I just want to draw the Committee’s attention to one or two points in this clause. It relates to the mechanism by which criminal offences under the National Minimum wage Act 1998 can be tried. Criminal offences already exist under that Act so this does not create new criminal offences, but it relates to the overall strengthening of the penalty regime which we have just heard that the Conservative party supports. The overwhelming majority of cases of non-compliance with the minimum wage have been dealt with under the civil law. That will continue to be the case under the new regime proposed in the Bill.

The national minimum wage is enforced under current arrangements by Her Majesty’s Revenue and Customs. As I said, that is initiated either by a complaint from workers or through risk assessment, including targeted enforcement at low paying sectors. An HMRC enforcement officer will visit the employer, interview the employer and the workers, check the employer’s national minimum wage records and so on. The vast majority of cases are resolved with the employer repaying arrears to workers who have been underpaid, which we have discussed. It is only in cases in which Her Majesty’s Revenue and Customs cannot achieve payment of arrears to workers that the issue and enforcement notice requiring the employer to repay the arrears takes effect. Let me give the Committee some figures. In 2007-08, HMRC investigated 4,500 cases. It found non-compliance in 1,649 cases. Of those, 96 per cent. were settled without the need to issue an enforcement notice and HMRC had to resort to the formal mechanism of issuing notices in only a small number of cases.

Clause 9 changes the enforcement notice process. Following recommendations from the Low Pay Commission, we also want to make changes in other areas, too. I want to talk about the criminal sanctions that are affected by the changes that we propose in clause 11. The National Minimum Wage Act provides for a number of criminal offences—deliberately paying below the minimum wage, failing to keep minimum wage records or keeping false records and obstructing enforcement officers. Currently, such offences can be tried only in a magistrates court in which the maximum fine is £5,000. Criminal conduct by employers is the exception rather than the rule.

As well as considering how we need to strengthen the enforcement regime with the penalties under the civil law, we also considered whether the sanctions for the criminal offences were sufficient. We concluded that in order to ensure a balanced spectrum of enforcement, the potential fine available to a criminal court when sentencing for an offence should be greater than the maximum penalty that can be imposed by notice of underpayment. Secondly, HMRC’s investigative powers, which we believe are necessary and are proposed in clause 12, could not be used if the offences remained triable only as summary offences in the magistrates courts. The clause is important on its own and in relation to clause 12.