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Baroness Miller of Hendon: My Lords, I am grateful to the noble Lord for giving way. I believe that my record in working for women is very good. However, does the noble Lord agree that in America there was an exemption in the Equal Pay Act 1963 which provided that men and women should receive the same salary because it was proved that, when there was a minimum wage structure, the women did much worse out of it than the men?

Lord Thomas of Macclesfield: My Lords, I do not accept that logic. In my experience, by treating women with respect an employer will earn much more loyalty and the business will benefit as a result. I see no reason to follow the example given by the noble Baroness.

If the principle is carried to extremes in terms of cash per hour worked, either extreme would be disastrous. Too much would result in redundancy, as the Benches opposite claim; in bankruptcy, unemployment and a reduction in gross domestic product and tax revenues. Clearly, therefore, too much would be wrong, though I wish that could be applied to some executive directors. That is why a commission needs to be set up which can be independent of the political debate and argument. It can judge what is an appropriate amount in terms of the economy at that time.

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The noble Baroness also confuses flexibility with minimum wages. Flexibility involves multiple skills; it concerns the hours of the day which one works. It is not about paying people a bag of rice a week. That is not flexibility; it is unethical. In terms of our New Zealand friend--obviously a refugee from New Zealand which has a national minimum wage--customers respect employers who respect employees. An employee is an employer's biggest ambassador and salesperson. If employees are exploited, they will not send a good message to the customers. It is therefore self-defeating to exploit people with very low wages.

Too little or no minimum wage, as has been suggested, results not only in low hourly rates, but also in increases in social payments--I have heard the figure of £2 billion suggested; that is a subsidy paid to some employers. However, it is interesting that the Benches opposite should be arguing that case. It puts the good employers at a disadvantage. And good employers, whether large or small, would regard it as unethical. They occasionally lose business because of the cowboys in the economy and the sooner we get rid of those, the better.

My experience of 44 years as a banker was that there was a tight correlation between what people were paid and what was invested in them in terms of skills and training. The more they are paid, the more advantageous it is to invest in them by helping them to develop skills. The opposite is also true. If the labour comes very cheap, it is rare to find those employers investing in and developing those employees.

If we carry on without a minimum wage, we will continue the exploitation, particularly of women and particularly of certain ethnic groups. Both extremes, therefore, could be a disaster to the individuals, to the companies, to the country's gross domestic product and to tax revenues. Worse still, a society with a value system that has no respect for individuals would result. That is part of the culture change which this legislation and the Budget of last week seek to address; that is, the culture change of valuing people.

It was Robert Owen, a textile manufacturer, who taught his fellow textile manufacturers 100 years ago that the more you invest in people and the more you respect people, the more profits you make and the more profits you are entitled to make. He had a track record that no one can besmirch after all this time.

I am delighted to support the principle of the Bill. The actual rate per hour should be decided by the commission and revised according to RPI every year. As a cautious banker, my inclination would be to start at the lower end of the scale and build on that rate every year. I certainly hope that the Bill will pass very quickly.

9.50 p.m.

Lord McCarthy: My Lords, I want to do two things at this late hour. First, I want to join those on this side of the House who have congratulated the Government on the drafting of the Bill. It is the next best thing to a masterpiece. It makes one appreciate what the parliamentary draftsmen can still do if they are properly encouraged. Secondly, I want to answer those who have

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opposed the purposes and functions of the Bill. The noble Lord, Lord Dixon-Smith, said that the arguments reminded him of Prospero in The Tempest. I could not quite get the connection, but they remind me of Touchstone in As You Like It, in particular what is called Touchstone's defence, a series of mutually contradictory arguments in declining order of plausibility.

There are four arguments really, four of what Touchstone would have called ripostes, replies, objections. The first riposte, reply or objection, which strangely enough has not been advanced very much in this House tonight although it was very much heard from the right honourable Member for Wokingham in another place--he made it the central arm of his defence--is that what the Opposition believe in is not a minimum wage but a minimum income. By that I think he meant the combination of social benefits--family credits, housing benefits and so on--that is likely to alleviate the worst forms of wage poverty. He said that if one got right the minimum income one would not need a minimum wage. I may or may not be seeing the noble Baroness, Lady Miller, nodding, but at least that is what the right honourable Member for Wokingham said.

There are three objections to that. In the first place the previous government were, I suppose, introducing the minimum income over 17 years, but there is no sign that they had achieved the minimum income. Secondly, what they achieved were inequalities of income and pay which were the second worst in the OECD. That is what they achieved in 17 years of trying to do without a minimum wage. Seven times the number of workers were below 40 per cent. of average income than was the case in 1979. That is what the previous government achieved with their minimum income guarantee. We do not think that is the answer, because we have had a long period of experience and it has not solved the problem.

The third riposte I would give to that refutation of our position is that to create a minimum wage involves part of a general policy of dealing with poverty. This is a multi-focused approach. The minimum wage is part of a whole series of measures, some of which might in the end produce a minimum income. I refer to job creation, social benefits, housing subsidies and tax remissions. If we go on long enough, we shall do something essential, important and permanent about wage poverty. But we certainly shall not do it without the assistance of a national minimum wage.

When one makes arguments of that kind, those who want to defend their position move on to the second riposte, saying, "That's all very well and fair, but it's unobtainable and impossible because the inevitable consequences of seeking to introduce a national minimum wage are higher costs, lower sales and rising unemployment". That argument has been put forward widely in this debate tonight. As I understand it, it is what the noble Baroness, Lady Miller, said. I did not hear him, but I understand it is what the noble Lord, Lord Harris of High Cross, said. It was also what the noble Baroness, Lady Eccles, and the noble Viscount, Lord Oxfuird, said. They said that if we try to solve the problem in that way all that we shall get will be unemployment, higher costs and lower productivity.

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There are three objections to this. The first is that the evidence for it is not evidence at all, but a series of simulations. One only gets this kind of catastrophic consequence if one uses computers and puts rubbish in and then gets rubbish out. One never gets that from empirical studies in the field. One can put in anything one likes. Various figures were tossed about. I can remember the expert on this, Michael Howard of another place, when he was Secretary of State for Employment. One Thursday afternoon at Question Time he got the figure to 1.7 million jobs. It was not very clear what was the minimum wage and how much the knock-on effects would be. He satisfied himself and he got the figure up to 1.7 million lost jobs. I believe that that is the record.

The most recent--and it has been tossed about in the debate tonight--was the 1996 figure of the DTI, which the previous government used in the course of the election. If there was a minimum wage of £4.15 an hour and a 50 per cent. knock-on effect in terms of differentials, one would lose 1 million jobs. That is a case of rubbish in, rubbish out. The CBI is a little more reasonable and serious. It told the Low Pay Commission that, going up to a figure of £4.40, with a replacement ratio of about 35 per cent., there would be a loss of 250,000 jobs. That is not quite so much rubbish in, and not quite so much rubbish out. Then there are the studies of Ferney and Metcalfe. They summarised the work of the academics who had done studies of this kind. They produced figures of between 9,000 and 120,000 jobs and an average of 80,000. So one can always obtain such figures if one makes assumptions about the level of the minimum wage. They are on the high side. If assumptions are made about the extent to which differentials are replaced, which are very much on the high side--especially if you are Michael Howard--one gets death-defying, terrifying figures.

Secondly, one never gets anything like that if one looks at the actual studies of the people who have been working minimum wage systems and who have increased that minimum wage by between 10 to 20 per cent. at any particular time. They can say what that has meant for employment. In those circumstances one has a wide variety of results, all about 2 per cent. plus or minus. But one never gets anything significant when one looks at computer-type simulations rather than what one gets from what really happens. That is my second argument against the misery of hypothesis.

My third argument is that the essential part of this Government's policy in this Bill is that they propose a softly, softly, catchee monkey approach to see what happens to unemployment, costs and wages whenever they change the minimum rate. That is the only sensible way. No intelligent person knows what a particular minimum wage is going to do to a particular industry or occupation at a particular point in time. Nobody knows, but anyone who tells you that he does has been mucking about with simulations.

The only thing to do is to start in a relatively modest way by keeping the Low Pay Commission in existence, giving it adequate research. It should then say exactly what is meant in terms of productivity or increased

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efficiency or in terms of employment levels in different parts of the labour market. That is the unique thing about this Bill. It proposes to do exactly that.

So I come to the third riposte or counter-claim: that all this may be true. That has been said by quite a number of speakers on the other side of the House. Their great objection is that the way in which we propose to establish a national minimum wage is inequitable and unfair because it is simple, understandable and will have a simple rate spread across the whole of industry. Those people who do not think that we need anything like a national minimum wage say that we need something much more complicated. They cite variations by industry, by region, and by size of firm.

There are three arguments against that. First, variations in levels of pay per hour for full-time workers by industry and by region are relatively small, with the possible exception of central London. The differences are relatively insignificant. At £3.50 per hour, 14 per cent. of the full-time labour force is affected--18 per cent. of the labour force in the north of England and 10 per cent. of the labour force in London. In other words, in terms of full-time workers, the variations are relatively insignificant.

Secondly, the main cause of variations between workers--and therefore the main beneficiaries of the minimum wage--is the number of part-time workers whom a particular industry, area or firm employs. It is part-time workers who are relatively low paid, and especially part-time working women. Indeed, part-time working women will be the major beneficiaries of any decent minimum wage, wherever they live in the country. That is because, even in central London, women part-time workers are universally badly paid.

The third argument against the "complications" of our simple, across-the-board minimum wage is that it is the only way we can imagine of having an enforceable system. Those who do not like it should come forward with an alternative. If everybody knows what the minimum wage is, if it can be printed on the back of payslips, everybody will know what they are entitled to and the system will be self-enforcing. That is the point about having a single minimum wage.

Indeed, that point was appreciated by the Conservatives when they were in office. I can remember--noble Lords who were there at the time will also remember--the noble Lord, Lord Young, standing at the Dispatch Box in 1986, when the then Conservative Government introduced the Wages Bill. The noble Lord told us that what was wrong with the wages councils was that they were so complicated, with enormous schedules of rates, differentials and regional changes. The noble Lord said that he would produce a single rate for every wages council. He said that it was sensible to have a rate across the board. He was right. The trouble was that several years later, the Conservatives abolished the whole lot!

Those are the arguments against, so I come finally to what I would call "the objection disingenuous", which is the last objection when all other objections have been destroyed. Frankly, this one is a bit of a cheek. It has

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been put forward tonight by the noble Baronesses, Lady Miller and Lady Eccles, by the noble Viscount, Lord Oxfuird, and by the noble Lord, Lord Dixon-Smith, and, I am sure, by several others. They say that the Government have a sauce not to put all this in the Bill. They say, "If the Government are so certain and want a straight rate across the board, and if they do not want exceptions, why not include it all in the Bill? Why do they leave us to wait and see what they are going to do?"

There are three answers to that. First, I remind those noble Lords who were here in 1992--I think that pretty well all noble Lords who are present were, and if they were not, they were in the country and they will remember the election--of what the Conservative Government said then when the Labour Party proposed a system such as this. In 1992, God save us, we proposed a simple rate which would be read off and automatically indexed every year from the new earnings survey. It was to be based on average male manual earnings. It was to be automatic, with no investigation. It was to be put on the face of the Bill--and the Conservatives went mad. They said that we should wait and see what could be afforded and study the matter in greater detail. They asked why we wanted to put a single figure in our manifesto. Perhaps we were listening and took the point and therefore arrived at a much more sensible system.

Those who say that the rate should be identified before legislation appears are asking for a delay of two-and-a-half years. They are suggesting that the low pay commission be set up to investigate the matter, do all the work, prepare a consultation document and argue about it, and a little time after the millennium legislation can be produced. That is not a serious argument; it is a disingenuous attempt to put us off.

The final point is that, far from rushing this issue, we have waited 86 years for it. Eighty-six years have gone by since a spokesman for the Labour Party in another place moved for the first time that there be a minimum wage. It has not been rushed or pushed. It is well overdue, and the sooner we do it the better.

10.6 p.m.

Viscount Bridgeman: My Lords, the sub-plot running through this debate tonight has been the question of jobs. I hesitate to follow the noble Lord, Lord McCarthy, with his dissertation on minimum wage and minimum income. The basic reason for our objection to a minimum wage is that it does not address the real roots of poverty. Most of those who will benefit from the minimum wage are young persons and part-time, usually female, earners in two-earner households. In other words, it will leave the bulk of poverty untouched. My noble friend Lady Miller referred to the calculation made by the Department of Trade in 1996 that a minimum wage--admittedly it assumed £4.15 per hour with a 50 per cent. restoration of wage differentials--would result in the loss of one million jobs in the United Kingdom. That is a frightening figure. In the absence of any revision of that estimate we must assume that that is still the department's view.

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It is the view of this party that there should be a targeting of cash subsidies via the tax and benefit system. That would be far less damaging to the labour market than a minimum wage. It has the advantage of helping individuals to remain in work in contrast to a minimum wage which, regrettably, may result in an individual losing his job. Sadly, the longer an individual remains unemployed the more difficult it is for that person to find work.

This Bill contains contradictions. Under pressure from my colleagues in another place, the Government have conceded exemption for the Armed Forces. Other exemptions include voluntary workers and share fishermen whose income is derived solely from the profits of a catch. This makes sense. But it is indicative of the Government's piecemeal approach to the anomalies thrown up. Countless small businesses whose profits and ability to pay their workforce can vary widely from year to year will be disadvantaged by this legislation. Small pharmacists who are already under threat from the Competition Bill could go out of business or have to cut staff. The hotel and catering trade in particular view this Bill with the greatest misgivings.

It is significant that the minimum wage legislation in the United States, about which the Government make much play, specifically excludes small businesses. There are other contradictory policy statements, most obviously the welfare-to-work initiative. On the one hand, employers are offered subsidies to take on the young or long-term unemployed to reduce the cost of employment. On the other hand, an increase in employment costs resulting from the minimum wage will lead to job losses.

My noble friend Lady Miller has said that most European countries have minimum wage rates. In practically every case these are accompanied by higher unemployment. My noble friend Lord Dixon-Smith referred to the correlation between unemployment and a minimum wage. Belgium, with a minimum wage of £4.05, has an unemployment rate of 12.9 per cent., and France, with a minimum wage of £3.60, has an unemployment rate of 12.1 per cent. France is indeed an interesting case.

A recent study in the Wall Street Journal Europe in November 1997 gave a stark contrast. From 1987 the real earnings of the lowest paid 10 per cent. of the British workforce rose by 13.8 per cent. without government intervention, compared to 4 per cent. in France where the minimum wage is being raised repeatedly. My noble friend referred also to the correlation of social security payments. In a recent study it was found that the average employee in the UK receives the equivalent of £6.80 an hour compared with £6.50 in Germany, £6.30 in France, and £5.70 in Sweden, after adjustments for national differences in pricing and purchasing power. We may be the only major country without a minimum wage, but the average worker here does not do too badly.

We are committed not to oppose the principle of the Bill. So my remarks are directed in the earnest hope that the rate will be set at a realistic and not an unacceptable level.

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10.11 p.m.

Lord Davies of Coity: My Lords, like others, I consider the Bill to be one of the most important that the Government, in their short period of life so far, have put before the House. Like others, I welcome it; there will be no one who welcomes it more. The Bill, and the campaign for it, have played a special and significant part in my life. I shall come to that later.

Noble Lords may recall that in the economic debate on 3rd December last year I referred to Wilberforce and Shaftesbury--two great parliamentarians who campaigned for legislation to abolish slavery and child labour respectively. I did that to demonstrate clearly that when they were campaigning for those two worthy causes they were confronted by economic argument--much of the economic argument that we have heard this evening--whereas those of us who, by our support for a national wage, are trying to help the most vulnerable, the most exploited and the most deprived, meet economic arguments relating to bankruptcies, lost jobs and other areas of difficulty.

I concluded my speech in December of last year with the words:

    "I may again feel obliged to remind the House of the things that I have said today".

I shall do that, but to this extent only:

    "Earlier this year, in Scotland alone, it was assessed that £265 million per year is paid from the state to top up low pay. In the north west, where I now come from, 30 per cent. of the working population earn less than £4 an hour. Advertisements in Jobcentres cite a banner maker at £2.36 an hour, which is £92 a week; a care assistant at £2.80 per hour for working a night shift; a hairdresser is cited at £1.31 per hour, which is £55 a week. An employee in a travel agent is quoted at £60 for a 39 hour week. I could go on with further examples".--[Official Report, 3/12/97; col.1386.]

The country cannot go on subsidising bad employers with welfare payments. We cannot go on allowing people to languish in the poverty trap between low wages and benefits, our people to have no training, no skills, no hope of jobs, or, indeed, even better jobs. That is a recipe for spiralling down further into the pit where we compete with the world's worst and not the best.

I wish to give two quotations. The first is:

    "Low pay is a cruel injustice which should not be tolerated in a society like ours and yet we all know of employment exploited women having to fight through equal opportunity courts to achieve what is their right ... We all know that the vast majority of low paid workers, mostly women employed in shops, in hospitals, in canteens, in hotels and many other areas of industry, make a contribution to the way of life of this nation no less equal than other workers and yet they are still low paid. These workers have been traditionally low paid. They have been historically disadvantaged, but despite our awareness of this injustice the situation grows worse, not better ... the low paid are the ones who also suffer most from the attack made upon the social wage. Again, it is the low paid who are caught in the cruel poverty trap when State provision is applied as a subsidy to bad employers. If low paid workers tolerate low pay, they qualify for a subsidy which raises them marginally to a different level of low pay. On the other hand, if they accept a modest increase in wages, their entitlement to the taxpayers' subsidy is threatened. This is the classic low paid workers 'Catch-22'. Low paid workers do not want dignity and self-respect destroying handouts, they want decent wages.

    "Low paid workers also suffer from not being able to borrow in the same way as better paid workers can. If you are well paid, credit worthy, you have established security, you can get the most economical and beneficial credit facilities, but if you are low paid

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    and, doubtless, have little or no security, you have to resort to the most expensive and sometimes illegal and extortionate loan provisions. That completes the vicious circle of pressure on low paid trying to survive on poverty wages. There is no doubt that the urgency of our issue places a duty, a responsibility and a commitment on all of us to demand the introduction of a statutory minimum wage ... Why? Because nothing short of a statutory minimum wage will solve the problem of low pay ... Low pay represents an exploitation we can no longer tolerate. It saps hope and confidence. It destroys dignity and self respect. It cruelly deepens poverty and deprivation".

The second quotation is as follows:

    "Low pay is no accident in this country. The injustice of low pay exists because we have not done enough about it ... The low paid are workers in shops, in hotels, in laundries, in hospitals, in garment factories. They are workers in sweat shop industries in which unscrupulous employers operate. The majority are women workers, young workers, home workers, workers from ethnic minorities and part time workers. They are now a third of the nation's work force. They are the workers for whom ... some legal protection has been provided for nearly 80 years. They are the workers for whom Wage Councils were established ... Let us not forget why Wages Councils came into being. It was in 1909 that they were introduced, not by a Socialist, not by a trade unionist, but by a Liberal minister named Winston Churchill and he said that unless there were legal wage regulations good employers would be undercut by bad employers and bad employers would be undercut by even worse employers ... Low pay is now so widespread that we need drastic action. We cannot tinker with the problem. Only by the introduction of a statutory minimum wage can we hope to remove the suffering, the hardship, the inequality and the injustice that low pay creates".

I draw those two references to the attention of the House for particular reasons. Your Lordships may say that much of what those extracts contain has been heard from the Minister on the Front Bench this evening. Your Lordships may have thought they were from Hansard when the Bill was going through the other place recently. They were neither. The first was from the speech I made to the British Trades Union Congress in 1986 when I seconded a composite motion on the introduction of a national minimum wage. For the first time in nearly 120 years the TUC Congress determined that year that we should have a national minimum wage campaign.

The second extract was from my speech to the Labour Party conference, also in 1986, when the Labour Party formally, for the first time in 80 years, determined that it would be campaigning for a national minimum wage. That was all very important to me. It was the year in which my trade union, USDAW, threw its weight behind a national minimum wage campaign. Twelve years later, it now looks as though it will reach the statute book.

Another big plus for my union in 1986 was the fact that we were one of the groups campaigning against the Sunday trading legislation. It was the first time that the Conservative government had been defeated since they came to power in 1979. In that year also I became general secretary of my trade union.

I do not wish to exaggerate the significance of my union's contribution to this campaign. But it can take some credit in being one of the prime movers. I have been somewhat disappointed to hear once again today the old arguments--sometimes described as the old bogeys--in opposition to this very worthy piece of

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legislation, namely, bankruptcies, lost jobs and high prices. Those are the essential areas of opposition to what is proposed.

As regards bankruptcies, let us bear in mind that the vast majority of employers have nothing to fear from a national minimum wage. But if there are some who are fearful because they survive by paying low wages or because their employees are receiving state benefits, paid by the taxpayer, because they are not receiving sufficient from their employment to survive, we must ask whether those employers deserve to be operating in those circumstances. Indeed, the question can go further. How long can they survive if that is what they are doing? But I do not believe that that is what is happening. In many circumstances, companies are maximising their profits as a result of paying low wages and ensuring that their employees receive state subsidies to compensate for those low wages.

I turn now to lost jobs. Nobody knows whether or not jobs will be lost. But it will not depend on the introduction of a national minimum wage. It will depend upon the level of that national minimum wage. Both the low pay commission and the Labour Government know precisely that difficulty. This Government are campaigning for and have policies in relation to full employment. They will not introduce a national minimum wage which will cost jobs.

Next, I deal with the issue of prices. In the early 1980s, I negotiated with hotel employers through the wages councils. I can remember arguing for a weekly rate of wage for hotel staff which was less than what many hotels in London were charging their guests for one night's accommodation and very often, not even providing breakfast. That was the disparity between prices paid by guests and wages paid to the employees. But in that regard we must recognise that if prices are being kept down because workers are subsidising those prices by low wages, that cannot be right and should be stopped in any event.

There are three areas in the Bill that I should like to address and to which I should like to draw the attention of the Minister, the Government and the low pay commission. The first is the question of the level of the national minimum wage; the second is the question of the wages and benefits syndrome or access, which is sometimes described as the "Catch 22"; and, finally, the 26 year-old threshold. I understand that we do not want a level for the national minimum wage that will be an attack on jobs. However, I recognise that we should have a national minimum wage that will be an attack on poverty and wages. I trust that the low pay commission and my noble friend the Minister will take those factors into account and address them as they should be addressed.

As regards the question of the national minimum wage and benefits access, perhaps I should explain that that arises where people have such low wages that they are entitled to benefit. However, when the minimum wage comes in, everyone on low wages should benefit. I trust, therefore, that the benefits system will be adjusted so that workers on low pay, who receive an increase by way of the national minimum wage, will not

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lose their benefit thus rendering them worse off as a result of the introduction of the national minimum wage. With regard to the 26 year-old threshold, this is obviously a changed qualification. If that qualification is to apply--which, to some extent, is contrary to the age at which the adult rate is normally applied--I trust that a full explanation will be given and that it will be a justified introduction.

10.26 p.m.

Lord Monkswell: My Lords, I thank my noble friend the Minister for introducing this debate in a most extensive and adequate manner. In my contribution tonight, I will touch upon history, economics, enforcement and the international situation. As several previous speakers have mentioned points that I wished to make, I hope that I shall be able to keep my remarks reasonably brief.

I believe that my noble friend Lord Davies pointed out to the House that it was only in 1986 that the labour and trade union movement actually adopted a policy for a national minimum wage. One might ask why they did so. We need to explain that they did so as a result of Conservative policies--indeed, because of the way that Conservative policies had affected the labour market in the United Kingdom.

Other speakers have mentioned the fact that we have had wage legislation since 1909, originally with the wages boards and then later with the wages councils. One of the factors that we should recognise is that, after the war, we had full employment for 30 years. Therefore, if a worker was in a badly paid job, he had the ability to walk away from it and get another one. Of course, some workers were not necessarily in that position, but most of them were. So the idea that they could, by their own efforts, get out of badly paid jobs was there simply because of the very fact of full employment. Indeed, the wages councils operated as a safety net for particular categories of employment.

We can see that, since 1979, we have had virtually permanent mass unemployment with levels of at least one million--sometimes two million or three million--above those recorded even for the late 1970s. That had a significant effect on the ability of low paid workers to improve their pay. The abolition of the wages councils effectively created an impossible situation to which the Labour and trade union movement responded by adopting their policy for a national minimum wage. I am glad to see that is now coming to fruition.

One of the aspects of this debate has concerned me. However, one should bear in mind that just under half the speakers in it sit on the Conservative Benches. Therefore, one can understand that one of the threads running through the debate has been the risk of increasing unemployment if the national minimum wage is set too high. I wish to offer a contrary argument to that supposition. I refer to an academic study that was carried out in a number of states in the United States eastern seaboard, all of which had a state minimum wage. One of them decided to increase its minimum wage above that of its neighbours. Extensive academic research was carried out to determine the effect of that

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on the economy. The study revealed that the state which increased its minimum wage above that of its neighbours had an increase in employment.

If one pays poor people at the bottom end of the labour market more money, they do not buy a big foreign car, or go on foreign holidays two or three times a year, or buy a second house. They purchase local goods and services with the extra money that they have in their pockets. That stimulates economic demand which generates more employment and that creates a virtuous circle. We need to understand and recognise that factor when we discuss the level of the minimum wage. I argue that it should be set as high as possible.

The figures that the noble Baroness, Lady Miller of Hendon, gave at the beginning of the debate help my case. She pointed out that in the 1950s and the 1960s the minimum wage across the United States was set at half average earnings. That was probably the period of the highest levels of employment and the most beneficial levels of industrial activity that the United States has ever experienced. I am glad that the figures of the noble Baroness help my case.

I quite understand that my noble friend who is to reply to the debate may not be able to answer my question off-the-cuff. His response may be more suitable for a Written Answer. As other noble Lords have mentioned, the other factor is that the Government subsidise bad employers who pay low wages. At what level would the minimum wage have to be set to eradicate government subsidy for employers who pay low wages?

I was interested to hear the remarks of the noble Lord--he is not a noble Lord, not yet anyway--John Edmonds, the general-secretary of the general, municipal, boilermakers union, when he said last year that one of the difficulties with minimum wages is that in a situation of mass unemployment unscrupulous employers will inevitably prey on desperate people and arrange matters so that poor employees are paid less than the minimum wage on the basis that no one tells anyone what is going on but at least they have a job. I hope that this legislation, along with the Government's commitment to full employment, will be effective in the medium to longer term.

On enforcement, my noble friend Lord Clinton-Davis pointed out that employers could be taken to court to enforce payment of the minimum wage; and that they could be subjected to criminal proceedings with a fine of, I think, up to £5,000. The problem with that is as regards the really bad, unscrupulous employers. The idea that they might suffer a financial penalty at that level will not be a great deterrent. Will the Government consider amending the Bill so that the worst employers would face a term of imprisonment? One argument is that if a bad employer pays less than the minimum wage, he is in effect stealing money due to his employee. If the situation were reversed, and an employee stole money from an employer, I think that most employers would argue that their dishonest employee should face the penalty of gaol. What is sauce for the goose should be sauce for the gander.

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Perhaps I may turn to the international situation. A number of noble Lords have touched on the concept of regional variations of the minimum wage across the United Kingdom--a concept comprehensively demolished by my noble friend Lord McCarthy. But as a party which is internationalist, and a Government with an ethical foreign policy, surely we should argue that what is good for us--a minimum wage set at a decent level--should also apply to our partners on the international scene. We have heard that most continental countries have minimum wages set in their own circumstances. Surely we should put the concept of a European minimum wage on the agenda of the European Union. Bearing in mind the references by my noble friend Lord Wedderburn of Charlton to the effect of transnationals, we should also think in terms of a world-wide minimum wage to ensure that transnational corporations do not exploit one group of workers against another, pitting each against the other by threatening to take their jobs away from them because the companies can obtain cheaper labour elsewhere.

I have posed a couple of questions to my noble friend on the Front Bench. I am sure he will not be able to respond precipitately today since I am tail-end Charlie, and I did not have the chance to give him notice of them. I shall welcome a note in response to my questions. I welcome the Bill and hope that we can dispatch it fairly quickly through your Lordships' House.

10.37 p.m.

Lord Newby: My Lord, as my noble friend Lord Razzall said, we support the Bill in principle. In deciding on our line, we have asked ourselves these questions. Should we be prepared as a society to see people continue to be paid derisory and demeaning wages? Should we be prepared to see gross exploitation, in particular of women and members of the ethnic society?

Earlier in the debate, the noble Lord, Lord Harris of High Cross, described this Bill as a flower arrangement to appease old Labour. The noble Viscount, Lord Oxfuird, described it as a triumph of popular opinion over public interest. We fundamentally disagree with both sentiments. The Bill deals with the question of decency. As the noble Lord, Lord McCarthy, said, it will form part of a strategy to tackle poverty, which is surely a noble cause, and not an issue on which to make party political jibes.

The key argument of those who oppose the Bill, and indeed the only substantial argument which can be urged against it, is that low pay equals no pay, and that the minimum wage will put out of work many existing low paid workers. The argument that regulating the terms and conditions of employment should be opposed because it will lead to job losses is as old as the hills. As the noble Lords, Lord Thomas and Lord Davies, mentioned earlier, it was used in the previous century in opposition to the Factory Acts. It was used against proposals to keep women and children from going down the mines. It was used against the ending of the

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employment of children as chimney sweeps. In all those cases, in the short term legislation undoubtedly led to job losses. But it could be justified on decency and fairness grounds--and it did not lead to a permanent higher level of unemployment.

Will the minimum wage now under discussion lead to significant job losses? That obviously depends on the rate, and on the exemptions. But at the levels that have been discussed, I suspect that the net effect will be relatively small. I certainly share the view of the noble Lord, Lord McCarthy, against adopting the misery hypothesis--although, given that the noble Lord was my tutor in industrial relations and employment policy some 25 years ago, I could hardly do otherwise.

I cannot agree with the noble Lords, Lord Bridgeman and Lord Dixon-Smith, who argued that there was some kind of mechanistic correlation between unemployment and a minimum wage. If that were the case, how can they explain the fact that, during the period their party was in office, the rate of unemployment in this country fluctuated like a yo-yo, with no minimum wage at the beginning, no minimum wage in the middle, and no minimum wage at the end. As an argument, it simply does not stand up.

We have heard a number of arguments and discussions as to whether there should be a single minimum wage for everybody, or whether there should be variations. In a number of respects we strongly disagree with the concept of variation. There has been some discussion about whether small businesses should in their early stages be able to pay below the minimum wage. When I and a colleague set up a small business about six years ago, we accepted that, as we were taking a risk in setting up the business, the matter of what wage we might get in the short term was extremely questionable. We accepted that if the business did not prosper in its early months we might not take a wage at all. But the argument that, when employing secretaries or other employees, we should say to them, "We are terribly sorry, but we don't want to pay you a decent wage until we've proved that our risk has adequately paid off", frankly, does not stand up to scrutiny.

Secondly, we do not accept the argument that the minimum wage should vary between sectors. In our view, the key test relates to the extent to which those in receipt of the minimum are in receipt of a wage that enables them to live at a decent level. Whichever place people live in, that does not vary between sectors.

There has been much discussion about the position of the under-26s, and whether they should be exempt and to what extent. Not straying very far from this building, if a minimum wage were presently to be introduced at the same level for those aged under 26 as for those aged over 26, there would be a significant number of researchers in another place who would need to look for another job. That demonstrates that there needs to be a certain degree of special treatment, particularly for those who have just left university and who might be spending a small amount of time, not formally as a student, but as an intern. However, we do not accept the argument that there should be no minimum wage at all for those up to the mature age of 26. Indeed, the evidence from

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the National Association of Citizens Advice Bureaux gives a string of examples of people aged under 26 who were earning unacceptably low wages. A young woman working as a receptionist for a Devon solicitor was earning £50 for a 34-hour week. A young man working for a local radio station in Lancashire was earning £60 for a 45-hour week. Those levels of wages are just as unacceptable as they would be for someone aged 36 or 46 doing an equivalent job. When the low pay commission reports, we look forward to seeing that there will be a combination of a limited exemption for those at the bottom end of the post-teenage group and protection for those at the top end and the older groups.

Finallly, in terms of variation, we come to the issue on which these Benches differ from the Government, namely regional variations. The argument, stated simply, is that if the cost of living varies between regions there is a strong prima facie case for having a different minimum wage in those regions. The cost of living differs. We have heard about London weighting and know that housing costs vary considerably between the regions. Here I may disagree with the noble Lord, Lord McCarthy, although in London the number of people who will be affected is 10 per cent. and it would only be 18 per cent. in the north-west, that is nearly double, a big difference. This is an area that needs careful scrutiny by the low pay commission. It may be, as the noble Baroness, Lady Turner, said, that when that has been undertaken the degree of regional variation may not be very great. But it seems to us that, first, it should be considered seriously. Secondly, even though it may not be a great variation, a small variation could be quite significant. Therefore, it merits careful thought. We shall return to that in Committee.

That brings me to the role of the low pay commission. As a number of noble Lords said, the simplicity of the Bill is a great strength. But it has been clear from the debates so far in another place that a whole range of issues is likely to arise relating to the interpretation of the Bill when it becomes an Act which the low pay commission will need to examine. For example, we may need further exemptions, and a number have emerged during the passage of the Bill to date. We may need further clarification on existing exemptions, and, for example, the position of voluntary workers was developed during the Committee stage and later stages in the other place. It may need developing further.

The question of young people needs to be looked at as well as benefits in kind. The whole issue of monitoring, coupled with research and implementation of the Bill, needs to be examined. Therefore, we believe strongly that the low pay commission should be placed on a permanent and statutory basis; it should have powers to take initiatives and not be beholden to the Secretary of State for requests for specific pieces of work to be done. We shall return to that at a later stage.

Finally, on enforcement, as the noble Lord, Lord Wedderburn said, no rights are stronger than their sanction. We have a certain amount of concern about the extent to which it would be possible effectively to enforce the measures in the Bill. We have heard and know that a large proportion of employers who will be caught by the legislation are small employers. We also

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know that despite the protection in the Bill for workers who assert their rights, many workers are likely to be deterred from complaining either through fear of the consequences or through finding the thought of going to an employment tribunal too daunting. I hope therefore that the enforcement of the Bill will be possible or will not be reduced by there being a shortage of resources. One cheap suggestion in terms of how enforcement of the Bill might be made effective is that the Government are looking at the concept of naming and shaming in another context. It occurs to me that perhaps they should think of naming and shaming poor payers. It might work wonders.

The National Minimum Wage Bill is about fairness and social justice. We have some differences with the Government on specific aspects of the Bill, as I have made clear. But we do not disagree with its principle. We look forward to the debates in Committee and to the later stages as well as to the eventual passage of an improved National Minimum Wage Bill.

10.50 p.m.

Baroness Seccombe: My Lords, I add my thanks to the noble Lord, Lord Clinton-Davis, for his generous remarks. I wish I could be as generous about his contribution, but I am sure he knows that we will agree to differ.

We on this side accept that this misguided measure is part of the Government's programme. We tried to dissuade them from it; economists tried to educate them against it; business tried to influence them against it; above all, small and medium-sized businesses begged them not to go ahead with it. But all to no avail. Labour were determined to go ahead with it. Why? Not because this measure will create a single job; it will destroy them. Not because it will make life easier for business; it will bind them even tighter in a noose of bureaucracy and regulation. Not because it will make people wealthier; it will make many people poorer by depriving them of work. Why then?

Because of old Labour dogma. This Bill is part and parcel of the deal that still binds the Labour Party to a few powerful unions. Those unions made the minimum wage part of their political mantra. It was first sung in the old socialist anti-enterprise age of Michael Foot and Jack Jones. It is still being sung today in a world that has completely and utterly changed. What a pity that a government, so intent on modernising everything that does not need to be modernised, did not act to modernise this absurd piece of old Labour dogma.

That said, of course we accept that the Government must have this Bill. But we intend to subject it to close and detailed scrutiny in the hope that we may persuade the Government to reduce its impact on business and the low paid, who will be the biggest sufferers. We have heard, in this excellent debate today, many good reasons for altering and reconsidering parts of the Bill. I hope that we shall have a chance to pursue some of those in Committee. But how much we would be helped in this place if we were given some clear indication of what the minimum wage will actually be before Parliament is invited to pass the Bill. This is a bad procedure, as my

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noble friend Lady Miller of Hendon said. I understand that the Low Pay Commission will report in May. Will the Minister therefore give an undertaking to this House in his wind-up that he will report to us on the findings of the Commission and the Government's reaction to it before inviting a Third Reading for the measure before us today?

A minimum wage is not a good way to help the poor. Many low-income earners tend to be on their way to higher paid employment anyway; many others are working part-time for low wages out of choice; they are not the main income earners in a household. As the noble Lord, Lord Harris of High Cross, said, this Bill may deprive earners of getting on the ladder in the first place, and deprive some part-timers of the chance to find any work.

The chairman of the Low Pay Commission admitted, as famously once did the Deputy Prime Minister, that he would be surprised if there were not some job losses. He implied that those jobs might be better lost anyway. Jobs better lost? Someone who has the commitment to take a job must be truly disheartened by such a view coming from someone whose earnings were reported to have been over £200,000 a year. I believe that the way to raise wages is to enhance the success and the profits of employers. That will not be done by adding to burdens on employers and increasing the complexity of taking on new staff.

Look at what happened in France, as my noble friend Lord Bridgeman said. When the noble Lord, Lord McCarthy, mentioned other countries, I noticed that he did not include France in his list of countries which have a minimum wage. There they have a minimum wage of £3.60 per hour, and they have raised the threshold of the wage. But in France the Wall Street Journal reported that real earnings of the lowest-paid 10 per cent. of the workforce rose by only 4 per cent. in the 10 years to 1997, compared with a 13.8 per cent. rise in the same period in unregulated Great Britain. Yet for such little relative gain, the rise in unemployment among the young in France has been truly terrifying. I shudder to think that we should go down that road.

What will be the impact of this measure on public services? Will the Minister undertake to write to me on this before we come to Committee stage? Will he specifically set out how many employees of the health service would be affected by a minimum wage set at £3.70 an hour or £4 an hour? What would be the costs of implementing the minimum wage in the NHS at those levels? Are any sums allowed for a minimum wage in the expenditure plans for the NHS, and, specifically, in the extra money announced by the Chancellor in the Budget last Tuesday? If so, on what level of wage are the Government's plans predicated?

We welcome that the Armed Forces are now exempted from the Bill. That was the result of much pressure, not least from some on these Benches. We understand the exemption also for share fishermen. But, in the light of the fact that the Government have abandoned their commitment to a uniform national wage, will the Minister now consider specific exemptions for small and medium-sized businesses in those sectors of industry most open to shifts in cash flow or to the sudden impact

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of a minimum wage? Will he also undertake to review the draconian enforcement powers and fines proposed for small companies in technical breach of the requirements of this legislation?

Industry as a whole and the millions of businesses that make it up are inherently different. It must be nonsense, I believe, to seek to impose a single minimum wage across all industry in every area. I do feel that I, as a rural village resident, must refer to one matter which does concern me greatly. Perhaps I may give an example of a small delicatessen in a village--very different from a large employer like Tesco. The owner works hard but needs additional help. She consequently employs three people part-time. This is the type of work and the hours that suit them. One is able to walk to work, the second cycles and the third sometimes cycles and sometimes arrives by car. This is their choice. Obviously travel to work for them is inexpensive as none of them has to travel more than one mile, which is very different from those who commute to London. They know that the owner makes just enough profit to keep the business afloat and that any extra financial pressure will in all probability result in the closure of the shop. I know I do not have to remind your Lordships of the dramatic decline in the number of village shops in rural areas and I am desperately alarmed that the implementation of this legislation would result in the demise of thousands of village shops country-wide.

The three employees I have referred to know only too well that the only alternative employment available would involve them in travel of at least 10 miles or so, which means extra expense and extra time away from home. This type of employment is often combined with family responsibility, when time is of the essence. I cannot for the life of me see why employer and employee in these circumstances should not make their own arrangements.

If the Government go ahead with this legislation they will have to accept that business closures will lead to extensive unemployment in country areas. It seems to me, therefore, that, as I have said before, in this Bill we can see that Old Labour is alive and well and that government action will result in elderly people in villages who do not own cars suffering as their local shops disappear in addition to the rise in rural unemployment.

But if the Government are as determined as they seem to be to press ahead with this damaging measure, I beg them to consider carefully and constructively some of the many pleas for moderation and exemptions from this measure that we have heard today and which we on this side will want to explore further as the Bill makes its way through the House. Tonight's debate has highlighted the many issues of concern and set alarm bells ringing. We look forward to scrutinising those issues at the next stage of the Bill.

10.59 p.m.

The Solicitor-General (Lord Falconer of Thoroton): My Lords, I believe that the expectations of my noble friend Lord Clinton-Davis have been fully realised. This debate has been an interesting one and of the highest possible quality. Perhaps I may pay a particular tribute to the noble Baroness, Lady Seccombe. I understand that

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this is the first time that she has wound up such a debate. Perhaps I may say, without any degree of patronisation, what an excellent speech it was.

A number of points have been made in the debate; but I first of all draw attention to the depth and quality of the speeches made in support of the Bill. I refer first to the speech of the noble Baroness, Lady Turner of Camden, who was assistant general-secretary of a union. She brought before the House specific examples of the effect of low, exploitative pay. I refer to the speech of the noble Lord, Lord Wedderburn, who is one of the most distinguished labour lawyers in this country. He went into detail about how people are exploited by way of low wages. He gave chapter and verse of the way they are exploited by low wages brought on them by people in a position to abuse them. I draw attention to the speech of my noble friend Lord Evans of Parkside who gave detailed and personal examples of his impressive history in a shipyard and the consequences of low and exploitative wages there. I draw attention to the speech of my noble friend Lord Thomas of Macclesfield who was the head of a business which employed a large number of people. He made the point with force and authority that employing people and paying them a decent wage means that the employer invests more in the employee and makes him or her more worth training and fitted for the economic society in which we live.

I refer to the speech of my noble friend Lord McCarthy who completely demolished the arguments advanced about job losses. So far as I am concerned, he made my reply almost redundant. The noble Lord is one of the most distinguished industrial economists in the country. I draw attention to the speech of the noble Lord, Lord Davies, who described the struggles that had been made on behalf of the unions to obtain a minimum wage over a long period of time. I draw attention to the speech of the noble Lord, Lord Monkswell, who effectively demolished the arguments advanced about the USA by the noble Baroness, Lady Miller of Hendon.

The speeches drew attention to two particular things. They drew attention to the extent to which people are exploited by the use of low wages. Did anyone on the other side of the House refer to that in their speeches? Not one of them did. The speeches made the second point that if one pays people decent wages, one gets more out of them and the company improves. Did any noble Lord who spoke against the Bill or its detail refer to that point? Not one of them did.

The case for a minimum wage is a case for decency and fairness; but it is also a case for improving employment practices and the quality of the work that is done. That case requires to be met, but it was not addressed for one moment by those who oppose the Bill.

What were the arguments advanced against the minimum wage? The noble Baroness, Lady Miller of Hendon, made very tired arguments sound fresh and exciting. She began with something she described as "the myth of the mandate". She sneered at the Labour Party for doing that which it promised to do in its manifesto. She said that what we had to do in the manifesto was a myth. She told us that she had been

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training canvassers for the past 25 years for the Conservative Party. I dread to think what she told them to say on the doorstep if that is the view she took in relation to the myth of the mandate.

She then referred to the myth of the USA. She simply selected one part of the material relating to the question of whether the minimum wage causes job losses. She said that one can draw no conclusions from the USA. She, like many other speakers, then addressed the issue of job losses. She said that it was plain that if a minimum wage were introduced, there would be job losses. My noble friend Lord McCarthy completely demolished those arguments.

Perhaps I may repeat the highlights in relation to it. In considering whether job losses will be caused, one has to have regard to the rate at which the minimum wage will be set. If it is set at a sensible level, the broad opinion of academics and those who have done research is that it will not cause job losses.

What is the material on which the Conservatives rely to suggest that it will cause job losses? It depends on the day of the week and the particular Conservative to whom one is listening. As my noble friend Lord McCarthy said, sometimes the figure is 975,000; sometimes it is 60,000; sometimes it is 1.6 million, and I have even heard it said that 2 million jobs will be lost. What is the material on which they are relying? They ignore the studies about the effect of the wages councils which showed that they did not have a negative effect on jobs. They ignore the studies of the USA and other countries with minimum wages which show that there are no negative effects on jobs.

The Conservatives rely on figures based on assumptions that they themselves create. The particular favourite at the moment is the 1996 DTI figure which was based on a minimum wage of £4.15 and an assumption that differentials would rise by 50 per cent. right up the hierarchy. As I understand the position of the Conservatives, if there was such a minimum wage, the earnings of the chairman of National Westminster Bank would rise by an appropriate percentage to preserve the differential. With respect to the Conservatives, that is completely bogus. I would respectfully suggest in relation to the issue of job losses that, instead of simply selecting figures that suit a particular prejudice, all the evidence is considered in the round.

The next argument advanced by those opposed to the minimum wage was the question of differentials. They have said that the inevitable effect of introducing a minimum wage is that earnings will increase for all above the lowest paid and right up the scale. They say that that is what the unions would inevitably seek. My noble friend Lord Clinton-Davis, drawing on evidence from a recent report by Income Data Services, effectively demolished the argument that differential rises would occur--no noble Lord has referred to the study of Income Data Services. That argument was simply advanced as a matter of assertion with no evidence whatsoever to support it. There almost certainly will be instances where the pay of a particular group of workers and of their supervisors will both be

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below whatever level is set for the minimum wage. Clearly, in those circumstances the arrival of the minimum wage will entirely wipe out the existing pay differential and will need to be addressed. That can be done only by the employer and workers concerned. However, we do not accept the notion that higher paid workers will queue up for consequential adjustments to their own pay rates. There is no such evidence. People are more concerned with their own pay--

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