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Lord Hoyle: My Lords, I thank my noble friend for his kind remarks in relation to the Home Secretary and to the Select Committee's report; and, indeed, in relation to the speed with which the Government have acted. My noble friend asked me about an independent body. As I said, this is something into which my right honourable friend the Home Secretary has promised to look. As regards the cost, I am afraid that I am not in the position to be able to give my noble friend any idea of the amount involved.

I should point out that the Home Secretary has said, both in the Statement and generally, that it is the perception of the public which demands an independent body. Indeed, the police officers conducting the present investigation are themselves very independent and robust in the way in which they conduct their investigations. However, he agreed that there is a perception in the mind of the public that such a process is not always independent. I should say that there was a request from the Select Committee that, wherever possible, an independent force should examine such matters as indeed is the practice in many cases at present. The Home Secretary has also promised to look into that aspect.

National Minimum Wage Bill

7.29 p.m.

The Minister of State, Department of Trade and Industry (Lord Clinton-Davis): My Lords, I beg to move that the Bill be now read a second time.

It is a great privilege for me to launch today what I hope and expect will be an interesting and constructive debate on one of the Government's flagship policies: to

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introduce for the first time in this country a statutory national minimum wage. I add, not exactly in parenthesis, that I am extremely pleased to welcome to the Opposition Front Bench on this occasion two much admired, well liked Members of this House, the noble Baronesses, Lady Miller of Hendon and Lady Seccombe. I enter no caveats about their appearance on the Opposition Front Bench except that I expect them to support the Bill to the hilt! I shall proceed by giving a brief summary of the Bill. Broadly speaking it sets up a legislative framework--

Lord Strathclyde: My Lords, before the noble Lord explains the Bill I hope he will not mind if I introduce a hint of dissent. It is now half-past seven and the noble Lord is introducing one of the most important Bills that the Government are introducing during the course of this legislative Session. We were told that this Bill would start at around six o'clock this evening. There are 18 speakers. That means this debate will probably not finish until between 10.30 p.m. and eleven o'clock. Apart from those who are to speak in the debate, the House is relatively empty. Does not the noble Lord think that he owes the House an explanation, and indeed perhaps even an apology for not having organised the business in such a way that we could start the debate earlier?

Is it not a reflection on the Government that they have so organised their business as not to be able to discuss this Bill at prime time after Questions on a normal day? It will not have escaped the notice of the Minister that half-past seven is normally the time that we adjourn for dinner. What arrangements have been made to feed noble Lords who will take part and listen to the debate? The noble Lord, Lord Clinton-Davis, will know how much we, the official Opposition, have sought to co-operate with the Government ever since they came into office last May. We have done so not just to the letter of the law but also to the spirit of the law. I hope the noble Lord will convey to the business managers that although we have sought to co-operate in the past, after this evening's performance it will be considerably more difficult to do so.

Lord Clinton-Davis: My Lords, first of all, as to the dinner arrangements I have had mine, and so has the noble Baroness, Lady Seccombe, who ate with me. We have a crowded Back-Bench here.

As to the substance of the point that the noble Lord makes, of course he knows that I am not in charge of the usual channels. If he has a complaint to make, I am sure that he will make it in the appropriate manner. We had a Statement which did not involve all the Members of the House who are present now. I do not think I can usefully comment further. I think the noble Lord will be aware that those on my Front Bench read Hansard and they will read what he says. I have no doubt that he will communicate directly to the Government Whips his concerns about the matter. I hope that we are not to construe what he said about future business as a threat; he is too benign for that.

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I was about to embark upon a brief summary of the Bill when I was so inappropriately interrupted. I see that the Chief Whip is leaving the Chamber; obviously he intends to eat his dinner now.

The Bill sets up a legislative framework for a national minimum wage expressed as an hourly rate and applying to all workers in this country. It provides a power to establish a statutory low pay commission, and to treat the report of the existing Low Pay Commission as if it were the report of the statutory commission. The commission will recommend a rate for the national minimum wage, as well as how to calculate a worker's hourly pay for minimum wage purposes, and what reference period should be used in making this calculation. In addition, it will consider whether there should be any different rates or exemptions for young people below the age of 26, and for those such as trainees above the age of 26.

The Secretary of State will set the rate and any different rates or exemptions through regulations once the commission has reported. If she departs from the recommendations in any way, she must lay a report before Parliament giving her reasons for so doing.

The Bill also sets out various enforcement measures including the power to appoint enforcement officers and the creation of criminal offences, and imposes a duty on the Secretary of State to publicise the minimum wage. It also ensures that the minimum wage legislation interacts with existing legislation on minimum agricultural wages, so that all agricultural workers will be covered by the national minimum wage in addition to their existing regime.

I shall now briefly explain how the Bill works by running through the various parts of the Bill in rather more detail. We have of course provided detailed Notes on Clauses for those noble Lords who wish to become even more expert in the subject. We welcome the contributions that they may make not only in this debate but at later stages.

Clauses 1 and 2 are key clauses. They establish a worker's right to the national minimum wage and give the Secretary of State the power to make regulations which set and adjust the national minimum wage, determine any pay reference periods and determine how properly to calculate a worker's hourly rate.

Clauses 3 and 4 give the Secretary of State the power to make regulations which exclude or provide a different rate for those under 26, and to add others to this group who are over 26, such as trainees which I have already mentioned.

Clauses 5 to 8 provide a statutory framework for the low pay commission. The Secretary of State must refer particular matters to the low pay commission before first setting the national minimum wage. She has to at any future time refer matters to the low pay commission. The low pay commission must have regard to the economy of the United Kingdom and competitiveness in preparing its reports. The existing, non-statutory Low Pay Commission is--as I have already indicated--to be treated as if it were the statutory low pay commission.

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Clauses 9 to 12 deal with record-keeping. The Secretary of State may make regulations requiring employers to keep records which workers will have the right to inspect, and giving workers a right to a written national minimum wage statement when they are paid. Clauses 13 to 22 deal with enforcement. The Secretary of State may appoint officers or use the officers of another department or Crown body, to enforce the national minimum wage. The powers of such officers are set out. The clauses provide for information exchange between enforcement bodies for national minimum wage purposes, including arrangements with agricultural wage enforcement officers.

Enforcement will be achieved through two routes. First, any worker paid less than the minimum wage will have a contractual right to recover the difference between what he has been paid and the national minimum wage by going to an employment tribunal or any other appropriate civil court. This reflects the existing right to recover underpayments. Secondly, enforcement officers can issue an enforcement notice requiring an employer to pay the national minimum wage. Officers will be able to follow this up with a financial penalty if an employer fails to comply.

Clauses 23 to 27 make it unfair to dismiss a worker or take detrimental action against him on the grounds that he qualifies or will qualify in the future for the national minimum wage. A worker is also protected from any action against him for asserting his rights under the Bill.

Clauses 27 to 30 deal with proceedings for civil cases. This includes a reversal of the burden of proof in all civil proceedings, so that the onus is on the employer to show that an individual making a claim is not entitled to the minimum wage, or has in fact been paid it. ACAS has a conciliation role in tribunal cases involving the minimum wage.

Clauses 31 to 33 deal with offences. There are to be six criminal offences, the main one being the refusal or wilful neglect to pay the national minimum wage. The others relate to obstructing an investigation and failure to keep records. A person guilty of one of these offences will be liable to a fine of up to £5,000.

Clauses 34 to 45 clarify the position regarding particular classes of people. Agency workers and homeworkers who may not otherwise be "workers" as defined in the Bill are given the right to the minimum wage. This is in line with the Bill's inclusive approach. The Bill also covers Crown employees, staff of the House of Lords and House of Commons--they are to be treated on exactly the same basis--and mariners in UK-registered ships provided they normally reside in the UK. The Bill can be extended to others, including offshore workers. The Bill does not apply to members of the armed forces; share fishermen; genuine volunteers; or prisoners.

Clauses 46 and 47 ensure that agricultural workers receive at least the national minimum wage as part of any agricultural minimum rate and make various

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adjustments to ensure a smooth interaction between the national minimum wage and the agricultural minimum wage regimes.

Finally, Clauses 48 to 56 are miscellaneous and supplementary. The most significant is the clause which has the effect of preventing a worker and employer from agreeing to a level of pay below the national minimum wage. These clauses also cover publicity for the national minimum wage, deal with the regulation and order-making powers--most of which I think the House will be pleased to know, are subject to affirmative resolution--and define the terms used in the Bill.

I hope that this outline is sufficient to give noble Lords an overall picture of the Bill. Its purpose is straightforward. It is to mount a direct attack on the scandal of low pay and in-work poverty which exists all too often today. The minimum wage which it will introduce is to be established on principles of universality, clarity and simplicity. As my right honourable friend the Chancellor of the Exchequer said during the debate in another place on the Queen's speech:

    "Only a minimum wage will provide the sure foundation for the tax and benefit reforms that we shall introduce to make work pay. Far from being a job-destroying measure, a minimum wage is an essential component of a constructive strategy to make work worth while and to create jobs."--[Official Report, Commons, 20/5/97; col. 544.]

The priority of that policy is underlined in much that the Government have already done, and in what the Chancellor has already taken forward in his Budget. It is a priority policy. We are very proud of the policy which we put clearly before the electors and on which we fought and won the election beyond any doubt whatsoever. I submit that the policy is right; it is fair; it is just and it is sensible.

The time is overdue for a minimum wage to be introduced. Our reasons for doing so are based both on social and on business grounds and I submit that the rationale may be considered from the workers' and the employers' points of view alike. For workers, together with tax and benefit reform, it can promote work incentives and form part of a strategy to "make work pay". By removing the worst cases of exploitation, it can ensure greater decency and fairness in the workplace. Too many people are paid too little. We need to raise their earnings and their earning power. We have made the introduction of a national minimum wage a top priority and it will set a floor of decent pay for everybody.

What we shall achieve through the Bill will contrast strongly with what went on in the previous 18 years before we took office, during which there was a constant erosion of the rights and security of workers, most notably, so far as concerns pay protection, involving the abolition of the wages councils which had protected the wages of large numbers of people in some of our lower paying industries.

Statistics tell us that the minimum wage will be of particular benefit to women and ethnic minorities. For a number of reasons, those groups are much more likely to be occupying jobs at the lower end of the pay spectrum. Many women have so far been unable to use

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the provisions of the equal pay legislation to raise their pay relative to that of men. Those groups will benefit, therefore, from the introduction of a fair and just minimum wage.

The goal that we set before the House is to make our country fit for the 21st century. The labour market our measures will usher in will accommodate the need for change and adaptability, aided by better training and retraining. But the workers in that market will have greater security and greater protection against abuse than they have ever enjoyed; and that is needed.

As well as the overwhelming social justification for a minimum wage, there is an equally powerful business case for having a pay floor legally set. More people will be attracted into work. Firms will be encouraged to invest in developing their staff. Workers will have a greater sense of attachment to and involvement and interest in their firms.

A minimum wage will prevent undercutting on price based on low pay. It should encourage firms to compete on the basis of quality, not just on the basis of price. It will bring an end to the situation, all too familiar, where a responsible employer finds he is being undercut by unscrupulous competitors paying rock-bottom wages.

A minimum wage should reduce staff turnover and encourage training. Rapid turnover of staff in low pay sectors is a key reason why employers are reluctant to invest in training. Research by the Centre for Economic Performance has shown that recruitment costs in sectors with a disproportionate number of low paid workers--the hotel and fast food business--can range from £352 to £686 per vacancy. This is in industries where recruits stay in a job on average eight to 10 months. There is little incentive to train employees if the skills acquired are likely to be lost to the firm.

We shall have a well trained and better motivated workforce--the kind of workforce in which good employers will want to invest. By helping to promote employee commitment, reduce staff turnover and encourage investment in training, the minimum wage will provide a boost to productivity. And that is seriously required in this country. This all adds up to a more competitive workforce and more competitive businesses. That represents one of my department's key priorities. It will make this country not only fairer, but also a more prosperous place in which to live. As both workers and businesses will benefit, so will the economy as a whole.

I anticipate--I hope that I am wrong--that we shall hear in the debate many of the traditional arguments against the Bill. The issue of job losses will no doubt arise even though the large number of studies into minimum wage fixing have revealed no evidence to prove that a sensibly set minimum wage will adversely affect employment prospects.

It is for all those reasons that, although we await the report of the Low Pay Commission, I hope that I have been able to rebut the claim that this Bill is nothing but an empty framework. And, hard on the heels of the job losses argument, I fully expect that we shall encounter the ogre of the "restoration of pay differentials", inviting us to believe that if the pay of a car worker in Daventry

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is raised to meet the requirements of the minimum wage, the pay of a car worker in Dagenham will go up in proportion.

It is interesting to note in that connection a recent study by Income Data Services [IDS]. This found that many of the arguments about the potentially damaging effect of minimum wages and the restoration of differentials had been highly partial and prone to exaggeration. It found that many companies were already putting up the pay of their lower paid employees--in advance of the arrival of the national minimum wage--and have not appeared unduly concerned at the costs involved. Even more interestingly, the study found no evidence of pressure from higher-paid workers to restore pay differentials. That provides, I submit, considerable food for thought for those who predicted that firms would lay people off rather than pay them a decent wage.

Of course, we recognise that companies which face competition from low paying competitors overseas face special problems. However, the fact is that the vast majority of workers who will benefit from the national minimum wage are not going to be under the immediate influence of the so-called "global market". Contract cleaners at Manchester airport, for example, where a company is offering rates of £1.30 per hour, are not up against competition from companies operating in Bangladesh or Sri Lanka. In the main it is all about local companies competing in a local labour market in a local economy.

There are those--and this may be articulated in today's debate--who favour a variable rate for the minimum wage, with different levels of minimum pay for different regions, sectors or size of company. Such a variable rate would fly in the face of our goal of keeping the minimum wage as simple as possible; but beyond that there are practical reasons for staying with a single national rate. Our view is that to attempt to aim tailor-made minimum pay rates at particular regions or sub-regions cannot be economically justified. Pockets of relatively low (and high) pay occur in all regions. Regional and sectoral rates would lead to endless special pleading from different groups and difficulties of the "where to draw the line" sort. Finally, we believe that workers for small businesses are entitled to the same degree of protection as are workers in larger undertakings. For all these reasons we reject the idea of a variable minimum wage.

As I touched on before, the Bill provides a power with the potential flexibility to make exemptions for specific narrowly defined groups and young people. We have asked the commission to make recommendations on possible lower rates or exemptions for young people. It makes sense, therefore, for the Bill to include provision for the commission's recommendations to be taken on board--there has to be that measure of flexibility--if that is what the Government ultimately decide. I wish to emphasise that, in the first place, it is entirely up to the low pay commission to recommend whether, and in what circumstances, there should or should not be exemptions. No decision has yet been made.

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Of course, it is right to look in depth at the problems of young people. The Government do not wish to see the national minimum wage discourage young people from remaining in education and training, or restrict employment opportunities for those looking for jobs. To fail to consider the options in this area would be foolish indeed. That is why we have asked the commission to pay particular attention to young people and make recommendations accordingly.

Perhaps I may remind your Lordships before moving on that the Government have a number of other initiatives which will benefit this age group. The New Deal for the young unemployed will give young people a number of options to help them escape from the travails of long-term unemployment. These initiatives have a common aim--to help young people get into the workplace, to end their exploitation, and to ensure that they are trained for the challenges of the 21st century.

Clearly, there would be little point bringing in legislation without providing the means to enforce it. Naturally, the priority will be to encourage compliance by companies and awareness by workers who are not being paid the statutory minimum. The fact that there is to be a single national rate, which should be given wide publicity and with which everybody will quickly become familiar, will greatly assist this process. Ensuring that proper records are kept is another important contribution to openness. For the reasons I gave earlier, it will be in employers' own interests to pay the minimum wage for business reasons, quite apart from the penalties that may apply for not doing so.

The Bill builds upon existing civil enforcement mechanisms for individuals to pursue recovery through the tribunals or courts. There will be cases, I hope very few, where wilful and deliberate efforts are made to avoid paying the legal minimum. There will be some wily employers who might attempt to wrest some perceived commercial advantage by exploiting vulnerable workers. That would be short sighted. But these people need to be stopped, and they will be stopped. That is what the business community as a whole will want to see. They will want to rest assured that, while they are observing the requirements of the minimum wage, their competitors are doing likewise.

That is why the Bill provides for criminal offences, including wilful failure to pay the national minimum wage. It is also why the Bill provides--as indeed it has to--for the possibility of enforcement by enforcement officers who will have the ability to enforce compliance, if necessary, through the imposition of a financial penalty.

The Government have been criticised over the manner in which we have pushed the legislation forward in parallel with the work of the low pay commission. Some of our opponents have referred to it as putting the cart before the horse. I would submit we have been shown to be right in taking this twin-track approach. We have been in office for a mere 10 months. A great deal has been accomplished in that time, and, with a fair wind from your Lordships' House, we now stand very near to seeing a national minimum wage become the law of the land.

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We wished to consult as widely as possible before setting a rate for the minimum wage. But to have waited until that had been achieved before starting to make progress with the legislation would have considerable lengthened the timetable, and entirely without purpose.

As it is, there are those who say we have not gone fast enough. They would like us to have declared a rate for the minimum wage right after winning the election. But that would have been wrong. It would have resulted in an arbitrary rate, based on some sort of formula, and would have carried little conviction in the world of business and commerce and even within the trade union movement. We have made no secret of the fact that we have considered, and discarded, such an approach.

It was vital to speak to, and, more importantly, listen to, those who would have to live with the effects of this measure and to take their views into proper account. During the years before the election we engaged in discussions with hundreds of individuals and groups about our proposals. The need to take action was clear, and that need was reflected unequivocally in our election manifesto. It was vital that we built on that foundation and cemented support for a partnership-based approach to the problem of low pay. For that purpose, we set up an independent body, the low pay commission which will present its recommendations by the end of May.

We hope that this method of proceeding, which, through the consultation process adopted by the commission, has involved as broad a range of people and organisations as possible, should result in the minimum wage commanding the widest respect and receiving the broadest observance--much more so than if a rate had been produced without any proper consultation and foisted on a suspicious business community.

The Government have themselves submitted evidence to the commission setting out the key issues which we thought it would find helpful to consider, but giving only factual background. It was presented in a balanced manner and did not attempt to steer the commission in any particular direction. I believe that that was the right approach.

Once the low pay commission has produced its report, full consultation on draft regulations to introduce the minimum wage will take place. The Government will themselves set the rate for the minimum wage, based on the recommendations we receive, and we will see to it that it is implemented as soon as practicable thereafter.

Many business people have long seen the sense of a legal floor to wages, provided it was sensibly set. We have succeeded in winning over more and more people to that view. I believe that when the minimum wage policy gets under way, as it will with the benefit of a number of supportive statements from businesses with household names, that will demonstrate its relevance to the needs of this country. More and more people are now seeing the sense of our minimum wage policies. Surveys have been undertaken by large numbers of organisations. There are employers now in every sector who support the principle.

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I believe that the setting up of a national minimum wage is a difficult task. We have tried to keep things as simple as possible; we have gone for a single national rate and not allowed variations by region, sector or size of firm. It is, of course, not a measure which should be seen in isolation. It is one of a range of policies which come under our broader "flexibility plus" agenda which has the overall aim of achieving high and stable levels of growth and employment. It takes its place alongside the tax and benefit reforms which will contribute towards reduction of poverty and welfare dependency and the promotion of work incentives.

The Bill is something to which the Government are totally committed. That is something I know the House will understand, even the noble Baronesses opposite. I believe that the intense consideration which we have given it illustrates our belief in the principles of justice and fairness. I look forward to hearing your Lordships' contributions to the debate. It is essential that we get it right. We shall certainly listen carefully to the contributions made. I commend the Bill to the House. I beg to move.

Moved, That the Bill be now read a second time.--(Lord Clinton-Davis.)

8 p.m.

Baroness Miller of Hendon: My Lords, I should like to thank the Minister for the warm welcome he gave to my noble friend and myself. I do not think he will be surprised and I hope he will not be disappointed to know that I do not agree with many of the things he said.

I wish to begin by disposing of two myths. The first is the myth perpetrated by every government of whatever political complexion: the myth of the mandate. It is as if every single voter reads and agrees with every single word in the fine print of the party manifestos. A party manifesto is not an a la carte menu. So those voters who read it have to take the whole package or nothing. Nor are the policies set in concrete. The policies set out in party manifestos themselves tend to change with the passage of time, due to what Harold Macmillan called "events". But apart from that, whatever we as politicians may think--and I speak from 25 years of door-to-door canvassing and teaching canvassing techniques to candidates and agents--the fact is that the majority of voters do not vote for anything. They simply vote against.

In 1979 they voted against the winter of discontent. In 1983 they voted against the longest suicide note in history. In 1997 they voted against the divisions in the Conservative Party, as well as against other things, some real and some imagined, that they felt the party was guilty of. However, according to the rules of the game which we on this side of the House fully respect and honour by virtue of the Salisbury convention, the Government have a mandate for introducing the concept of a minimum wage, however misconceived we believe the idea to be. We are, however, entitled to invite the Government to think again on some of the details, in addition to the changes which the Government have conceded in the other place.

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The second myth is the myth of the United States of America. This claims: "They have had a minimum wage since 1938, and look how prosperous they are". This myth has been repeated many times in the other place during the passage of the Bill and will doubtless be repeated here during this present debate.

The minimum wage in the United States of America has always contained exemptions in favour, for example, of small businesses which the Government refuse to concede. Secondly, it has always been set at a figure comparatively low to the average wage. During the 1950s and 1960s it was about 50 per cent. of the average wage. In the 1970s and the inflationary 1980s, it declined to around one-third of the average wage in manufacturing. It held steady at 3.35 dollars during the 1980s and so by 1989 its real value had fallen by a further 25 per cent. It was therefore so low that it had little, if any, effect in terms of its impact on jobs.

Since 1996, it has been only 5.15 dollars, which is about £3.09. That is trivial compared with United States wage levels. Even that is not the whole story, for if that 5.15 dollars were to be pro-rated to the United Kingdom level of wages, it would come out at just under £2.70.

A majority of American minimum wage earners are either young persons living in non-poor families or are a second or third earner in the household and not the primary breadwinner and in any case are subject to wide exemptions. In 1992, only 4.25 per cent. of minimum wage earners were adult householders.

In the Second Reading debate in the other place, the President of the Board of Trade alleged that:

    "the Conservative party has argued that Britain can only and should only seek to compete by aiming to be the cheapest at all costs; aiming to be the bottom of the heap; aiming for the lowest wages and the worst working conditions to be found among our competitors".--[Official Report, Commons, 16/12/97; col. 162.]

That statement is not only a monstrous distortion but is manifest nonsense. It is just a refurbishment of Old Labour's caricature of the wicked bloated Tory capitalists grinding the faces of the poor. Unlike the Government and their paymasters in the trade unions, we on this side of the House understand that no one owes us a living.

Of course, to attract business we must be, as the Government say, a centre of excellence. Indeed, we have become ever increasingly so since the last government cured the British disease of constant industrial strife. We have acquired in this country more inward investment than any country in the world except the United States of America for three simple reasons: first, because of our low tax rates--

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