Mr.
Prisk: The hon. Gentleman is right that the growth of
small companies has been at a lower rate than the overall population,
so the proportion of small businesses within the country as a whole has
fallen in the past 12 years. Is he also aware that the proportion of
small businesses that employ people has fallen steadily over the past
10
years?
Jon
Trickett: I am aware of that, but is the hon. Gentleman
saying that what has been achieved in the past 11 years of this
Administration is a bad thing? I suggest not. Many people are seeking
the path of self-employment, which is not something I would have
thought any party would wish to discourage. Many more people are in
self-employment than previously,
including members of my family. They are proud to have moved from the
status of employee to self-employed. It would be wrong to characterise
the effect of the national minimum wage on small businesses as
deleterious, given the increase in the number of people who are
self-employed or working in SMEs, and the fact that general employment
has increased at the same time—that is the significant factor
that must be taken into account. Figures for employment,
self-employment and employment in SMEs have all increased at a time of
a rising national minimum wage. I invite my hon. Friend the Minister to
comment on that point in particular.
In the early
days it was right to move forward on enforcement with a gentle touch. A
case had been made by the Opposition and others in business that the
national minimum wage might have an effect on employment. I have just
argued that that was not the case, but in the early days it had to be
tested in the real economy and therefore enforcement was carried out
with a light touch. In fact, however, employers are exploiting the lack
of enforcement that existed in the early years, for the reasons I have
just given. They continue to pay people less than is justified and less
than the minimum wage, either by simply paying less than the minimum
wage or by making inappropriate deductions. It is time to increase the
rigour of the enforcement regime, and the Government are beginning do
so. Will my hon. Friend the Minister comment on those
matters? I
turn to the issue of work trials, which my hon. Friend was trying to
pursue when various hon. Members intervened on matters that were not
relevant. It is true to say that many people, especially in areas such
as the one I represent, have been trapped in a life on benefit for more
than a decade, some of them for two decades, since the coal mines
closed in my area. Those people would like to get back to work, but to
some extent the system seems to work against them, at least in their
own perception, so giving somebody the opportunity to go to work for a
short period, to see whether they have the work discipline and the
physical and mental capacity to hold down a job, is a good
idea.
Work trials
are to be welcomed, but not if unscrupulous employers begin to use them
as a way of obtaining cheap labour. For the moment, I shall not argue
against the increase from three weeks to six weeks because a three-week
work trial is somewhat short. It is only after a period of time that
someone can be confident that they can hold down a job, and the
employer, too, can be confident that the person on trial is capable.
If, however, the Government were minded at a later stage to come back
and argue that we should go beyond six weeks, it would have to be
seriously tested before many of us could say that it was justifiable. I
invite my hon. Friend to say how he came to decide on six weeks, rather
than any other number between three and six, so that we can test his
arguments slightly.
The
Chairman: Before we proceed, I remind the Committee that
this is a narrow order and I have been
indulgent.
2.59
pm
Mr.
Stuart: Thank you, Mr. Key. I welcome your
words of admonition to myself and others, which I am sure are
particularly timely before I speak. I would like
to ask the Minister again the question that I asked earlier. I did not
ask him what was the impact of the minimum wage, coupled with tax
credits, on the 1 million people affected; I wanted to know what the
impact of the minimum wage was in isolation from tax credits.
Particularly at a time of economic difficulty and challenge, it is
important to understand how much difference the minimum wage is making
in reality to the lives of the people it affects. The minimum wage
increases will help to reduce the cost to the Government of tax
credits, which would otherwise supplement people’s income, but
how much difference will they make to the incomes of those
concerned? A
further point for the record is that of the new employment created in
the past 10 years, a large amount has gone to foreign nationals and not
to existing residents and citizens of this country. Many millions of
our citizens of working age are not working. In this 12th
year of a Labour Government, over a time of astonishingly benign
broader economic circumstances, many people in the inner cities of
London, Hull and elsewhere throughout the country are still languishing
on invalidity benefit and unemployment
benefit. Hilary
Armstrong (North-West Durham) (Lab): The hon. Gentleman is
probably not aware that most of the people on the minimum wage are in
the north of England, where many fewer people from outside the UK are
working—certainly in my constituency. The minimum wage and such
regulations as we are discussing have been critical in getting some
people anywhere near a living wage. If he really wants to have a look
at the impact of the minimum wage, let him come to North-West
Durham.
Mr.
Stuart: I do not need to take any lessons from the right
hon. Lady about employment in the north of England, because I represent
a seat
there.
Hilary
Armstrong: It is in the
midlands.
Mr.
Stuart: I hardly think that east Yorkshire is in the
midlands, although the right hon. Lady might. The Labour party thinks
that Yorkshire is in the midlands—if that is an official
statement, it shows just how out of touch Labour is with modern Britain
and the feelings of people in Yorkshire, east Yorkshire in
particular. Too
many jobs have gone to foreign nationals, while many existing residents
have languished on the dole or various other benefits, instead of
having the opportunity to develop themselves. That brings us back to
the critical point, which is to understand what impact the minimum wage
changes will have on the real lives of those in the north of England,
whether in the right hon. Lady’s northern seat or my
own. 3.2
pm
Mr.
McFadden: I shall try to cover some of the points raised
in questions and so on. I turn first to small businesses. We had a
question about whether the impact on small businesses is taken into
account. It certainly is. The Low Pay Commission considers all factors
relating to employment and employment
prospects.
There was some
discussion of the rate of business and employment creation. There are,
in fact, record numbers of small and medium-sized businesses in the
economy. For example, from before the minimum wage began until the most
recent figures, the increase was around 800,000. Employment in small
and medium-sized enterprises also rose, from around 12 million people
employed before the minimum wage. More recently, about 14 million
people were employed in small and medium-sized businesses. Employment
in low-paid sectors has increased by about 650,000 since the minimum
wage was brought into
being. Those
figures show that some of the predictions about the minimum wage having
adverse effects on employment have proven not to be true. That is
because we have taken care in operating the minimum wage. We have used
the Low Pay Commission
system.
Mr.
Prisk: My question was what the impact would be if pay
differentials were maintained. I understand that the small firms test
does not include that, so what estimate has the Minister’s
Department made to understand the impact on those
businesses?
Mr.
McFadden: Before the minimum wage was brought into being,
some people said that it would result in great wage inflation, because
of differentials—we heard all that. Even on our side, some
people were sometimes unsure for that reason. There have been no
adverse impacts on wage inflation because people were seeking to
maintain differentials between themselves and the minimum wage. We have
not seen those
effects. The
hon. Member for Hertford and Stortford said that enforcement was an
issue close to my heart—he is absolutely right. My hon. Friend
the Member for Hemsworth also mentioned that. We are doing much on
enforcement. It is important that the legislation is properly enforced.
In his last Budget as Chancellor, the Prime Minister increased the
resources for enforcement by about £3 million per year. That
money has been used to employ more people to enforce the national
minimum wage and to advertise the rates better. There is a continued
need for awareness of the raise so that the minority of employers who
may be tempted to be unscrupulous and not pay people the minimum wage,
will not get a chance to do so. If they do, people should know where to
report it so that it can be properly corrected.
On corrective
action, some £29 million in arrears has been recovered on behalf
of people who were underpaid or not paid the minimum wage. In the most
recent year for which figures are available, the number was
£3.9 million. The number of prosecutions is
small—five over the last couple of years—because the
emphasis is on recovery, and prosecution happens only in more extreme
circumstances. However, the story does not end there; the House will
shortly consider the Employment Bill, which has finished its stages in
the other place. The Bill proposes to increase the penalties on
employers who underpay the minimum wage, and gives a better system of
awarding arrears to the employee who may be underpaid. I agree with
hon. Members on both sides of the Committee who have stressed the
importance of enforcement—it is a matter that we take
seriously.
A regional
minimum wage is raised every year in this Committee—perhaps by
the hon. Member for Solihull. We are not attracted to the idea. The
simplicity of the national minimum wage is part of its strength and
helps when it comes to enforcement, so I am not tempted to follow her
down that road. She asked about the time cycle during the course of the
year of the Low Pay Commission’s work. The rates were
recommended in March this year. There is a familiar cycle; the Low Pay
Commission makes its recommendations in March, the House considers
those recommendations formally around this time of year, and the
uprating is in October. There is a constant process of assessing the
economic circumstances.
I will say a
little more about work trials. My hon. Friend the Member for Hemsworth
asked why they are for six weeks and whether the period would be
longer. The trials are part of a more active welfare to work policy.
The Department for Work and Pensions talks about active and inactive
benefits—jobseeker’s allowance is active, while some
other benefits are inactive. In the past, Government policy may have
been tempted to concentrate on people in receipt of active benefits
when it came to welfare to work, but we must do more for those who are
in so-called inactive benefits.
The programme
is geared to that. It has been in place for a long time and goes back
to work trials in the 1990s. It has a high success rate—50 per
cent. or more of those who take part in such a scheme end up getting
into work. The DWP wishes to extend the period from three to a maximum
of six weeks, because experience on the ground and in trying to pursue
a more active welfare to work policy shows that three weeks is
sometimes not long enough for the employer or the person involved to
make a judgment about going back to work, while six weeks is better.
That is not a recipe for exploitation, but an important expansion of
opportunity and I hope that the Committee will support it.
The hon.
Member for Hertford and Stortford asked an interesting question about
the accommodation offset and I hope that I can answer him by explaining
how it works. It is where accommodation is provided in association with
a job. There is an issue of exploitation in that people could be
charged for accommodation, transport or similar matters, which would
take them beneath the minimum wage, and we are very alive to that. The
one area where it is allowable for people to be paid less than the
minimum wage, and where such deductions are lawful, is the
accommodation offset. However, it is capped at £4.46—I
think that is the correct figure. That is in cases where accommodation
is provided and some deduction can be made. We do not want a situation
where the deductions are so large that people end up working only to
pay the rent. That is how the offset works and what it is geared
towards. I hope that helps the hon. Member for Hertford and
Stortford.
How much
people will benefit from tax credits depends on circumstances. Not
everybody on the minimum wage receives tax credits, it depends on
whether they have children and so on. In terms of making work pay, the
Government believe that we do not need a single policy. The minimum
wage is important, but so are tax credits, which have given real
increases for those on low incomes for whom work may be less attractive
and for whom moving from benefits to work may lead them into a poverty
trap.
In conclusion,
the minimum wage has been one of the Government’s most
successful policies. The predictions of those who opposed it have been
unfounded. We want to build on it; it is an important part of labour
market policy and we want to do more and better in enforcing it. The
regulations are part of that process.
Question
put and agreed
to. Resolved, That
the Committee has considered the draft National Minimum Wage
Regulations 1999 (Amendment) Regulations
2008. Committee
rose at twelve minutes past Three
o’clock.
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