National Minimum Wage (Amendment) Regulations 2021

Motion to Approve

Moved by

That the draft Regulations laid before the House on 1 February be approved.

My Lords, the purpose of these regulations is to raise the national living wage and the national minimum wage rates on 1 April 2021. We are determined to make the UK the best place in the world to work. This has been an extraordinary year presenting extraordinary circumstances. Our approach is to balance the needs of workers and employers.

The impact of coronavirus on the economy has been significant. The UK economy contracted by 9.9% in 2020. This recession has been much more severe in magnitude than previous ones. The effects on the labour market, however, have so far been more muted. The latest ONS headline estimate of unemployment was 5.1% from October to December 2020. This is in part due to government intervention, including the Coronavirus Job Retention Scheme. With the number of employees supported by the scheme peaking at 8.9 million in May 2020, workers were able to retain some form of attachment to a job. At the end of December, there were around 4 million jobs on the scheme.

Turning to these regulations, which will increase the rates of the national minimum wage and the national living wage from 1 April, we estimate this will provide a pay rise to approximately 2 million workers. I am pleased to say that this Government accepted all the recommendations made by the Low Pay Commission in October 2020. This independent body brings together the views of businesses and workers, informed by expert research and analysis, to reach a consensus on its advice. I would like to place on the record my sincere gratitude for its work.

Many low-paid workers have supported the country through these challenging times, but this Government recognise that many businesses are also struggling in the current crisis. In its recommendations, the Low Pay Commission sought to balance these needs against the wider economic conditions. Therefore, 2021’s increase is smaller than in previous years. The Low Pay Commission concluded that these rates would give low-paid workers a real-terms pay rise, recognising their contributions during this pandemic, without presenting a significant risk to employment prospects. The LPC makes its recommendations on the basis of significant stakeholder evidence from business, worker and academic representatives. Business representatives broadly supported a cautious increase to minimum wages.

These regulations will increase the national living wage for those aged 23 and over by 19p to £8.91, an increase of 2.2%. A full-time worker on the rate will be more than £345 better off over the course of the year. The national living wage currently applies to workers aged 25 and over. However, from April 2021 it will be extended to those aged 23 and over. This gives 23 and 24 year-olds an extra 71p an hour, the largest increase for these individuals ever.

The regulations also increase the rates for younger workers and apprentices. Workers aged 21 and 22 will be entitled to a minimum hourly rate of £8.36, a 16p increase. Workers aged between 18 and 20 will receive an extra 11p an hour, taking their rate to £6.56. Under-18s will earn at least £4.62 an hour, a 7p increase. Apprentices aged under 19, or those in the first year of their apprenticeship, will receive an increase of 3.6%—an hourly rate of £4.30, 15p more. The regulations also change the amount that employers can charge workers for accommodation without it affecting their pay for national minimum wage purposes. From April, that will increase to £8.36 per day.

My Lords, I am grateful to the Minister for his introduction to these regulations, which of course must pass this evening. Some will no doubt welcome in particular the 19p rise to the national living wage and its extension to those aged 23 rather than 25, but I suggest that many more people will feel, as I do, that neither measure is enough in practice or in principle, especially in a pandemic that has so amplified poverty in our nations, including in-work poverty, and inequality, sometimes with quite deadly consequences.

Surely it is time to move more quickly towards breaking the £10-an-hour threshold for those in the lowest-paid work. I could not agree with the Minister’s suggestion that the current rates are fair in relation to low-paid workers, many of whom are literally saving our lives in this pandemic.

Surely it is time to end this age discrimination. Even the move from 25 years old to 23 for the national living wage is inexplicable in discrimination and human rights terms. I do not believe that a 23 year-old’s rent will be cheaper or that they will need less expensive food or fuel every week.

Surely it is time to ensure that no one has to risk their own health or that of the community by leaving home to go to work—often insecure work—when they are symptomatic. Surely we have learned during this pandemic that financial insecurity breeds health insecurity, not just for individuals but for society as a whole. Surely it is time to explore a minimum guaranteed income for everyone in our nations.

I was particularly interested in the Minister’s discussion of compliance and record-keeping but I wonder whether, in his summation of the debate, he might say a little more about enforcement. How are these national minima enforced and how much enforcement action have we really seen, not least over the last year?

My Lords, I will not follow up the approach of the noble Baroness, Lady Chakrabarti, because I do not think that this is probably the Bill in which to discuss the question of minimum wages being raised by large amounts. What I am concerned about is whether over the last five years the number of inspectors employed to enforce these rules has increased or decreased and what sort of attitude the courts take when people are brought before them. I hope the Minister will reply to me on that and if he cannot do so immediately then in writing. More importantly, a large army of people are being cheated out of the minimum wage by various methods and I certainly agree that if we have a minimum wage it should be something that people can look forward to enjoying. It should be at least a minimum reward for a decent day’s work. Otherwise, I am quite content with the regulations as they are.

My Lords, I thank the Minister for his statement and I welcome the rise of the national living wage from £8.72 to £8.91 an hour, a rise of 2.2%, with commensurate rises for those aged under 22 and apprentices. The rise of 3.6% for apprentices is particularly welcome, taking their pay to £4.30 an hour.

This is little enough but 139 companies were fined last year for failing to pay even this minimum, amounting to £6.7 million in withheld payments. If the Minister is in a position to do so, perhaps he will say something about the steps the Government are taking this year to ensure that the minimum wage is paid by all companies. I particularly look forward to the Minister’s answer to the question posed by the noble Lord, Lord Bradshaw.

I do not know about other noble Lords but speaking for myself I find it very difficult to see how anyone can possibly live on that sum. Even an eight-hour day brings in scarcely £70. I know we have to realistic and that there is a limit to what so many employers are able to pay if they are going to remain solvent, especially in these difficult times; however, wherever possible, we should set our sights higher.

In that connection I commend the work of the Living Wage Foundation in trying to raise the level to a sum that does at least make it a little easier for people to actually live on. It was exactly 20 years ago when London Citizens, a community-based organisation in London, started a campaign for a real living wage. Two priests—one Anglican and one Roman Catholic—were the seminal figures behind this. London Citizens quickly became Citizens UK, a national organisation campaigning for companies and public authorities to voluntarily commit themselves to paying a real living wage. This campaign established the Living Wage Foundation, founded 10 years ago in 2011, which now spearheads the campaign.

My Lords, as a number of speakers have said, it is clear that this year is obviously not the year in which decisive steps can be taken on the issues that we are discussing today. So many people are still struggling, particularly with food and accommodation costs. The LPC recognised the necessity of ensuring a balanced decision between the needs of individuals and the ability of the many struggling businesses that employ them to deal with the situation today.

However, there is one aspect of this that I would like the Minister to address in his summing up. Here in Northern Ireland, we had experience of an abuse by a number of employers regarding the accommodation being provided to workers. A practice developed where companies were buying houses in various conditions and cramming a large number of individuals, primarily migrant workers, into those dwellings, and deducting sums from their wages at the end of the week. It became an abuse. Can the Minister tell us what steps are being taken to ensure that the allowance that is provided to cover accommodation costs reflects value for money, and that the employees are not also required to purchase goods from their employer? That is another practice that effectively forced people to shop with their own employer, which can lead to all sorts of abuses.

Other speakers have mentioned enforcement. I would be particularly interested to know whether the enforcement to ensure that there is decent accommodation provided at reasonable rates is happening. Regulation 2(4) increases the offset amount, but that does not indicate the level of quality or value for money. Employers can and have required their employees to live in garages and outhouses that have been converted into accommodation units where large numbers of people are accommodated in appalling conditions; we have seen examples on television.

While this is clearly not the year when we can address the matters in the minds of many Members, that does not prevent us preparing the ground for trying to address the inability of many working people even to feed themselves properly. That is another debate, but can the Minister address the issue of accommodation? Who looks at this issue and, if they find there is inadequate accommodation, what steps are taken to ensure that the employer provides value for money?

This pandemic has highlighted the very real link between low income and health inequality in a very dramatic way. It is appropriate as part of this debate to put on record the huge concern about the low level of the minimum wage in this country.

The National Minimum Wage Act 1998 was brought in by the 1997 Labour Government. I was a Labour candidate in that general election, in a seat where there were a lot of strong views about the national minimum wage. It was a large rural seat in the south west of Scotland, the seat of Galloway and Upper Nithsdale. Many people were on very low incomes there, particularly rural workers, who were earning perhaps 50p or 75p per hour. That was a very low income even at that time, and definitely not the kind that could lead to people having a living wage if they worked long hours.

In that election, it was repeatedly argued that if we introduced a national minimum wage there would be high unemployment, people would lose their jobs and businesses would go bust. The reality, of course, was very different and that did not happen. That is something we need to be aware of every time we have this debate, because the reality and the backdrop is that people are suffering.

We are seeing big campaigns in the United States at the moment, such as the Fight for $15 campaign, which is trying to get the minimum wage increased to a level people can live on. In this country we have had the McDonald’s campaigns, whereby McDonald’s workers —represented by the Bakers, Food and Allied Workers’ Union—are trying to get £10 per hour and other improvements to their terms and conditions. In Scotland, the GMB trade union is campaigning to get care workers a minimum wage of £15 per hour and is putting pressure on the Scottish Government to deliver that in the upcoming Budget.

I say to the House that this is an issue about justice and economic sense. Frankly, it does not make economic sense to have people on the kinds of poverty wages being discussed this evening. It is also an issue of dignity. It is simply not acceptable if people working full-time are having to rely on state benefits, which they may or may not claim. They simply cannot provide for themselves and their families if the living wage is based on a minimum income of the levels outlined in these regulations. Companies like McDonald’s pay very different rates in different countries, depending on the legal minimums in those countries. In countries such as Denmark, the rates of pay are far higher than in the United States, for example, or indeed the United Kingdom.

My Lords, I welcome the opportunity to speak on this issue, which is of huge concern to the 2 million or so workers paid at or— shamefully and illegally—below the minimum wage. These are workers in sectors such as retail, cleaning, maintenance, social care and hospitality. A rise of 2.2% may not, at first glance, appear too bad at this time, but 2.2% of not very much is very little. At the rate for those aged over 25, which is due to become the rate for those aged over 23, 2.2% amounts, as the Minister said, to just 19 pence per hour. Small wonder, then, that 3,000 care workers in Hillingdon, in the constituency of the Prime Minister, cannot afford £112 a week—what Loughborough University assesses is necessary to feed a family of four—even with two adults in a four-person household working at that level. I am really not sure how the Minister thinks that is a fair reward, as my noble friend Lady Chakrabarti said earlier. The level of the minimum wage is simply too low, and appallingly so in the fifth—or is it the sixth?—richest country globally.

The national minimum wage is not a minimum wage; it is simply an hourly rate, and one that is all too low at that. Even with a much more significant and, in my view, highly justified, increase, the situation for a worker on a zero-hours contract, with no guarantees of how many hours will be available shift to shift, let alone week to week, is not an acceptable state of affairs. It provides no income security at all. For the minimum wage to be an acceptable arrangement, the level should be increased significantly beyond what is envisaged today. But that increase should be part of a collectively bargained contract that encompasses pay and conditions, including hours to be worked and wages to be paid at a level that affords income security and a life free from the fear of the next bill arriving.

In short, fairness and social justice, as well as the Government’s much-vaunted levelling up agenda for all workers, requires the introduction of wages determined through sectoral collective bargaining, not the imposition of poverty pay levels. To quote the OECD:

My Lords, I do not welcome these regulations. I accept that they are necessary, but I do not welcome this pathetic rise. I do not see how the Government can feel justified in bringing forward such a pathetic rise when people are struggling through this pandemic. The last 12 months have exemplified the harsh reality for low-paid workers. We all know that the Government’s national living wage is no such thing—it is a complete misnomer. The Government misappropriated that phrase from some people who had done their homework and we are left with a so-called national living wage that is absolutely pathetic. People find it extremely difficult to live on.

I support everything that the noble Baronesses, Lady Chakrabarti, Lady Clark of Kilwinning and Lady Blower, have said. They have laid out clearly that this is simply wrong. The noble Baroness, Lady Chakrabarti, said that reducing the age limit for the living wage from 25 to 23 shows how arbitrary it is—she called it inexplicable. I hope that the Minister will explain the rationale for that to us, as it seem very strange.

During this pandemic, many of us with higher-paying jobs have been able rapidly to shift to remote working and not face too many struggles. We have been able to wait out the virus at home. But underpaid key workers have had to keep going in and face the pandemic, exposing themselves and their families to the risks of the virus. Then there are those underpaid jobs that have been shut down during the pandemic, such as in hospitality and the arts. These people face huge uncertainty over the future, along with the 20% furlough cut taken out of their already low wages. The Low Pay Commission reported that the lower paid someone was the more likely they were to be furloughed and lose pay as a result. Of people who were furloughed, those who were higher paid were more likely to have their employer top up their furlough to 100% of normal pay. It is just another example of the huge inequalities in the system exposed by this virus. It is no longer the great leveller that our Prime Minister—I say, “our Prime Minister”; I suppose he is our Prime Minister—once described it as.