave the 21-year-olds to one side for a moment—and considered whether there needs to be a different rate for 18 to 20-year-olds.

Although it is rather voluminous, the LPC report deserves scrutiny. Paragraph 2.15 states:

    ``In the year following the introduction of the minimum wage, growth in the employment rate of 18-21 year olds was more than twice the average for the working age population as a whole''.

The corollary, as the report notes, is that in the year since the national minimum wage was introduced unemployment fell faster in the 18 to 21-year-old age range than it did for all workers.

The markets are completely different for the two age groups. The evidence on 18 to 20-year-olds is that they are youngsters starting out in their working life. If an employer, especially in the sectors that we were discussing, has a choice between someone with experience and someone with no experience, inexperienced young workers will be trapped in a vicious circle: they cannot get a job because they have no experience and they cannot get experience because they have no job. We are adamant that we will tackle the problems—not just with the minimum wage, but also with the working families tax credit and the new deal—and we will not take any risks with 18 to 21-year-olds.

We are in happy agreement with the Low Pay Commission, except in respect of 21-year-olds. We respect the position taken by the LPC; it is not the first time that it has argued that 21-year-olds should be on the adult, rather than the youth rate. We rejected that recommendation purely because we think it would be too great a risk to give 21-year-olds a 28 per cent. increase in their hourly rate from 1 October. If we did so and figures suggested that we had created unemployment among 21-year-olds it would, first, diminish the impact of the national minimum wage and thus threaten the happy consensus and, secondly, we would have to say to the 21-year-olds affected, ``Sorry we took that risk, let's go back on it.''

Yes, the LPC argued the point consistently, but it is the only recommendation that we have failed to implement. We are introducing a 9.4 per cent. increase in the development rate, which will affect 21-year-olds; we are not comfortable taking risks with those of that age.

Question put and agreed to.


    That the Committee has considered the draft National Minimum Wage Regulations 1999 (Amendment) (No. 2) Regulations 2001.

        Committee rose at six minutes to Five o'clock.

The following Members attended the Committee:
Amess, Mr. David (Chairman)
Brinton, Mrs.
Cable, Dr.
Challen, Mr
Cotter, Brian
Duncan, Mr Alan
Hesford, Stephen
Johnson, Alan
Laxton, Mr.
Pearson, Mr.
Simmonds, Mr.
Taylor, Ms Dari

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Prepared 16 July 2001