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Session 2007 - 08 Publications on the internet General Committee Debates Employment Bill [Lords] |
Employment Bill [Lords] |
The Committee consisted of the following Members:Hannah Weston,
Committee Clerk † attended
the Committee Public Bill CommitteeTuesday 14 October 2008(Afternoon)[Mr. Martin Caton in the Chair]Employment Bill [Lords]Clause 11Offences:
mode of trial and
penalties Question
proposed [this day], That the clause stand part of the
Bill. 4.30
pm Question
again
proposed. Mr.
Brian Binley (Northampton, South) (Con): On a point of
order, Mr. Caton. We were told that it would be absolutely
safe to leave our notes and papers here in the room during the
intermission. That has turned out not to be the case. I wanted to put
that on the record because we cannot be told one thing and then find
that our papers have
disappeared.
The
Chairman: I understand that that has happened. We shall
try to prevent it from ever happening again. Things are in hand to
recover any papers that have gone missing. I call Mr.
Jonathan
Djanogly. Mr.
Jonathan Djanogly (Huntingdon) (Con): I am pleased that I
took my papers with me to have a little look at them over lunch;
otherwise, matters may have been rather
difficult. Why
are we being asked to give Her Majesty’s Revenue and Customs
more powers when those that it has have been used so sparsely, or is
the Minister implying that the Government miscalculated so badly when
they drafted the National Minimum Wage Act 1998? Furthermore, while I
may be persuaded of the merits of proceedings in the Crown court where
an unlimited fine is appropriate for large-scale and malicious acts of
non-compliance, I am not so easily convinced that it has any real
application in the usual course of enforcement. Can the hon. Gentleman
enlighten us and explain what proportion of current cases would be
prosecuted under the new proposed criminal powers and say how many
would remain civil? Furthermore, to date in how many
cases—successful or not—has HMRC applied for the maximum
fine of £5,000? I fear that the Government are trying to hand a
howitzer to HMRC, when it has shown itself loth to use even a pop
gun. I
sympathise with the Government’s attempt to empower HMRC and
give it the ability to prosecute larger scale offenders, as so
concisely set out by Lord Jones, the Minister in the other place, who
said: “We
do not believe that the sentencing powers available to magistrates
would be suitable in the most serious and exceptional cases where
employers refuse or contrive not to pay the national
minimum wage and do not co-operate with a compliance officer’s
investigations.”—[Official Report, House of Lords,
13 March 2008; Vol. 699, c.
GC258.] However,
the Government need to show that such a problem actually exists. I am
concerned about supporting the clause on the basis of only perceived
exceptional circumstances for which there is scant, if any,
evidence. If
the Minister can answer the questions that I am about to ask him, I
might find myself more able to support the clause. First, how many
exceptional cases have occurred, and how many are being investigated?
Secondly, how would we prevent HMRC from becoming overly zealous in its
pursuit of actions in the Crown court at the expense of the taxpayer?
Thirdly, if such gross and serial underpayment is being perpetrated,
why has HMRC not heard of it and begun an investigation with a view to
nipping it in the bud before it reaches a stage that requires such
large-scale, legal involvement? If the Minister can provide me with
answers to those questions, he will go a long way towards easing my
concerns.
Mary
Creagh (Wakefield) (Lab): It is a pleasure to serve under
your chairmanship, Mr. Caton. I congratulate the Minister on
his elevation to the Privy Council.
I shall speak
briefly about the new powers contained under clause 11. It is important
that we empower our officials to have the full range of penalties
available to them. We talked earlier about the exceptional nature of
the circumstances, but in Yorkshire and Humberside—the region
covered by my constituency of Wakefield—372 investigations took
place last year and there were 158 non-compliant employers. That is a
serious issue for my constituents in Wakefield and for the 140,000
people claiming the minimum wage throughout the area.
I will give
an example of the sort of people that we are talking about. My friend
Joseph Marshall told me about his son who, before the introduction of
the minimum wage, was earning £2.25 an hour as a landscape
gardener. He earned £18 a day, and was so tired when he came
home because he had worked an extra couple of hours that he would fall
asleep while eating his dinner. It was one of the happiest days in that
family’s life when, in 2001, he got a job as a security guard
earning £4.10 an hour. Obviously his wages have gone up
since.
We are
talking about vulnerable workers. The hon. Member for Huntingdon has
commented on whether those workers are vulnerable or not, but people
who work so hard that they fall asleep during their evening meal and
rejoice at earning the princely sum of £4 an hour are the
poorest people and most vulnerable workers in the
country. When
employers decide not to pay the minimum wage, it is a crime like any
other. It is a white collar crime, but it takes money from extremely
poor and vulnerable people. Businesses that avoid paying VAT are
prosecuted to the full extent of the law because they take money from
Her Majesty’s Government. I do not see why there should not be
similar penalties for companies that fail to give their workers the
wages that are due. The clause and the provisions in clause 8 mean that
for employers, choosing not to pay the minimum wage is not a zero
penalty option. I know that my constituents in Wakefield will welcome
the measure.
Lorely
Burt (Solihull) (LD): I have every sympathy with and am
totally in agreement with the points that the hon. Lady makes. She
talks about a number of companies that were found not to have been
paying the minimum wage. Does she know how many were prosecuted and
fined out of the, I think, 174?
Mary
Creagh: It was 158 companies across the region, and one of
the difficulties is that I have not been able to drill down and see how
many that affected in Wakefield. We must also look at the number of
people affected. Each of those companies will employ between 10 and 100
workers. That is the size of company involved, as larger companies will
have the policies and procedures in place. That probably represents
about 1,500 people across Yorkshire and Humberside, and it could have
been more. Perhaps I could ask the Minister for a breakdown on the
basis of our constituencies, and it would also be useful to know the
numbers of people who have been affected. If he could get his officials
to place copies of that information in the Library, that would greatly
assist us in scrutinising the Bill and in making the case
for these further powers to our
constituents.
Lorely
Burt: I agree with the hon. Member for Huntingdon on the
importance of enforcement once the failure of an employer to achieve
the national minimum wage is discovered. I have crossed swords with the
Minister on a number of occasions about this, but the chance of an
employer being inspected for non-enforcement of the national minimum
wage is, statistically, about once every 200 years. The Minister
rightly says that we should go after companies if we have evidence that
they might be flouting the law. However, what concerns me, as the hon.
Member for Huntingdon has said, is why those companies are not properly
prosecuted. It is certainty of detection that will make employers
comply with the legislation, rather than the size of the fines. If
companies are not seen to be punished, all the good intentions in the
clause, which I completely agree with, will not come to anything
because employers will feel that they can flout them with
impunity.
I
am becoming ever more concerned about the numbers that we are throwing
about. We can do damage in that respect; we need to be sure that we are
talking factually. Let me declare an interest. I am the non-executive
chairman of a company employing 140 people, which I started in 1989. In
my experience, everybody that I know is most diligent about paying
above the minimum wage, because over recent years, in most areas of the
country, it has been hard to get labour at the minimum wage. We need to
take that fact into
account.
Mary
Creagh: I know the hon. Gentleman’s
business—we have mutual friends—but that is set up in the
south-east of England, where there is almost a full-employment economy.
That is certainly not so in other areas of country and in other
countries—in Scotland and Wales—in rural areas and in
certain cities in the north, north-east and north-west. Does he
agree?
Mr.
Binley: It might be helpful if I told the hon. Lady that
we have a site in Wakefield employing some 20 people. I am delighted to
tell her that we find it just as difficult to get good labour in
Wakefield as we do in other parts of the country. Wakefield is a good
place to employ people. I have knowledge of other areas.
[Interruption.] I would be delighted if she
visited. I
am concerned about the numbers that are being thrown about. We ought to
be a bit careful until we get the actual figures, because to talk about
companies with 10 to 100 employees suggests that we are talking about
sizeable companies. Although there is some difficulty, none of us
wishes in any sense to not pay the minimum wage as a minimum. However,
in my experience, those companies employing 100 people that are not
paying the minimum wage would be important ones. We need to talk about
the facts—I am sure that the Minister would agree with that
point. We ought to be careful until we have those
facts.
The
Minister of State, Department for Business, Enterprise and Regulatory
Reform (Mr. Pat McFadden): I echo the comments
of other Committee members in welcoming you to the Chair,
Mr. Caton. We look forward to serving under your
chairmanship this
afternoon. We
are in danger of conflating two different things in this debate: the
penalty regime as it has operated up till now and the penalty regime as
it is changed by the Bill. That is an important
difference. I
gave some figures in my opening remarks on the clause, which I shall
mention again to help Committee members. In 2007-08, Her
Majesty’s Revenue and Customs, which is responsible for
enforcing the minimum wage, investigated 4,524 cases; it found
non-compliance in 1,649 cases, of which 96 per cent. were settled
without an enforcement notice being issued. That happened under the
current, unreformed system of enforcement. HMRC issued enforcement
notices to 59 employers and 25 penalty notices for failure to comply
with an enforcement notice. I will mention prosecutions in a moment. It
is important to set those figures out, because they illustrate that, in
the system as it has operated until now, enforcement notices and
penalties exist in the process, but they come at the end of the
enforcement activity. That is what the Bill
changes. Our
thinking behind how enforcement operates has evolved during the course
of the minimum wage. This was a major change to the labour market. We
took a decision in the early years of the minimum wage to operate with
a fairly light touch on enforcement. That was a major change, but the
point that I have made several times during our deliberations is that
it has been in place for 10 years. Non-payment now is somewhat
different from non-payment in the first year or two, when people could
argue that the system was new, that they were ignorant of the necessity
to abide by it and so on.
We have
changed the enforcement regime over time, and the Bill represents a
major change. The figures that I gave about the number of companies
investigated, penalty notices issued and so on will be changed
fundamentally. Clause 9 states that a penalty will now be automatic for
non-payment of the minimum wage. Instead of being given at the end of
the process, the penalty will be given at the
beginning.
4.45
pm Barry
Gardiner (Brent, North) (Lab): May I express my pleasure
at seeing you in the Chair, Mr. Caton? I have served under
your chairmanship many times and have always enjoyed it.
Does the
Minister agree that the current system has provided almost a perverse
incentive to the less scrupulous employer to take what is in effect an
extended loan from their work force by underpaying them? The only thing
that such employers suffered was having to pay the minimum wage after
being notified that they were in breach. By contrast, the regime that
we are looking forward to will apply a penalty much earlier, acting as
a positive discouragement to that bad
practice.
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