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Lord Astor of Hever: My Lords, I am grateful to the Minister for explaining these regulations in great detail. Having opposed the introduction of the national minimum wage for reasons which we considered valid at the time, we naturally accept them as a fact. We are pleased that our predictions about their effect on unemployment have not yet come to pass. That is not to say that they never will. It all depends on the state of the economy. At the moment, the economy continues to do well under the momentum that the previous Conservative government provided. With the economy strong in most areas, employment has continued to do well with it. The real test will come if, as is predicted, the economy turns down and the Chancellor suffers together with the rest of us from a bust. Then it will be seen what effect the national minimum wage has on the vulnerable low-paid sector of employment.
As an aside, perhaps I may say that I had always assumed that economic activity was the result of the activities and work of the employees and workers of the country not of government. But I bow to the assumption of the previous speaker that the economy is sound because of the actions of the previous administration.
When the Act and regulations came before the House we had reservations about two issues. The first involved whether there should be a regional variation of the minimum wage. In dialogue with the Minister in recent years, we have indicated that from these Benches we have changed our mind with regard to regional variation. We accept the position of the Government and of the Low Pay Commission that regional variation, as we originally advocated, was not a sensible policy. At the levels at which the minimum wage has been introduced, we accept that a regional variation would not be acceptable.
I listened carefully to the Minister's remarks on a differential rate for 18 to 21 year-olds. We have significant concern about that. The experience of 18 to 21 year-olds, in particular in the catering industry in the south of England, leads one to believe that a differential rate for 18 to 21 year-olds may be unfair. If the Minister cares to attend almost any public house or restaurant south of a line from the Wash to the Bristol Channel I doubt that he will be served by anyone born in the United Kingdom. He is most likely to be served by an Australian, a South African or someone from the Balkans or the European Union. In the south of England, therefore, I do not think that there would be unemployment fears if the rate were brought into line with the adult rate.
The Minister indicated that the Low Pay Commission wanted to keep in mind the differential rate. I hope that the Government will retain an open mind should the Low Pay Commission recommend a narrowing of the differential or its elimination.
I have two final points, the first of which I have made previously to the Minister. In debate on the Act, we were concerned that the permanence of the Low Pay Commission should be enshrined in government thinking. I welcome confirmation from the noble Lord that the Low Pay Commission will be with us for ever. I believe that he gave that commitment previously. It is important that we have objective surveys if the minimum wage is always to be part of our life.
With the current operation of the national minimum wage, what is the position regarding evasion? Do the Government have statistics on the extent to which employers of the wrong kind are evading the regulations? To what extent is that regarded as a problem?
Lord Lea of Crondall: My Lords, in welcoming the regulations perhaps I may ask two questions. First, does the Minister agree that the introduction of the regulations on the basis of the evidence of the first year
It is good to hear that, albeit with some caveats, the Opposition now admit that they got it wrong, at least for a period of time. I think that period of time will continue. It is also fair to say that the Opposition are tacitly conceding that they got it wrong when they said that the whole of industry and commerce would be smothered in red tape as a result of the introduction of the minimum wage. Leading on to the question asked by the noble Lord, Lord Razzall, does my noble friend agree that the national minimum wage, which is a remarkable innovation in the tradition of British industrial relations of voluntary collective bargaining, has been carried through with a light touch? The lack of regional variation also means that the figure is easily recognisable. Whatever the figure--£4, £4.10 or £4.20--it is known to everybody.
It is also worth congratulating our friends in the Inland Revenue. Those are not words that we hear very often. The fact that no one ever hears about the Inland Revenue's enforcement department suggests that it is doing its job pretty well.
Does the Minister agree that the figure for non-payments--it is hard to be certain about this, but one hears informal guesstimates of 200,000--should be kept under active review together with the Low Pay Commission to see whether some fine-tuning is needed in due course?
Lord Monson: My Lords, the eve of a Summer Recess is no time to start arguing with the Minister about the principle of the minimum wage, which compels employers to pay above the market rate. I shall leave that to economists associated with the Institute of Economic Affairs, though, alas, none of them seems to be present this afternoon.
I am sure that the Minister will concede that a minimum wage is not the same as a minimum standard of living. A minimum standard of living is a highly desirable objective, but it can be achieved without introducing a minimum wage. Indeed, the latter might even lower the standard of living of certain unskilled prospective employees if it is set so high that employers no longer feel that it is worthwhile to employ them.
I have no interest to declare on this point, but the least desirable aspect of the issue is the derisory allowance made for accommodation provided by the employer. The figure of £22.80 a week is probably half what it really costs an employer to provide accommodation for an employee anywhere in London or the South-East and about two thirds of what it would cost in the West Country or the North of England. I think that is an error, but there is nothing that I can do about it, so I shall simply sit down.
Lord Sainsbury of Turville: My Lords, I do not know whether the general acceptance of the regulations is due to them being very good legislation or the fact that the summer holidays start after this debate. It is encouraging that there is now such wide support for the national minimum wage.
People will note that, even at this late stage, the Opposition are suggesting that they are not fully supportive of the measure. It is not a measure which one can support in good economic times but decide not to back in bad economic times. One must be either for or against it. I believe that people will note that, even at this point, the Opposition are not enthusiastic about this piece of legislation.
I am glad that it is accepted by the noble Lord, Lord Razzall, that it is right to set a national level. As was said later in the debate, I believe that that is a simplifying factor which is desirable in this case. Of course, it is always open to any pub owner to pay more in order to attract workers. This is a national minimum wage, not a national minimum maximum. However, given the fact that substantial international research shows that countries which have a uniform national minimum rate have seen increases in unemployment in the 18 to 21 age range, I believe that it is right to be cautious about a national minimum wage for people aged 18 to 21.
The Government have confirmed that the Low Pay Commission is now permanent and will be given full terms of reference in due course. There remain some problems in relation to enforcement, but they are not substantial and we shall keep them under review.
We are, of course, always happy to accept that the success of any government scheme is due to its excellent implementation by the Government. I am also happy to agree that little red tape is involved in this measure. The cost of it to business is simply the cost of paying decent wages.
The question of the minimum wage and the minimum standard of living is important. The report of the Low Pay Commission shows that the national minimum wage has not led to a lowering of standards. There is absolutely no evidence of that; if anything, the reverse is true. Of course, this is not the only part of our policy which deals with the problem of low standards of living; the working families' tax credit is another.
I hope that I have explained that it is almost impossible to provide a clear economic figure for the accommodation off-set. Equally, we want the national minimum wage essentially to be paid in the form of wages rather than accommodation. That is why we have consistently accepted the report of the Low Pay Commission which states that the figure which is set cannot be said to be the clear economic figure applying across the country but is one which provides some off-setting effect for accommodation.
I hope that I have answered all the questions that were raised. I believe that this is an excellent piece of legislation which is showing its worth. On that basis, I am very happy to commend the proposals to the House.