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Baroness O'Cathain: I listened to the persuasive arguments on both sides, especially with regard to Amendment No. 116. If the Secretary of State will consult, why does not the Minister consider it wise to put it on the face of the Bill? The Minister described a hypothetical situation. He said that it would be crazy to consult the employers because they would be the people avoiding the payment of the minimum wage. The amendment does not refer to the employers. The amendment provides:

I agree with the Minister that if someone is openly flaunting the application of this law, one would want a process whereby one could stop that immediately and not consult. That is not what is stated in the amendment.

We hope that when the Bill becomes an Act it will last for a number of years. Events move on and none of us can forecast the different situations which will pertain in six months' or six years' time. In order to keep abreast of events and the changing pattern of process in industry and business, it would help the Secretary of State to have the power of consultation written on the face of the Bill.

I am ignorant as to whether the Low Pay Commission has an ongoing role which would enable the Secretary of State to consult with the commission in three or four years' time. I suspect that it has not. If it had such a role, that might be an answer. I believe that there is a risk--it may not be huge--and that in some situations it might be better if the Secretary of State were involved in the consultation process. I hope that I have made the point clearly. I would not go to the stake on it, but I believe that there is merit in putting the provision on the face of the Bill.

Lord Clinton-Davis: There is a misunderstanding about the way in which we have consulted through the Low Pay Commission. As I said when we were last in Committee, the Low Pay Commission is not drawn from representatives of industry and small business. It ensures that people of sufficient expertise in the various fields

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to be covered can join together in offering expertise to the work of the commission. That is very different. So the amendment is fatally flawed.

The significance of what the noble Baroness says is recognised by the Government. We say that we have already consulted widely. In the overwhelming majority of cases we would do so. But I have drawn attention to an urgent situation where the Government have to take immediate action and would not have the opportunity to consult with the Low Pay Commission, or anyone else.

I made a Statement in the House on the national minimum wage recently. I was bombarded with a large number of questions from the noble Baroness, Lady Miller, which I did not have time to answer. But we said then that the Government will be using the Low Pay Commission in order to engage in the development of proposals for, and to take forward work on, monitoring and evaluating the introduction of the national minimum wage over the next year. Clause 6 of the Bill enables the Secretary of State to refer matters to the Low Pay Commission at any future time.

Baroness O'Cathain: I thank the Minister for giving way. I am not worried about the first year. I am worried about years three, four, five, six and onwards. I believe that there will be an automatic reaction: everyone will want to behave perfectly properly under the terms of the Act. I am worried about the situation beyond the euphoria which will attach to the first 12 months' operation of the Act.

Lord Clinton-Davis: I am delighted to hear that there will be a state of euphoria after we have enacted the Bill. That is in marked contrast to the position adopted by the noble Baroness, Lady Miller. I am euphoric now even thinking about it!

The principle applies equally to a situation now or three or five years ahead. It would be unnecessarily inflexible and too rigid for the Government to tie themselves in all circumstances to the consultation that the noble Baroness wants as a matter of legislative requirement.

5.15 p.m.

Baroness Miller of Hendon: I thank the Minister for what he said. He may not be surprised to hear that I am disappointed. The point I sought to make was that Clause 41 provides the power to apply the Act to individuals who are not otherwise "workers". Clause 41(a) refers to "any individual". We sought in the amendment to ensure that the genuinely self-employed worker would not fall into that category. Amendment No. 117 deals with exactly the same point. I was not asking the Minister for a long, detailed explanation. The Secretary of State is taking sweeping powers upon herself in extending the definition of "worker". I referred to the allegorical riddle: why is a self-employed person like an elephant? The Minister was not then present. The answer is that we know what we are talking about, but it is difficult to recognise.

In discussing Clause 2(4), I sought to make the point that I have put again in Amendment No. 117 on the different regimes for income tax. The Minister

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commented on the numerous questions I asked when he made a Statement. I accept that this is a convenient time to mention it. I accept that the Minister could not answer all those questions. However, I hope that he and his officials will ensure that I receive written replies.

The Minister asks me not to press the amendment. I did something which I understand politicians do not do--perhaps I am not a politician. I made clear to the noble Lord, Lord Haskel, that we had no intention of dividing on any of the amendments. First, I understand from the Labour Chief Whip that there is the tug-of-war this evening; and, secondly, many noble Lords will wish to watch England play Romania. Therefore because I am a reasonable Opposition spokesman, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 117 not moved.]

Clause 41 agreed to.

Clauses 42 to 44 agreed to.

Baroness Miller of Hendon moved Amendment No. 118:

After Clause 44, insert the following new clause--

Family businesses

(" . A person who is employed by his spouse, parent or child, or by a private limited company of which his spouse, parent or child is a substantial (but not necessarily a controlling) shareholder, does not qualify for the national minimum wage in respect of that employment.").

The noble Baroness said: Although Amendment No. 118 is not grouped with Amendment No. 119, I indicated to the noble Lord, Lord Haskel, that I would speak to the amendments together.

Clause 44 recognises the need to exempt voluntary workers and hence the organisations for which they work from the requirements of the national minimum wage. That is entirely right and proper. I declare an interest as chairman of the National Association of Leagues of Hospital Friends, an organisation which would collapse if we were required to pay our volunteers for the invaluable service that they freely give. However, there are two other categories of employees whom it is essential to exempt from the operation of the Bill. The first, referred to in Amendment No. 118, is spouses, parents and children of the owners of a business.

I used the word "owners" because some small businesses, even the corner grocery shop or newsagent, may be incorporated as a limited company. A limited company was once described as having no soul to damn and no body to kick. Neither does it have a spouse, parent or child. We are talking about the family business where sometimes, or frequently, the spouse, child or parent of the owner comes in to help at a particularly busy period, at a time of staff shortage, or even as a regular means of keeping overheads down and avoiding the need for extra paid staff. The family concerned derives its living from the business, so whether a wage is paid to the spouse, parent or child is the concern of

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the family and no one else. The Government have no business involving themselves in people's ordinary domestic affairs.

Are the Government really saying that if a shopkeeper's spouse comes in to help out on a Saturday afternoon or during the Christmas period some wretched greengrocer will be liable to be served with an enforcement notice under Clause 19, sued by an official under Clause 20, suffer a penalty notice under Clause 21 and, last by no means least, be prosecuted under the criminal law and be fined at the maximum rate normally reserved for the most heinous offences under Clause 31?

During the passage of the Bill, I was approached by a smallholder who told me that he had a farm shop on his land. His 70 year-old mother ran it purely to give herself something to do. She wanted no wages from her son. He said that if he were forced to pay her he would have to close his shop, damaging his business, and his mother would have to stay at home all day. Rendering a parent liable for not paying a child the minimum wage when the child is assisting in the family business would be as ludicrous as complaining that the child was not being paid for mowing the lawn or washing the car.

Lord Clinton-Davis: Does not the noble Baroness realise that that would not apply because children of the age she is contemplating are not within the provisions of the Bill?

Baroness Miller of Hendon: I thank the noble Lord for his interruption, but I do not accept what he says. There are plenty of teenagers of 18 or 19 who help their parents in a local shop on a Saturday and who would be covered by the Bill. I use the word "child" in the relationship of parent and child. I am well aware of the age because I have studied the Bill thoroughly, as I am sure the Minister knows.

We cannot rely on the possibility that the officials who are to enforce the provisions of the Bill will do so with discretion and in a reasonable manner. I regret to say that experience shows us that that is not something we can rely on. The over-enthusiastic enforcement of EC directives is a case in point. In any event, why should we have to depend on the good will of some official or risk inconsistent treatment in different parts of the country? The amendment is a common sense provision which neither damages the Bill nor the general principle of a national minimum wage.

I turn to Amendment No. 119 in respect of which I believe exactly the same principles apply. The vast majority of limited companies are family owned. Even when the directors are unrelated they are, in essence, business partners trading under what is called "the corporate veil." Such companies are often described as quasi partnerships and the directors of most companies of that kind are usually the only or the main shareholder. Once again, it is not for the Government to interfere in private arrangements freely entered into by directors and shareholders who enjoy equal bargaining power.

In connection with Amendment No. 2, the Minister claimed--indeed, he insisted--that a partnership was the same as an individual employer and not X number

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of separate employers, a topic to which I shall return in a later amendment to Clause 54. Before we get into another legal argument, perhaps I may draw his attention to the recent case of the Secretary of State for Trade and Industry v. Bottrill. That case involved the Minister's own department, so I am sure that he is perfectly familiar with it. The ruling was that a person who was the managing director and the holder of the sole issue share in a company was nevertheless an employee.

Perhaps I may give the Committee two examples from my own experience of the anomalies which can arise unless directors are exempt. I began my own business early in 1972 with a partner. In order to help it through its first two shaky years, we drew no salary until 1974. I was fortunate in having other sources of income, but my partner, my co-director, did not. He survived by using other assets and bank and other loans. It would have been wrong to force us to increase the company's overdraft or imperil our ability to meet our bills immediately they fell due by making us take an unwanted salary, however small--or, in our case, considering the number of hours we worked, quite substantial--and having to pay tax and national insurance on unwanted income, too.

In giving my second example, I must again declare an interest in some small family investment companies of which I am a director. We do not pay directors' salaries simply because we prefer to pay all surplus income as dividends to our shareholders who are our family members. Once again, the purpose of the amendment is to avoid an anomalous situation where the state would be interfering in private internal arrangements which are none of its concern. In both cases, why should the Government exclude members of the Armed Forces and prisoners from the operation of the Bill simply because the Treasury would have to foot the bill and not exclude the owners of private businesses in relation to what they pay themselves and their immediate family out of their own pockets? I do not suggest that either of the two omissions--family members and directors--from the exclusions contained in Clauses 43, 44 and 45 is caused by any desire to over-regulate or to indulge in "nannyism". I believe that there are incongruities caused by a drafting oversight arising from the Government's desire to achieve universality. I trust that the Government will accept that there is no breach of the principles of the national minimum wage which they are pursuing by the legislation if they accede to the moderate exclusions we are seeking. I beg to move.

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