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Baroness Byford: Before the Minister sits down, I should like to follow up the point made by my noble friend Lady Miller in relation to where there is, for example, a management buy-out. The Minister did not respond to that point and I seek guidance. Am I wrong that, if a group of workers decide that they wish to keep their project or business going, there is in those circumstances no way in which they can forgo their wage to keep the business going? I am uncertain as to the position and should be grateful if the Minister could elucidate a little further.

Lord Clinton-Davis: The noble Baroness raises an interesting point; but there would not be an exception in that event. However, one has to examine the totality of the circumstances affecting the company. One cannot just say that the company has gone down the drain because of a particular situation which would be affected by the national minimum wage. I do not see that I can isolate that particular circumstance--which is hypothetical anyway--and say that that is the whole cause to which the company's failure is attributable. One would have to look carefully at the situation. I do not accept the conclusion reached by the noble Baroness.

Baroness Byford: I thank the Minister for that reply; but there have been such circumstances in the past, and I suspect that there will be in the future. If this attitude is taken to its fullest extent, those who are temporarily employed at that stage will cease to be employed. They will be worse off because they are not even given the opportunity for a short period of time--as has happened in the past--to decide to forgo their wages or take lower wages to keep the company buoyant and afloat so that it can continue in business. The Minister has just told me that is precluded in the Bill, and I am anxious about that.

Lord Clinton-Davis: If one is considering a buy-out, one has to look at all the circumstances. It is not possible for me to respond to the noble Baroness on the spur of the moment. I will write to her about it. We can always return to the matter at a later stage.

Baroness Byford: I thank the Minister for that. This is an important point. I shall certainly not press him tonight but, if he could come back to me on it, I should be very grateful.

Baroness Miller of Hendon: I am grateful to my noble friend for reiterating what I said in moving my amendment. I do not think the Minister took note of it. The point I was making, and which was repeated by my noble friend, was that Meridian Motor Cycles became insolvent. With the encouragement of a former Labour Government, and a great deal of public money, it was taken over by an ill-fated workers' co-operative. I have no idea what kinds of salaries they were paid or

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what kinds of salaries they drew. The point I was making was that in such cases the employees volunteer to forgo some of their wages in a bid to save their jobs. As the Bill is presently drafted, that could not happen.

All I am saying is that I was disappointed with the Minister's answer, but I hope that he will look at this again, because we are talking about events that happen from time to time and it would be foolish if a business were not able to survive simply because of that situation. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 [The first regulations: referral to the Low Pay Commission]:

[Amendments Nos. 49 to 60 not moved.]

Clause 5 agreed to.

Clause 6 [Referral of matters to the Low Pay Commission at any time]:

11 p.m.

Baroness Miller of Hendon moved Amendment No. 61:

After Clause 4, page 4, line 45, at end insert--
(" ( ) The Secretary of State shall also, without prejudice to his other powers under this section, refer to the Low Pay Commission any proposal which would result in any increase in the actual hourly rate, whether by the application of some formula or in percentage terms or by a general amount; and the provisions of section 5 shall apply to any subsequent recommendation of the Low Pay Commission.").

The noble Baroness said: Clause 6 enables the Secretary of State to refer any matters relating to the Bill to the Low Pay Commission at any time. It is, as with so many other provisions of this Bill, entirely permissive. As the DTI's explanatory note says, it is up to the Secretary of State to decide whether, and if so when, to consult the Low Pay Commission. Again, the Secretary of State is not obliged to follow any of the recommendations of the Low Pay Commission, though she is obliged to explain to Parliament her reasons for not doing so. What would happen if Parliament disagreed with her reasons is not clear. But we would be grateful if the Minister could perhaps tell us.

In other words, these provisions are largely cosmetic. The Secretary of State can refer matters to the low pay unit if she wants to, but if it does not sanctify whatever course she favours, she can ignore it. On the other hand, she can act unilaterally if she wants to. There is no regulation or criterion as to which of the two courses she should adopt. She does not have to act consistently from one case to another and does not have to explain why she preferred one course to another.

It is unclear what the Low Pay Commission will actually do after its first burst of activity in recommending what is called in Clause 5(1) "the first regulation". After that, it is presumably to go into hibernation until the Secretary of State, like the prince in "Sleeping Beauty", rouses it from its slumber and asks it to give her some advice on something or other, which she can ignore or override if she does not like the

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advice. After that--mixing up the fairy tales--it will be sent back to sleep again, just like the dormouse at the Mad Hatter's tea party.

According to the financial statement, the Low Pay Commission will cost between £500,000 and £1 million a year to run. But to do what? Absolutely nothing, if that is what the Secretary of State so decides. It may become involved in some pointless exercise if the Secretary of State decides to ignore its findings and advice. It will have to produce an annual report and accounts, but that report might conceivably say, "We have not done anything this year". It does not have to study and report on the economic effects of its own activities and of the Secretary of State's independent actions. It does not have the power to recommend that the Secretary of State should consult it on anything connected with the Bill, whether on the current rate or the desirability of altering it, creating modifications or exemptions where they are required. No. The Secretary of State will command it to sit like a well-trained dog, and sit it will, until instructed to the contrary.

There is one important task however that it can and should be given, and that task is the subject of this amendment. It requires the Secretary of State to refer to the Low Pay Commission any proposal which will have the effect of increasing the national minimum wage. There are two important--indeed vital--reasons why that should be done, and not merely at the discretion of the Secretary of State. She still retains the discretion given to her under Clause 5(4)(d) of the Bill as to whether to follow any new recommendation.

The first of the two reasons is economic. There may be cogent reasons why there should be no increase in wages at a given time, reasons why pay restraint should be exercised. We have all seen it happen in the past, and doubtless circumstances will require it again in the future.

What has to be avoided is some automatic increase for one group of workers inserted into what is called "the annual pay round". Apart from the inflationary effect that that will have and the consequences to our international competitiveness, it will also have a disastrous effect on the pay claims of workers earning well above the national minimum wage, and that is because of the resulting demands to restore differentials.

In the debate in your Lordships' House on 23rd March, the noble Lord, Lord Clinton-Davis, said.

    "I fully expect that we shall encounter the ogre of the 'restoration of pay differentials'".

He went on to cite a study by Income Data Services which claimed that,

    "Arguments about the ... effect of minimum wages and the restoration of differentials had been highly partial and prone to exaggeration".--[Official Report, 23/3/98; cols. 1031-2.]

I do not know how and where this think-tank conducted its research. Perhaps it should have consulted the noble Lord, Lord Healey, who said in 1994, "Don't kid yourselves": the minimum wage is something on which unions will build differentials. Therefore, the minimum wage becomes the floor on which one erects

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a new tower, but then, of course, he is only a former Chancellor of the Exchequer, so what would he know about inflationary cycles?

Has this think-tank, on whose over-optimistic predictions the Government are relying to justify their head-in-the sands forecasts, ever heard of the Amalgamated Engineering and Electrical Union, one of the largest, most powerful and influential trade unions? Perhaps not, because they would then have read its policy paper on the national minimum wage which states,

    "The AEEU will seek to restore differentials in wage settlements. While the AEEU agrees with the long-term aim of increasing the earnings of the lowest paid, it should not be at the expense of those slightly better off. The AEEU will seek to restore differentials".

I do not believe that the noble Lord, Lord Healey, and the AEEU deserve the dismissive description by Income Data Services, quoted by the Minister, of being,

    "highly partial and prone to exaggeration".

I have tried very hard this evening not to be political. The second reason that I mention as regards this amendment is entirely political. If there is an unfettered discretion to increase the national minimum wage without even going through the motions of seeking the advice of the Low Pay Commission, there will be the temptation arbitrarily to increase it at the time of a general election or an important by-election. After all, the incumbent of the office of Chancellor of the Exchequer of either party is frequently accused of having give-away budgets for electoral purposes. I cannot believe that the Secretary of State will not be subject to similar political pressure by the strategists in her party and by the unions which influence its policies.

Needless to say, I readily assume that the Secretary of State, whether the present one or any future incumbent, will be able to resist such crude pressures. However, elsewhere in the Bill on the question of exemptions the Secretary of State has strenuously tried to avoid any discretion. To be consistent, she should simply eschew any discretion as to whether it is time to consider a reversion to a national minimum wage only--the Committee will note, only to consider whether it is time--still without being bound to follow the commission's advice in whole or in part. Involving the Low Pay Commission will at least partially absolve the Secretary of State from having a political agenda.

Before the Secretary of State presses the button to start an inflationary wages spiral, perhaps she ought to commit herself to obtaining independent advice and to come to Parliament to explain her reasons if she declines to take it. As I have already pointed out, the Low Pay Commission will cost up to £1 million a year to run. That is about £19,000 a week or £4,000 a working day. For a party that used to complain about quangos, surely it is not about to create one in this Bill, which is also nothing but a sinecure for its members and staff.

Once again, this amendment does not affect the principles of the Bill. It merely adds a necessary safeguard in the manner of its operation. I beg to move.

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