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National Minimum Wage Naming Scheme

Volume 661: debated on Tuesday 4 June 2019

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy to make a statement on the suspension of the national minimum wage naming scheme.

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.

Thank you, Mr Speaker, for granting this urgent question, which finally forces a Minister to admit to the House that the Government have quietly dropped one of the few policies they had to protect vulnerable workers. The naming scheme had exposed nearly 2,000 employers who illegally underpaid nearly 100,000 workers by millions of pounds, including household names from TGI Fridays to Marriott hotels, but the last such list was almost a year ago.

As we now know, the Government have privately decided to suspend the scheme, despite the Department’s official guidelines maintaining that the scheme still operates. The Minister claims this was based on a recommendation of the director of labour market enforcement, made over a year ago, yet the director made no such recommendation to suspend the scheme; he simply called for an evaluation and specific improvements. The Government accepted those recommendations, so why have they not simply implemented them and continued with the scheme in the meantime? Can the Minister confirm that as this review has “no set completion date”, this policy has been effectively halted? Can she tell us what progress the review has made in the last year? What evidence has it taken, what research has been commissioned, what work has her Department done, and what proposals will come to the House and when? Or is the so-called review in reality just an excuse to let bad employers off the hook?

This is the latest in a long list of policies that would help working people, from fair tips to equality for agency workers, that have been delayed or dropped by the Government. Time and again, they crack down on the vulnerable and back down before the powerful. When will this capitulation to rogue employers over working people finally end?

I have to say that the hon. Lady is incorrect: the scheme has not been dropped. Given the impact that being named can have on a business, it is right that we properly consider the effectiveness of the naming scheme. We want to make sure that our enforcement approach balances the need to crack down on the most terrible employers, who purposely and persistently break the law, with the need to be fair to and educate employers who try to do the right thing.

We are in no way going soft on employers. Last year, we issued record financial penalties to more than 1,000 non-compliant employers to the value of £17 million. That was part of our commitment to support workers’ rights. Our good work plan sets out a vision for the future of the UK labour market and includes an ambitious programme of work to implement 51 of the 53 recommendations Matthew Taylor made in his review of modern working practice.

I must point out, however, that it was this Government who gave the lowest paid workers the biggest increase in the national living wage in 20 years.

I was reading the report from the Resolution Foundation, an independent organisation, and it says that the proportion of low-paid workers in Britain has dropped to its lowest level since the 1980s, thanks to the national living wage. Why on earth would we not name and shame employers if they were not complying with such an important part of the Government’s policy?

I thank my hon. Friend for outlining that piece of work. It is right that naming and shaming rogue employers is a key part of our enforcement. We have doubled the budget since 2015 for enforcement of the national minimum wage, and one of the key things that I am particularly interested in is making sure that we go after those individual employers or big organisations that are deliberately trying not to pay workers the minimum wage.

I thank my hon. Friend the Member for Barnsley East (Stephanie Peacock) for securing this important urgent question. One of the proudest achievements of the last Labour Government was the introduction of the national minimum wage, safeguarding workers from exploitative pay practices. Sadly, from the Trade Union Act 2016 to their failure to address exploitation through zero-hours contracts or bogus self-employment, this Conservative Government cannot be proud of their record on workers’ rights. The admission today that the naming and shaming scheme has been effectively shelved only adds to that woeful record.

The national minimum wage is effective only if it is adequately enforced. The Government have stated that the naming and shaming element of minimum wage enforcement is vital, alongside other measures such as fines. Has the Minister made any assessment of the impact of the scheme’s suspension on minimum wage avoidance in the last year? Has the Department continued to identify those employers underpaying during that period, and what action has been taken?

The Minister will also be aware that the director of labour market enforcement also criticised the Government not so long ago in respect of their utilisation of the enforcement mechanisms available to them. The director also asked about additional resource, so it would be helpful if the Minister could identify what funding has been made available to enhance enforcement capacity at Her Majesty’s Revenue and Customs.

Not only is enforcement of the minimum wage important, but the level at which it is set is crucial. I know the Chancellor of the Exchequer thinks that poverty is a figment of our imagination, but the fact is that in 2017 more than 1.5 million people had less than £10 a day to live on, according to the Joseph Rowntree Foundation. Labour is committed to ending the scourge of low pay. We will introduce a real living wage of £10 an hour and end the unfairness of lower rates for those under 18. Will the Minister take this opportunity to improve her Government’s record on poverty and workers’ rights and commit to doing the same?

The hon. Lady says that the Government have nothing to be proud of, but I am absolutely proud to serve in a Government who have put so much focus on enforcing the national minimum wage. As I have already mentioned, this year we increased the national minimum wage by the biggest amount in 20 years, up 4.9%.

It is simply not true to say that we have shelved the naming and shaming scheme. 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, and enables us effectively to communicate exactly what the breaches are and why, and the detriment to the individual worker. We remain absolutely determined to stamp out low pay.

We currently have larger numbers of people in work than ever before, and it is absolutely right that those individuals should get the hourly rates to which they are entitled. As I said in my opening remarks, we doubled the enforcement budget to £27.4 million in 2019-20. That was up from £13.2 million in 2015-16. We are committed to continuing that enforcement. I will not make excuses for reviewing the naming and shaming scheme, because we want to add value and make it more effective, and we want to make sure that we aid employers, help workers to understand their rights and offer routes to recourse.

I entirely agree with the Minister: I, too, am proud of the record that has meant £2,750 more has been put into the pockets of my Redditch constituents since the introduction of the living wage. Will the Minister update us on the progress towards having a single organisation that looks after workers’ rights, which will be valuable in the seeking of redress?

I thank my hon. Friend for raising that point. She is absolutely correct that in our good work plan we announced our intention to consult on a single labour market enforcement body. Our good work plan was a major step forward for the Government. I should point out to Opposition Members that the good work plan is the biggest reformation of workers’ rights for 20 years. It is this Government who are doing it and I am proud to be part of it.

The Government’s wage policy simply is not delivering for those who need it. Under the Tories, FTSE 100 chief executive pay has gone up by two thirds; when will the Minister finally deliver for those who are not rich and match the Scottish living wage? Incidentally, the Scottish living wage is now paid by 1,300 employers in Scotland—more than a quarter of all the living wage employers in the UK. Outside London, that means a wage of £9.55 an hour paid to all workers, including those aged under 25 whom the Tories have left behind. If the Minister cannot commit to that, she should devolve powers so that the SNP Scottish Government can. Given that nearly 370,000 workers on national minimum wage contracts are being underpaid, will she commit to implementing in full the recommendations in the Low Pay Commission’s report on non-compliance and enforcement, including on naming rounds for those who do not comply?

First, let me point out to the hon. Gentleman that we are not dropping the naming and shaming scheme. He was right to mention corporate governance and the issues around executive pay, which this Government take seriously and we are taking steps to address. He will know that the Low Pay Commission recommends national minimum wage levels to the Government. He mentioned the under-25s, but let me point out to him that almost nine in every 10 18 to 24-year-olds are paid above their wage bracket.

My constituency is one of the top 10 constituencies with the highest proportion of workers on the national living wage, so I welcome the fact that we have increased that wage by another £600 thanks to our excellent Chancellor and his Budget. I know that the Minister has come here to help the lowest paid make something of themselves, but may I say to her that it is essential that we make sure that employers do not get away with non-compliance, because it is unfair to other employers and to the employees who will not be protected. She is right to review the scheme, and she is taking great steps, but I urge her to keep the name and shame policy because there is no better way of shaming people into compliance.

I thank my hon. Friend for his comments. Her Majesty’s Revenue and Customs will investigate any complaint that it receives about underpayment of the national minimum wage. We also have ACAS, which provides a helpline for individuals who feel that they are not being paid the national minimum wage. Naming and shaming is part of our toolkit of enforcement, but, as I have said, it is only one tool. I want to make sure that when we name and shame organisations, we understand what the detriment is and how much the detriment is. We need to make sure that, when we report these companies, we are reporting not just big names to grab a headline, but meaningful information that helps to advise and educate employers and, really importantly, educates workers so that they understand that, where there is a detriment, they can take action.

With record numbers of people struggling with in-work poverty, this Government should be doing everything they can to reverse this shameful record. Instead, they are removing schemes that expose exploitative employers. Will the Minister think again and not only reinstate the national minimum wage naming scheme, but use the scheme to enforce the law? Will she also provide a date by which she intends to complete the review?

The hon. Lady knows that I have a great deal of respect for her, but she has not listened to what I have said. We have not dropped the naming and shaming scheme. I want a scheme that is valuable and meaningful, that aids compliance and enables workers to get their entitlement, and that makes sure that employers follow the law. I want to focus on enforcement, absolutely making sure that we penalise and reprimand any employer that is underpaying workers who are entitled to the minimum wage. Since the start of the scheme, we have seen 12 prosecutions. Last year alone, there were seven labour market enforcement undertakings and orders where the national minimum wage had been breached. I am committed to this scheme; this Government are committed to this scheme. We have a record number of people in work, and, this year, this Government have overseen the largest increase in the national minimum wage.

Can the Minister confirm that it remains Government policy to increase the national living wage to 60% of median earnings by 2020? If that does remain the case, will that not mean an extra pay rise for millions of workers?

My hon. Friend is absolutely correct. We remain on target to reach our ambition of 60% of median earnings by 2020. That is something that this Government are looking forward to achieving. We are not stopping there. We are looking forward to seeing where we can continue to increase the wages for our lowest paid workers past 2020.

Naming and shaming employers who fail to pay even the basic minimum is one of the strongest ways that society can send a message that such behaviour is unacceptable. The Minister talks about the impact on employers of being named, but I am more concerned about the impact on workers who are underpaid—some of the most vulnerable people in our society. Whether it is deliberate or otherwise, they feel that impact. I recall the opposition that I had to face from the Minister’s Conservative colleagues when I was in her role and introduced this scheme. Will she give the House an assurance today that the review will include no watering down of the scheme to let employers off the hook, and will she name the date when the next round of naming will happen?

Given the hon. Lady’s previous role, I know that she understands well the portfolio, and the naming and shaming system. I reiterate that we have not dropped the naming and shaming scheme. I have tried to be extremely clear that I want the naming and shaming scheme to be meaningful, add value and give us proper information so that we can understand where there is detriment to workers and why. We will still name individuals, but I want employers to comply with the law and workers to get what they are owed. That is not just about naming and shaming; it is also about ensuring that the information that we are publish aids education and helps to stop any detriment to employees. Not all employers are wilfully paying under the national minimum wage, and we have a duty to educate businesses so that they are easily able to comply with the law.

Why was it necessary for the Minister to suspend the scheme while she reviewed it to make it more meaningful and useful?

I decided to do that because I wanted to ensure that I was naming and shaming with meaningful information. I will not make excuses for making sure that we are delivering and reviewing a policy, or for carrying out what the director of labour market enforcement asked us to do.

So can the Minister confirm that those sleazebag employers who rip off the lowest paid in our country are actually going to be named and shamed for the last 12 months?

Naming and shaming is one tool, but does the Minister agree that one of the most powerful tools to increase incomes is to reduce the amount of tax paid by people on low pay? Like me, does she take pride in the fact that instead of people having to pay tax on earnings of above around £6,000, as was the case in 2010, the figure is now closer to £12,000—adding hundreds of pounds to people’s incomes?

Absolutely, and this Government have made great ground in that regard. This is not about grabbing headlines. It is about ensuring that workers get the pay to which they are entitled, which is why we have doubled the enforcement budget and are collecting more arrears than ever before. There were more than 3,000 successful investigations by Her Majesty’s Revenue and Customs in the last year alone. I want that budget to be spent effectively on catching more employers who are underpaying the minimum wage.

It is all well and fine for the Minister to say that some under-25s are paid more than they are legally entitled to receive, but that gives no reassurance to those who are not. May I suggest that she adds to her naming and shaming scheme employers who employ young people on short-term, temporary contracts and then dismiss them when they cost more money?

The hon. Lady raises an issue regarding the incorrect practice of employers. As I have said, HMRC will investigate every complaint and ACAS is available to receive those complaints. We have asked the Low Pay Commission to undertake a review of the structure of the national minimum wage, and it will report back later in the year. We encourage employers always to pay above the minimum wage brackets if they are able to do so.

The Minister has said on a number of occasions that the Government are taking tough enforcement action against employers who fail to pay the minimum wage, but between 2010 and 2018 in Wales there has not been a single successful prosecution resulting in a fine against employers for underpaying. This is not tough enforcement; it is impunity.

The hon. Lady raises prosecutions as the only way of action or enforcement, but that is not true. I have said that since 1999 over £118 million has been paid back—to over 200,000 workers in 2019, so in just one year. It is true that there have been only 14 prosecutions. However, organisations are required to pay back the arrears, and pay a penalty, wherever a breach is found. I would like to highlight the fact that the Government have recently been consulting on salary sacrifice schemes. There have been examples in the media of workers being found to have a detriment through salary sacrifice schemes. This has been a key area in employers being caught under the national minimum wage legislation.

What assessment has the Minister made of the pay discrepancy among cleaners in Whitehall? The Department for International Development pays the London living wage but the Ministry of Justice, which should be seeking justice, pays the national minimum wage. What does she intend to do about it?

I thank the hon. Lady for raising that point about the differences between Departments. I do not personally have the details of that and I have not looked into it, but I will happily do so, and I am more than happy to write to her with a fuller answer.

Last time I spoke to the Minister about the use of unpaid work trials and the minimum wage, there had not been a single tribunal case anywhere in the UK in this regard that had been successful. Since that time, there has, but it was in Jersey, where a Polish woman took on her employer and won back the £30 that the tribunal said she was entitled to for the trial. What impact will that have on UK employment law? In the 20-odd years of the National Minimum Wage Act 1998 we have only just this year had one successful tribunal. Does that not tell her that the law is deficient and needs amending, and that unpaid work trials should be outlawed in their entirety?

The hon. Gentleman is a keen campaigner in the area of unpaid work trials. As I have said on many occasions, in most cases, unpaid work trials, if they are not a small trial that is conducive to the work environment, are illegal. On the back of his campaign and work that had been done before, we issued new guidance in December 2018. As I have said, where a worker feels that they have had a detriment, they are to report it to HMRC or ACAS. HMRC will investigate every complaint. We cannot just judge this issue on prosecutions. We need to judge it on where the detriment to the worker is, and then ensure that they get what is owed to them and that the employer is penalised.

I thank the Minister for the response that she has given. What discussion has taken place with the Chancellor with regard to help for small businesses who struggle to make the payroll, and have a presence on the high street, in order to provide tax relief or other help so that the local economy is helped and that small businesses can survive and pay a correct and fair wage?

I thank the hon. Gentleman for raising the issue of small businesses. It is absolutely true that small businesses are the backbone of our economy—99.6% of all UK businesses are small businesses, and is absolutely right that we are able to help them. A key part of that is making sure that, as the small business Minister, I make representations to the Chancellor and across Government on what small businesses need. The work that is being done on the review of naming and shaming is to make sure that when small employers find themselves in breach of the national minimum wage legislation, we are able to give them the right guidance and advice to enable them to meet their obligations. Many small employers want to make sure that they pay the national minimum wage, and above the national minimum wage. It is our duty not only to penalise but to aid and enable small businesses to meet their obligations.