Enterprise and Regulatory Reform Bill

Debate between Earl Cathcart and Lord Hunt of Kings Heath

Wednesday 16th January 2013 Grand Committee

[Lord Hunt of Kings Heath]

My Lords, that was an interesting contribution from the noble Baroness, who speaks from experience, but there is no guarantee that farmers will do the right thing. My concern, apart from the procedure, is that by removing the Agricultural Wages Board you are removing an essential safeguard. The noble Lord, Lord Plumb, also spoke with great experience. Both noble Lords gave us a rather warm-hearted view of how farmers will respond. Apparently, we can rely on them to do the right thing and pay much higher wages than are paid under either the minimum wage or the rates contained in the order issued by the Agricultural Wages Board—but I wonder.

If one looks at the evidence given during the very truncated consultation period, the fact is that the supermarkets will undoubtedly be looking to drive down those wages in order to ensure that they keep the profits themselves. That is the story in history of how the supermarkets have behaved time and again.

My principal reason for coming into this debate is that I, alongside my noble friend Lady Royall, led for the Opposition on the Public Bodies Bill. I find it extraordinary that we are debating the abolition of the Agricultural Wages Board in this Bill. We spent hours debating the Public Bodies Bill. We had two very good debates on the Agricultural Wages Board in Committee and on Report during passage of the Bill, and in no way was there any suggestion by the Government that they would not be using the process laid out in what is now the Public Bodies Act to deal with the Agricultural Wages Board.

We have lost the super-affirmative procedure, which would have allowed for extensive engagement and consultation with stakeholders. It would have allowed noble Lords who had an interest to have taken part in extensive debate. Instead, we have had this remarkably truncated consultation—four weeks for England and one week for Wales—when many people are engaged in other activities during the winter period. We all welcome the Minister to his place but it is remarkable that in his introductory remarks he gave no explanation whatever about why this amendment was being introduced at this late stage, why the Public Bodies Bill procedure agreed by your Lordships' House is not being used and why such a short consultation period was agreed.

The consultation has been discussed very recently by the Secondary Legislation Scrutiny Committee. It very helpfully undertook a review of the new approach to consultation by the Government. We have to go back only to November of last year when the Prime Minister made a speech to the CBI conference and said:

“When we came to power there had to be a three month consultation on everything and I mean everything”.

He continued:

“So we are saying to Ministers: here’s a revolutionary idea—you decide how long a consultation period this actually needs. If you can get it done properly in a fortnight, great, indeed the Department for Education has already had a consultation done and dusted in two weeks”.

We know where that has landed the Department for Education. The Prime Minister added:

“And we are going further, saying, if there is no need for a consultation, then don’t have one”,

at all.

We now have a remarkable situation where, instead of having a well ordered process to consultation, it is entirely up to Ministers to decide how long it should be. I should have thought that there would be the inverse rule of ministerial law, which says that the more contentious the issue the shorter the consultation will be. Here we sit: one week in Wales on the abolition of the Agricultural Wages Board when we know there is absolutely no support whatever for its abolition in Wales. No wonder it is a week. People should be grateful, should they not? Why not a day? Christmas Eve would no doubt have produced the result the Government wanted. The way the Minister’s department has acted is, frankly, a disgrace.

I refer the noble Lord to the evidence given to the Secondary Legislation Scrutiny Committee. It received a lot of evidence and, unlike the summation of the evidence that Defra made of the consultation receipts, which I regard as wholly inadequate, this is a very well ordered summation. The committee report refers to a quote from the Academy of Medical Sciences, which said:

“‘We are concerned that if adopting a consultation response time of less than 12 weeks becomes the default, this may prevent expert membership organisations from being able to provide considered responses to support evidence-based decision-making in policy … as so many legislative proposals impose additional costs on business, calculating their actual cost impact can often take time and resources’”.

The committee concluded that there was a,

“widely expressed preference for a 12-week standard duration”.

We can see from what has happened in relation to the Agricultural Wages Board why that should be the case.

The Fresh Produce Association, as my noble friend says, is a convenient front for the supermarkets; no wonder it is in favour. On the issue of what landowners’ companies will do, I noticed the Duchy of Cornwall Nursery response in the consultation. The manager there says: “Overtime rates are ridiculous”. We know what will happen to the overtime rates of Duchy of Cornwall employees when we abolish the Agricultural Wages Board. I doubt there will be any overtime rate at all. That is what will happen in practice when this wretched amendment is passed, if it is passed, by your Lordships’ House.

The Minister then talked about this being a “deregulatory” action. I was a Minister at Defra for a little while and I am reminding myself of the Agricultural Wages (England and Wales) Order. It is not a very long document and absolutely clear. It is one of the most readable documents that I have come across. Here is a very clear way for employers and employees to understand what the rates are and how to put them into practice. That is admitted by Defra, whose regulatory impact assessment, in talking about the impact on the affected groups, states:

“Employers will need to familiarise themselves with relevant legislation instead of”,

having to look at the agricultural wages order. I refer noble Lords opposite to their continued and frequent complaints about the complexity of employment legislation. I fail to see how getting rid of this very slim, readable document and replacing it with the need for hard-pressed farmers to go through and read Act after Act is, frankly, a nonsense.

The impact assessment goes on to say:

“Workers and employers will need to spend time on negotiations to agree pay levels & other terms & conditions individually”.

How on earth is that reducing the time and effort of both farmers and farm workers?

The Government are replacing a well ordered system, easily understood by everyone, with bargaining that will have to take place from farm to farm, involving both farmer and farm worker in the complexity of negotiations. Is there any group of workers who work harder than farm workers? I doubt it. Surely they are the “strivers” that this Government were so pleased to cite when Mr Osborne started to try to divide this nation up in a very disturbing and discomfiting way. We know that the real impact of this will be to drive down the wages of some very good and vulnerable people, and we ought to have nothing to do with it.

[Earl Cathcart]

My Lords, when these amendments came to my attention, my first rather tongue-in-cheek reaction was, “Blimey, does the Agricultural Wages Board still exist? I thought it went out with the ark”. I say that as a farm employer. When setting a farm worker’s salary, I have to pitch it to reflect the salaries in the wider market outside of farming; that is, the competition.

Within the past year, we have employed two new farm workers and I will use one of them as an example. Previously, he had been working for a road haulage firm, on a salary of £16,000. It became clear in the interview that he was keen to take our job and he seemed exactly the right man for it from my point of view. Getting him to switch jobs all rested on his salary package. I was advised that the job equated to about £7 an hour, which is just above grade 2 on the latest agricultural wages order scale. Let us look at the practicalities of using the agricultural wages order scale in negotiations. The prospective employee said, “What is my salary going to be?”. I replied, “£7 an hour”, because the Agricultural Wages Board only works in pounds an hour. He said, “What does that mean in gross per annum?”, because he wanted to compare my offer to the £16,000 from his existing job. I said, “That is £7 an hour grossed up for the year”. So we got out the calculator: £7 an hour times seven hours a day, five days a week, 52 weeks a year is £12,740. That is what the Agricultural Wages Board is saying I should pay him. He wanted the job and I wanted to employ him but the Agricultural Wages Board pay scale does not cut the mustard because he would not move jobs for a £3,260 cut in pay. I offered, and he accepted, £16,000—the same as he was getting from the job outside farming. The important point here is that it was the competitive wider employment market that determined his salary, not the agricultural wages order pay scales, which we ignored as not being helpful.

I asked my firm of accountants in Norfolk whether other farmers ignored the Agricultural Wages Board rates when setting salaries. Was I alone, and was I breaking the law? I now know that it is not strictly legal to pay a salary to a farm employee under the agricultural wages order. Happily, the accountants’ answer to both questions was no—I was not alone and it was not illegal. They said that few, if any, use the agricultural wages order rates nowadays because one has to pay over the odds to attract people into farming, especially if skills are involved, given, as my noble friend Lord Plumb said, the combine harvester worth £250,000—that is a big skill. I also asked my neighbouring farmers, who employ workers on their farms, and got the same answer.

Another point is that the way the Agricultural Wages Board works is archaic in that it sets pay rates per hour, rather assuming that we still hand out weekly wage packets. That is clearly impractical in today’s world. The preferred option for both parties is for a monthly standing order. If employers and their advisers are not using the rates set by the Agricultural Wages Board, what is the point of the board? Here is the rub because the practicality of today’s employment market has made the board obsolete. Also, the raft of modern employment law referred to just now has made the board irrelevant, not least by the national minimum wage that was just referred to, which currently stands at £6.19 an hour. The current minimum rate under the agricultural wages order is £6.21 an hour, a difference of a mere 2p, as has already been said. That 2p difference is not surprising because the board cannot set its minimum below the national minimum wage and it would look too simplistic to set it at the same rate—

[Lord Hunt of Kings Heath]

I am most grateful to the noble Earl for giving way. He has referred to the grade 1 rates, but he might have referred to the other grades listed in the Agricultural Wages Board order, particularly those around overtime. Where are the guarantees on those?

[Earl Cathcart]

If I may, I shall come on to that point later. As I was saying, the board cannot set the same rate as the national minimum wage because that would look too simplistic, so the rate is set at 2p more. Last year—surprise, surprise—it was also set at 2p above the national minimum wage. Next year, if the board still exists, I would hazard a guess that the rate will be set at 2p more. This is hardly rocket science.

Recent research shows that the average earnings of full-time farm workers are 40% higher than the rate set by the board and that in 2010 some 90% of farm workers received more than the grade 2 minimum. The conclusion must be that farm workers are paid well over the minimum set by the board. I have talked largely about full-time employees, but what about temporary workers? I would argue that they are and will be protected by the national minimum wage.

Apart from some noble Lords opposite, who does not want to see the abolition of the Agricultural Wages Board? It is the union, Unite, which is deploying scare tactics by saying that without the board farm workers will see reductions in their pay with only the national minimum wage to protect them. That is quite clearly rubbish. Going back to my employee on £16,000 a year, if the board goes, am I really going to reduce his pay to the level of the national minimum wage; that is, £11,300? I am not going to do so because he would not accept a drop in salary of some £4,700 and he would leave. That action would disrupt my business because I would have to interview new applicants, train the new person, and probably have to pay the new worker £16,000 to entice him to move from his existing job. It is highly likely that all existing employment terms and conditions will remain exactly the same as my noble friend the Minister has said, in spite of—

--- Later in debate ---

[Lord Myners]

I sense that the noble Earl is coming to the close of his comments. I want to remind him that he said he would answer the point raised by my noble friend Lord Hunt of Kings Heath; namely, that the higher grades are not protected by the national minimum wage. The noble Earl said he had an answer, and I think that the Committee is looking forward to hearing it.

[Lord Hunt of Kings Heath]

Perhaps I can help my noble friend. I am referring to grades 1 to 6: grade 6 is the farm management grade and the rate is £14.10 an hour; grade 5, which is the supervisory grade, is £13.05 an hour; and grade 4, the craft grade, which I suspect is the grade that the noble Lord has in mind, is £12.32 an hour, which on a 37-hour week comes to £22,000 a year. I really do not understand what he is saying.

[Earl Cathcart]

The noble Lord did raise a question and I did say that I would come back to it. This is all about the competitive market. I said before that one has to attract people with skills into farming and to pay a higher rate according to those skills, and that is exactly where I am; you have to pay a higher rate of salary—not a higher rate per hour—to the person with the greatest skills, and it is the competitive market that determines that price, which is normally higher than the Agricultural Wages Board rates.

I said that the board is irrelevant to today’s employment markets. It is outdated, working in hourly wage rates not salaries. Those who need an hourly rate are protected by the national minimum wage, and if the Agricultural Wages Board disappeared tomorrow I do not believe that most employers and employees would notice. Those who did would, I believe, breathe a sigh of relief as it would reduce the administrative burden on farmers and their advisers.

The noble Lords opposite have all argued strongly for the board’s retention, but they had 13 years in office to change, modernise and bring the Agricultural Wages Board into the 21st century. They chose to do nothing.