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National Minimum Wage

3.30 pm

Mr. John Lyons (Strathkelvin and Bearsden): I begin by declaring an interest. As a member of Unison and, previously, of the National Union of Public Employees, I have a background of campaigning for low-paid workers and of fighting for the establishment of the national minimum wage.

I, and millions of workers throughout the United Kingdom, think that the national minimum wage is a huge success story. Its introduction is a tribute to the work of Rodney Bickerstaffe, Lord Sawyer and many other trade union and political leaders who campaigned for so long to establish it.

I will highlight a number of concerns, including the fact that there is no rate of pay in the national minimum wage for 16 to 18-year-olds, and the issue of the development rate for 18 to 21-year-olds. I will also address the question of home working in the UK and its relationship to the national minimum wage, and deal with the rate of the national minimum wage.

The National Minimum Wage Act 1998 came into force on 1 April 1999 and there is no evidence to suggest that the national minimum wage has had a negative impact on employment, but there is evidence to show that it has delivered gains for the lowest paid in society. There are now 1 million more jobs in the economy than in 1999, so it is safe to say that we have all-party support for the national minimum wage, which never previously existed. That is a testament to its success.

The legislation does not include a rate of pay for 16 to 18-year-olds, however, and I believe that to be a mistake—a deficiency—that creates major exploitation in our towns and cities, and in some rural areas. Many youngsters leave school at 16. Some will not go on to higher or further education, but will go straight into the labour market to look for employment. Those young people must be protected against unscrupulous employers, and the way to do that is to establish a payment for the 660,000 young people aged between 16 and 18 who have no such protection at all. It is a simple balance: if there are youngsters in the work force, they must be protected. They should not feel isolated and unsupported.

Good employers are unhappy with the situation, and no guidance is given to them on what they should do when employing 16 to 18-year-olds. If an employer agrees a rate of pay for that age group, no matter what it is, someone will criticise it. If the rate is considered to be too low, the employer could quite properly say, "I am doing nothing wrong or illegal. I am paying the rate that I think is appropriate for the job." That is where the disparity creeps in throughout the UK, because different employers have different estimates of what appropriate pay should be.

As well as school leavers in the employment market, young people who are still at school often seek employment at particular times of year—in school holidays, for example. Employers in places with tourist attractions that are busy in summer, at Easter or at Christmas time need additional labour in those periods. Whether we like it or not, those employers often recruit those who are still at school, who will work for a few weeks and then return to school. That highlights the crux of the problem.

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Last summer, a man and wife came to my surgery to complain on behalf of their 17-year-old daughter, who was working in a store. The employer had decided to pay her £2 an hour. I had to say, "The employer is doing nothing wrong. There is nothing in the legislation to protect your daughter. I may disagree with the rate of pay, but the employer will say that he is doing nothing wrong."

When I visited the employer, that is, of course, exactly what he said. He told me, "If the Government will give me some guidance, I shall be happy to follow it." In the end, he paid the young woman the national minimum wage. He said, "If that is what you want me to do, Mr. Lyons, I am happy to do it." The major problem is not only employees' need to fight for their rights, but employers' need for guidance and support.

We need to review the situation—it is as simple as that. There is an argument for post-legislative scrutiny, which is ideal, as it would enable us to discover what is happening without relying on horror stories or anecdotes. We could simply consider the evidence provided by Citizens Advice and other organisations. It is unfair to treat young people as we do. Often we criticise them for not taking enough interest in society or politics, but the truth is that we do not take enough interest in them. What I have described is proof of that.

We need also to tackle the question of the development rate for the pay of people aged 18 to 21, which has existed since 1999. In evidence to the Low Pay Commission, the TUC said:

It is offensive that employers can legally pay lower wages to workers just because they are younger. I should be offended if that practice were applied to older people. The youth, or development, rate can often undermine a company's recruitment and retention strategy, and in today's economy that is often an important issue. We need to consider more fully the Low Pay Commission's views on 21-year-olds and the national minimum wage.

When the legislation was introduced, many people felt that the development rate would lead to a massive expansion of training, but there is no evidence of that. Many employers are abusing the availability of the development rate.

David Hamilton (Midlothian): I agree with my hon. Friend's sentiments and those of the TUC. Given that people can vote at 18 and, indeed, in this time of turmoil, could go to war and die for their country at 18, surely they should be entitled at that age to the minimum wage—which, of course, some employers treat as the maximum wage.

Mr. Lyons : My hon. Friend makes a valid point. He has a long record, based on what he has done in Midlothian and elsewhere, of fighting for young people and for proper pay for them.

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Home working is a major anomaly, and it is expanding massively in the UK. The figures speak for themselves. The National Group on Homeworking estimates that 1 million people are engaged in home working, while the Office for National Statistics thinks that the figure is about 650,000 for 2001–02. A range of organisations report not only the expansion of home working, but the abuse of home workers by some employers. I refer to citizens advice bureaux all over the country, the Scottish Low Pay Unit and the National Group on Homeworking. Recently, the Scottish Affairs Committee heard evidence from a range of home working organisations about what it is like to work in that situation—how employees are paid and dealt with. It did not make nice reading.

In 1981, only about 345,000 people were engaged in home working. Since then, there has been growth in electronics, and teleworking, telecanvassing and the general assembly of gifts are increasing. That has led to the expansion of home working. If it is developing in that way, we need to tackle it and resolve the problem. In 1996, the International Labour Organisation set out clear guidance on home working and the importance of treating home workers as fairly as those employed in an office or a factory. The National Group on Homeworking estimated that, in 2001, the average wage for home workers was just £2.66 per hour. It also produced a report, "Getting what's rightfully theirs?" which examined the impact of the national minimum wage on home workers and identified worrying trends and examples.

I compliment the Department of Trade and Industry, as everyone involved in the home working survey said that their main sources of information on the national minimum wage were based on Government initiatives, especially television and radio adverts and the helpline. That was a great help to them, but there is one worrying aspect. Some 83 per cent. of those earning below the national minimum wage have not made a formal complaint, but for good reason: of those who made a formal complaint to the Inland Revenue, none managed to secure rates at or above the national minimum wage while keeping their work.

The minute that someone complains as an individual, the employer has the right to transfer that person's work to any other person or home worker. They have no support and are left completed isolated. There are lessons for us all in the National Group on Homeworking report and the evidence from, among others, Citizens Advice.

I turn finally to the question of pay. Everyone rightly has their own views on the rate of the national minimum wage and when it should be paid. Unison, the TUC and all other trade unions have their arguments about what it should be, but they all say much the same: we need to move from a national minimum wage to a living wage on which a family can live without a problem. That is what we need to aim at.

Jim Sheridan (West Renfrewshire): I congratulate my hon. Friend on securing this crucial debate. Like him, through the Transport and General Workers Union, I was proud to campaign for the national minimum wage and even prouder when my Government introduced it. I remember organisations such as the Confederation of

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British Industry arguing against the minimum wage because it would cause job losses. As he noted, that was not the case.

Does my hon. Friend agree that the fundamental principle of the minimum wage should be that the taxpayer should not fund unscrupulous employers who choose not to pay people a decent wage? We have a working families tax credit that works out at £5 per hour, so surely it is right that the minimum wage should be no less than £5 per hour.

Mr. Lyons : I agree. My hon. Friend has long experience in the TGWU of examining the issues and coming to proper conclusions to support low-paid workers.

In recent evidence to the Low Pay Commission, the TUC suggested that we examine a new national minimum wage of between £4.60 and £4.75 by October 2003 and between £5 and £5.30 by 2004. It is important to develop a strategy for the minimum wage that includes an annual upgrade and review, rather than the current drifting system. The Low Pay Commission properly reported on the beneficiaries of the minimum wage—70 per cent. of them are women. It also said that the minimum wage is making an important contribution to narrowing the gender pay gap and addressing equality in the workplace. I welcome that.

The Government are on the right track. The National Minimum Wage (Enforcement Notices) Bill tackles some anomalies and problems, including when someone is a former rather than a current employee. The compliance teams throughout the country are doing an outstanding job, as are the citizens advice bureaux, which have to give the initial advice when someone comes through the door. In East Dunbartonshire, Catherine Bradley and her team are doing excellent work in advising people with problems with the minimum wage.

There can be no question but that the national minimum wage is a success story. The legislation is a credit to the Government, but to maintain its popularity with working people up and down the country, it must have relevance and importance. To achieve that, we must continually review it, examine its problems and rectify them. That will ensure that people keep their great faith in the minimum wage. They enjoy the legislation, but they want it improved, as it helps millions of people throughout the country. Long may it continue to do so.

3.44 pm

The Minister for E-Commerce and Competitiveness (Mr. Stephen Timms) : I congratulate my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Lyons) on securing the debate, and I very much agree with him about the success that we have enjoyed from the introduction of the national minimum wage. More than 1 million people have benefited since its introduction in 1999. We have tackled the appalling situation that existed before the minimum wage was introduced whereby quite a lot of people were receiving wages of £2 an hour or less. As my hon. Friend rightly said, there has been no significant adverse impact on businesses.

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Indeed, as he also said, there has been a big increase in overall employment since the minimum wage was introduced.

The vast majority of employers are complying with the requirements of the legislation. For bad employers who are not complying, we have a network of 16 enforcement teams across the UK. My hon. Friend is right to draw attention to the excellent work of those teams, and I am grateful to him for making that point. Between them, the teams have completed more than 24,000 case investigations since April 1999, and they have identified more than £12 million of wage arrears on behalf of low-paid workers.

However, my hon. Friend is also right to say that we should not just leave things as they were when the legislation was introduced. I think that he used the term "post-legislative scrutiny", and I agree that we need to go through that process to ensure that the legislation is kept up to date, and that we must learn from our experience. My hon. Friend made proposals about the future rate of the minimum wage, drawing on the evidence that the TUC submitted to the Low Pay Commission. As he knows, the LPC's recommendations will be published shortly.

My hon. Friend picked on two aspects of the legislation that I want to deal with. He mentioned the position of 16 and 17-year-olds, who are currently exempt from the minimum wage. It is often claimed that the fact that the minimum wage does not apply to people of that age puts them at risk of being economically exploited, a point that my hon. Friend the Member for Midlothian (David Hamilton) made. It is also claimed that it is a form of discrimination against vulnerable workers.

The Government's priority for young people is that they acquire the education and skills that they need to progress in their working lives. There are fewer 17-year-olds in education in Britain than in any other country in the Organisation for Economic Co-operation and Development except for Turkey, Mexico and Greece. We need to do much better in keeping young people in education. The Department for Education and Skills recently published proposals for reform of 14-to-19 education. We want increased continuity in the lives of young people between the ages of 14 and 19, when education should be the priority. The minimum wage therefore needs to be structured in a way that is consistent with that aim. Employment and unemployment rates are less favourable for young workers aged 18 to 21 than for adults. Again, the structure of the minimum wage needs to reflect the reality of the labour market.

Annabelle Ewing (Perth): I thank the Minister for giving way. I hear what the Minister is saying about 16 and 17-year-olds, but surely that is not a reason to exclude young people who are already in work from the protection of the minimum wage?

Mr. Timms : The point that I am making is that the present structure of the minimum wage, which is based on a recommendation from the LPC, has been framed in light of those considerations, with a lower rate for 18 to 21-year-olds and no rate for 16 to 17-year-olds. However, my hon. Friend the Member for Strathkelvin and Bearsden made an important point about that, and I want to make it clear that we are not irrevocably opposed to a minimum wage for 16

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and 17-year-olds. We would be prepared to reconsider the matter, provided that the rate was set carefully and that the possible impact on education policy was taken fully into account. We can perhaps now be more confident about the matter given that, as my hon. Friend rightly pointed out, the legislation has so far certainly not had the adverse impact on overall employment that some expected.

Anne Picking (East Lothian): Does the Minister agree that, laudable though it is to want to introduce a national minimum wage for 16 to 17-year-olds, it is a bit rich for someone from the Scottish National party to come and lecture us about it when none of its Members turned up to vote for the measure in the first place?

Mr. Timms : My hon. Friend makes a telling point.

The question of home workers has also been raised. Successive publicity campaigns have ensured that there is almost universal awareness of the minimum wage. Research carried out in 2001 by the National Group on Homeworking found that 95 per cent. of home workers knew that they were entitled to the minimum wage. The majority of employers are complying with the minimum wage but some bad employers are not. I accept that, in some cases, although home workers vaguely know about the minimum wage, they are not clear exactly how it applies to them. We also know that few home workers are prepared to complain about underpayment and that they fear, sometimes with justification, that they may lose their job if they complain.

There are two key problems affecting home workers. We need to make it clearer to them how they are affected by the minimum wage, and we need to see what can be done to address the problem about complaints. We are taking several steps. We are issuing a consultation paper on the case for amending fair estimate agreements in the regulations so that employers would be required to pay all home workers either the minimum wage for all the hours that they work or a fair piece rate linked to the minimum wage. Those proposals should help to make the rules simpler and more easily understood. In turn, that should help home workers to understand and claim the minimum wage to which they are entitled. Both employers and home workers have said that they support the proposals.

David Hamilton : May I suggest to my hon. Friend the Minister that one way of getting that information out to home workers, which is a real problem, is to use local authorities that regularly put out newsletters? Perhaps the Department could include in such newsletters information for people who are really quite isolated.

Mr. Timms : My hon. Friend is correct. We need to be imaginative about sending out information. We are working with Citizens Advice Scotland and the Scottish Low Pay Unit to establish a Scottish minimum wage helpline, which was launched last month by the Under-Secretary of State for Scotland, my hon. Friend the Member for Stirling (Mrs. McGuire). In the first week, the helpline received almost 30 calls and passed four complaints to compliance teams in Scotland. I am sure that we can deliver the information by working with a variety of agencies.

We are funding an enforcement pilot project, which aims to improve awareness and compliance among home workers in Bradford. We are establishing a team

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of experts in home working cases to disseminate best practice throughout the Inland Revenue. We are working with ACAS on a fact sheet for all workers who want to bring a claim. The Inland Revenue will, in future, be trying to make it clearer to employers that home workers are not self-employed. We have also put substantial extra funds into enforcement and increased the number of enforcement teams to 16, as I mentioned.

The Department has also been looking at other ways of helping home workers. In particular, it is investigating home working scams. In 1998, the Department launched a publicity campaign to address that problem. There was evidence of people posing as home work providers and asking potential home workers to send them money. My Department also provides a leaflet, "Homeworking: Don't be taken in by bogus job offers."

To put all that into context, we collect figures through the labour force survey, for which the Office for National Statistics interviews about 60,000 households every quarter about aspects of their employment, including earnings. The results suggest that there are about 1 million home workers in the UK and that perhaps as many as 70,000 of them receive less than the minimum wage, so this is a significant issue. We must continue to be imaginative and, as my hon. Friend the Member for Strathkelvin and Bearsden said, to work with a variety of agencies to address the problems.

As my hon. Friend was winding up his remarks, he spoke about the enforcement arrangements. I want to say a little about how those are working, because some very effective work is being done. The minimum wage helpline takes calls that are assessed and referred to one of the 16 compliance teams. Compliance officers then investigate the employer's business to which the complaint relates. That investigation will usually include a review of the pay records, an interview with the employer and interviews with workers. The length of the investigation will depend on several factors, including the number of workers and whether there are technical questions about interpretation of the legislation.

On conclusion of an investigation, the officer will issue a calculation of arrears to the employer and to the worker, and an enforcement notice will be served if payment is not made. Our experience is that persuasion works best in the great majority of cases. Out of some 6,000 cases each year, it has been necessary to issue only about 100 notices.

If an employer fails to comply with an enforcement notice, the compliance officer may serve a penalty notice. That levy is a financial penalty payable to the Secretary of State, which is twice the hourly amount of the minimum wage for each day that the notice has not been complied with in respect of each worker named on the notice. So far, about 40 penalty notices have had to be issued every year. Further penalty notices can be issued where the employer's failure continues. That is not an automatic procedure, and an officer will consider the facts of the case before issuing a notice.

If there is continued non-compliance, the legislation gives compliance officers one of two options. First, officers can take a case to the courts. In that case, an officer can seek to recover arrears only for a period of up to six years from the date of the last underpayment, or five years in the case of Scotland, as my hon. Friend will

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be aware. Most of the cases that the Revenue has brought so far have taken that route. They are therefore subject to the restriction that has been introduced.

Secondly, officers can take a case to employment tribunals. In that case, they must put their case before the tribunal within three months of the underpayment or the last in a series of underpayments. In theory, at least, however, officers could pursue underpayments exceeding the six-year threshold. The three-month time limit for bringing a claim is very tight. In practice, therefore, the Revenue does not often use that route, but uses the first route of going to the courts.

It is possible for employers to appeal against enforcement notices, and in those cases, the appeals would then be heard by employment tribunals that can confirm, rescind, or amend the notices. Once an employment tribunal decides that the employer owes a worker moneys, that decision is legally binding. If an employer refuses to pay the amounts awarded, further action would need to be taken to enforce the payment.

The National Minimum Wage (Enforcement Notices) Bill will soon receive its Third Reading in the House, as my hon. Friend will know because he has taken part in the debates on it. If it is passed, it will limit to six years the period that enforcement notices can go back in time on behalf of workers, whether cases go through courts or tribunals. The Bill will not affect the rights of individuals who are pursuing cases on their own behalf; the restrictions do not apply to them.

Finally, I want to say a few words about avoidance of the minimum wage. It is generally acknowledged that its implementation has been a success and that the enforcement operations have been effective in tracking down employers who are not paying the minimum wage. Non-compliance has been identified in only around a third of the 6,000 cases that the Revenue investigates each year, and enforcement notices will be necessary only in 1 or 2 per cent. of cases. Complaints from workers and former workers are therefore very important in tracking down businesses that are not complying.

Compliance officers try to ensure that there is anonymity for complainants, because some people will be afraid of losing their job if their employer finds out that they have made a complaint. It will not always be possible to ensure anonymity. If formal enforcement action through a tribunal or court is necessary, for example, the minimum wage team at the Revenue also gather and analyse information from internal and external sources to help to identify employers who are most at risk of non-compliance. The work of the compliance officers is therefore not solely dependent on worker complaints.

There are areas where compliance could be improved, and in response to recommendations in the LPC's second report we funded a number of pilot projects around the UK. We are working to identify the areas where we are doing less well and where employers may be avoiding paying workers the amounts that they are due.

This has been a useful debate, and I am grateful to my hon. Friend and to the other hon. Members who contributed.

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