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Lord Addington: My Lords, I, too, hope to be very quick—I shall try to avoid using the word "brief" and the many pitfalls that accompany it. Everyone seems to be in agreement on the issue. My noble friend Lord Sharman said that the administration is to proceed with speed, which is what we sought to do in the Bill when it was first brought before us. I think, therefore, that we can say that we are in favour of the order. The two exemptions, and the idea of protecting brownfield site development and public utilities, seem sensible.

I am afraid that there is not much detail on the second exemption. I would appreciate it if the noble Lord could tell us when we will get more technical information.

Lord Davies of Oldham: My Lords, I am grateful for the generally favourable reception of the order. I am somewhat overwhelmed by the fulsome commendation of the noble Baroness, Lady Miller. I am sure that the wires will be humming to the DTI on that commendation; if not, I shall make them hum. I would have hoped that the quote could have been in a wider context across the swathe of government policy for which the Secretary of State is responsible, but that is probably asking a bit much.

The noble Baroness asked whether company rescue would effectively be achieved. In the areas covered by the exceptions, the purpose of appointing an administrative receiver is to ensure that the company will continue to trade so that the provision of the public service is not interrupted and, in other cases, that the income stream from the company is maintained. That outcome is entirely in line with the

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aims of the Enterprise Act, which seeks to ensure that viable companies that face financial difficulty can be rescued and do not go to the wall. We are at one on the broad objectives. I recognise the noble Baroness's reservation on that point.

I also recognise the noble Baroness's rather fetching analogy of a patchwork quilt of legislation. Some of us regard such legislation as impenetrable thickets rather than patchwork quilts. However, we will do our best to try to make the picture more attractive and more meaningful, if only for the sake of Ministers defending orders at the Dispatch Box.

On Question, Motion agreed to.

National Minimum Wage Regulations 1999 (Amendment) Regulations 2003

11.33 a.m.

Lord Davies of Oldham rose to move, That the draft regulations laid before the House on 19th June be approved [23rd Report from the Joint Committee].

The noble Lord said: My Lords, I am proud to talk about the national minimum wage. Without doubt, it is one of this Government's finest achievements. As we all know, the Government faced some opposition when we introduced the national minimum wage in 1999. However, we were determined that the minimum wage should be a success and that it should not, as so many predicted, damage the economy or lead to increased unemployment for the very people we were trying to help.

We believe with justification that we have succeeded in that goal. The national minimum wage has made an enormous difference for more than a million low-paid workers in the United Kingdom and helped us to tackle the very low rates of pay that were so prevalent under the previous administration. There has been little or no evidence so far of any impact on the employment prospects of low-paid workers. That is why we are now in such a strong position, with the minimum wage widely recognised as an outstanding success and accepted on all sides as a permanent fixture of the British labour market.

In June of last year, the Government asked the independent Low Pay Commission to produce its fourth report on the minimum wage by the end of February 2003. The commission reported earlier this year, and the Government announced in March that we had accepted almost all the commission's recommendations.

The regulations that we are debating today do two things: they implement the increases to the adult and youth rates recommended by the commission in March, and they implement adjustments to the accommodation offset that have been agreed with the commission. I shall discuss each aspect in turn.

The first aspect is increases to the minimum wage rates. The commission was able to reflect on the first four years of operation of the minimum wage. It found little or no evidence so far of any impact on the employment

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prospects of the low paid and believed that all the signs were that the minimum wage could now be increased as a percentage of average earnings—benefiting more workers—without producing damaging economic effects.

The commission therefore recommended increasing the adult rate of the minimum wage from the present 4.20 to 4.50 in October 2003, and increasing the youth rate—paid to workers aged 18 to 21—from the present 3.60 to 3.80 in October 2003. Those increases are substantial. The increase proposed to the adult rate, for example, is around 7 per cent—around double the present rate of growth in average earnings and three times the rate of inflation. They would extend the coverage of the minimum wage substantially so that 1.3 million to 1.6 million low-paid workers should benefit from those increases.

The Government agree with the broad approach followed by the commission; namely, that the minimum wage should be increased to help the low paid while taking care not to damage their employment prospects. The commission has made clear that it believes the recommendations are affordable for business and will not have any significant effect on levels of employment. The Government therefore accept the rate increases proposed by the commission. Sections 2 and 3 of the regulations will introduce those increases with effect from 1st October.

The commission has also proposed further substantial increases in the rates, to take place in October 2004, to 4.85 for adult workers and 4.10 for workers on the youth rate. That would mean substantial increases in the minimum wage for a second successive year—around 8 per cent in the adult rate—and a further extension of the coverage of the minimum wage, so that around 1.7 million to 2.4 million workers should benefit from the 2004 increase.

However, the commission has also recommended that it should be invited to fine-tune the recommended 2004 upratings of the rates in early 2004, in the light of economic circumstances. We believe that that is eminently sensible and therefore the 2004 increases are not contained in these regulations. But I want to make it clear that the Government share the fundamental view of the commission; namely, that we are now in a position to make substantial increases to the minimum wage in successive years without producing damaging economic effects.

It may be helpful briefly to explain this complex aspect of the regulations relating to the accommodation offset. When an employer provides accommodation for a worker, it is the only benefit in kind that can be counted towards the minimum wage. However, an employer cannot charge whatever he likes for accommodation in order to reduce the worker's net pay because the regulations set limits on the value of accommodation that can be counted towards the minimum wage. That limit is known as the accommodation offset and it is presently set at 57p per hour worked or 3.25 for each

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day that accommodation is provided, whichever is the lower. The maximum possible accommodation offset is therefore 22.75 per week.

The commission recommended in its report that that two-tier system was unnecessarily complex and that the hourly and daily rates should be abolished and replaced by a weekly offset. It also recommended that the offset should be increased, in line with the increase in the adult minimum wage rate, to 24.40 per week.

The Government agreed to those recommendations in March. However, on further reflection, we have agreed with the commission that some slight adjustments in the area would be helpful. First, we have agreed that it would be more straightforward to have a daily rate rather than a weekly one, because that would make it more straightforward to calculate the offset where a worker is paid monthly rather than weekly or every four weeks. Secondly, we have agreed to increase the amount by a further 10p per week to 24.50, because that figure is divisible by seven and gives a neat daily offset of 3.50. I hope that noble Lords will agree that the amendments—agreed with the commission—are sensible and entirely in line with the spirit of the commission's original recommendations. Section 4 of the regulations introduces those changes to the rules on the accommodation offset.

Finally, it may be helpful if I briefly explain the remaining provisions of the regulations. Regulation 6 contains a transitional provision, so that the changes to the rules on the accommodation offset will apply only to pay reference periods beginning on or after 1st October. Regulation 5 is a technical provision which will remove the need for further transitional provisions if the accommodation offset is increased in future years. Regulation 7 revokes previous provisions relating to the rates of the minimum wage and level of the accommodation offset. I commend the regulations to the House.

Moved, That the draft regulations laid before the House on 19th June be approved [23rd Report from the Joint Committee].—(Lord Davies of Oldham.)

Baroness Miller of Hendon: My Lords, I should like to repeat, in your Lordships' House, the warning given by my honourable friend the shadow Minister for Trade and Industry prior to the Budget:

    "Rises above the rate of inflation inevitably add to the costs of many businesses at a time when the outlook for both jobs and investment in the private sector look increasingly poor".

The increase in the national minimum wage created by these regulations, and what I may describe as the staged increase planned for October 2004, are an additional burden on business on top of the increases in employers' national insurance contributions, the leap in the cost of employers' liability insurance and the ever increasing burden of regulatory compliance. In this context, when I talk about business, I mean small businesses, because larger businesses can absorb the increase in their overhead because of their size, and because they have a smaller proportion of lower-paid workers than the corner shop, for example. That is why we find the CBI describing the increase as,

    "a sensible balance between prudence and boldness",

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while the Federation of Small Businesses—and it should know—complains that the increases,

    "will be detrimental to a whole range of small businesses".

The British Chamber of Commerce says that,

    "the Government is showing business where we stand on its priority list . . . to survive under this increase employers will slash costs wherever they can, including possibly a reduction in their workforce".

The Government justify their decision on the basis of the Fourth Report of the Low Pay Commission. Not only do the Government have business viability low on their priority list—as the British Chambers of Commerce complained in the passage I have just quoted—but the Low Pay Commission in its Fourth Report made the claim that:

    "All the signs are that the National Minimum Wage can be increased without producing damaging economic effects".

Well, they would say that, wouldn't they? That is one of those pontifical statements that is impossible to prove. The fact is that the economy is in a dire declining state. The fact is that there are still large numbers of young people in some areas unable to get a job or get their feet on the first rung of the employment ladder.

The national minimum wage is, of course, here to stay, but there is a problem. The effect of the recommendations does not necessarily give rise to any confidence to small and medium-sized businesses that their essential interests are fully taken into account. Of course, the increase is welcomed by the TUC, albeit grudgingly, because although the increase is above the rate of inflation it still wants even more. By the way, I think that there was a slip of the tongue at the beginning of the debate when the Minister introduced the regulations. I think he meant to say what I said about the increase being above the rate of inflation, but I think he said, "the wages are above the rate".

The TUC would like 5 an hour. The Government, conscious of their deteriorating relationship with the unions, and of the loss and threatened loss of financial support from some of them, will, no doubt, step by step, help them to realise that ambition, regardless of the consequences. The unions mostly deal with large businesses, such as those that are members of the CBI. Neither of those organisations seems to have grasped what is happening to the golden goose in the form of small and medium-sized businesses.

We on these Benches are not able to oppose the making of these regulations, nor do we wish to, but we do want to urge the Government, the Low Pay Commission and, indeed, the TUC and the CBI to take into account the back-breaking effect of the ever escalating costs on SMEs. That is still a problem. They are, after all, the main source of employment in Britain after the continuing disappearance of our manufacturing industry over which the present Government are presiding—I wrote "blithely presiding" in my speech, but I am sure that the Government do not mean to be blithely presiding. However, the truth is that manufacturing industry has a real problem and we definitely have to look after small and medium-sized businesses.

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11.45 a.m.

Lord Addington: My Lords, the noble Baroness, Lady Miller of Hendon, told us that the TUC said that the increase was too little, small business employers said that it was too much and the CBI said that it was about right. One wonders whether the figures were more or less what the CBI had been expecting.

The main comments that noble Lords would expect from this party are ones that form our party policy. We feel that all those over the age of 16 should be brought into the scheme. I do not understand the idea that somebody younger doing the same job should receive a lower rate—but a little bit of politics is excusable, even on a Friday. Neither do we understand why the rate change is not made annually. An annual upgrade would probably remove some of the shock and the idea that people are not sure what is going to happen even if they have a reasonable idea. There should be an annual increase.

Do the Government have any figures on what they are doing about the illegal workers who come over to the UK and are paid incredibly small amounts, on East Anglian farms, for example, where great gangs are paid extremely low rates? If we need these workers, are we doing enough to inform them about their rights? What steps are the Government taking to make sure that people who are not paying proper rates are caught and punished for that activity?

We should bear in mind that, if this policy is supposed to ensure that we get decent work done at a decent level of pay, enforcement is a major consideration. Such behaviour also places an unfair burden on those employers who do play by the rules. I hope that the Government can give us some reassurance on those issues.

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