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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.
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.
That the Committee has considered the draft National Minimum Wage Regulations 1999 (Amendment) Regulations 2009.
5.4 pm
Committee rose.
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