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

The new rate increases are based on recommendations from the Low Pay Commission, following its extensive consultation with stakeholders and consideration of the current economic data and circumstances. The Low Pay Commission is an independent expert body made up of employer and worker representatives and independent commissioners. This year has seen some challenging economic circumstances for both workers and employers, including high inflation. When the Low Pay Commission recommended the new rates for the minimum wage, it took into account many of these economic circumstances, including how affordable the rate increases are for businesses and the current state of the economy. By accepting these recommendations from the Low Pay Commission, the Government are striking the right balance between the needs of workers and the affordability to business, while also ensuring that we deliver on our long-term commitments on the national living wage.

The Government would like to place on record their thanks to the Low Pay Commission, its previous chair Bryan Sanderson and the commissioners for their commitment to gathering thorough evidence and providing these recommendations. I also welcome the noble Baroness, Lady Stroud, to her role as the new chair of the Low Pay Commission.

We expect that this increase to the minimum wage will put more money in the pockets of around 3 million of the lowest-paid people in every corner of the country. The new rates are due to come into force on 1 April 2024. In the meantime, any worker who is concerned that they are not being paid the correct wage should check their payslip and speak with their employer. If the problem is not resolved, they can contact ACAS or complain to HMRC.

Since 2015, the Government have more than doubled the budget for compliance and enforcement to £27.8 million in 2022-23. HMRC enforces the national living wage and national minimum wage on behalf of my department. I thank HMRC for its ongoing work with employers and workers to ensure that all workers receive the pay they are due and help give businesses the right resources to stay national minimum wage compliant.

I remind the Grand Committee that, on 1 April, regulations will also come into force to ensure that so-called live-in domestic workers are paid at least the relevant minimum wage rate, providing protection from exploitative low pay. This will help protect these workers, giving them a new right to the entitlement to the national living and minimum wage for the first time. These regulations, alongside the regulations debated today, will aim to reward the lowest-paid workers in every sector and in every part of the country for their contribution to our economy.

This Government are aware of the cost of living pressures and will continue to closely monitor all the impacts of increases to the national living wage and national minimum wage rates on workers and businesses alike. We will continue to carefully monitor economic developments as the NLW target is implemented. The Government will shortly publish this year’s remit to the Low Pay Commission and ask it to provide recommendations for the rates, which will apply from April 2025.

Without hesitation, we support these regulations. I look forward to the Minister’s response to my question about sanctions.

I will make one more point on that. Prior to this Government being in place, our lowest-paid cohort had a higher percentage of their annual income coming from benefits. Today, a higher percentage comes from earnings, so we have been successful in moving that cohort into work. I emphasise that a full-time worker on the national living wage is earning £8,600 more today than in 2015. That will be an increase of 70% by 1 April this year. As inflation has been 35% in that time, this cohort has had a double increase in their wages. We are now in a position to say that with the national living wage being set at two-thirds of median earnings, that cohort has been taken out of low pay, which is defined as being below two-thirds of median earnings. There are now 1.5 million people on the national living wage who are no longer in that category.

We are proud of the Government’s record of delivery. We have achieved our target of the national living wage reaching two-thirds of median earnings for all workers aged 21 and over. I again extend my thanks to the Low Pay Commission, which is very important. Its independent and expert advice means we can ensure that the right balance is struck between the needs of workers, affordability for business and the wider impact on the economy. We look forward to receiving its recommendations for the 2025 rates, which will be published later this year.