National Minimum Wage Regulations 1999 (Amendment) Regulations 2006

It is clearly right that we carefully consider these changes to the minimum wage rate, since they obviously impact on workers and employers a great deal. I shall cover the points raised by noble Lords and give them reassurances. The six per cent increase to £5.35 was the right approach. Six per cent is clearly more than the current average earnings of around four per cent, but the Commission found no strong evidence to support the contention that the minimum wage is damaging employment levels in low-paid sectors. As I said, there is a clear recognition that the period of substantial increases over the rate of inflation is probably coming to an end. The noble Lord asked about the impact of the minimum wage on differentials. What the Low Pay Commission found in its 2005 report was that there is a concertina effect. In the years when the rate increase has been relatively large, businesses have narrowed the differentials and then restored them in the years when the increases have been smaller. It is therefore difficult to say precisely what the impact is, but one has to assume that if you move the minimum rate upwards, with some time lag it will affect differentials. That has to be taken into account when considering increases in costs. On the point that employers’ organisations are saying that job losses will follow, the situation is that the UK labour market remains extremely healthy with high rates of employment and low unemployment. Of course, over the years since the first debates were held, people have argued that the national minimum wage would result in huge unemployment figures. We have not seen that, but it is absolutely key to continue to keep a close watch on the situation to make certain that we do not suffer impacts. We see this very much as a question of balancing all the time the need to retain a minimum wage while ensuring that it does not drive up unemployment. So far as the retail sector is concerned, there has been a period of slack retail sales. However, in May, they were 1 per cent higher than in the preceding three months and up 2.1 per cent on a year earlier. Most forecasters are now predicting that we will see a pick-up in retail sales, so I do not think that there is any particular problem in that sector or, indeed, in other low-paying sectors. On the future, we are not in the business of making commitments. Our approach so far has been that we need to make judgments as we go along in the light of the circumstances at the time. We should not be saying that the minimum wage will be linked to the RPI or make other commitments. The final question put to me concerned the suggestion to set regional rates rather than a national rate. This has always been an issue. One of the problems with it is that within regions themselves there is as much wage rate variation as there is between regions. I believe that going down that road would introduce an enormous amount of complexity that would become very difficult to manage. It is a case where we have to trade off exact fairness and economic efficiency against complexity. I think that we have reached the right position, which is to continue with a national rate. I accept that, as with any kind of national wage agreement, it means that those living in London experience considerable difficulties while a person on an island off the coast of Scotland might be keen on the relative wealth of the national minimum wage. However, it is necessary to trade complexity against equity. I think that I have answered all the questions raised and I commend the regulations to the Committee. On Question, Motion agreed to.