rose to move, That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2008.
The noble Baroness said: The minimum wage is a key protection for the UK’s workers that provides a floor for workers while protecting business through a level playing field without competition on the basis simply of low pay. The regulations will increase the national minimum wage rates by 3.8 per cent from 1 October this year and will benefit around 1 million people. The Government have accepted the recommendations of the independent Low Pay Commission on the new rates. As always, the Low Pay Commission considered a wide range of evidence before making its recommendations. This included talking to business and workers and considering economic, sectoral and labour market data and forecasts. The rate is intended to balance an increased minimum wage without damaging employment prospects by being set too high.
The regulations also make changes relating to the Jobcentre Plus work trials programme, and clarify the position of participants in some government employment programmes. Work trials are a long-standing, successful employment programme on which individuals claiming benefits agree to be placed with a potential employer for a short trial period with the intention of being offered the job permanently. Evidence suggests that employers sometimes screen out the long-term jobless because of misconceptions or stereotypical views about their work experience and skills. Work trials can help to overcome this by allowing employers to find out more about an individual’s actual performance in a job. At the same time, they help demonstrate to individuals that their barriers to work are not as high as they might have thought.
Work trials have proved very successful, with consistently around half of the 10,000 to 15,000 people annually converting their trial into a permanent job. The Government have announced their intention to extend the maximum three-week period of the programme to six weeks. This is to update the programme in line with developments in our wider welfare reform agenda, which is progressively extending help and support to economically inactive groups. For example, many people on lone parent and incapacity benefits will have been out of work for a long time, and have only a weak attachment to the labour market. They may need more time to demonstrate their suitability to an employer, to develop the confidence that they can take a permanent job or to make decisions about the type of work they want to do.
In addition, the extension responds to requests from local areas for additional flexibilities to help them improve the co-ordination of local support for unemployed and other jobless people, and be as responsive as possible to the needs of individuals. That flexibility will be carefully implemented at the local level by Jobcentre Plus staff so that it is targeted to the needs of the individual. We would expect it to be used in only a minority of cases, and only with the agreement of both the individual concerned and their prospective employer. Jobcentre Plus also has controls in place to prevent work trials being abused.
During the trial the participant continues to receive benefits from the DWP and so is exempt from the national minimum wage. The regulations before your Lordships today will enable the current three-week minimum wage exemption to be extended to six weeks. The regulations also make an amendment to the wording of the current regulations applying to participants in certain government employment programmes. Those programmes provide a range of tailored options to provide jobless people with training, work experience or temporary work. Participants usually remain on benefits or receive a benefit-based training allowance. However, some may opt for a period of subsidised employment with an employer, during which they will receive a wage. Current regulations ensure that that must be at least the national minimum wage. The amendment before your Lordships will not change the current position, but clarifies which programme participants are entitled to the minimum wage and which continue to receive a benefit-based training allowance or benefits. That will assist participants and their employers alike, helping to ensure that workers obtain their entitlement if the minimum wage is due to them.
I turn to the detail of the regulations. Regulation 1 provides that the increase to the minimum wage rates will come into force on 1 October 2008. The new rates were announced in March, ensuring that business had sufficient time to prepare and plan for them. That is a well established pattern. The provisions on work trials and employment schemes will take effect from the day after the day on which the regulations are made to ensure that individuals will be able to benefit as soon as possible from extended work trials. We would expect the impact on business and individuals to be beneficial. The DWP has ensured that guidance is available on these matters, and those arranging placements will ensure that businesses and participants are aware of how the provisions apply to them.
Regulation 3 increases the adult rate of the minimum wage from £5.52 to £5.73 per hour. Regulation 5 increases the rate for workers aged between 18 and 21 from £4.60 to £4.77 per hour and the rate for workers under 18 from £3.40 to £3.53 per hour. The amount of the accommodation offset is increased from £4.30 to £4.66 per day by Regulation 6. As noble Lords will be aware, the accommodation offset is the maximum daily amount which an employer may deduct from a worker to pay for accommodation.
Regulation 4 clarifies the circumstances in which workers on schemes made under government arrangements qualify for the national minimum wage. Workers who are entitled to pay under the terms of the arrangements by Government, or who receive pay from an employer, must receive the minimum wage. Regulation 4 also extends the current three-week exemption from the national minimum wage for individuals taking part in a work trial to six weeks. That exemption applies only to work trials arranged for customers of Jobcentre Plus and not to any other trial arrangements agreed between workers and employers, to which the national minimum wage would apply. I commend the regulations to the Committee.
Moved, That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2008. 21st report from the Joint Committee on Statutory Instruments.—(Baroness Vadera.)
I thank the Minister for explaining the regulations, although she did it at some speed so I hope your Lordships will forgive me if I have not picked up every nuance. The British workforce is among the most dedicated in the world, and we support the intent that our people not only are encouraged to work but also earn enough income from that work to support themselves and their families and to protect them from unfair discrimination by unscrupulous employers. Employers’ organisations, on the other hand, have of late been expressing their increasing concerns at the impact of inflation—arising from, among other things, the recent dramatic increases in fuel and other costs—on the competitiveness of British businesses.
In accepting the LPC’s recommendation of slightly above predicted increases in prices, as well as the average increase in current pay settlements, are not the Government concerned about the effects of inflation upon the competitiveness of our companies? If they are, what action are they taking to ameliorate the effect of that inflation on the health of our businesses, without which, of course, there would be no earnings and no profits on which to levy tax?
Small businesses—I declare an interest as a shareholder in one—employ a sizeable proportion of the country’s workforce. They employ a high proportion of lower paid workers and often already operate at marginal rates of profitability. This gives rise to the concern, especially in the manufacturing and retail sectors, that if costs rise when profits are already wafer thin, redundancies are the only realistic option, thus often hitting the lowest paid hardest. The Minister mentioned that there is a delicate balance between keeping inflation at an acceptable level and ensuring that workers are protected from unacceptably low levels of pay. I look forward to her comments on this matter.
I have two other questions. First, how will the Government avoid a conflict between the provisions of the forthcoming Equality Bill to outlaw discrimination on grounds of age on the one hand and the fact that these regulations include lower minimum wage provisions in respect of workers below the age of 21 on the other? I suspect there is a straightforward answer and I look forward to it.
Finally, does Regulation 6 mean that if you are provided with free accommodation in return for a few hours’ free work per week, but you also have a full-time job independent of your landlord, that your landlord will be de facto in breach? Have the Government assessed how many people might lose their homes as a result? I look forward to the Minister’s responses to these points and to the points of other noble Lords.
Whenever these regulations come before your Lordships, I always welcome the change in tone of the Conservative Opposition from when we started these debates 10 years ago. They were then, of course, significantly against the introduction of the national minimum wage, which is now recognised on all sides of the House as an important part of our economic framework. We welcome the regulations, particularly—this is a point we made when the Bill was introduced all those years ago—as the Government seem to be sticking, by and large, to their undertaking at the time to comply with the recommendations of the Low Pay Commission. The noble Baroness indicated that this is a recommendation of the Low Pay Commission.
I do not wish to detain the Committee for long but perhaps I may touch on the point made by the noble Lord, Lord De Mauley, with regard to the differential between workers over 21 and under 21. The noble Baroness will be aware that, right from the start, my party has had significant reservations about this. I am not going to come to the issue from the point made by the noble Lord about how the new Equality Bill will impact on it; rather I ask the noble Baroness, perhaps somewhat cheekily, whether she would care to comment on press rumours that the Government will be under pressure from the trade union movement to alter the differential.
I am grateful for the support of noble Lords for the national minimum wage. In response to the question of the noble Lord, Lord De Mauley, the issue of inflation is obviously very current and we are cognisant of the impact that it has on businesses, particularly in the retail, construction and other specific sectors. Nevertheless, the 3.8 per cent increase proposed is in line with the independent forecast for average earnings, which is 4 per cent. So it does not have an additional impact on businesses; it is what they would get, in one sense, from the market. On the Equalities Bill, I am advised that it provides an exemption for employers using the youth or development rates of the minimum wage from challenge on the grounds of age discrimination. I am afraid that I do not have the correct answer as regards the point about landlords and I am not entirely sure that I correctly understood the question. I would have been aware of any problems as regards people being thrown out of their homes. Therefore, I can probably reassure the noble Lord on that point in writing.
I understand that Regulation 6 refers to a minimum rate of earnings even if you have free accommodation. If you provide a few hours of unpaid work in return for free accommodation but also have a salaried full-time job elsewhere, would that place the landlord in breach of the measure?
I believe that it would not. However, I suspect that it would depend on how the work provided in lieu of accommodation has been declared. The hourly rate for work carried out elsewhere would be subject to the national minimum wage provisions. However, I am still not sure that I have understood the noble Lord’s question. Therefore, I shall take it away and respond in writing.
I can only restate for the noble Lord, Lord Razzall, the Government’s clear view on pay restraint. Temporary price increases will sustain inflation if they lead to a spiral of wage increases. Therefore, we remain firm on all issues relating to public sector pay. As regards the impact on businesses, an impact assessment has shown that the cost will be somewhere between zero and £62 million. Given the rate of inflation and average wages, I should say that that will be a decreasing cost. As I said, the measure is in line with average earnings so there will not be an additional cost in adhering to the national minimum wage provisions. I commend the regulations to the Committee.
On Question, Motion agreed to.