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Baroness Farrington of Ribbleton: My Lords, I beg to move that the House do adjourn during pleasure for three minutes. I suggest that the House reconvenes at 8.52 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 8.49 to 8.52 p.m.]

National Minimum Wage Bill

House again in Committee on Clause 1.

Baroness Seccombe moved Amendment No. 6:

Page 1, line 15, leave out ("single").

The noble Baroness said: Before I speak to the amendment, I wish to refer to the fact that we had Second Reading before Easter. Some of the amendments were tabled, and, once again, I have to say how sad and unhelpful it has been not to have had the details of the Low Pay Unit Report.

This evening I wish to speak to Amendments Nos. 6, 7, 14, 15 and 16. The purpose of Amendments Nos. 6, 7, 15 and 16 is to explore whether there should be more than one wage rate. We on these Benches have serious reservations as to whether a single rate is appropriate in every case.

Areas of the UK differ widely. One national wage would have varying effects on large and small firms. Of course it is simpler to have only one wage rate, but, as we know, the cost of living varies in different parts of

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the country. My honourable friend the Member for Daventry in another place quoted from the evidence that the CBI gave to the Low Pay Commission when he said that in Greater London 15 per cent. of employees earn under £4 an hour, while in South Yorkshire the figure is 35 per cent. I am sure that many noble Lords appreciate the higher cost of living, especially commuting, in London.

Many other areas could be taken into account under the amendment; for example, those who work in the catering industry and who receive non-monetary benefits in kind. It is always the smaller business employer who is hit by this type of legislation. As he builds up a business an employer often takes for himself less than the minimum wage. Small businesses have been the fastest growing sector. That is a fact which, I understand, has been much welcomed by new Labour, but, sadly, in the Bill we see the hand of old Labour as it proposes to price jobs out of the market in the very areas in which we need them.

The rigidity of one national minimum wage will be detrimental to one group or another. If it is fixed at a level which will not damage the economy of, say, the south-west, it will be so low that it will be of no benefit to the south-east. If, however, it is levied at a rate that lifts low wages in the south-east, it will result in significant and probably unsustainable costs on small firms in the less prosperous regions. I hope that the Minister will accept the conundrum and have an encouraging answer.

I move now to Amendment No. 14 which is a probing amendment. It relates to the two words "what is". I cannot understand why those words are included, because they do not seem to add anything, unless there is some special significance in them which is not apparent. Perhaps the Minister will tell us, or for the purpose of any future litigation disclaim, the significance. The words add nothing to the clause which reads equally well either with or without them. "Equally well" is not correct, because the clause reads badly. It is a convoluted piece of legalese. It would be easier to read the clause if it used the same words but in a different order; for example:

    "The Secretary of State may by regulations make provision for determining for the purposes of this Act the hourly rate at which a person is to be regarded as being remunerated by his employer in respect of his work in any pay reference period".

In that way, the words "regarded" and "remunerated" which are the objectives of the clause are close to each other, and not separated by unnecessary parenthesis. However, I suppose that we are not here to discuss grammar. As I have already said, we need to know the significance of the two words, if they are not mere tautology. I beg to move.

Lord Newby: We on these Benches have associated ourselves with Amendments Nos. 6 and 7. Logically, we might have associated ourselves with Amendments Nos. 15 and 16 because such amendments are required if more than a single minimum wage is to apply in all circumstances. Some noble Lords will be aware that in another place and elsewhere we have argued that the issue of regional variations in the rate should be looked

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at seriously. As it stands, the Bill appears to rule out any such variation, not as a matter of policy, but just because the legislation is in the singular rather than in the plural.

In the light of the stories which have appeared about the Low Pay Unit proposing two minimum wages--one applying to those over 21 and one applying to those aged between 18 and 21--the Government will need to make a similar amendment to allow for two minimum wages to come into force.

Lord Monson: Although I agree with all the amendments in the group, I commend, particularly, Amendment No. 14. Alas, Lord Airedale, is no longer with us to swoop like a hawk from the Liberal Democrat Benches upon bad grammar or sloppy drafting in Bills. I agree strongly with the noble Baroness that the words "what is" are inelegant and redundant. I hope that the Government will at least agree to remove those two words.

The Solicitor-General (Lord Falconer of Thoroton): This grouping brings together a set of amendments which attack the principle of the minimum wage being a single rate. As the noble Baroness and the noble Lord, Lord Monson, made clear, it draws attention to what may be a drafting point rather than anything else. I refer to the words "what is" to which I shall come in a moment.

First, perhaps I may deal with the noble Baroness's preliminary observations about the absence of the Low Pay Unit's report. As the noble Baroness, Lady Seccombe, will be aware, the effect of the Bill is to permit the Government, after receiving the report of the Low Pay Commission, to fix a national minimum wage. It also permits the Government in the future by secondary legislation to change the national minimum wage. We are dealing here therefore with a Bill which provides a framework in which the national minimum wage is to be set now and in the future.

I should have thought--I could be wrong--that if it is a framework for the future, the examination of the Bill by this House would require examination, in effect, of the framework, and that that is what the process of examination would concentrate on. Although certain advice will be given by the Low Pay Commission, it might not be the same advice that it would give on a subsequent occasion.

At present I am somewhat surprised by the number of times noble Lords opposite have made the point about the absence of the Low Pay Commission's report. I am not entirely clear at the moment about the extent to which that has affected the amount of examination that they think the Bill requires. No doubt when the noble Baroness determines what to do about the amendment she will say what effect she believes it has in relation to the examination of the Bill.

I return to the substance of the amendment. I am glad to be given the opportunity of defending the principle of a national minimum wage, and a single national minimum wage. As has been made clear in another place, and was made clear during the course of the

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Second Reading debate, a single national minimum wage is a fundamental principle of the Bill. A single rate is easier to understand, and fairer and easier to enforce. The Bill provides some limited flexibility to take account of the recommendations of the Low Pay Commission. For example, the Bill provides for the possibility of a youth rate or a rate for trainees. But the flexibility is strictly limited.

I believe that there is great virtue in simplicity. The simpler we can make the provision, the simpler and more effective the Bill will be. People will know what their rights are. There will be no difficulty in understanding their minimum wage entitlement; and there will be no over-complexity which might lessen the effect of the Bill.

I do not think that I need to refer to the detail of Amendments Nos. 6 and 7. They are intended to remove the reference to a single rate in Clause 1. The noble Baroness made absolutely clear why she wished to remove that reference. She believes that there should be the ability to have differential rates. As I have indicated, the Government do not believe that a multitude of regional, sectoral or other minimum wages is the right approach. It is neither sensible nor justifiable intellectually.

I deal with examples that the noble Baroness gave. First, on variation by region or sector we need to establish a general floor under all wages, not different floors for different types of workers in different places. If we had different regional rates, there would be advantages to being in some parts of the country rather than others. There would be disadvantages for the employees in some parts of the country. Those people would be stuck on lower pay than others in other parts of the country. The proposal gives power to set a number of different rates. There could be different rates in Wales from those in Northumberland. Regional rates, quite simply, would be unfair and would not work. They would be unfair because they would not discriminate purely by where you live or work. What would one use to determine it? Is it where a worker lives or where he works? The potential for complication and bureaucracy is enormous.

Regional rates throw up anomalies for employers as well as workers. Employers in low minimum wage areas could gain a competitive advantage over those in higher areas--in the extreme case, this could encourage clustering of low paid employment in certain areas.

The noble Baroness, Lady Seccombe, referred to the fact that the cost of living is different in different parts of the country. Of course it is. But that is a factor that the Low Pay Commission can take into account in determining the national minimum wage and the Government can take into account in determining the level at which they set the rate.

Having put forward her case in relation to regional differentials, the noble Baroness then moved to sectoral differentials. I suppose we would have to have rules for deciding which sector each worker's job was in. The labour market is developing rapidly, as we all know. One has only to look at the sectoral divisions drawn up in former years to see how quickly they can lose much of their relevance.

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Defining the sectors would not be easy and many workers and their employers would inevitably be uncertain about which sector their job is actually in. Many jobs will seem to be in more than one sector. Some may seem not to fall into any particular sector. Again--I say with respect to the noble Baroness--this is a recipe for bureaucracy, confusion and complication.

There are further difficult questions. How would a regional or sectoral rate be enforced? For businesses with employees who live or work in more than one region, there would be huge complications in knowing whether they were complying with the statutory minimum for each employee.

The same goes for those businesses--and there are an enormous number of them--whose activities and workers cover more than one sector of employment. Is that really what the noble Baroness wants--a great bureaucracy placing burdens on employers and providing uncertainty and a lack of simplicity for the employee?

The noble Baroness then turned to the variation of the size of the business. We have heard that smaller businesses should be exempt from the national minimum wage or be allowed to pay lower rates than their larger rivals. Why should large firms be vulnerable to undercutting by a small minority who by paying poverty wages may be able to keep costs artificially low?

Of course we are aware of the situation of small firms and their importance to the economy. We value that contribution and understand the importance of it to the economy. That is why we asked the Low Pay Commission to have regard to the position of small firms in coming to its recommendations on the national minimum wage. I do not, therefore, believe that there is any reason to distinguish on the grounds of size of firm in the Bill or under the regulations.

On a wider level, differentiation according to size of business could be unfair and could potentially distort the structure of competition. It might even lead to fragmentation of businesses into smaller units simply to avoid paying the national minimum wage. There would be less incentive to achieve economies of scale through growth.

I come back to the point I started with. We believe that a single national rate is the fairest, simplest and most easily enforceable approach. It keeps things clear cut and cuts out unnecessary complications.

That deals with Amendments Nos. 6 and 7. I hope we have made our position clear in relation to those. I now turn to Amendments Nos. 14 to 16 with which I can deal more shortly.

These amendments are similar in their effect to Amendments Nos. 6 and 7. They are all linked or consequential amendments to do with replacing references to a single rate with references to more than one rate. Taken singly or together, the amendments would fundamentally alter the effect of Clause 2. By removing references to a single national minimum wage,

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the amendments attack the fundamental principle behind the Bill. I have covered that in what I said in relation to Amendments Nos 6 and 7.

My main point in relation to Amendments Nos. 14, 15 and 16 is simply to make clear that their effect would be rather different from the effect of Amendments Nos. 6 and 7. While the latter are to do with the setting of the rate, Amendments Nos. 14, 15 and 16 are aimed at the calculation of pay for minimum wage purposes--that is to say, the subject of Clause 2. However, they would lead to a similarly odd result by providing in principle for different rates of pay to be calculated--for example, according to region, sector or size of firm.

I hope that I have explained sufficiently why we need a single rate of minimum wage. For the same reasons, we need to ensure that there are no variations in the calculation of pay. That is to say, if a particular benefit can count as payment towards the minimum wage in East Anglia, it should also be able to count towards payment of the minimum in Wales. Any other approach is unfair and would lead to absurdity's.

That covers every point except for the point made by both the noble Baroness and the noble Lord, Lord Monson, concerning the words "what is". The general view expressed by the two people who spoke is that this is not a very elegant form of drafting.

When I looked at it, after the point was made, I thought that the words "what is" probably did not have much effect on the meaning of the Bill. That was my impression. I am glad to say that those in the Box take the same view. It probably means nothing different without those words, but it could hardly be said to be ungrammatical. The advantage is that, taken with the words "is to be regarded" they emphasise that the calculation contemplated concerns what is to count in determining whether the single hourly rate has been paid. Obviously, it is a matter of opinion, but there is a good case that the sub-section is clearer with those words than without them.

I shall certainly undertake to consider carefully the points made about the elegance of the drafting. To be honest, I do not think that there is any point of principle on this matter.

I hope that, in the light of the rather laborious explanation which I have given, the noble Baroness will feel minded to withdraw her amendments.

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