By the time it was introduced, the national minimum wage had considerable employer support. Indeed, just before the 1997 general election, the private company DHL carried out a survey among UK exporters, almost

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70% of which were either not opposed to, or directly supportive of, a national minimum wage. The case for a national minimum wage is not just a moral argument; it is not just an argument for social justice or greater equality; it is also an economic argument. Companies that can compete internationally only on the basis of quality almost always need a secure domestic base too. The small minority of rogue businesses that undercut that domestic market share of the mainstream business community undermine the latter’s ability to secure a share of the domestic market that enables it to compete on the quality that is essential to win orders in the international marketplace. Far from being a hindrance to businesses, therefore, the national minimum wage helps to ensure that employers wanting to export overseas are not undercut by other employers offering lower wages in the domestic market.

The idea that the national minimum wage is holding back employment in this country is as true as the nonsensical idea that Britain is, or was ever, in a similar economic position to Greece. That argument and those advanced today are like Don Quixote tilting at windmills. The truth is that the real danger to employment in this country are the Chancellor of the Exchequer’s economic policies—creating, as they are, a vicious circle in our economy, because of his decision to cut public spending too hard and too fast. The cuts are hitting families and those on low incomes, and leading to more jobs being axed than is necessary. The county desperately needs a sensible plan B to encourage growth. That is the way to help the unemployed, not this piece of legislation.

12.17 pm

Mr Peter Bone (Wellingborough) (Con): It is a great pleasure to follow the shadow Minister, the hon. Member for Harrow West (Mr Thomas), who put the official Opposition’s case clearly and well—I hope that he continues to do so for many years. I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on introducing such an interesting and productive Bill that has found support on both sides of the House—not in total, but in part. On the decision whether to vote on the Bill today, I should say that I, as a parliamentarian, believe that the will of the House should be expressed. However, I completely understand why the shadow Minister is jumping up and down asking for a vote. He does not really care whether this gets a Second Reading. He has already written a press release that says, “Nasty Tories divided over minimum wage. The real Tories want to abolish it”, which is nowhere near the truth, of course—the Bill in no way abolishes the national minimum wage. I shall, at the moment, be supporting the Bill wholeheartedly.

Tony Lloyd: Having quoted this press release—“Nasty Tories divided over the minimum wage”—the hon. Gentleman seemed to challenge the division over the minimum wage, not the concept of them being nasty Tories. Can he clarify that?

Mr Bone: I am not sure I really understand the hon. Gentleman’s point, but “nasty Tory” is clearly an oxymoron.

I plan, at the moment, to support the Bill, but of course we have not heard from the most important person in the House, the Minister. Many people would say that the Minister is one of the best in Parliament, and I would entirely agree with that. In fact, others

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would say that he is the Jim Hacker of Parliament. His Ministry is the closest to the Department for Administrative Affairs in “Yes Minister”, and he is responsible for getting rid of regulation and red tape, which is in part what this Bill would do. Everybody thinks that “Yes Minister” shows what really happens in this place, but of course, Jim Hacker went on to become Prime Minister, so I hope that the Minister will not forget me in future.

I refer Members to my entry in the register and the fact that I am a fellow of the Institute of Chartered Accountants in England and Wales. I want to take the politics out of this debate, or at least out of my speech. I have never doubted Opposition Members’ sincere concern about low-paid people and the unemployed; I just think that the policies that they propose do the opposite of what they want. Every Labour Government have left power with unemployment higher than when they came to power. That is not because Opposition Members set out to do that or because they did not care passionately about unemployment; it is because their policies lead to unemployment.

I happen to have with me the Library figures for the constituency of the hon. Member for Blaenau Gwent (Nick Smith). In April 2006, unemployment in his constituency was 1,917, but in April 2010, when Labour left power, it was 3,202, which is an enormous increase. After a year of this successful coalition Government, the figure has dropped to 2,955. I do not say that in any way to make a political point; I just think that the policies that the Opposition pursue sound good, but result in more unemployment.

Nick Smith: I fundamentally disagree with the hon. Gentleman’s point. Unemployment has gone up in Blaenau Gwent because of the recession and the banking crisis. Until then, the Labour Government did a very good job of boosting employment in my area, and I am proud of their policies.

Mr Bone: For many years I lived close to the hon. Gentleman’s constituency. It is a very nice constituency, made up of fine, hard-working people; there are just not enough jobs there at the moment, and I take a different view from him on how they might be created.

I thought that I could add most to this debate by not talking from within the Westminster bubble. I spent many years before I came to this place as an employer. I employed hundreds of people in both the manufacturing industry, and the service and travel industries. What particularly attracts me to this Bill is clause 3, which deals with the training wage. One thing that has been a problem for both parties for many years is this idea that we must get more and more people going on to university, because that is the way forward and the way we must progress. However, there are many young people who do not want to go to university. They want to leave education as soon as possible, get a job, work hard and progress in a career.

In the 1990s, when I was running a travel company, I was known as the meanest boss in Britain, because I made some points at a party conference that were translated into the claim that I was paying people less than £1 an hour. That is the level of debate that really frustrates me. We are talking about the kind of young

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people who used to come into my office. They were really bright young people, but they just did not like school. They wanted to get out of school as soon as possible, they wanted a job, they wanted training and they wanted a career. At that time, the travel industry had a good scheme in place whereby people were taken on and paid a nationally agreed wage—at that time it was, I think, £30 a week, although we are going back to the 1990s. For part of the time that they were working, they received on-the-job training, but they also went away to be trained in a classroom, which was paid for by my professional body, which I subscribed to through fees.

What we finished up with after two years were young people with national vocational qualifications who knew everything about the travel industry first hand. Furthermore—I can say this now, but I could not say it then—those young people have progressed and are now in senior positions across the country. One of the people I employed went on to become a director of my company.

We seem to have forgotten those young people who are not necessarily wealthy and who do not want to go on to university, but who want proper training and a proper career. The problem is that, if I were an employer now, I could not take on such people without paying them the minimum wage. I could not then afford to give them on-the-job training or to let them go off to college. I would also not be able to afford to let them travel to America to see how the operation worked there, as I used to do. That is a real problem, but it is addressed totally by the Bill. I freely accept, however, that there are many things in the Bill that might need to be changed.

Mr David Hamilton: May I put the converse argument to the hon. Gentleman? He is making a good argument for his particular circumstances, but I also used to be the chief executive of a company. I employed people and training took place. In the 1980s, companies such as Wimpey had hundreds of apprentices. They were operating in competition with other companies, and they had to stop taking on apprentices because the cost factor for them was far greater than it was for their competitors. A line has to be drawn, so that the same conditions apply to all companies. Surely that is the fair way forward.

Mr Bone: I am sorry that I cannot comment on that situation; I can comment only on what I know about.

There is a problem at the moment in that we are not providing those young people who want employment but do not want to go on to university with the opportunities that they need. The Government have moved forward with the apprenticeships scheme and a training rate of £2.50 an hour, but that rate is limited to those on apprenticeships. I am talking about providing good quality training in the classroom and on the job, as well as allowing the person to earn some money. That is why I would like the Bill to move into Committee.

The hon. Member for Manchester Central (Tony Lloyd) made a good point about asylum seekers, with which I entirely agree. The Bill also contains provisions relating to that. He is an outstanding parliamentarian, and I hope that he will vote for the Bill and seek to amend it in Committee. That would get around the silly business of the official Opposition saying that the Tories

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want to abolish the minimum wage. That is not what the Bill is about. I recently visited the British Footwear Association in Northamptonshire. Its representatives told me that they had a real problem getting people to come into the industry because there was no method by which to attract them. Clause 3 of the Bill could address that problem.

My hon. Friend the Member for Northampton South (Mr Binley) is an employer of many people. There is a fundamental misunderstanding on the part of people who have never employed anyone. They do not understand that the most important thing for an employer is to look after their employees. They are the company and the family, and the employer must ensure that they are looked after. The minority who do not do so is very small. Any company that does not look after its employees will go bust. It has frustrated me for years in this place that I cannot say, “Look, it is just not like that out there. We look after our employees. We want them to do the best they can. Yes, they might start on a very low wage, but we want them to progress within the business and go on to jobs elsewhere.”

I shall tell the House about something that has really wound me up about this place. In the first five years I was here, I never employed an intern. Our budget was high enough to pay people to do all the work that we as Members of Parliament had to do. Our constituency postbags are now getting bigger and bigger, and when the constituencies get even larger, we will have more to do. Then the dear old Independent Parliamentary Standards Authority came along and cut the staffing budget, which meant that we had to make people redundant. This is wholly relevant to the Bill as it concerns the minimum wage and training. I have recently taken on an intern. Two people approached me who were first-class people with university degrees. By the way, if anyone is looking for a researcher, those two are still available; they are very good. The problem is that I cannot pay them anything less than the minimum wage, so they would have had to work for free.

The real scandal is that unless people’s families can afford to allow them to work for free in this place, they cannot come here. There will be equally well qualified and good people, some of whom have come out of university, who cannot afford to take an internship, making them worse off when it comes to getting a job in the future. That cannot be right, but clause 3 would allow those people to be paid at least something while they are working to become interns. As I say, that is the real scandal. As for IPSA, many good things can be said about it—[Interruption.] No, they cannot. I withdraw that remark, Mr Deputy Speaker, as I was clearly wrong. There are some good things about IPSA, but on this issue, they have got it totally wrong.

In conclusion, my hon. Friend the Member for Christchurch has done a great job in introducing this Bill. It has created cross-party interest and arguments within the parties. The excellent Minister intervened earlier to tell him that he should not hold his breath. I also recall my hon. Friend the Member for Christchurch saying that he was previously winded when the Government accepted his Bill. I think that the worst thing that could happen to someone would be if they were holding their breath and then got winded. I expect the Minister to welcome the Bill.

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12.31 pm

Mr David Nuttall (Bury North) (Con): It is a great pleasure to follow my hon. Friend the Member for Wellingborough (Mr Bone) and I thank him for the sound comments he made; and I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on bringing the Bill before us. I am conscious that time is marching on and that other Members wish to speak before we hear from the Minister. I shall not, therefore, reiterate the sensible and sound arguments made in support of this Bill, which I, too, am proud to support. However, one or two points have not been mentioned, so it might be of benefit to everyone if I highlighted them.

First, let me say at the outset that my support is based on my desire to do all I can to help those people in my constituency—people in Bury, Tottington and Ramsbottom—who are unemployed. The latest figures from the Library on the number of people claiming jobseeker’s allowance in my constituency as of May 2011 show that 625 such claimants are aged 24 or under; 1,055 are between 25 and 49; and 280 are aged 50 and over—totalling 1,960, which is nearly 2,000 people. Those are the people I want to help.

The great benefit that would accrue if the Bill reached the statute book is that we could make the rights of those people a reality. I mean the basic human right contained, as my hon. Friend the Member for Christchurch said, in article 23(1) of the universal declaration of human rights—that everyone has the right to work. The minimum wage legislation, however, removed that right to work from certain people, who were told, “We are sorry, but you cannot do what you would like to do. We have decided for you. We have taken that right away from you. We will tell you whether or not you can choose to work.” That cannot be right.

My hon. Friend the Member for Wellingborough, who is no longer in the Chamber, did not make clear whether he was an employer at the time when the minimum wage was introduced, but I can tell the House that I was. I can speak about the effects of that legislation on the basis of first-hand experience. Credit should be given where it is due: we were given notice, and we knew what was coming down the line. The legislation had been enacted, and we knew that, in time, a national minimum wage would be introduced. So we started to plan, and to assess the likely impact on our business.

Members might assume that it would be a simple matter of having to increase the pay of anyone who was earning less than the minimum wage at the level at which it was introduced back in 1999, and of course that was the first thing that we, as employers, had to do. However, it had a knock-on effect. Ours was a small business employing perhaps 40 people, and the introduction of the minimum wage probably affected two or three of them, although I cannot recall the precise number. They were the office juniors—the staff members who were at the bottom of our pay scales. They might have been with us for only a few weeks or months.

Most of our staff were moved on, and those who started as office juniors knew that they would be able to work their way up and become junior typists, then secretaries, and eventually, perhaps, trainee legal executives. Other staff members, however, had already progressed within the business and were earning what had now

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become the minimum wage. As soon as the office juniors were moved up, we had to start moving everyone else up. I understand that the process is known as “pay leapfrogging”. All that happened was that everyone was moved up the ladder.

Mr Binley: Another facet of the minimum wage was that it increased at twice the rate of inflation, which had the effect of shoving all wages up. Does my hon. Friend agree that Ministers in the last Government—the present Opposition—worked on behalf of their paymasters, the unions, to achieve that very objective? One wonders where it would have ended in terms of Britain’s competitiveness.

Mr Nuttall: My hon. Friend has made a good point. That was part of the overall effect of the introduction of the national minimum wage, with which I was about to deal. Earlier speakers have said that many employees—especially those at the bottom of the pay scales—benefited from its introduction, but it is sometimes forgotten that, by implication, it must have had an inflationary effect on the economy. Nowadays we are constantly hearing that the increase in the VAT rate has, understandably, had an effect on the inflation figures. Similarly, given that the cost of employing people is the biggest single cost incurred by many businesses—especially in the service sector—the introduction of a national minimum wage is bound to have a serious and significant inflationary effect. Therefore, the overall effect of helping those at the very bottom of the pay scales is perhaps not as great as may sometimes be thought.

We have heard a lot about the arguments for, and logic behind, the national minimum wage, but I submit that they are, in fact, arguments for a national income guarantee, as there would be logic in saying every member of society should have a given minimum level of income. That is not what the national minimum wage does, however. It is entirely different, and therefore in most cases—there are exceptions, one of which I shall touch on shortly—the choice is between a life on benefit and a life in work.

Let us consider the following hypothetical situation. An entrepreneur wants to establish a new restaurant in my constituency. It is a large restaurant with a number of tables, and he wants to employ waiters and waitresses. The restaurant will be open full-time, and he calculates that he can pay a total of £53.37 per hour for his workers. It just so happens that that is nine times the current national minimum wage of £5.93. At present therefore, he would be able to employ nine members of staff. The entrepreneur places an advertisement in the press, and 10 people apply for the jobs—the true figure would probably be much higher, of course. They are all friends who went to school together or met at the local job centre. They are probably some of the 625 people to whom I have referred who are unemployed. They say to the entrepreneur, “This is great. This is just what we would like to do. It is an opportunity for a job. We would all like a job.” The entrepreneur replies, “I’m sorry, but under the current legislation I cannot employ all of you. The best I can do is employ nine of you.” Therefore, the 10th friend is left unemployed and living on benefits, whereas the other nine can get a job earning the minimum wage.

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Under the Bill’s provisions however, they would be allowed to say, “Actually, we’ll help our friend out. We want to help our friend No. 10; we want him to have a job. We all voluntarily agree to that. We would still be far better off if we worked for, let’s say, £5.33 an hour, and then all 10 of us will be able to have a job. We’ll all be friends working together. That will be tremendous, and our poor 10th friend will not be left on their own.” Without this Bill’s provisions, the great irony of the existing situation is that the nine would be employed while the 10th could become self-employed and would be entitled to work for less than the minimum wage in any case. That is an anomaly in the current legislation.

Whenever the national minimum wage is discussed and arguments are put for and against it, people always talk about “big businesses” and “rogue employers”, but let us not forget that the national minimum wage applies to all employers, including charities and small organisations in the voluntary sector. They are all affected by the national minimum wage. The Bill is a contribution to the big society, because it would mean that small charities would be able to employ more people, not only the young, but perhaps older people, too—this is not just about people in the under-24 category. My figures show that in my constituency this might apply to 280 people over 50. These people might be able to afford to work for less, perhaps because they have bought their own home and paid off the mortgage, and they may wish to help a local charity. I am talking about self-sufficient people who are not claiming benefits and who want to work for a small local charity. As the law stands, they would not be able to do so. The Bill therefore contributes to another other theme of the big society—that of passing power over.

Mr Alan Campbell (Tynemouth) (Lab): In those circumstances, could the person not volunteer for the charity? They would therefore not be “working” and would not be subject to the minimum wage legislation.

Mr Nuttall: Many charities employ people and also have volunteers; many small charities employ a certain number of people on a full-time basis and also have volunteers.

Mr Campbell: But is not the premise of the big society that people should volunteer? It is about encouraging people to volunteer, rather than about people seeking employment.

Mr Nuttall: The big society is about helping to enlarge the voluntary sector. [Hon. Members: “It is voluntary.”] Yes, but some voluntary organisations still employ people to run the volunteers.

The other aspect of the big society is the passing of power from the Government down to the individual. What better example could there be of the big society than for this Bill to become law and for this House to say to the individual, “We will give you back the right to decide for yourself whether or not you wish to work.” That would be the biggest move that this House could make towards helping the big society, as it would give individuals the right once more to decide for themselves whether they want to live a life on benefit or to work for a living. I commend the Bill to the House, and I look forward to hearing the rest of the contributions.

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12.47 pm

Mr Edward Leigh (Gainsborough) (Con): I apologise for being delayed and missing the start of this debate, Madam Deputy Speaker. I wish to congratulate my hon. Friend the Member for Christchurch (Mr Chope)—he is also an actual friend—on doing a signal service to the House by courageously raising this issue, as it is important that we have an honest debate about it.

There are many arguments in favour of what my hon. Friend is trying to do. That applies both in terms of the Bill’s wider context, which I shall deal with in a moment, and what he is specifically trying to do on the minimum wage. The first relates to the tragedy of youth unemployment, which is an increasing problem. In addition, businesses undoubtedly need to respond to the marketplace, because they are in the marketplace and they cannot avoid it. It is also undoubtedly better for people to work for less than be unemployed, because work helps people to get training, make contacts, gain experience and so on.

My hon. Friend has also said that we are talking about a voluntary process, but it is precisely on this point that his Bill has difficulty. As was well said by the hon. Member for Harrow West (Mr Thomas), who leads for the Opposition, this issue may well be a show-stopper that prevents the Bill from becoming law. There is undoubtedly a mismatch in power between an employee who is desperate for a job and an employer. Although my hon. Friend the Member for Christchurch assures the House that the process is entirely voluntary, one can undoubtedly envisage many situations in which there will be problems. My hon. Friend the Member for Shipley (Philip Davies), who has unfortunately been called away for a moment, mentioned the example of disabled people, who often find it more difficult to get jobs because what the employer has to pay them is on a level with people who are not disabled. As I said to my hon. Friend, the employer might summon the disabled person and say, “I’m sorry, but you have this disability and you are not quite as capable as doing this job as other people, so please sign on the dotted line to be paid less, as this provision is now law.” One has to assume that these Bills will become law, so we need to tease out these important points.

In other circumstances, an employer might say to employees that there are severe problems and that the marketplace is very difficult, so employees will have to sign on the dotted line and take less than the minimum wage. It is a bit simplistic—and, dare I say to my hon. Friend the Member for Christchurch, a bit naive—to assume that the process is entirely voluntary. I am not sure that the marketplace works like that.

Mr Bone rose

Mr Leigh: I shall give way to my hon. Friend, who has undoubted experience as an employer.

Mr Bone: It was quite wrong of me to call my hon. Friend a shocking leftie on this issue—I clearly got that wrong. He makes a very fair point about the Bill needing to be considered carefully in Committee. The original version contained the idea of limiting the period for which someone could opt out of the minimum wage. Perhaps that would reassure my hon. Friend.

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Mr Leigh: Obviously, if the Bill is allowed to progress to Committee, we will have to tease out some of those points. My hon. Friend the Member for Christchurch accused me of being a paternalist, but there is nothing wrong with thinking like a parent. I suspect that this is a clash between the free market wing and the socially conservative wing of the Conservative party.

The Victorian age has been mentioned. Many Victorian owners were very bad and we can read about them in Dickens’s novels, but many, particularly those inspired by conscience, religious faith and other such factors, were superb employers. There was a big debate about these issues in Victorian times. Without boring the House, I want briefly to allude to a papal encyclical called “Rerum Novarum”, issued in the latter part of the 19th century, which made it absolutely clear that the wage earner is entitled to a just wage and that we cannot live with an untrammelled free market because there is a mismatch in power between employer and employee. These are very important issues that must be addressed by my hon. Friend the Member for Christchurch before the Bill becomes law.

Mr Binley: I find my hon. Friend’s contribution interesting, but will he accept an example of an experience that was brought to me in my constituency? Some people were made redundant through no fault of the owner of the company—the recession smacked him hard. Three of the elder members of the group who wanted to work, for their own esteem and because they felt that working had a greater relevance to their lives than not working, went to him and suggested that they take a cut below the minimum wage for a limited period. He looked into it and found that he could not do that, of course. Is that not a foolish situation when we are trying to encourage people to recognise that work is a valuable part of the human experience?

Mr Leigh: That is an excellent intervention that shows the moral issues in our debate. There will undoubtedly be situations—this is where I agree with my hon. Friend the Member for Christchurch and why I think his Bill deserves to be debated in Committee—involving a perfectly good and caring employer, such as the one described by my hon. Friend the Member for Northampton South (Mr Binley), who is in a difficult situation and employees who are desperate to keep their jobs. We must be aware of that.

There are two other issues that are worth mentioning. The first is the increasing scandal of internships, particularly for young graduates. I feel quite strongly about this matter, which has already been mentioned by my hon. Friend the Member for Wellingborough (Mr Bone). I suppose I should declare an interest as a parent, and two of my children are already graduates. All of us who are parents know that whereas our generation—that of my hon. Friend the Member for Christchurch and myself—left university in times of full employment, young people are increasingly trapped in a disgraceful situation in which employers tell them that they can work for them, but only if they work for nothing. I do not think that that is right.

When I take on an intern in the House of Commons, I pay them the minimum wage. I am firm on that. It is fine if a young person between school and university wants to come here for a week’s work experience and

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work for nothing, but I am absolutely clear that if someone is working here for six months or so, they should get the minimum wage, and I will not pay any less than that. However, many young people are now trapped.

One advantage of the Bill—it is worth debating further—is the excellent idea of a training wage, which I see as a kind of halfway house. It would enable employers to pay graduates something, although my view is that, if the company involved is in the City, it should pay the minimum wage. It is better if young graduates, having worked so hard to get through university, are not in the dreadful situation of kicking their heels at home or, if they do work, getting nothing for it. We must have a proper debate about the scandal of internships. It is good that my hon. Friend the Member for Christchurch has put that in his Bill. It is a Back-Bench Bill and we all know that in reality it is unlikely to become law. However, we need a fuller debate on that matter.

We also need a fuller debate on clause 1, and my hon. Friend has been honest about that. It deals with a subject we do not hear much about. It is a scandal that in this country large number of foreign nationals—people whose applications for British citizenship are being considered, or asylum seekers—are trapped in the appalling situation of not being able to work. I think that we are a bit dishonest with ourselves about that.

The hon. Member for Harrow West, made the valid point that we should not allow employers to pay less than the minimum wage because all that will happen is that the taxpayer will have to step in through the tax credit system. My hon. Friend the Member for Shipley said that he did not agree with a tax credit system, but that is a bit of a simplistic argument. It is impossible for people with children to raise a family on anything much less than the minimum wage plus some tax credit. My hon. Friend the Member for Bury North (Mr Nuttall) made the point that we should have an honest debate about what basic national benefit should be paid to keep people in body and soul. I have always argued that a universal minimum benefit payment should be available, with a minimum of churning of taxation on top of that, and as flat a tax rate as possible, which would encourage people into employment. The trouble is that so much of our minimum wage-tax credit system does not help the poor. It often traps people in unemployment and dependency and discourages people from going into employment. Those issues need to be debated much more honestly, so I congratulate my hon. Friend the Member for Christchurch on introducing the Bill. It is an interesting Bill that raises issues of great importance, and I hope that it will be allowed into Committee.

12.58 pm

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk): I congratulate my hon. Friend the Member for Christchurch (Mr Chope) on securing parliamentary time for the Bill. I confess that I have not been a regular attender on Fridays and I found this to be—how can I put this nicely?—a different style of debate.

We began with some rather florid language. I think there was talk of gouging and the crushing hand of

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state socialism by stealth—a particular favourite of mine—which presumably is the opposite of the hand which Adam Smith liked to talk about. Perhaps more predictably, we had some early fireworks from the right hon. Member for Rotherham (Mr MacShane) in response to that. Then there was a wide-ranging debate, ably chaired, Madam Deputy Speaker, by your fellow Deputy Speaker. We visited small business in Wellingborough, asylum seekers in Zimbabwe, and, at one point, the Victorian age, possibly in person, though my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) is not here now. Two topics which I suspect, although I am happy to be corrected, may be popular on a Friday morning—the EU and IPSA—also seemed able to be drawn into the heart of debate, all within order, of course. There was, just for a moment, the prospect of an unholy alliance between the hon. Member for Manchester Central (Tony Lloyd) and my good friend the hon. Member for Christchurch, but as my hon. Friend rightly concluded, this is an important debate to our constituents, and in many senses too serious for yah-boo politics. I will seek to address the range of issues that have been highlighted during the past three and a half hours.

There are four elements to the Bill. Clause 1 provides that no foreign national lawfully resident in the UK who is above compulsory school age can be prevented from engaging in remunerated employment. The rest of the Bill concentrates on the national minimum wage. Clause 2 provides an opt-out, clause 3 exempts a person who is getting a training wage from the minimum wage, and clauses 4 to 8 provide for the introduction of a regional minimum wage. As the Bill principally concentrates on the national minimum wage, I will discuss those provisions first, but I will address clause 1 as well.

I am pleased that the debate gives me the opportunity to remind hon. Members that the Government are committed to the national minimum wage. We believe that it gives protection to low-income workers and provides incentives to work, and we made that clear in our coalition agreement. As the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), who has responsibility for these matters, made clear, the aim of the national minimum wage is to establish fairness in the workplace and to make sure that work pays. It does that by ensuring that all workers receive at least the hourly minimum rates set. As well as helping workers, the minimum wage also helps business by ensuring that competition is based on the quality of goods and services provided, and not on the lowest price potentially based on exploitative low rates of pay.

Hon. Members will be familiar with the fact—we have talked about it in the debate—that the level of the minimum wage is recommended to the Government by the Low Pay Commission. The commission has widespread support, not just from the trade union movement, but from employers. It is independent of Government and comprises nine commissioners, and the aim is simply stated as to

“have a minimum wage that helps as many low-paid workers as possible without any significant adverse impacts on inflation or employment.”

Those impacts have been raised in the debate, and I will address them specifically because I know that they are of concern to right hon. and hon. Members.

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Commissioners receive submissions and take oral evidence from a wide range of representative organisations. They also visit businesses throughout the UK. That puts them in direct contact with businesses in low-paying areas and areas with unemployed and low-paid workers and their representatives, so that they can understand the realities of the circumstances in the workplace. That consultation supplements the commission’s analysis of high quality and extensive research and official data, so the basis of the agreement that commissioners represent to Government is robust evidence. Since the introduction of the national minimum wage, the commission has carefully monitored its impact on the economy in general and the labour market in particular. It looks at a range of issues and variables, including profits, prices, productivity, investment and business creation.

Clause 2 provides that a person who would otherwise qualify for the minimum wage may elect to opt out of such an entitlement. It makes it clear that any such election must be made by an employee in writing to their employer and must be signed by both the employer and the employee. I believe that the proposals in clause 2 are flawed in a number of serious ways. First, they make it easier for workers to be exploited. My hon. Friend the Member for Christchurch stressed that he is talking about arrangements for freely consenting adults, but how will he ensure that that is in fact the case in every place of work? Low-paid workers who may be fearful of losing their jobs are unlikely to have that free choice—that equal position—over whether they should accept a pay cut taking them below the national minimum wage.

Some people might feel that that is far-fetched, but it is worth looking at the first evidence that the Low Pay Commission established. In its June 1998 report, it states:

“Most workers in the UK have seen an increase in their real earnings over the past two decades. But increases have not been uniform. Average earnings have increased much more rapidly than the earnings of lower-paid workers, and the earnings of the skilled have increased relative to those of the unskilled. Certain groups of workers are much more likely to be low paid than others: these include women (particularly those who work part time) as well as young ethnic minority and disabled workers. Temporary workers and male part-time workers are also more likely to experience low pay.”

The report concludes:

“We met many workers who felt trapped on low pay because of lack of skills, mobility or opportunities. They feared that their only alternative was unemployment.”

The commission also found examples of “gross exploitation”. In its report it cited the example of a woman employed in a bar who routinely worked what was described as a “four hour” evening shift for £12 gross. The four hours reflected only the time that she was serving, however; they did not include the requirement for her to spend another two hours after closing in order to clear up the bar. That time was not paid for at all. Those instances do occur, and we need to ensure that when we frame legislation we respect all of them.

There is no guarantee that an employer’s motives for getting a worker to accept pay below the minimum wage will be based on ensuring the business’s survival. That has come out in the debate from a number of contributors, and it goes to the heart of the economic reasons underpinning a national minimum wage. In technical terms, that would be described as monopsonistic

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competition, but in less technical language it is about market power, and several hon. Members, including the hon. Member for Manchester Central and my hon. Friend the Member for Gainsborough (Mr Leigh), have highlighted that issue.

Vulnerable workers—those with few qualifications, those who are in fact functionally illiterate and those with work-limiting disabilities—do not have equal bargaining power when compared with their employer. There is a mismatch, and there is that risk of exploitation, and the problem with clause 2 is that it does not take account of that potential problem. We believe that it could reinstate the problems that led to the introduction of the minimum wage in the first place.

That is not the only problem, however, important as the issue of vulnerable workers is, because the Bill’s proposals could be bad for business as well. The Low Pay Commission found in its first report that competing simply on the basis of low pay can lead to a damaging downward spiral of low wages and poor standards, which would be bad for businesses and workers. This was recognised by the British Chambers of Commerce, which stated in its evidence to the commission that

“businesses recognise that a low wage policy leads to a vicious circle of low morale, low performance and low productivity”.

It is important to remember that, although the vast majority of employers seek to do the right thing and do the right thing, there will always be that minority, and the danger of shifting away from that is one that affects employers and employees. That is not just my own view, or indeed that of the Government. I am in good company, because Winston Churchill made the point that

“the good employer—

without minimum wage protection—

“will be undercut by the bad, and the bad employer will be undercut by the worst.”

There is also no evidence that the provisions in clause 2 are necessary. I have mentioned what the Low Pay Commission set out, but it is also worth looking briefly at the balanced way in which it has implemented the national minimum wage over its lifetime. I know that there was much discussion about the expectations that were or were not raised prior to the introduction of the minimum wage, but the commission’s approach has been reasonably cautious. It has been cautious in difficult times, but, yes, it has balanced that with more generous rate recommendations in better times.

Mr Binley: Will my hon. Friend help me? I need to understand something, because under the previous Government—it could only have been under the previous Government—the minimum wage increased by twice the rate of inflation. Is that where this Government want to go with the minimum wage, or will it not increase at that rate under my hon. Friend’s jurisdiction?

Mr Prisk: I am saying that the Government will seek from the Low Pay Commission a careful assessment of the market conditions year on year, whether they are good or bad: what is affordable and where the balance can best be struck between ensuring that the minimum wage is reasonable for those who are affected and not having an unreasonable effect on businesses as a whole. The Government cannot set it in advance or seek for it to double.

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Mr Binley: Perhaps my hon. Friend can help me further, because he did not answer my question. We all recognise that the double-inflation increase has had the effect of raising wages throughout the system. Given that, does the Minister understand why it is important, particularly at this time, to ensure that the minimum wage does not rise above the rate of inflation?

Mr Prisk: Absolutely; we will be careful to ensure that the recommendations we receive from the Low Pay Commission take that point into account. It should consider not only the conventional measures of inflation, but the costs that affect businesses, who are also the employers. This is a year-on-year process because flexibility is needed as the market changes.

In 1999, the commission set the rate at £3.60 an hour, which was pretty cautious. In the early years of the minimum wage, the commission continued to take that cautious approach. I do not propose to go through each and every year, although it is tempting. Since 1999, we have seen good times and bad, and I think it is worth considering how the commission has responded in those different contexts.

In 2001, the commission recommended that in 2001 and 2002 the adult minimum wage should increase to the level that it would have reached if it had always been raised in line with average earnings. In other words, at the start when things were challenging, the commission did not want to raise it too early. However, as the market improved and became more robust in labour terms, it was able to add to the minimum wage in a way that related to the costs of businesses.

In 2007, the commission came to the conclusion that a more cautious approach was again required. It looked at the pay differentials, particularly in the retail and hospitality sectors, both of which were progressing. That was coupled with concerns about price inflation feeding into wage inflation. The commission reported for the first time that it was concerned that the minimum wage was biting in that way.

In the most recent reports in 2009 and 2011, the commission was clearly dealing with a very different economic environment. By the time of the 2009 report, the UK was clearly in significant economic decline and recession, accompanied by sharp increases in unemployment and a fall in total employment. The decline in economic activity was much sharper than had been anticipated by most economists, never mind those working for the commission. That is why the commission recommended that the adult minimum wage should increase by only 1.2%—much less than in previous years.

The report published in April 2011 reflects the fact that the UK economy is recovering following the recession. The labour market has continued to show the resilience it had in the recession and unemployment remains below the median levels forecast at the time of the 2009 recommendations. The commission concluded that its approach needed to recognise the continued economic uncertainty, while protecting the lowest-paid workers from falling further behind—hence the recommended increase in the adult minimum wage of 2.5% to £6.08, which is broadly in line with average earnings and pay.

Those points in time—1999, 2001, 2007, 2009 and 2011—were all at different points in the economic cycle. The review that I have undertaken in preparing for this

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debate has demonstrated that the commission has been sensitive to the different market conditions. Sometimes it was able to be more generous and sometimes it had to be more restrictive. That is the right balance.

Many Members have raised the impact of the minimum wage. I will deal first with its impact on earnings and labour costs. Businesses react in different ways to labour costs. If they rise, some businesses absorb them by reducing non-wage benefits or adjusting their pay structures, as we have heard from several hon. Members. However, the employment picture is a little different from the one that has concerned several Members. In fact, I say in particular to my hon. Friend the Member for Shipley (Philip Davies) that since the minimum wage was introduced in April 1999, aggregate employment has grown. Despite the recession, it was still higher last September than it was prior to the introduction of the minimum wage. That occurred through the boom, through the Labour bust and back into the new coalition Government’s recovery. During that period, the number of employee jobs has increased by 1.1 million and the number of employees by 1.4 million. The number of hours worked has increased by 3.1%.

My hon. Friend—I do not see him in his place at the moment, but I will continue my point for the benefit of the House—asked the eminently sensible question whether the impact of the minimum wage on those on lower incomes had been adverse by comparison with the rest of the economy. I have sought the answer to that question. In the same period, from the introduction of the minimum wage in 1999 to the first quarter of 2011, the number of employee jobs in the low-paying sectors has actually increased by 366,000, which is 4.8%.

Nick Smith: Does the Minister agree with the suggestion of the hon. Member for Shipley (Philip Davies) of a drop in the minimum wage of £1 an hour, or nearly 20%?

Mr Prisk: Of course not. I hope that my reference to the figures on the employment impact will make people reconsider what I suppose is the natural suspicion that if all wages rise, people will be squeezed out of the labour market. The evidence suggests otherwise. The size of the labour market has changed since the minimum wage was introduced, and a series of factors have changed its character, but I take some comfort from the fact that the figures are heading in the right direction. However, we need to be continuously careful that the minimum wage does not start having a negative impact.

The consensus of the research on the impact of the national minimum wage is that it has greatly affected the distribution of earnings but not had a significantly adverse impact on employment, including of those on lower income.

Mr Chope: In trying to undermine clause 2, my hon. Friend has concentrated on the position of those who are already in employment. Does he accept that there are people who are out of employment who are looking for work and genuinely willing to work for less than the minimum wage? Why is he intent on preventing them from entering into an agreement with a potential employer to do so?

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Mr Prisk: That brings us back to whether it is actually a choice to do so. I totally respect my hon. Friend’s point that there are people on the edge of the labour market who are keen to work. However, if we open up the system and return to competition based on the lowest pay, we will go back to the original problem. I agree that we must ensure that we do not have undue inflexibility in the system, but I believe that returning to the position that the Bill suggests would create more problems than it solved.

Mr Binley: Will my hon. Friend give way again?

Mr Prisk: I will briefly, then I must come to clause 3.

Mr Binley: I am most grateful. Does my hon. Friend recognise that most employers, and certainly my company, try very hard to set the wage levels for their low-paid employees above the market rate, to attract the very best labour? That is the major concern of most small and medium-sized enterprises. I recognise that a very few rogue employers would not do that, but does he accept that in the main, companies wish to pay more to attract better labour?

Mr Prisk: Absolutely. The vast majority of decent employers are keen to ensure that they get the brightest and best, and are willing to pay for that. We should not allow any characterisation of employers in this country as always wanting to do down their employees. That is not my experience, and I hope Opposition Members will not tolerate such a characterisation in future.

Clause 3 seeks to exempt a person from the minimum wage as long as they receive a training wage. We have had a constructive discussion on apprenticeships, training and the importance of helping young people, to which the clause is relevant. Ever since the Low Pay Commission’s first report in 1998, it has been argued that young people should be treated differently from their older counterparts. The rationale is that the threat of unemployment because of too-high wages is greater for younger people than it is for older people. Clearly, young people often lack experience in the workplace, and are therefore more likely to be both on lower earnings than older workers, and to work in lower-paying sectors.

Young people are therefore more likely to be more vulnerable in the labour market. We have seen that, sadly, in the last couple of years. If I may say, it is encouraging that since May of last year, there has been an improvement in youth unemployment. I am pleased that I can confirm today that youth unemployment is lower than that which we inherited. I hope that Opposition Members will acknowledge that, because it is an important issue on which we agree.

The current rate for workers aged 16 to 17 is £3.64 an hour, and the rate for those aged 18 to 20 is £4.92 an hour. That contrasts with the adult rate for those aged 21 or above, which is currently £5.93. In recommending minimum wages for young people, the commission aims to ensure that the rates neither provide an incentive for young people to leave education or training—that is an important balancing act—nor harm the employment prospects for those who decide to work. As well as the minimum wage rates for young workers, we last year accepted the commission’s recommendations to end the

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exemption from the minimum wage for apprentices under the age of 19, or those aged 19 and over in the first year of their apprenticeship.

We have hence introduced a new minimum pay rate for those people within that framework, which has ensured—for the first time, I believe—that all apprentices in the UK get the protection of the minimum wage. It gives them a fair deal, and therefore protects them from exploitation, but it does not deter businesses from taking them on. As we have heard, that apprentice rate is currently £2.50 an hour.

Mr Bone: The Minister is making a well-constructed argument, but on that specific point, the Government have accepted that there should be a different minimum wage for apprentices, like a training wage. Why cannot we extend that differentiation to the travel industry, which I mentioned in my speech, and other industries?

Mr Prisk: My hon. Friend is a few inches ahead of me, but he is right that that is the kernel of the argument on clause 3.

Let me give a little background, and then I shall address specifically how we expand our provisions and encourage young people in training and apprenticeships. The point about the apprenticeship rate is that it recognises that employers invest significantly in apprenticeships, and that apprentices—quite naturally, given where they are in their working cycle—are less productive than other skilled employees. In addition, young people who complete an apprenticeship derive significant long-term advantages. They know that by accepting a lower wage when training, they will enjoy future higher earnings and better job security. That fits into another Government policy, namely the significant expansion of apprenticeship places—we have increased spending by £250 million to encourage 75,000 extra places.

Is a training wage such as the one in clause 3 feasible? The clause states that someone who is contractually entitled to a training wage, and to training in skills relevant to their employment, does not qualify for the national minimum wage. However, the Bill does not specify what would be an appropriate training wage level. As the Bill stands—that is all we have to debate—employers would therefore be free to pay a training wage at any rate. In addition, individuals receiving those low wages would, as workers, be carrying out work or services for the employer.

The danger is that the provisions could be open to widespread abuse by unscrupulous employers—that small minority that look to pay exploitatively low wages.

Mr Leigh: Before the Minister finishes this part of his speech, will he deal with the points I made about the scandal of internships? The problem, which is now more widespread, is that employers are paying nothing to graduates.

Mr Prisk: I will come to internships later. It is important that we get right the balance between internships and work experience.

I want to continue my point about training. Another problem with the Bill is that what is meant by

“an entitlement to training from the employer in skills relevant to the employment”

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is unclear. A contractual entitlement to training does not mean that the worker is actually receiving any useful training. Under the Bill, for example, a worker could, if they were working in, let us say, a cold-call centre, undertake that work—that would be allowed—because it could be deemed the best way to learn on the job and be trained. In other words, if an individual’s work involved cold-calling, they could become skilled, as described in the Bill, simply by doing the job, and not actually having a separate training programme with accreditation requirements. The question then is: would this mean that they are entitled to a minimum wage? The Bill is unclear. Under the Bill, two people doing the same job could have different contracts. Consequently, one would be entitled to the minimum wage, but the other, having a contract for a training wage, would not. The danger therefore is that these provisions could be open to abuse.

I turn to the question of how we could go beyond apprenticeships. This involves the question of whether we have some form of accreditation, which is a real problem that the Bill does not seem to address. Were we to have accredited training in certain circumstances, we would probably end up going down the route of the old development rate, which was set out in 2006, and under which there were complex rules and conditions seeking to determine exactly what the training was. That would create real problems for employers, who would want to know what the conditions were and how they would work. Would the opportunities they are providing qualify for the training wage? We would have all these grey areas and loopholes sitting between the existing minimum wage and the training wage. That is a practical problem about which I, as a former employer in the private sector—obviously I remain an employer as a Member of Parliament—would be very anxious. I would not want to find that I am unintentionally breaking the rules or finding that the guidance from the Government has to be so specific and complex that I spend too much time trying to comply with a new set of regulations, when in fact the original system was simpler—so there are real practical problems with this suggestion.

Mr Chope: Instead of putting up Aunt Sallies, why can the Minister not address the question put to me by one of my constituents who is out of work? He is aged 24 and says that he would be willing to work as a trainee for less than the minimum wage—in other words, at a training wage—but at the moment is not allowed to do so. No employer can let him, because the apprenticeship wage only applies to much younger people.

Mr Prisk: I come back to the point that were we to consider expanding this provision, we would need to put in place a system robust enough not to create either the complications I described or the uncertainties that I, as an employer, would not want. The Bill fails to do this. I agree that we need to encourage training, but to be blunt with my hon. Friend, I do not think that his Bill fulfils that task.

Mr Chope: Will my hon. Friend specifically answer my point, because I will be writing to this constituent to set out the Government’s response to his plea that he

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should be given the freedom to take a training job at less than the minimum wage from somebody prepared to offer him that training?

Mr Prisk: I can understand that frustration, but the moment we make law on the basis of one instance, we create difficulties for the scrupulous. That is the risk we are talking about.

I turn to work experience and interns. I understand the frustration and concerns of my hon. Friend the Member for Gainsborough. Work experience, whether as a paid or unpaid intern, can be a valuable way for young people to get the experience, skills and confidence they need to start up. The Government want as many internship opportunities as possible to be made available, but we are clear that those who are entitled to the national minimum wage should get it. The example he gave of how he works as an employer accurately describes exactly that position.

Mr Bone: This seems to be an announcement of new Government policy.

Mr Prisk: No.

Mr Bone: May I finish my point before the Minister says no? Is he saying that all interns should have to be paid the minimum wage? Is that what the Government are now saying?

Mr Prisk: No. Let me spell out exactly what I said—and put it back on the record for a second time. We are clear that those who are entitled to the national minimum wage should receive it. That is the point; that is how the law stands.

Mr Leigh: This issue is important, because we are talking about people who are being exploited. They are working 60 to 80 hours a week for big companies, big legal firms or big merchant banks all over the place, and they are being exploited. They are not training; they are working, and they should get paid. The Government should step in and do something about it.

Mr Prisk: I understand that, but as we have heard today, the Government are strongly of the belief that we should ensure that where people are entitled to the minimum wage, they should receive it. However, we would not want to intrude in the more informal areas that several Members have described, such as a week of work experience, and so on.

Mr Leigh: They work for six months.

Mr Prisk: My hon. Friend has made a powerful point about those working longer term. We want to ensure that the law is upheld.

Before I return to clause 1, which deals with the unlawful prevention of employment, let me turn to the four clauses at the back end of the Bill, namely clauses 4 to 8. These relate to the regional minimum wage, the idea being that we should move away from a national rate, towards a more flexible, regional structure. It is worth looking briefly at how the existing law works. Under the National Minimum Wage Act 1998, workers of compulsory school age are entitled to be paid at least the national minimum wage, although there are some exceptions. Different treatment may be permitted in

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relation to different sectors of employment and for people of different occupations. However, having different areas poses practical problems.

Clause 4 sets out the role of the Low Pay Commission. It provides that the commission

“must consider and take evidence on the availability of employment opportunities and the impact of the national minimum wage on job creation and access to employment in…areas where the average level of unemployment in the preceding year has been above the national average”.

The commission must then

“consider in the light of that assessment whether to recommend that the minimum wage in any such area should be set at a level below the national minimum wage.”

It is not clear from clause 4 what happens if a lower minimum wage is applied to a travel-to-work area and the unemployment level of that area subsequently falls below the national average. We presume—although it is unclear from the Bill—that the lower minimum wage could no longer apply, and that the national minimum wage would therefore apply. It is also not clear whether the Bill envisages more than one lower minimum wage rate. For example, would the same lower rate apply regardless of the extent to which average unemployment in an area was greater than the national average?

Clause 5 sets out the duties of the Secretary of State in the event of the Low Pay Commission recommending that the minimum wage in a particular area should be set at a level below the national minimum wage. Perhaps peculiarly, clause 5 provides that the Secretary of State has no discretion in the matter, but must make regulations to bring the commission’s recommendations into force. I note that this is different from the Secretary of State’s position in respect of the national minimum wage, where it is for him to decide on the appropriate rate, based on the Low Pay Commission’s recommendations. It is unclear why the Secretary of State should have the discretion to implement the commission’s recommendations on the national minimum wage, which would affect around 1 million people, but not where its recommendations could affect a far smaller number of people.

Clause 6 provides that a change to the minimum wage in an area to a level below the national minimum wage would not affect existing contracts of employment. I will come to the issue of fairness later; I merely note now that this provision is another instance of allowing an employer to pay two workers different wages for doing the same job. It could also encourage employers to get rid of workers who were being paid at the national minimum wage and replace them with people paid at a lower rate.

Clause 7 presents significant practical challenges. It provides that a travel-to-work area is

“an area so defined by the Office for National Statistics.”

This point is crucial, because it affects the way in which the final four clauses operate. Ideally, a self-contained labour market is one in which all the commuting occurs within the boundary of that area. However, in practice it is not possible to divide the UK neatly into separate labour markets based on commuting patterns. They are just too diffuse. Our concern is that the opportunity for complexity and continuous change would make the operation of the proposed system significantly more challenging than at present. Speaking as an employer—which I continue to be—I am concerned about how this would work within and on the edges of those regions.

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There are currently 243 travel-to-work areas. They were defined in 2007 using the old 2001 census data, so there is already a problem of time delay. The areas vary considerably in size. For example, Anglesey has two such areas, while Greater London has only one. I hope that no one will ask me why, because I do not have the answer. If we moved to a system of regional rates based on travel-to-work areas, the real problem would be the complexity that that would generate for employers. As someone who wants to see less regulation, I would be very much opposed to that. I hope that the House will acknowledge the specific practical problems associated with each of the clauses, especially relating to the way in which this part of the Bill would operate.

Clause 1 deals not with the minimum wage but with the question of unlawful prevention in relation to foreign nationals. It relates to foreign nationals above compulsory school age who are legally residing in the UK, and provides that such individuals shall not be prevented from undertaking paid employment unless certain conditions apply. The first condition is where the foreign national has only a visitor’s visa. The second is where the foreign national’s most recent application for entry into the UK has been refused. The third is that the foreign national’s most recent application to stay in the UK has been refused. Like my hon. Friend the Member for Christchurch, I noticed the typo in subsection (4), for which he has graciously apologised. The effect of the subsection as drafted would be to exempt foreign nationals who were not in detention. The problem that that would create is self-evident.

The Government support the principle that everyone of working age who has the legal right to work in this country should have the opportunity to gain a living by work which they freely accept. That is set out in article 6 of the international convention on economic, social and cultural rights, and the Government are committed to fulfilling our obligations under the convention. The problem is that the provisions in the Bill are contrary to the Immigration Act 1971. The fact that the Bill does not provide for the repeal of the relevant provisions of the Act raises an important technical issue. When we debate these Bills, we are debating whether they should become the law of the land. While I understand that points of principle are involved, we also need to ensure that we get the legislation right.

Mr Bone: This is a Second Reading debate. The Minister knows full well that an amendment to that effect could be tabled in Committee. This is about the principle of the Bill, not about the detailed technicalities.

Mr Prisk: The problem is that the practicalities affect the principle. That is an important point for my hon. Friend to bear in mind.

Section 3 of the Immigration Act provides for a foreign national’s lawful stay to be subject to conditions preventing his employment or occupation in this country. That is the basis of the UK’s controls on access to the labour market. Foreign nationals who are admitted specifically for the purpose of employment may be subject to conditions of stay which require them to seek authorisation to change their employment. Those who enter for another purpose—study, for example—may be subject to conditions which require them to seek a variation of their conditions of stay if they wish to

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remain for the purpose of work. The provisions in the Bill are the basis for arrangements for determining the circumstances in which an individual would be allowed to take employment or not, depending on their skills.

My hon. Friend’s proposal appears to remove any legal basis for the operation of an effective control on migrants’ access to the labour market, including the operation of a labour market test in respect of a migrant’s employment, except at the point at which they initially seek entry to the UK. The Bill would therefore significantly undermine the Government’s ability to regulate the entry and stay of foreign nationals, other than at the point at which they seek entry, or to protect the interests of resident labour.

My hon. Friend might well have intended the provisions in clause 1, in respect of recent refusals of applications to enter or stay, to protect against such issues. However, they would not satisfactorily achieve that effect. It is also difficult to see how such provision could be reconciled with the effective operation of transitional restrictions, to which the Government are committed, on labour market access to nationals of new member states of the European Union who are not subject to immigration control but, as foreign nationals, would be covered by the Bill.

Mr Chope: Will the Minister spell out whether the Government believe that asylum seekers who have been waiting for many months to have their claims dealt with should be given the right to work, or does he believe that that is the wrong solution?

Mr Prisk: I think the challenge is to make sure that the asylum system works properly, which is what my colleagues in the Home Office and elsewhere are doing—and doing very ably—despite the mess they inherited. That is the challenge we face.

The national minimum wage is a key part of the Government’s overall strategy to establish fairness in the workplace and to make work pay by ensuring that all workers receive at least a set hourly minimum rate. The minimum wage has brought substantial benefits to a large number of workers, especially women and part-time workers, and it has established basic minimum standards in the labour market. To make the minimum wage optional, as clause 2 suggests, could undermine those achievements and leave some vulnerable low-paid workers open to exploitation.

The Government also believe that the proposals in clause 3 are unnecessary. There are already options available to employers who wish to offer training but not to pay the minimum wage. Certain apprentices are entitled to a lower minimum wage rate. There are some specific exemptions in the law that relate to training—where, for example, an individual is on a specified Government or European scheme, individuals acting in that context as volunteers are not, of course, entitled to the minimum wage.

Making the minimum wage more complex through the introduction of regional rates would have adverse effects on workers and businesses, and make the task of setting and enforcing the minimum wage far more complex. The proposal would introduce potential unfairness for workers, particularly those located near to the boundaries

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between regions. It is worth noting that when one looks at the evidence, one sees that there is already significant variety within those regions.

As for clause 1, we believe that it would have an adverse effect on the operation of an effective control on migrants’ access to the labour market and would significantly undermine the Government’s ability to regulate the entry and stay of foreign nationals and so to protect the interests of resident labour.

For those reasons, if my hon. Friend seeks to press his Bill to a Division, I have to tell him and the House that the Government cannot not support its proposals.

1.42 pm

Mr Chope: With the leave of the House, I would like to respond to the debate. It has been a good one and I am most grateful to everyone who has participated in it.

I begin by commenting on the Minister’s performance, as I think that Antony Jay and Jonathan Lynn would have been proud of what the Minister’s officials have been able to provide him with in the form of a “Yes Minister” script. The tone and content of what the Minister said was so reminiscent of that wonderful series, which was performed on television and is now a play in the west end.

I understand that clause 1 deals with issues that are not full-square within the Minister’s responsibilities. However, he says that it would raise all sorts of difficulties of definition, but it is quite obvious from the evidence I adduced earlier that the Government do not know how to count the people coming into the country or the ones going out; they do not know how many people have applied for asylum; and they do not know how many people have been waiting for their asylum cases to be dealt with for more than three months or for more than six months. The Government do not have the basic material before them, yet when I come forward and say, “Wouldn’t it be a good idea if people who were seeking asylum had the opportunity to improve themselves and work?”, all I get is a whole lot of gibberish saying that my clause 1 is defective in the following 1,000 particulars.

I am not having that, Madam Deputy Speaker. If the Minister’s intention was to provoke me into testing the opinion of the House on this Bill, he has certainly succeeded in doing so.

I want to comment briefly on my hon. Friend’s observations about some of the other clauses. He failed to answer my simple question about a constituent, aged 24, who is out of work, wishes to engage in a training contract, and is willing to do so for less than the minimum wage. I shall therefore have to send my constituent a blank piece of paper, which I shall identify as the Government’s policy on the matter. The Government recognise that there is a problem, but have no solution. My Bill presents a potential solution, and all that has happened is that it has been rubbished.

I told my hon. Friend in an intervention that he was seeing clause 2 far too much from the point of view of a person who was already in work rather than that of a person who was out of work and seeking it. That constituted another big failure in the Government’s response.

A number of my hon. Friends commented on the problems of youth unemployment and access to employment. I do not know whether the Minister is

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aware of the figures, but according to figures for 2010 produced by Doing Business, an organisation which

“measures and compares regulations relevant to the life cycle of a small to medium-sized domestic business”,

in June 2010 a 19-year-old worker in this country had a minimum wage five times higher than that of an equivalent worker in Poland, 2.5 times higher than that of an equivalent worker in France, 50% higher than that of an equivalent worker in the United States or Germany, and about the same as that of an equivalent worker in Ireland. If we want to find an answer to the ghastly issue—the really serious issue—of rising youth unemployment, we could do a lot worse than examine the international comparators, which make it plain as a pikestaff that we have too high a minimum wage for our young people, leaving aside the need to give them access to a training wage.

My hon. Friend the Member for Shipley (Philip Davies) was inimitable in his fairness. He emphasised the number of people who benefit from the national minimum wage, but also wanted to ensure that more people could become employed. He has been an employee in a very large firm, and he and my hon. Friend the Member for Northampton South (Mr Binley), who made so many cogent interventions, and my hon. Friends the Members for Wellingborough (Mr Bone) and for Bury North (Mr Nuttall) have a mass of experience of employing people and participating in the real economy of the country.

My hon. Friend the Member for Gainsborough (Mr Leigh), a former Chairman of the Public Accounts Committee, also made some potent observations. He highlighted the scandal over internships, but again the Minister did not answer the question. Why should it not be possible for someone who wishes to be an intern to be paid something between zero pounds and the minimum wage? There came no answer from the Government, apart from the rather patronising, patrician response that if we introduced such an arrangement, some people might exploit it. I do not think that that is a Conservative approach; I do not think that it is a market-oriented approach.

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This has been a rather depressing occasion for me. My worst fears about a Government who are losing touch with reality have been borne out by what we have heard today. However, I think it important for the debate to continue, and I therefore invite the House to take a view on whether the Bill should be given a Second Reading.

Question put, That the Bill be now read a Second time.

The House divided:

Ayes 5, Noes 33.

Division No. 298]

[1.49 pm


Binley, Mr Brian

Chope, Mr Christopher

Davies, Philip

Leigh, Mr Edward

Nuttall, Mr David

Tellers for the Ayes:

Mr Peter Bone and

Mr Philip Hollobone


Bingham, Andrew

Blunt, Mr Crispin

Brennan, Kevin

Brown, rh Mr Nicholas

Campbell, Mr Alan

Clark, rh Greg

Ellis, Michael

Fabricant, Michael

Gardiner, Barry

Gibb, Mr Nick

Green, Damian

Greening, Justine

Hamilton, Mr David

Hancock, Matthew

Harris, Rebecca

Hendry, Charles

Hurd, Mr Nick

Johnson, Diana

Jones, Andrew

Lidington, rh Mr David

Lloyd, Tony

McCarthy, Kerry

Miller, Maria

Penning, Mike

Pound, Stephen

Prisk, Mr Mark

Rees-Mogg, Jacob

Seabeck, Alison

Smith, Nick

Thomas, Mr Gareth

Trickett, Jon

Truss, Elizabeth

Vaizey, Mr Edward

Tellers for the Noes:

Mr Robert Goodwill and

Mr Shailesh Vara

Question accordingly negatived.

17 Jun 2011 : Column 1075

Tribunals (Maximum Compensation Awards) Bill

Second Reading

2 pm

Mr Christopher Chope (Christchurch) (Con): I beg to move, That the Bill be now read a Second time.

This is a short Bill that would set a limit on compensation for awards for unfair or wrongful dismissal or discrimination arising out of employment and provides that that maximum limit should be £50,000. I propose this partly because I know that the Government are considering the matter, although they announced their review in May whereas my Bill was presented as long ago as 5 July 2010.

At the moment, there are strict limits on the awards that a tribunal can give in respect of claims for unfair dismissal arising from ordinary employment law. When the claim for unfair dismissal is based on discrimination, however, an unlimited amount of damages can be awarded. That is now leading to all sorts of farcical situations. The situation has been recognised by a group described by Mr Mark Leftly in The Independent on Sunday on 5 June as “an influential group” in the City,

“led by Sir Michael Snyder”

who have

“told ministers that employment law must be overhauled, with tribunal awards for discrimination cases capped at £50,000”—

the exact figure proposed in my Bill. The article goes on to say that

“an employee who successfully sues for discrimination, be it racial, sexual orientation or gender, can get unlimited awards. There is a growing belief that this has led to employees without genuine grievances making discrimination claims.”

People are making or threatening to make claims when they are faced with dismissal, saying that they will not go for the ordinary unfair dismissal but will base their claim on the fact that their dismissal has been on the grounds of racial discrimination or discrimination based on sex, gender or something similar. We are getting a two-tier system in which people threaten to sue in a tribunal for the much larger, open-ended awards that are available and my Bill would place a cap of £50,000 on all that.

Mr David Hamilton (Midlothian) (Lab): In the interests of clarity, can the hon. Gentleman tell us how many such claims have been unsuccessful? That would give weight to the argument that people are claiming just for a chance of getting some money.

Mr Chope: I have the figures somewhere, but I do not have them to hand this instant because I have a lot of papers. I hope the hon. Gentleman will forgive me for not answering his question, but the figures that I saw show that many claims are unsuccessful or not pursued, quite often because they are the subject of a settlement. Quite often the settlement is between unequal parties. The claimant has nothing to lose by taking the case to a tribunal but the employer is faced with substantial legal costs, plus disruption to his business, in defending his position. Those claims can end up being settled out of court, as it is called. They would probably be regarded by the hon. Gentleman as unsuccessful claims, but they might have been taken to the tribunal had it not been for the imbalance of power between the applicant and the employer.

17 Jun 2011 : Column 1076

Mr David Nuttall (Bury North) (Con): May I help my hon. Friend on that point? I suspect that no accurate figures are available because many of these claims are resolved before the application is put to the industrial tribunal. Although figures will be available for those withdrawn or settled after the industrial tribunal proceedings began, I suspect there will be many thousands of other cases that the public do not know about.

Mr Chope: To put the issue in context, I will quote briefly from some newspapers. On 24 October 2008, the MailOnline had the headline “Asian bank worker gets record £2.8m race discrimination payout”. On 10 September 2009, another headline read: “Sacked council manager wins £1 million age discrimination payout”,

and a report has come out in the past few days saying:

“Discrimination compensation payouts hit an all time high.

A recent annual survey of compensation awards in the Equal Opportunities Review has revealed that the amount being paid out by employers in discrimination cases has more than doubled in two years.”

Mr Brian Binley (Northampton South) (Con): Does my hon. Friend recognise that there is a level below a claim which employers are quite concerned about? They are being threatened with being taken to a tribunal as a way of extracting money from them. Many employers are advised at local level to give in and not allow the case to go to a tribunal. In that respect, there is a certain element of the blackmailers charter about all this. I wondered whether my hon. Friend had thought about that and why he had not included it in his Bill.

Mr Chope: I am sure that I could have included it in the Bill, but it is implicit that having a lower maximum figure in the case of unfair dismissal and an absolute maximum figure—there is no maximum figure at present—in the case of discrimination cases will reduce the bargaining power in a situation such as that my hon. Friend outlined. He described it as blackmail. We know that companies can sometimes be threatened with being taken to a tribunal and subject to all sorts of allegations it will find difficult to answer, so they pay up to an aggrieved ex-employee.

Diana Johnson (Kingston upon Hull North) (Lab): I wonder whether the hon. Gentleman has had an opportunity to look at the employment tribunal annual reports for 2007-08 to 2009-10. They set out the median compensation awarded in race, sex and disability discrimination cases. In 2009-10, the median for race discrimination was £5,392 and for sex discrimination it was £6,275, which are well short of the millions referred to in Mail Online.

Mr Chope: Obviously I cannot quarrel with the statistics that the hon. Lady quotes, but the issue is causing the coalition Government concern. That is why on 11 May the Department for Business, Innovation and Skills announced that the Government would look in detail at the case for reforming compensation for discrimination:

“Compensation levels for cases of discrimination are unlimited and employers worry that high awards may encourage people to take weak, speculative or vexatious cases in the hope of a large payout. This can lead to employers settling such cases before they reach a Tribunal.”

The Government therefore seem to think that there is a problem.

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I see my hon. Friend the Minister for Immigration on the Front Bench—we could have done with his wisdom on asylum cases in the previous debate. I hope he will be able to bring some of that wisdom to bear on this subject in particular, as I had the opportunity to talk to an official from his Department who said that the Government were carrying out a review of the subject. The point that I made to my hon. Friend’s official was that that is all very well, but how will it deal with the rulings in the European Court of Justice. In the ECJ case Marshall v. Southampton and South-West Hampshire Area Health Authority (No.2) (1993) IRLR 445, the court decided that the cap that had previously been put on discrimination compensation did not provide an adequate remedy under European Community law.

The Minister for Immigration (Damian Green): I am grateful to my hon. Friend for giving way so that I can confirm to him now, should the debate run out of time before I have chance to reply in full, which I very much look forward to doing, that the Government will be launching a public consultation on this specific matter later in the year. As he has already said, this is a matter that the Government are considering and receiving recommendations on, and we want the widest possible input into the public discussion of this important matter.

Mr Chope: I am grateful to my hon. Friend, but I thought that in the announcement on 11 May his colleague with responsibility for employment relations had announced the extension of the Government’s review of employment law into this area. The question I was trying to get an answer to was how compatible the Government’s aspiration to introduce a limit on compensatory awards was with the ECJ case to which I have just referred. The issue was drawn to my attention by staff in the House of Commons Library who wondered whether my Bill would cut across EU law, and that is why I have included clause 2, which states:

“This Act shall have effect and shall be construed by the courts of the United Kingdom as having effect notwithstanding the European Communities Act 1972”,

thereby reasserting the sovereignty of this Parliament to decide on such issues and not be subject to rulings from the ECJ interpreting European Union law.

Some firms of solicitors are already on to this point. I have a report from Lee Rogers, an associate at Weightmans solicitors, who says that the Government may face obstacles if they decide to impose such a cap. I really wanted to find out from my hon. Friend whether the Government recognised that this was a problem and, if so, how they would overcome it. There is no point in going out for consultation on something where the Government’s ability to manoeuvre is restricted by European Union law, unless the Government are saying that they will override that law. The fact that my hon. Friend does not seek to intervene again suggests to me that either the message that went through his office was misinterpreted, or that when he sought information from the responsible Minister he did not get a clear answer, so he has done the best that he can in his inimitable way from the Front Bench today with the problems that the Government obviously have on this issue. The public do not believe that compensation for discrimination should be in the hundreds of thousands of pounds; they think that is unreasonable.

17 Jun 2011 : Column 1078

People talk colloquially about something costing an arm and a leg, and I would not want to make this issue seem anything other than serious, but if somebody were to lose one leg below the knee, under the criminal injuries compensation scheme they would be entitled to £33,000. If they were to lose one arm and one leg, they would be entitled to far less compensation than is paid to people who bring successful claims for discrimination before an employment tribunal. We value the damage of hurt feelings from discrimination cases far more than the criminal injuries compensation scheme values the actual loss of a leg or an arm and that is absolutely ridiculous, so if the Government were able to bring in some amending legislation that would be very useful.

I also cannot understand why, if the Government are concerned about the level of compensation and tribunal awards, they allowed the ceiling for such awards to be raised in line with inflation in a recent statutory instrument. If they felt that the awards were already too high, why did they not rein them back and not increase their maximum level in line with inflation?

This is a simple, straightforward Bill, and I hope that it receives hon. Members’ support so that it can be discussed in Committee, and so that the Minister can be asked probing questions and answer those I have put to the House this afternoon.

2.17 pm

Tony Lloyd (Manchester Central) (Lab): I will be brief, because my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) on the Front Bench also wants to say a few words.

Many of us share the sense of astonishment of the hon. Member for Christchurch (Mr Chope) at the extraordinary £2 million-plus claims that have occasionally gone through, but it is important that we make it clear, as my hon. Friend already has, that the median payout by tribunals for sex discrimination and for discrimination on the grounds of gender, race or whatever is considerably lower. The median payout for all those is less than £7,000, which is a world apart from the £2 million that the hon. Gentleman has cited, and we need to put that firmly on the public record. Those payouts of under £7,000 are also all way below the maximum cap for unfair dismissal, which is £68,000, so it really is desperately important that what the hon. Gentleman says about high-end payments should not determine the tribunal payouts for sex discrimination or for discrimination on the grounds of gender, race or whatever. Such discrimination still infects our workplaces, and people suffer enormously.

The median payout of £7,000 recognises the loss of earnings that takes place, but people do not simply lose their jobs, because those who go through such intolerable bullying in the workplace suffer enormously at psychological and personal levels, too. Earlier, we debated good and bad employers, and the fact that such tribunal cases are fought successfully is evidence that some employers allow the most unacceptable practices in the workplace. However, those cases do not involve the mega-payouts that the hon. Gentleman has mentioned.

If the idea is to equate, for example, sex discrimination with unfair dismissal, I also say gently to the hon. Gentleman that I do not understand why he has not equalised the cap on each. I share with him my profound belief, however, that he was right to challenge the Minister

17 Jun 2011 : Column 1079

on the impact of European law, because it would not be possible to bring in his legislation without at least a massive challenge going right through our domestic legal system to—I think I am right in saying—the Court in Luxembourg and, perhaps, to the Court in Strasbourg. He will therefore have some difficulty persuading any Government to take on the Bill as it stands.

2.20 pm

Diana Johnson (Kingston upon Hull North) (Lab): I stand to oppose the Bill. There was little hard evidence in the opening speech of the hon. Member for Christchurch (Mr Chope) for the Bill. The evidence available from employment tribunals on the levels of compensatory awards shows that they are nothing like the figures that he gave. Of course, there have been some high-profile cases in the papers, but the compensation awarded in the vast majority of tribunal cases is less than £10,000.

The Bill intends to limit compensation in wrongful dismissal, unfair dismissal and discrimination tribunal cases. Most people recognise that it is important to have employment regulation that is fair and treats employees properly. The Opposition do not believe that setting the arbitrary figure in the Bill of £50,000 as the maximum that can be awarded in compensation, without having a wider debate about the employment, legal and equalities issues, is the proper way to set employment policy. Issues such as compensation, fines and penalties for health and safety, rights on leave and dismissal, and many others should be dealt with in a far more integrated way.

As a constituency MP, I saw the Hull trawlermen suffer hugely from not having proper employment rights; they had no redundancy rights and had to fight for pensions. I am therefore very aware of the need for good, clear employment protection legislation. When I worked in law centres before I entered the House, I often acted for people who found themselves in great difficulties with employers who had not treated them fairly and properly.

Of course, before 1997, to get unfair dismissal protection one had to be in employment for two years and there was no statutory right to annual paid leave unless it was in one’s contract. From 1997, the Labour Government opted into the social chapter, brought in the right to paid annual leave, reduced the period for unfair dismissal protection to one year, brought in the statutory right to paternity leave and improved maternity leave. It would be a retrograde step to start to unpick the straightforward and basic employment protection rights we now have in this country.

I will return to the compensation levels that I referred to in my intervention. When we make laws in this country, we must do so based on evidence and consider carefully what that evidence shows. As I pointed out to the hon. Member for Christchurch, £4,903 was the median award in 2009-10 for unfair dismissal claims in tribunals. That is nowhere near the millions that he talked about.

Mr Chope: My Bill does not talk about medians, but would limit the excessive awards. She will be aware of a disability discrimination award of £729,347. My Bill would prevent that from happening again.

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Diana Johnson: Obviously, I cannot comment on the circumstances of that case. The tribunal or court that dealt with it would have considered all the issues that arose. Some dreadful discrimination cases are brought before the tribunals and courts, and tribunals do their best to make just and equitable awards that fit the circumstances that are brought before them. I dispute the idea that everybody who goes before a tribunal is awarded a huge amount of money. When people are awarded very high compensation payments, there may well be very good reasons.

May I also say to the hon. Member for Christchurch that I believe he has got the law wrong in a number of ways, particularly on wrongful dismissal? He wants to limit payments that can be made for that, but often people’s contracts of employment contain clear rights to notice. If he wants to limit those rights, he may find that he is in breach of contract. That may apply to some high earners.

I want the Minister to have an opportunity to contribute, so I will cut my comments short, but I wish to point out that at the moment there is a limit of about £68,000 on unfair dismissal compensation payments. My hon. Friend the Member for Manchester Central (Tony Lloyd) made that point. When awarding compensation for unfair dismissal, the tribunal has to make clear judgments about the immediate loss of earnings that the person has experienced, their future loss of earnings, the expenses that they have incurred, the loss of statutory rights and the loss of pension rights. At the moment, tribunals consider the range of losses to an individual and make a judgment based on that, but there is a cap of about £68,000 on the compensation.

I am interested to hear what the Minister has to say about the particular issues of sex, race and disability discrimination claims. We know from the Marshall case that European law states that it is not possible to have an upper limit for those claims, because damages should be awarded for the losses sustained.

Mr Nuttall: Will the hon. Lady give way?

Diana Johnson: I am very keen to hear from the Minister, but I will give way.

Mr Nuttall: Is it not the case that since the decision to which the hon. Lady refers, EU directive 2006/54/EC has recast the legal position so that there is a prohibition on the fixing of a prior upper limit to restrict compensation, and a provision that the “effective, proportionate and dissuasive” remedy should be given? I believe that a cap of £50,000 would be dissuasive.

Diana Johnson: That is obviously where the hon. Gentleman and the Labour party disagree. We do not think it is right to have such a cap. I would be interested to hear the Minister’s view about the European dimension to imposing a cap on sex, race and disability discrimination compensation. On the basis of what I have said this afternoon, the Opposition oppose the Bill.

2.27 pm

The Minister for Immigration (Damian Green): I thank my hon. Friend the Member for Christchurch (Mr Chope) for giving the House the opportunity to discuss this matter. He said in his opening remarks that he regretted

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my absence from the previous debate, particularly when there was reference to asylum seeking. In that context, I would say that what he proposed in his Employment Opportunities Bill was the biggest single incentive to increasing the amount of asylum seeking in this country that I have seen in potential legislation. That was why I was extremely pleased to be in the Division Lobby voting successfully against it.

I move on to the current Bill. My hon. Friend is right to point out the concerns that businesses have raised about the high levels of compensation sometimes awarded by employment tribunals in cases of unfair or wrongful dismissal or discrimination. The debate has been particularly timely, on which I congratulate him, because as I said, one aspect of the Bill is currently under active consideration by the Government as part of our general review of employment law.

I should make it clear to the House that there already exists a limit on compensation for unfair dismissal. It stands at £68,400. The average award is considerably below that level, as the hon. Member for Kingston upon Hull North (Diana Johnson) said. The median award for unfair dismissal is £4,903, and the mean is £9,120.

On 27 January we launched a consultation on proposals to improve the way in which workplace disputes are resolved, and we published an employers charter to give employers more confidence to take on workers and support growth. In that consultation, we sought views on changing the formula for calculating employment tribunal awards, including that current limit on compensation for unfair dismissal. Among other things, the consultation sought views on increasing the current qualifying period for unfair dismissal rights from one to two years. The consultation closed after 12 weeks on 20 April 2011, and we are currently considering our response. We will publish that, setting out what we intend—

2.30 pm

The debate stood adjourned (Standing Order No. 11(2)).

Ordered, That the debate be resumed on Friday 9 September.

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Business without Debate

Public Bodies (Disposal of Assets) Bill

Motion made, That the Bill be now read a Second time.

Hon. Members: Object.

Bill to be read a Second time on Friday 9 September.

Shared Parenting Orders Bill

Motion made, That the Bill be now read a Second time.

Hon. Members: Object.

Bill to be read a Second time on Friday 9 September.

Lawful Industrial Action (Minor Errors) Bill

Resumption of adjourned debate on Question ( 22 October ), That the Bill be now read a Second time.

Hon. Members: Object.

Debate to be resumed on Friday 14 October.

Volunteering Bill

Resumption of adjourned debate on Question (10 June), That the Bill be now read a Second time.

Hon. Members: Object.

Debate to be resumed on Friday 9 September.

Medical Insurance (Pensioner Tax Relief) Bill

Motion made, That the Bill be now read a Second time.

Hon. Members: Object.

Bill to be read a Second time on Friday 9 September.

17 Jun 2011 : Column 1083

Rail Services (Hastings)

Motion made, and Question proposed, That this House do now adjourn.—(Michael Fabricant.)

2.31 pm

Amber Rudd (Hastings and Rye) (Con): I should like to set the scene, if I may, of a beautiful town on the south-east coast. Some very exciting new projects are taking place in Hastings. We will have a new gallery at the end of this year, and we are rebuilding our pier after recently receiving Heritage Lottery Fund money. Saga, which moved to the town in the past year, is bringing 800 new jobs. I could go on and on about the amazing positive developments that are taking place in Hastings, but we also have some major problems, and sadly, I should like to take this opportunity to draw attention to those for a few minutes.

The index of multiple deprivation is like a sin list for boroughs. There are 352 on the list and Hastings has risen steadily up it—the top is the worst. We recently found ourselves, sadly, at No. 19. There is poverty and a lack of industry in the town. There has been much debate in the town on what can be done to change that. How can we bring about the regeneration that we so desperately need? Everyone has a different view, but transport is the one matter on which we are united. How can we improve transport, and particularly rail links to London, to stimulate the regeneration that we need?

We feel cut off, like an island. Road problems compound the rail problem. From London, it takes 1 hour and 50 minutes to get to York by rail, 1 hour 55 minutes to get to Cardiff, and 1 hour and 45 minutes to get to Hastings. It is clearly absurd that such a short distance takes such a long time. Under the previous Labour Government, we had no investment in our roads or rail. We were shamefully neglected.

I am encouraged by the Government’s speedy and affirmative action in respect of electrification on the Great Western route and other railways in the north-west of England, and I dare to hope that they will also deliver improvements for the people of Hastings.

Why is the train service in Hastings quite so bad? This is an unfortunate, historical situation. We were let down when the new railway was built in the 1850s, because it competed for speed with the one being built to Brighton. We have problems with our tunnels, single lines in certain areas and we are vulnerable to points failure and slow periods during journeys. We also have electrification problems, so 12 cars cannot go south of Tunbridge.

How do we achieve the improvements that we so badly need? I am happy to say that Network Rail is working with Southeastern trains on small improvements. Incremental improvements are being made that will shave seconds, possibly minutes, off our journey times. We so hope that we will not for ever be known as the Cinderella line. Improvements are being made this year to some of the assets, including the points, and in order to rein back some of the speed restrictions.

We had horrific problems over the winter caused obviously by the snow, but what my constituents really objected to was the lack of information—they were kept waiting for hours unable to access the right

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information. I am told that Southeastern Trains and Network Rail are now working closely with National Rail to provide that information. However,I am ambitious for my constituency. I want to get rid of this end-of-the-line reputation, and I want us to have a much, much better line in order to achieve the necessary regeneration. I do not want just these incremental improvements; I want a first-class line, so that we can make the great leap forward that we need. We need a better quality of line, and we need that without enormous costs to the taxpayer.

The recent McNulty report leads the way. We were faced with the shocking statistic that our lines cost over 40% more than European ones. It points out how to stop above-inflation rises and it tells us about the reforms that can be instigated within our railway lines to stop this constant rising of costs and deterioration of services. My constituents have had enough of these constant inflation-busting rises. McNulty stresses value for money, and that is what we need but are not getting in Hastings. We need the reforms to stop these constant rises.

I believe we need to be ambitious with our railway service. I believe that we need investment—we cannot make these changes without investment—but I am very aware of the situation in which the Government find themselves with the terrible deficit they inherited. Where else can we look for the investment we so desperately need? We should look to a longer franchise. Those of us in Hastings were disappointed when the Secretary of State for Transport said that there was likely to be a three to six-year franchise after 2014. We should remember that the McNulty report calls for longer franchises—he makes the point that it simply makes good business sense. Sadly, we are told that the franchise proposal is because of Thameslink, but why should Hastings, which is so urgently in need of regeneration, be subject to Thameslink? We feel that we are always an afterthought—the little sister to be hushed up in the corner. I respectfully ask the Minister to stop ignoring us when it comes to deciding transport priorities. We do not want always to be a consequence of what is going on in the Thameslink project. Let us have a longer franchise—at least in double digits—and then we can get some investment in our line.

We can surely include some requirements for change to modify and adapt within the Thameslink requirements. We should be part of the consideration of Thameslink. Thameslink can go ahead, and we can have our franchise extended within certain requirements for modification if Thameslink requires it. However, having three to six-year franchises, as suggested, is like treading water with a repeatedly shoddy line. We urge the Minister to ensure that we are not let down and to reconsider the proposal. However, if the Department proceeds with a shorter franchise, at the very least we would ask it to focus on requiring an intermediary timetable change across the network for Hastings services to ensure that one of the existing trains per hour converts to a fast one.

My rail action group had a meeting with Southeastern Trains to put this proposal to it, and it responded by showing us the existing franchise to demonstrate that it had no room for manoeuvre. If we are to have the same type of shorter franchise as a stop-gap, which is not what we desire, we would ask that it be less prescriptive, so that we can at least have some fast trains a day. What we need from this investment is upgraded electrification

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and, eventually, double-tracking. I urge the Government to consider what could be done to help us achieve that. Perhaps there could be match funding when the new franchise is introduced. With £34 billion going into High Speed 2, perhaps we could have a small amount down in Hastings, so that the new franchise could have some investment to encourage the upgrades that we so desperately need.

I would also like to mention European funding. It sometimes feels like an elusive rabbit that keeps skipping across us in the picture. People say to us, “Have you tried European funding?” or, “What about TEN-T funding?”, but it seems to slip away from us whenever we try to reach out, or find out where it comes from or who can guide us. I would therefore be grateful for any guidance from the Minister on whether we should try to get European funding.

The franchise should be longer, but less prescriptive. My right hon. Friend the Member for Tunbridge Wells (Greg Clark) has long campaigned for this. He has recent experience of travelling on the line—I believe at the front of the train, with the driver—and supports our efforts to secure a longer franchise.

Let me say a word about the Cannon Street to Hastings line. Every few years, it seems that we in Hastings have to fight once more to keep the service. Once more, we are being told, “Well, you may or may not get to keep it—it depends on Thameslink.” Please do not make us dependent on Thameslink. We need our Cannon Street service. We are a town that has some areas of deprivation. I hate going on about the deprivation—I would much rather extol the virtues of Hastings—but given that we have those problems, I must point out that the commuters who take the Cannon Street line are important to us because they are the higher earners. Sometimes people say, “Don’t worry about Cannon Street: if they get to Blackfriars or St Paul’s, they’ll be absolutely fine,” but I do not agree. Some 80% of the passengers who arrive at Cannon Street make their way on foot. Arriving at London Bridge or St Paul’s is entirely different. We need to keep the Cannon Street service, and we will campaign hard to do so.

My hon. Friend the Member for Bexhill and Battle (Gregory Barker) has asked me to add his voice to this debate. He has said that the Cannon Street service is

“essential to both commuters and businesses”

in his constituency, and that it

“should not be put under threat or in any way adversely affected by the Thameslink programme. Rail companies in East Sussex are already struggling to maintain a reasonable level of service due to poor investment in the track, signalling and rolling stock in the past. My constituents deserve a better deal. I seek investment to improve rail travel to make it affordable, reliable and sustainable.”

He puts it well and reinforces the arguments that I am making.

My constituents are patient, but we believe that we deserve better. We are ambitious for our town and for our regeneration. We have a rail action group, the St Leonards and Hastings Rail Improvement Programme, which is known locally as SHRIMP. SHRIMP is not known for its militancy, but we hope to change that. We will be stepping the campaign up and making our case, to make it clear that the rail links for Hastings are not incidental to our regeneration, and that we do not

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want to be incidental to the Thameslink programme. I would ask the Minister to consider helping us to structure a franchise to deliver a first-class line to a first-class town.

2.43 pm

The Parliamentary Under-Secretary of State for Transport (Mike Penning): It is a pleasure to respond to the Adjournment debate this afternoon. I congratulate my hon. Friend the Member for Hastings and Rye (Amber Rudd) on securing it, although sadly she has probably drawn the short straw, because I am the duty Minister—I have responsibility for shipping and roads. She does not have the mechanic with the oily rag responding to this debate. I apologise to her for that, but that is what happens on a Friday. She has been lucky in the ballot, but perhaps unlucky in many other ways. I am sure that the Minister of State would be more than happy to meet the action group and the hon. Members responsible for that part of Kent as we move forward.

My brief says how wonderful it is to live in Sussex and that part of Kent. As someone who fished on the beaches of Hastings on many occasions as a young man, I can honestly say that it is a beautiful place to visit as well. Indeed, the tourism industry is very important to that part of the world. However, we are not talking about living there; we are talking about ensuring that the economy grows, and I am very well aware of the social deprivation that still hinders growth in that part of the country.

My hon. Friend mentioned the fact that the history of the line goes back a long way. The lack of investment probably started right at the outset, because the Hastings line was built in a hurry in the 1850s, and it was not built particularly well, even when connections were made with it. It was not part of a network and it meandered from village to village. It was almost a forgotten line, even when it was being built. It was the Brighton line that attracted a lot of investment. The Department is well aware of the problems that still exist on the line from Tunbridge Wells to Hastings.

My hon. Friend should not underestimate the power of the argument that she makes on behalf of her constituents. It has been heard loud and clear in the Department, and I suggest that it would not hurt if the campaign were to up the ante. The case is obvious: there are real logistical problems and they affect growth. There are also real problems with investment, and my hon. Friend mentioned the difficult financial situation that we found ourselves in when we formed the coalition a year ago.

I know that local residents and MPs would like not to have to involve Thameslink in these discussions, but I am afraid that we have to, simply because Thameslink represents a major piece of investment to which the Government are committed. It will have an effect on the income of whoever is running the franchise in that part of the world and, as the Secretary of State said in his statement, it would be difficult to go ahead with a long franchise without knowing what is going to happen to Thameslink and Crossrail. It would be foolish to do so. We have seen too many franchises issued over the years without a proper cost analysis and without any evidence base. We are conscious of the need for a sustainable, longer franchise. My hon. Friend referred to the integrated Kent franchise, which is commonly known as the IKF.

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Until I started to read this brief last night, I had no idea what the IKF was, but I certainly have now. We will be looking initially at a shorter contract, until the business case has been formatted. We shall issue a much longer one once the financial situation has been addressed, and once Thameslink is up and running.

Many hon. Members come to the House and simply ask for more money. It was excellent that my hon. Friend appreciated the financial problems and asked where other money could come from. I have had more than one conversation with my right hon. Friend the Member for Tunbridge Wells (Greg Clark) on the subject of road funding, which is in my portfolio, and he will know that match funding is very much the way forward. I will take back to the Minister of State the ideas about match funding, and I am sure that that can be discussed in the meeting that my hon. Friend the Member for Hastings and Rye will be seeking with the Minister. I do not personally understand the consequences of such arrangements in rail terms, but I know that match funding represents an exciting way forward for roads.

The McNulty report looked carefully at why our railways were so much more expensive than those elsewhere in Europe. My hon. Friend rightly referred to the fact that they are 40% more expensive. We must ensure that, in providing a 21st-century service, we take out some of the costs that are squeezing prices up and making life difficult for commuters. I also know that timetables are a real issue, and we will look into that matter in relation not only to the shorter franchise but further ahead as well. Understandable concerns have been expressed about Cannon Street; my briefing refers to an historic battle. According to what I read, there should not be a carte blanche “no” to Cannon Street. That matter needs further discussion, and local commuters and MPs should be involved in that.

Network Rail is committed to making improvements, and my hon. Friend mentioned some of the smaller ones that are being made. They illustrate the investment that is taking place. They will shave off a limited amount of journey time, except of course when we experience really difficult weather conditions such as those that we saw over the Christmas period. I fully take on board what she and others have said about the communication between the rail operator, the commuters and the local community not being up to scratch at that time. The report commissioned by the Secretary of State came to that conclusion as well.

There is no way that the Department—the Secretary of State, the Minister of State or me—is going to hush anything up. My hon. Friend is doing exactly what I would do—and have done in the past on behalf of my own constituents who are on the east coast main line. Sorry, I mean the west coast main line: if we were on the east coast main line, we would be some way away from my constituency! It is right and proper to raise the issues and the concerns of constituents rather than debate only the technicalities of the case. I know that my hon. Friend will continue to do that.

It is going to be difficult for me to address EU funding in this debate. If my hon. Friend does not mind, I will arrange for the Minister of State to write to

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her. EU funding always seems something of an anomaly to me. I see how much money we contribute and I understand that when it comes back, it tends to go into areas of social deprivation and need. It is often perceived that the south-east does not fall into that category, yet we all know that there are deprived areas in the region. There are some in my own constituency and many more in my hon. Friend’s.

In this Adjournment debate, it is right not just to talk about how much we would like to spend and how easily it could be spent, as we do not have that sort of money available. There are obvious constraints around Charing Cross, Cannon Street and London Bridge, which has had extensive works going on, and also physical constraints—the line coming in and out of London, particularly around Guy’s hospital; the major roads around the Strand; and, not least, the great river that flows past this great Palace—which considerably affect where and how we can bring trains and lines into London.

There is an obvious alternative to an expansion of those stations—particularly the investment from Transport for London and the Mayor for the underground. I understand my hon. Friend’s concerns about Thameslink and its effect in curtailing what and how quickly things could be done. I think she will have to accept that Thameslink is a major piece of infrastructure, for which London has waited for some considerable time—it has been talked about since I was a lad, growing up in this great city. The Government’s decision to go ahead was courageous. We know it will have some knock-on effects, but it is not a complete block on investment elsewhere. What it must do, probably for the first time, is lock in better services coming into London from the south.

As we go forward, it is imperative that everybody is consulted. The Government do not want consultations for the sake of having consultations, as we want the public to feel engaged with them. I am going into detailed consultations at the moment on the future of the coastguard. At some stage, I suspect I might be accused of doing a U-turn, but we said at the start that if we believe in public consultations and public involvement, we cannot be completely arrogant and come out at the other end with identical processes to what went in at the start. When it comes to the consultation on future franchises and services, it is imperative that the public—that means everybody involved, from action groups to local MPs and local authorities, and, indeed, commuters—feel that they have engaged fully with it.

My hon. Friend referred to the Cinderella line. When I first read my brief, I must admit that I at first thought, “What is this Cinderella line?” Many people have strong feelings about this and will receive no consolation from me saying that it is not a Cinderella line, but a line that has an in-built historical problem stemming from the 1850s. There are limited claims that we could put in the limited funds available. Whatever schemes go forward, the early franchise agreements—I know this was a disappointment to my hon. Friend—have to be slightly shorter than we would have liked so that they can be locked in with other contracts, particularly with Thameslink.

It was important to raise this issue. I am sorry it is happening late on a Friday afternoon when everybody has disappeared. I apologise to my hon. Friend that

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the Minister of State is not here. Any of my hon. Friend’s points that I have not covered will be responded to in writing, and, as I have said, I am sure that the Minister of State will be more than happy to see her and any other Members representing her part of the world, along with their delegations. I commend her

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for standing up for her constituents as she has this afternoon.

Question put and agreed to.

2.55 pm

House adjourned.