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National Minimum Wage Naming Scheme

Volume 798: debated on Wednesday 5 June 2019


My Lords, with the leave of the House I shall now repeat, in the form of a Statement, the Answer given yesterday in another place to an Urgent Question which asked my honourable friend the Secretary of State for Business, Energy and Industrial Strategy to make a Statement on the suspension of the national minimum wage naming scheme. The Statement is as follows:

“Enforcement of the national minimum wage and the national living wage is a priority for the Government, and we take tough action against the minority of employers who underpay. Last year, employers were ordered to repay over 220,000 UK workers a record £24.4 million of arrears. We have more than doubled the budget for minimum wage compliance and enforcement since 2015, and it is now at a record high of £27.4 million.

As part of our enforcement approach, we name employers who have breached the legislation, which raises awareness of national minimum wage enforcement and deters others who may be tempted to break the law. To date, the Government have named almost 2,000 employers who have underpaid the national minimum wage. The Government are reviewing the naming scheme to ensure that it continues effectively to support minimum wage compliance. This is in response to a recommendation made by the director of labour market enforcement, Professor Sir David Metcalf, last year.

In December 2018 we accepted both of the director’s recommendations relating to the naming scheme, specifically to review the scheme’s effectiveness and to consider how to provide further information under the scheme in future. The Government have sought to learn from other naming schemes and other regulatory approaches. We have also discussed the evidence with the director of labour market enforcement and have conducted further analysis to understand the impact that any changes to the scheme would have on the number of employers named.

Naming and shaming remains an important part of our enforcement toolkit, and the review will be concluded in the coming weeks. Any changes to the scheme will be communicated through the national minimum wage enforcement policy documents”.

That concludes the Statement.

My Lords, I am very grateful to the Minister for repeating the Statement. I am still a bit confused, however. He went on at length about the value the Government place on the scheme, but has it actually been suspended during this review, or not? Will he confirm, for the record, that the review the Government are carrying out is actually on the effectiveness of the naming and shaming scheme, not on the scheme itself, that the scheme has not been suspended or dropped, and that naming and shaming will continue until such time as a firm decision has been reached by the Government on the current review? Will he also confirm that, although it is true that the director of labour market enforcement called for an evaluation of the naming scheme, this was only one of 37 recommendations made in the excellent 2018 report? What is happening to the other very important recommendations, including the one to which he referred which called for greater use of, and more publicity for, prosecutions, undertakings and orders, so as to alter employers’ behaviour by raising their risk of being caught and increasing the penalties for breaching the law?

My Lords, naming and shaming is just one of a number of different actions that can be taken, alongside self-correction by employers, the civil penalties that are available, and the criminal proceedings and resulting fines. As the noble Lord said, and as I made clear in the Statement, we will review the naming and shaming scheme and he will have to await further announcements on that. As my honourable friend Kelly Tolhurst made clear yesterday, she considers that it has been effective, but it is obviously quite a draconian measure to use against employers and we should be wary about the effect it might have on them. I think it is quite right that the Government should consider how to operate this in the future: that is what we are doing and I ask the noble Lord to be patient about this and about the other recommendations made by Sir David. In due course, announcements will be made.

I join the noble Lord, Lord Stevenson, in thanking the Minister for repeating the Statement. I am confused by his answer and the debate in Hansard yesterday in the other place, where no one seemed to be calling out naming and shaming as an issue. Can we get to the nub of what exact problem the Government are seeking to fix here in cherry picking this one recommendation and putting it up for review? Can the Minister tease out that information by telling us what terms of reference this review will have? Is it to make naming and shaming more effective or to find a way of not having naming and shaming? Finally, the last sentence of the Statement says that this will be made public through the national minimum wage enforcement policy document. That is not good enough. Given the nature of this and the interest from both Houses, a Statement from the Minister on what this review comes up with will be important. Will he undertake to do that?

My Lords, as I said to the noble Lord, Lord Stevenson, the noble Lord will have to be patient and wait for the full announcement. Sir David made his comments and my right honourable friend took them on board. We want to review the effectiveness of naming and shaming. My honourable friend made it clear yesterday that:

“It is absolutely right for me, as the Minister responsible, to evaluate the scheme and make sure that any naming and shaming scheme is meaningful, adds value, acts as a tool to aid employers to make sure that they are able to comply with the national minimum wage legislation”.—[Official Report, Commons, 4/6/19; col. 49.]

We want to make sure that that legislation is effective. This is just one tool among many. As I made clear, there is also self-correction by employers and the possibility of civil fines and, as has happened on occasion, prosecuting in the criminal courts. We want to see how effective this is and whether it should be looked at again. That is what my honourable friend and right honourable friend are proposing to do.

My Lords, I am quite sure that it is my fault, but I remain confused. Has the naming and shaming scheme been suspended?

I would not want to use the word “suspended”. My honourable friend made it clear in her Statement yesterday that naming and shaming was still there and available, but that while we were reviewing the scheme we were not using it. We want to look at the effectiveness of that scheme, as my honourable friend said, and decide how it can be made use of most effectively as one of the tools in ensuring that the minimum wage legislation, which goes back a long way—it was introduced by the party opposite, extended by the coalition Government and had further increases under the Conservative Government—all works well. It belongs to all of us.

My Lords, the Minister has asked us to be patient. Does he have any idea at all when this review might be completed so that we can have more definite information? Having spoken recently to Sir David Metcalf, who was an original member of the Low Pay Commission—we served together 20 years ago—at the 20th anniversary of the minimum wage, I know that he is quite clearly looking at the whole range of possibilities to make sure that implementation takes place. Without wanting to sound too critical, if you divide £24.4 million of arrears among 220,000 UK workers, if my maths is right that is about £110.90 each. I accept that that is a lot for people on minimum wage, but implementing the whole area is more important than worrying about this one issue. I hope that we get some very speedy action on the whole range of implementation of underpayment, rather than just the naming and shaming issue.

My Lords, I cannot be any more precise on the timing of when the Government will make a further announcement. I have got things wrong in the past when I have said that things will be published “later in the spring”, and one had to be quite flexible about how one defined the spring. I will say only that we hope that there will be something later in the summer.

My Lords, can the Minister name how many of the 239 companies that were named and shamed previously are not paying the national minimum wage?

My Lords, again, I cannot answer that. However, one would hope that naming and shaming has been effective, and that we will know that in due course. As I made clear in some of my earlier responses, one also has to understand that naming and shaming is quite a draconian power and can have a major effect on any individual company. We therefore want to look at just how useful it is as part of the overall toolkit that is available to ensure that we can get all employers to meet the minimum wage.

My Lords, for many years, gangmasters have taken people out of cities to work in rural communities and have been known to pay them below the minimum wage. Are they regarded as employers or is the farmer who uses these men and women regarded as the employer, and if so, how many farmers have been named and shamed?

My Lords, I am afraid that I cannot answer the noble Countess’s question, but if I have any further information, I will certainly write to her. However, as I made clear in the Statement, we have increased the resources available to HMRC, more or less doubling them. I am told that last year it completed some 3,000 investigations and issued £17 million in financial penalties to more than 1,000 non-compliant employers. Obviously, more can be done, and we will do as much as we can to make sure that where there is legislation—which has had all-party support—it is effective with regard to the employers concerned.

My Lords, I am a patient person, and I was glad that my patience has resulted in getting a statement out of the Minister which he was perhaps reluctant to make. His noble friend asked whether this scheme had been suspended. He ducked that question and said that it had not been suspended, but I took from him—I would be grateful if he could confirm it—that the scheme in its present form is not being used until the results of the review have been published. We do not know when that will be but we hope it will be imminent. Given that most of the 37 recommendations in the very good report we have referred to assume that the scheme will continue, are the Government really considering suspending it completely?

I will not prejudge that review. We have made it quite clear that we believe the scheme is effective, but, as I have made clear, on occasion it can be quite a draconian power. We want to look at how the scheme works, whether it is good, and whether it is, as I put it, a useful tool to have in the box to deal with this issue.