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On Question, Motion agreed to.
National Minimum Wage Regulations 1999 (Amendment) Regulations 2008
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The Parliamentary Under-Secretary of State, Department for Business, Enterprise and Regulatory Reform (Baroness Vadera) rose to move, That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2008.
The noble Baroness said: The minimum wage is a key protection for the UK’s workers that provides a floor for workers while protecting business through a level playing field without competition on the basis simply of low pay. The regulations will increase the national minimum wage rates by 3.8 per cent from 1 October this year and will benefit around 1 million people. The Government have accepted the recommendations of the independent Low Pay Commission on the new rates. As always, the Low Pay Commission considered
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The regulations also make changes relating to the Jobcentre Plus work trials programme, and clarify the position of participants in some government employment programmes. Work trials are a long-standing, successful employment programme on which individuals claiming benefits agree to be placed with a potential employer for a short trial period with the intention of being offered the job permanently. Evidence suggests that employers sometimes screen out the long-term jobless because of misconceptions or stereotypical views about their work experience and skills. Work trials can help to overcome this by allowing employers to find out more about an individual’s actual performance in a job. At the same time, they help demonstrate to individuals that their barriers to work are not as high as they might have thought.
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Work trials have proved very successful, with consistently around half of the 10,000 to 15,000 people annually converting their trial into a permanent job. The Government have announced their intention to extend the maximum three-week period of the programme to six weeks. This is to update the programme in line with developments in our wider welfare reform agenda, which is progressively extending help and support to economically inactive groups. For example, many people on lone parent and incapacity benefits will have been out of work for a long time, and have only a weak attachment to the labour market. They may need more time to demonstrate their suitability to an employer, to develop the confidence that they can take a permanent job or to make decisions about the type of work they want to do.
In addition, the extension responds to requests from local areas for additional flexibilities to help them improve the co-ordination of local support for unemployed and other jobless people, and be as responsive as possible to the needs of individuals. That flexibility will be carefully implemented at the local level by Jobcentre Plus staff so that it is targeted to the needs of the individual. We would expect it to be used in only a minority of cases, and only with the agreement of both the individual concerned and their prospective employer. Jobcentre Plus also has controls in place to prevent work trials being abused.
During the trial the participant continues to receive benefits from the DWP and so is exempt from the national minimum wage. The regulations before your Lordships today will enable the current three-week minimum wage exemption to be extended to six weeks. The regulations also make an amendment to the wording of the current regulations applying to participants in certain government employment programmes. Those programmes provide a range of tailored options to provide jobless people with training, work experience or temporary work. Participants usually remain on benefits or receive a benefit-based training allowance. However, some may opt for a period of subsidised
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I turn to the detail of the regulations. Regulation 1 provides that the increase to the minimum wage rates will come into force on 1 October 2008. The new rates were announced in March, ensuring that business had sufficient time to prepare and plan for them. That is a well-established pattern. The provisions on work trials and employment schemes will take effect from the day after the day on which the regulations are made to ensure that individuals will be able to benefit as soon as possible from extended work trials. We would expect the impact on business and individuals to be beneficial. The DWP has ensured that guidance is available on these matters, and those arranging placements will ensure that businesses and participants are aware of how the provisions apply to them.
Regulation 3 increases the adult rate of the minimum wage from £5.52 to £5.73 per hour. Regulation 5 increases the rate for workers aged between 18 and 21 from £4.60 to £4.77 per hour and the rate for workers under 18 from £3.40 to £3.53 per hour. The amount of the accommodation offset is increased from £4.30 to £4.66 per day by Regulation 6. As noble Lords will be aware, the accommodation offset is the maximum daily amount which an employer may deduct from a worker to pay for accommodation.
Regulation 4 clarifies the circumstances in which workers on schemes made under government arrangements qualify for the national minimum wage. Workers who are entitled to pay under the terms of the arrangements by Government, or who receive pay from an employer, must receive the minimum wage. Regulation 4 also extends the current three-week exemption from the national minimum wage for individuals taking part in a work trial to six weeks. That exemption applies only to work trials arranged for customers of Jobcentre Plus and not to any other trial arrangements agreed between workers and employers, to which the national minimum wage would apply. I commend the regulations to the Committee.
Moved, That the Grand Committee do report to the House that it has considered the National Minimum Wage Regulations 1999 (Amendment) Regulations 2008. 21st report from the Joint Committee on Statutory Instruments.—(Baroness Vadera.)
Lord De Mauley: I thank the Minister for explaining the regulations, although she did it at some speed so I hope your Lordships will forgive me if I have not picked up every nuance. The British workforce is among the most dedicated in the world, and we support the intent that our people not only are encouraged to work but also earn enough income from that work to support themselves and their families and to protect them from unfair discrimination by unscrupulous
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In accepting the LPC’s recommendation of slightly above predicted increases in prices, as well as the average increase in current pay settlements, are not the Government concerned about the effects of inflation upon the competitiveness of our companies? If they are, what action are they taking to ameliorate the effect of that inflation on the health of our businesses, without which, of course, there would be no earnings and no profits on which to levy tax?
Small businesses—I declare an interest as a shareholder in one—employ a sizeable proportion of the country’s workforce. They employ a high proportion of lower paid workers and often already operate at marginal rates of profitability. This gives rise to the concern, 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. The Minister mentioned that 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 her comments on this matter.
I have two other questions. First, how will the Government avoid a conflict between the provisions of the forthcoming Equality Bill to outlaw discrimination on grounds of age on the one hand and the fact that these regulations include lower minimum wage provisions in respect of workers below the age of 21 on the other? I suspect there is a straightforward answer and I look forward to it.
Finally, does Regulation 6 mean that if you are provided with free accommodation in return for a few hours’ free work per week, but you also have a full-time job independent of your landlord, that your landlord will be de facto in breach? Have the Government assessed how many people might lose their homes as a result? I look forward to the Minister’s responses to these points and to the points of other noble Lords.
Lord Razzall: Whenever these regulations come before your Lordships, I always welcome the change in tone of the Conservative Opposition from when we started these debates 10 years ago. They were then, of course, significantly against the introduction of the national minimum wage, which is now recognised on all sides of the House as an important part of our economic framework. We welcome the regulations, particularly—this is a point we made when the Bill was introduced all those years ago—as the Government seem to be sticking, by and large, to their undertaking at the time to comply with the recommendations of the Low Pay Commission. The noble Baroness indicated that this is a recommendation of the Low Pay Commission.
I do not wish to detain the Committee for long but perhaps I may touch on the point made by the noble Lord, Lord De Mauley, with regard to the differential
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Baroness Vadera: I am grateful for the support of noble Lords for the national minimum wage. In response to the question of the noble Lord, Lord De Mauley, the issue of inflation is obviously very current and we are cognisant of the impact that it has on businesses, particularly in the retail, construction and other specific sectors. Nevertheless, the 3.8 per cent increase proposed is in line with the independent forecast for average earnings, which is 4 per cent. So it does not have an additional impact on businesses; it is what they would get, in one sense, from the market. On the Equalities Bill, I am advised that it provides an exemption for employers using the youth or development rates of the minimum wage from challenge on the grounds of age discrimination. I am afraid that I do not have the correct answer as regards the point about landlords and I am not entirely sure that I correctly understood the question. I would have been aware of any problems as regards people being thrown out of their homes. Therefore, I can probably reassure the noble Lord on that point in writing.
Lord De Mauley: I understand that Regulation 6 refers to a minimum rate of earnings even if you have free accommodation. If you provide a few hours of unpaid work in return for free accommodation but also have a salaried full-time job elsewhere, would that place the landlord in breach of the measure?
Baroness Vadera: I believe that it would not. However, I suspect that it would depend on how the work provided in lieu of accommodation has been declared. The hourly rate for work carried out elsewhere would be subject to the national minimum wage provisions. However, I am still not sure that I have understood the noble Lord’s question. Therefore, I shall take it away and respond in writing.
I can only restate for the noble Lord, Lord Razzall, the Government’s clear view on pay restraint. Temporary price increases will sustain inflation if they lead to a spiral of wage increases. Therefore, we remain firm on all issues relating to public sector pay. As regards the impact on businesses, an impact assessment has shown that the cost will be somewhere between zero and £62 million. Given the rate of inflation and average wages, I should say that that will be a decreasing cost. As I said, the measure is in line with average earnings so there will not be an additional cost in adhering to the national minimum wage provisions. I commend the regulations to the Committee.
On Question, Motion agreed to.
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Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008
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The Parliamentary Under-Secretary of State, Department for Business, Enterprise and Regulatory Reform (Baroness Vadera) rose to move, That the Grand Committee do report to the House that it has considered the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008.
The noble Baroness said: We propose that these new regulations shall replace the current regulations, the Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regulations 1987 under the vires of the Consumers, Estate Agents and Redress Act 2007 and Section 2(2) of the European Communities Act 1972.
The purpose of the proposed new regulations is to extend to solicited visits the cooling-off period and cancellation rights that currently apply to contracts made during unsolicited visits by traders; and to require that a notice of the right to cancel the contract be prominently and clearly displayed in the same document where the contract is completed wholly or partly in writing.
As in the current regulations, the proposed regulations apply to contracts made during visits by a trader to the consumer’s home; to his place of work; to the home of another person; or on an excursion organised by the trader away from his business premises.
There are certain contracts to which the proposed regulations do not apply. These include contracts made during solicited visits and relate to consumer credit and home purchase sales, where current regulation under the Consumer Credit Act 1974 and the Financial Services and Markets Act 2000 is considered adequate and satisfactory.
As before, under the proposed regulations the consumer will have the right to cancel the contract at any time during a cooling-off period of seven calendar days starting from the date of receipt by the consumer of a notice of a right to cancel. The regulations apply to contracts with a total payment value of £35 or more.
The proposed regulations will now require that the notice of the right to cancel must be prominently displayed in a contract that is completed wholly or partly in writing. The notice must be easily legible and where incorporated in a contract must be set out in a separate box with the heading “notice of the right to cancel”.
For certain types of contract, for example the sale of perishable goods, where a consumer has agreed to performance of the contract beginning before the end of the cooling-off period, we propose that the trader must include in the notice of the right to cancel a statement that payment may be required if the contract is subsequently cancelled, and the consumer must record their agreement in writing to performance of the contract beginning before the end of the cooling-off period, if that is what the consumer wishes. These
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The OFT in its 2004 report on the doorstep selling market estimated that a substantial proportion of complaints, around 44 per cent, are generated by home maintenance, improvements, repairs and doubling glazing sales. The potential for consumer loss is high in relation to these types of sales because of the value of the goods or services provided. For example, in 2007, the value of contracts for which complaints were made in relation to the construction or repair of conservatories alone was in excess of £20 million. We therefore propose that the new regulations should now apply to contracts for the construction or repair of extensions, conservatories, patios and driveways. We believe it is right that these types of contract should fall within the scope of the regulations. As in the current regulations, the new regulations make it clear that failure to provide a written notice of the right to cancel a contract or to provide the information required, or failure to do so in accordance with the regulations, would make a contract unenforceable against a consumer. In addition, the new regulations would allow a maximum level 5 fine, which is up to £5,000, to be imposed on a trader. I commend the regulations to the Committee.
Moved, That the Grand Committee do report to the House that it has considered the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008. 21st Report from the Joint Committee on Statutory Instruments.—(Baroness Vadera).
Lord De Mauley: Again I thank the Minister for explaining these regulations, which I think originate in the Citizens Advice complaint to the OFT in 2002. I understand that they extend the existing right of consumers to a seven day cooling-off period for unsolicited visits to solicited ones as well. We understand the impetus behind the regulations and certainly agree that vulnerable consumers need protection from unscrupulous vendors. However, I have one particular question to which I am sure the Minister can provide a satisfactory answer.
Once these regulations are in force, if, as an example, I invite a plumber to carry out some work on my house and within seven days I decide I do not like the quality of his work, can I avoid the contract with him? If so, can he sue me, and on what legal basis? I cannot believe that he would not be allowed to sue, but if he cannot, would it not simply allow me to take advantage of the regulations to get work done for free? Under the law as it stands, before confirmation of these regulations, I can argue with the plumber that his work was deficient, but at least he has a contractual basis on which to argue with me. The Small Business Advice Service made it clear during the consultation process that it believes these regulations will result in increased costs for many legitimate businesses while having a limited impact on real rogue traders. How does the Minister propose to ensure that such negative impact
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Lord Razzall: Like the noble Lord, Lord De Mauley, I welcome these regulations and congratulate Citizens Advice, which has been leading the campaign to deal with what is clearly a serious problem. The only point I want to make is that under the cancellation notice the period is to be seven days. I think that I am right that during the consultation period before these regulations were brought in, a strong view was expressed in the lobbying that that period was slightly too short and that a 14-day period would be better. Moreover, when the regulations were debated in the other place, the answer the Minister gave then—which seemed to have some degree of spurious common sense—was that the seven-day period would bring it in line with solicited visits and the existing provisions in consumer credit legislation.
On reflection, I would have thought that that is not necessarily the case. When a solicited visit is made, the individual consumer has already determined in principle that they wish to enter into that particular form of contract, whereas unsolicited visits of the nature that this regulation is designed to deal with are often quite different. Have the Government had an opportunity to reflect yet again on whether a 14-day period would be better than seven days?
Baroness Vadera: In response to the first question, I can safely say that it would not hinder the ability of the supplier to ensure that they can get payment. The cooling-off period is therefore not related to the quality of the work which, depending on the type of work, would have its own set of regulations for settling any disputes. It would therefore have no impact. Indeed, the regulation specifies that a consumer shall be required,
of the specified contractor for goods that were provided before cancellation and that were made to a customer’s specifications or had been incorporated into any contract. There is therefore no impact on the requirement on the consumer to pay.
I understand that the noble Lord is also concerned that the burden should fall only on rogue traders. In fact, many businesses already voluntarily provide consumers with a cooling-off period and a cancellation right in relation to a contract made as the result of a solicited visit by a trader. Members of the Direct Selling Association, whose member companies account for 59 per cent of total direct sales, offer consumers a 14-day cooling-off period as part of their code of practice.
There was some lobbying about whether the cooling-off period should be 14 days. My understanding is that, after analysing the issue, we were not persuaded that the cooling-off period should be increased because there was no quantifiable evidence to suggest that that was necessary. We also considered the point in light of the ongoing discussions in the European Commission, which will consider cooling-off periods in all the legislation that applies to consumer protection. The Commission will bring forward proposals later in the year.
On Question, Motion agreed to.
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