Draft National Minimum Wage (Amendment) (No. 2) Regulations 2024

Justin Madders Excerpts

Monday 18th March 2024 General Committees

[Justin Madders (Ellesmere Port and Neston) (Lab)]

It is a pleasure to see you in the Chair this afternoon, Mr Hosie. I thank the Minister for outlining the changes these regulations make to implement the new rates of minimum wage, as recommended by the Low Pay Commission, to which I also pay tribute for its sterling work. I will refer to some of the findings from its annual report during my contribution.

I also—he should really steel himself, because I do not do this often—congratulate the Minister on delivering the promise to match the minimum hourly rate to two-thirds of median wages. I think that has been eight years in the offing, but we have got there. In achieving this figure, the Low Pay Commission recommended a rise that represents the largest increase in cash terms since the introduction of the minimum wage. That is clearly welcome news for those working in minimum wage jobs, as is the extension of the entitlement to all those over the age of 21. It represents a 9.8% increase for those older than 21, with the hourly rate of the main rate—the so-called national living wage—now at £11.44 an hour. That equates to an annual increase of just over £1,800 for someone working a 35-hour week, and clearly we in the Opposition welcome that.

While I understand the Government are keen to celebrate this year’s levels, I would caution them not to be too overconfident, because anyone who has taken the time to study the Low Pay Commission’s report will see that much more needs to be done before work in this country pays in the way that it should. There are clear warning signs in the report about the persistence of insecure work and in-work poverty.

No one here will need reminding that the rates of inflation we have had to endure in recent years have thrown workers—and, indeed, everyone in this country—into a cost of living crisis. Inflation rates peaked at 11.1% in October 2022 and have been hovering around 4% and 5% even now. Between April 2021 and April 2022, household bills doubled, and the price of essential goods and services increased at a magnitude not experienced since the 1970s and 1980s. The Low Pay Commission report notes that energy, food and transport costs were at the “highest rates recorded” since the CPI series began, way back in 1989. Even in September last year, when inflation was beginning to come down, energy prices were still increasing by 5% and food inflation was 12.2%.

Last year I raised concerns that, in the face of such high levels of inflation, the minimum wage uplifts were not large enough to prevent a real-terms cut to the rate. That has been confirmed by the Low Pay Commission report, which states that the past two years’ increases in the minimum wage have in fact represented a cut in real terms due to inflation. I am pleased that the commission is confident that today’s increases will restore the value of the minimum wage in real terms, but I am also aware that the increases do not undo the previous two years, when pay did not keep up with the cost of living and hardship has endured as a result.

[Kevin Hollinrake]

As I said, the national living wage has outstripped inflation twofold during the period since its implementation. At one point in time, the Opposition talked about a national living wage of £15 an hour. Is that still the hon. Gentleman’s policy? Is that his personal policy or the Opposition’s policy?

[Justin Madders]

That very interesting question is some way outside the remit of the regulations. Of course, if the Minister wants to talk about what our policies will be, he should advise the Prime Minister to call a general election—but perhaps we are not quite there.

My question for the Minister is about the inflationary spikes of the last couple of years. What mechanisms are being looked at to ensure that the minimum wage increases at a rate that reflects those in real time? The evidence gathered by the Low Pay Commission on how workers have been affected is truly sobering. In Belfast, the commission found that supermarkets had introduced payday pantries, which provide food for workers in the run-up to payday. A care worker in Manchester told the commission,

“Most of my colleagues are using food banks.”,

and stated that that was not a new, post-pandemic problem. Such examples chime with responses in trade union surveys. In autumn 2022, Unison found that 17% of respondents had skipped meals and that 20% had asked for a loan from family or friends. In May 2023, USDAW found that 46% of its members surveyed were worried about food bills, 15% had turned to food banks and 42% had missed meals in the last year to pay for bills. If anything, the situation has been getting worse. The Joseph Rowntree Foundation’s yearly poverty report states that the proportion of households in poverty with at least one working adult increased from 61% in 2021 to 64% in 2022. The poverty rate across the country as a whole is now more than one in five, and poverty has not fallen for 20 years.

It is worth saying a few words about why, despite the Minister’s comments, minimum wage increase have not eradicated in-work poverty, which is what we would like to see. Of course, I commend the Government for reaching their 2016 pledge to increase the minimum wage to 60% of median wages by 2020 and to two thirds of median wages by this year. Indeed, the impact has been that the number of employees on low hourly pay has fallen consistently; the fall since 2015 is estimated to have been about 20%.

However, the graph on page 62 of the Low Pay Commission report reveals that on two issues we still have an awful long way to go. It is hard not to be struck by the large disparity between men and women in terms of low pay—a point I shall return to—and the persistence of low weekly pay as opposed to low hourly pay. That instructive graph shows that increasing the minimum wage floor is only one of the tools needed to tackle problems in the labour market, and that it has largely left unaffected the issue of low pay for those on weekly earnings. There is clearly an issue about the number of hours people are working.

The Low Pay Commission annual report highlights the wide gap between men and women. Consistently since 2011, roughly 15% of men in employee jobs have been on low weekly pay, despite the increases in the minimum wage. The percentage of women on low weekly pay is double that of men, at roughly one in three. That has fallen gently since 2011, when the rate was around 41%, but that large disparity is still there. Will the Minister say whether there are any plans to deal with that gender pay gap and the question of hours worked?

To adequately address the problems in our labour market, we have to consider not only the number of hours but the quality and insecurity of work. Citizens UK has estimated that there are 6.1 million workers currently trapped in insecure forms of work, 3.4 million of whom are on low pay. That amounts to 19% and 11% of the total workforce respectively on low pay. Low pay is not an inherent condition for those in insecure work, however; those on low pay are around five times more likely to be in insecure jobs.

It is noted in the Low Pay Commission’s report that those insecurely employed struggle to get adequate hours, still receive late shift notices and are on zero-hours contracts. Respondents noted that workers in sectors such as hospitality had to take on multiple jobs to obtain full-time hours, which brings the challenge of having to juggle their availability in order to be accessible for both.

In its fieldwork, the Low Pay Commission found that workers continue to struggle to get contracts that reflect their actual hours worked. It was also noted that employers are still allocating shifts with as little as a day’s or just a few days’ notice, with some workers interviewed even stating that they had had shifts cancelled on the day they were meant to be in work. That is clearly a problem that is not going away. I ask the Minister this: how is someone supposed to plan for the future when they do not know how many hours they will work from week to week or month to month? What can a worker do if they are told they are surplus to requirements on a particular day when they might have already paid out for childcare or transport costs? Such practices erode the gains that we have made on the minimum wage.

As I say, I will not be entirely negative—the Minister would not expect me to be so. Positive steps have been made this year. We particularly welcome the removal of the 21 to 22-year-old age category. That measure was found to have broad support among those contacted by the Low Pay Commission. But as I mentioned last year, we are sad to see the Government continuing to support age discriminatory bands for those over the age of 18. Why should someone’s age determine their pay? A young adult is unable to go to their landlord and demand lower rent or to tell the cashier at the supermarket that they should have a discount because they are under the age of 21. Their bills are no cheaper than anyone else’s, yet for some reason we expect young people to make ends meet on lower pay.

That is accentuated by the fact that the rates have grown more slowly for younger workers. The gap between the main rate and the 18 to 20-year-old rate has grown massively since the Conservative party came to power in 2010. The Low Pay Commission report shows how the 18 to 20-year-old rate hovered around 85% of the value of the adult rate throughout Labour’s time in office. It then fell to below 80% between 2011 and 2013 and has continued to fall since 2015.

The minimum wage rate now for those aged 18 to 20 is just over 70% of the adult rate—around 15% lower than it was under the Labour party, rubbing salt into an already unjust situation. I appreciate that the Minister has referred to an above-rate increase for 18 to 20-year-olds this year, but is that part of a concerted plan and strategy to bring back the differential that existed under the Labour Government?

Eligibility is only half the battle. Unfortunately, entitlement to a minimum wage does not translate directly into securing that rate of pay. Enforcement is key and the right to be paid a minimum wage remains an important part of the enforcement universe. Questions, therefore, ought to be asked about the effectiveness of enforcement, as too many workers still report being underpaid.

Data from the annual survey of hours and earnings shows that, despite the total number of people reporting being paid less than the minimum wage having fallen since 2019, last year 365,000 workers were still being underpaid by their employer. As a share of the minimum wage coverage, that has increased since 2019, at a rate of 23.4%. That means that of those who earn on or around the minimum wage, around a quarter of them are not actually receiving it. That is certainly something that we need to see more action on.

From what we have seen from the Low Pay Commission’s report, workers in certain sectors are impacted more than others. I spoke last year in the same debate about the impact in the social care sector and raised the findings that Unison had shared with me about the exploitation of domiciliary care workers. I mentioned then that 73% of those workers were being underpaid. They were not being paid for the travelling time. I also stated that record keeping by employers was found to be way below the standards expected and that the complexities of those pay calculations made it incredibly difficult for employees to establish whether they had in fact been underpaid.

It was therefore pleasing to see that the Low Pay Commission had dedicated some space in its annual report this year to discussing those issues. It noted that the amount of arrears that His Majesty’s Revenue and Customs recovered for non-payment of the minimum wage

“pales into insignificance when compared to the average amount of arrears that Unison secures”

for social care workers—well done to the trade union Unison, but should it not be HMRC’s job to recover arrears and ensure the minimum wage is paid properly in the first place? Is it the case that HMRC is unable to properly decipher the records, or is it going lightly on social care employers?

[The Chair]

Order. I know that the Low Pay Commission report and recommendations are in the paperwork we have been given, in the impact assessment, but enforcement and so on are slightly wide of the scope of this very narrow SI, which is simply about a change to rates. I am sure the shadow Minister will reflect that in his soon-to-be brief closing comments.

--- Later in debate ---

[Justin Madders]

I understand what you say, Mr Hosie, but this is the only occasion we get to debate the Low Pay Commission report and, as you correctly point out, it is instructive in setting the minimum wage. I will, of course, be guided by your comments.

I will just say a little more about the naming and shaming scheme. I am pleased to see that we have managed to get two rounds of it in the last year. However, one problem is that we are talking about historical breaches—one of them in the last round was from 2012. There are evidently problems with the naming and shaming system. Employers that do not pay the minimum wage must feel that they will face the obloquy of the naming and shaming scheme quickly—much more quickly than they do now. When will the Minister be able to update us on how the enforcement and naming and shaming schemes will be operating faster?

I will skip over the questions on procurement that I raised last year, Mr Hosie, but I want to raise a couple of final points mentioned in the Low Pay Commission report. One was about the number of commissioners. There has been a gap in that number, and the commissioners expressed some frustration that they were not at their full complement. I think there is still a vacancy on the commission. Can the Minister update us on when that is likely to be filled?

Finally, the commission noted that the labour force survey was becoming less reliable. What plans does the Minister have to ensure that in future, when the Low Pay Commission is setting its rates, it can do so on the basis of a robust dataset? I recognise that he has made comments about the remit being issued for 2024 shortly, but it is probably lacking a little bit of detail. Does he have anything to share with us about the Government’s plans and ambitions for raising the minimum wage in the next decade?

--- Later in debate ---

[Justin Madders]

On the Minister’s point about how the minimum wage has increased over the past eight years, why is it still the case that so many people are in in-work poverty? How many people have actually made that request for predictable hours under the legislation?

[Kevin Hollinrake]

There has been a significant decrease in the number of people in absolute poverty—millions of people since 2010 and 400,000 fewer children in absolute poverty, which we all welcome. As I said before, in pushing the national living wage as high as we have done, we are putting burdens on businesses. We want to ensure that we strike a balance, and that is our concern with this. We always take into account the concerns of employers as well as workers.

[Kevin Hollinrake]

My right hon. Friend is right to say that part of the rationale behind the national living wage is to ensure that wages that employers pay are not being subsidised. The total cost of the welfare system is around £303 billion, some of which is a result of the issue he raised. To me, that is wrong and that is one of the reasons why we would like to see the national living wage increased. Nevertheless, we do not want to see that at the detriment of jobs in our economy.

There is still a balance to be struck on making sure people have the opportunity for predictable hours. That is covered in the legislation we have introduced. I understand that the policy of the hon. Member for Ellesmere Port and Neston is that anybody who has been in work for 12 weeks and is on a contract can request those hours in terms of as a permanent position. I think that is the policy that the Opposition are going to introduce. It will be interesting to see what impact that will have on employers, particularly employers of seasonal workers.

There is a balance to be struck between business and workers. I point out that there are 4.2 million more jobs in our economy than there were in 2010. That is a huge success story. There are 1.2 million fewer people unemployed and looking for work. That is a huge achievement. Some of the policies that Labour always tend to bring forward end up costing jobs. Every single time we have had a Labour Government, unemployment is higher at the end of their term than it was at the start.

[Justin Madders]

Is the Minister aware that an election is about to be called, because he has spent the last couple of minutes talking about Labour policies rather than the statutory instrument? If he is so convinced that our policies are bad, why won’t he let the public decide?

[Kevin Hollinrake]

I am purely responding to the points that the hon. Gentleman raised, to try to make him understand there is a balance to be struck in the economy between jobs and pay. That is the balance we are trying to strike.

The hon. Gentleman and the SNP spokesman, the hon. Member for Glasgow South West, made points about enforcement, which we take very seriously. We have doubled the compliance budget between 2015-16 and today to £27.8 million. We have ordered employers to reimburse £100 million to 1 million workers. We take this very seriously.

The naming and shaming scheme was suspended during covid. I understood why, but I was very keen to reintroduce it. It is the principal deterrent. I reassure the hon. Member for Ellesmere Port and Neston and other members of the Committee that, whenever we are about to do a naming round, we write to all the employers and tell them that they are going to be named. We get a lot of push-back, and we push right back again. There is no excuse for not paying the minimum wage. We have named a total of 3,200 businesses since 2013, including more than 500 just last month.

The hon. Gentleman raised the point about the vacancy in the Low Pay Commission. We are actively seeking candidates for that; if anybody is out there listening, I am very happy for them to come forward. I am very confident that new chair Baroness Stroud will do a fantastic job.

The SNP spokesman said that he wants a higher living wage, which I completely understand. He is very willing to nail his colours to the mast, unlike the Opposition, about where he thinks that should be, but I gently push back to him as well on the balance we need to strike here. The hospitality sector in Scotland is struggling as well as ours, and others are too. We must make sure we get that balance right. I have to say that in Scotland the failure rate in hospitality is even worse, being 30% higher than it is in England. That is partly down to the fact that Scotland has not passed on the rates money for those hospitality businesses, as has been done in England. The average pub in Scotland is £15,000 a year worse off because of that policy.