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Lord Razzall: My Lords, I join the noble Baroness in thanking the Minister for repeating the Statement made in another place. We on the Liberal Democrat Benches agree with the Statement. No one can deny that manifestly the national minimum wage has been one of the achievements of this Government. This is perhaps the moment when noble Lords on the Tory Opposition Benches should admit that they were wrong. When the national minimum wage legislation passed through this House, they forecast that it would have a dramatic effect on employment and spell disaster for large areas of the economy of this country. The report of the Low Pay Commission, not the Government, manifestly demonstrates that that analysis was wrong. It well behoves politicians of all parties when they are wrong to say so.

Certainly, I am prepared to say that I was wrong in relation to the representations to the Government by these Benches about the regional impact of the national minimum wage. We were very concerned that to introduce an across-the-board rate for the minimum wage which applied equally to central London as to Cornwall would have distorting effects on the economies of those different regions. I am delighted that the Low Pay Commission's report demonstrates that our fears were unnecessary. I am particularly delighted by the indication in the report, which the Minister highlighted, that there have been significant regional increases in income as a result of the introduction of the minimum wage. There has been the regional disparity that we feared would not occur.

Having said that, perhaps I can ask the Minister to clarify one or two points. As he knows, and as is clear from these remarks, the Liberal Democrats have fundamentally supported the Government on the introduction of this long-needed provision. First, can I ask him to confirm--I suppose it is a statement of the obvious--that the movement of the minimum rate to £4.10, rising to £4.20, will not bring low-paid employees into the marginal tax rate problem that so bedevilled low-paid employees in the past? In other words, the marginal tax difference between being employed and not being employed was very dramatic

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in relation to unemployment benefit as against low pay. Perhaps the Minister can confirm that the Government have taken that matter on board.

Secondly, I would welcome some clarification on what will happen in October 2002. We can calculate that a £4.10 increase this year is a significant increase over and above the current rate. I enjoyed the reference of the noble Baroness to the pending general election and whether that might have something to do with the issue.

The Minister indicated that the rate will go up to £4.20 next year if economic circumstances permit. Perhaps he can help us on what those economic circumstances might be. An increase from £4.10 to £4.20 as a percentage is so de minimis that he cannot be contemplating that the increase to £4.20 will not happen. Therefore, is he actually saying that if economic circumstances remain buoyant, the rate will go above £4.20, or is he simply saying that the Treasury will never take the view that a year is short enough in politics to be able to give a definitive answer or a definitive commitment? I cannot see any possible prevailing economic circumstances under which £4.20 would not be a minimum appropriate figure if £4.10 is appropriate one year earlier. I would welcome the Minister's views on that matter.

My final point is one that again is consistent with the line that the Liberal Democrat Benches have taken on the Bill. We were very concerned to ensure that the Low Pay Commission stayed in place. The third report of the Low Pay Commission demonstrates the wisdom of having the commission, which in many ways takes the politics, or certainly the partisan politics, out of these issues. Can he confirm that the Low Pay Commission will remain in place and that we can look forward to many more reports from that body?

6.13 p.m.

Lord Sainsbury of Turville: My Lords, I emphasise once again that this was a unanimous report from the Low Pay Commission. It has nothing to do with a general election. We received the report, and it seemed right, having taken a decision on the matter, that we should come to the public and this House and say how we were going to treat it. I am sure that if we had left it until after the general election the noble Baroness would, as usual, have said, "Well, of course you were concealing it during the course of the general election so people didn't know the cost to industry". I am sure she will accept that it has nothing to do with a general election whatsoever.

The costs are quite clear. What the British Chamber of Commerce has in its figures is for it to say. All I need to say at this point is that there are no administrative costs involved in this issue at all. The only costs involved are the costs of paying a decent wage to people. We hope that the British Chamber of Commerce will at some point acknowledge that the national minimum wage figures in their Burden's Barometer are based on the draft regulations back in 1998 before the Government dropped certain administrative requirements. If it cares to correct that point, that would be very helpful.

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Figures of £10 billion have been bandied about. May I emphasise once again that the total administrative costs are about £50 million? The rest is simply the cost of paying additional wages or giving additional holiday pay. If the other parties in this House want to say that they will roll back the national minimum wage or they will change the Working Time Directive, it is their prerogative to do so. But to confuse that with the administrative costs is constantly to try and make something of the administrative costs which is completely inappropriate.

I do not have the answer to what happens with regard to care homes, but I shall write to the noble Baroness to let her know about that particular situation. In answer to a question about the jobs of people who house-sit people's homes for them while they are away, we discussed such subjects when we introduced the national minimum wage. It was said then that all kinds of jobs would disappear. That has not proved to be the case.

So far as concerns this Government's record on unemployment in the past three years compared with the last three years of the previous government, again I do not have the figures. However, I shall be very happy to write to the noble Baroness, but I do not believe that they are totally relevant. The argument always was that there would be a sharp rise in unemployment because the national minimum wage existed. The Low Pay Commission has made it very clear that that has not happened.

I do not have the answer to the question on the marginal tax rate and how this minimum wage impacts on it. I shall write to the noble Lord, Lord Razzall, on that matter. I agree with him that it is very unlikely that there will be circumstances in which we might not want to go ahead with the £4.20 rate. But it seems right, in giving industry warning of this increase, also to be cautious and prudent and to say that if there are economic changes, it will be looked at again.

I can confirm that the Low Pay Commission will stay in place. Its latest report is a further example of how extremely valuable it is to have an independent body. It has done a great deal of work on this matter and has produced an excellent and very fair report.

6.18 p.m.

Lord Lea of Crondall: My Lords, does my noble friend agree that this welcome announcement demonstrates that the regular reporting from the Low Pay Commission--a consensus body with representatives of trade unions and employers--has stood the test of time? Although this announcement is not timed to do with any general election, nevertheless, it has been a notable achievement of the Government to get the rate up to £4.00. That was, I remember, at one stage, thought to be a far-fetched campaigning objective of the trade union movement.

Does my noble friend also agree that it is particularly welcome that the emphasis is consistent with the idea that opportunities at work are relevant and a key to dealing with the problem of endemic

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poverty, both in particular regions of the country and among those under-privileged sections of society and people who have normally taken the most low paid and menial jobs?

Lord Sainsbury of Turville: My Lords, I agree with my noble friend that the Low Pay Commission has done a remarkably good job. It has looked at issues that are always of great concern to government; for example, whether it would lead to a rise in unemployment or bear heavily on particular industries with low wages and therefore create unemployment. The Low Pay Commission has done that in a very detailed and fair way and its advice has been extremely helpful.

As the Secretary of State made clear in the Statement, it is fundamental to make work pay for people because that is the best way to deal with poverty. It is important, therefore, that the national minimum wage is not seen as a one-off increase, which is then allowed to wither away. It should be kept in line with the growth in earnings.

Baroness Hogg: My Lords, I apologise to the Minister for having missed the first part of his Statement: my desk, I am afraid, is in the rather far-flung territory of Abbey Gardens. However, I am reasonably confident that he has not dealt with the point I wished to put to him, as it is an example of where the right and left hands of government are not working entirely well together.

As I am sure the Minister is aware, the Inland Revenue runs a simplified deduction scheme for employers with one or two employees, but it is available only if they pay less than £160 a week to an employee. This figure is wholly out of date and becoming more so with every movement in the minimum wage; and indeed it has been out of date for some time for those who wish to pay rather more above this level. Will the Minister look at this figure to see whether he can lift the burden of filling in a number of forms which are more appropriate to a supermarket than to small employees in the economy?


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