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National Minimum Wage

Volume 765: debated on Monday 19 October 2015


Asked by

To ask Her Majesty’s Government what assessment they have made of the financial impact on British business of the new minimum wage when it comes into effect in 2016.

My Lords, the Government believe that the new national living wage is affordable, given the strength of the UK economy and labour market. We created 2 million jobs in the last Parliament and the OBR has forecast another 1.1 million by 2020. The Low Pay Commission will continue to play a critical role in setting the path for the national living wage to achieve a rate of 60% of median earnings by 2020, as recommended by Professor Sir George Bain.

My Lords, while welcoming the increase in the minimum wage, noble Lords will notice that the increase is much greater than the usual rise that results from rigorous and careful analysis by the Low Pay Commission, which studies the different regions and the different sectors of industry. What studies have the Government done as to the effect on jobs and the economy of their proposed increase, or are we witnessing yet another example of the Government’s irresponsible politicisation of pay and the minimum wage?

My Lords, the whole policy of this Government is to create the right environment for businesses to succeed and to create more jobs. In the previous Parliament, the main rate of corporation tax was cut from 28% to 20%. In this Parliament, the Government will go further and cut the rate of corporation tax to 19% in 2017 and 18% in 2020. These cuts will benefit over 1 million businesses. They will save businesses £6.6 billion by 2021 and give the UK the lowest rate of corporation tax in the G20, supporting investment, productivity and growth.

According to the Institute for Fiscal Studies, those in work, on benefits and receiving tax credits will receive only 25% compensation through the advanced minimum wage, assuming that they keep their jobs. What advice are the Government giving to these hard-working families on how they should cope with this cut in their standard of living?

My Lords, the noble Lord is only too well aware of the issue, since he was part of the party that joined us in coalition in the previous Government that reduced claimants of tax credits from nine out of 10 families to six out of 10 families. The fact is that we are doubling free childcare for working parents—we are giving 30 hours of free childcare—and we are also introducing tax-free childcare from 2017.

My Lords, one of the perverse effects of tax credits was to encourage people to work only part-time. As the Minister pointed out, this economy has created a remarkable number of jobs. Is it not a fact that many of those who will be suffering if their tax credits are cut will be encouraged and helped to find full-time work?

My noble friend makes some good points. Recent employment figures show the greatest number of people ever in work. We have more young people in work and we have more women in work.

My Lords, the new minimum wage, as well as the living wage, is causing some confusion in industry, given that one is statutory while the other is advisory. Will the Government consider asking the Low Pay Commission to lead a discussion to ensure that a new social living wage emerges?

My Lords, the noble Lord mentions both the national minimum wage and the national living wage. The adult rate of the national minimum wage, as the noble Lord is no doubt aware, increased by 3%—the biggest real increase since 2006. The noble Lord also mentioned the national living wage. This becomes statutory from 2016.

My Lords, while welcoming the Government’s moves to look at the level of wages as the Minister has mentioned in terms of the minimum living wage, I am aware that the Resolution Foundation is concerned about very small businesses—those that employ fewer than 10 people. Its research indicates that this is likely to add roughly 1.5% to wage bills. What are Her Majesty’s Government doing to mitigate those effects—for example, by cutting red tape and by offering extra assistance to boost productivity—so that we can look forward with confidence to the Government’s wishes being delivered?

My Lords, we are continuing to look at all matters that affect small and medium-sized enterprises. As I understand the current situation, national insurance contributions are being cut for those that employ four people or fewer.

Will the Minister join me in condemning the actions of the employer of 14 cleaners working at the Foreign and Commonwealth Office, who appear to be facing disciplinary action because they had the temerity to write a letter of congratulation to the Foreign Secretary on his reappointment and mention in it their rates of pay?

My Lords, a good lesson to learn is always to check the newspapers before you come to the Dispatch Box. The Foreign and Commonwealth Office is in the process of vacating the Old Admiralty Building, which has reduced the number of cleaning staff required. The department has not taken any disciplinary measures against any cleaning staff. Our contractor Interserve has assured us that no one has been made redundant as a result of a letter asking for an increase in pay. From April 2016, all Interserve staff will benefit from the new mandatory national living wage.

My Lords, on the subject of reading the newspapers, has my noble friend read the excellent article in today’s Telegraph by Boris Johnson, in which he says that, as a result of a decision in Europe, employers are going to have to pay for travelling time from the moment people leave for their place of work? Can this possibly be true? Can it also be true that Ministers are not in a position to do anything about that?

My Lords, I am afraid I did not read the Mayor of London’s article in the Daily Telegraph. However, I can tell my noble friend from my own experience of employing people in an SME that we did pay people for their travelling time to and from work.

Is it not the case that many carers need to be paid for their travelling time? The dismissive attitude about this being another European gimmick is appalling for those people.

My Lords, the noble Baroness raises a question of social care. The overall costs of providing social care and the travelling issue are being considered as part of the spending review. We are working with the social care sector, including with care providers from the voluntary sector, to understand how the introduction of a national living wage will affect them.