National Minimum Wage Regulations 1999 (Amendment) Regulations 2005   

Once again, I thank the Minister for explaining the regulations. The British workforce is among the most dedicated in the world and we of course support the intent that our people have enough income to support themselves and their families. It is noted that the uplift in the minimum wage for adult workers contained in these regulations represents an increase of 4.1 per cent, which compares to the Government’s inflation target of 2.5 per cent. The headline rate of inflation, currently at about 2.9 per cent, remains obstinately above the Government’s target rate, as does the retail price index, which has hovered between 2.7 and 2.9 per cent since January. I note that the CBI has expressed a concern about the impact on the competitiveness of our companies. I also note that the Federation of Small Businesses has expressed strong concerns on behalf of small business, not at the principle of the minimum wage but that it is increasing as a matter of course. I declare an interest as a director and controlling shareholder of a small business and need hardly say that small businesses employ a sizeable proportion of the country’s workforce. Some small businesses employ a high proportion of lower paid workers and already often operate at marginal rates of profitability. A related concern, perhaps especially in the manufacturing and retail sectors, is that if costs rise when profits are already wafer thin, redundancies are the only realistic option, thus often hitting the lowest paid hardest. I would appreciate reassurance from the Minister on those points. It is easy to argue that the increase affects so few people spread across so many employers that the effects are immaterial. But it is of course the straw which breaks the camel’s back. Perhaps the Minister would also give an assurance that the risk that the grades of staff above those on the minimum wage might use this as a pretext to negotiate an increase for themselves on grounds of maintaining differentials—thus exacerbating the inflationary impact—has been taken into account. It is wise that the Government have not yet followed the recommendation of the Low Pay Commission to award a further inflation-busting increase in the national minimum wage of nearly 6 per cent in 2006. There is a delicate balance between keeping inflation at an acceptable level and ensuring that workers are protected from unacceptably low levels of pay. Having said that, and with confidence that the Minister can reassure me on the above points, we will not oppose the regulations.