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Draft National Minimum Wage (Amendment) Regulations 2022

Debated on Thursday 10 March 2022

The Committee consisted of the following Members:

Chair: Dr Rupa Huq

† Afolami, Bim (Hitchin and Harpenden) (Con)

† Bristow, Paul (Peterborough) (Con)

† Fletcher, Mark (Bolsover) (Con)

† Gray, James (North Wiltshire) (Con)

† Green, Chris (Bolton West) (Con)

† Greenwood, Lilian (Nottingham South) (Lab)

† Holden, Mr Richard (North West Durham) (Con)

† Hollern, Kate (Blackburn) (Lab)

Johnson, Dame Diana (Kingston upon Hull North) (Lab)

† Johnson, Gareth (Dartford) (Con)

Jones, Mr Kevan (North Durham) (Lab)

† Madders, Justin (Ellesmere Port and Neston) (Lab)

† Mortimer, Jill (Hartlepool) (Con)

† Scully, Paul (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy)

† Stephens, Chris (Glasgow South West) (SNP)

† Webb, Suzanne (Stourbridge) (Con)

† Winter, Beth (Cynon Valley) (Lab)

Katya Cassidy, Jonathan Edwards, Committee Clerks

† attended the Committee

Eighth Delegated Legislation Committee

Thursday 10 March 2022

[Dr Rupa Huq in the Chair]

Draft National Minimum Wage (Amendment) Regulations 2022

I beg to move,

That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2022.

It is a pleasure to serve under your chairmanship, Dr Huq. The purpose of the regulations is to raise the national living wage and national minimum wage rates on 1 April 2022.

We should be proud of the labour market’s recovery from the pandemic. In the UK, the current number of payroll employees is over 400,000 more than pre-pandemic levels, while unemployment has fallen to 4.1%. That is in no small part down to Government intervention in protecting jobs and livelihoods, ensuring that businesses can get back to working with their customers, increasing footfall, and getting back to a sense of normality so that they can go through the gears. On the economic recovery, GDP recovered to the pre-pandemic level at the end of 2021 and increased by an estimated 7.5% over the year.

However, we are aware, clearly, that a key issue on people’s minds is the cost of living. We have already acted to support households with rising energy bills. We recently announced a package of measures worth £9.1 billion in the coming financial year, including a £200 reduction in energy bills and a £150 rebate in council tax bills for all households in bands A to D in England. That is in addition to measures already announced, such as the universal credit taper rate and freezing fuel duty for the 12th year running.

We are committed, in our recovery, to supporting the lowest paid. We cannot have a recovery off the backs of the lowest paid. Since 2015, we have increased the national living wage significantly faster than average wages, and more than twice as fast as inflation, meaning more money for the lowest-paid workers. An increase in rates this year will continue to protect the lowest paid against the increase in the cost of living.

The regulations will increase the minimum wage rates from 1 April. We estimate that that will give a pay rise to around 2.5 million workers, and I am delighted to say that we accepted all the rate recommendations made by the Low Pay Commission in October 2021. The independent Low Pay Commission brings together the business and worker stakeholder views, informed by expert research and economic analysis, and I am grateful for its well-informed recommendations and the work it has done to reach them.

We have set a target for the national living wage to equal two thirds of median earnings by 2024. When the Low Pay Commission made its recommendations last October, it took into consideration that target and the strong economic and labour market recovery—to that point—as well as the remaining uncertainty and feedback from the wide range of stakeholders it spoke to and engaged with.

We are pleased that the increase keeps us on track to reach the target for 2024, which we remain committed to. The LPC’s recommendations are based on significant stakeholder evidence from business, worker, and academic representatives. Businesses told it about the concerns they face, at this stage of the recovery, and how they continued to plan for the future, based on our target for the national living wage.

I thank the Minister for giving way. May I congratulate the Government on being able to increase the national minimum wage in this way? It is extremely good news. However, I feel that the figures, which the commission came up with, are a little odd. Would it not be easier, from the point of view of a worker or apprentice, if the figure was rounded, so they would know that they were getting £8.90 or £5.20—or whatever it might be—rather than these rather odd, random figures?

The figures are based, as I said, first on the evidence, weighing the benefits for the lowest paid with the increased cost pressures on business. Of course, it is not only for the minimum wage or living wage itself, but pushing the differentials up for other people who are slightly further up the chain. I suppose that we could make the argument, “Do you want a rounded percentage or a rounded cost?”

Having had that evidence, there is then, effectively, a negotiation between the employers’ and workers’ representatives on the commission. They then come up with that recommendation, in between, of what they feel the economy can bear. It is not always rounded—clearly, that would be easier for everybody concerned—but we do not always allow perfection to be the enemy of the good. I think we have come up with something that is good for low-paid workers and for keeping to the manifesto commitment.

The national living wage for those aged 23 increasing by 6.6% to £9.50 is an increase of 59p. A full-time worker will be more than £1,000 better off over the course of the year. The regulations also increase the rates for younger workers and apprentices, and the accommodation offset, so workers aged 21 and 22 will receive an increase of 82p an hour to a minimum hourly rate of £9.18. Workers aged 18 to 20 will be entitled to an extra 27p an hour, taking their rate to £6.83. Under-18s will have an increase of 19p to an hourly rate of £4.81, and apprentices aged under 19, or those in the first year of their apprenticeship, will receive an increase of 11.9% to an hourly rate of £4.81—51p more.

I will announce another change to the regulations that we will shortly bring forward. Last year, we asked the Low Pay Commission to gather evidence on the use of the live-in domestic worker exemption to minimum wage entitlement, which exempts employers from having to pay the minimum wage to workers who live in the employer’s home and are treated as part of the family, such as au pairs. The Low Pay Commission heard evidence from au pairs, domestic workers, and agencies for those workers. The commission concluded that the exemption is not fit for purpose, and recommended that it be removed. We have accepted that recommendation, and will introduce legislation to remove the live-in domestic worker exemption when parliamentary time allows.

We have pledged to continue raising the minimum wage in the coming years. As I mentioned, our manifesto includes a target for the national living wage to reach two thirds of medium earnings by 2024.

The Minister talked a lot about consultation with business, but he will be aware that some businesses do not comply with the legislation. Can he tell us a bit more about that, what the Government are doing to invest to ensure that their national minimum wage compliance unit is fully staffed, and whether there will be any approach to increase staffing in that area?

I thank the hon. Gentleman. Enforcement, which is covered by Her Majesty’s Revenue and Customs, is clearly really important. We work closely with HMRC to ensure that it is resourced to enforce in this area. We will also look at a single enforcement body, as part of our wider work. One of the things that it will look at, in a number of enforcement areas, is the national minimum wage and the national living wage. Clearly, that will bring even more experience and resource to bear for it to enforce in this area, along with a number of other areas that businesses may be encroaching on. That is really important, because if a business is falling short in one area there is every chance that it is falling short in other areas as well. By bringing those enforcement regimes to a single enforcement body, it will be more effective and efficient, and it will be able to drive out poor behaviour by employers.

We understand the difficulties faced by business, workers and consumers at the moment, and our targets remain dependent on the economic circumstances, but we will continue to monitor the labour market. The draft regulations ensure that the lowest-paid workers are fairly rewarded for their valuable contribution to the economy. We will continue to monitor the impacts of increasing the national minimum wage, and will remain abreast of concerns on the cost of living. We will shortly publish this year’s remit to the Low Pay Commission, asking it to provide recommendations for new minimum wage rates to apply from April 2023. In the meantime, I commend the draft regulations to the Committee.

It is a pleasure to see you in the Chair, Dr Huq. I am grateful to the Minister for setting out the draft regulations. As he said, their purpose is to amend the National Minimum Wage Regulations 2015 to increase the single main hourly rate of the national living wage, which applies to people aged 23 or over, and to increase the national minimum wage for those aged 21 or over, those aged 18 or over, those under 18, and apprentices who are under the age of 19 or in the first year of their apprenticeship. As the Minister said, the draft regulations also increase the maximum daily amount for living accommodation, known as the accommodation offset rate, which is counted towards pay for the purpose of calculating whether the minimum wage has been met.

The regulations are not contentious and we will not be opposing them today. Any rise in the minimum wage is welcome. That is not to say that there are not areas where we think more could be done and more progress made. It is also fair to say—this is not a criticism of the Minister—that the rates were set before the current inflationary pressures that we have been talking about over the last few weeks emerged.

We recognise that the regulations provide for different rates of national minimum wage for different age groups, at the recommendation of the Low Pay Commission. We note that there is an above-inflation rise for 21 and 22-year-olds and apprentices. However, conversely, the rise is below inflation for those aged 18 to 20 and those under the age of 18.

We also note the Government have retained the age limit, which we think fails to acknowledge that those under 23 face many of the same pressures as those over 23. Many have to pay rent and other bills, and buy food and fuel. Those costs are not cheaper just because a person is younger. Perhaps the Minister can set out why it is still the Government’s position that those between 18 and 20 should be paid a far lower rate than those aged 21 for exactly the same work, and even less than those aged 23 and over. The impact assessment for the regulations notes that the roll-out of the main rate for those aged between 23 and 25 has gone smoothly, so I would be interested to hear from the Minister whether he will consider extending that rate in the light of the progress made so far.

The Opposition value the contribution of people in work equally, regardless of their age. We believe their value to society and the economy is worth the full rate of the national minimum wage; it is time that everyone was paid the same rate for the same job. There are increases in the cost of living and the pressures faced by people in work. One in six working households are in poverty. Despite increases in the minimum wage, we have had a decade of stagnation—debts have been running up and savings have gone down. Millions of people are unable to deal with an unexpected loss of income or an unexpected one-off payment, and are in a very precarious economic situation.

Of course, none of this helps those who are self-employed—almost half of whom, according to the TUC, do not earn the minimum wage. There is an argument, for another time, about whether all those who are self-employed are genuinely self-employed or whether they should be classed in another category.

As the hon. Member for Glasgow South West noted, not everyone who is entitled to it receives the national minimum wage. Underpaying remains a serious problem, particularly in certain sectors of the economy such as the care sector. Employers continue to find ways to cheat their workers out of pay. The Government’s list of shame, which came out at the end of last year, of minimum wage transgressors showed the care sector along with hospitality and retail as the main sectors where transgressions took place.

I note the Government have finally appointed a new director of labour market enforcement, 10 months after the departure of her predecessor. The Government have said part of that role will be to oversee an annual assessment of the scale and nature of non-compliance in the labour market. I know the new postholder has only been in the job for three months, but I hope the Minister can set out in his reply what work has been done on that matter to date and what level of detail the assessment will entail.

As I have mentioned, in December last year the Government named and shamed 208 employers who were failing to pay their workers the national living wage or the national minimum wage. Those employers were found to have breached the law to the total of £1.2 million, leaving some 12,000 workers out of pocket. Of course, not all those underpayments will be intentional, but there can be no excuse for underpaying workers. Some of those employers included such well-known high street names as House of Fraser and Waterstones, and I am sorry to say that even Lancashire County Cricket Club appeared on the list. Those are not fledgling companies that can say that they were not aware of the legislation. There really can be no excuse for such long-established employers failing to pay the right amount to their staff.

I note that on the list there are some companies that are well known for contracting with the public sector, such as Mitie and Greencore. Those are not fledgling organisations either, and they really ought to know better. The question for the Minister is whether he thinks that Government ought to be doing better. Why should minimum wage transgressors be allowed to pick up contracts from the Government, the NHS or any other part of the public sector? Does he agree that we really ought not to be rewarding that type of behaviour?

I wonder whether the Minister has had any thoughts on the geographical spread of those found to have broken the regulations. The top regions on the list were the east midlands, London and the north-west, in that order. Does that mean there is a particular problem in those regions, or does it mean that people in those regions are more willing to report issues? I would be grateful to hear the Minister’s reflections on that. It is also worth noting that the investigations referred to in the report were concluded between 2014 and 2019, so some of the breaches that appeared on the list were up to eight years old. I wonder why it has taken so long to conclude the investigations.

It is right that we call out those who are in the wrong, but we need to go further. This would be an opportune point at which to hear from the Minister about the progress in the Government’s own consultation. The “Good Work Plan” established a new single enforcement body for employment rights. The Minister will know that three quarters of respondents to the consultation for that plan supported a balanced approach to enforcement, based on compliance and deterrence.

It was also noted in the consultation that there was support for a compliance notice system for less serious breaches, giving employers a fixed period of time to take corrective action before further measures, such as the issuing of a fixed notice, are taken. Even the TUC has agreed that there should be greater use of labour market enforcement orders and undertakings, recognising that they form an important bridge between informal action and official prosecutions.

When the Minister responds, can he tell us how many enforcement orders have been issued? If he cannot tell us that today, perhaps he can write to me with that information. Can he also tell us how many undertakings have been given by employers, how many undertakings have been breached subsequently, and how many prosecutions have followed when undertakings have failed? It is important that stronger sanctions are imposed as a deterrent. Some of these fines are for only a few thousand pounds, and it does not seem as though there are many prosecutions, either. Finally, when will the single enforcement body that has been promised so often end up on the Order Paper as part of some legislation?

We want to build a Britain where everyone in every part of the country, regardless of their background, can get a good quality job that provides security, treats them fairly and pays them a proper wage to enable them to live a good life.

It is a pleasure to see a friend of the worker in the Chair, Dr Huq.

I thank the Minister for his presentation, and I will make a number of points. First, the so-called national living wage is no such thing. The Scottish Government promote the real living wage, which is set by the Living Wage Foundation and which is £9.90 an hour; you will be aware, Dr Huq, that in London it is £11.05 an hour. Although there is a suggestion that the Government have introduced a living wage, it is not a real living wage.

Setting minimum wage rates appropriately is important because workers spend their wages in the wider economy, so there is a boost. I noticed that the Minister did not develop that point, but businesses have an interest in ensuring that there is an adequate minimum wage rate level, because workers spend that money in the private sector and use it when they can.

The reality is that in-work poverty remains the norm and is on the rise. One other way of helping to tackle in-work poverty, in addition to the national minimum wage rates, would be the much-promised employment Bill. We have been waiting for it for four years, so perhaps the Minister can tell us where it is, and whether it remains a priority for the Government to help workers in the gig economy, where work is traditionally low paid and where there is, I am afraid, a lack of enforcement of minimum wage rates.

I want to develop the points made by my fellow Glaswegian, the hon. Member for North Wiltshire, regarding some of the figures. I have been and remain concerned about the age discrimination that goes on in the national minimum wage rates, and they do look peculiar as they have been presented. Perhaps the Minister can explain why, for example, a 17-year-old could be working in McDonald’s flipping hamburgers next to a 37-year-old who was doing the same job but would be paid a different rate. Both are participants in the labour market and they are doing the same job, but with vastly different wage rates. I am not sure that that is sustainable going forward.

Perhaps the Minister can also explain why some wage rates seem to be getting a low increase—in fact, some of the increases are lower than the price of a Freddo bar—while others are getting a big increase. There does seem to be a presentational difficulty with what the Minister has put forward. I would be obliged if he could write to the Committee to explain why for some wage rates the increase is 9.8%, for example, and for some it is 4.1%. I am sure that apprentices will welcome their increase, because that is something that we have raised before.

Could the Minister also write to the Committee on the current number of vacancies in the national minimum wage compliance unit and the actual numbers employed by that unit? I am concerned that according to the last figures that I saw, in a parliamentary answer, the numbers employed by the state in the national minimum wage compliance unit are a tenth of those chasing social security fraud. I think that ensuring that we have a good and robust national minimum wage compliance unit will help more workers in the economy.

My last question for the Minister is this. We are obviously in a cost of living crisis. He has today presented figures for April onwards, but he will be aware of the forecasts that inflation could increase within the next year, so what scope does he have to review the minimum wage rates still further? Is he in a position to look at those wage rates and increase them further, or is it possible that he may be in a position to do so in the next financial year? I ask because that may very well be required in the cost of living crisis.

I conclude by reminding the Minister of the words that we heard yesterday at the Select Committee on Work and Pensions, of which I am a member, from the great writer and author Jack Monroe about the consequences of the cost of living crisis. I would hope that every Minister has placed those words in their offices and on their walls, so that they know exactly what they need to do going forward.

Order. Both Opposition speeches went a little out of scope of the regulations. I am very nice, so I let that go, but we are talking about just these regulations. Would anyone else like to say anything else? No. In that case, I call Minister Paul Scully to respond.

Thank you, Dr Huq, and I thank hon. Members for their contributions to this debate. The national minimum wage and the national living wage will make, and do make, a real difference to millions of workers across the country. The increase will be welcomed, I am sure, by the people who see a real, tangible benefit. Undoubtedly, as the hon. Member for Glasgow South West said, we have the ongoing cost of living issues, and we need to look at the measures in the round, but as you rightly say, Dr Huq, we do not want to go out of scope of the measure being debated. It is therefore important that in other debates we can look at support measures for everybody, but especially for the most vulnerable in our society. We can do that in other fiscal events and in other places, with other measures that we have. However, I am glad that there is agreement that the lowest-paid workers in this country deserve a pay rise, which will help to protect them from rising inflation and protect their standard of living.

This year’s change means that on 1 April, workers on the national living wage will be earning more than £5,000 more than they did in 2015, when the policy was first announced. Younger workers will also get more money through the increases to the other national minimum wage rates. There were a number of questions about the differentials between those. The apprenticeship figures were a lot higher because we are gradually aligning them with the under-18 rate, which was preannounced by the LPC back in 2020. It has given businesses the opportunity to become aware of that and to factor it into their cash flows, for the reasons that I have given.

Let me address the point about the differentials for people doing the same job—the example was flipping burgers. Young people have a competitive disadvantage when entering the labour market because of their lack of work experience, and because they have less knowledge of the area. They may have lower productivity while they are being trained and learning the job, and employers may need to provide additional training. Any minimum wage structure has to recognise and reflect that, because if we do not have that within the system, some employers may well be unwilling to give young people those critical first opportunities that are really important for them. None the less, we are starting to align more of the age group’s living wage to make sure that we can flatten it as much as possible, and we continue to monitor economic conditions.

We are indeed more cautious about increasing wages for younger people, but for the right reasons. We want to make sure that they get paid as much as possible, but we also want to make sure that they are in work. At the end of the day, the cost of living situation is far easier to face if people are in work in the first place, although it is still a challenge. What we do not want to do is to stifle our productivity. We do not want to stifle our recovery, which is one of the reasons why we have more people on payroll now than we did pre pandemic. That is a testament to our plan for jobs and growth.

The hon. Member for Ellesmere Port and Neston talked about enforcement and naming and shaming. Some cases can be incredibly complicated to go through and can involve quite technical breaches. None the less, it is right that we do not exclude companies from being named and shamed because of ignorance of the law, but it can sometimes take a while to enforce. Bear in mind that we paused the naming and shaming process throughout the early stages of the pandemic, and we are now effectively playing catch-up with some of those cases.

I am grateful to the Minister for giving way. I appreciate that sometimes these things are quite technical, but it has been eight years. What is the reason why it has taken so long for some of the cases to be published?

As I say, some of that was the pausing of the naming and shaming, and we are effectively playing catch-up on that.

On the percentage points that the hon. Member for Glasgow South West talked about, he asked whether I would write to him, but I recommend that he looks at the Low Pay Commission report, which details how the LPC came up with them. That content is already there. There are 400 full-time equivalents in the enforcement area of the national minimum wage under HMRC, but I will certainly look into the vacancies and fill in any more detail for the Committee in writing.

I think I have covered most of the points that have been raised.

I do apologise, but I think the only thing that has not yet been covered is whether the Government are keeping the minimum wage rates under review for the next year because of what is happening with the cost of living crisis.

It is difficult to do mid-year, but there will be other fiscal events, and there are other areas of support for people during the cost of living crisis. At the moment, we are going through the process of setting the remit for the Low Pay Commission to consider. It is doing a lot of evidence work now. April and May are usually its busiest time for gathering evidence, which it then considers. The LPC effectively goes away on retreat in the autumn to have those negotiations, and we usually announce the figures in October so that they are ready to start in the next financial year. It is difficult to get something substantive mid-financial year, but, as I say, there is always scope for us to look at how we can work through the cost of living crisis and pressures, which will invariably increase.

We all know that with Putin’s war, he has inflicted misery on Ukraine, and it is right that we support Ukrainians and stand steadfast with them. Hon. Members will have seen the increase in sanctions this morning, and they will inevitably have an effect on us. That is the price we are paying for Putin’s war and for freedom, frankly, and we have to acknowledge and face up to that. We will certainly see what we can do in the round, whether it is on energy, inflation or supply chains. However, I am going slightly off on a tangent, and I do not want to push that too far.

Once again, I put on the record my thanks to the Low Pay Commission for the evidence gathering that it performs and the way it works to get a consensus between employers’ representatives and workers’ representatives, which is not always easy. The LPC believed that it would face a particular challenge this year, but it came up with a really good settlement that will benefit millions of people up and down this country. I am looking forward to receiving the Low Pay Commission’s recommendations for 2023 later this year, but in the meantime I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2022.

Committee rose.