National Minimum Wage Regulations 1999 (Amendment) Regulations 2005   

rose to move, That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2005. The noble Lord said: I am pleased today to present these regulations to the Committee. The minimum wage remains one of the Government’s finest achievements. Over the past six years it has made a real difference to the lives of at least 1 million low-paid workers—particularly women, who make up around 70 per cent of those benefiting. Last summer, the Government asked the independent Low Pay Commission to evaluate the impact of the minimum wage, with particular reference to low-paying sectors and small firms, and to make recommendations for change if necessary. The commission reported in February and the Government accepted all but one of its recommendations. The regulations that we are debating today implement the increases recommended by the commission to the adult and development rates of the minimum wage. We have also introduced an exemption from the minimum wage for participants in the European Community’s Leonardo da Vinci programme. It may be helpful if I briefly explain each of the regulations in turn. Regulation 1 provides for the regulations to come into force on 1 October 2005. That will give employers sufficient time to prepare and plan for the rate increases, which were announced by the Government in February. Regulations 2 and 4 deal with increases to the minimum-wage rates. Although the minimum wage rose broadly in line with average earnings for the first four years, the adult rate increased by around 8 per cent in 2003 and 2004, around double the rate of average earnings. The increases recommended by the commission are around a further 4 per cent this year—broadly in line with average earnings—increasing the adult rate to £5.05 an hour and the development rate to £4.25 an hour. The commission concluded in its report that the overall economic situation and employment levels remain robust, and it did not find any significant adverse impact resulting from the minimum wage. Unemployment is at a record low, and a record 28.5   million people are now in work. The commission also proposed further rate increases to take place in October 2006—to £5.35 for adult workers and £4.45 for those on the development rate—but recommended that it should be invited to fine-tune those rates in early 2006, in the light of economic circumstances. The Government accepted that recommendation and included it in the terms of reference for the commission’s 2006 report, which we announced last week. Therefore the 2006 increases are not contained in these regulations. The commission also asked to be invited to review the operation of the rate for 16 to 17 year-old workers in its 2006 report. We agreed that it should do so, and this should also be included in its remit. However, the Government did not accept one recommendation made by the commission: that 21 year-olds should qualify for the adult rate of the minimum wage. The regulations do not therefore make that change. The Government are concerned that employment prospects for 21 year-olds have often been worse in recent years than those for 20 year-olds, and that to compel employers to pay 21 year-olds the adult rate might exacerbate this situation. However, we will keep the position under close review. Regulation 3 introduces an exemption from the minimum wage for participants in the Leonardo da Vinci programme. This is a European Community training programme under which participants gain vocational work experience in other member states. This exemption was requested by the Department for Education and Skills. It is concerned that if the minimum wage applied to UK host organisations, the participation rate in the UK could significantly decrease and, given that many partnerships have reciprocal projects, that this could then have a detrimental effect on the number of outgoing UK participants. Regulation 5 increases the amount that can be taken into account when determining whether the minimum wage has been paid in situations where a worker is provided with living accommodation by the employer. The amount is increased, as recommended by the Commission, from £3.75 per day to £3.90 per day. Regulations 6 and 7 contain some minor technical transitional provisions. Noble Lords will appreciate that as well as raising the level of the minimum wage we also need to ensure that it is successfully enforced. It is not enough just to set increasing minimum wage rates; we need to be sure that workers are actually receiving the money they are due. Noble Lords may have seen the Statement on enforcement made by the Government in another place earlier this week. It may be helpful if I briefly summarise that again today. While we know that the great majority of employers pay above the minimum wage, the Government are absolutely determined to tackle difficult employers. We have therefore decided to proceed with a new approach called ““targeted enforcement””, under which we will target publicity and enforcement at each of the key low-paying sectors in turn. This approach will allow us to meet the employers and unions in each sector to discuss their concerns about the minimum wage and then mount an enforcement drive, encouraging workers paid below the minimum wage to come forward. We believe that this approach will enable us to raise the profile of the minimum wage in each sector in turn, address their concerns and improve compliance at the same time. For the first year of this programme, we have chosen the hairdressing sector. The key federation has welcomed this decision. In addition, the National Minimum Wage Act also provides for criminal prosecutions as a long-stop where employers are regularly or deliberately non-compliant. In addition to failure to pay the minimum wage, the criminal offences include obstructing officers, failing to keep adequate records and producing false records. Although the maximum fine for each offence is fairly small—up to £5,000—the details of the court case can be made public, which should maximise the deterrent effect. To date, the Government have not taken forward any criminal investigations, but we believe there is now a case for using this route, particularly where lesser sanctions alone are not producing compliance. I should like to stress that we anticipate criminal proceedings only in relatively few cases, focused on the very worst cases. But I believe that it will be a useful additional enforcement tool to deploy and that this will, together with the targeted enforcement initiative that I mentioned a moment ago, help us to raise the profile of the minimum wage and improve compliance. I beg to move. Moved, That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2005 [First Report from the Joint Committee].—(Lord McKenzie of Luton.)