My Lords, I declare an interest as one of my children is an apprentice aged over 19. He is in the first year of the apprenticeship and so would benefit from the figures that we have in front of us today. I have not discussed it with him but I am sure he will be delighted to hear that there is more money on its way.
My noble friend Lady Donaghy’s comments were well made and it is astonishing that we are 20 years into what was seen at the time as quite a revolutionary policy and which is now, in the words of the Minister who introduced the order, settled between all parties as a feature of our working environment. It is a good thing as it works for all sections of society, particularly those at the lower end of the pay spectrum.
This is the fourth consecutive year that I have been reviewing this order, so I took the change of looking back to last year’s Statement, when the Minister was also responding, although that was only his first time. I will repeat some of the things that were said then because I think that the issues are still relevant. There are two important points to put on record. The document in front of us is an excellent piece of work. Again, I congratulate the team responsible for it. It reads very well indeed. It is a bit scary to go back to what we learned at university about the economics of wage policy and the impact of living and national wages but, nevertheless, it is important to see it all there. The document itself is good but also it plays back to the work done by the Low Pay Commission, in place for 20 years now, but doing fantastic work. It is very good to see its ability to move from the national minimum wage conditions when it was set up in 1998 to now, with the national living wage, which progressively moves the lower paid on full rates up to 60% of the median wage. The commission has adapted and continues to do its work in a way that is important and effective for society as whole.
Three points were made last year which I think have been picked up in the current document. One concerned whether the approach that has been taken to calculate the impact of the national minimum wage has stood the test of time. It was good that the department decided to take external advice from an expert body, and it is good to read the report and evaluation, which goes some way to answer some of the points I raised last time. That gives us a good basis on which to go forward.
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My substantial second point concerns whether the straight line bite path—a rather curious phrase—will be on target to hit the position of 60% of median
earnings in October 2020, which is not very far away. Echoing the noble Baroness, Lady Burt, it is not clear in the document before us whether we will hit the target on that date and, if not, what the issues are. It is clearly conditional and contingent on economic growth, but I think I heard the Minister say that he was confident that the essentials of the economy were sound, so that does not need to be a factor.
It is then simply a question of how one tracks what is obviously a moving target—the median wage—how it will move and how changes made annually in the current form can do that effectively. I do not think there is any problem, but if the Minister wants to say anything more about it, I should be grateful to receive it.
My final point is one raised by my noble friend Lady Donaghy. The only figure that sticks out from the table on page 1 of the Explanatory Memorandum as being out of sync is the accommodation offset rate, which has been set at 7.9%. Everything else has percentages beside it; this one does not, so I have had to make my own calculation; I hope it is approximately right. The rate of 7.9% is a bit different from all the others, which are between 4.9% and 5.4%.
I understand the logic behind that, which was explained well by my noble friend, but I do not understand the differential approach. There must be figures which support it, which may be in documents to which I have not had access, but will the Minister explain why it is necessary to raise it at the rate of 7.9%, which seems to be adverse in terms of remuneration—taken-home pay—when the rest of the percentage increases are at a more modest level? Is there a particular reason? Do rents in the areas we are talking about particularly differ from the rest of the country? Is there a particular reason or has a general approach been taken? I should be grateful for further information on that.