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Lord Burnham: My Lords, I thank the noble and learned Lord for giving way. If he thinks that there is no such evidence that there will be a demand to maintain differentials, he should talk to his noble friend Lady Dean of Thornton-le-Fylde with regard to the printing unions in her time as general-secretary of SOGAT.

Lord Falconer of Thoroton: My Lords, I can tell the noble Lord one thing: the printing unions were not having their wages raised by any effect of the minimum wage. The question we are addressing here is what effect the minimum wage will have on differentials. Not one jot of evidence has been produced to suggest that it would have the sort of significant effect that noble Lords are suggesting. People are more concerned with their own pay and with the pay of those with whom they are accustomed to compare themselves than they are with what people elsewhere in the pay range may or may not be getting.

The next basis of attack on our proposals relates to the level at which the minimum wage will be set and to the question, "Why does the Bill not state what the level of the minimum wage will be?" Again, I submit that my noble friend Lord McCarthy dealt with that extremely effectively. We are putting in place a mechanism for the fixing of a minimum wage. That minimum wage will not last for ever. A time will come when it will have to be changed. If one followed the proposals made by noble Lords opposite one would have a huge amount of consultation. One would then decide on the minimum wage and introduce primary legislation. By the time that had reached the statute book the minimum wage decided upon would probably be out of date. Surely, the most sensible way to deal with it is to establish a mechanism for a minimum wage to be fixed after proper consultation.

Next, noble Lords ask why we do not know what the low pay commission has said about the issue. The reason is that that body is considering the matter at the moment. We believe that the two-track approach we have adopted--establishment of the mechanism by which the minimum wage can be fixed and, at the same time, consultation with the low pay commission--means that the matter can be dealt with as expeditiously as possible. But that occurs only after consideration has been given to all the issues by an independent body such as the low pay commission made up of representatives of the employers' side, the employees' side and small businesses.

It was also said that, surely, there should be an exemption for small firms. We appear to have given the impression that low pay is endemic in the small business

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community. It is not. Not all small firms by any means are low payers. Who, then, would benefit from a small firms exemption? The answer is that the beneficiaries in the main would be the more disreputable employers--those who competed solely on poverty pay rather than quality and service and those who forced reputable businesses to pay low wages so that they could continue to compete. In popular terminology, they are the cowboys.

Many small firms are on their way to becoming big firms while others, quite rightly, are content to remain modest in size. The Government recognise that small and growing firms are the bedrock of a successful enterprise economy. We appreciate that to run a small firm takes dedication, hard work, drive and imagination. We are taking steps to nurture this area of the economy with a number of policies that are particularly helpful to this sector. In his Budget speech last week the Chancellor announced a wide range of measures to help small firms. However, we shall not exempt small firms from paying the minimum wage. As my noble friend said earlier, employees of small firms are as entitled to receive protection from low pay as those who work for larger companies. This has been increasingly recognised by small firms themselves. I believe that the majority of them would be affronted if they were left out of the minimum wage legislation to form some kind of low-paying ghetto where morale and esteem would be as low as the pay rates.

Nevertheless, recognising as we do the importance of small firms to the economy and the special circumstances within which they operate, we have asked the low pay commission to take full account of the impact of the national minimum wage on small firms when formulating its recommendations. We do not believe that administrative and enforcement arrangements arising out of the legislation should be unduly burdensome for smaller businesses.

The noble Baroness, Lady Seccombe, gave the example of the small country shop. She did not tell us the rates of pay. The effect on the small country shop in relation to the minimum wage will depend on the level at which it is set but, as I have made clear, the low pay commission is to consider the effect on small businesses along with all other businesses when fixing the advice it gives on the level of the minimum wage.

The noble Viscount, Lord Oxfuird, asked about competitiveness. Perhaps I misquote him. I believe he said that the only person who mattered was the customer. That is not the view of noble Lords on this side of the House. We believe that the customer is not the only person who matters. There is an obligation to treat employees with fairness and decency. We also believe that if they are so treated it is likely that the business will be run better and that the customer will thereby benefit. Just to take the narrow view that everything must be sacrificed to the customer is short-term and unfair.

The Viscount of Oxfuird: My Lords, I thank the noble and learned Lord for giving way. He may be aware of total quality management and the programme under ISO 9000 which places the customer first, and

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obviously also accommodates the argument that he put forward. They can live together, but it is the customer first.

Lord Falconer of Thoroton: My Lords, I was just responding to the noble Viscount's remarks to the effect that it was only the customer who mattered. That is not the view that we take. What the noble Viscount just said amends and dilutes what he said earlier. We do not believe that so far as concerns competitiveness it is a legitimate argument against the minimum wage Bill. On competition with third world economies, most people who are being paid below minimum levels at the moment are not in businesses that are competing, as my noble friend Lord Clinton-Davis said, with manufacturing industries in Bangladesh or such places; they are businesses employing cleaners at Manchester airport at £1.30 an hour. They are not competing with any third world economy paying low rates.

In any event we believe that the way companies should compete is not on the basis of poverty pay; it is on the basis of quality of service or the quality of goods they produce. We further believe that it is beneficial to the economy as a whole that companies should be prevented from competing on such an unfair basis.

Those were the main arguments advanced against the principle of the minimum wage as a whole. As a matter of decency and fairness and as a matter of logic those arguments do not hold water. It is not without significance that the arguments in favour of the minimum wage were never addressed by those on the other side of the House.

I shall refer now to the speeches made on behalf of the Liberal Democrats by the noble Lords, Lord Razzall and Lord Newby. We are grateful for the support that they have given in principle to the Bill. We believe that they are right to give it their support. We may differ on a number of details, but we do differ on one major issue; namely, regional variation in relation to the minimum wage. They favour a regional variation in relation to a minimum wage. We do not.

Lord Razzall: My Lords, the noble and learned Lord attributes to us a view that we do not have. We favour the low pay commission being given the power to examine whether there should be regional variations. We would not be so presumptive as to say that we have decided that there should be regional variations but that the low pay commission should be given that power.

Lord Falconer of Thoroton: My Lords, fair enough. The Government believe that there should not be regional variations. The arguments against regional variations are strong. We said in our manifesto--we believe it right, not just because we said it in our manifesto, but as a matter of principle--that there should be a simple, easily understood minimum wage.

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If there is one minimum wage for the whole country, save for the possibility of those who are 26 or under, that would lead to a much easier, unbureaucratic and well-understood system of minimum wage. If one has regional variations one has the problem of identifying what are the regions; what happens if one works in two places; what happens if one lives in one place and works in another. Low pay is low pay wherever one lives. The purpose of the Bill is to eliminate it.

Moreover, to adopt a regional basis is not to deal with the problem that in many regions there are pockets of low pay and pockets of high pay. What happens if we have lots and lots of regional variations? Do we have six regions, 10 regions or 20 regions? Will they be uprated altogether or separately?

How will you deal with that position? We do not want to create low pay ghettos. Low rates of pay in some areas would act contrary to the Government's aim, which is to encourage firms to compete in terms of the quality of the goods and services they provide and not to focus on low prices based on rock bottom rates of pay. We believe that if you have a regional system of variation you will eventually "ghettoise" and institutionalise low pay in certain regions of the country. We therefore believe that a regional variation scheme will not achieve the overall goals of the Bill, and we reject it.

A number of your Lordships asked why we had adopted 26 as the possible exemption age for young people. The low pay commission is considering whether there should be exemptions or lower rates for people under 26 and we do not know what advice it will give. We took that figure because people under the age of 26 are defined as young people for the purposes of student support, social security payments such as income related benefits and the jobseeker's allowance and the new deal. In practice, that means that some people could join the new deal on the day before they reach the age of 26 and therefore would be working under the new deal at the age of 25. Therefore, a cut off point of under 26 has been chosen.

A number of noble Lords asked what would happen if just before one reached the age of 26 the lower rate were adopted. Would one then be fired by the employer? We sought to provide protection in relation to that by making it a ground of unfair dismissal if someone is dismissed because he is about to receive the benefit of the minimum wage or go into a higher bracket in relation to it.

I have dealt with all the major points raised in the debate. The Bill is delivering on a major manifesto promise. It is part of the Government's policy to make work pay. We have been waiting for the Bill for a considerable length of time and it is long overdue. I commend it to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

        House adjourned at twenty-three minutes past eleven o'clock.

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