Draft National Minimum Wage (Amendment) Regulations 2022 The
Parliamentary Under-Secretary of State for Business, Energy and
Industrial Strategy (Paul Scully) I beg to move, That the Committee
has considered the draft National Minimum Wage (Amendment)
Regulations 2022. It is a pleasure to serve under your
chairmanship, Dr Huq. The purpose of the regulations is to raise
the national living wage and national minimum wage rates on 1 April
2022. We should be...Request free trial
Draft National Minimum
Wage (Amendment) Regulations 2022
The Parliamentary Under-Secretary of State for Business, Energy
and Industrial Strategy ()
I beg to move,
That the Committee has considered the draft National Minimum Wage
(Amendment) Regulations 2022.
It is a pleasure to serve under your chairmanship, Dr Huq. The
purpose of the regulations is to raise the national living wage
and national minimum wage rates on 1 April 2022.
We should be proud of the labour market’s recovery from the
pandemic. In the UK, the current number of payroll employees is
over 400,000 more than pre-pandemic levels, while unemployment
has fallen to 4.1%. That is in no small part down to Government
intervention in protecting jobs and livelihoods, ensuring that
businesses can get back to working with their customers,
increasing footfall, and getting back to a sense of normality so
that they can go through the gears. On the economic recovery, GDP
recovered to the pre-pandemic level at the end of 2021 and
increased by an estimated 7.5% over the year.
However, we are aware, clearly, that a key issue on people’s
minds is the cost of living. We have already acted to support
households with rising energy bills. We recently announced a
package of measures worth £9.1 billion in the coming financial
year, including a £200 reduction in energy bills and a £150
rebate in council tax bills for all households in bands A to D in
England. That is in addition to measures already announced, such
as the universal credit taper rate and freezing fuel duty for the
12th year running.
We are committed, in our recovery, to supporting the lowest paid.
We cannot have a recovery off the backs of the lowest paid. Since
2015, we have increased the national living wage significantly
faster than average wages, and more than twice as fast as
inflation, meaning more money for the lowest-paid workers. An
increase in rates this year will continue to protect the lowest
paid against the increase in the cost of living.
The regulations will increase the minimum wage rates from 1
April. We estimate that that will give a pay rise to around 2.5
million workers, and I am delighted to say that we accepted all
the rate recommendations made by the Low Pay Commission in
October 2021. The independent Low Pay Commission brings together
the business and worker stakeholder views, informed by expert
research and economic analysis, and I am grateful for its
well-informed recommendations and the work it has done to reach
them.
We have set a target for the national living wage to equal two
thirds of median earnings by 2024. When the Low Pay Commission
made its recommendations last October, it took into consideration
that target and the strong economic and labour market recovery—to
that point—as well as the remaining uncertainty and feedback from
the wide range of stakeholders it spoke to and engaged with.
We are pleased that the increase keeps us on track to reach the
target for 2024, which we remain committed to. The LPC’s
recommendations are based on significant stakeholder evidence
from business, worker, and academic representatives. Businesses
told it about the concerns they face, at this stage of the
recovery, and how they continued to plan for the future, based on
our target for the national living wage.
(North Wiltshire) (Con)
I thank the Minister for giving way. May I congratulate the
Government on being able to increase the national minimum wage in
this way? It is extremely good news. However, I feel that the
figures, which the commission came up with, are a little odd.
Would it not be easier, from the point of view of a worker or
apprentice, if the figure was rounded, so they would know that
they were getting £8.90 or £5.20—or whatever it might be—rather
than these rather odd, random figures?
The figures are based, as I said, first on the evidence, weighing
the benefits for the lowest paid with the increased cost
pressures on business. Of course, it is not only for the minimum
wage or living wage itself, but pushing the differentials up for
other people who are slightly further up the chain. I suppose
that we could make the argument, “Do you want a rounded
percentage or a rounded cost?”
Having had that evidence, there is then, effectively, a
negotiation between the employers’ and workers’ representatives
on the commission. They then come up with that recommendation, in
between, of what they feel the economy can bear. It is not always
rounded—clearly, that would be easier for everybody concerned—but
we do not always allow perfection to be the enemy of the good. I
think we have come up with something that is good for low-paid
workers and for keeping to the manifesto commitment.
The national living wage for those aged 23 increasing by 6.6% to
£9.50 is an increase of 59p. A full-time worker will be more than
£1,000 better off over the course of the year. The regulations
also increase the rates for younger workers and apprentices, and
the accommodation offset, so workers aged 21 and 22 will receive
an increase of 82p an hour to a minimum hourly rate of £9.18.
Workers aged 18 to 20 will be entitled to an extra 27p an hour,
taking their rate to £6.83. Under-18s will have an increase of
19p to an hourly rate of £4.81, and apprentices aged under 19, or
those in the first year of their apprenticeship, will receive an
increase of 11.9% to an hourly rate of £4.81—51p more.
I will announce another change to the regulations that we will
shortly bring forward. Last year, we asked the Low Pay Commission
to gather evidence on the use of the live-in domestic worker
exemption to minimum wage entitlement, which exempts employers
from having to pay the minimum wage to workers who live in the
employer’s home and are treated as part of the family, such as au
pairs. The Low Pay Commission heard evidence from au pairs,
domestic workers, and agencies for those workers. The commission
concluded that the exemption is not fit for purpose, and
recommended that it be removed. We have accepted that
recommendation, and will introduce legislation to remove the
live-in domestic worker exemption when parliamentary time
allows.
We have pledged to continue raising the minimum wage in the
coming years. As I mentioned, our manifesto includes a target for
the national living wage to reach two thirds of medium earnings
by 2024.
(Glasgow South West)
(SNP)
The Minister talked a lot about consultation with business, but
he will be aware that some businesses do not comply with the
legislation. Can he tell us a bit more about that, what the
Government are doing to invest to ensure that their national
minimum wage compliance unit is fully staffed, and whether there
will be any approach to increase staffing in that area?
I thank the hon. Gentleman. Enforcement, which is covered by Her
Majesty’s Revenue and Customs, is clearly really important. We
work closely with HMRC to ensure that it is resourced to enforce
in this area. We will also look at a single enforcement body, as
part of our wider work. One of the things that it will look at,
in a number of enforcement areas, is the national minimum wage
and the national living wage. Clearly, that will bring even more
experience and resource to bear for it to enforce in this area,
along with a number of other areas that businesses may be
encroaching on. That is really important, because if a business
is falling short in one area there is every chance that it is
falling short in other areas as well. By bringing those
enforcement regimes to a single enforcement body, it will be more
effective and efficient, and it will be able to drive out poor
behaviour by employers.
We understand the difficulties faced by business, workers and
consumers at the moment, and our targets remain dependent on the
economic circumstances, but we will continue to monitor the
labour market. The draft regulations ensure that the lowest-paid
workers are fairly rewarded for their valuable contribution to
the economy. We will continue to monitor the impacts of
increasing the national minimum wage, and will remain abreast of
concerns on the cost of living. We will shortly publish this
year’s remit to the Low Pay Commission, asking it to provide
recommendations for new minimum wage rates to apply from April
2023. In the meantime, I commend the draft regulations to the
Committee.
11.39am
(Ellesmere Port and Neston)
(Lab)
It is a pleasure to see you in the Chair, Dr Huq. I am grateful
to the Minister for setting out the draft regulations. As he
said, their purpose is to amend the National Minimum Wage
Regulations 2015 to increase the single main hourly rate of the
national living wage, which applies to people aged 23 or over,
and to increase the national minimum wage for those aged 21 or
over, those aged 18 or over, those under 18, and apprentices who
are under the age of 19 or in the first year of their
apprenticeship. As the Minister said, the draft regulations also
increase the maximum daily amount for living accommodation, known
as the accommodation offset rate, which is counted towards pay
for the purpose of calculating whether the minimum wage has been
met.
The regulations are not contentious and we will not be opposing
them today. Any rise in the minimum wage is welcome. That is not
to say that there are not areas where we think more could be done
and more progress made. It is also fair to say—this is not a
criticism of the Minister—that the rates were set before the
current inflationary pressures that we have been talking about
over the last few weeks emerged.
We recognise that the regulations provide for different rates of
national minimum wage for different age groups, at the
recommendation of the Low Pay Commission. We note that there is
an above-inflation rise for 21 and 22-year-olds and apprentices.
However, conversely, the rise is below inflation for those aged
18 to 20 and those under the age of 18.
We also note the Government have retained the age limit, which we
think fails to acknowledge that those under 23 face many of the
same pressures as those over 23. Many have to pay rent and other
bills, and buy food and fuel. Those costs are not cheaper just
because a person is younger. Perhaps the Minister can set out why
it is still the Government’s position that those between 18 and
20 should be paid a far lower rate than those aged 21 for exactly
the same work, and even less than those aged 23 and over. The
impact assessment for the regulations notes that the roll-out of
the main rate for those aged between 23 and 25 has gone smoothly,
so I would be interested to hear from the Minister whether he
will consider extending that rate in the light of the progress
made so far.
The Opposition value the contribution of people in work equally,
regardless of their age. We believe their value to society and
the economy is worth the full rate of the national minimum wage;
it is time that everyone was paid the same rate for the same job.
There are increases in the cost of living and the pressures faced
by people in work. One in six working households are in poverty.
Despite increases in the minimum wage, we have had a decade of
stagnation—debts have been running up and savings have gone down.
Millions of people are unable to deal with an unexpected loss of
income or an unexpected one-off payment, and are in a very
precarious economic situation.
Of course, none of this helps those who are self-employed—almost
half of whom, according to the TUC, do not earn the minimum wage.
There is an argument, for another time, about whether all those
who are self-employed are genuinely self-employed or whether they
should be classed in another category.
As the hon. Member for Glasgow South West noted, not everyone who
is entitled to it receives the national minimum wage. Underpaying
remains a serious problem, particularly in certain sectors of the
economy such as the care sector. Employers continue to find ways
to cheat their workers out of pay. The Government’s list of
shame, which came out at the end of last year, of minimum wage
transgressors showed the care sector along with hospitality and
retail as the main sectors where transgressions took place.
I note the Government have finally appointed a new director of
labour market enforcement, 10 months after the departure of her
predecessor. The Government have said part of that role will be
to oversee an annual assessment of the scale and nature of
non-compliance in the labour market. I know the new postholder
has only been in the job for three months, but I hope the
Minister can set out in his reply what work has been done on that
matter to date and what level of detail the assessment will
entail.
As I have mentioned, in December last year the Government named
and shamed 208 employers who were failing to pay their workers
the national living wage or the national minimum wage. Those
employers were found to have breached the law to the total of
£1.2 million, leaving some 12,000 workers out of pocket. Of
course, not all those underpayments will be intentional, but
there can be no excuse for underpaying workers. Some of those
employers included such well-known high street names as House of
Fraser and Waterstones, and I am sorry to say that even
Lancashire County Cricket Club appeared on the list. Those are
not fledgling companies that can say that they were not aware of
the legislation. There really can be no excuse for such
long-established employers failing to pay the right amount to
their staff.
I note that on the list there are some companies that are well
known for contracting with the public sector, such as Mitie and
Greencore. Those are not fledgling organisations either, and they
really ought to know better. The question for the Minister is
whether he thinks that Government ought to be doing better. Why
should minimum wage transgressors be allowed to pick up contracts
from the Government, the NHS or any other part of the public
sector? Does he agree that we really ought not to be rewarding
that type of behaviour?
I wonder whether the Minister has had any thoughts on the
geographical spread of those found to have broken the
regulations. The top regions on the list were the east midlands,
London and the north-west, in that order. Does that mean there is
a particular problem in those regions, or does it mean that
people in those regions are more willing to report issues? I
would be grateful to hear the Minister’s reflections on that. It
is also worth noting that the investigations referred to in the
report were concluded between 2014 and 2019, so some of the
breaches that appeared on the list were up to eight years old. I
wonder why it has taken so long to conclude the
investigations.
It is right that we call out those who are in the wrong, but we
need to go further. This would be an opportune point at which to
hear from the Minister about the progress in the Government’s own
consultation. The “Good Work Plan” established a new single
enforcement body for employment rights. The Minister will know
that three quarters of respondents to the consultation for that
plan supported a balanced approach to enforcement, based on
compliance and deterrence.
It was also noted in the consultation that there was support for
a compliance notice system for less serious breaches, giving
employers a fixed period of time to take corrective action before
further measures, such as the issuing of a fixed notice, are
taken. Even the TUC has agreed that there should be greater use
of labour market enforcement orders and undertakings, recognising
that they form an important bridge between informal action and
official prosecutions.
When the Minister responds, can he tell us how many enforcement
orders have been issued? If he cannot tell us that today, perhaps
he can write to me with that information. Can he also tell us how
many undertakings have been given by employers, how many
undertakings have been breached subsequently, and how many
prosecutions have followed when undertakings have failed? It is
important that stronger sanctions are imposed as a deterrent.
Some of these fines are for only a few thousand pounds, and it
does not seem as though there are many prosecutions, either.
Finally, when will the single enforcement body that has been
promised so often end up on the Order Paper as part of some
legislation?
We want to build a Britain where everyone in every part of the
country, regardless of their background, can get a good quality
job that provides security, treats them fairly and pays them a
proper wage to enable them to live a good life.
11.48am
(Glasgow South West)
(SNP)
It is a pleasure to see a friend of the worker in the Chair, Dr
Huq.
I thank the Minister for his presentation, and I will make a
number of points. First, the so-called national living wage is no
such thing. The Scottish Government promote the real living wage,
which is set by the Living Wage Foundation and which is £9.90 an
hour; you will be aware, Dr Huq, that in London it is £11.05 an
hour. Although there is a suggestion that the Government have
introduced a living wage, it is not a real living wage.
Setting minimum wage rates appropriately is important because
workers spend their wages in the wider economy, so there is a
boost. I noticed that the Minister did not develop that point,
but businesses have an interest in ensuring that there is an
adequate minimum wage rate level, because workers spend that
money in the private sector and use it when they can.
The reality is that in-work poverty remains the norm and is on
the rise. One other way of helping to tackle in-work poverty, in
addition to the national minimum wage rates, would be the
much-promised employment Bill. We have been waiting for it for
four years, so perhaps the Minister can tell us where it is, and
whether it remains a priority for the Government to help workers
in the gig economy, where work is traditionally low paid and
where there is, I am afraid, a lack of enforcement of minimum
wage rates.
I want to develop the points made by my fellow Glaswegian, the
hon. Member for North Wiltshire, regarding some of the figures. I
have been and remain concerned about the age discrimination that
goes on in the national minimum wage rates, and they do look
peculiar as they have been presented. Perhaps the Minister can
explain why, for example, a 17-year-old could be working in
McDonald’s flipping hamburgers next to a 37-year-old who was
doing the same job but would be paid a different rate. Both are
participants in the labour market and they are doing the same
job, but with vastly different wage rates. I am not sure that
that is sustainable going forward.
Perhaps the Minister can also explain why some wage rates seem to
be getting a low increase—in fact, some of the increases are
lower than the price of a Freddo bar—while others are getting a
big increase. There does seem to be a presentational difficulty
with what the Minister has put forward. I would be obliged if he
could write to the Committee to explain why for some wage rates
the increase is 9.8%, for example, and for some it is 4.1%. I am
sure that apprentices will welcome their increase, because that
is something that we have raised before.
Could the Minister also write to the Committee on the current
number of vacancies in the national minimum wage compliance unit
and the actual numbers employed by that unit? I am concerned that
according to the last figures that I saw, in a parliamentary
answer, the numbers employed by the state in the national minimum
wage compliance unit are a tenth of those chasing social security
fraud. I think that ensuring that we have a good and robust
national minimum wage compliance unit will help more workers in
the economy.
My last question for the Minister is this. We are obviously in a
cost of living crisis. He has today presented figures for April
onwards, but he will be aware of the forecasts that inflation
could increase within the next year, so what scope does he have
to review the minimum wage rates still further? Is he in a
position to look at those wage rates and increase them further,
or is it possible that he may be in a position to do so in the
next financial year? I ask because that may very well be required
in the cost of living crisis.
I conclude by reminding the Minister of the words that we heard
yesterday at the Select Committee on Work and Pensions, of which
I am a member, from the great writer and author Jack Monroe about
the consequences of the cost of living crisis. I would hope that
every Minister has placed those words in their offices and on
their walls, so that they know exactly what they need to do going
forward.
The Chair
Order. Both Opposition speeches went a little out of scope of the
regulations. I am very nice, so I let that go, but we are talking
about just these regulations. Would anyone else like to say
anything else? No. In that case, I call Minister to respond.
11.54am
Thank you, Dr Huq, and I thank hon. Members for their
contributions to this debate. The national minimum wage and the
national living wage will make, and do make, a real difference to
millions of workers across the country. The increase will be
welcomed, I am sure, by the people who see a real, tangible
benefit. Undoubtedly, as the hon. Member for Glasgow South West
said, we have the ongoing cost of living issues, and we need to
look at the measures in the round, but as you rightly say, Dr
Huq, we do not want to go out of scope of the measure being
debated. It is therefore important that in other debates we can
look at support measures for everybody, but especially for the
most vulnerable in our society. We can do that in other fiscal
events and in other places, with other measures that we have.
However, I am glad that there is agreement that the lowest-paid
workers in this country deserve a pay rise, which will help to
protect them from rising inflation and protect their standard of
living.
This year’s change means that on 1 April, workers on the national
living wage will be earning more than £5,000 more than they did
in 2015, when the policy was first announced. Younger workers
will also get more money through the increases to the other
national minimum wage rates. There were a number of questions
about the differentials between those. The apprenticeship figures
were a lot higher because we are gradually aligning them with the
under-18 rate, which was preannounced by the LPC back in 2020. It
has given businesses the opportunity to become aware of that and
to factor it into their cash flows, for the reasons that I have
given.
Let me address the point about the differentials for people doing
the same job—the example was flipping burgers. Young people have
a competitive disadvantage when entering the labour market
because of their lack of work experience, and because they have
less knowledge of the area. They may have lower productivity
while they are being trained and learning the job, and employers
may need to provide additional training. Any minimum wage
structure has to recognise and reflect that, because if we do not
have that within the system, some employers may well be unwilling
to give young people those critical first opportunities that are
really important for them. None the less, we are starting to
align more of the age group’s living wage to make sure that we
can flatten it as much as possible, and we continue to monitor
economic conditions.
We are indeed more cautious about increasing wages for younger
people, but for the right reasons. We want to make sure that they
get paid as much as possible, but we also want to make sure that
they are in work. At the end of the day, the cost of living
situation is far easier to face if people are in work in the
first place, although it is still a challenge. What we do not
want to do is to stifle our productivity. We do not want to
stifle our recovery, which is one of the reasons why we have more
people on payroll now than we did pre pandemic. That is a
testament to our plan for jobs and growth.
The hon. Member for Ellesmere Port and Neston talked about
enforcement and naming and shaming. Some cases can be incredibly
complicated to go through and can involve quite technical
breaches. None the less, it is right that we do not exclude
companies from being named and shamed because of ignorance of the
law, but it can sometimes take a while to enforce. Bear in mind
that we paused the naming and shaming process throughout the
early stages of the pandemic, and we are now effectively playing
catch-up with some of those cases.
I am grateful to the Minister for giving way. I appreciate that
sometimes these things are quite technical, but it has been eight
years. What is the reason why it has taken so long for some of
the cases to be published?
As I say, some of that was the pausing of the naming and shaming,
and we are effectively playing catch-up on that.
On the percentage points that the hon. Member for Glasgow South
West talked about, he asked whether I would write to him, but I
recommend that he looks at the Low Pay Commission report, which
details how the LPC came up with them. That content is already
there. There are 400 full-time equivalents in the enforcement
area of the national minimum wage under HMRC, but I will
certainly look into the vacancies and fill in any more detail for
the Committee in writing.
I think I have covered most of the points that have been
raised.
I do apologise, but I think the only thing that has not yet been
covered is whether the Government are keeping the minimum wage
rates under review for the next year because of what is happening
with the cost of living crisis.
It is difficult to do mid-year, but there will be other fiscal
events, and there are other areas of support for people during
the cost of living crisis. At the moment, we are going through
the process of setting the remit for the Low Pay Commission to
consider. It is doing a lot of evidence work now. April and May
are usually its busiest time for gathering evidence, which it
then considers. The LPC effectively goes away on retreat in the
autumn to have those negotiations, and we usually announce the
figures in October so that they are ready to start in the next
financial year. It is difficult to get something substantive
mid-financial year, but, as I say, there is always scope for us
to look at how we can work through the cost of living crisis and
pressures, which will invariably increase.
We all know that with Putin’s war, he has inflicted misery on
Ukraine, and it is right that we support Ukrainians and stand
steadfast with them. Hon. Members will have seen the increase in
sanctions this morning, and they will inevitably have an effect
on us. That is the price we are paying for Putin’s war and for
freedom, frankly, and we have to acknowledge and face up to that.
We will certainly see what we can do in the round, whether it is
on energy, inflation or supply chains. However, I am going
slightly off on a tangent, and I do not want to push that too
far.
Once again, I put on the record my thanks to the Low Pay
Commission for the evidence gathering that it performs and the
way it works to get a consensus between employers’
representatives and workers’ representatives, which is not always
easy. The LPC believed that it would face a particular challenge
this year, but it came up with a really good settlement that will
benefit millions of people up and down this country. I am looking
forward to receiving the Low Pay Commission’s recommendations for
2023 later this year, but in the meantime I commend the
regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft National Minimum Wage
(Amendment) Regulations 2022.
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