To call attention to the impact of the National Minimum Wage on household and individual poverty; and to move for Papers.

My Lords, in an age when the scale of bankers’ bonuses dominates the headlines, I feel privileged to be introducing a debate about how we make work pay and deliver social justice hand-in-hand with economic stability. Eleven years since its introduction, the national minimum wage has delivered a new deal and a fairer society to thousands of households and millions of individuals. There is now a consensus that the introduction of the national minimum wage was a giant step away from poverty towards economic equality and social justice. In this debate, I want to set out the business case for the national minimum wage, together with the case for the social justice that it brings.

Last year we celebrated the 10th anniversary of the national minimum wage, which has been one of the Labour Government’s most significant achievements and a key part of the strategy of making work pay. The policy has delivered a fairer wage to lower-paid workers without limiting their employment opportunities or harming the efficiency of business. Today, I want to stand back and look at the impact of the national minimum wage on households and individual poverty.

Prior to 1997, when critics and cynics spoke about a minimum wage, they did so using the language of fear and hysteria. They said it would drive up inflation and drive down productivity. They said it would lead to business closures and mass unemployment. They said it would damage our economy beyond repair. However, fast-forward to 2010—11 years since the introduction of the minimum wage—and it can be seen that none of the predictions of the merchants of gloom and doom has occurred. The hysterical forecasts about economic Armageddon have proved to be totally without evidence and completely without foundation. The reality has been that the introduction and development of the minimum wage was accompanied not by job losses but by rapid job creation. Despite the severe problems of the recession, there are still 1.5 million more people employed in the UK economy now than there were when the minimum wage was introduced. Indeed, the Low Pay Commission’s most recent research, which looks back at 10 years of the minimum wage, says:

“In all, we conclude that the minimum wage continues to exert a benign influence on the economy”.

I would also argue that the minimum wage has had a major impact, and it has been an impact for the better.

I will highlight six areas of real advances. It has helped to tackle poverty by raising the living standards of the lowest-paid. I am proud to say that well over a million people have benefited from the introduction of the minimum wage. It has played a major part in closing the gender pay gap, with 70 per cent of low-paid women workers gaining from the minimum wage. It has also helped to close the pay gap for ethnic minority workers and those with work-limiting disabilities. The minimum wage has played a part in reducing exploitation and protecting vulnerable workers. It has protected the good and decent employers from the bad, rogue employers who undercut by paying poverty wages. The minimum wage has also been good for taxpayers because it has helped to make work pay.

The minimum wage leaves no one behind. Even those described as the invisible workers, working from their kitchens and back rooms as home workers, have seen their piecework prices upgraded. I believe that the national minimum wage, as a law, deserves and should get the support of all of us. I use the word “all” deliberately because I am pleased to say that the minimum wage now seems to enjoy cross-party support, which is to be welcomed.

Before the minimum wage came into force, the current leader of the party opposite went on the record to say that the minimum wage,

“would send unemployment straight back up”;

but I am pleased to note that in 2005 Mr Cameron expressed yet another change of heart and yet another change of policy by saying:

“I think the minimum wage has been a success, yes. It turned out much better than many people expected, including the CBI”.

I say hear, hear to that. I welcome any conversion to a just cause, no matter how late in the day it may come. My advice to Mr Cameron is simple: stop listening to the CBI; start listening to the TUC. It got it right, the CBI got it wrong.

I welcome that change of attitude and approach. I welcome it because the minimum wage is a matter of national importance which requires a national consensus. Yes, the minimum wage has proved a success; and yes, it is now an integral part of this country’s industrial and economic landscape. However, we live in testing political and economic times. So whatever the verdict of the electorate in the weeks ahead, I would argue that the minimum wage cannot be supported with party press releases and left unresourced to wither on the vine. To do so would undermine all the good that it has achieved in the 10 years and more. As we emerge slowly from recession, it would also pull the rug out from under the tentative recovery.

Cutting people’s living standards, increasing poverty and reducing the tax-take is no way to generate economic growth; and that is precisely what would happen if all the minimum wage got from politicians was warm words. I was therefore delighted that in his speech to the party conference in Brighton, the Prime Minister announced that he would ensure that the minimum wage was raised for at least the next five years.

Is the minimum wage perfect? Of course it is not. I believe that we need to go further to ensure progress in a number of areas. We need to improve it, and that means regular uprating. We need to extend it, and that means including apprentices. We need to make it fairer, and that means scrapping the age bands that discriminate against young workers. Although the Government are to be commended for their comprehensive and co-ordinated structure of enforcement, we need to strengthen the provisions of enforcement, and that means heavy penalties and credible sanctions for those breaking the law.

Whatever the facts about the need to improve it, one thing is for certain. From day 1, the minimum wage has made a real, lasting and positive difference to the lives of many. The national minimum wage is one of the great achievements of the past decade. It has improved the lives of thousands of vulnerable workers and their families, including women, ethnic minorities and people with disabilities.

Sadly, we still have millions working in subprime jobs, receiving subprime pay, with no access to acquiring skills or training. The Child Poverty Action Group reminds us that there are more than 2 million children in working homes which are still below the poverty line.

The business case for the minimum wage has been well met. We now need to see more support for the case for social justice. As we celebrate the success of the minimum wage, the challenge for the Government, and for us all, is to build on their achievements with a new deal for a fairer society—a society which guarantees fairness and protection for all, and a society which combines economic stability with real social justice. I beg to move.

My Lords, I congratulate my noble friend Lord Morris of Handsworth on securing this important debate. He, of course, reached the very pinnacle in working for trade unions. My noble friend the Minister can claim the same and, over the years, my colleagues on these Benches have also worked for various trade unions. I welcome that, although I would have welcomed contributions from other sides of the House as well. However, we shall make of this debate what we can.

Since the national minimum wage took effect in 1999, it has had a dramatic effect on the number of people in low-paid employment in the UK. When the legislation was introduced, some 460,000 adults were earning less than the adult rate. In 2008—the last period for which such figures are available—that total was around 225,000. Therefore, over a decade, that is a reduction of more than 50 per cent, and those continuing to be paid less than the legal minimum are largely those in excluded categories, which means that less than 1 per cent of employed adults are now paid below the current adult rate of £5.80 an hour.

That provides evidence, were it required, of the need for the legislation that introduced the measure. The fact is that the operation of the market in terms of wage levels demonstrates that there needs to be a statutory safety net beneath which pay cannot fall. That is why every modern industrial country has a minimum wage—indeed, the USA has had one since 1938.

Many will recall the harbingers of doom, to which my noble friend Lord Morris referred, when the legislation was proceeding through its various stages in this House and in another place in 1998. There was scarcely a member of the Opposition who believed it was necessary at all. They argued that it would create extra costs for businesses and cause unemployment, especially among young people. Indeed, as has been stated, Mr Cameron was one of them, although, in the light of evidence to the contrary, he has now significantly changed his position and that of his party.

That said, it seems that he still has some convincing to do with some of his parliamentary colleagues. As recently as a year ago Mr Chope, with the support of a dozen colleagues, introduced a Private Member’s Bill in another place seeking to allow people to “opt out” of the legal minimum and accept an even lower wage. Thankfully, that attempt to turn the clock back did not progress but it demonstrates that there remain those who look beyond the need for a legal safety net to perceived concerns about the effect of a minimum wage on employment levels. This despite the fact that, according to figures published last month by the Office for National Statistics, the number of people currently in employment in the UK is just under 29 million—an increase of very nearly 2 million on the figure that existed on the day that the legislation was introduced in 1999. Of course, there has been a downward trend in employment over the past two years due to economic factors, of which we are all too well aware, yet the Department for Business, Innovation and Skills stated last month that, even in the recent economic climate, the national minimum wage has not adversely affected employment rates.

Remarkably, those figures do not appear to have registered with the Chartered Institute of Personnel and Development, which only two months ago published what it termed its “manifesto for work”. One of its recommendations was that the national minimum wage for younger workers should be frozen in absolute terms in 2010 to ensure that government efforts to combat youth unemployment were not “fatally undermined”. Without explaining how such a fatality might occur, the CIPD’s chief economic adviser was quoted as saying:

“It is right that younger workers lucky enough to have jobs should play their collective part in helping maximise the chances for those who do not”.

Such a freeze, far from assisting economic recovery, would simply lead to the exploitation of hundreds of thousands of young workers. I find it thoroughly distasteful that an organisation with the reputation of the CIPD should seek to target young people, patronising them with the tag of being “lucky enough to have jobs”. Why should vulnerable young people, who receive a starting rate of just £3.57 an hour, have to pay the price for the recklessness of voracious bankers? The CIPD manifesto contains a list of other measures that the organisation would like to see introduced, but I searched in vain for a demand that bankers’ pay should be frozen, far less that their enormous bonuses should be restricted, in order to aid economic recovery.

The CIPD is correct in its assertion that restraint is a feature of this year’s pay round, but it does not follow that those receiving the national minimum wage should be expected to contribute to that restraint. We are talking about people living on or below the poverty line—people who have next to no room for manoeuvre when it comes to tightening their belts. To put the adult minimum wage in an annual perspective, someone aged at least 22 working a 35-hour week will earn £942 a month, which translates annually to £11,310 gross income. After PAYE is deducted, that figure becomes £811 a month or £9,732 a year at current rates. That does not allow much leeway for belt-tightening.

Indeed, London Mayor Boris Johnson believes that the minimum level should be significantly increased for those working in the metropolis. He has supported the London Living Wage, ensuring that all City Hall employees and sub-contracted workers now earn at least £7.60 an hour, and he has gone further, promoting that level to employers across the city. It is pleasing to note that a number of the major banks have already heeded his call in respect of their cleaning staff. Perhaps I could invite my noble friend the Minister to indicate whether Whitehall might be persuaded to follow suit. I notice that one of the principal aides to the Leader of the Opposition, Steve Hilton, has been advocating this initiative recently.

The Government have asked the Low Pay Commission to consider introducing a national minimum wage rate for apprentices; as my noble friend Lord Morris said, recommendations are scheduled to be announced in the commission’s 2010 report, which I believe is expected before the end of this month. Making sure that all apprentices are entitled to an hourly minimum wage can prevent exploitation, improve the quality of apprenticeships and help to ensure that more young people complete their courses. The TUC has set out its support for the proposal complete with three different age rates, and the CBI has recognised the need, while arguing that,

“any new minimum wage for apprentices must be set at a cautious level”.

The question of how effective the national minimum wage has been in reducing poverty cannot be dealt with in isolation because it is complicated by other issues. Since 1997, the Government have implemented a raft of redistributive policies, such as the tax credit for the low paid. However, many people remain below the line, despite the introduction of social support for low-income families in difficulty, and with childcare, nursery education and Sure Start children’s centres for new parents. Universal childcare is developing and is allied to flexible working, which millions of women now claim from their employers. Maternity pay has doubled in value and tripled in time off work. Women have gained most from the introduction of the national minimum wage.

All this has helped many families, yet working-age people without children now suffer record levels of poverty. If you are poor, and neither a pensioner nor a parent, you are often worse off. However, we know that around 1 million people now benefit from the national minimum wage—that is to say that, were it not for that important legislative wage floor, most if not all of those people would be receiving less.

The very helpful Library note provided to all participants in today’s debate highlights the impact of the national minimum wage in various categories. As has been mentioned, because more women than men tend to be found in low-paid employment, a larger proportion of women have benefited from the establishment of a legal minimum. The Equality and Human Rights Commission has also concluded, again as my noble friend Lord Morris referred to, that the ethnic minority pay gap has narrowed—although, intriguingly, those from Indian and black ethnic groups have benefited more than those from the Bangladeshi and Pakistani communities. It would be interesting to hear some reasons for that. It is also interesting to note that the Low Pay Commission claims that age is arguably the most distinguishing factor with regard to the national minimum wage. It has had a positive impact on the earnings of older workers, with a rise in employment rates for people over state retirement age.

As for poverty levels, the indicators of relative poverty—defined as 60 per cent of median earnings—declined consistently between 1998 and 2005, though unfortunately the trend has been slowly upwards in the three following years. The 2009 report from the Institute for Fiscal Studies, Poverty and Inequality in the UK, contains statistics on absolute poverty—after housing costs have been factored in—illustrating that same trend, but over the period 1999 to 2008 there was a large fall in the proportion of children in that category, from 29 per cent to 17.5 per cent. The proportion of the population as a whole designated as living in poverty shows a reduction of one-third—significant, but the figure still stood at 8 million in 2008.

That figure must come down much further, and that will entail a reversal of recent trends. However, overall comparisons during the lifetime of the Government show a significant decrease in levels of poverty. Although it is difficult to disaggregate the contribution of the national minimum wage to that decrease, there has certainly been an important effect that has assisted the process. It must be allowed to continue, and any attempts to impede the essential role of the national minimum wage must be resisted.

My Lords, it is not often that I can claim to be at the forefront of a policy initiative, but on the issue of the minimum wage, I like to think that enlightenment came to me rather earlier than to some of my colleagues in the labour and trade union movement. When I first became active in the Labour Party in the 1970s, the predominant view was that free-collective bargaining was the best way to improve workers’ pay. Even then, some maverick unions took a different view and, in 1979, I went to work for one of them, the National Union of Public Employees, precisely because it took a radical view on low pay and supported a national minimum wage. The campaign continued to gain ground and, in the mid-1980s, as a young constituency delegate, I seconded the motion which finally converted the Labour Party conference to support a national minimum wage. It would be nice to claim that it was the power of my rhetoric that swung the conference, but, in truth, it was the culmination of years of hard work and a brilliant speech from the general secretary of NUPE, Rodney Bickerstaffe, that persuaded the doubters. He deserves much of the credit for that change in policy.

It is, of course, a policy that we all now take for granted, but it was cloaked in controversy to the last moments of parliamentary debate, when the incoming Labour Government in 1998 finally passed the legislation that would make the establishment of the Low Pay Commission and the principle of a national minimum wage a reality. It was, as my noble friend has reminded us, fiercely opposed by the Tories and by business. It was argued that it would increase unemployment, with some estimating that up to 1 million jobs would go; it was argued that it would destroy Britain’s competitiveness in the world; and it was argued that it would prove to be inflationary. It did not and it has not. Instead the policy remains one of Labour’s proudest achievements because it was a bold statement of our values and it was a simple principle which everyone could understand. Overnight, it gave a pay rise to more than 1 million of our lowest paid workers, who previously had been working for poverty pay.

I was working as a trade union official at the time when the national minimum wage was introduced, and I saw the direct effect of the new policy, particularly on the hundreds of thousands of women who benefited. It was clear to me that, in addition to the welcome pay rise, the national minimum wage gave them a new dignity at work; it closed down the argument that they worked for pin money; and they gained new respect from their partners and families. It also, as we now know, had a significant impact in narrowing the gender pay gap at the lowest end of the income scale.

The minimum wage is now in its eleventh year and it continues to be a success story. It has become an accepted feature of employment rights in Britain. It is estimated that more than 2 million workers directly benefit from it—around one in 10 of the total work force. The fact that it is well established leads to the danger that it is taken for granted, whereas in reality there is a need to nurture and to defend it because the value of the national minimum wage is only as good as its last increase. If, over time, it does not continue to be uprated, at least in line with inflation, it will become worthless.

I am confident that when the Labour Government are re-elected, as I sincerely hope they will be, we shall continue to ensure that the minimum wage is increased regularly to provide an effective protection against poverty pay. I note that the Conservative Party has had a rather late conversion to the principle of the minimum wage and is no longer saying that it will abolish it, but if it beats the pollsters’ predictions and becomes the next Government, can we be sure that its warm words will extend to maintaining the independence of the Low Pay Commission and implementing its recommendations for increases? One thing is for sure, the same businesses which lobbied so hard to prevent Labour implementing this policy, with doom-laden talk of job losses and uncompetitiveness, will no doubt be out in force again seeking a new opportunity to hold down wages and increase their profits by persuading a future Government to freeze the level of the minimum wage.

Yet this period of economic uncertainty is the very time when the minimum wage could come into its own, because it is arguably one of the most effective ways of helping the country to climb out of recession. An increased minimum wage would immediately increase the spending power of those at the bottom of the economic hierarchy. Moreover, it would go some way towards compensating these workers for the rapidly increased costs of energy, food and transport in recent years.

For example, a project by the Joseph Rowntree Foundation has calculated that the cost of a minimum household budget has risen by about 5 per cent for most families in the year to July 2009, a much higher figure than the official inflation rate for that period. The same study calculated that, in a two-parent family with two children, both adults working full-time would need to earn a minimum of £7.15 an hour to achieve a socially acceptable minimum income standard. So the minimum wage still has some way to go to lift the lowest earners out of poverty.

There is still something wrong with an economic system that requires the Government to bail out bankers and their bonuses, but where a decent minimum income remains out of reach for many hard-working families. We have come a long way, but there is clearly more to be done in order to create a fair society. I believe that today’s leaders need to champion the cause of the lowest paid workers in a new crusade. Let us introduce a system, similar to that already in operation in Sweden, where everyone’s wage is published, and then people will be able to see, right across the spectrum of bankers, footballers, media commentators, politicians and front-line staff, what constitutes fairness in a civil society. Perhaps then we will reassess our priorities and accept the case for a real living wage.

In the meantime, we should acknowledge the success story of the national minimum wage and the undoubted contribution it has made to lifting individuals and their families out of poverty. I therefore thank my noble friend for giving us this opportunity to record its success and debate its future.

My Lords, I welcome this debate and thank my noble friend for introducing it. We should be proud of the introduction of the minimum wage. I well remember when it was first introduced and there was a debate in this House. It occasioned a great deal of opposition from the Conservative Benches. This turned out to be unjustified. In fact, it has played a substantial role in dealing with poverty. A number of Government interventions—the introduction of the minimum wage, tax credits and other benefits—have helped to take families out of poverty. It is said that half a million children have been taken out of poverty. The Child Poverty Bill, which is currently before the House, is expected to assist still further. Tax credits are said to have taken 700,000 families out of poverty.

However, the biggest cause of poverty is joblessness. We are currently in a recession, which we hope is receding. The way forward is not, as is currently claimed, by cutting public services, which, of course, involves cutting public service jobs. That would create more unemployment and more people who cease to be taxpayers and become benefit recipients. It causes more damage to the less well-off, since they are more reliant on public services than are the well-off.

One of the problems has been the decline in manufacturing industry, a decline for which the Thatcher Government were largely responsible. It was never sensible to rely on financial services alone to produce sustained growth in the economy, and thus the possibility of achieving relatively full employment. Fortunately, the present Government seem to realise this. Recent pronouncements indicate support for manufacturing and this is beginning to show in some of the statistics. That is important.

The Government have sought to reintroduce apprenticeship schemes. This is necessary, because we need a skilled workforce, but there needs to be an industry available to produce jobs for the workforce when trained. Present economic policies seem to be based on this assumption and should be welcomed. A key part of all this is the requirement for a minimum wage, properly monitored to ensure that it continues to provide a wage on which it is possible to live free of poverty. There also needs to be a proper inspection process. Many employers have sought to keep wages down by employing immigrant workers who are often not aware of the minimum wage entitlement. Some employers have believed that the option of employing immigrant workers enables what is sometimes called “wage inflation” to be contained. By that they mean that it keeps everyone else’s wages down. That must not be allowed to happen. Immigrant workers should be encouraged to join trade unions, so that their employment rights are safeguarded.

In the mean time, the Government have taken steps to ensure that the level of the minimum wage is kept under review. The Low Pay Commission, an independent body on which unions and business have representatives, makes recommendations as to rates, and it recently did so, with the result that there was an increase last October. It also recommended that the adult rate should in future be paid to 21 year-olds, to which the Government have agreed. So it will be paid from next October.

The Employment Act, which was operative from April 2009, contains measures to deal with employers who fail to pay the national minimum wage. It removes the limit on the fines which can be imposed for non-payment. The most serious cases can be tried in the Crown Court, which can impose an unlimited penalty. The Act introduced a fairer way of dealing with national minimum wage arrears, calculated so that workers do not lose out. In the past year alone, the Government helped to restore £3.9 million in arrears to more than 19,000 workers and have also increased the enforcement budget for the national minimum wage by £2.9 million.

As already indicated, we must maintain the national minimum wage. It must be properly monitored and we must make sure that it keeps families out of poverty. It is an important element in a policy with which we are all in agreement; that is, to make sure that work produces a standard of living acceptable in what is, after all, still one of the world’s most highly developed economies.

My Lords, I join other noble Lords in congratulating my noble friend Lord Morris of Handsworth on having initiated this debate. I am ashamed that so few noble Lords have seen fit to contribute. Those who have are all on this side of the House. But the compensation is that every speech so far has been a little gem and lovingly polished. Noble Lords have said much of what I was proposing to say anyway.

The minimum wage is one of the most important innovations of the Labour Government. It is crucial however to recognise that it does not stand alone and cannot be assessed alone. It was and is part of a much more ambitious endeavour to transform and modernise the welfare state in such a way as to combine high levels of employment with combating poverty, especially child poverty. Tony Blair’s celebrated Beveridge lecture in 1999 brought all these themes together. It was one of the first places where he introduced the proposal for the national minimum wage and was when he announced plans to radically reduce child poverty. The whole lecture was built around the idea of the transformation of the welfare state, in which he invoked the name of one of my predecessors at the LSE, William Beveridge. He said that William Beveridge would have approved of his radicalism, which I believe to be the case.

The best way to make an impact on poverty is to get a high proportion of people in work above a decent minimum wage. One can say that over the 13 years that Labour has been in power, this strategy by and large has worked effectively. On its initial introduction, the national minimum wage elevated the pay of more than 1 million workers immediately by about 15 per cent. As other noble Lords have mentioned, it affected women workers in particular in a positive way. About 8.5 per cent of all women workers saw their incomes raised, compared to 3.2 per cent of men. The minimum wage has gone up from £3.60 in April 1999 to £5.80 today, which is an increase of 20 per cent in real terms. That is a substantial increase and further increases are projected.

Studies by the Centre for Economic Performance at the LSE show no significant job losses for workers directly affected by the minimum wage, nor is there any evidence of knock-on effects for better-paid workers. It is fair to say that the minimum wage has not played a major role in actively reducing inequalities, but it has held down inequalities at a time when these were rapidly rising in other countries. The conclusions of the studies of the Centre for Economic Performance were backed by research organised by the Low Pay Commission. As other noble Lords mentioned, in spite of the frequent observation that inequalities have not declined under the Labour Government, the lot of the poor has substantially increased. In John Hills’s recent study of inequality, the bottom 10 per cent has profited more than any other comparable group over the period—at least up to the recession, which of course puts things in some disarray. By and large, these policies taken as a package have been notably successful. They are part and parcel of what a decent society means. We should seek to shore them up still further.

They are of course in a process of continuing evolution. I have one or two questions which the Minister is free to answer or comment on as he sees fit, as would be the case for representatives on the other Benches. First, it would be interesting to hear the Minister’s views, if he has any, on the Living Wage Campaign, which my noble friend briefly alluded to. This campaign was originally initiated in the United States and has achieved a large following. It does not undercut the national minimum wage. The idea is to create a living wage in certain core sectors. These could be progressive vanguard sectors within the economy. The idea is worth experimenting with. According to the Rowntree Foundation, looking at cost of living, something above £7 would be a basic living wage. It would be interesting to combine that with the Government’s intention to look at John Lewis as a model for possible forms of corporate organisation, to see if you could create a vanguard which would not undercut the national minimum wage but create the possibility of elevating income further without destroying employment.

Secondly, as other noble Lords mentioned, what of the continuing issues of enforcement? This has quite rightly been given prominence by the Low Pay Commission. It says we have reached a watershed, especially in respect of migrant workers. It is crucial to enforce the minimum wage for employers across the economic spectrum or it could lead to the creation of secondary underground labour markets. The issue of enforcement is a continuing one. What plans are in train to continue to ensure that the minimum wage is properly enforced?

Thirdly and finally, is the Minister inclined to comment on the possibility of a high pay commission to complement the low pay one? There has been a strong movement to establish a high pay commission. It makes some sense to me. The point of having a high pay commission would not simply be to discuss the salaries of what my noble friend called the wretched bankers. It would have a more thorough-going role. The point of the Low Pay Commission is to assess the functionality of the minimum wage, to find the point at which it elevates a floor without compromising employment. It is not easy to assess where that level is. The same thing would be true of a high pay commission. It would look not simply at the banking sector but at the functionality of high pay—that is, the consequences of high pay for the rest of the economy in terms of job generation and other factors. I do not know whether the Government are looking at this issue but there would be an interesting balance between a Low Pay Commission and a high pay one.

My Lords, I thank the noble Lord, Lord Morris, for introducing this timely debate on a very important issue. He is right to point out that rates have risen generally, not only for those at the lower end of the scale but right through and upwards. Clearly this has resulted in a closing of the gap for minorities and vulnerable people and we should all support it.

The noble Lord, Lord Watson, spoke strongly and with great feeling, as did many other speakers. He is right: the minimum wage has affected poverty. He referred to the record of the Official Opposition, to which I shall return shortly, and the noble Baroness, Lady Turner, mentioned their inconsistent approach. Were they to come into government, we would all be concerned to ensure that they did not abandon this important initiative.

The noble Baroness, Lady Jones, acclaimed this as a proud achievement for the Government. We on these Benches would not resile from that and agree that she is right to say so. One million people received pay rises as a result. It gave them dignity—a feeling that they were doing a decent job and that their work was appreciated. I shall return to this issue later.

The noble Baroness, Lady Turner, made clear statements about concerns for the future and the importance of concentrating on jobs. That occupies all of us in this day and age. I speak for these Benches on skills and small businesses, but we all have to get round the issue of not only setting the right rate but creating jobs for people to do.

The noble Lord, Lord Giddens, with his expertise, said that the minimum wage was the right thing to do. He gave the statistic that the bottom 10 per cent who are working had profited more than others. That is very important in at least trying to address poverty and the concerns that we have for those people who are still struggling in this society. All speakers have said that, in its way, it has helped, but that many other things need to be done to improve the situation of people at the disadvantaged level of society.

On these Benches we support the minimum wage as a concept and in reality. I was a member of the committee on the minimum wage in the other place. At that time there was fierce opposition from the Tory party—the Official Opposition. I know that to my cost because historically we had the longest ever committee sitting—I think it went on for 24 hours—and, during that sitting, I came to appreciate what filibustering meant. Some of the speeches made in the early hours of the morning by the Official Opposition seemed to be less than targeted towards the subject we were talking about; they seemed to be engaged in a long exercise of keeping the talking going.

As I said, I have had experience in the other place and I am glad to say that we on these Benches have consistently supported the minimum wage. Despite concerns, the legislation became law and those who thought that there would be 2 million job losses were proved wrong. All the speakers to whom I have referred so far have made these points in their own individual way.

We have had a good debate. Clearly the existence of the minimum wage has been extremely important in all kinds of ways. I do not want to use the trite expressions which come to mind, but if you pay derisory rates, as used to happen, you cannot expect the workforce to be dedicated to doing the job well or to feel valued and that they are doing something worth while. That has become clear in the hospitality industry, where people were often paid quite low rates in cafés or restaurants, for example. People who are concerned about the minimum wage need to be aware that if you do not pay people well, not only are they not able to live a reasonable life, but they feel, “What is the point? Why should I bother?”. If somebody claps a cup of tea down on the table because they are cross about that, we should not be too surprised.

Once rates were raised, it made it much better not just for employees but for employers. They could feel entitled to say, “At least I am paying a reasonable rate”, and they would feel it more worth while—to come to a very important subject—to train their employees. The fact that they had to pay them a bit more meant they would say to themselves, “I need to get all I can out of them”, in a nice way. That raised esteem all round in the workforce and has proved a major success in motivating people to take the jobs that perhaps not everybody else would want to do. However, as the noble Lord, Lord Giddens, and the noble Baroness, Lady Turner, said, it is important to ensure that enforcement is carried through. Even now, there are occasions when the minimum wage is not adhered to.

There are still issues around providing jobs. This is akin to what we are talking about. It is important to have the right rates but it is also important—as colleagues have said—that we do all we can in the manufacturing industry and all spheres of activity to encourage the creation of jobs in this recessionary period. I am glad to say that most people have got the message that we need to be training and skilling people and trying to provide jobs to keep them in work.

I am sure my colleague will forgive me if I say that the record of the Conservative Party has been disappointing. It has said that it accepts a national minimum wage but—as the noble Lord, Lord Watson, said—just last year an attempt was made from the Tory Benches in the other place to introduce a Bill to allow workers to opt out and accept a wage less than the national minimum wage. This implies a lack of commitment to the national minimum wage, which is a concern, and I hope colleagues from the Opposition Benches will address this issue. The fact remains that the Conservative Party was dragged reluctantly to accept the national minimum wage, and only last year tried to put through a Bill which seemed to resonate with what they were saying before about the need to get rates down to get through the recession. It did not succeed but it is a concern.

I thank the noble Lord, Lord Morris, for the debate. At the end of it all, we must set out to raise, not lower, standards and give people good opportunities where they are valued and where they can make a real contribution to society and to the economy.

My Lords, this has been an interesting debate and I thank the noble Lord, Lord Morris of Handsworth, for giving us an opportunity to discuss poverty from an angle from which in this House we have perhaps not examined it for some time. My noble friend Lord Freud from these Benches has been engaged with a number of your Lordships for several days recently with the Child Poverty Bill, analysing the causes of household and child poverty and the ways in which the Government can assist those suffering in it. If one thing has become clear in those debates, it is that, although it may be a relatively straightforward matter to identify the causes of poverty, it is not so easy to address them successfully and lift people out of it.

What is clear, however—the noble Lord, Lord Giddens, spoke of this—is that assisting and encouraging people to find jobs is of critical importance, not only to their income levels but also to other parts of their lives. Employment not only brings a pay packet; it also brings social, educational and health benefits. It even increases one’s life expectancy.

Of course, as the Motion of the noble Lord, Lord Morris, suggests, poverty, even among those who have jobs, is a serious problem. We share his concern and the concern of other noble Lords that people should be appropriately rewarded for their work. Exploitation in the workplace must be prevented. Perhaps I may—I hope, gracefully—acknowledge the prods from noble Lords on the Labour Benches, the noble Baronesses, Lady Jones and Lady Turner, among them, and say that a minimum wage is a useful tool in achieving that. I promise the noble Lord, Lord Cotter, that I shall not filibuster today.

The recession has led to worryingly rising levels of unemployment. The First Secretary of State has admitted that the figures would be even worse if many employees had not taken cuts in their working hours and incomes to help the businesses which employ them survive. I suggest that those employees and their employers are to be congratulated on the pragmatic and constructive way in which they have approached this.

Private sector employers, to whom we look to offer employment, are in many cases themselves struggling as a result of a lack of available credit, inefficient and inconsistent regulation and red tape, and an acute shortage of skilled workers. The cost of such funding as is available is in severe danger of escalating if public sector debt is not brought under control, because of its potential to affect interest rates. Temporary employment has been a valuable source of work and income, so I remain concerned about the impact of the agency workers directive, with all its considerable complications and confusions.

The Low Pay Commission makes specific note of the impact of the minimum wage on the rate of employment and hours worked. There is a balance to be struck. We must all hope that its 2010 report will not indicate that, in our enthusiasm to ensure that low paid workers have a sufficient income, we risk pricing people out of the job market. An effective way of addressing poverty among those in employment will always be the strategy of ensuring that both the employed and unemployed have access to high-quality training and education. The Low Pay Commission has just consulted on the minimum wage for apprenticeships. Apprenticeships should not be used as cheap labour by unscrupulous employers—indeed, the very unscrupulous employers to whom the noble Lord, Lord Morris, referred. However, there is a balance to be struck and it would do the army of the more than 1 million people who are not in employment, education nor training a disservice if the minimum wage were to discourage companies offering useful apprenticeships.

Due to the variations in pay levels across the country, I hope that it is not too contentious to suggest that the national minimum wage, which takes no account of regional living costs, is something of a blunt instrument. The areas with the highest proportion of minimum wage jobs are Wales, the north-east or England and Northern Ireland. Those areas need special attention.

The noble Lords, Lord Giddens and Lord Cotter, spoke of enforcement. I understand that it is the role of HMRC to enforce the national minimum wage. It does so not only by responding to complaints but also by visiting a sample of employers to check compliance. It would be interesting to hear from the Minister, by geographical area, how many such visits take place and what is the offending rate so uncovered. On the other hand in London, the Greater London Authority’s living wage, to which the noble Lord, Lord Watson, and others have referred, is £1.87 above the national minimum wage. The long list of socially responsible businesses which have signed up to ensure that all their employees are paid the higher rate in London, to take account of higher living costs in this great city of ours, shows how many find the national minimum wage irrelevant to their attempts to ensure fair working practices. We wish the Living Wage Campaign every success in signing up London employers. Can the Minister tell us what of a similar nature is being done elsewhere?

My Lords, I thank my noble friend Lord Morris of Handsworth for calling for this debate. The issues he raises are important both on their own terms and in light of the tough economic climate. He prefaced his remarks by saying that the introduction of the national minimum wage was a giant step for equality and social justice and that the doom-mongers were proved wrong. These are sentiments that I wholeheartedly endorse.

He went on to make a comment about what he described as “sub-prime” jobs. Unfortunately one-third of UK employers still do not do any training. We have taken some steps to improve the situation. From 2013 we are raising the participation age for training so there will not be young people aged 16 and 18 without any training: they will have 280 guided learning hours. Further, in the Apprenticeships, Skills, Children and Learning Act we introduced the concept of the employee’s right to request time to train. Again these are important steps forwards but they will not be the total answer to the problem.

It is very important that there should be fair standards in the workplace and that work should pay. Many noble Lords have commented on that. That is why we introduced the national minimum wage. Since it came into force in April 1999 it has brought substantial benefits to the lowest-paid workers and combined with the tax credits system provides minimum income guarantees that ensure that work pays. It is worth reminding ourselves about the situation prior to its introduction. We estimate that in 1998 around 400,000 people were paid less than £3 per hour, and some were paid as little as £1.50 or £2 an hour. We endorse the point that the noble Lord, Lord Cotter, made when he talked about the dignity of work and the corrosive effective of derisory pay rates.

The Low Pay Commission’s first report, in June 1998, found that there had been a growth in earnings inequality over the previous 20 years, leading to a substantial degree of in-work poverty, particularly among families with young children. In making its recommendations, the Low Pay Commission has always sought to balance the potential benefits of the minimum wage to low-paid workers against the risk of adverse economic effects. It has taken a cautious approach to minimum wage rate recommendations in more difficult times, with more generous rate recommendations during periods of growth. That balanced approach has enabled us to introduce a minimum wage without having adverse employment effects, as so many noble Lords have pointed out.

Since 1999, average earnings have consistently risen faster than prices and the minimum wage has increased substantially faster than average earnings, especially since 2001. Since its introduction in April 1999, the adult minimum wage has risen by around 61 per cent in real terms. The value of the adult minimum wage has risen by one-third when deflated by consumer prices and by around one-quarter when deflated by retail prices. The minimum wage as a proportion of median earnings is often termed the “bite” and is a measure of how high up the earnings distribution the minimum wage cuts in. The bite of the adult minimum wage is currently around 51 per cent; an increase of around 5 percentage points since 1999.

However, as my noble friend Lord Giddens remarked, it cannot be seen in isolation. It forms part of the Government’s wider strategy for tackling low living standards, and because people’s circumstances vary it should be seen in conjunction with others measures for alleviating poverty. The minimum wage complements tax credits in achieving both fairness and flexibility in the labour market. One may consider the position of a family with one child and one adult working 35 hours a week. The minimum wage, when combined with working and child tax credits and other benefits, provides the family with a net income of £306 per week, compared to £182 in 1999, when the minimum wage was first introduced. So noble Lords can see the collective beneficial effect of the minimum wage with those measures in reducing poverty.

Measures taken by the Government since 1997 have therefore boosted in-work incomes, improving incentives to have a job and tackling poverty among working people, which we saw as so profoundly important. However, it is important that we do not inadvertently harm the low paid by damaging their employment prospects. Using the minimum wage on its own to increase in-work income would mean setting it at a level that would cause job losses for low-skilled workers. While wages do not respond to family circumstances, such as number of children, tax credits do. Nor should we forget that the Government’s action to help businesses and families through the downturn has been successful in mitigating its impact. The noble Lord, Lord De Mauley, talked about private employers suffering. If we had listened to the siren voices of Her Majesty's Opposition, they would have been suffering even more, because they opposed most of the measures that have proved beneficial. For example, more than 3 million people have been helped to move off of unemployment benefit since November 2008. The temporary VAT cut has, on average, increased households’ purchasing power by the equivalent of around £20 per month and 400,000 families whose income has fallen have received extra help through tax credits—on average £37 more per week.

Skills, to which a number of noble Lords referred, play a crucial role in transforming the lives of people and their families. We have improved skills achievements at every level, simultaneously laying the groundwork for a strong exit from recession and greater competitiveness in the global economy.

Both the Government and the Low Pay Commission believe that lower minimum wage rates for young people are justified to protect employment and reflect the training element attached to these workers. I know that that is not agreed by everyone, but we genuinely feel that that is the case. Unemployment rates are higher for young people and employment rates lower. Both are more sensitive to the economic cycle. We are concerned that removing the youth rates would adversely affect their employment levels. Getting young people back into work is an important area. While continuing to participate in education or training to at least age 18 is in the long-term best interest of young people, it is important that those who have chosen to work do not lose their jobs, or find it harder to access the important employment opportunities that might advance their careers. There is little point pushing wages up if it means that jobs are no longer available. Once young people are in work they gain important skills and experience which help them progress. We are doing what we can to keep them there.

As I have said on many occasions, when we looked at apprenticeships in 1997, they were really in a dire state. Now we have a target of 250,000 people a year starting an apprenticeship in England by 2020 and a commitment that one in five young people will be on an apprenticeship by 2013. We are well on our way to achieving that target, with 245,000 apprenticeships and a 71 per cent completion rate. That is a real success story.

It is important that there is a fair deal for apprentices which protects them from exploitation, but which does not deter businesses from taking them on. There I agree with the noble Lord, Lord De Mauley. An apprenticeship is an investment for both employers and individuals, with apprentices having life earnings on average considerably more than people without an apprenticeship qualified at the same level.

Last year we asked the Low Pay Commission to consider detailed arrangements for apprentices under the minimum wage framework, and to recommend an appropriate apprentice minimum wage. The commission has now reported to Government, and we will publish that report alongside our response shortly. As noble Lords will appreciate, I cannot give any more details at this time. However, they have already benefited from an increase in the minimum rate of pay for government-funded apprenticeship training. It has gone up from £80 to £95 per week. In reality, the average net wage of apprentices was £170 per week, which surprised me. That is not to say that I do not encounter apprentices that earn considerably less but still it is an impressive average figure.

We are committed to enforcement. Again, there is not much point in having a national minimum wage if we cannot provide effective enforcement. We have put a lot of effort into dealing with this. We need to support workers and businesses by deterring non-compliant employers from underpaying their workers. It removes the unfair competitive advantage for business that underpayment can bring. Since 1999, HMRC has identified more than £38 million in arrears for more than 130,000 workers. In the 2008-09 financial year, nearly £4.5 million of arrears for more than 23,000 workers were identified: £580,000 more than the previous year. It is an excellent record by HMRC. However, the best protection we can offer workers and compliant businesses is to ensure that arrears do not arise in the first place.

The noble Lord was beginning to answer my question but he has now left it. I asked specifically about the geographic distribution of the results of the compliance work.

I will have to write to the noble Lord. I do not have that information and there is limited time.

We have implemented a tougher enforcement regime to provide a fairer outcome for workers who have been underpaid and a more effective penalty regime to deter non-compliance. It is already delivering results. We are reviewing our compliance strategy, covering the work done by HMRC in enforcement and awareness-raising activities—led by my department—to achieve the greatest impact from the resources and tools at our disposal.

There was a reference to agency workers. The conversion to raising the pay and conditions of workers by the noble Lord, Lord De Mauley, who once again resorted to the view that he felt that this was not necessarily a step in the right direction, does not seem to be quite complete. Its purpose is quite clear: to provide equal treatment for agency workers compared to a worker who would have been hired directly by the employer to do the same job. This will guarantee fairness for agency workers and maintain flexibility in the labour market, which I agree with the noble Lord, Lord De Mauley, is important for job creation. For the first time, agency workers will be entitled, after 12 weeks in a given job, to equal treatment on basic working and employment conditions—including pay and holiday—as if they had been hired directly by the hirer. That is fair. It is important that temporary agency workers have appropriate protections. UK agency workers are already entitled to be paid at least the national minimum wage and are covered by working time legislation.

I am conscious of a number of other issues that were raised. I will try to address as many as I can. There were one or two references to the London living wage. We are not in favour of setting a separate minimum wage for London. However, we recognise the progress of the London living wage. It was my noble friend Lord Giddens who described it as “a vanguard approach”. That is absolutely right. If individual firms are in the position to pay higher London wages, we welcome that. However, imposing a higher minimum wage on all firms in London might be counterproductive due to potentially negative effects on economic activity.

I am grateful to my noble friend for giving way. On the London living wage I specifically mentioned Whitehall. The Government could perhaps take a lead—be in the “vanguard”, as the Minister said—in terms of Whitehall staff. Has any thought been given to that idea?

Yes. It would not be right for the Government to have one rule for public sector workers and another for the private sector. Saying that public sector employers should not be paid less than a certain London minimum wage is a judgment on a fair wage. It would be very difficult not to apply it also to the private sector workforce. So we have looked at that.

While I am on the subject, I might as well deal with the question of a regional minimum wage. We are not considering regional minimum wage rates. The national minimum wage does not set the average wage. It sets a minimum threshold. Differential regional minimum rates would introduce substantial administrative complexity for businesses and the Government seeking to monitor and enforce the regime. Single national rates are less bureaucratic and more easily understood by all concerned. There are some other details, but that is currently our view.

My noble friend Lady Turner referred to migrant workers. We are keen to ensure that all workers have appropriate rights and protections. Legal migrant workers in the UK have the same employment rights as their indigenous equivalents. We will not tolerate mistreatment of migrant workers. We have established a really good innovation in the Pay and Work Rights helpline, which can respond to calls in more than 100 languages and has proved very successful. Since it was established last April, it has had something like 50,000 calls and hundreds of thousands of hits on its website. We have also run a national minimum wage awareness campaign targeting migrant workers, which involved outreach work with migrant communities, articles and advertisements in the press and posters.

My noble friend Lord Giddens postulated a number of ideas on the London living wage. We certainly agree that the John Lewis Partnership approach is something worth exploring, so I would not demur from that. We do not seem to be on board yet for the concept of a high pay commission. The Government believe that businesses and workers are generally best placed to determine the pay of employees but that the Government have a role in preventing exploitation, especially where the pay system promotes the wrong behaviours. We have been concerned about excessive remuneration. The Financial Services Authority is to introduce a code of practice on that. Directors’ pay is a matter for the company, but it is interesting that there have been a number of examples of shareholders voting against remuneration reports of excessive pay and bonuses.

My noble friend Lady Jones gave us an interesting historical point of view. She is absolutely right. I, too, remember the days when the Labour movement was very much wedded to collective bargaining as being the answer to all the problems. She was quite right to remind us that the National Union of Public Employees played a pioneering role in achieving the national minimum wage. We believe that the measures that the Government have taken overall, together with the minimum wage, have had a profound effect on removing poverty and reducing inequalities. We see no room for complacency in that area, which is why we have been encouraging our enforcement agencies to work together. Examples of that are HMRC working with the employment agency services of the Health and Safety Executive to ensure that, wherever we can, we eradicate exploitation of workers.

On the question of equality, briefly, we have also taken action to help parents improve their work/life balance through the right to request flexible working, free and early education for all three and four year-olds and statutory maternity and paternity pay. Once again, that gives parents a greater choice, enabling fathers to play a more substantial role in bringing up their children and allowing mothers to return to work earlier if they so wish. We believe that the minimum wage plays a part in narrowing the gender pay gap, as women are more likely than men to work in lower-paid jobs, particularly part-time jobs. Another area of exploitation that we have recently removed was the fact that tips and gratuities were included in minimum wages by some businesses. We have acted quickly on that with a code of practice, a campaign which we have run asking people to put the question, “What happens to the tip?”, and encouraging employers to sign up to a code that calls for openness and transparency.

The noble Lord, Lord Cotter, talked about hospitality workers; they must now be paid the minimum wage, not including gratuities. Care workers are another area where there is room for significant improvement. I have already referred to the importance of enforcement and we now have an automatic civil penalty of between £100 and £5,000 if businesses do not comply with minimum wage requirements. The worker will receive back-pay at current minimum wage rates, and HMRC will enforce this. We also had a drive recently on the agricultural minimum wage in Lincolnshire, with a campaign consisting of regional press and community radio. The feedback has been very positive.

My time is up. I have tried to answer as many questions as possible. I congratulate the contributors and my noble friend Lord Morris on initiating what I think has been a really important debate. We are fully committed to ensuring that low-paid workers are treated fairly. The principle of fairness cannot be applied or ignored depending on the economic climate. At the same time, we need to ensure that we do not disadvantage low-paid workers in the jobs market. I believe the measures I have outlined to help low-paid workers prove our determination to make a difference to the lives of the UK’s lowest-paid people.

My Lords, I thank my noble friend the Minister and all noble Lords who have contributed to this debate. It has been a good and well-informed debate, a debate whose outcome will, I trust, assist the Low Pay Commission in its work ahead. As long as there is injustice and as long as there is poverty, then of course the issue of fair pay will make a contribution to changing the lives of many. That is the essence that I take from this debate. Meanwhile, I beg leave to withdraw the Motion.