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National Minimum Wage

Volume 753: debated on Tuesday 1 April 2014


Asked by

To ask Her Majesty’s Government what plans they have to mark the 15-year anniversary of the minimum wage, which took effect on 1 April 1999.

Since 1999, the national minimum wage has grown faster than average earnings without an adverse effect on employment. Going forward, we want to ensure that the benefits of growth are shared equally. The best way to mark this anniversary is to commit to continue to deliver benefits to the low paid through the national minimum wage for the next 15 years and for many years thereafter.

I thank the Minister for his reply and congratulate the Government on their new-found conversion to the benefits of the minimum wage—and even the living wage. It makes a pleasant change from the previous opposition of the Conservative Party and the CBI and their predictions that it would cause massive job losses. Does the Minister agree that the minimum wage depends on effective enforcement? What are the latest figures and are we actually naming and shaming those who are still not obeying the law? Are there any plans to increase the minimum wage?

My Lords, the naming and shaming scheme, as the House will know, came into effect on 1 October 2013. The new rules are part of the Government’s efforts to toughen enforcement of the national minimum wage and to increase compliance. By naming and shaming employers, it is hoped that bad publicity will be an additional deterrent to employers who would otherwise be tempted not to pay the national minimum wage. The Government have accepted the Low Pay Commission’s recommendation of the first real increase since 2007. We welcome its assessment, and 2014 could mark the start of a new phase of bigger real increases in the minimum wage.

My Lords, does my noble friend agree that what matters is not the minimum wage but how much of your wage you take home in pay? Is not the Chancellor to be congratulated on implementing the policy of raising the tax threshold so that more of that money is kept—a policy, incidentally, first put forward by my noble friend Lord Saatchi some years ago but which, rather like pedestrian crossings in a constituency, has been hijacked by the Liberal party?

My noble friend makes a very good point: raising the tax threshold has been extremely important in helping the low paid. The Government are taking other measures, including on fuel duty, which remains frozen. The House should realise that wages in the private sector are now outstripping inflation and the OBR has predicted that that will continue until 2018. Indeed, current wage growth in the manufacturing sector is as high as 3.2%, so we are going in the right direction.

My Lords, will the Minister follow the good practice of the Mayor of London and support not just the minimum wage but the living wage?

The noble Lord makes a very good point about the living wage. It is good to note that 80% of all employers pay above the living wage, but I am the first to say that there is much more to do. The Government support employers who choose to pay the living wage. However, decisions on what wages to set are for employers and workers to agree, as long as employers pay at least the national minimum wage.

My Lords, in too many instances, the minimum wage has become the maximum wage that employers are prepared to pay, leaving many workers trapped on low pay. As the economic recovery begins, what encouragement and support can the Government give to employers, particularly small businesses, to redress the balance and ensure that their employees can also reap the benefits of our improving economic situation?

My noble friend may be alluding to the recent report from Professor Sir George Bain on the future of the national minimum wage. We are considering all the recommendations and their implications in advance of the 2015 LPC agreement. I agree with George Bain’s finding that the national minimum wage has been a huge success in improving low pay and reducing exploitation in the UK labour market. The Government, however, think that the simplicity of the national minimum wage and the independence of the LPC remain key to its success.

My Lords, in view of what the Minister has said about there being much work to do on the living wage, does he agree that a good way to mark this anniversary would be to commission an independent inquiry into the actual effects of raising the minimum wage to the living wage for everyone?

I cannot comment on whether there should be another inquiry but it is fair to say that this strays into the territory of poverty. Perhaps I may reassure the House that this Government are very much focusing on poverty, which is very complex. There are all kinds of root causes for poverty, including household food security, and we are looking at this very carefully as well in the light of the national minimum wage.

Does the Minister share my wry satisfaction at the fact that when I first proposed the national minimum wage as policy, I was roundly condemned by Conservatives yet now we have a Chancellor of the Exchequer who says that he aspires to increase it? Should not the Government take up the suggestion of the right reverend Prelate and begin to replace the national minimum wage with the living wage, which would mean a shift from £6.50 an hour to £7.45 an hour, and by that means begin to compensate the national minimum wage earners—who in real terms have lost £1,000 a year since 2000—and reduce the 9.4 million households which now exist at below the minimum income standard while, in the bargain, saving the Exchequer £5.7 billion a year because of the reduction in the need for the subsidies on which very low wage earners have come to depend?

The noble Lord will know that the Government follow the guidance from the Low Pay Commission and have accepted all its recommendations. The new rate from October, which is a 3% rise in the adult rate, will mean that around 1.25 million low-paid workers will enjoy the biggest cash increase in their pay packets since 2008. As I have said, we encourage all employers to pay above the national minimum wage and to pay the living wage.