Mr. David Foden:

I thank the Chairman and committee for the opportunity to be here. In some ways I do not feel very well equipped to be here and to comment in detail on the heads of the Bill. I circulated some material and will illustrate the key points in respect of that.

I will start with the arguments for and against having a minimum wage and the things that need to be taken into account in designing it and amending or changing it. It can prevent exploitation, play a key role in tackling in-work poverty and encourages companies to compete on quality not price. Better paid staff tend to work more productively. It prevents the bad employer relying on the State to top up poverty wages but there are things that need to be taken into account as well and reasons for caution. If the labour market is competitive, and that is a big “if”, any wage floor will have some negative impact on employment. There may be problems of maintaining differentials which are costly. There may be adverse effects on prices, business closures, etc. Most important, if there are adverse effects the most vulnerable groups in the labour market are likely to be most affected. Caution is merited.

In the background material I distributed I drew attention, albeit briefly, to the variety of experiences in other European countries and made some specific reference to the UK experience because it is of particular relevance and interest in this case. Over the past 15 or 20 years the UK has moved towards the centre of gravity of the European experience, having at one stage been an outlier without a statutory minimum wage, although it had a long history of some minimum wage protection. It now takes care to involve social partners in the discussion, which is important although it is done in different ways in other countries.

Many would say that if collective bargaining functioned effectively it would be fine to leave it to the unions and employers. We know there are areas of the economy where collective bargaining cannot function effectively. That is why it is important to have some State intervention and protection. That centrality of the social partners is important in Britain as elsewhere.

The success, and I do think it has been a success in the UK, has been in establishing an embedding of the system. What is a relatively recent political innovation, if one takes the long view, has now become largely accepted as a successful way of dealing with the issue. This is perhaps because people tempered their ambitions at the outset and thought it was worth investing in having something which would endure and remain in force in the longer run. It has now survived a change of Government and a very deep recession. It has worked by consensus and it has worked on the basis of evidence. All those things have been important.

I suspect I am coming towards the close of my few minutes. Perhaps my final remark would be to go back to the scope and ambition for a minimum wage, having heard the very interesting exchanges earlier. In the UK, it is very clearly a wage floor and it does not claim to be a total answer by any means to issues of poverty in society or wider questions of inequality. It could be claimed and it could also be disputed that there are other policies in place to address those things adequately. It is a big ask for a single policy of a national minimum wage to address all of those things. There is therefore merit in having different policies, taxes and benefits and having public services look at the other elements as well.