In setting out policies to bring back Wages Councils, Owen Smith is responding to a call for the same, made over three years ago by the Trades Union Congress. He is also proposing to build on policy already enacted by Labour in Wales for those working in the agricultural industry. For Owen, like so many of us in Labour, being in power means being able to do something to improve the condition of the people. Something, in 40 years in opposition to whoever was in Government, Corbyn has never been able to do.
Wages Councils for workers in the hotel and catering and retail sectors, many of whom are women, are the sort of policies that will gain the attention and, hopefully, the support of working class voters who have come to feel left behind by Labour. Owen Smith offers such voters policies addressing their daily concerns. Jeremy Corbyn offers them just windy rhetoric.
In his often-quoted speech in 1909 on Second Reading of the Bill (that became the Trade Boards Act 1909), Winston Churchill, then President of the Board of Trade, explained that the Boards (Wages Councils by another name) were necessary to ensure that workers received a living wage in industries where the bargaining strength of employers greatly outweighed that of employees:
“It is a serious national evil that any class of His Majesty’s subjects should receive less than a living wage in return for their utmost exertions. It was formerly supposed that the working of the laws of supply and demand would naturally regulate or eliminate that evil ……………. Where in the great staple trades in the country you have a powerful organisation on both sides, where you have responsible leaders able to bind their constituents to their decision, where that organisation is conjoint with an automatic scale of wages or arrangements for avoiding a deadlock by means of arbitration, there you have a healthy bargaining which increases the competitive power of the industry, enforces a progressive standard of life and the productive scale, and continually weaves capital and labour more closely together. But where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad, and the bad employer is undercut by the worst; the worker, whose whole livelihood depends upon the industry, is undersold by the worker who only takes the trade up as a second string, his feebleness and ignorance generally renders the worker an easy prey to the tyranny of the masters and middle-men, only a step higher up the ladder than the worker, and held in the same relentless grip of forces – where those conditions prevail you have not a condition of progress, but a condition of progressive degeneration.”
The 1909 Act was the first national minimum wage legislation in Britain. Churchill’s Boards were superseded by Wages Councils established under the Wages Council Act 1945. Legislation introduced by a Liberal Government, built upon by a Labour Government leading to, amongst other things, the Agricultural Wages Act 1948. The Wages Councils consisted of representatives from both sides of industry, together with independent members. They had the power to set detailed minimum rates of pay, including shift premia, for different age groups and types of worker as well as complex holiday entitlements relating to length of service.
At their peak, in 1953, (under a Conservative Government headed by Winston Churchill) there were 66 Wages Councils, covering about 3.5 million workers.
In March 1985, the Conservative Government, as part of its policy of deregulating the labour market, published a Consultation Paper which proposed that the Wages Councils should either be abolished altogether or radically reformed. There was considerable opposition to outright abolition, from employers as well as employees, and the Government opted for radical reform.
The Wages Act 1986 preserved the 26 Councils (down from 27 in 1981) then in existence but prevented any new ones from being established. It removed young workers under the age of 21 from the scope of the Wages Councils altogether and ended the Councils’ power to set minimum holiday entitlements, separate pay rates for different occupations, and premium rates for unsocial hours or shift work. As a result, Wages Councils were only able to set a minimum hourly basic rate; a minimum overtime rate; the number of hours after which overtime must be paid; and a daily limit on the amount an employer could charge for any living accommodation he provided. Employers who failed to pay these rates were liable to a fine and for arrears of wages underpaid. The law was enforced by Wages Inspectors employed by the Department of Employment, but their numbers were cut during the 1980s and early 1990s and they adopted a policy of ensuring that minimum rates were paid by persuasion rather than coercion. Prosecution was rare, despite many instances of underpayment.
In December 1988, the Government once again issued a Consultation Paper which suggested that the Councils should be abolished. The response did not reveal enormous support for abolition even from employers’ organisations; and, in March 1990, Michael Howard, then Secretary of State for Employment, announced that he had decided not to proceed with abolition “for the present”.
It remained Conservative policy that Wages Councils should have “no permanent place in the labour market.” Although the Conservative Manifesto for the 1992 Election did not mention abolition, the Trade Union Reform and Employment Rights Bill, published on 5 November 1992, contained legislation repealing the Wages Councils altogether. Section 35 of the Act, which abolished the Councils, came into effect on 30 August 1993.
The only remaining area in which a minimum wage was enshrined in law after 30 August 1993 was agriculture. The Agricultural Wages Board, as indicated above, was established under separate legislation, the Agricultural Wages Act 1948. The government had considered abolishing this too, but, in the face of opposition from both sides of the agricultural industry, it backed down.
William Waldegrave, Secretary of State for Agriculture, announcing this decision, said, “It is clear from the responses to consultation that there is wide acceptance, from both sides of the agricultural industry of the present arrangements. We do not therefore currently intend to change the existing statutory framework. However, since the Government believe that statutory wage fixing arrangements can introduce flexibilities which prevent rather than encourage job creation, we shall continue to keep the future existence of the AWB under close review.”
After the Wages Councils were abolished, there was growing evidence of jobs being offered below the old minimum rates and little evidence of increased employment in the deregulated industries. For example, a Low Pay Network study, “After the Safety Net”, analysed almost 6,000 jobs offered at Jobcentres in the catering, retailing, clothing manufacturing and hairdressing sectors in April and May 1994. Over a third of the jobs on offer paid less than the old Wages Council rate uprated by inflation. In retailing, the figure was over 50%. The network also found a net loss of 18,000 jobs recorded in the retail and catering sectors between September 1993 and March 1994, despite the removal of minimum wages.
See Research Note 92/75 on “Wages Councils”, Research Note 92/95 on the “Trade Union Reform and Employment Rights Bill 1992/3” and Research Paper 95/7 “A Minimum Wage”.
Between 1993 and the introduction of the NMW, only the AWB set pay rates for any group of workers in the UK work force. The NMW when enacted covered many more workers than the Wages Councils, but did not replace the AWB which continued to set rates above those set by the NMW.
“The Abolition of the Agricultural Wages Board
10 May 2013
In 2010, the Coalition Government announced its intention to abolish the Agricultural Wages Board, as part of its shake-up of public bodies. The Enterprise and Regulatory Reform Act 2013 abolishes the Agricultural Wages Board from 25 June 2013. The 31 Agricultural Wages Committees and Agricultural Dwelling House Advisory Committees will also be abolished at the same time.
The Agricultural Wages Board, which was established by the Agricultural Wages Act 1948 (http://www.legislation.gov.uk/ukpga/Geo6/11-12/47/contents/enacted), has a statutory obligation to fix minimum wages for workers employed in agriculture in England and Wales. The rate of pay depends on the type of work involved. The Board also has powers to decide other terms and conditions of employment for agricultural workers, such as holidays and sick pay. It produces a legally binding Agricultural Wages Order, which is enforced by the Department for Environment, Food and Rural Affairs. The Order is made annually and normally comes into force on 1 October. The current Order is due to expire on 30 September 2013.
The effect of abolition is that employers will be able to take on new agricultural workers on less generous terms and conditions than under the Agricultural Wages Order, provided they comply with employment law generally, such as the provisions of the National Minimum Wage Regulations and the Working Time Regulations.
Whether existing workers are entitled to continue to be paid at the rates prescribed by the current Agricultural Wages Order will depend upon the wording of their contracts of employment. If the contract states simply that the worker is entitled only to the statutory minimum, then that will probably be treated as meaning the National Minimum Wage Regulations and so the employer is likely to be able to reduce the worker’s wages down to national minimum wage rates. If, however, the contract of employment is unclear or states that the worker is entitled to the rates under the Agricultural Wages Order, then the employer is likely to have to continue to pay the rates prescribed by the current Agricultural Wages Order until the national minimum wage rates rise to meet or exceed the levels set out in the Agricultural Wages Order.
If the employer makes unlawful reductions in the worker’s wages, it is likely to give rise to a constructive unfair dismissal claim and/or a claim for unlawful deduction from wages. Employers should therefore check their workers’ contracts of employment and take legal advice if necessary.
The changes will not affect Scotland and Northern Ireland, which have their own Agricultural Wages Boards and have no plans to abolish them. The Welsh Assembly, however, was opposed to abolition and may try to create a separate Welsh Agricultural Wages Board.”
The AWB survived the scrapping of the other boards by John Major and had survived the era of Mrs Thatcher (http://www.eurofound.europa.eu/emire/UNITED%20KINGDOM/WAGESCOUNCILS-EN.htm). The AWB was abolished by the Coalition on 1st October 2013 (http://www.unitetheunion.org/news/unite-stands-by-farm-workers-as-agricultural-wages-board-is-axed-today/).
Labour in Power in Wales brings back Welsh Agricultural Wages Board
Labour has brought back into existence a Welsh Agricultural Wages Board in the teeth of fierce opposition from the heirs of Thatcher (http://www.walesonline.co.uk/news/wales-news/agriculture-wages-bill-uk-government-7394743). Incidentally, the leader of the Tory antis in the Welsh Assembly is a farmer, but she was not campaigning on behalf of herself, it seems. She also declines to say how much she receives in the way of agricultural subsidies (aka taxpayers’ money) from the European Union. She benefits from an AWB for farmers, just like ukip’s former candidate in Clacton, another farmer. And ukip has announced (see Agriculture and Fishing) that it will replace taxpayer funded subsidies for farmers via Brussels with taxpayer funded subsidies direct from the UK Treasury.
PS Municipal regulation of wage levels began in some towns in 1524.