Mr.
McCartney: The hon. Gentleman from a sedentary position
has asked me to stand up. He has been making that joke for 22 years.
All I can say is that I am a bigger man than he will ever be when it
comes to workers’ rights. He is a very interesting gentleman. As
someone who knows quite a lot about tipping, I can see that he probably
does
not. In
welcoming the proposals, may I say that this was one of the areas of
greatest debate when formulating the original regulations? I used to
work in a relevant industry—indeed, I was sacked on three
occasions for arguing my corner with the employer over the
maldistribution of the tronc, both its value to the staff and on behalf
of those who worked in the kitchens and the other non-restaurant parts,
who received no payments, either of the tronc or the service charge. I
wanted to ensure in the original regulations that the tronc and all
tips given personally to staff were not used to cover the minimum
wage. Cover
and service charges were part of the regulatory compromise and left a
huge and significant hole. My right hon. Friend the Minister has closed
that hole with overwhelming support from the public and from much of
the industry concerned, too. He has done it by consultation and has
rightly given credit to those who have campaigned inside and outside
the House over the
anomalies. I
want to leave a thought with my right hon. Friend, which does not have
to be answered today. The regulations do not do away with cover charges
or service charges. That was not an intent of the campaign, but the
truth is that once the regulations are complied with in October, I bet
my mortgage that service and cover charges continue. In fact, a service
change of 15 per cent. will continue even on the basis that the money
is an additional charge on someone who has already paid the costs set
out on the menu for a meal or set out in the hotel charges for a
bedroom. That is a huge and significant top-slicing of additional
income, while no other services are provided as they have already been
paid
for. Those
who complain about the decision that my right hon. Friend the Minister
has made would be wise to consider that, in restaurants, hotels and
other service industries, substantial sums—I predict hundreds of
millions of pounds a year—are creamed off as service charges,
which we are not required in law to pay, by the way, but people do not
argue because they do not want to be embarrassed. Most people pay on
the basis that the money went to the staff, but my right hon.
Friend’s consultation debunked that idea. I used to work in the
industry, and I think that it is the same today. The service charge
pays for new crockery or carpets, cleaning, electrical lighting, hotel
laundry, soap and other such things, in addition to the service
provided. That is likely to continue. After October, if the industry
starts complaining too loudly, questions should be asked, because it
will need to be more transparent in setting out in its company accounts
how much it gets in service charges and what it does with the money.
After October, it cannot use service charges to bring staff wages up to
the minimum wage. However, in my view, almost 100 per cent. of
businesses will continue to take that service charge
off. On
the comments made by the hon. Member for Huntingdon, my right hon.
Friend does not need to justify the rise. The whole concept and purpose
of the Low Pay Commission was for employers to sit down with employee
representatives and independent people with knowledge of the labour
market and the economy and make recommendations. The Government have
not tried to add to, or amend, these recommendations; they have
accepted them. That was the purpose of establishing the
commission—to ensure that in good times and bad an appropriate
minimum wage will be set in accordance with what the economy can
afford. Ten
years on and nearly 1 million people a year have been helped. We
underestimate that number, but more than 10 million people, most of
them women, have been helped as a consequence of the minimum wage; and,
as these regulations show, mainly women will benefit from this uprating
as well. The Government should be congratulated. The minimum wage is
important, especially now, when for those—mainly women—in
low-paid jobs, it is the difference between the family staying out of
or entering poverty. The minimum wage is part of a range of measures,
including tax credits, that make work affordable. The minimum wage is
not something on its own; it is about making work affordable and giving
people the capacity to be in, rather than outside, the labour
market.
I hope that
my right hon. Friend does not chasten himself too much over the
comments by the hon. Member for Huntingdon. The truth is that the hon.
Member for Huntingdon would desperately like to find a way of not
supporting the minimum wage, but the Conservatives can no longer do
that, because, over the past 10 years it has proved to be such a
successful Government policy, supported by the Low Pay
Commission.
If my right
hon. Friend cannot say anything today, will he give my comments some
consideration and talk to the Minister with responsibility for consumer
affairs about what we can do to protect consumers? After October,
consumers will probably continue to be asked to pay service charges of
15 or 17.5 per cent.—I have
seen them as high as 22 per cent. in some restaurants, if there are more
than six people at the table. That is incredible! A business invites
customers in and then charges them for walking in the door. Is that
possible? Well, actually, it is. That is exactly what happens.
Consumers, as well as low-paid workers, need protection from that type
of
exploitation. 4.53
pm Colin
Challen (Morley and Rothwell) (Lab): It is a great honour
and privilege to follow my right hon. Friend the Member for Makerfield
who did so much to introduce the national minimum wage. I have a couple
of points to make. First, the increase is quite small—to the
average worker it will amount to about £5 a week. We ought to do
more research on the benefits to businesses of the minimum wage and of
improving morale and motivation among workers. There are definite
benefits to businesses in having a well-motivated work force, which can
save them money
directly. Secondly,
out of my own ignorance, I would like my right hon. Friend the Minister
to answer one question: how will the changes to the tips system apply
to employers already paying above the minimum wage? I assume that they
apply to every employer, but if this is simply a question of changing
the regulations to ensure that employers cannot make up the minimum
wage—at £5.80 or whatever—using tips, will it also
apply to employers who pay their workers £6 an hour? They might
think that they are exempt from this
change. 4.54
pm
Mr.
McFadden: In my opening remarks, I concentrated on the
legal change before us. However, the point raised by my right hon.
Friend the Member for Makerfield and by the hon. Member for Huntingdon
touched not on the legal change but on another important issue,
transparency, which was part of our consultation. That brings me to the
question that my hon. Friend the Member for Morley and Rothwell has
just asked. The legal change is to ensure that tips, service charges,
gratuities and so on, whether by cash or by credit card, cannot be used
to make up the minimum
wage. From
the consumer’s point of view, however, that is not the end of
the story. As consumers, we still have an expectation that the money
that we leave will go to the staff in some way. We all have experience
in this. When I was a student, many years ago, I was a dish washer in a
Mexican restaurant. If my memory serves me correctly, the system that
we operated in that restaurant meant that I received 5 per cent. of the
total pot of tips. The waiters got a certain amount, the head waiter
got a bit more, and so on. The Government have not chosen to start
legislating about how such moneys are distributed, and that is right.
However, customers want to know what is happening to their tips. That
is why we are working with the industry so that in advance of the
changes in October, we will publish a code of transparency that we
expect the industry to adhere to, so that customers get greater clarity
about what happens to the money that they
leave. My
right hon. Friend the Member for Makerfield is right. Service charges
are not legally binding, although a lot of people think that they are.
In fact, there is what
could be called double tipping, where people pay the service charge and
then leave more, often not realising that they are doing so. Greater
transparency in this matter is very important. After all, it is the
customer’s money, and we must come back to that point time and
time again. The hon. Member for Solihull also made that same point. The
critical thing is to make the legal change, but we must also work with
the industry for greater transparency. The changes that we are bringing
in today will affect a minority of businesses in the hospitality
industry. Most employers in that industry do not use tips to make up
the minimum
wage. Mrs.
Betty Williams (Conwy) (Lab): In his opening remarks, my
right hon. Friend mentioned that during the consultation exercise, most
businesses gave their approval to the proposals. I take it that there
were also objections. Will he tell us where those objections came from?
Were they from a certain grade of
profession?
Mr.
McFadden: That brings me to the issue that was also raised
by the hon. Member for Huntingdon. We have not had many objections to
the principle of what we are doing, but we have had objections to the
timing. The British Hospitality Association, for example, asked us to
delay the changes, and the hon. Gentleman asked me why we rejected
that. I think that this change is overdue; it is not something that
should be delayed. It might affect a minority of service workers, but
even in tough economic times I do not see why we should delay something
that is a basic principle of justice at work, and a basic principle in
line with customers’ views about what should happen to their
money. That is why we did not accept entreaties from the British
Hospitality Association to delay the measure.
I will be
candid with the Committee about what I said to the British Hospitality
Association. I said that that industry is critical for our country and
that I do not want our country to market itself to visitors, tourists
and all other customers of the hospitality industry on the basis that
we use tips to make up the minimum wage. That would not do the industry
any good, so we did not accept those representations. However, the vast
majority of responses to the consultation were in favour of the change.
The Federation of Small Businesses, for example, told us that less than
5 per cent. of its members use the practice that we are talking about
today. In
terms of the minimum wage raise, I feel that the hon. Member for
Huntingdon perhaps betrayed his instincts. He began his remarks by
saying that of course he would not oppose the changes that we are
making today, and he then asked the Government to justify why there
should be an increase at all. The answer is the one given by my right
hon. Friend the Member for Makerfield. It would be a major thing for
the Government to reject unanimous recommendations from the Low Pay
Commission, which we set up precisely to recommend those
rates. There
will be an election in a year or so, or some time in the next
year—I do not know when; only one person knows that—and
the hon. Member for Huntingdon hopes to be making these decisions after
that. I think that he has hinted today that if he were in that
position, his view would be not to accept unanimous recommendations
from the commission, but to reject them and offer no rise or a lower
rise. That has been
noticed on the Labour side, and low-paid people should be made aware of
it. That is why we accepted the recommended rates, which are
modest. I
have already quoted the CBI. The British Retail Consortium has
said: “The
Low Pay Commission and Government have listened to our evidence. This
is the right decision for these difficult times and exactly what we
asked
for.” The
hon. Gentleman might be placing himself in a harder-line position than
the BRC, the CBI and other business voices that support the increases.
I do not think that is the right position for him or for low-paid
people.
Mr.
McCartney: May I add one point to the Minister’s
analysis about what has been said so far? I want to know whether the
Conservatives have made a commitment to the future of the Low Pay
Commission, because they are being extremely silent on that, as well as
being a bit iffy on whether the minimum wage will continue. The whole
context of the minimum wage is that if the Low Pay Commission is not
retained, it will undermine completely the validation of and commitment
to any long-term policy on maintaining a minimum
wage.
Mr.
McFadden: That is a question for the hon. Member for
Huntingdon. Certainly, we, on the Labour Benches, believe that the Low
Pay Commission has been a highly successful method of recommending
minimum wage
rates. It has acted in a responsible manner; it has considered the data
and the voices of both employees and employers; and it is one reason
why this area of legislation has become such an established part of the
labour
market. My
hon. Friend the Member for Morley and Rothwell asked about people who
earn above the minimum wage—perhaps £6 or £6.50 an
hour. If they are already paid those wages as of right, these legal
changes will not affect them, because the regulations are about the
minimum wage. This is about not using tips or gratuities to make up the
minimum wage. What is important in the example that he has raised is
the point about transparency. Whatever people are
paid—£5.80, £6 or £6.50—the customer
wants to know what is happening to their money, and that is why we are
so keen that, alongside the legal change we are making today, we should
bring in greater transparency throughout the industry.
To conclude,
I believe that it is right to give a modest increase in the minimum
wage this year, and that it is also right to bring an overdue measure
of justice to service workers to ensure that, in line with public
expectations, they get the minimum wage as of right, and that tips
cannot be used to make that wage
up. Question
put and agreed
to. Resolved,
That
the Committee has considered the draft National Minimum Wage
Regulations 1999 (Amendment) Regulations
2009. 5.4
pm Committee
rose.
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