National Minimum Wage (Enforcement Notices) Bill [Lords]

House of Commons, 11 February 2003.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I beg to move, That the Bill be now read a Second time.

The minimum wage is now firmly established as a feature of the UK labour market and widely recognised as an outstanding success. Since its introduction in 1999, more than 1 million people have benefited from increased pay and we have tackled the appalling situation whereby poverty wages of £2 per hour or less were being paid. That has been achieved without a significant adverse impact on business, and the most recent Low Pay Commission report said that the vast majority of employers were complying with the minimum wage and that the enforcement system was working well.

When the Government introduced the national minimum wage in 1998, we had to create an enforcement system that was fair and effective, without putting unnecessary burdens on business. We did not want workers to have to take action on their own behalf against employers, although that remains an option for them if they wish. Low-paid workers are a vulnerable group and are sometimes unable or unwilling to take action on their own behalf. Fear and intimidation can also deter people from making a complaint.

For that reason, we created a network of 12 enforcement teams across the United Kingdom, operated by the Inland Revenue. Since April 1999, those teams have completed more than 21,000 case investigations and identified more than £12 million of minimum wage arrears. I should perhaps add at this point that the minimum wage legislation and this Bill cover both the national minimum wage and the agricultural minimum wage. Since 1999, minimum wage officers from both the Inland Revenue and the Department for Environment, Food and Rural Affairs have been issuing enforcement notices to require employers either to pay the minimum wage in future or make good arrears of the minimum wage, or both.

For three years, therefore, our officers have issued those notices on behalf of current workers, who are still working for the employer in question, and former workers, who have left the employer. In August last year, however, the Employment Appeal Tribunal ruled in the case of Inland Revenue v. Bebb Travel plc that officers could only issue enforcement notices requiring the employer to pay the minimum wage in respect of current and future pay periods or in respect of current, future and past pay periods. That ruling means that enforcement officers cannot at present issue notices for past periods alone, and, therefore, that we cannot now issue notices to recover arrears due to former workers.

The Government are determined to restore the position to what we believed it to be before the Bebb decision, for two reasons. First, former workers are entitled to the minimum wage in the same way as current ones. If someone was not paid the minimum wage for some work that they did, for example, over the Christmas period, we believe that the employer should be required to make good the shortfall, regardless of whether the person concerned is still in their employment.

While former workers can take independent action against their employer, that is not as satisfactory as action by our officers for several reasons. The worker may need a reference from their former employer, or may believe that their chances of success against the employer are limited. As I mentioned earlier, low-paid workers are vulnerable and sometimes unable or unwilling to take action on their own behalf.

Brian H Donohoe (Labour, Cunninghame South)

My hon. Friend may not be aware that I had a case, which was properly represented by my union, the Transport and General Workers Union, of a young girl who was not being paid the minimum wage. The tribunal upheld the case six months ago, and the girl is still waiting for compensation. What will the new measure do for her?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

If she is a former employee who claimed arrears since August 2002, the enforcement officers would not be able to act on her behalf. Her trade union would be able to represent her at an employment tribunal—that is unaffected. The issue is whether enforcement officers can act for former employees to claim arrears. That is the focal point of this particular amendment to the legislation.

John Bercow (Conservative, Buckingham)

The Minister will be aware that my noble Friend Baroness Miller of Hendon, on behalf of the Conservative Opposition, supported this thoroughly sensible Bill in the other place, and I am glad that the Opposition are doing so today. Will the Minister reflect on the point that I made in moving an amendment to the National Minimum Wage Bill in 1998 that, when employees are deprived by cowboy or skinflint employers of their legitimate entitlement to be paid the minimum wage, and are obliged subsequently to take steps to recover it, a powerful moral case exists for them to be paid interest on top of the wage that they should have received?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

The hon. Gentleman was a veteran of the National Minimum Wage Bill. As I recall, his mum advised him to support it; he ignored her advice, but now wishes that he had not. He raises an interesting point, on which, although it is not the specific focus of this legislation, I will reflect.

I was explaining why the situation whereby enforcement officers are not entitled to claim in respect of former workers is unsatisfactory. I noted that the worker may need a reference from their former employer or believe that their chances of success against the employer are limited. That is why we believe that former workers should enjoy the protection of Revenue officers—or DEFRA officers, if the agricultural minimum wage is at issue—in the same way as current workers.

It could also be argued—this is a very important point—that if we do not amend the Bill in this way today, we would create an incentive for unscrupulous employers to dismiss workers as soon as they knew that they were being investigated to escape the arrears of minimum wage payments. That would obviously be undesirable.

The second reason for restoring the previous position is that former workers tend to be much more willing to complain to the minimum wage helplines, which then kick-start the enforcement system. Current workers tend not to complain, for obvious reasons. When our officers follow up the complaints of former workers, they often discover that the minimum wage is being withheld not only from former workers but from current workers. We must not fall into a position where former workers think that we can do nothing for them and therefore stop making complaints. Such complaints can lead to benefit for everyone.

I hope that I have explained clearly why the Bill is needed. This is not a party political Bill and—as the hon. Member for Buckingham (Mr. Bercow) said—it enjoyed support from both sides in another place. It is a small but important Bill that deals with complex issues that I will briefly summarise.

The Bill proposes to insert a new subsection (2A) after section 19(2) of the National Minimum Wage Act 1998. According to the decision of the Employment Appeal Tribunal, the existing subsections (1) and (2) of section 19 allow an enforcement officer to issue a notice only in respect of current and future pay periods or in respect of current, future and past pay periods together. The proposed subsection (2A) allows an enforcement officer to issue a notice on an employer to require him to pay minimum wage arrears to a worker or workers who have, at any time, qualified for the minimum wage. The notice will not have to cover future pay periods, so, if required, officers will be able to issue notices that cover minimum wage arrears for former workers. The proposed subsection will restore the position that the Government believed existed before the recent tribunal ruling.

Subsection (2A) has been drafted deliberately to allow enforcement officers to issue notices in respect of pay reference periods that ended before or after this Bill comes into force. I will say a few words about why that has been done. As matters stand, our officers have not been able to issue any notices on behalf of former workers since August 2002. That was a result of the Bebb Travel Employment Appeal Tribunal decision. Some workers may have taken independent action against their employers, but, although we do not have precise figures, I suspect that many will not have. Unless we allow officers to issue notices covering pay periods before the Bill comes into force, we will not be able to recover, on behalf of former workers, minimum wage arrears that might have arisen in the past.

The vital point to stress is that subsection (2A) will not change anyone's existing entitlement to the minimum wage but merely create a new means of enforcing existing rights to help former workers to recover their proper entitlement. We have approached the Attorney-General on this point and he has advised us that he is content for the subsection to apply in that way.

The proposed subsection (2B) will limit the period that an enforcement notice may cover. Any period that is

"more than 6 years before the date on which the notice is served"

will not be covered. We expect few cases to go back for more than three years. That is because the minimum wage regulations require employers to keep pay records for only three years. We therefore expect it to be difficult for the Inland Revenue to pursue cases that go back further, unless there is no dispute about the hours worked, or the worker holds clear evidence, such as payslips.

John Bercow (Conservative, Buckingham)

I understand the rationale behind proposed subsection (2B), but may I again ask the Minister about underpayment? He offered a bird's-eye view of underpayment, but will he help us further by telling us what proportion of the total amount of underpayment, or of the total number of underpayment cases, is represented by existing employees—who may have been given reassurances about their current and future pay entitlements, but not yet have been reimbursed for their previous entitlement? In other words, what is the extent of past underpayment for existing employees?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

If I understand the hon. Gentleman correctly, he is asking about employees who have not left their employer, and is wondering how many of them are claiming arrears, in relation to the number of previous employees who are claiming arrears.

John Bercow (Conservative, Buckingham)

indicated assent.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I do not have precise figures. Of cases that are reported to the Revenue and DEFRA for action by our enforcement officers, we understand that the majority, perhaps the vast majority, are from previous employees—that is, employees who have left the work place. For various reasons, previous employees feel safer and more relaxed in pursuing claims. As I said earlier, when such claims are pursued, we often find that existing employees are not being paid the minimum wage. That is an important reason for introducing this Bill.

Bill Tynan (Labour, Hamilton South)

If the changes proposed in the Bill are accepted, enforcement officers will be able to pursue the past claims of individual employees. Would employees who had left employment still be able to pursue their claims through an industrial tribunal, or would the three-month period kick in, which would mean that they would have to use enforcement officers?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

My hon. Friend asks an important question. Since August 2002, when the Bebb Travel Employment Appeal Tribunal decision prevented enforcement officers from acting on behalf of former employees, those former employees have still been able to pursue their cases themselves. The three-month rule is very interesting. The reason why most enforcement orders go through the county courts—where the six-year limit that I mentioned earlier already applies—is that they are not governed by the three-month rule. That is why the vast majority of enforcement cases and of individuals pursuing cases on their own behalf go to a county court rather than an employment tribunal. The number of cases going to employment tribunals is tiny compared with the thousands of cases that enforcement officers take through the county courts.

Brian H Donohoe (Labour, Cunninghame South)

What will happen in Scotland, where we do not have county courts? Would cases go to the sheriff courts?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I am not an expert on the Scottish legal system, but cases would go to whatever the equivalent of the county court is.

Proposed subsection (2B) is very important. I was explaining that we expect few cases to go back further than three years, primarily because the National Minimum Wage Act 1998 requires employers to keep records for only three years. In addition, the average minimum wage case goes back less than a year, and the Limitation Act 1980 means that the vast majority of cases that go through the county courts can go back only six years. Enforcement officers can also take cases to employment tribunals. Although the tribunals could allow enforcement officers to claim for underpayments of the minimum wage going back more than six years, that jurisdiction is rarely used. That is because—as my hon. Friend the Member for Hamilton, South (Mr. Tynan) suggested—claims in employment tribunals must be made three months from the date of the last underpayment of the national minimum wage.

Annabelle Ewing (Scottish National Party, Perth)

Is the Minister aware that the Limitation Act 1980 does not apply in Scotland? Has the Minister had discussions with Scottish Executive Ministers about that potential inconsistency? Our general prescriptive period for civil recovery is five years.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I have indeed had discussions with Scottish Executive Ministers and I will come to that when I talk about agricultural wages. I did not have an answer to the question about county courts and their Scottish equivalents, but I will do by the time I reply to this debate.

John Robertson (Labour, Glasgow Anniesland)

Does my hon. Friend agree that it is a pleasure to see the nationalists turn up for a debate on the minimum wage? When the previous legislation went through the House, they could not be bothered to get out of their beds.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I shall skate gently over that intervention.

On the six-year limitation, let me stress that we do not propose to limit the existing rights held by individual workers, who can currently take cases that go back more than six years to tribunals. That point is at present irrelevant to the application of the national minimum wage, which was introduced only in April 1999, so six years of arrears have not been built up anywhere. We are not interfering with that individual right of employees. To do so would put workers claiming in respect of underpayments of the minimum wage in a worse position than workers claiming in respect of other contractual underpayments.

The Government believe that the proposed new subsection (2B) will bring clarity to the situation and ensure that the rights of both the worker and the employer are respected. The subsection was introduced following helpful debate in the other place.

Michael Connarty (Labour, Falkirk East)

On the rights of workers, does my hon. Friend accept that one of the most difficult provisions of the National Minimum Wage Act 1998 to enforce for workers in the service industry relates to the difficulty of obtaining a true valuation of the wage given them from the tips of customers who, like me and my hon. Friend, are generous tippers? Those tips are intended to go into the workers' pockets, but how much is considered to contribute to the minimum wage? How would an enforcement officer settle disputes about the rights of the worker and the rights of the employer?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I have never been a generous tipper, but I was generously tipped as a postman at Christmas. I give due thanks to my previous customers.

The Low Pay Commission has considered this point. The national minimum wage legislation says that tips that are paid in wages from a pool that is intended for all the employees and that go through the proper channels of insurance and so on should be taken into account for the national minimum wage. Individual tips given to a waiter, postman or postwoman are not to be taken into account. The commission keeps such important but esoteric and sensitive questions under constant review, and we expect to receive advice on whether the system is working.

As I was saying, we believe that proposed subsection (2B) will bring clarity to the situation. It was introduced following helpful debate in the other place and follows the thrust of an Opposition amendment that the Government were happy to accept.

Clause 2 provides for the Bill to extend to Northern Ireland as well as to the remainder of the United Kingdom. That is the same arrangement as for the 1998 Act. The clause also deals with the enforcement of the agricultural minimum wage in Scotland. Agriculture is a devolved matter in Scotland and Northern Ireland and the agricultural minimum wage has been in place throughout the United Kingdom for more than half a century. Schedule 2 of the 1998 Act made a number of amendments to the Agricultural Wages (Scotland) Act 1949 to incorporate some of the provisions of the national minimum wage into the agricultural minimum wage.

The Scottish Executive have decided that they intend to lay independent, parallel legislation in the Edinburgh Parliament that is similar to the Bill but that covers just Scottish agriculture. The relevant subsection ensures that the provisions of this Bill will not be carried across into the Agricultural Wages (Scotland) Act 1949. For the sake of total clarity, let me say that this does not affect the existing structure of the national minimum wage or agricultural wages legislation.

I shall say a few brief words about Northern Ireland. Although agriculture is also a devolved matter in Northern Ireland, the House will be aware that the Stormont Assembly is temporarily suspended. My Department has confirmed with the Northern Ireland Office that it is content for the Bill to cover agriculture in Northern Ireland.

The Bill will not concern or trouble the vast majority of employers who are already paying the minimum wage. The only people who will be affected by it are the minority of bad employers who do not pay the minimum wage. I feel that it is right and proper that all workers—whether they are current or former workers—should enjoy the protection of our enforcement officers. I commend the Bill to the House.

Henry Bellingham (Conservative, North West Norfolk)

I am extremely grateful to the Minister for that comprehensive and clear explanation of the Bill. Although it is a small Bill, parts of it are quite complicated. As he clearly explained, the Bill will effectively overturn the Employment Appeal Tribunal decision in the case of the Inland Revenue v. Bebb Travel plc. It will restore the position to what business, the unions and Parliament believed it to be. The Bill will allow employees or enforcement officers to claim for past wages. We obviously support the Bill, which has the backing of the CBI, the TUC and most business organisations.

I have a number of questions and points to put to the Minister. I refer to the retrospective nature of the Bill, about which there was much debate in the other place. As he explained, under the main 1998 Act, employers can take action on their own account or—this is the more likely route—action is taken on their behalf by departmental enforcement officers from the Inland Revenue or DEFRA. Civil legal action can be pursued in the county courts or in the employment tribunals, using the powers in the Employment Rights Act 1996.

In practice, virtually all the cases so far have been brought in the county courts, largely because cases in the employment tribunals must be brought within three months of the last underpayment. In the case of the former, the six-year statutory limitation applies but, in the case of the latter, cases could, in theory, have been taken in respect of underpayments going back more than six years. That was the position until my noble Friend Baroness Miller of Hendon tabled an amendment to introduce a six-year time limit for both categories of court. I am pleased that the Minister in the other place tabled a Government amendment restricting the work of Government enforcement officers to a six-year limit.

In the light of the Government's acceptance of the broad thrust of our amendment in the other place, my next remarks may sound a little churlish. However, as the Minister in the other place pointed out, companies are required to keep records for only three years. Bearing that in mind, should we not be thinking in terms of an overall three-year limit? After all, what would happen if a company does not keep records for more than three years—it has no legal obligation to do so—and, as a consequence, vital information is destroyed? For the sake of argument, let us suppose that the employee who is claiming underpaid wages has kept pay slips and other information. It is easy to envisage a situation in which the company—probably a small business—is seriously disadvantaged and is brought to court. It might have a strong case, but might be unable to produce the documentary evidence because it has quite legally been thrown away.

Will the Minister comment on whether he thinks that there is a case for having an overall limit of three years? Perhaps we can return to this issue in Committee, especially in the light of the fact that—Lord Sainsbury made much of this in the other place—companies do not have to keep records for more than three years. That may surprise some Members; it certainly surprised me when I first took this particular brief.

Bill Tynan (Labour, Hamilton South)

If the employee could produce documentary proof such as a wage slip that showed that he had been paid below the minimum wage, would the hon. Gentleman still consider having a limit of three years instead of allowing it to remain at six?

Henry Bellingham (Conservative, North West Norfolk)

We should certainly discuss this point in detail in Committee. I think that I am right in saying—the Minister might clarify this—that the Government amendment tabled in the House of Lords does not restrict the right of the individual employee to go back as far as he likes for cases going to the Employment Appeal Tribunal. The six-year limit applies to Government enforcement officers. I merely flag that up as an anomaly that may lead to conflict, particularly in the small firms sector. We must keep an eye on that—the Opposition are very concerned indeed that we should not overregulate that sector. However, we obviously support the Bill and the minimum wage.

John Bercow (Conservative, Buckingham)

Does my hon. Friend accept that our wise support for the Bill will necessarily entail a future rise in employers' costs, for the simple reason that the logic of a minimum wage is that it will be periodically and affordably increased?

Henry Bellingham (Conservative, North West Norfolk)

I am grateful to my hon. Friend for his intervention. We have made it clear that we support the minimum wage in principle, and shall go into the next election campaigning in favour of it. If we return to power, we will look carefully at the levels recommended by the Low Pay Commission and, above all, at the burdens on business. My hon. Friend is right, as our priority in government will be to look at the many other burdens that the present Government have put on business which need to be removed quickly.

Michael Connarty (Labour, Falkirk East)

Could the hon. Gentleman turn his fine mind to the point about records that I made to the Minister? There is a dispute in the service sector about whether someone should give a tip to the person serving them or to the management. How do we reconcile the enforcement process with the constant barrage of complaints that money given to people who are serving ends up as part of their minimum wage, and does not go directly into their pocket?

Henry Bellingham (Conservative, North West Norfolk)

I accept the hon. Gentleman's point. When we give a tip to someone, whether a taxi driver or a helpful waiter in a restaurant, we expect it to go to the employee. Even if it does not go straight into that person's pocket, we expect it be pooled and given to them later, with no consequences whatever for the minimum wage. If employers are abusing that practice, the Inland Revenue or other enforcement officers may like to look into that. Perhaps the Minister could comment on the problem when he makes his winding-up speech at the end of this short debate.

Baroness Miller moved, then withdrew, an amendment in the other place that would have brought the Bill into effect immediately, not in two months' time. Lord McIntosh, like the Minister, confirmed that the Inland Revenue believes that well over 250 cases involving former employees are currently on hold. It is only fair that those cases are dealt with as soon as the Bill receives Royal Assent. Two months may not seem long to wait, and Lord McIntosh made it clear that the two-month delay will not affect entitlement, but many low-paid employees have been deprived of their rightful wages. Their cases are outstanding, mainly in the county courts, but some in the Employment Appeal Tribunal. Surely, those cases should be heard immediately, not after a two-month wait.

We have had a look at what has happened to other measures. The Minister may or may not be aware that quite a few Bills are enforced immediately. The Northern Ireland (Elections) Act 1998 was enforced immediately, as was the Education Act 2002, the Anti-Terrorism, Crime and Security Act 2001, the Armed Forces Act 2000, and the Freedom of Information Act 2000. Furthermore, an investigation was carried out in 1979—I know that that is some time ago and that Government practice has changed—by a working party from the Statute Law Society which looked at 105 Acts passed between 1 January 1978 and April 1979, a period of 14 months, to ascertain when they came into force. It found that 41 Acts came into effect on the exact date on which they were passed; 12 Acts came into force on a date specified in the Act; and 14 came into force on the expiry of a two-month period.

As I pointed out, that investigation was conducted a fair while ago, but I do not believe that there has been a recent appraisal of enforcement. I cannot understand the argument by the Department of Trade and Industry that there must be pressing reasons for a Bill to be passed and enforced immediately. The Attorney-General has apparently advised that there are no pressing reasons for the Bill to be enforced immediately, so two months can elapse. We are going to a lot of effort to pass this small Bill, and a lot of people are waiting for their due entitlement in wages. We should therefore get rid of that two-month delay—as soon as the Bill receives Royal Assent, those cases should be dealt with. The less time that is lost, the better.

In an earlier intervention, my hon. Friend the Member for Buckingham (Mr. Bercow) made a point about underpayment. People have been underpaid and deprived of something that is their legal right. I agree with my hon. Friend—there is a strong case on the payment of interest, which the Government could consider. The Minister seemed to show approval when the suggestion was made. Surprisingly, at no stage in the debate on the National Minimum Wage Act 1998 was there any amendment about or discussion of interest being paid.

John Bercow (Conservative, Buckingham)

My hon. Friend's sense of equity and fairness never deserts him. On a point of fact, may I emphasise that such an amendment was tabled. I spoke to it shortly after 5 o'clock one morning.

Henry Bellingham (Conservative, North West Norfolk)

I humbly accept my hon. Friend's correction. I read in detail the debate on the 1998 Act, but I must have missed that amendment. I apologise to my hon. Friend, who has just made a bid to serve as a Committee member. He will have ample opportunity in Committee to table another amendment, which I very much hope will succeed. Perhaps the Minister will comment on the payment of interest when he winds up.

The Government made an appeal against the Bebb decision. The Bill has been introduced to obviate the effect of the tribunal's decision, but will the Government pursue their appeal in any event? If so, what is the logic behind that? There was mention of such a course of action in another place, but no satisfactory explanation was given. The Bill will obviously cost a certain amount of public money. We hope that the Bebb case is a unique one-off. The parliamentary draftsman may have examined the 1998 Act with enormous expertise and in great deal, and the relevant parts of the measure were debated here and in another place. However, debate in the Commons was sometimes curtailed, although not as much as debate on Bills is now curtailed, by a timetable motion. I very much hope that the drafting mistake was not the result of lack of scrutiny.

The 1998 Act was controversial when it was first introduced, but far too often the Government impose a timetable motion on Bills that are not necessarily controversial. In the previous Session, I served on the Committee that considered the Adoption and Children Act 2002, which contains about 120 sections, the overwhelming majority of which are non-controversial. However, a timetable motion was imposed, so about 50 sections were not debated in the House. Much of the measure went to the other place undebated.That is an intolerable and wretched state of affairs. Perhaps a small lesson can be learned. Although the Bebb decision may not have been the result of poor scrutiny in either House but of unfortunate drafting, if more time had been spent going through the 1998 Act section by section and looking at every detail, perhaps such an omission would have come to light.

Perhaps we should examine the drafting in this and other Bills. For example, the Minister and I know what clause 2(4) means, and he has tried to explain it, but there may be other hon. Members who do not know what it means. It states:

"But, notwithstanding section 20(2) of the Interpretation Act 1978 (c. 30) (construction of references to other enactments), the reference in section 1 to section 19 of the National Minimum Wage Act 1998 (c. 39) shall be taken not to include a reference to that section as applied by section 3A of the Agricultural Wages (Scotland) Act 1949 (c. 30)."

The Minister explained succinctly that the amendment made to the National Minimum Wage Act 1998 by clause 1 is not to have effect in the application of section 19 of that Act in relation to the agricultural minimum wage in Scotland. That is simple. Why must the drafting be so convoluted? Why is the clause so complicated, when the guidance in the explanatory notes makes the matter so simple? If we used common sense a little more, we might avoid some of the mistakes that were made in the 1998 Act.

John Bercow (Conservative, Buckingham)

Does my hon. Friend agree that such drafting recalls the wisdom of Churchill's legendary and memorable statement:

"This is the sort of English up with which I will not put"?

Henry Bellingham (Conservative, North West Norfolk)

I agree with my hon. Friend. Anyone who doubts that should get a copy of the Bill and read and re-read clause 2(4) until they understand it. It is extremely convoluted and long-winded.

In conclusion, we support the mini-Bill. We hope that Bebb was a one-off error, but if any Government have to introduce a Bill to correct a drafting error, that means, by definition, that there has been a failure. Such a Bill is not inexpensive. It costs public money, and any unnecessary expenditure of public money is painful, so let us hope that lessons have been learned. I hope that the Minister will respond to the few questions that I put to him.

John Lyons (Labour, Strathkelvin and Bearsden)

The Minister and the research paper have both described the purpose of the Bill: to close the loophole that exists. That is to be welcomed. If we do not do so, it will encourage abuse by bad employers. Most fair-minded people, both in and out of Parliament, would agree that the loophole must be closed.

I believe that the Employment Appeal Tribunal made the wrong decision. The National Minimum Wage Act 1998 never intended to give the tribunal the opportunity to make such a decision. In the case of Inland Revenue v. Bebb Travel plc, I believe that the decision of the EAT breaks the spirit and intention of the 1998 Act. It sticks in my throat to say so, having completed a tax return for the end of January, but on this occasion the Inland Revenue got it exactly right.

The Act authorises enforcement orders for employees who have left employment. There is no room for debate or discussion of that; it was the purpose and intention of the legislation. The Employment Appeal Tribunal confuses individuals with employers, and that confusion creates tremendous uncertainty in the labour market. The national minimum wage legislation was derided by many in the House, who predicted that it would wreck jobs all over the country and create economic havoc, but it has worked well, as the Minister said in his opening remarks. However, it demands compliance and protection 365 days a year and 24 hours a day. It cannot be used part-time, as the Employment Appeal Tribunal would lead one to conclude.

Employers who are using the loophole are breaching the minimum wage in a way that no one could have foreseen and no one would support. The Act was framed to assist employees, particularly through the use of enforcement officers. That was an important part of the legislation.

Employment law is littered with cases of retrospective payment in terms of wages, holidays and bonuses. People leave their employment and have a case for the payment of wages, bonus, holiday pay or even additional holidays. That is bread-and-butter fare for personnel managers throughout the country. It happens daily and such cases are resolved retrospectively. Delays often occur because of failure to agree terms and conditions on a specific date—the anniversary date for employers and employees. That is not unusual, nationally or locally. The anniversary date drifts on for days, weeks and months. In that period, people might decide to leave their employment, but that does not deny them the right to make a claim for the pay increase that might be agreed after they have left, the holidays that might change after they have left, or holiday pay after they have left.

John Robertson (Labour, Glasgow Anniesland)

My hon. Friend is very knowledgeable on the subject, which we have looked into in the Scottish Affairs Committee. Does he agree that the case under discussion may be only the tip of the iceberg? It is not unusual for people to leave employment when they are not being paid what they should be paid, but they are too frightened to come forward and allow themselves to be used to test legislation or to help to change the law. The Bill is important for low-paid people and the protection that they need. It is up to us to make sure that it goes forward.

John Lyons (Labour, Strathkelvin and Bearsden)

I thank my hon. Friend for raising that important point. He and other colleagues on the Scottish Affairs Committee have looked extensively at compliance, particularly for low-paid workers. I welcome that work and hope it continues.

As I said, delays beyond anniversary dates is normal fare for trade unions and employers, but it is resolved without difficulty in hundreds of agreements across the UK. Enforcement officers are important for the reason that my hon. Friend suggests. There is fear and intimidation, and enforcement officers are an alternative way of trying to resolve a grievance independently of the employee concerned. I would welcome an increase in enforcement officers.

As the Minister mentioned, the employee can take a minimum wage case to an employment tribunal or to the county court, and of course enforcement officers can do the same thing. The figures prove conclusively how important enforcement officers, the tribunals and the county courts are: since 1999, £9 million has been raised from failure to pay the minimum wage. That is a substantial sum, particularly for low-paid workers. It means an awful lot to them.

Tony Cunningham (Labour, Workington)

Would you agree, however, that many low-paid workers are not in trade unions, and find it extremely difficult to put a case together and go to the tribunal? Would you not—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The hon. Gentleman is not the first this afternoon to transgress with regard to the form of address. He should remember by now that he should refer to his hon. Friend in the third person.

Tony Cunningham (Labour, Workington)

My apologies, Mr. Deputy Speaker.

Would not my hon. Friend tell people in that situation that the best way to protect themselves is to join a trade union?

John Lyons (Labour, Strathkelvin and Bearsden)

I thank my hon. Friend for raising that point. I always argue that that is the best way for people to ensure the best terms and conditions for themselves and ensure compliance by their employers with the minimum wage.

I said earlier that the Employment Appeal Tribunal had made a poor decision. I still feel that, having read the decision a number of times. I think that the Government felt that the tribunal had not properly interpreted the legislation. In their evidence to the Low Pay Commission, the Government said:

"The Government believes that Ministers clearly intended, when introducing the Act, that compliance officers should be able to pursue cases involving workers who are no longer employed by the employer in question. We are determined to help low paid workers and intend to restore the position as soon as possible, so that the Revenue and Agricultural minimum wage compliance officers can once more pursue these cases fully."

That is an absolutely correct approach to compliance with the national minimum wage.

In another place my noble Friend Lord Sainsbury said:

"First, former workers are entitled to the minimum wage in just the same way as current ones. If someone was not paid the minimum wage for, say, some work they did in the summer, then we believe that the employer should be required to make good the shortfall, whether the person is still in their employment or not."—[Official Report, House of Lords, 10 December 2002; Vol. 642, c. 152.]

Other hon. Members have referred to the fact that in another place Lord Razzall, the Liberal Democrat, and Baroness Miller of Hendon fully supported the changes to the legislation that would guarantee much more protection to employees. That is very important.

Another point that has been raised is that some workers fear raising the issue of failure to pay the minimum wage, or seem to be in difficulty about how best to raise it. If they are not in a trade union or do not feel comfortable about going to an employment tribunal, they often finish up at a citizens advice bureau trying to explain their circumstances. I am sure that they always receive assistance on how to pursue the matter.

Russell Brown (Labour, Dumfries)

My hon. Friend is on an extremely important point. He may have had the same experience with some of his constituents as I have had with some of mine, who may not wish to say anything about the national minimum wage and simply tend to look for another job where it is being paid. Not having been paid the appropriate going rate, they fall into the very category that the Bill is looking at, in that they become ex-employees.

John Lyons (Labour, Strathkelvin and Bearsden)

My hon. Friend raises a very important point. The evidence proves quite clearly that people in that situation often feel that they are forced to leave a job rather than pursue the issue, as my hon. Friend described.

I should like to give the House four examples. The Scottish Association of Citizens Advice Bureaux has produced documentation on the question of the national minimum wage. It says:

"A North of Scotland CAB reports of female client who works as a cleaner. The manager is withholding the annual pay increases until October when the NMW increases. Her contract states that increases come in April of each year. The delay will mean that all employees will lose 6 months of increased pay."

This is where there are problems related to the minimum wage: other actions are taken because of it as some very awkward employers try to find ways around the legislation. That is why all of us need to make sure that the legislation is tightened up in a way that makes it impossible for people—

John Bercow (Conservative, Buckingham)

I am very grateful to the hon. Gentleman for giving way. I have been listening to his speech with interest and approval. What the hon. Member for Dumfries (Mr. Brown) said was perfectly valid, but it is worth while also looking at the other side of the equation. If former employees cannot secure redress, even though of course they no longer have any reason to be anxious about the reaction of their former employer, there is obviously scant hope for existing employees seeking to secure redress for past underpayment. In that sense, there is a commonality of interest in supporting the Bill between current and past employees.

John Lyons (Labour, Strathkelvin and Bearsden)

That is a very valid point. The position clearly is that when people leave a job, the fact that they have highlighted a problem, either to the compliance people or the citizens advice bureau, may well bring in enforcement for people who are still employed by that employer. There is clear evidence that that has happened in the past. We return to a situation in which there may be a collective of workpeople unprepared or frightened to raise the issue, despite the fact that colleagues are leaving regularly, but the enforcement officers give that alternative, saying "We are here to find out what is happening on the minimum wage." No one knows who has reported the matter, and there is no pressure, hopefully, on employees for that reason. But this leads to an interesting area of work, which is—

Michael Weir (Scottish National Party, Angus)

Is the hon. Gentleman aware that there can be a problem with enforcement in that the minimum wage is not always enforced in the same way throughout the country? In some cases enforcement officers have gone to a firm for an employee and have looked only at the wages of that employee rather than of everybody in the firm. Unless it is done throughout the firm, it can have the effect of identifying the employee.

John Lyons (Labour, Strathkelvin and Bearsden)

That is an important issue that needs to be considered. Enforcement should be done across the whole range of people in the organisation concerned, rather than in specific cases. I commend the work of the citizens advice bureaux, because they are trying to assist people on a daily basis with problems related to the minimum wage and other associated difficulties.

I have another example from the Scottish Association of Citizens Advice Bureaux:

"An East of Scotland CAB reports of a female client who received a 'new' contract of employment confirming entitlement to paid holiday leave. However, the contract also stated that her salary included 8 per cent. to cover the cost of paid leave."

So the minimum wage had a deduction of 8 per cent. to pay for paid holidays, which is nonsense and unlawful. We need to try to make sure that we cover this matter in any future legislation so that the loophole for employers to do that is closed and people are employed in a very fair way.

Here is another example:

"A North of Scotland CAB reports of a female client employed as a cleaner paid 28p an hour above the NMW."

Hon. Members will probably think that it is good that that extra 28p is being paid, but

"When she inquired with her employer about entitlement to holiday pay, she was told that the 28p over the NMW is paid to cover her holiday entitlement."

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I have allowed the hon. Gentleman a certain amount of scope in making his speech, but the time has come to remind him of the content of the Bill. This is not a general debate about the minimum wage and other perceived defects or advantages. It is about this particular Bill, which seeks to correct a particular loophole.

John Lyons (Labour, Strathkelvin and Bearsden)

Thank you, Mr. Deputy Speaker, for your guidance.

I return to the point that I started on. The loophole is there. We need to close it. Everyone will agree with that. I give my hon. Friend the Minister my full support.

Vincent Cable (Liberal Democrat, Twickenham)

I wish to add to the general air of consensus and support for the Bill, which, as has already been noted, has the support of the Confederation of British Industry as well as the Trades Union Congress and all three parties in the House. Indeed, it was supported in the other place by my colleague, Lord Razzall.

Although you have just reminded us, Mr. Deputy Speaker, that this is not a general debate on the minimum wage, it is probably fair to respond to the Minister's introductory comments, in which he rightly and fairly observed that the minimum wage legislation has been a success story. One of the reasons for that is that employers as well as employees have bought into it and accepted it. That is, at least in part, because of the way in which the system has operated. Effectively, we have had a relatively successful, growing economy and a tightening labour market. The minimum wage has increased the supply of workers because a lot of people at the bottom end of the pay scale now feel that it is more attractive to work than to remain on benefits. Employers have benefited from the system because there is more labour, workers have benefited because they are better paid and the Government have benefited because there are fewer benefit payments. Thus a triple gain has been made as a result of the way in which the minimum wage system has operated.

What has yet to be demonstrated is that that system works equally well when there is a downturn in the economy. There may be questions about the effect of such a downturn on the demand for labour. Whether the system works well in those circumstances will partly depend on whether the generally successful system of setting the minimum wage at an economically sensible level continues. The Low Pay Commission's determination of that level in accordance with economic conditions seems to be a key element in the formula.

The other element in the formula that has contributed to the system's success is the enforcement mechanism, which is what we are discussing today. It has not been emphasised enough that an important aspect of the current enforcement mechanism is that it functions to a very large extent on a voluntary basis. It is because employers have accepted the minimum wage and, by and large, enforced it without pressure and extensive form filling and bureaucracy that the system is working well. An admirable balance has been struck between an effective enforcement mechanism and one that is not as enormously intrusive and bureaucratic as those associated with other instruments, such as the working time directive. Employers are required, by and large, to enforce the system themselves, but that system gives individual workers the opportunity to take action, backed by enforcement officers. That strikes me as exactly the right balance.

The Conservative spokesman mentioned the question that I now want to ask: why are we back here with this legislation? I was not involved in discussion of the original legislation, but it seems obvious with hindsight that somebody should have asked about retrospective payment and questioned why it was not covered. I am not pointing fingers at anybody. Clearly, nobody in the House of Commons or the other place picked up on the problem, nor did Government draftsmen and administrators, but I am still baffled about why the provision slipped through. It may have done so because of a lack of scrutiny, as the Conservative spokesman suggested. There may also have been a particularly quirky ruling by a judge. If that is the case, it might have been more appropriate to have an appeal process than to introduce fresh legislation.

Henry Bellingham (Conservative, North West Norfolk)

As I understand it, the old law covered future and present underpayment; it also covered past underpayment if it was combined with those two things. According to the tribunal, it was underpayment in the past only that was not included.

Vincent Cable (Liberal Democrat, Twickenham)

I thank the hon. Gentleman for that clarification, but it seems odd that we are returning to the Chamber to debate the matter, whatever the reason.

Annabelle Ewing (Scottish National Party, Perth)

As I understand it, an appeal is pending, as the Inland Revenue is appealing against the Employment Appeal Tribunal's decision.

Vincent Cable (Liberal Democrat, Twickenham)

I thank the hon. Lady for that intervention, which raises the question whether, if the Government win the appeal, the amendment introduced by the Bill will be superfluous or whether it introduces a new element into the process.

I want to speak only for a few minutes, so I shall return to the issue of substance and consider why the process of retrospective payment is important. Many of the arguments have already been covered. It is clearly unjust that people should not be able to claim back payment of the minimum wage if they have left the employer in question, and especially if they were dismissed. The threat of dismissal on pursuing rights to the minimum wage is especially important and it is right that people should have the entitlement in that regard. I want also to reinforce the other point that has been made: many people will be much bolder in pursuing a claim once they have left the employer and the threat of dismissal is no longer hanging over them. There are good reasons why the retrospective issue must be addressed.

It has not been mentioned that large sums may be involved. There is a lot of difference between a current minimum wage problem, which will involve a few pounds a week, and three years of underpayment, which may involve several thousand pounds. In those circumstances, it is much more likely that a bad employer will resist and force the process to a tribunal, and that an enforcement officer will have to be engaged. There are very good reasons why there should be proper protection with regard to retrospective payment.

My final point relates to limitations, which were raised in another place by Baroness Miller. The Government have said—I think that I understood the argument correctly—that the problem is to some extent academic, as after three years there is no longer a requirement to collect data. Why should there be a limit? Presumably, the legislation will still be here in 10 years. There may be some hard cases in which people were working in very malign circumstances with oppressive employers who systematically underpaid them for very long periods. There may be good records to demonstrate what has happened in such cases. Why should people who have suffered such enormous losses find that they have run out of time for arbitrary reasons? If they can demonstrate their case, it will not matter whether three, six, nine or 10 years are involved.

John Bercow (Conservative, Buckingham)

The hon. Gentleman raises an important issue. Does he accept, however, that there is a powerful case for amending the Bill to provide for mandatory interest charges on underpayments, given that that would be widely regarded as right in itself and that many people who have been maltreated through illegal underpayment for long periods will thereby have fallen into indebtedness?

Vincent Cable (Liberal Democrat, Twickenham)

That is a very good point. I would have made it slightly differently, but I agree that, after long periods of underpayment, the real value of people's payment is lost because of inflation—assuming that inflation is present. In any event, there should be some compensation for such loss, and interest payments seem a sensible and fair way of dealing with the issue.

I want to question why there is a need for a formal limit on the period involved and why enforcement officers cannot come forward in the small number of cases that will arise and support a claimant in exceptional circumstances involving a significant backlog of arrears, perhaps in a decade's time. That is a small technical point that the Minister may not have considered.

In broad terms, I am glad to see that there is support for the Bill in all parts of the House. The fact that we all now support the principle of the minimum wage is remarkable in itself, given the controversy about it five or 10 years ago. Given that we all support the change that the Bill makes, perhaps the House can proceed to other business fairly speedily. 2.37 pm

Chris Pond (Labour, Gravesham)

Only a few hours ago, I received a phone call from the Low Pay Unit—an organisation for which I worked for 18 years—asking whether I would like to collect some of my personal possessions from it, as it is sadly having to wind up its operation this week. It is a sad irony that we are discussing a measure such as the Bill on the very day when the organisation that had kept such issues in the forefront of our attention for so many years is sadly no longer with us.

I also welcome the fact that we are discussing the Bill today. Like the hon. Member for Buckingham (Mr. Bercow), I was privileged to be involved in seeing the original minimum wage legislation through Parliament. We tried to anticipate and close every possible loophole, but we clearly failed to do so in respect of this Bill. I am pleased that Opposition Members are with us on the Bill, because I remember sitting long hours through the night while the minimum wage itself was being opposed.

The particular loophole in question is important because it can render enforcement of the national minimum wage almost completely ineffective. This small Bill will help to bring the minimum wage back to life. It is important because it gives back to enforcement officers the power to enforce payment of arrears of underpaid wages. As the Minister and other hon. Members have pointed out, trade unions may still be able to pursue payment of arrears on behalf of their members, but many of the lowest paid are not members of trade unions. They are often in a vulnerable position and work in small establishments in isolated circumstances.

David Hamilton (Labour, Midlothian)

One of the loopholes that bad employers—small employers—exploit is that they are not required to recognise trade unions if they have only 12 employees. Does my hon. Friend agree that a change in that legislation could be helpful?

Chris Pond (Labour, Gravesham)

That is a major problem. I would not agree with bracketing bad employers and small employers together, however, because many small employers are very good employers. We must encourage as far as possible the employers—the firms—to be fully involved in the negotiation process at a collective level, and ensure that people working in small firms feel that it is worth their while to become members of trade unions. That is why people in those circumstances will rely on enforcement officers to make sure that they get their entitlements under the law. That is not necessarily something that they can pursue through trade unions, although I pay tribute to organisations such as the National Association of Citizens Advice Bureaux for advising people in those circumstances.

The Bill is also important because, as the Minister pointed out, claims for underpayment are often made only after employment has come to an end. Without the Bill, there would be a real incentive for employers to dismiss staff as soon as they became aware of an investigation.

It has been pleasing to hear Conservative Members supporting the Bill. I detected a certain anxiety on their part to ensure that people understood that they now really are in favour of a national minimum wage. Indeed, the hon. Member for North-West Norfolk (Mr. Bellingham) said that they would campaign for it at the next election. I pay tribute to them for such a dramatic conversion on the Damascene bypass.

John Bercow (Conservative, Buckingham)

I understand the hon. Gentleman's surprise at the change of heart that has taken place among Members on the Conservative Benches. I put it to him that I do not deny that I have changed my mind on the issue, as I have manifestly done so. I would simply argue, however, that there is no shame in having previously made a mistake, only in failing to acknowledge the possibility that one may have done so.

Chris Pond (Labour, Gravesham)

I welcome the hon. Gentleman's admission of a previous mistake. He has been very honest in his position—he has not pretended that there was not a period when he completely opposed the national minimum wage, nor that he did not support a previous Government who abolished a minimum wage system that had existed from 1909 until the mid-1990s. In responding to the hon. Member for North-West Norfolk, he referred to the words of Winston Churchill, so perhaps I may remind the House that Winston Churchill said that without the minimum wage

"the good employer is undercut by the bad, and the bad employer is undercut by the worst".—[Official Report, 28 April 1909; Vol. IV, c. 388.]

That is why it is important that the Bill is supported not only by Members on both sides of the House, but by the TUC and the CBI. Otherwise, we would have a situation whereby the good employer was also undercut by the Employment Appeal Tribunal. The Bill will ensure that we provide protection not only for the most vulnerable workers, but against undercutting and unfair competition for the great majority of firms, large and small, who pay the minimum wage and recognise that decent conditions of employment make good business sense and improve competitiveness and efficiency. I welcome and applaud this small Bill.

Annabelle Ewing (Scottish National Party, Perth)

I rise to add the support of the Scottish National party to this important Bill. Hon. Members will be aware of the SNP's long-standing commitment to the principle of a minimum wage as the mark of a civilised society. It is regrettable, however, that the Government have not taken this opportunity to end the age discrimination that is inherent in the minimum wage legislation. We in the SNP believe that there should be a rate for the job, regardless of age. I believe that that view is also expressed forcefully by the TUC and the Scottish Trades Union Congress.

We support the aim of the Bill, which is to deal with an anomaly that has arisen in respect of enforcement notices. That anomaly became clear following last summer's ruling by the Employment Appeal Tribunal, and I understand that the Inland Revenue is appealing the decision. Further to the decision, law enforcement notices may be issued in relation to past periods where the worker is no longer employed. I do not believe that that was the intention of the National Minimum Wage Act 1998—indeed, it would have made a mockery of it had that been the case. It would have excluded affected workers from the support system of the enforcement officers, which is an innovative approach that has been much welcomed by many individuals who have found themselves in the invidious position of not having been paid a proper wage for their work.

On retrospection, I have already asked the Minister to clarify the position in Scotland. From my reading this morning, it seems to me that the Limitation Act 1980 does not apply in Scotland. If the retrospective approach, which we support, is based on a six-year period to reflect the position in English law, has account been taken of the position in Scots law whereby the general prescriptive period is five years for civil recovery? We do not want the Bill to create a further loophole by not reflecting the reality of the situation under Scots law.

On the exclusion of the agricultural minimum wage regime from the scope of the Bill, I am aware that the Scottish Executive decided against seeking a Sewel motion, which is unprecedented since the inception of the Scottish Parliament. That is a welcome move, if a bit late in the day. Instead, legislation is to be introduced in parallel in the Scottish Parliament. I welcome that development.

I shall keep my comments brief because hon. Members have said much today that we can all sign up to and support. The Scottish National party and Plaid Cymru support the Bill, which will enhance the protection available to workers and close a loophole that was never intended. We congratulate the Government on quickly introducing a Bill to deal with the matter and to close the loophole, but we regret that they have not taken this opportunity to end the age discrimination that is inherent in the minimum wage legislation.

Michael Connarty (Labour, Falkirk East)

This amendment to the National Minimum Wage Act 1998 is welcome. It is sad that any company could force the Government to introduce legislation by underpaying 25 workers to the tune of £37,000. That shows how mean people can be. We can talk about big employers as opposed to small employers, but in my view many employers like low-wage employees because they want to cut their wage bill, and if they can cut it below the national minimum wage, they will.

The Bill amends section 19 of the 1998 Act, which empowers the officer to serve a notice on any employer who has not paid a worker at a rate that is at least equal to the national minimum wage. The Bill will allow the officer to serve a notice in retrospect regarding people who have left employment. I have read that £9,412,513 has been gained in actions by persons under the tribunals established by the 1998 Act. Can the Minister tell me how many of them were in the category to which I have been referring for some time in questions and in debates in my parliamentary group? I refer to the 4 million people who work in the service industry and have to prove under the 1998 Act that they receive their tips personally and that those tips are not given to their employer. I conducted research and the Minister said that there were references to the Low Pay Commission. However, when people give a tip through a credit card, an enforcement officer would find it difficult to know whether they intended it to go to the individual who had served them or to the employer to distribute among all the employees, and thereby be included as part of the minimum wage.

Even if someone gives a tip in cash in a place that has a kitty—it has a special name in the 1998 Act—the money can be distributed among all the employees and taken into account as part of their minimum wage. If the people who gave the tip wanted it to go to the individual who served them, but it was taken into account as part of the minimum wage, how would the enforcement officer make a judgment? How does he judge, under section 20 onwards in the 1998 Act, whether the employer is compliant?

I believe that the Bill covers those who leave employment because they cannot get their employer to give them a proper wage. Perhaps the employer is giving them less than the cash sum of £4.20. I spoke in the Statutory Instrument Committee that upgraded the sum to £4.20, and I wanted it increased to £5. I have continually raised cases in which a substantial tip by the customer makes up the £4.20. Surely those employees are not being paid the national minimum wage. Tips intended for an individual should be in addition to the £4.20. An opportunity to deal with that vital point has been missed. How can we enforce the rights of the 4 million people in the service industry who get tips from customers?

I welcome the Bill because it can be applied retrospectively to take on bad employers such as Bebb Travel, which did not pay money that was clearly owed and not related to tips. However, I challenge the Minister to justify the fact that enforcement officers will continue to wade through a mire of accusation and counter-accusation if it appears that a large portion of the wages that people in the service industry receive is made up of tips that customers pay them directly.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

With the leave of the House, I shall reply to the debate. Many technical issues are probably best left to the Committee, but I shall try to pick up some of the main points that have been made in our short debate.

First, the hon. Member for North-West Norfolk (Mr. Bellingham) applauded the minimum wage. My hon. Friend the Member for Gravesham (Mr. Pond) said that he sensed a move by the Conservative party towards a campaigning mode on the national minimum wage. However, the two issues that the hon. Member for North-West Norfolk raised suggest that some contradiction remains. We do not know whether we face an Opposition of Rebecca of Sunnybrook Farm or the Boston strangler on the minimum wage. On the one hand, they claim that they are so keen on it and on helping low-paid workers that there is no need to delay Royal Assent for two months, but on the other, they ask why we allow people to receive arrears of more than three years. We suggest six years.

Six years is consistent with the Limitation Act 1980. A six-year limit already applies in county courts for arrears in overtime payments and bonuses. I shall deal with Scotland and the sheriff courts shortly. The six-year limit is therefore well established and there is no reason to change it. There is probably a better argument for asking employers to keep records on the minimum wage for longer than three years than for reducing the arrears payment to three years. Perhaps we will deal with that in Committee.

I am advised that the normal conventions, which are cleared through the Cabinet Office and the Attorney-General, provide for legislation to be introduced immediately only in the most exceptional cases. There is no problem with keeping to normal conventions on the Bill because we have deliberately ensured that, since August 2002, we keep track of every employer who has had a case reported to enforcement officers. We shall also ensure that the Bill applies retrospectively. I am pleased about the extent of consensus on it. It is a fair point that even waiting two months can be a problem for low-paid workers. However, given our efforts to ensure that we can pick up the so-called Bebb cases so that people get their money, there is no need to breach the normal conventions.

The hon. Member for Buckingham (Mr. Bercow) made a point about interest. The majority of cases are pursued through the county courts, and interest is paid on the debt. We are considering thousands of cases that go through county courts and only 100 to 150 a year that go through employment tribunals. The hon. Gentleman's wishes at 5 o'clock in the morning many years ago have therefore been fulfilled to some extent.

The hon. Member for North-West Norfolk made a point about wording. He said that the drafting was convoluted. I have much sympathy with that point. We used to have a campaign, which involved eminent former parliamentarians and others, on clear language in Bills. I shall shortly deal with the reasons for introducing a Bill rather than conducting an appeal. I was asked whether that was a result of poor draftsmanship, whether an error had occurred or whether we should have spotted a lacuna. Before dealing with that, I simply draw hon. Members' attention to the original wording, which was approved despite intense scrutiny in the House and in another place. It stated in clear, unambiguous language:

"An enforcement notice may also require the employer to pay to the worker within such time as may be specified in the notice the sum due to the worker under section 17—

which simply points out the difference between what the minimum wage should be and actual wages—

"in respect of the employer's previous failure to remunerate the worker at a rate at least equal to the national minimum wage."

That is clear, unambiguous, plain English. However, we now have to include a wodge of words to ensure that lawyers do not overturn our precise meaning. That is a powerful argument for the need for the convoluted wording on Scottish agriculture. We want to ensure that we are not in such a position again.

John Bercow (Conservative, Buckingham)

During proceedings on the Standing Committee that considered the National Minimum Wage Act 1998, on which I served with the hon. Member for Gravesham (Mr. Pond), my hon. Friends the Members for Banbury (Tony Baldry), for Solihull (Mr. Taylor), for Ashford (Mr. Green), for Runnymede and Weybridge (Mr. Hammond), for South Cambridgeshire (Mr. Lansley) and I subjected the measure to close and rigorous scrutiny. None of us noticed the lacuna, if it existed. The Minister does not need to beat himself over the head about that.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I shall not beat myself over the head. My right hon. Friend the Minister for Pensions was responsible for the 1998 Act. His head is much lower and is therefore easier to beat. However, I am sure that he will not beat himself over the head, either. We do not accept that there is a lacuna or a problem with the drafting. The point is that, given that there is a possibility that we could lose the appeal—for the reasons that I gave earlier, we cannot rule that out, no matter how confident we are about the wording—and that we are talking about low-paid workers, this is very important. Incidentally, we have concentrated on ex-employees being able to claim arrears, but the Bebb Travel judgment also means that current employees who have not been paid the minimum wage can get their money now and in the future but cannot claim arrears, so both groups of workers are disqualified.

We are not prepared to take the risk of losing the appeal, then having to see whether we can get a slot in the parliamentary timetable for a Bill, then—way down the track—having to exercise the Bill. People ask why we do not withdraw the appeal. I am advised that that is because we would have to pay the costs to Bebb Travel, and we have already put a fair amount of money into this case. When it arose in August last year, we could not guarantee that we would get a Bill, or that any Bill would get a slot, so we lodged the appeal. It would also be wrong for us to withdraw the appeal because we would be prejudging the decision of Parliament, and because we might have to give lots of public money to the company that we are challenging. Those are important reasons for not withdrawing it.

Bill Tynan (Labour, Hamilton South)

Does my hon. Friend agree that another benefit of taking the amendment through Parliament is that it will send a clear signal to bad employers that, when situations such as this arise, we are willing to deal with them?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

That is the most powerful point. It is the real reason. We took the decision, almost immediately after the Bebb Travel judgment, to give out the clear message that workers should never be put in this position again. My hon. Friend the Member for Strathkelvin and Bearsden (Mr. Lyons), who has long experience of these issues, said that he was puzzled by the Employment Appeal Tribunal's decision. All I can say to that is, so are we. The hon. Member for Twickenham (Dr. Cable) talked about the Liberal Democrats' support for the Bill, but also asked why we should come back with legislation rather than an appeal. I hope that I have now covered that point. My hon. Friend the Member for Gravesham gave us the bad news about the Low Pay Unit. I think that my right hon. Friend the Member for Birkenhead (Mr. Field) was one of its founding fathers, and he will be as dismayed as I am to hear the news of its demise.

The hon. Member for Perth (Annabelle Ewing) raised the issue about Scotland. I would like to go into more detail about that in Committee. I am advised that the sheriff courts are the equivalent to the county courts in England and Wales. The hon. Lady is right to say that the limitation in Scotland is five years. We consulted the Scottish Executive through the Scotland Office, and decided to leave the provisions as they are, which means that the legislation will provide for a limitation of six years but in Scotland it will be only five years because of the different legislation and because of the horrendous complications of trying to draft the measures differently. We have acted on the advice that we received from the Scottish Executive and the Scotland Office; we will perhaps explore the matter in greater detail in Committee.

My hon. Friend the Member for Falkirk, East (Mr. Connarty) has been extremely assiduous in pursuing the issue of tipping, in relation to how it affects the national minimum wage. An important point that I know he will appreciate is that carrying the Bill forward today will help us to enforce arrears payments for people in the service industry who have been underpaid. In relation to the issues that he has raised, I will undertake to talk to the enforcement officers—who do a splendid job for us all round the country—on the specific issue of tipping, and I shall write to my hon. Friend about how that is being dealt with. The basis of the original legislation, as hon. Members who served on the Bill will remember, is that if tips go through the payroll, they can be counted in terms of the national minimum wage. If they do not go through the payroll, they cannot. I understand that there are abuses of that system, many of which my hon. Friend mentioned.

Michael Connarty (Labour, Falkirk East)

I am grateful to my hon. and personal Friend. I know that he is assiduous in trying to follow this up, but why do not the Government just accept that, when people give a tip to someone in the industry, they are giving it as an addition to that person's wages? That is why they give it; they give it as an extra. In France, a tip is called a pourboire, meaning "for a drink". It is an extra. Why do we insist that anyone should take that into account when they are paying a wage for the hours worked? That is wrong, and the Government should change it.

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

If we can separate that issue from the Bill, which I know he appreciates is narrowly focused on arrears, we can look at it. It is a bit like the issue of young workers, which has been raised by other hon. Members. We can deal with that through secondary legislation, and we have got the Low Pay Commission to look into it for us. I want to ask our enforcement officers about the specific points that my hon. Friend has raised. He has raised them before and they are very important. The original decision on tipping, as it appears in the National Minimum Wage Act 1998, was based on the fact that, in some areas of employment—restaurants, in particular—pooled tips are often paid through the payroll as part of the contract of employment. That is my understanding of the argument, although I was not on the Committee that considered that Bill. Let us address that matter separately, however, because I want to look at the specific issues that my hon. Friend raised.

Henry Bellingham (Conservative, North West Norfolk)

The Minister mentioned that he would like to separate the issue of tipping from this mini-Bill, but the Bill is about enforcement. Might there be an opportunity in Committee to go back to this issue, and perhaps to table an amendment to make it illegal for employers to pool tips in a way that means they become part of the minimum wage calculation? Would it not be reasonable to consider that in Committee?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

Let us look at the issue in Committee in respect of enforcement. It would be a mistake to widen the scope of the Bill, but let us deal with that in Committee.

Annabelle Ewing (Scottish National Party, Perth)

I would like to go back a few sentences to the Minister's reference to a point that I raised earlier about the inherent age discrimination against young workers in the present legislation. He mentioned that the matter could be dealt with through secondary legislation. What plans do the UK Government now have to deal with this problem?

Alan Johnson (Labour, Kingston upon Hull West and Hessle)

I cannot let this matter lie. I am not talking about age discrimination; I am talking about a decision taken by the House. In the experience of many other countries, introducing a national minimum wage for 16 and 17-year-olds, in particular, takes the focus away from education and harms the ability of those who leave school at that age to get work. Further experience shows that 18 to 21-year-olds who have a minimum wage, albeit set at a different level, are in a similar position. This is a crucial issue.

The reason that the implementation of the minimum wage has been so successful is that we confounded all the critics. We have a minimum wage, and 1.4 million more people in work. Had we failed to achieve that, we might perhaps have made an argument that would have gone down well as oratory at union conferences, but which could well have destroyed the principle of the minimum wage in this country, which was very reluctant to adopt it in the first place. Labour Members will remember that it was not only Conservative Members who opposed it 20 or 30 years ago; the British trade union movement did so as well. We need to remember that the idea grew roots. To answer the question put by the hon. Member for Perth, the Low Pay Commission has been asked specifically to look again at the rates for 18 to 21-year-olds, and for 16 and 17-year-olds. The Low Pay Commission is a piece of social partnership in action, and I believe that it has done a tremendous job.

I have strayed off the subject slightly, Madam Deputy Speaker, but I was provoked into doing so. I would now like to commend to the House this very positive approach to these matters. The Bill is crucial to a very vulnerable group of workers. It might not be the most important piece of business that we conduct this week, and it might not attract the most attention, but it is crucial to that group of workers and I look forward to debating the issues again in Committee.

Question put and agreed to.

Bill accordingly read a Second time.