Previous Section Back to Table of Contents Lords Hansard Home Page

Noble Lords: Oh!

Lord Clinton-Davis: No, I did not say that!

Perhaps I had better use the word "beguiling" again because it seems to persuade the noble Baroness to withdraw her amendments more readily. Although the noble Baroness moved her amendment so beguilingly, I am afraid that it encounters certain difficulties. The definition of "remuneration" for tax purposes is not the same as that for minimum wage purposes. I shall try to explain why. The natures of the tax regime and of the minimum wage regime are very different. The tax regime examines all forms of income. It is not concerned simply with remuneration as such. It examines the whole range of remuneration and income at all levels. It operates according to a general set of criteria which individuals use to assess their own tax liability. Then, a tax inspector will test the situation

11 Jun 1998 : Column 1257

periodically. What is taxable remuneration in one person's case may turn out not to be taxable in another case or to be taxable at a different rate.

On the other hand, the minimum wage regime will focus purely on remuneration. The intent is to provide a floor; it is not to intervene at all levels of pay. The composition of what will constitute remuneration will be a standard package. I am talking here of it consisting of gross pay or of net pay. Whatever the case, the same rules will apply to all. We are considering the detailed application of the minimum wage in this and other areas in the light of the commission's report.

The amendment would be very prescriptive and require the regulations under Clause 2 to deal with the calculation of remuneration for national minimum wage purposes in a very particular and direct way. As I and my noble and learned friend have said on a number of occasions, we shall consult on draft regulations to be laid before the House in the light of the commission's report. We are dealing here with a very technical matter but a very important one that affects everyone in the low-paying sectors. Employers and employees will want to know precisely what does and does not count as payments for determining compliance with the minimum wage.

We would be very chary of defining "remuneration" in the way suggested in the amendment. We believe that it is inappropriate and that it would lead to the definition of remuneration being changed every time the income tax rules changed. Those rules change frequently. Employers and individuals are obliged to adjust to those changes--sometimes they even become reconciled to them--but it is entirely different to have adjustments of this kind that create uncertainty in the context of the minimum wage, which imposes duties and obligations on employers and creates rights for workers. That unnecessary uncertainty prevents this amendment being helpful. I ask the noble Baroness to consider withdrawing her amendment.

Lord Lyell: Before the Minister sits down, perhaps I may be very naughty. I did not detect much more than a hair's breadth between what he said about remuneration and what was said by my noble friend. He spoke about differing rates of tax and remuneration. I am just an accountant. I am not a lawyer like the noble and learned Lord opposite or my noble and learned friend who has just sat down, let alone an expert like my noble friend on the Front Bench. To me, "remuneration" is "remuneration". Everything that the Minister has said covers remuneration and is perfectly clear. He may have referred to differing rates but he has said nothing about forms of income, whatever they may be called, that do not come within "remuneration" for tax or minimum wage purposes. He spoke of differing rates of remuneration and changes in tax rates but it is still remuneration. I did not detect much between the excellent case argued by the Minister and the pretty good case argued by my noble friend.

Lord Clinton-Davis: The noble Lord is the first accountant I have ever heard to describe himself as "just

11 Jun 1998 : Column 1258

an accountant". I do not believe that he is being naughty. He is perfectly entitled to make a bogus point. I believed that I had categorically set out the substantive differences between my argument and that of the noble Baroness. I do not complain that she makes this point. It is a point which superficially is attractive. But I hope that the noble Lord will do me the honour of reading what I have said and comparing it with the speech of the noble Baroness.

Lord Lyell: I concentrated with all the attention that I could muster. I apologise to the Committee. I rose at three o'clock this morning and I have just flown back from Cyprus. I hope that my faculties are undiminished. I concentrated very hard on what the noble Lord said. I hope that it will be as attractive in writing as his mellifluous way of putting it, even at this late hour and even for me. He put it beautifully. I hope that my point is not a bogus one. I did not detect an awful lot--perhaps it was a little wider than a hair's breadth--between the Minister's case and that put by my noble friend in relation to remuneration. As an accountant, layman or a mere Angus lad I always make a naughty dig at the lawyers, but I shall desist and read what the noble Lord has said. No doubt I shall learn. I hasten to assure the noble Lord that mine was not a bogus point. I may be an accountant but I hope that I am reasonably serious, even this evening.

Lord Clinton-Davis: The noble Lord will not have received what I have said by 3 o'clock tomorrow morning. It will have to be a little later. I am sorry if I have not persuaded him that there was a substantial difference between my approach and that of the noble Baroness. I leave it to him to detect further when he has read my contribution.

Baroness Miller of Hendon: The Minister is in extraordinarily good form this evening. He tempts fate somewhat when he says that I present my amendments in a beguiling way. The more that he says that I am beguiling, the quicker I am to withdraw the amendment. I listened carefully to what the Minister said. I do not agree, but then I am neither a lawyer nor an accountant. The best thing for me to do is to read carefully what he said. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Hendon moved Amendment No. 20:

Page 2, line 22, at end insert--
("except that expenditure made by an employer in respect of training that is wholly or partly attributable to a person shall not be treated as part of that person's remuneration for the purposes of this Act").

The noble Baroness said: This is a probing amendment intended to elicit an answer to a problem raised in the other place on Third Reading. No answer came on that occasion. Now that the Government have had a chance to reflect upon the problem perhaps we can have a clear response.

11 Jun 1998 : Column 1259

As is well known, we are opposed to the principle of a national minimum wage because of the burdens that it will place on industry, with consequential adverse effects on employment. It may therefore seem strange that we propose an amendment, the effect of which will be to add to the costs of employers who provide training for individuals by not permitting those training costs to be treated as part of that employee's wage, despite the fact that the training an employee receives will, it is hoped, benefit him for the rest of his working life.

We have had to ask this question because of the Government's coyness in revealing their intentions as regards the amount and the administrative details of a national minimum wage. Parliament is being forced to legislate on the national minimum wage on the basis of a largely skeleton Bill, when most of the important details will be filled in at some later date in the form of a ministerial order.

Like a stone thrown into a pond, the ripples caused by the Bill will spread into many unexpected quarters for which the Government have not provided any contingency provisions. Training costs, and the consequences of including or excluding them, are such a contingency. The problems regarding training costs are contradictory. They begin with the failure to say whether they will impose a training rate of a national minimum wage on genuine trainees. Presumably it will be a rate lower than the universal rate that the Government will impose elsewhere.

There are two sides to the problem. If the training costs are not counted as part of the national minimum wage, and if there is not a lower training rate of pay, there will be an incentive to potential employees to take up the benefits of a training place. On the other hand, if employers cannot get credit for the cost of training, or even a percentage of the cost of providing the training, against their labour costs, it will be the employers who may be discouraged from incurring the expense.

In the end, employers may find it cheaper to let someone else do the training and to poach the employee as soon as he is qualified. The Government have expended a great deal of rhetoric on the need for a well-trained workforce. Now is the time to come off the fence and to tell us what they mean.

I can speak to Amendment No. 21 briefly as it is a simple amendment. I am sorry for my hesitation but I am having a slight problem because I have had a bit of a nose bleed which has made a bit of a mess on my paper. The amendment is simple in content and in terms of reasonableness and fairness. It provides that if the employer makes a contribution for an employee into a recognised pension fund, and hence for the employee's benefit, then such contribution shall be treated as additional wages enjoyed by that employee.

It is such a logical and obvious provision that it defies any necessity to explain it. One simple fact will serve to illustrate the point. The CBI's evidence to the Low Pay Commission says that pension payments are often worth as much as 10 per cent. of pay. Encouraging private pension arrangements is an important part of the Government's avowed plans to establish a second pension to supplement the state retirement pension.

11 Jun 1998 : Column 1260

Acceptance of the amendment would be evidence of the genuineness of the Government's well publicised utterances on this topic.

However, what is difficult to explain is why the Government have wrapped up all the potential ingredients of what is pay in the mysterious wide-ranging regulatory powers in Clause 2(4). Instead of making their thinking clear and embodying it in this primary legislation, they want power to create a major piece of law by ministerial fiat.

The Government's attitude is that, as with the actual minimum wage, we shall have to wait for the pronouncement of this currently non-statutory body when all will be revealed. At that point, we shall presumably be presented with a fait accompli by the Secretary of State unless she happens to dislike the findings and decides to alter them. In the meantime, we are supposed to discuss this important Act on the basis of abstract principles. I say that because in the debate on Second Reading in another place, my honourable friend the Member for South Cambridgeshire specifically invited Ministers to say whether they wished the Low Pay Commission to treat pension payments by employers as remuneration for the purposes of the national minimum wage. That invitation was not replied to. Therefore we are still none the wiser. I repeat the question to the Minister now. If the Minister cannot or will not answer it at this stage, perhaps he can tell us why not. I beg to move.

10.15 p.m.

Lord Clinton-Davis: I hope that the noble Baroness is now all right. Of course if she requires a short adjournment, we shall certainly accommodate that.

Next Section Back to Table of Contents Lords Hansard Home Page