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Lord Monson: I did not take part in the Second Reading debate on the Bill because another, more compelling, matter intervened, notably the titanic struggle between Ivanisevic and Rafter!

In rising to give my broad support to this group of amendments, I make a general observation on the Bill. I value enormously my London Transport pass. It is extremely helpful to me and in a small way it is helpful to the bus operating companies in so far as the driver of a one man operated bus spends much less time at bus stops if he or she merely has to glance at a pass rather than accepting coins and notes and dispensing change. Nevertheless, I cannot help feeling a trifle uneasy that I, and everyone in my position--like many in this Chamber--are being subsidised by those under the age of 65, and shortly by the rather smaller group of people under 60.

That blanket approach might have made good sense 50 or 60 years ago when the overwhelming majority of men and women over 60 were, indeed, much poorer than the population as a whole. But is that so today when although there are, of course, unfortunately, large numbers of poor elderly people, there are also a great many extremely wealthy ones, largely, although not entirely, due to the rise in house prices well in excess of inflation? I suspect that 90 to 95 per cent of the passengers on a round-the-world cruise where the cabins cost £25,000 or so will be over 60. So I wonder whether perhaps a little more targeting may have been justified in this case. Having made those points, I shall sit down.

Lord Falconer of Thoroton: These amendments concern the funding issues in relation to the concession. We accept that the funding for delivering the increased concession--which means extending it to men between the ages of 60 and 65, which is not the present position--will cost money. That money will come from central government. A process will need to be developed whereby, properly, the amounts of that extra cost can be assessed between central government and local government. I made it clear at Second Reading--I make it clear again--that that is the objective that central government and local government must work towards in trying to reach a solution in relation to the funding. It will be done through the revenue support grant. It would not be appropriate for there to be separate compensation schemes.

My relationship with local government has become more intense since 7th June, when I became the Minister for housing, planning, urban renewal and urban regeneration. That relationship indicates that local government is averse to specific pots of money

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being put in--and I am very happy to see many Members who serve in local government and to hear a loud noise of approval in relation to that--whereas some of these amendments appear to flirt with "compensation schemes", which is another way of saying some kind of ring fencing.

Let me now deal with the individual amendments against that background. Amendment No. 3 requires the Secretary of State or the National Assembly for Wales to consult with the local authority associations before bringing the Act into force. I can reassure the movers of that amendment that my department and, in Wales, officials of the National Assembly will of course be in touch with the local authority associations about commencement and implementation through the normal course of business. Furthermore, as I shall explain in a moment, the local authority associations are a vital part of the discussions which surround the local government finance settlement. In the light of the assurance that I have given, I suggest that that amendment is not necessary.

The effect of Amendment No. 4 would be to hold the Government to ransom, preventing the Act being brought into force in London until agreements are made with the local authority associations regarding the level of funding. This could potentially delay the benefits of this legislation being enjoyed by men aged 60 to 65 living in the London area. I do not know whether or not that was the intention of the noble Baroness in moving the amendment, but that is its effect. I respectfully ask the noble Baroness to reconsider that amendment and not to move it.

So far as concerns Amendment No. 5, a compensation scheme is not necessary. I do not think that the noble Baroness is really suggesting that local authorities should receive funding for the extended eligibility through their revenue support grant allocation in the usual way, and also receive compensation. I assume that she is suggesting them as alternatives in that respect.

I suggest that Amendments Nos. 4 and 5 are not needed. I can assure the Committee, as has been mentioned by the noble Baroness, Lady Scott, that we are committed to the "new burdens" principle. This requires us to reimburse local authorities for the extra costs they face. We shall be working with the local authority associations as we finalise our estimates of the financial implications for councils.

The noble Baroness, Lady Hanham, again made the point that she made at Second Reading that it is a 100 per cent concession, what are we going to do about it? The Association of London Government is very much involved in the usual revenue support grant allocation discussions with my department and in discussions on the Spending Review--as are all local authority associations--and it will no doubt be making many of the points made by the noble Baroness in the course of those discussions. But there is absolutely no harm in paving the way by making the points now. Any extra provision needed for men aged 60 to 65 will be included in the annual local government settlement. That seems to be at the very heart of the issue.

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Let me reassure the Committee that the local authority associations will be consulted on our proposals for the local government settlement and that we will listen carefully to the points that they make, alongside all other representations, before taking final decisions.

The noble Baroness, Lady Scott, raised the question of monitoring, to which my noble friend Lord Whitty referred. I believe that that was in the context of saying that it is quite difficult to work out how many more people will be using the concession, because working men between 60 and 65 may use it more than men who are retired. There needs to be detailed discussion about how its use can be monitored. The bus companies will want to monitor it as much as everyone else, and that should form part of the discussions that take place between central and local government.

I hope that in the light of the reassurances that I have given, the noble Baroness will feel able to withdraw her amendment and that it will not be found necessary to move the other two amendments.

Baroness Scott of Needham Market: I thank the Minister for his reassuring words. With the single caveat that I hope the Minister's understanding of "consultation" is the same as mine--in other words, that it will mean a proper dialogue with local government--I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hanham had given notice of her intention to move Amendment No. 4:

    Page 2, line 10, at end insert ", and

(c) not be made until there is agreement with the relevant local government associations concerning the funding provision for the scheme in the annual Revenue Support Grant negotiations."

The noble Baroness said: The Minister has conjured up the delicious possibility of my being able to hold the Government to ransom. What could be a better parting of the ways for the Summer Recess than holding a pistol to the Government's head?

I am grateful to the Minister for his comments on the amendment. I heard clearly what he said about consultation. It is important to bear in mind that there is presently a "mismatch" as regards expectations of cost. Therefore, consultation will need to take place to ensure that London in particular is properly compensated for the costs of the scheme. In the light of the Minister's remarks, I shall not move the amendment.

[Amendment No. 4 not moved.]

[Amendment No. 5 not moved.]

Clause 2 agreed to.

Clause 3 agreed to.

House resumed: Bill reported without amendment.

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National Minimum Wage Regulations 1999 (Amendment) (No. 2) Regulations 2001

3.42 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville) rose to move, That the draft regulations laid before the House on 5th July be approved [2nd Report from the Joint Committee].

The noble Lord said: My Lords, I am pleased to present these amending regulations to your Lordships. They are primarily about increasing the main rate, and the development rate, of the national minimum wage.

The national minimum wage is an outstanding success. It is now very widely recognised that it was sensibly introduced and effectively implemented, and that it is helping all those it was designed to help without causing any significant problems to the economy.

The independent Low Pay Commission has a key role to play in this policy. The Low Pay Commission not only makes unanimous recommendations on rate increases and other changes to the regulations as appropriate; it also monitors the impact of the policy so far by looking at the official data and also, crucially, by talking to the small businesses and other employers, the workers, the sectors, the advice groups and so on who are in the front line. It has found none of the dire consequences predicted by opponents of the minimum wage. Indeed, its success has now converted all but the most blinkered critics into supporters of this policy, though with varying degrees of enthusiasm.

The Low Pay Commission submitted its report this year in two volumes. In March, it presented us with Volume One, which contained the recommendation to increase the main rate to £4.10 an hour from the current £3.70 an hour. That report also contained a great deal of very interesting evidence and findings about how the minimum wage had impacted on the country so far. It is comprehensive and it challenges many of the assumptions that have been made about the effects of legislating in this particular part of the labour market. Above all, Volume One found that,

    "results from research ... show that the effect of the minimum wage on employment was broadly neutral or, if anything, mildly positive".

So much for the collapse of the economy and the predictions of millions of job losses.

I repeated a Statement in this place on 5th March of this year about the main rate increase from £3.70 an hour to £4.10 an hour. We now have the regulations before the House. I should like to say a few more words on the subject.

The first point to note is that, like all its reports and recommendations, this was unanimously agreed by the members of the Low Pay Commission, which includes a small business person, the Deputy Director-General of the CBI and one other business person, as well as academic experts and leading trade unionists. This was

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a balanced recommendation based on factual analysis and the consultations and evidence gathered over the preceding year. A rise to £4.10 represents an increase of 5.4 per cent a year over the period of two-and-a-half-years since the introduction of the minimum wage in April 1999. It is roughly in line with rises in average earnings over that period.

In our Regulatory Impact Assessment, the Government noted that,

    "whilst its impact on the overall wage bill of employers will be small, the rise will be of significant benefit to workers on low incomes, especially those who are paid at the prevailing minimum wage rate".

Or, as the Low Pay Commission put it:

    "We believe we have recommended an increase ... which will be manageable by low-paying sectors, but will still provide low-paid workers with a substantial rise in their hourly earnings".

The Low Pay Commission submitted Volume Two of its third report at the start of June. This volume covers the development rate for younger workers and for adult workers who are receiving training at the start of their jobs. It looks at the age at which the main, adult rate should apply. It looks at the future role of the LPC itself. It also covers quite a number of other detailed issues around implementation and coverage.

The LPC recommended that the development rate should rise from £3.20 an hour to £3.50 an hour on 1st October, and the Government agreed. The regulations that we are considering here today effect that change. This represents an increase of around 6.7 per cent a year since April 1999-- slightly higher as a percentage than the main rate because the initial rate was lower than the £3.20 recommended by the LPC in its first report.

One of the most welcome findings in the LPC report was that the rise in employment levels of young workers was actually greater than the average rise in employment across all ages. That is a significant finding. It supports our case for having a lower rate for young workers. International studies have shown that countries that apply a single rate to all workers aged 18 or over can sometimes experience problems with worsening youth unemployment among the unskilled. However, I know that this is a sensitive issue. The LPC indicated that it would like to keep the whole question of age coverage under review. The Government have accepted that recommendation. We do not want to take risks with young people's jobs. Our success in getting young people back to work is one of our proudest achievements. We want to do nothing that might jeopardise that.

Perhaps I may say a few words about the sectors that are likely to be most affected by the rate increases; namely, sectors such as hospitality and social care. The LPC is well aware of the sectors where low pay is a particular problem. Its reports have looked into those areas in great detail, both in terms of the effects so far and the likely effects of the rise in October. The commission found that some sectors would, of course, be more affected than others. It also found particular issues in respect of care homes that we are following up

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with relevant government departments, because they link into the whole question of the provision and funding of social care.

But, overall, the Low Pay Commission concluded that there was no reason why the same positive response that it had found from most companies in 1999 on the introduction of the national minimum wage should not also be found in 2001, with this increase. Perhaps I may reiterate that the increase restores the original value of the national minimum wage; it is not "inflation-busting". It will cover roughly the same number of workers--1.5 million--as the £3.60 did in 1999.

So far, I have refrained from quoting lists of figures from the LPC report, but I should now like to do so in order to explain what we mean when we talk about a "positive response" from businesses. The following facts come from Appendix 2, Volume One, of the third report of the Low Pay Commission which gives the result of the LPC's own survey of firms--mostly small firms--in low paying sectors. Almost a third of respondents that were affected by the national minimum wage said that they had benefited from it. Higher staff motivation was the most common benefit. One third of childcare business, for example, had seen increases in motivation. Other benefits included lower staff turnover, the faster filling of vacancies and increased productivity.

Increasing productivity does not mean laying off workers or lengthening hours. About one third of businesses said that they had responded by increasing their investment in training and development. About the same proportion reported an improved quality of service.

However, we are not complacent. It is only fair to point out that some respondents also reported increases in prices or reductions in profits. Our task now is to ensure that businesses respond in a positive rather than a negative way to the new national minimum wage rate.

Two other changes are brought about by the regulations. First, and in line with another recommendation of the Low Pay Commission, we are proposing to increase the maximum allowable offset for accommodation. This will go up in line with the rate increases.

The Low Pay Commission has recommended that these maximum amounts increase to £3.25 a day, or 57p an hour, up to a maximum of £22.75 a week. This is in line with the increases to the rates and therefore preserves the real value of the offset. We know that some particular business lobbies have called for a much higher maximum offset to reflect the real market value of the accommodation provided. But there are real difficulties with trying to make an accommodation offset represent a real cost or value.

First, on a point of principle, we want the majority of the minimum wage to be paid in money, not as a benefit in kind. And on a practical point, there is no way of establishing the "right" rate in market terms. Rents vary enormously from region to region and even from month to month. What is "the right rate" for

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hotel workers in central London, for gamekeepers in the Highlands of Scotland, for waiters in a bar in Blackpool? That is why we agree with the Low Pay Commission that the accommodation offset should remain a token recognition of the value of accommodation which can be applied universally to all sectors and regions.

Secondly, the regulations change the definition of "accredited training" to reflect changes to legislation on education and skills. This is a bit of "good housekeeping" and does not affect policy. In brief, the development rate can be applied to adults in the first six months of their new job, provided that the employer can show he is receiving accredited training in that period.

The original regulations defined accredited training as being any course which was listed in Schedule 2(a) of the Further and Higher Education Act 1992. That Act has now been repealed and replaced by the Learning and Skills Act 2000. The amending regulations therefore refer to Sections 97, 98 and 99 of that Act, but we have kept in a reference to Schedule 2 of the now repealed Act, too, to ensure that nothing falls between the gaps in the transitional period before those sections of the new Act are brought into force.

All these changes come into force on the same day--1st October this year. I have no hesitation whatever in commending these regulations to the House and I am confident that they will enjoy the support of all Members. I truly believe that the way the minimum wage has been introduced and maintained is an example of consultative policy-making at its best and I urge the House to support the rate increases and other changes. I beg to move.

Moved, That the draft regulations laid before the House on 5th July be approved. [2nd Report from the Joint Committee].--(Lord Sainsbury of Turville.)

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