National Minimum Wage (Amendment) Regulations 2020

Lord Callanan Excerpts

Tuesday 3rd March 2020 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the National Minimum Wage (Amendment) Regulations 2020.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the purpose of the regulations is to increase the national living wage and all of the national minimum wage rates from 1 April 2020. The regulations also include an increase in the accommodation offset rate, which is the only benefit in kind that counts towards minimum wage pay.

The national living wage has had a positive, real-terms impact on the earnings of the lowest paid. Between April 2015 and April 2019, those at the fifth percentile of the earnings distribution saw their wages grow by almost 11% above inflation. This is faster than at any other equivalent point in the earnings distribution. The labour market has continued to perform well: the employment rate is at a record high of 76.5%, while the unemployment rate is at 3.8%, the lowest rate since the 1970s.

From April, the national living wage for those aged 25 and over will increase by 51p to £8.72, which is a 6.2% increase. The 51p increase in April will mean that full-time workers on the national living wage will see their pay increase by £930 over the year. This national living wage increase is projected to meet the Government’s target of 60% of median earnings in 2020. The national minimum wage rate for 21 to 24 year-olds will increase by 50p, meaning that those in this age group will be entitled to a minimum of £8.20, an annual increase of 6.5%. Those aged between 18 and 20 years old will be entitled to a minimum of £6.45, which is an annual increase of 4.9%, while those aged under 18 will be entitled to a minimum of £4.55, an annual increase of 4.6%. Finally, apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, will be entitled to £4.15, which is a 6.4% increase. All of these above-inflation increases represent real pay rises for the lowest-paid workers in the United Kingdom.

All the rates in these regulations have been recommended by the independent and expert Low Pay Commission. As noble Lords will be aware, the commission brings together employer and worker representatives to reach a consensus when making their recommendations. The Government asked the commission to recommend the rate of the national living wage such that it reaches 60% of median earnings in 2020, subject to sustained economic growth. For the national minimum wage, the commission has recommended rates that increase the earnings of the lowest-paid younger workers as high as possible without damaging their employment prospects. I thank the Low Pay Commission for its extensive research and consultation, which has informed these rate recommendations, all of which is set out in its 2019 report, published in January.

The Government have further pledged to raise the national living wage to two-thirds of median earnings and apply it to those aged 21 and over by 2024. The Low Pay Commission will continue to have a central role, ensuring that the lowest-paid workers benefit from national living wage increases.

On the subject of enforcement, the Government are clear that anyone entitled to be paid the minimum wage should receive it. That is why we have more than doubled the enforcement and compliance budget, with funding reaching £27.4 million for 2019-20, up from £13.2 million in 2015-16. HMRC follows up on every complaint it receives, even those which are anonymous. This includes complaints made to the ACAS helpline, via the online complaint form, or from other sources. Increasing the budget allows HMRC to focus on tackling the most serious cases of non-compliance, while educating employers into compliance. In 2018-19, HMRC identified a record £24.4 million in pay arrears for over 220,000 workers, and issued more than £17 million in penalties for non-compliant employers. The Government have taken further measures to help employers get the rules right first time by providing improved guidance and support.

While increases in the national living wage and national minimum wage represent a cost to some businesses, the Government have introduced a number of measures to support them. For example, we have cut the corporation tax rate from 28% in 2010 to 19% today, benefiting more than 1 million companies and delivering the lowest rate in the G20.

Record increases to the national living wage and national minimum wage rates are just part of this Government’s agenda to make the UK the best place in the world to work. I commend the draft regulations to the Committee.

[Baroness Burt of Solihull (LD)]

My Lords, it would be churlish not to congratulate the Government on achieving their target of 60% of median earnings this year. I also welcome the increased funding for enforcement.

The increase in the national living wage will provide a considerable uplift for the working poor in our country. A top rate of £8.72 is getting closer to the Living Wage Foundation’s recommended £9.30—I presume that it will be further uprated in due course—but it is still a way off the London living wage of £10.75. I should probably know this, but can the Minister explain why there is no Low Pay Commission London minimum wage, when clearly it is more expensive to live in London than anywhere else?

The difference between the minimum wage and the living wage is that the living wage is based on a basket of goods and services which should give a basic but acceptable standard of living. It therefore follows that the national minimum wage is not sufficient for someone to live on. Instead, it has to be subsidised by the Government through universal credit and various other benefits.

I can see that different individual and family circumstances will need a different underpinning level of help. The idea of always making work pay was quite a genius move on the part of the Government when it came in, but implementation was, and still is, another story. Fortunately, that does not come within our remit today. We are where we are and there is something to celebrate.

The adult rate for 21 to 24 year-olds received the greatest percentage uplift, at 6.5%, but the youth rate for under-18s has fared proportionately worse, at 4.6%, or the princely sum of 20p an hour. I know that it is argued that these youngsters enter the world of work with very little knowledge, but it cannot help their self-esteem to give them a 20p rise, especially if they and their families need that money.

I wish I had a crystal ball to see whether, in a time of full employment and even greater skills shortages, not helped by this Government’s immigration policies, wage rates will rise above and beyond the minimum. Unfortunately, I do not have a crystal ball, except to predict that we are all likely to meet here next March. Who knows what state the country and wage rates will be in then?

--- Later in debate ---

[Lord Callanan]

I thank the noble Baroness, Lady Burt, and the noble Lord, Lord Stevenson, for their contributions to this important debate. I do not know whether it is a commentary on the time that the debate is being held or the fact that there is such widespread support for the Government’s policy that they are the only two valiant Peers who have turned up to comment on something that will make such a difference to hundreds of thousands of workers in this country.

The introduction of the national minimum wage and the national living wage is one of the great successes of the UK labour market. Since the year that the national living wage was announced, the annual earnings of a full-time minimum wage worker will have increased by more than £3,700. That is equivalent to a 21% increase in the national living wage since 2015. The record high employment rate shows that a higher minimum wage can go hand in hand with strong employment growth. The Government’s green-rated impact assessment estimates that the minimum wage increases we have debated today will directly benefit around 2.4 million low-paid workers, and of course nearly 8 million workers are estimated to benefit both directly and indirectly because some workers who are paid slightly above the minimum wage will also benefit from increases in the average wage of employees in their companies.

Sustainable increases in minimum wage rates also depend on strong economic fundamentals and I am delighted to say that those of the UK are strong. Since 2010 our economy has grown by 19.5%, which is faster than in France, Italy and Japan. In 2016 the Government committed to raise the national living wage to 60% per cent of median earnings and we have stayed loyal and true to that commitment. Looking ahead, our pledge to raise the national living wage to two-thirds of median earnings by 2024 makes the UK the first major economy in the world to set such an ambition.