My Lords, the regulations were laid before the House on 28 January 2019. Their purpose is to increase the national living wage and all the national minimum wage rates from 1 April 2019. The regulations also include an increase in the accommodation offset rate, which is the only benefit in kind that counts towards minimum wage pay.
The national living wage has had a positive impact on the earnings of the lowest-paid. Between April 2015 and April 2018, those at the fifth percentile of the earnings distribution saw their wages grow by almost 8% above inflation. That is faster than at any other point in the earnings distribution.
The labour market has continued to perform well. The employment rate is at a record high of 75.8% and the unemployment rate is at 4%, the lowest since the 1970s. Increasing the minimum wage is one more way in which the Government’s industrial strategy is boosting people’s earnings power and seeking to raise productivity throughout the UK.
From April, the national living wage for those aged 25 and over will increase by 38p to £8.21, which is a 4.9% increase. The 38p increase in April will mean that a full-time worker on the national living wage will see their pay increase by more than £690 over the year. The national living wage is on course to reach the Government’s target of 60% of median earnings in 2020. The annual earnings of a full-time minimum wage worker will have increased by more than £2,750 since the introduction of the national living wage in April 2016.
The 21 to 24 year-old rate will increase by 32p, meaning that those in that age group will be entitled to a minimum of £7.70, an annual increase of 4.3%. Those aged between 18 and 20 will be entitled to a
minimum of £6.15, an annual increase of 4.2%. Those aged 16 and 17 will be entitled to a minimum of £4.35, an annual increase of 3.6%. Finally, apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, will be entitled to £3.90. This is a 5.4% increase and is the largest increase of all the rates that we are debating today. All these above-inflation increases represent real pay rises for the lowest-paid workers in the UK.
The Government’s green-rated impact assessment estimates that more than 2.1 million people will benefit directly from the regulations. All the rates in the regulations have been recommended by the independent and expert Low Pay Commission. The LPC brings together employer and worker representatives to reach a consensus when making its recommendations. The Government asked the Low Pay Commission to recommend the rate of the national living wage such that it reaches 60% of median earnings in 2020, subject to sustained economic growth.
For the national minimum wage, the LPC has recommended rates that increase the earnings of the lowest-paid young workers without damaging their employment prospects by setting it too high. I thank the LPC for the extensive research and consultation that has informed these rates recommendations, all of which is set out in its 2018 report published in November. At Budget 2019, the Chancellor will announce the LPC’s remit in the years after 2020. The Government have an aspiration to end low pay. This year, we will engage with the LPC, workers and businesses to balance this ambition with the need to protect employment for lower-paid workers.
The Government recognise that as the minimum wage rises, there is a higher risk of non-compliance as a larger share of the workforce is covered by the minimum wage. The Government are committed to cracking down on employers who fail to pay the national minimum wage, and we are clear that anyone entitled to be paid the minimum wage should receive it. Consequently, the Department for Business, Energy and Industrial Strategy has almost doubled the budget for enforcing the national minimum wage and national living wage. Funding reached £26.3 million this year, up from £13.2 million in 2015-16.
HMRC follows up on every complaint it receives, even those which are anonymous; these include those made to the ACAS helpline, via the online complaint form or from other sources. Increasing the budget allows HMRC to focus on tackling the most serious cases of wilful non-compliance. It also increases the number of compliance officers available to investigate national minimum wage complaints and conduct risk-based enforcement in sectors where non-compliance is most likely. In 2017-18, HMRC recovered pay arrears in excess of £15.6 million for over 200,000 workers.
Sustainable increases in minimum wage rates depend on strong economic fundamentals—and those of the UK are strong. The economy has now grown for 24 quarters in a row—the longest streak in the G7. Evidence has also long told us that investment in human capital is crucial for the long-term productivity of the workforce. The industrial strategy sets out our long-term vision for increasing productivity, including through raising
the minimum wage, and so boosting the earnings power of the lowest-paid workers. Through these regulations, the Government are building an economy that works for everyone. I commend them to the Committee and I beg to move.