Why local councils should be given the power to enforce the minimum wage

Councils are much closer to the ground than HMRC could ever be - they know local businesses, both good and bad


It has been over 15 years since the introduction in the UK of the National Minimum Wage (NMW), brought in to put a floor under pay and curb work poverty. It is hard to imagine now living in a Britain without it.

However, according to a new report, Pay by the Rules, published yesterday by Newham Council, there are at least 236,000 people in the UK today still missing out on up to £533 million wages annually because they do not receive even the legal minimum pay to which they are entitled. This latest research shows that in the London Borough of Newham alone, 17 per cent of working residents are paid below the NMW, missing out on £38.2 million of wages owed each year.

The Centre for London, in its 2013 report, Settle for Nothing Less, reached similar conclusions, observing that in over one in five London boroughs more than five per cent of workers were being paid the NMW or less. Such exploitation in 21st century Britain is nothing short of a scandal.

Since its introduction by the then Labour government, the NMW has provided some security for millions of people for whom it guarantees just enough to get by in return for a hard day’s work. But loopholes in the system still allow unscrupulous or incompetent employers to exploit workers. Among them are those doing some of the most important work in our society, like providing home care to our parents as they grow old, but not getting paid for their travel time between appointments.

Hotel cleaners sometimes get paid per room rather than per hour, and don’t get paid for cleaning stairwells or landings. Waiters and waitresses sometimes don’t get paid for their time when business is slow. Immigrant workers, disproportionately concentrated in the capital, are particularly susceptible to such abuse. Meanwhile, people starting out in certain industries, including politics and the media, are often expected to work unpaid internships at the outset of their career.

The NMW is supposedly enforced by Her Majesty’s Revenue and Customs (HMRC), which spends about £8 million per year bringing in only £4m of arrears owed to workers. Newham Council’s report suggests that there has been a 60 per cent reduction in the number of businesses inspected by NMW enforcement officers from HMRC in the past five years, and only two prosecutions for criminal employers since the coalition government came to power.

The council argues, rightly, that local authorities, given the necessary powers, resources and responsibility, could do a better job of enforcing the NMW in their patch. Under such a devolved model, HMRC could still retain a role, especially when it comes to securing NMW compliance among national and international employers.

Localising NMW enforcement needn’t cost the state extra money. If councils were allowed to keep the fines generated from non-compliant employers, while securing the arrears for short-changed workers, this new system could be self-financing.

If Labour is in government after 7 May, it has said it will give local authorities more powers to enforce the NMW. In Islington, as in Newham, that’s an opportunity we would grab with both hands. Councils are much closer to the ground than HMRC could ever be. We know the businesses in our area, both good and bad.

Our enforcement teams already deal with those businesses that flout licensing, planning, trading standards, waste disposal and other rules. They are often the same businesses that fail to pay the NMW. The next government should let councils make them pay by the rules.

Cllr Andy Hull is Executive Member for Finance at Islington Council. Follow him on Twitter

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