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11 Feb 2003 : Column 797—continued
Mr. Michael Weir (Angus): Is the hon. Gentleman aware that there can be a problem with enforcement in that the minimum wage is not always enforced in the same way throughout the country? In some cases enforcement officers have gone to a firm for an employee and have looked only at the wages of that employee rather than of everybody in the firm. Unless it is done throughout the firm, it can have the effect of identifying the employee.
Mr. Lyons: That is an important issue that needs to be considered. Enforcement should be done across the whole range of people in the organisation concerned, rather than in specific cases. I commend the work of the citizens advice bureaux, because they are trying to assist people on a daily basis with problems related to the minimum wage and other associated difficulties.
I have another example from the Scottish Association of Citizens Advice Bureaux:
- "An East of Scotland CAB reports of a female client who received a 'new' contract of employment confirming entitlement to paid holiday leave. However, the contract also stated that her salary included 8 per cent. to cover the cost of paid leave."
- "A North of Scotland CAB reports of a female client employed as a cleaner paid 28p an hour above the NMW."
- "When she inquired with her employer about entitlement to holiday pay, she was told that the 28p over the NMW is paid to cover her holiday entitlement."
Mr. Lyons: Thank you, Mr. Deputy Speaker, for your guidance.
I return to the point that I started on. The loophole is there. We need to close it. Everyone will agree with that. I give my hon. Friend the Minister my full support.
2.28 pm
Dr. Vincent Cable (Twickenham): I wish to add to the general air of consensus and support for the Bill, which, as has already been noted, has the support of the Confederation of British Industry as well as the Trades Union Congress and all three parties in the House. Indeed, it was supported in the other place by my colleague, Lord Razzall.
Although you have just reminded us, Mr. Deputy Speaker, that this is not a general debate on the minimum wage, it is probably fair to respond to the Minister's introductory comments, in which he rightly and fairly observed that the minimum wage legislation has been a success story. One of the reasons for that is that employers as well as employees have bought into it and accepted it. That is, at least in part, because of the way in which the system has operated. Effectively, we have had a relatively successful, growing economy and a tightening labour market. The minimum wage has increased the supply of workers because a lot of people at the bottom end of the pay scale now feel that it is more attractive to work than to remain on benefits. Employers have benefited from the system because there is more labour, workers have benefited because they are better paid and the Government have benefited because there are fewer benefit payments. Thus a triple gain has been made as a result of the way in which the minimum wage system has operated.
What has yet to be demonstrated is that that system works equally well when there is a downturn in the economy. There may be questions about the effect of such a downturn on the demand for labour. Whether the system works well in those circumstances will partly depend on whether the generally successful system of setting the minimum wage at an economically sensible level continues. The Low Pay Commission's determination of that level in accordance with economic conditions seems to be a key element in the formula.
The other element in the formula that has contributed to the system's success is the enforcement mechanism, which is what we are discussing today. It has not been emphasised enough that an important aspect of the current enforcement mechanism is that it functions to a very large extent on a voluntary basis. It is because employers have accepted the minimum wage and, by and large, enforced it without pressure and extensive form filling and bureaucracy that the system is working well. An admirable balance has been struck between an effective enforcement mechanism and one that is not as enormously intrusive and bureaucratic as those associated with other instruments, such as the working time directive. Employers are required, by and large, to enforce the system themselves, but that system gives individual workers the opportunity to take action, backed by enforcement officers. That strikes me as exactly the right balance.
The Conservative spokesman mentioned the question that I now want to ask: why are we back here with this legislation? I was not involved in discussion of the original legislation, but it seems obvious with hindsight that somebody should have asked about retrospective payment and questioned why it was not covered. I am not pointing fingers at anybody. Clearly, nobody in the House of Commons or the other place picked up on the problem, nor did Government draftsmen and administrators, but I am still baffled about why the provision slipped through. It may have done so because of a lack of scrutiny, as the Conservative spokesman suggested. There may also have been a particularly quirky ruling by a judge. If that is the case, it might have been more appropriate to have an appeal process than to introduce fresh legislation.
Mr. Bellingham: As I understand it, the old law covered future and present underpayment; it also covered past underpayment if it was combined with those two things. According to the tribunal, it was underpayment in the past only that was not included.
Dr. Cable: I thank the hon. Gentleman for that clarification, but it seems odd that we are returning to the Chamber to debate the matter, whatever the reason.
Annabelle Ewing : As I understand it, an appeal is pending, as the Inland Revenue is appealing against the Employment Appeal Tribunal's decision.
Dr. Cable: I thank the hon. Lady for that intervention, which raises the question whether, if the Government win the appeal, the amendment introduced by the Bill will be superfluous or whether it introduces a new element into the process.
I want to speak only for a few minutes, so I shall return to the issue of substance and consider why the process of retrospective payment is important. Many of the arguments have already been covered. It is clearly unjust that people should not be able to claim back payment of the minimum wage if they have left the employer in question, and especially if they were dismissed. The threat of dismissal on pursuing rights to the minimum wage is especially important and it is right that people should have the entitlement in that regard. I want also to reinforce the other point that has been made: many people will be much bolder in pursuing a
claim once they have left the employer and the threat of dismissal is no longer hanging over them. There are good reasons why the retrospective issue must be addressed.It has not been mentioned that large sums may be involved. There is a lot of difference between a current minimum wage problem, which will involve a few pounds a week, and three years of underpayment, which may involve several thousand pounds. In those circumstances, it is much more likely that a bad employer will resist and force the process to a tribunal, and that an enforcement officer will have to be engaged. There are very good reasons why there should be proper protection with regard to retrospective payment.
My final point relates to limitations, which were raised in another place by Baroness Miller. The Government have said—I think that I understood the argument correctly—that the problem is to some extent academic, as after three years there is no longer a requirement to collect data. Why should there be a limit? Presumably, the legislation will still be here in 10 years. There may be some hard cases in which people were working in very malign circumstances with oppressive employers who systematically underpaid them for very long periods. There may be good records to demonstrate what has happened in such cases. Why should people who have suffered such enormous losses find that they have run out of time for arbitrary reasons? If they can demonstrate their case, it will not matter whether three, six, nine or 10 years are involved.
Mr. Bercow: The hon. Gentleman raises an important issue. Does he accept, however, that there is a powerful case for amending the Bill to provide for mandatory interest charges on underpayments, given that that would be widely regarded as right in itself and that many people who have been maltreated through illegal underpayment for long periods will thereby have fallen into indebtedness?
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