National Minimum Wage Regulations 1999 (Amendment) Regulations 2006

rose to move, That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2006. The noble Lord said: I beg to move the Motion standing in my name on the Order Paper. I am pleased to present these regulations to the Committee today, which are primarily to implement the increased national minimum wage rates that come into effect on 1 October. The minimum wage has come a long way since its introduction in 1999 and remains one of the Government’s finest achievements. It has benefited many hundreds of thousands of people each year, particularly women, who make up two-thirds of those benefiting and is now widely supported by all sides of the House. Before I speak to the detail of the regulations, it might be helpful to put them in context by saying a little bit about the independent Low Pay Commission’s remit last year. The Government asked the Low Pay Commission to consider whether the October 2006 uprating of the adult and development rates recommended in their 2005 report remained appropriate in the light of economic circumstances and other factors, andif not to make any recommendations for change. The remit also asked it to review the level of the rate for16 to17 year-olds, keeping in mind the position of the youth labour market and the incentives for the young to participate in education and training. Furthermore, the Government invited the Low Pay Commission to review the operation of the accommodation offset and, if appropriate, to make recommendations for any changes needed to the regulations. We were asked to review the treatment of benefits-in-kind, including where those benefits are offered as part of a salary sacrifice arrangement. The commission reported in March 2006 and the Government announced that they had accepted most of the recommendations. I will now talk to each regulation in turn. Regulation 1 provides for the regulations to come into force on 1 October 2006, giving employers sufficient time to prepare and plan for the rate increases which were, of course, announced by the Government in March. Regulation 2 deals with increases to the minimum wage rates and the accommodation offset. The regulations increase the adult rate from £5.05 to £5.35, as recommended by the Low Pay Commission and accepted by the Government. That equates to an increase of nearly 6 per cent. The regulations also increase the development rate for workers aged 18-21 from £4.25 to £4.45 an hour, an increase of 4.7 per cent. The commission also made a recommendation in respect of the 16 and 17 year-olds rate for 2006, recommending a 10 per cent increase from £3 to £3.30, to take into account the absence of any uprating in October 2005. In arriving at this decision, the commission looked at whether the introduction of a rate for 16-17 year-olds has encouraged young people out of full-time education or training. It concluded that it has not, nor has it damaged their prospects in the labour market. The Government recognise that in increasing the minimum wage they must be mindful of the economic conditions. They must ensure that the minimum wage is set at a level which avoids the risk of adverse effects on employment, inflation and the PSBR. In short, the economic data indicates that these rates are sustainable. Employment continues to grow both in the overall economy and in the low paying sectors. Corporate profitability continued its cyclical improvement. The UK labour market remains healthy with high employment rates. Unemployment remains low. That is not just our view. It was the view of the Low Pay Commission, too. In its considerations, it looked at the low paying sectors, since any adverse employment effects of the minimum wage would be most evident in low paid sectors over and above the labour market as a whole. Employment in most of these sectors has continued to increase since the introduction of the minimum wage. Having said that, the Low Pay Commission stated that, in arriving at its decision, it recognised that there has been some divergence in economic outcomes. While it supported the rate rises for 2006, it concluded that the phase in which the Low Pay Commission is committed to increases in the minimum wage above earnings is over, and furthermore makes no presumption that further increases above average earnings are required. We support this. As I have already said, the minimum wage is about protecting the vulnerable, while ensuring that the economy is not damaged. Additionally, the regulations will uprate the accommodation offset from £3.90 per day to £4.15 per day. That is the amount which can be taken into account when determining whether the minimum wage has been paid in situations where the employer provides a worker with accommodation, which is in line with the Low Pay Commission’s recommendation. Regulation 3 contains some minor technical provisions. In addition, the Low Pay Commission recommended in its 2006 report that the accommodation offset provisions should continue to apply to all workers housed by their employer in all circumstances, and that the Government should update existing guidance and raise awareness. It also recommended that the Government should implement legislative measures to prevent employers using the device of a separate accommodation company to circumvent the restrictions imposed by the offset and, as a result, evade paying the national minimum wage. We agree that the accommodation offset should apply in all situations in which employees are housed by their employers. However, legislative measures are not required since our legislation already covers a wide range of circumstances in which the employer provides accommodation to workers. We will issue draft guidance on when the accommodation offset is likely to apply and will embark on a consultation process with all interested parties, including the Low Pay Commission, to ensure that the guidance is sufficiently clear to meet needs. Finally, last year we announced a new approach called ““targeted enforcement””. The purpose is to target publicity and enforcement at key low-paying sectors in turn. As we stressed at the time we announced this approach—but I will stress again now—our purpose is not to tackle the great majority of good employers, but to tackle the minority of bad employers. This year's sector will be childcare nurseries. Her Majesty’s Revenue and Customs enforcement teams have found that one in three nurseries they have looked at have been paying less than the minimum wage. It is vital that we raise the perception of childcare as an attractive career option. As well as taking the action I am announcing today, the Government are also investing and legislating to ensure that childcare providers, including those in the private and voluntary sectors, can improve quality and give parents increased choice and confidence. We will therefore work with representative bodies, employers and employees in the nursery sector to identify the main issues, and produce appropriate guidance, which will be followed by an enforcement drive. That approach was successfully adopted last year in the hairdressing sector. I commend these regulations. Moved, That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2006.—(Lord Sainsbury of Turville.)