National Minimum Wage Regulations 1999 (Amendment) Regulations 2006

I thank the Minister for explaining the effect of 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, and to protect them from unfair discrimination by unscrupulous employers. We note however that the uplift in the minimum wage for adult workers in these regulations represents an increase of just over 5.9 per cent, which is considerably above the Government's inflation target. Employers' organisations have expressed their increasing concerns, among other things, at the impact on the competitiveness of our companies. There was historically an intention to achieve a minimum wage above £5, which was achieved last year. The regulatory impact assessment states that it has not accounted for additional costs to employers as a result of what it calls the ““uprating””. Presumably, that means that it has not contemplated the effect of successful pay claims by those above the minimum wage seeking to maintain their differentials. Given that these are likely to have a significant effect on many small businesses, especially those in the Midlands and the north, I would be grateful if the Minister would inform the Committee of his estimate of that effect. I repeat my concerns voiced in the equivalent debate last year that some small businesses—I declare an interest as a shareholder of one, and need hardly say that they employ a sizeable proportion of the country’s workforce—employ a high proportion of lower paid workers, often operating at marginal rates of profitability. That gives rise to concerns, perhaps especially in the manufacturing and retail sectors, that if costs rise when profits are already wafer thin, redundancies are the only realistic option, thus often hitting the lowest paid hardest. It is interesting to note that the Low Pay Commission’s report this year states that its review of economic conditions revealed some factors which could argue for a slight reduction in the October 2006 increase. It admitted, for instance, that subdued consumption spending had negative implications for the retail sector. It said that average earnings over the last year had increased somewhat less than they anticipated: that is, by 4.1 per cent and not 4.5 per cent. It acknowledged that forecasts for 2006 showed a similar shortfall, and admitted that the slowdown in average earnings growth appeared greater in the private sector, especially some parts of it. I look forward to hearing the Minister’s comments on these points. As the Minister said, the Low Pay Commission’s 2006 report went on to say that it considered that the phase in which it is committed to increases in the minimum wage above average earnings is over. The Minister said that the Government support this. Will he go further, and undertake that the Government will not push forward increases next year at above the increase in average earnings? There is a delicate balance between keeping inflation at an acceptable level and ensuring that workers are protected from unacceptably low levels of pay. I look forward to the Minister’s comments on these and other noble Lords’ points.