Small Business, Enterprise and Employment Bill

Lord Watson of Invergowrie Excerpts

Monday 26th January 2015 Grand Committee

[Lord Stoneham of Droxford]

I thought that the Government were doing much more than the noble Lord, Lord Young, indicated to enforce the minimum wage. That has been led by the Secretary of State and the naming and shaming is an important element of it—there has been considerable publicity. The Minister should perhaps spell out a little exactly what the Government have been doing in this area and the Opposition should not take all the credit. They deserve the credit for introducing this measure, but the Government are committed to seeing it enforced, and seeing that people are paid appropriately.

Finally, it should be said that this is a Bill for small businesses and, as we saw in the previous discussion, there is a danger as to affordability when it comes to the paying of fines, particularly by small employers. Those should be appropriate, so I will be interested to hear what the Minister will say about enforcement. I hope she will confirm the Government’s commitment to making sure that the minimum wage is firmly enforced.

[Lord Watson of Invergowrie (Lab)]

My Lords, I was certainly in accord with the noble Lord, Lord Stoneham, on his last remarks, but I find it rather strange that he should pray in aid of his argument that any fines should be affordable by the small businesses concerned. Small businesses have no need to incur any penalties whatever; all they have to do is abide by the law and they will not be forced to pay a penny more than they are legally obliged to do. There is no merit to that argument. If you do not want the fine, pay the national minimum wage.

While I suspect that the Government will resist the move from £20,000 to £50,000, my point in respect of the amendment has two prongs to it. One is that I want to know why there should be an upper limit at all at £20,000. Why is there a need for an upper limit? In earlier parts of this clause, it says that the total amounts should be in respect of the amount owed to the individual. But if there is an upper limit of £20,000—and goodness knows what kind of employer would incur a debt of failure to pay the national minimum wage in excess of £20,000—why should we use that as a cap? What is the logic, first, for having a cap at all and, secondly, for that to be the figure? If £20,000 is not to be a sufficient disincentive, £50,000 might just about do the job, and for that reason this amendment ought to be accepted by the Government.

[Lord Whitty (Lab)]

My Lords, I, too, support this amendment and I take issue with the noble Lord, Lord Stoneham. The worst thing for a small business that is obeying the law is that there is another business down the road that is not. There has been quite some fragmentation at the bottom end of the labour market since 1998 and we know that the way people are employed—or quasi-employed—is now much more dubious in terms of what they are entitled to and how you can check on it. Where people are not being paid the minimum wage for the hours that they work, it is important that the authorities can both check on it and enforce it. I fear that, at the moment, there are not many resources for doing either. Strictly speaking, the wages inspectorate is part of this as well as HMRC, but this is not top of its priorities and the number of prosecutions in this area has been very limited. I am not denying that there have been noises from BIS and from the noble Baroness’s fellow Ministers on this front, and I welcome that. However, the reality is that are a lot of people who are either on zero-hours contracts, which we will debate in moment, or on various other quasi- terms which they cannot argue with the employer and whose money is below the rate they should be getting.

The Agricultural Wages Board used to have a particular inspectorate—it was not even five people at last knockings —but when the board was abolished last year we received assurances that that resource would be transferred into HMRC. I understand that no such increase has actually occurred, either in the wages inspectorate or HMRC. Regarding HMRC, I would be reluctant to agree with Amendment 68ZR that enforcement should go entirely to local authorities. HMRC often has a way in because it sees the books, so I would keep a role for it. That could be followed through in rather the same way as local authorities follow through environmental health legislation by being given more of a role in that respect. Local authorities would also need the resources to be effective in this area.

We need to recognise that the present situation is not adequate. The enforcement resources that would be subject to the annual report are not adequate either. Having a maximum penalty of £20,000 is also not a deterrent for a lot of employers who operate on the murkier side of the labour market. It is not always small companies that are doing this; it is often large companies, or their sub-contractors, or labour-only suppliers who are paying below this rate. We therefore need a step change. Amendment 68ZN would go a considerable way to providing a degree of deterrence. Amendment 68ZQ would mean that Parliament would at least know what the level of resources in this area ought to be and actually is. On Amendment 68ZR, I would hope that local authorities would have some role, but HMRC and its resources are also an important element.

--- Later in debate ---

[Baroness Donaghy]

My Lords, Amendment 68ZT asks the Government to publish a report on the whole issue of internships. Clearly, it is a probing amendment, and I make it clear that I am not against internships. Paid internships are not only fair but can be argued to be good for business, as they allow all to compete on an equal footing for valuable experience. Across all sectors, those firms offering paid experience get more applications from a broader range of candidates. By offering the minimum wage, or even the London living wage, firms are able to secure the most able workers.

However, where internships are informal and unpaid, they are likely to be unstructured and unhelpful for the intern and for the company. The proliferation of unpaid internships is now a barrier to social mobility and is blocking routes into higher-paid jobs for young people from low-income backgrounds. Although information on internships varies, the Chartered Institute of Personnel and Development, of which I am a member, estimates that 21% of businesses offering internships do not pay their interns. According to the Sutton Trust, it is estimated that across the UK 22,000 interns are working unpaid at any one time. Data from the trust show that 31% of recent graduate interns are working for no pay. In the 2012 report on fair access to professions, the Social Mobility and Child Poverty Commission noted that unpaid internships are concentrated particularly in the creative industries, the media, and financial and professional services.

The Sutton Trust report continues by stating that an unpaid internship can cost an individual £926 a month in London, or £804 a year in Manchester, on a six-month work placement. The cost of working for nothing rules out all but those from better-off families and discriminates against the majority of young people, who cannot afford to work for free. The trust goes on to say:

“All internships longer than one month should be paid at least the National Minimum of £6.50 per hour, and preferably the National Living Wage of £7.85 (or London Living Wage—£9.15—in London)”.

I am not making any particular proposals on this issue; I am simply indicating what other organisations support. If I am asking for an inquiry, it would be rather inconsistent for me to state what policies I particularly supported. The trust wants internships to be advertised publicly rather than being filled informally, and recruitment processes to be fair, transparent and based on merit. That reflects a statement issued by BIS regarding internships, so I do not think it contradicts anything that is already BIS policy.

An Ipsos MORI poll of 1,700 adults in England for the charity suggested that 70% felt that unpaid internships were unfair as only the wealthy could afford to take them, and some 55% agreed that internships of up to six months should pay at least the minimum wage, with 73% supporting it for placements of more than a year. The YouGov polling shows that 65% of businesses support the proposal to end unpaid internships, presumably because it gives an unfair advantage in certain cases if you do not level the playing field. Bodies such as the Institute of Directors, UK Music, the Royal Institute of British Architects and a range of bodies representing the PR and creative industries also support getting rid of unpaid internships. Alan Milburn, chair of the Social Mobility and Child Poverty Commission, has called on policymakers to adopt a four-week limit on unpaid internships. As I have said, BIS supports an open, fair and transparent process of appointment to internships and indicates:

“Anyone who is a worker is entitled to be paid at least the minimum wage, this includes interns who fall into the worker category”.

Thereby hangs the problem. The lack of clarity about what constitutes an internship is frustrating the application of the National Minimum Wage Act.

In conclusion, internships are becoming essential for access to many professions. Because a high number are unpaid and unaffordable to those from ordinary backgrounds, too many young people are being excluded from the opportunities that they deserve. Although I accept that there will always be a need for casual labour in a flexible labour market, the current position is unfair and disproportionate. A civilised society should be prepared to look at the obvious nooks and crannies in its system, not least if it might go some way to solving our poor productivity record. I cannot help but think that the increasing casualisation of our labour force and our poor productivity record have something in common. I beg to move.

[Lord Watson of Invergowrie]

My Lords, I came along this afternoon intending to support my noble friend Lady Donaghy on this amendment and I shall attempt to do so, but I regret that so comprehensive has been her advocacy of it that it has left me with little to say. Perhaps I might stress two or three of the points that she made.

One of the aspects that worry me is undoubtedly the fact that unpaid internships are, by their very definition, exclusive to people who, by whatever means, are able to have their costs of living covered while they undertake them. That necessarily makes them exclusive and is unfair. Some people would say that life is unfair; yes, of course it is, but in terms of employment we can try to make the playing field as level as possible. I see no reason why anybody undertaking an internship of more than one month should not be paid. Up to one month, it may be genuine work experience; beyond that, it is a bit more. While the person may find personal benefit, the employer gets a benefit as well. That very important point should be looked at.

There is also a rather disturbing trend now of companies emerging that will charge people a fee for placing them in an internship. That is worrying and, while some of them are paid, you may have to pay even to get on to an unpaid internship. I do not believe that that is right. There are also situations where auctions for internships are held. They sometimes involve charities and, on the face of it, that is worth while but, again, it suggests that it is not an appropriate way to bring anybody into the workforce, paid or unpaid. I regret that development.

Most of all, it is important that anybody doing a job should be paid the rate for that job. Some Members of this House and some Members of the House just down the Corridor need to look at their own practices in this respect, because it has been revealed that there are more than a few unpaid internships within the Palace of Westminster. That does not set any kind of positive example for keeping anybody on beyond a month. With those brief remarks, I am pleased to support the amendment in the name of my colleague and noble friend Lady Donaghy.