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Employment Bill [Lords]

Employment Bill [Lords]

The Committee consisted of the following Members:

Chairmen: Mr. Martin Caton, John Bercow
Baron, Mr. John (Billericay) (Con)
Binley, Mr. Brian (Northampton, South) (Con)
Burt, Lorely (Solihull) (LD)
Crabb, Mr. Stephen (Preseli Pembrokeshire) (Con)
Creagh, Mary (Wakefield) (Lab)
Djanogly, Mr. Jonathan (Huntingdon) (Con)
Engel, Natascha (North-East Derbyshire) (Lab)
Foster, Michael Jabez (Hastings and Rye) (Lab)
Gardiner, Barry (Brent, North) (Lab)
Hemming, John (Birmingham, Yardley) (LD)
Kidney, Mr. David (Stafford) (Lab)
McFadden, Mr. Pat (Minister of State, Department for Business, Enterprise and Regulatory Reform)
Palmer, Dr. Nick (Broxtowe) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Swire, Mr. Hugo (East Devon) (Con)
Ward, Claire (Vice-Chamberlain of Her Majesty's Household)
Hannah Weston, Committee Clerk
† attended the Committee

Public Bill Committee

Tuesday 14 October 2008


[Mr. Martin Caton in the Chair]

Employment Bill [Lords]

Clause 11

Offences: 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.
Mr. Binley: Mr. Caton, it is a pleasure to sit under your control yet again.
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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