My Lords, I beg to move that the National Minimum Wage (Amendment) Regulations 2018, which were laid before the House on 5 February 2018, be approved. The purpose of the regulations is to increase the national living wage and all of the national minimum wage rates from April 2018. 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 real, positive impact on the earnings of the lowest paid: between April 2015 and April 2017 those at the fifth percentile of the earnings distribution saw their wages grow by almost 7% above inflation. This is faster than at any other point in the earnings distribution and, according to the Resolution Foundation, wage inequality, as measured by the ratio between the top decile and the bottom decile of the earnings distribution, fell in all regions of the United Kingdom between 2015 and 2017 thanks to the national living wage. Increasing the minimum wage is one more way in which the Government’s industrial strategy is boosting people’s earning power and seeking to raise productivity throughout the United Kingdom.
From next month the national living wage for those aged 25 and over will increase by 33p to £7.83, which is a 4.4% increase. The 33p increase in April will mean that a full-time worker on the national living wage will see their pay increase by over £600 over the year. The national living wage is on course to reach the Government’s target of 60% of median earnings by 2020.
The 21 to 24 year-old rate will increase by 33p, meaning those in that age group will be entitled to a minimum of £7.38—an annual increase of 4.7%. Those aged between 18 and 20 will be entitled to a minimum of £5.90—an annual increase of 5.4%—and those aged 16 and 17 will be entitled to a minimum of £4.20, an annual increase of 3.7%. Finally, apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, will be entitled to £3.70, which is the largest annual increase of all the rates at 5.7%.
All of these above-inflation increases represent real pay rises for the lowest-paid workers in the United Kingdom. For younger workers on the national minimum wage, it is the largest and fastest increase in more than 10 years. The Government’s green-rated impact assessment estimates that more than 2 million people will directly benefit from these regulations.
All of 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 so 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 rate recommendations, all of which was set out in its 2017 report, published in November.
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. 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 increased funding for HMRC national minimum wage enforcement to £25.3 million this year—up from £13 million in 2015. 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.
In 2016 HMRC recovered pay arrears in excess of £10.9 million for more than 98,000 workers. Those employers who underpay their workers the minimum wage face public naming by the Government. Indeed, last Friday BEIS named 179 employers who had underpaid a total of £1.1 million to 9,200 workers.
Sustainable increases in minimum wage rates depend on strong employment growth. Over the past year the UK labour market has reached a record high employment rate, and the lowest unemployment rate since the 1970s. Evidence has long told us that investing 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 earning power of the lowest-paid workers. Through these regulations the Government are building an economy that works for everyone. I commend the regulations to the Committee.