Small Business, Enterprise and Employment Bill
The Committee consisted of the following Members:
Fergus Reid, Committee Clerk
† attended the Committee
“(7) The Secretary of State may by regulations devolve the enforcement of the National Minimum Wage to local authorities.”
‘(1) Section 17 of the National Minimum Wage Act 1998 (Non-compliance: worker entitled to additional remuneration) is amended as follows—
(2) In subsection (2) after paragraph (a) insert—
“(b) the relevant remuneration related to any holiday pay or other related pay connected to the worker, and”.”
I am delighted that amendment 238 is so wonderful that it was printed twice. I hope the Minister will see its wonderfulness and decide to support it. Opposition Members will never tire of reminding the House that the national minimum wage was one of the previous Labour Government’s greatest achievements, raising pay at the bottom with increased productivity and wide industry support, and without job losses. The national minimum wage was originally designed to prevent exploitation and extreme low wages.
I am delighted that every party in the House now accepts that the national minimum wage is a part of the economy that we should keep, nourish and improve. However, it has not always been that way. In 1997, the current Secretary of State for Work and Pensions told the House that, if we introduced the national minimum wage,
In the same year, the current Secretary of State for Defence told the House that the Conservative party had “always resisted” the minimum wage and that he thought there were “other better solutions” to address extreme low pay. The current Leader of the House said that the minimum wage would be
Those negative arguments were made in 1997, and I am glad that the Conservative party has come round to accepting the national minimum wage, and that we no longer see people in this country earning as little as £1 an hour.
Toby Perkins (Chesterfield) (Lab): I am grateful to my hon. Friend for reminding the Committee of the history of the national minimum wage. Does he agree that although the Government now talk about accepting the minimum wage, they find numerous ways to undermine it, such as through the huge increase in unpaid internships and workfare? People are actually working below the national minimum wage in all sorts of ways. These important amendments would address abuses.
Ian Murray: That was a timely intervention by my hon. and physically close Friend the Member for Chesterfield. I have no idea why we have decided to sit on two chairs between three people, but he raises a good point. It is critical that we properly enforce the national minimum wage. There have been attempts in the past few years to undermine the national minimum wage, which has fallen significantly in value compared with wages. We have heard about other issues in the past few weeks. Lord Freud suggested that some people should not be paid the national minimum wage, and the Exchequer Secretary to the Treasury and various Conservative Back Benchers have called the national minimum wage into question. People have also said that it should be scrapped altogether, or that small businesses should be able to opt out. I am not sure whether that is the message that the House should be sending.
Andy McDonald (Middlesbrough) (Lab): I want to share the concern of a constituent who came to me in March. She had taken up a two-week trial position, which grew into a two-week job at 42 hours a week for £40. There was no payslip, no tax and no national insurance. That was properly reported through the pay and work rights helpline run by Her Majesty’s Revenue and Customs, and she was told in May that the reason why she was still waiting was that there was a backlog of cases. To this day we are still none the wiser as to whether there will ever be a prosecution of that terrible case. Is it not right that we should focus on enforcement issues? The principle is there; we should ensure that the prosecutions are made.
Ian Murray: My hon. Friend is right. As we have said on a number of occasions in the Committee, there is no point in having regulations that are not enforced. The amendment would be a greater deterrent to people who do not pay the minimum wage. My hon. Friend gave the example of someone working 42 hours a week for £40, who reported that to enforcement but is none the wiser as to whether the law will be enforced. I hope that the Minister will take on some of those cases and look at them in great detail. While members of the coalition undermine the national minimum wage, employers use that as a smokescreen and do not pay what they are legally obliged to.
Let me move on to the different problems and challenges of too many people in this country working hard for not much pay. Poverty pay is one of the scourges of the modern-day economy. Figures show that more than 5 million people, which is almost one in five employees, are low paid. That problem, which has been building for years, has got worse under this Government. On average, people will be £1,600 a year worse off. The national minimum wage, as I have already said, has declined in real terms since 2010.
It is worth noting—we fail to do this regularly in this House because of the rhetoric of some of the people in it—that three quarters of people who claim social security in this country are in work. That in itself shows the problem that we have with low pay, and we should robustly challenge it.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op): My hon. Friend is making a strong point and is characterising the situation that many people in this country find themselves in. Just a couple of weeks ago, in Grangetown in my constituency, I met some constituents who were working many hours, but on very low pay. They were really struggling to cope with the cost of living, their bills, and their food costs, and struggling to try to provide for two young daughters and give them a better life. It is those real stories, as well as enforcement and the improvement of the situation of people on low pay, that the Committee needs to be concerned with.
Ian Murray: I am grateful for my hon. Friend’s intervention because it highlights the issue. We talk in Committees and in the House about the generalities of legislation and regulation, but it is the real-life issues that my hon. Friends have raised that matter. When we read those stories and talk to people who are involved in those situations, it is pretty shocking. We need to ensure that we put regulations in place that allow that to be robustly addressed.
There is no doubt that even if people are paid the minimum wage and are not exploited, there is a feeling around the economy that the national minimum wage is fast becoming the maximum wage for too many people. We should address that, particularly this week, as it is living wage week. We should be promoting the living wage as much as we can. I applaud the City of Edinburgh council, which took the decision some time ago to ensure that all its employees were on the living wage. Many councils across the country have also taken that step. I would encourage public authorities, where they can, to pay the living wage and set a strong example.
Ian Murray: It would. This is very much a gender issue. On local authorities being involved on the ground—a point that I will come on to some time around 3 o’clock this afternoon in this contribution—we see that local authorities are in the best position to enforce the national minimum wage, particularly working in partnership with HMRC. They are on the ground, talking to businesses all the time, and they know the local geography and the local business practices. With regard to deterrents, although the national minimum wage enforcement section does an incredibly good job, it does seem distant. If local authorities also had a role in enforcing the national minimum wage, they would be local and more visible, which would mean that the deterrent was much stronger.
Andrew Griffiths (Burton) (Con): I am grateful to the hon. Gentleman for mentioning living wage week. Will he join me in congratulating our colleague, my hon. Friend the Member for Warwick and Leamington? He has secured this afternoon’s Opposition day debate and will be leading Parliament’s calls for the living wage—[Hon. Members: “Opposition day?”] Sorry, I meant the Back-Bench business debate. Does he agree that that shows cross-party support for the living wage?
Ian Murray: Perhaps we have just had a bit of a premonition from the hon. Gentleman, because in six months’ time he will be calling Opposition day debates. I am delighted that the Backbench Business Committee has scheduled a debate on the living wage for this afternoon, and the Opposition will certainly participate robustly. Notwithstanding that, I do not understand why the Government will not support the Labour party’s policy of “make work pay” contracts, which would encourage employers to pay the living wage and share in the benefits, so that all the gains do not go to the Treasury, and so that businesses get their share as well.
Chris White: I thank my hon. Friend the Member for Burton for surprising me while I was going through my speech for this afternoon. I would welcome contributions this afternoon from all Members of the House. In living wage week, we all appreciate how important it is to recognise so many of our constituents who are on low incomes. Across parties, we should do all we can to support the promotion of the living wage this week.
Ian Murray: I could not agree more with the hon. Gentleman. I am delighted that he has just managed to rehearse the first paragraph of the speech that he was reading when he was surprised by the hon. Member for Burton. While we are offering congratulations on the promotion and paying of the living wage, I refer the
Bill Esterson (Sefton Central) (Lab): I congratulate Heart of Midlothian on coming out of administration and being a living wage employer. I am sure that Government Members’ support for the living wage is a prelude to them supporting the fine amendments before us. The enforcement of the minimum wage is a very serious issue for people working in the care sector. One reason why it is so important to localise enforcement is to deal with the scandal of the 15-minute visit, the way that travel time is not paid, and the reality that many people working in the sector with the most vulnerable people in our society—the elderly and the disabled—do not get decent pay. They receive very much below the minimum wage, let alone the living wage. Proposals such as those in the amendments will help to deal with the scandal of low pay for such vital workers.
Ian Murray: Absolutely. My grandmother was a health care worker—a home help, as they used to be called—and she took great pride in her job. When she was visiting her clients she was able to not only deal with their daily needs but provide social interaction. We have seen that that is no longer the case because of how social care has developed over the past few years. As social care is now given in 15-minute visits and there is clocking in and out, there are questions about not only whether care workers are paid the living wage but whether they are even paid the national minimum wage. I hope that the Minister will reflect on those kinds of issues.
We all appreciate that local authorities are under significant financial stain and have taken much of the burden of the Government’s cuts in percentage terms, but we must ensure that we treat the people who look after the most vulnerable, the elderly and the disabled with the respect that they certainly deserve. I am sure that we will return to the issue often between now and the general election campaign.
Toby Perkins: Does my hon. Friend agree that it would strengthen the case made by the hon. Member for Warwick and Leamington in this afternoon’s debate if he was able to refer to his supporting the minimum wage by voting for the amendments? It will be hard for him to go into a debate on the living wage if he has just voted against legislation to strengthen the minimum wage.
Ian Murray: There is a strange irony here. I am delighted that the hon. Member for Warwick and Leamington has a Back-Bench business debate on the living wage; we should commend him on that. However, it is strange that he will stand up in the House of Commons this afternoon promoting the living wage
Toby Perkins: My hon. Friend should have a little more confidence in himself, because he is making a persuasive case. I hope that the hon. Member for Warwick and Leamington will listen, be persuaded and vote with my hon. Friend. Get your head up, son; I think you can win this.
Ian Murray: My hon. Friend is getting cocky because he has managed to win two amendments. One, admittedly, was agreed to because the Government were asleep when the vote was taken, but he and the hon. Member for South East Cornwall won the vote on pubcos. The Government have been defeated twice in this Committee, and I hope my powers of persuasion will defeat them a third time, so that the hon. Member for Warwick and Leamington can go to the House of Commons Chamber this afternoon and confidently say, “I am a champion of not only the living wage but the national minimum wage.” Would that not be great?
Stephen Doughty: Another argument in favour of the amendments is the situation of women on low pay. My hon. Friend will recall that it was equal pay day on Tuesday. The statistics are shocking for the whole country, and particularly for Wales. They show that women are on average paid only 82p for every pound that a man is paid, which is simply unacceptable in this day and age. We must strengthen the minimum wage, the living wage and all related measures.
Ian Murray: Absolutely, and I believe that the gender pay gap has the same effect as female employees not being paid between this Monday and the end of this year; we must address that in this Committee. The Minister herself said in our debate on Tuesday that if people were paid significantly above the national minimum wage—in fact, if they were paid the living wage, which we will hear about this afternoon from the hon. Member for Warwick and Leamington—we would not need national minimum wage enforcement because nobody would cross the line between paying the national minimum wage and not paying it, and the grey areas would be removed.
Let us be clear about what we are trying to do. The measure would also be good for employers and the economy. Hon. Members may ask why, so I will give an example. I was an employer of many dozens of staff when I ran my own small businesses—I do not know whether I have mentioned that fact yet. I paid my staff well above the national minimum wage and ensured they were on proper contracts, with the hours they wanted, but I was struck by the fact that many rival employers did not do the same, which made it uncompetitive. Enforcing the national minimum wage and ensuring that people are paid properly is therefore good not only for employees but for business. It would create the level playing field that we all want, and would enable businesses to compete on quality and cost, rather than having a race to the bottom as regards their employees’ terms and conditions. That is an important distinction.
Bill Esterson: My hon. Friend’s point about the quality that comes from paying people properly is incredibly well made. In the care sector, the local authorities that invested in becoming living wage employers found that their quality increased, and they made savings because of the increased commitment and performance of their staff. The minimum wage pays for itself, which makes perfect business sense in a number of sectors, including the care sector. I hope Committee members will support the amendments as a means of ensuring that, at a local level, there is enforcement to support achieving quality through decent pay.
Ian Murray: Absolutely. We have a productivity problem in this country, which might be explained by the fact that although unemployment has dropped by 500,000 in the past 18 months or so, the tax take to the Treasury has been completely flat, even though a 6.5% increase had been predicted. That reveals the kind of economy the Government have created. The productivity problem we have is due to people being low-paid in insecure jobs. We have to deal with that, and that enforcement is wanting. I appreciate that intervention.
Turning to the amendments and what we are trying to do by imposing proper deterrents and enforcements. We have to reflect on the fact that the Government have failed to ensure that there is proper enforcement of the national minimum wage so that the most vulnerable are protected. We mentioned on Tuesday that Ministers have announced the naming and shaming policy on four occasions. I believe, from the Minister, that it has been used about 30 times recently and that more cases are on the way. We appreciate that the Government are trying to move in the right direction with the naming and shaming of those who flout the national minimum wage.
However, there is a problem with national minimum wage enforcement. My hon. Friend the Member for Middlesbrough described how people have reported problems with pay through the helpline, but they do not seem to be acted on. That is not a slight on the national minimum wage enforcement section, because it does a tremendously good job. I have often met officers and senior members of that section to discuss some of the problems they come across.
It is very difficult when there are potentially 300,000 people being paid less than the national minimum wage and the HMRC enforcement section has only 150 staff and 100 front-line officers. It is difficult for it to cope with that. That is why, in debating amendment 240, we might consider whether local authorities can play a role in enforcement to supplement that staffing complement.
The report “Settle for Nothing Less”, published last year by the Centre for London, found that only two employers in four years had been prosecuted for paying below the national minimum wage. I ask the Minister to reflect on why that is. It may be because the national minimum wage legislation has made it too difficult for employees to take action where there might be unscrupulous employers.
I recall that an amendment tabled by Liberal Democrats was made to the national minimum wage legislation, but I have been unable to find the justification for the amendment and the speeches in favour of it. As I understand it, it meant that national minimum wage
HMRC has investigated 10,777 firms since 2009 for allegedly breaking the law on low pay, collecting £15.8 million in arrears payments and imposing just over £2 million in fines. The “Settle for Nothing Less” report that says there has been systematic failure in how the national minimum wage is policed. That is not the Opposition saying that; it is a report by the Centre for London.
It would be uncharitable to suggest that the Minister had done nothing about enforcement, because she did raise the fines to £20,000 via statutory instruments that went through the House last year, and she has said clearly that under the Bill that will now apply to each worker. In amendments 238 and 239 we suggest that the figure should be £50,000. We can all pluck figures out of the air for the level of fines, but at the moment someone can be fined £50,000 for fly-tipping but not for non-payment of the national minimum wage. Steve Turner from Unite said at our evidence session that someone could be fined £50,000 for selling a fake Manchester United replica top outside Old Trafford—given what is being sold in that example, perhaps the fine should be much higher. If someone can be fined £50,000 for fly-tipping or selling a replica shirt, when there is no detriment to an individual, why is it a £20,000 fine in this case? We think that it should be of equal value to fines for those other offences, if not greater. We therefore tabled the amendments to suggest increasing those fines to £50,000.
Amendment 240 proposes more effective enforcement by giving local authorities new powers to enforce the national minimum wage through working alongside their colleagues in HMRC. My hon. Friend the Member for Hartlepool raised that issue earlier. HMRC does a great job in enforcing what it can, but there is limited scope in the funding and numbers available to it. Local authorities are on the ground visiting businesses all the time, perhaps through environmental health officers or health and safety visits. In some industries they visit licensed premises such as restaurants on a more regular basis. Local authorities are already on the ground visiting those high-risk businesses where there is more likely to be infringement of the national minimum wage.
Local authorities know their own patches very well. In terms of local geography and the make-up of local businesses, they might receive complaints about other issues that allow them to have more eyes and ears on the ground and effectively look at whether businesses are paying the national minimum wage. The amendment would give the Secretary of State the power to bring forward regulations, if he or she wished, to devolve enforcement powers to local authorities. It would certainly be the right thing to do. It is Labour party policy to bring that forward when we go from opposition to government, and when the hon. Member for Warwick and Leamington goes from Back-Bench debates to Opposition day debates in just over six months’ time.
Ian Murray: I agree. Local authorities are on the ground, so they can see these kinds of thing happening. This is also about reporting. I am sure that businesses and, indeed, employees and workers would have much more confidence reporting these issues to the local authority—with which they are familiar—than reporting them directly to national minimum wage enforcement through a helpline that might not even deal with it.
Mr Wright: I want to pick up on the point made by my hon. Friend the Member for Middlesbrough. Is the shadow Minister aware of the excellent report on umbrella companies by the Union of Construction, Allied Trades and Technicians? It makes exactly that point about skilled workers in the construction industry who are paid £13, £14 or £15 an hour but then deducted fees that take them below the minimum wage. Under amendment 240, local authorities would help to address the problem of umbrella companies, particularly in the construction industry but also beyond.
Ian Murray: Absolutely. We should commend UCATT for that report. It has done much to bring the issue of bogus self-employment to the authorities’ attention, and we will hopefully be able to deal with that issue. On the issues of bogus self-employment, forced self-employment and non-payment of the national minimum wage, it is clear that there are unscrupulous employers out there using every possible loophole they can find to obfuscate their responsibilities as employers. Their responsibility is not only to their employees and workers, but also to the Exchequer in terms of paying tax and paying for the public services on which they and their employees rely.
It is absolutely right for local authorities to be an integral part of the process. I could use a simple hypothetical situation, such as a hospital being built, to highlight the issue. We could also look at how Newham council, UCATT and the trade unions dealt with the building of the Olympic park. A major construction project went on in that council’s backyard, but it was able to work with trade unions and employers to ensure that health and safety was dealt with properly, people were paid properly, and the terms and conditions of the people on that site were in line with the legislation we currently operate under. It was deemed a tremendous success.
Sheila Gilmore (Edinburgh East) (Lab): I do not know if my hon. Friend was present in the Chamber earlier for business questions, but I am sure that he will be interested to hear this. My hon. Friend the Member for Bridgend (Mrs Moon) gave an example of a way of potentially getting around the minimum wage. A constituent came to her who worked in a call centre, and who had
Ian Murray: Absolutely. I was not in business questions, but I will look at Hansard. That is the kind of thing that must be dealt with. In that particular example, the employee has gone to their Member of Parliament to seek advice, but all that they can do at the moment in terms of enforcement is to call the same helpline that the constituent of my hon. Friend the Member for Middlesbrough called, not knowing whether any action will be taken. A local authority is much closer to where the action is taking place, so it would be better to report the situation to a local authority and allow it to determine what should happen. There is also a direct democratic link in the local authority through local councillors, which gives added impetus to dealing with such enforcement issues. It is pretty extreme if a deduction for toilet breaks takes someone below the national minimum wage. I would hope that my hon. Friend the Member for Bridgend would bring it to the Minister’s attention so that she can deal with it directly.
New clause 12 would allow enforcement officers to calculate holiday pay alongside any non-payment of national minimum wage. In all the discussions that I have had with national minimum wage enforcement officers, one of their biggest frustrations has been the inability to include holiday pay in their calculations, which has diminished and diluted their ability to calculate any losses applicable to employees on that basis. Section 17 of the National Minimum Wage Act 1998, “Non-compliance: worker entitled to additional remuneration”, says:
“If a worker who qualifies for the national minimum wage is remunerated for any pay reference period by his employer at a rate which is less than the national minimum wage, the worker shall be taken to be entitled under his contract to be paid, as additional remuneration in respect of that period, the amount described in subsection (2) below.
Essentially, the relevant pay is all down to the period in question. Our amendment would ensure that section 17 includes everything in a normal pay period, including holiday pay and all the other issues, so there is no dilution of the compensation due to an employee when an employer is found not to have paid the national minimum wage by virtue of their calculation of holiday periods and so on. I have encountered a case in which an employee had clearly not been paid the national minimum wage, but as he had been on holiday for one week out of a four-week period, when the three weeks were divided by the amount of pay that he had received, he had been paid more than the minimum wage, because the holiday pay element had been subtracted from the calculation. That does not seem sensible when it is clear that someone has not been paid properly under the terms and in the spirit of the national minimum wage legislation. I commend the amendments to the Committee.
The Minister for Business and Enterprise (Matthew Hancock): I have listened carefully to the hon. Gentleman’s long and largely thoughtful speech. Can he bring himself to congratulate us on what we are introducing in the Bill to strengthen the minimum wage, which we strongly supported? Given what he said, it is surprising that after not having taken that action during 13 years in government, the Labour party in opposition has not explicitly congratulated the Government on doing so in the Bill.
Ian Murray: If the Minister had been listening for the last 35 minutes, he would know that I was not being uncharitable to the Government. I have said so on a number of occasions. I congratulated him on introducing £20,000 fines for each employee into the Bill. If he had been listening, he would have heard me do so. I am delighted at this conversion by the Minister, who is now such a proud supporter of the national minimum wage, given that he was an adviser to the very Chancellor whose party, in opposition, voted against the Government’s introduction of the national minimum wage back in 1997.
Ian Murray: The Minister says it was a long time ago, but he starts every intervention with “In 13 years of Labour Government”. Perhaps his memory is slightly more refreshed. I was just about to sit down before he decided again to throw his toys out of the pram without listening to the actual debate. However, I am delighted to have taken that intervention, because it allowed me to reiterate my congratulations to the Under-Secretary for the things that she has done on the national minimum wage. In the spirit in which the Committee has conducted itself in the past few weeks, I am merely trying to strengthen what was already a reasonably good Bill, and I hope that the hon. Member for Warwick and Leamington, who has his living wage debate this afternoon, will support our amendments.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): Even if other hon. Members were not saying that it is a shame that this is the last day of the Committee, I would be with you, Mr Robertson; it is a shame that this is the last day and we should make the most of it. Who knows how late we will be here this evening?
I thank the hon. Member for Edinburgh South for his amendments, which have given us the opportunity to discuss the important issue of the national minimum wage and how it is enforced. He rightly pointed out that the minimum wage was a strong achievement of the past Labour Government; I do not have any difficulty in saying that. It was supported by my colleagues who were elected as Liberal Democrat MPs at the time and it is absolutely right that we have it as a basic minimum protection for workers, although we obviously encourage employers to pay above the minimum wage. It is a “minimum” and in living wage week in particular it is appropriate that we discuss this issue.
I welcome the fact that there will be a debate later today, led by my hon. Friend the Member for Warwick and Leamington, on the living wage, for which there is great cross-party support. Ensuring that we can encourage
It is a positive sign that employers increasingly make a virtue of the fact that they pay more than the minimum wage. I am sure that, like me, other hon. Members will have noted various adverts around Westminster tube station about a particular employer promoting the fact that it is a living-wage employer. That is to be commended. Of course, the Government have also been doing other things to help people on low pay—not least cutting income tax for low earners, taking 3.2 million people out of paying income tax entirely. A range of activities are in place.
In his remarks, the hon. Member for Edinburgh South became slightly less uncharitable; he turned from saying that I had not done nothing on the issue to actually congratulating me, which was a slightly more positive way of framing it. I am glad that he said that, because it is absolutely right that this Government have done a considerable amount to strengthen the national minimum wage. We have increased the budget on enforcement by 15% and we are increasing the penalty for non-payment of the national minimum wage to £20,000 through the legislation we are debating today. We are increasing the penalty so that it can be charged per worker rather than as an overall total.
We have also introduced the revised and much stricter naming and shaming criteria, so that the default position becomes this: if an employer does not pay the minimum national wage, they have to pay not only the arrears owed to the worker but the penalty—indeed, they will be named and shamed for having got that wrong and not having complied with the law in the first place. That is a strong record. It is right that we do these things, because it is important that the basic national minimum wage is properly enforced.
I turn specifically to the amendments. Amendment 238 —notwithstanding the fact that it was printed twice—is designed to increase the maximum civil penalty from £20,000 to £50,000 per worker. I welcome the fact that the Opposition recognise that there is a need to increase these penalties. However, I hope I can convince the hon. Gentleman as to why we have considered £20,000 to be the appropriate level. The impact assessment sets out that 6% of cases in the last year where HMRC issued a notice of underpayment involved total arrears in excess of £20,000. The amount paid and the penalty are directly calculated as a result of the amount of arrears.
Employers who have not paid properly are charged a penalty equivalent to the amount of the arrears owed. That has increased: it used to be 50%, but now it is 100%. However, if they pay the arrears quickly, they can get a discount. We have already increased the percentage of the arrears that is paid, but because it is done on that percentage basis, just raising the maximum amount in itself does not increase the penalties unless there are cases in which the overall arrears are greater.
The 6% of cases in which the total arrears were more than £20,000 involved 13,000 workers, with an average of 478 workers a case. The average arrears per worker ranged from £148 to £321. Only a tiny number of cases
The clause will provide for a penalty to apply on a per-worker basis. Because of that, £20,000 is a perfectly fair amount. In cases where many workers have been underpaid significant amounts, the total to be paid by an individual employer could be far in excess of £20,000; it depends on how many workers have been underpaid and by how much.
Our actions mean that, in almost every case in the past year for which HMRC has issued a notice of underpayment, the employer would have been issued with a penalty equivalent to the total amount of arrears owed and the £20,000 cap would not have come into play at all. That is why there is no need to set a higher cap of £50,000.
It is also worth noting that, as well as having little impact on the penalties in such cases, there would also be no impact on the individual workers, because they will get the amount of arrears owed regardless of the cap on the overall penalty. I say to the hon. Member for Edinburgh South that if in future evidence shows that a higher maximum cap is needed, that change could be made through secondary legislation. I imagine that such a change will be necessary in the passage of time owing to inflationary pressures. However, at the moment the £20,000 figure deals with the cases coming through, which is why we have gone for that amount.
A few points were raised by various hon. Members about enforcement. The hon. Member for Middlesbrough mentioned the pay and work rights helpline case as reported by his constituent. Every complaint that is reported is investigated. I do not know the specifics of his constituent’s circumstances in terms of the date when that was reported, where the investigation has got to and what facts have been found, but if he writes to me with the details, I will happily look into the matter.
Jo Swinson: Certainly. It is not a case of simply logging and that is it. Clearly steps are needed to identify whether there is merit to the complaint being made, which involves a degree of record checking, and there will be a conversation with the employer. However, it will depend on the circumstances.
It is important to recognise that people may make complaints anonymously. In performing such an investigation, the investigator will not typically ring up
It is not the case that every complaint made leads to a finding of a breach of minimum wage law; that depends on the specifics of the case. When we are talking about a number of hours worked and an amount of pay received, the matter is straightforward, but sometimes, given accommodation offset and deductions for purchasing uniform and so on, things can get slightly more technical. It is not that people are necessarily making unfounded complaints, but sometimes the facts of the case will show that the law has been complied with.
Andy McDonald: We are waiting on the case I mentioned. If a prosecution was successful—we do not know whether it would be, which is why I am being a little guarded—its power would be enormous. It would send out a message in the locality that people cannot get away with these exploitative wage practices. If I provide the Minister with the details, perhaps she will have a look into the case.
Jo Swinson: I am happy to look specifically at that case. The hon. Gentleman is right that, to increase the number of employers who are named and shamed, the Government have not only dealt with specific cases to make sure people get the arrears they are owed, but sent out the much wider message to employers that they need to focus on getting this right.
If employers paid people a significantly higher rate, it would perhaps not matter if they got the number of pence per hour wrong by one or two digits, because they would still comply with the national minimum wage legislation. However, if they are going to pay the national minimum wage, they need to make absolutely certain that their records are accurate, their payment processes are top-notch and they definitely pay people what the law requires.
I want briefly to mention the case in Bridgend, mentioned in business questions. Again, the circumstances sound pretty horrendous. I do not know whether the case has been reported to the pay and work rights helpline. I would encourage all hon. Members who come up against such cases to report them. If they are concerned about the level of enforcement by HMRC, they are always free to write to me, as the Minister responsible.
Mr Wright: The Minister is being very generous in giving way. I understand what she says about naming and shaming, but my concern is that a business that is breaking the law by not paying the minimum wage will probably be more amenable to fraud, such as doctoring pay slips. What investigation of fraudulent activity will be undertaken?
Jo Swinson: The hon. Gentleman makes a fair point. If I may say so, he also makes a good point about why amendment 240, well intentioned though it is, is not the right way to tackle this issue. HMRC is the enforcer in
Clearly, it is not acceptable for a company to doctor records, and HMRC has powers more generally regarding the information kept by companies, which must, for example, maintain information for tax purposes. If an employer that HMRC investigates has not kept proper national minimum wage records, that might well ring alarm bells about whether the company has kept proper records in relation to taxation and all its other responsibilities.
It is important to deal with issues relating to the national minimum wage, but there may sometimes be a route whereby we can look at wider issues, such as whether fraudulent record keeping is a practice at a company and whether other taxation issues need to be explored. I encourage employers to recognise that if they are not able to produce accurate records for the HMRC national minimum wage team, that may lead to a more intensive forensic investigation of other aspects of their business.
The hon. Member for Chesterfield raised the issue of unpaid interns. I absolutely agree that that is a real issue. There has been far too much exploitation of individuals who have, effectively, been workers, but who have been working for free. Obviously, there are cases where individuals are genuinely volunteering; that happens in the charity sector. Indeed, I am sure that every member of the Committee, including yourself, Mr Robertson, relies on selfless volunteers who give up their time for the political parties we belong to.
There is a role for volunteering in society, but it is also important that somebody who is working in a job, and who is required to turn up on time and do specific tasks, is paid at least the national minimum wage. I pay tribute to the work done by the right hon. Member for Salford and Eccles (Hazel Blears) on this issue. I had the pleasure of working with her and the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) on setting up the Speaker’s parliamentary placement scheme. That has helped to galvanise change in the House on what is deemed to be acceptable and on its culture, so that we do not have unpaid internships, which are so damaging to social mobility.
The culture is changing in other sectors of the economy as well. Enforcement has an important role to play. HMRC, for example, as well as investigating individual cases when complaints are made about unpaid internships that should have been paid, has made proactive investigations into industries such as the fashion industry, where such internships were a particular issue. HMRC has contacted companies advertising unpaid internships to make it clear that they need to be careful to comply with the law. Significant work is therefore going on—not only in Government, but because of increasing realisation in industry more generally, which I welcome, about the ethics and the legal position of people who are working needing to be paid.
The hon. Member for Sefton Central raised the important issue of travel time, especially for care workers—not exclusively, but it is a particular issue in that area. Travelling to and home from a place of work is not included in the national minimum wage, but for jobs in which someone is required to undertake several
Significant investigations have been made into the social care sector. HMRC undertook some between 2011 and 2013, and some are still ongoing. It found a high level of non-compliance, approaching 50%, though not purely as a result of the travel time issue, because in some cases other issues were involved. We certainly recognise, however, that travel time is significant.
As a result, a range of work has gone on with care sector bodies to improve understanding of what compliance means and to design payroll systems to ensure that workers will be prevented from being underpaid minimum wage in the first place. Guidance for local authorities was published recently by the Department of Health as part of the secondary legislation accompanying the Care Act 2014. The guidance includes a chapter on “market-shaping and commissioning”, which explicitly states that
Bill Esterson: I am pleased that the Minister has spent some time on the issue of travel between appointments, especially in the care sector. It was not quite clear whether she accepts that such travel time should always be paid. As things stand, the exploitation that goes on is undermining the minimum wage—will she be clear about her position and that of the Government?
Jo Swinson: I am happy to be clear. Yes, travel time should be paid, with the distinction that it is for travel between appointments during the day, rather than for the initial journey to work in the morning or the final journey at the end of the day, because travel to and from a place of work is not paid. In between those times, travel time absolutely should be paid. We are not prepared for that to undermine the national minimum wage. It is concerning that that has happened in some cases.
It is not that the law is unclear; the law is very clear. We are ensuring that the published guidance and the work done with care bodies, local authorities and the Department of Health are in place to supplement the law, but we also have the power to act now, which is why investigations have already been undertaken by HMRC, some of which are ongoing because, as can be imagined, some of the cases are incredibly complex and involve hundreds of workers. In order to do proper calculations, we have to look at time sheets and all the individual travel journeys in the working day. Things are happening but, as I am sure the hon. Gentleman recognises, some of the work is forensic and to do it for hundreds of employees to ensure that any notices of underpayment are issued properly takes time and it is being worked through now.
Jo Swinson: Again, where costs are incurred by employees, as the hon. Gentleman says, wholly and necessarily for the purposes of their employment—whether petrol or uniforms—and not reimbursed, those fall under the national minimum wage. If employers are paying far in excess of national minimum wage and the national minimum wage applies, even if such sums are removed, then ultimately that becomes a contractual issue for individuals to decide with their employer. However, it is not acceptable for deductions to be made that would take the most vulnerable workers who are on the low wages of the national minimum wage, below the national minimum wage level. Such issues are already investigated by HMRC in great detail. As part of its calculations, HMRC will issue a notice of underpayment as part of the overall arrears, which will factor in and include any deductions wrongly made.
Toby Perkins: I am glad that the Minister has clarified that. Does she also recognise that there is a danger in the care sector particularly, where local authorities are contracting care companies to provide half-hour or one-hour appointments and travel time is not being considered? In such instances, people who require the care end up being short-changed. Does she fear, as I do, that for many care companies the solution to this will be to make all their carers self-employed, employing them on a self-employed basis and circumventing minimum wage legislation that way?
Jo Swinson: We would not want there to be the kind of avoidance that the hon. Gentleman describes. He may be aware that we are already undertaking a review of different worker types that exist. There has obviously been a big increase in self-employment, which we want to understand more and dig down into. It is important that such issues are considered; I am not dismissing what he says in any way. We are considering the issues at the moment and what he describes does not seem to be happening. Again, the commissioning guidelines and the guidance that has been worked on with the Department of Health and local authorities is an important part of that, because ultimately local authorities are in the position of making decisions about who to give contracts to. While I recognise that they are under pressure in terms of finance, it is not acceptable to have a race to the bottom, where some of the most vulnerable people in society, who require social care, are effectively, as the hon. Gentleman says, not getting care of the standard that everybody would wish them to have, because care workers are being paid less than the national minimum wage. That is unacceptable.
In commissioning decisions, local authorities have a responsibility to ensure that they are not letting contracts at a level that it is impossible for any bidding company to fulfil while complying with national minimum wage law. Local authorities should certainly look at any kind of avoidance in terms of self-employment.
It is also important to recognise that, when such cases are investigated, it is not a defence for a company to say, “Oh, this person is self-employed,” putting that label on them and ticking a box; the facts of a specific case are considered, to find out whether a person is actually self-employed or whether the facts show that they are effectively an employee. Obviously, it will depend on circumstances, which is why HMRC is able to investigate cases. It is not sufficient for somebody to have a piece of paper saying that they are self-employed: the characteristics of self-employment have to be fulfilled for that to be the case.
Mr Wright: Is the Minister concerned about certain sectors? The construction industry has a systemic bad case of bogus self-employment, which many people have mentioned. Is she concerned that, in terms of subcontracting, the nature of much of industry lends itself to bogus self-employment? What are the Government going to do about it?
Jo Swinson: Concerns have been raised in respect of various sectors, particularly the construction sector, including in a recent report by the Union of Construction, Allied Trades and Technicians on some of these issues, which we need to look at in more detail. That is why we have announced that we are reviewing different employment statuses. There are clear differences between an employee and a worker, but individuals might not always be clear what their status is. Until tested in an employment tribunal, it is not always possible to be 100% certain of that status. Indeed, self-employment is another element of that debate. We have seen the shape of the economy change in many ways through the financial crisis and difficulties, and it is important that we take stock and look at whether our different employment statuses still serve the right purpose and are properly defined. People must have enough clarity. That review is under way at the moment and is due to report within the next few months. It is an important piece of work which will help to inform this debate.
Prosecution comes up quite regularly and has been mentioned by various Members. In a sense, I have sympathy with the instinct that says, “If people are breaking national minimum wage law, they should be prosecuted.” That sounds a simple and automatic solution. However, I would like to outline the complexity of that discussion and why we mainly use civil sanctions to deal with enforcement of the national minimum wage. First, we want to ensure that the worker gets what they are owed. The advantage of a civil sanction is that it can enforce that the worker gets paid what they are due. When it comes to the national minimum wage not being properly complied with, the most important thing is that the worker who has done the hours, undertaken the work and not been properly paid gets the money they are owed. The difficulty with prosecution is that it does not help the worker get their money, and that is one reason why civil sanctions are the best response.
In terms of criminal prosecutions, there is a wider issue. It is not okay to not pay the national minimum wage. It is in no way acceptable or excusable. That is why we must rightly force the arrears to be paid and impose a penalty that is equivalent to the value of those
I have already said that I do not think amendment 240 is the right enforcement approach. I appreciate the intention of ensuring that our enforcement is as strong as possible. However, I do not think that local authorities are better placed to undertake that. As I said to the hon. Member for Hartlepool, HMRC has expertise in this area and a strong track record, so it can deal with the enforcement issue. Since 1999, HMRC has identified more than £54 million in arrears for over 229,000 workers during more than 65,000 investigations. It investigates every complaint made to the pay and work rights helpline. I remind the Committee, as I always take the opportunity to, that the number is 0800 917 2368. HMRC also does risk-based enforcement, looking at particular sectors where there is a risk. It is a central enforcement body with a consistent approach across the whole of the United Kingdom, a high-quality service and a brand that everyone recognises. In terms of employers that we are already familiar with, HMRC is the key body in charge of ensuring that taxation is properly complied with. It is in the best and strongest position to do this, rather than local authorities, and that is why I will reject amendment 240. However, I welcome the opportunity to discuss that.
New clause 12 covers holiday and other pay in the context of the national minimum wage. The Working Time Regulations 1998 entitle the worker to a week’s pay for each week of leave. Where holiday pay has not been paid, workers already have a right to take action under regulation 30 of those regulations or under section 13 of the Employment Rights Act 1996 for unlawful deduction of wages. Both claims are brought in the employment tribunal. Workers already have rights of redress and access to early conciliation, which may negate the need for formal enforcement action. That is the right way to deal with enforcement on this matter. It must be right to focus on early conciliation and to try to get swifter responses to such disputes. That is the best way forward. There is still the backstop of right to redress through the tribunal system if necessary.
Given that, we do not believe that it is necessary to extend the enforcement powers under the National Minimum Wage Act. What we have is sufficient. On that basis, I hope that the hon. Member for Edinburgh South will be happy to withdraw the amendment.
Ian Murray: I appreciate the Minister’s explanation. As a result, with the Committee’s leave I will withdraw the amendment, and will not press amendment 239, which is on the same issue, or new clause 12 to a vote.
I want to test the will of the Committee on amendment 240, however—the amendment on the role of local authorities. The Minister is right to suggest that responsibility for enforcement should stay with HMRC. Amendment 240 would not change that but would mean that the Secretary of State would bring forward a report considering whether local authorities should be involved in the process, in partnership with HMRC. HMRC’s enforcement ability would not be diluted by amendment 240, which is simply suggesting that it is probably best that the capacity for people to report incidents of non-payment of the national minimum wage is at the local level, through local authorities working in partnership with HMRC.
Although I appreciate the Minister’s explanation, amendment 240 simply asks the Secretary of State to bring forward proposals that could allow that to happen. It would not replace the HMRC enforcement section but would add a reporting mechanism, after we had looked into whether local authorities should be able to carry out enforcement. I will help the hon. Member for Warwick and Leamington, who has a debate on the living wage this afternoon, and will not press the other measures in the group to a vote—I would hate him to have to vote against them and then have to explain that vote in the House—but I want to test the view of the Committee on amendment 240.
“(7) The Secretary of State may by regulations devolve the enforcement of the National Minimum Wage to local authorities.”—(Ian Murray.)
“(3A) The provisions in this section shall be enforceable by the employment tribunal system. The Secretary of State shall make regulations that determine—
(a) the length of any qualifying period;
(b) the involvement of early conciliation at ACAS;
(c) the level of any fee payable by the worker;
(d) the imposition of penalties on the employer; and
(e) the remedies available to the workers;
The Secretary of State shall make such regulations by affirmative resolution procedure.”
“(4) For this purpose, an employer will be legally obliged to offer a fixed hours contract when a worker has worked regular hours over six months of continuous employment, where the worker will have an option to refuse the offer.
(5) The Secretary of State shall by regulations make provision for the determination of “regular hours” under subsection (4).”.
“(f) extending provisions to prevent “effective exclusivity” through conferring further rights on zero hours workers.”
“(5A) For the purposes of section 5(c), the Secretary of State shall require an employer to pay compensation to workers when—
(a) the said worker is requested to work, turns up for work, and is subsequently given less than minimum level of hours worked; or
(b) the said worker is requested to work, but the work is cancelled at short notice.
(5B) The Secretary of State shall by regulations define “compensation”, “short notice” and “minimum levels” under this section.”
“(f) extending provisions to prevent “effective exclusivity” through conferring further rights on zero hours workers.”
“27C Power to make further provision in respect of transparency of zero hours workers terms and conditions
(1) The Secretary of State may by regulations make provision to require employers to provide basic information about terms and conditions to all zero hours workers within two months of their start date.”
Ian Murray: I am incredibly disappointed that the hon. Member for Warwick and Leamington did not vote for our amendment. Perhaps some of us will intervene during his Back-Bench debate later and ask him to explain why he did not.
I will give a little background to the group of amendments. Too many people across the UK face the fear of insecurity in their employment. Zero-hours contracts
Mark Garnier (Wyre Forest) (Con): I have always been curious about the much cited figure of the £1,600 reduction. This is only a technical question and I am not trying to make a political point, but does that include the tax cuts that have been made as a result of increasing the tax-free limit?
Ian Murray: It includes everything. It is about wage growth against increased inflation of prices, so it takes into account the tax system, including the massive increase in VAT, which, before the election, the Conservative party promised would not happen. People are £1,600 worse off because of that combination of Government decisions and announcements and the fact that wages have not kept up with the increase in inflation. That comes to approximately £1,600.
The hon. Gentleman may want to question the figures, but the Government should be hanging their head in shame for making people—mainly working people—in this country worse off—[ Interruption. ] The Minister, from a sedentary position, says “Oh dear.” I would like him to explain to my constituents, who are feeling worse off, that they are indeed worse off, particularly because of what the Liberal Democrats called the Tory tax bombshell.
Matthew Hancock: Does the hon. Gentleman agree with the shadow Chancellor that the great recession—otherwise known as Labour’s great recession—was a central cause of the fall in living standards? When an economy shrinks so too does the wealth of those within it.
Ian Murray: There is no doubt that the Minister is an intelligent individual who has been promoted rather quickly in the Government. However, if he thinks the great worldwide recession was Labour’s recession, I am sure the people in Japan are equally of the view that it was the UK’s recession, as are the people in America, Germany and right across the world. It was a worldwide economic recession.
The Minister has not told the Committee that, at the general election in 2010, the UK economy was growing and unemployment was falling, thanks to the previous Government’s actions. He has had four and half years to grow the economy and there has been three years of dither and delay. He has failed on all counts.
Sheila Gilmore: I am sure that my hon. Friend agrees that the Minister cannot have read the very first Office for Budget Responsibility report that came out after the election of 2010 because that showed an expectation of
Ian Murray: Absolutely. My hon. Friend makes a good point. The growth figures from the OBR, which is supposed to be an independent organisation set up by the Government, have been downgraded time after time. It has assessed the decisions by Government over a period of time and has had to reduce its forecasts on that basis. Let us not forget that the Chancellor promised to eradicate the deficit by 2015, but it is still going up. That shows that the Chancellor’s decisions are making the deficit worse. [Interruption.] That sounds very much like the ghost of deficit past going by because the deficit is continuing to rise.
Mark Garnier: While we are exchanging estimates, the hon. Gentleman will be aware that the International Monetary Fund has recently been increasing its estimates of the performance of the British economy. It has been going back and saying that it had got it completely wrong when it said that the measures brought in by the Government would lead to austerity. Things are much better than the IMF thought.
Ian Murray: I am absolutely delighted because it seems that the Government’s whole proposition to the Committee today is that everything is all right; everything is rosy in the garden. The Government deserve credit for everything that is happening. To the people who are on zero-hours contracts, unable to earn a living, get hours, pay rent, pay their mortgages, to know whether they will be able clothe and feed their children or heat their house rather than eat, that seems to be the proposition. If it is, it is completely unacceptable. The Government should support the amendments to ensure that people who are underemployed in this country are dealt with fairly and properly. It is not just a recovery for those at the top, but for everyone.
Mark Garnier: The hon. Gentleman has made two points that are worth addressing. The first was about Labour’s economic legacy leading up to the financial crisis, and the second was to do with mortgages. The bubble that was created in the lead-up to the economic crisis was created on the backs of hard-working households. Household debt went up by £1 trillion.
As an aside, the Minister for Business and Enterprise, who is not listening to the debate but will probably intervene later anyway, was an adviser to the current Chancellor who agreed with Labour’s public spending right up to 2010, and indeed called for less regulation of the banks. While we are putting the record straight, perhaps the Minister would like to get to his feet and deny that is the case.
Bill Esterson: It struck me while listening to interventions from Government Members that they mentioned subjects completely unrelated to zero hours because they want to cover up the fact that they have supported the disgraceful exploitation of the poorest people in our society by their total failure to act on zero hours. That is why the amendments are so important.
Ian Murray: Absolutely. In the spirit that we have always had in this Committee, we agree with the provisions in the Bill but do not think that the Government have gone far enough. I will skip some of the interventions and get on to the crux of the matter. This is a real opportunity to deal with the problem of underemployment in the labour market. The Government have done a reasonable job in bringing forward issues around exclusivity but, as I shall discuss shortly, that is not enough and is a missed opportunity.
Stephen Doughty: I cannot remember which part of Edinburgh my hon. Friend is from, either. Going back to the real experience of people in our constituencies, does he hear regularly, as I do, from people with their tales of zero-hours contracts, waiting for texts to come, low wages and insecurity? They are sick of hearing the Government banging on about all the wonderful jobs that have been created and that it is all right Jack. That attitude is in complete contrast to their daily lived experiences.
Ian Murray: I appreciate that intervention That goes back to what we discussed with the national minimum wage. This is about real life: the real experiences of people in the modern labour market that the Government preside over. They are not getting the hours or pay they require. Some are working two or three part-time jobs, underemployment is a real issue, the state is subsidising wages through tax credits to employers who refuse to give people proper hours. The benefits bill goes up as tax take stays flat. That is a simple equation that shows that people going back into the labour market are going into low-paid jobs when they would like higher pay and more security of employment. That is a simple equation that even the Minister could agree with. If he does not, perhaps he could justify that view.
Sheila Gilmore: In looking to strengthen the Bill, the crux of zero-hours contracts is whether people have control. If the choice to give or withhold the hours is completely in the hands of the employer, the employee is not choosing what they are doing. I think my hon. Friend would agree that there has been some confusion between those who have a real choice and those who do not.
Ian Murray: That intervention is incredibly timely. Opposition Members recognise that zero-hours contracts have their place in the UK economy as part of the patchwork of employment opportunities that are currently available, but it must be a matter of choice. Zero-hours contracts will work for some industries and people, who should be entitled to have those kinds of contracts if they choose. However, there are people at the lower end of the labour market who are forced on to zero-hours contracts and exploited by unscrupulous employers on that basis, and we should make regulations in this place to ensure that that stops. I make no apology for seeking to regulate in these areas, because we are talking about real people’s lives.
We should reflect on the words of Martin Smith from the GMB, who said when he gave evidence a few weeks ago that zero-hours contracts are about not flexible earnings but “chaotic earnings”. We should think about that. We are all paid salaries that we know will land on the same day, we know roughly how much they will be, and we are able to plan on that basis. Imagine a scenario in which, with a family, with rent or a mortgage to pay, and with other responsibilities, someone has no idea from one week to the next how much money they will be paid and whether they will have any hours to work.
We support the thrust of the Government’s position on the exclusivity of zero-hours contracts, but it seems to be a significantly wasted opportunity to go further and really deal with the problem once and for all. The issue is becoming increasingly complex as people are forced into self-employment—we have bogus self-employment and problems with the loopholes in the agency workers directive. People at the lower end of the income table and of the labour market are being hit the hardest.
Do not take it from the interventions of colleagues and my contributions in Committee that zero-hours contracts are a problem; we heard the Economic Secretary to the Treasury give evidence with the Minister a few weeks ago, and, in answer to a question about the tax take and whether the Treasury is better or worse off in trying to reduce the deficit with people in work, she said that the Treasury’s view was that “better contracts” would give more tax take. There is obviously a clear issue if even the Treasury is saying that, with regard to tax take, it wants people on “better contracts”.
Mark Garnier: The hon. Gentleman is being very naughty. He is well aware that the Economic Secretary clarified that point later. He has the transcript in front of him, so I am sure that he will be happy to read back her comment on that.
“but, equally and even more importantly, it is very keen to see more people in decently paid jobs. That has been the focus of this Government right from 2010. Of course, there will be a correlation: if we see a reduction in zero-hours contracts and people are employed on better contracts where they have regular hours, we expect we will see”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 16 October 2014; c. 123, Q282.]
Let us look at that paragraph. We can set aside the fact that the word “better” was used by the Economic Secretary and simply look at the fact that the Treasury says that if we get people on to better contracts with more regular hours and pay, there will be more tax take for the Treasury. That is the whole point of trying to deal with zero-hours contracts. I will repeat myself: unemployment has dropped, which is good, but if that has not brought more tax take into the Treasury, there is obviously a problem with people being underpaid, underemployed, and on zero-hours contracts. The Government must recognise and deal with that. Even their own Economic Secretary is saying that the tax take would be increased if people were on better contracts that were not zero-hours or underemployment.
Andy McDonald: Does my hon. Friend agree that if someone is on a contract that varies between 10 hours and 20 hours a week, or perhaps 25 hours or five hours a week, a permanent contract for 37.5 hours a week is better?
Ian Murray: It is a better contract because the person is able to earn, plan and pay tax into the system like everyone else. That is exactly what the Economic Secretary said. She was asked why the country’s tax take is flat if unemployment is dropping. The answer is because of underemployment and poor pay. The hon. Member for Wyre Forest is correct that she clarified her remarks later, but she talked about the therapists on zero-hours contracts who worked for private clients, whom she knew when she was involved with a charity. We have never denied that people should be able to choose to be on a zero-hours contract—in some instances, it is essentially freelancing—but we must deal with the people who are forced to be on zero-hours contracts because they have no other opportunities.
The Economic Secretary talked about better contracts. The hon. Member for Wyre Forest said that she clarified her use of the word “better”, but she used it in that context. However, she was clear that this issue is about the overall tax take to the Treasury, which she admitted is harmed by the contracts that people are on.
Ian Murray: I see that the hon. Gentleman has the transcript in front of him. No doubt, he is going to selectively quote something. In the interests of fairness, I am happy to give way to the hon. Gentleman, who is frantically reading that piece of paper, so he can tell us what the Economic Secretary actually said.
“Yes, I absolutely agree. My point is more that the Treasury’s interest is to see more people in work, on any form of hours”.––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 16 October 2014; c. 131, Q312.]
That absolutely clarifies the point about the tax take. The tax take is irrelevant because, whether people are on fixed-hours or zero-hours contracts, the same number of hours are worked. The Opposition seem to be struggling with that simple economic point.
Ian Murray: I appreciate the opportunity to respond to that intervention. The hon. Gentleman is trying to clarify the issue, but I think he is fundamentally wrong. I give him two out of 10 for trying. I have the transcript in front of me, and he is right that he said:
That is not true, is it? If 100 people work a certain number of hours and are below the tax allowance and 20 people are on 35-hour contracts, the tax take will not be the same. The 100 people do not pay tax until they reach the tax allowance threshold, but those who are on the 35-hour contracts do. Therefore, the hon. Gentleman’s point is not correct. If the tax take to the Treasury is the same, we should deal with people on zero-hours contracts because one person’s gain should not be somebody else’s loss. We should make it fair for everybody. I hope the hon. Gentleman will reflect on the fact that the tax take is certainly not the same.
Some companies use the tax credit system, in terms of the number of contracted hours they give employees, to maximise the tax credit system. The tax system is actually subsidising employers to pay poverty wages to their employees, who are the most important part of the business. At the same time, there have been significant cuts to corporation tax. We must put mechanisms in place to ensure employees are paid proper wages. I hope I have clarified that issue.
Amendment 237 would enable the Government to introduce regulations to allow employment tribunals to enforce the provisions on zero-hours contracts. Let me tell the Committee why we tabled the amendment. I have the transcript of our debate during which I questioned the Minister for Business and Enterprise on this issue. He did not seem to know what the consequences will be for people who are on exclusive zero-hours contracts. Although we agree that exclusivity is part of the problem, it is only a small part of the jigsaw of the problems that arise from zero-hours contracts. The Minister for Business and Enterprise singularly failed to understand that if somebody who is on an exclusive zero-hours contract has no way of enforcing their rights against their employer, there is no point in the regulation. It is like saying murder is illegal, but if a person murders somebody there is no way of taking action against them. It is like saying, “Just don’t do it because it would be bad.”
When I asked about enforcing the rights against exclusive zero-hours contracts, the Minister for Business and Enterprise said that they would be enforced through
“In the same way that you enforce against any loss of job if it is not done properly.”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 16 October 2014; c. 124, Q287.]
“Employment law applies in order to ensure that if people lose their job in an inappropriate way, there is redress against that.”––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 16 October 2014; c. 125, Q288.]
How can there be redress? If an employer says to a potential employee, “Here is your contract of employment”, and it is a zero-hours contract including an exclusivity clause, the potential employee says, “Hold on a second, exclusivity contracts are illegal.” The employer can say, “What are you going to do about it?”, or, “Take it or leave it.” In essence, we end up having exclusivity by the back door. That is an extreme example, but people are frightened of exercising their rights with an employer, and even if they decide to exercise their rights, how can they do so in the circumstances, because there is no ability to have redress with the zero-hours contracts?
I hope the Minister will resolve some of the issues. That is what our amendment is about. We are asking the Secretary of State to come back with regulations to allow us to see how things will be enforced. They might state the length of the qualifying period, which is two years at the moment, so someone would have to be on an illegal exclusive zero-hours contract for more than two years. Will the early conciliation process at ACAS be included, which is a legal requirement now? Will any fee be payable to enter an employment tribunal to enforce those rights? Will an imposition of penalties on the employer be among the remedies available? At the moment, the legislation does not include any of those matters. Sarah Veale of the TUC said:
“It is actually quite extraordinary to have a breach of employment rights proposed in a Bill without any kind of penalty”.––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 14 October 2014; c. 71, Q162.]
Let me move on to the right to fixed hours. Amendment 242 is a probing amendment about when a person who is employed on a zero-hours contract has in effect worked those fixed hours regularly for a period of time and should therefore be entitled to request a contract that defaults to those hours. The Opposition is clear that employees should have a right to demand a regular contract if they are in practice working regular hours for a certain period of time.
There is indeed a case to be made for people having an automatic right to a fixed-hours contract after a certain period. It is unacceptable that people can be on zero-hours contracts for years and years on 35 to 40 hours a week, but not even be offered a full-time contract if they are doing the regular hours. In response to the
Peter Cheese of the Chartered Institute of Personnel and Development came to speak to us during our evidence sessions. Research from the institute has shown that 83% of staff on zero-hours contracts have been engaged for longer than six months and 65% have been engaged for two years or more. Another witness commented:
“We have a situation, then, in which 65% of staff on zero-hours contracts have been there for two years or more. That is not short-term need”.––[Official Report, Small Business, Enterprise and Employment Public Bill Committee, 14 October 2014; c. 27, Q54.]
The whole point of zero-hours contracts was to deal with short-term need and fluctuations in seasonal employment or because of emergencies. We appreciate that there are situations in which employers require workers on a zero- hours basis. However, under amendment 242, employers would be able to refuse a request only if they were able to demonstrate that their business needs would not be met by any other form of contract. As I said, seasonal work would be an example.
Amendment 243 is fairly minor, but would none the less make a crucial change. The Secretary of State would have to bring forward regulations to make provisions
Amendment 244 is on compensation. The shadow Business Secretary, my hon. Friend the Member for Streatham (Mr Umunna), said on Second Reading that we should ensure that those on zero-hours contracts have the right to compensation if shifts are cancelled at short notice. That is the right thing to do. People may have arranged child care, travelled, or altered other plans, only to be told at short notice that they are not needed that day. There should be some compensation for that.