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Siobhain McDonagh (Mitcham and Morden) (Lab)
I beg to move,
That this House recognises Living Wage Week which began on 31 October; believes that the use of the introduction of the national living wage to drive down conditions and take-home pay is against the spirit of the law; calls on the Government to close down those loopholes which make this possible; and further believes that any move to reduce the value of the national living wage to a level below the promised £9 per hour in 2020 is unacceptable.
I thank the Backbench Business Committee for granting time for this debate. Living Wage Week is about celebrating the real living wage—£9.75 in London and £8.45 outside London—which provides an income that meets a minimum cost of living.
I called the debate to highlight the inadequacies of the so-called national living wage, the new statutory minimum rate of pay. Initially, the main criticism of the wage was its name, because, at £7.20 an hour, it is far lower than the actual living wage. However, since April a growing number of high-profile companies have used its introduction to cut total pay for long-standing employees, despite the former Chancellor’s promise that
“Britain is getting a pay rise.”—[Official Report, 8 July 2015; Vol. 598, c. 337.]
Back in February, I was approached by a constituent who worked at B&Q and had been told that his contract would change. His contractual entitlement to double-time pay and seasonable bonuses meant that he would be losing £2,600 a year, after the increase in his basic pay. He is a man with two children, living in London and earning around £15,500 a year. B&Q is one of the main employers that have offset the basic pay increase with a total pay cut for employees on old contracts. It has cut the majority of its discretionary payments to staff on older contracts, stripping their pay and removing almost all their employee benefits. Although B&Q’s chief executive has promised me that all affected employees will continue to receive transitional payments to top up their pay, I know that thousands still believe that they will be significantly worse off.
It is a similarly sad story at Marks & Spencer. As one of Britain’s premier retailers, Marks & Spencer employs tens of thousands of workers across the country. It forced a consultation a few months ago to cut the terms and conditions for its employees on pre-2002 contracts. Like those at B&Q, these employees have been penalised for their long and loyal service. Their double time has been cut, as has their unsocial hours entitlement. In fact, M&S went even further than B&Q and scrapped its employees’ pension scheme at the same time.
Carolyn Harris (Swansea East) (Lab)
As my hon. Friend is aware, my mother was a long-time member of staff in Marks & Spencer—45 years. Such was the affection for the company that it was known by the staff, and indeed in our house, as “our shop.” Does my hon. Friend agree that this betrayal of loyalty of long-time members of staff is nothing short of, in the words of one staff member, a “kick in the teeth”?
Siobhain McDonagh
Absolutely, and I thank my hon. Friend for her involvement in the campaign. She will know that 11,000 employees were adversely impacted by the changes. Of those, 2,700 have lost at least £1,000 a year, 700 have lost at least £2,000 a year, and a significant proportion will lose up to £6,000 a year.
The human cost of those actions is huge. Literally hundreds of employees from across the country have contacted me in desperation. Let us consider just two examples. There is a gentleman—we will call him Connor to keep his identity secret—who has worked for M&S for more than 20 years, mainly on night shifts. He told me:
“I have enjoyed those years... getting satisfaction from delivering our goals and feeling like I was contributing greatly to achieving our targets. But as you are aware, M&S are cutting my night premium, Sunday premium and bank holiday, totalling several thousand pounds worth of shortfall in my wages per annum. On top of that, they suggest I also start to contribute into a pension. How am I going to be able to do that? I am sick but have a wonderful, large family to support, as well as a mortgage. I stand to lose everything... I have nothing to fall back on. I have given my best years to M&S... I feel cheated and betrayed.”
Let us consider Ms Smith from Yorkshire, a hard-working, low-paid mum. As a result of B&Q’s contractual changes, she is going to receive a staggering 30% pay cut and will lose £2,000 a year from 2018. She told me:
“How exactly am I going to make up this wage deficit? I have a young son to support, and next year is looking very bleak for us…I am worried about how I will support my family...I am heartbroken that the company I have worked so hard for, done 16-hour shifts for, come in on days off for, and valued greatly, has treated me like this.”
Two companies, one sad pattern of hard work and loyalty being punished. Thousands of employees at these two companies will never earn again what they earned in April. Indeed, the general public have been shocked by these actions, with a quarter of a million people signing Change.org petitions against these practices.
What is so shocking is the ease and speed with which these companies have legally cut staff pay. Both companies launched 90-day consultations, which is the statutory minimum. Neither recognises a trade union. Both targeted those workers on older contracts, and both conducted consultations that ended with these pay cuts being pushed through, regardless of the employees’ heartache and the reputational damage the companies have faced.
The consultations are a foregone conclusion. In fact, M&S’s head of retail told me that the company had been planning these changes for 18 months. M&S’s board will meet tomorrow to finalise these contractual changes, and it will be issuing notices a few weeks before Christmas to staff members who refuse to sign their new contracts. I ask the Minister to address that point in summing up.
Joan Ryan (Enfield North) (Lab)
I commend my hon. Friend for her tireless campaign on this issue. Given that a Resolution Foundation survey of employers found that there was no evidence for the claim that the national living wage leads to job losses, does she agree with John Hannett, the general secretary of the Union of Shop, Distributive and Allied Workers, that
“employers must not be allowed to blame higher wages for every job loss, every cut in hours and every change to terms and conditions”?
Siobhain McDonagh
I completely agree with my right hon. Friend, and I will go on to say how cuts in pay never seem to apply to those at the top of an organisation or to impact on its profits.
Steve Rowe, the chief executive of Marks & Spencer, still refuses to meet MPs to discuss these changes, and he has not accepted that he should have a pay cut in solidarity with his shop-floor staff. I hope Members will bear all this in mind when they are doing their Christmas shopping at M&S next month.
The fact that this happens at the same time as low-paid workers have been promised a pay rise by the Government is incredible. In many ways, B&Q and Marks & Spencer have just been unlucky in being singled out, because there are many more doing the same thing.
Liz Kendall (Leicester West) (Lab)
My hon. Friend has secured a really important debate. Is she aware of very similar problems at Samworth Brothers in my constituency? Long-serving workers are seeing their night shift and weekend work pay cut; there is no recognition of a trade union; and the bosses are refusing to provide information and are not taking a pay cut themselves. Does my hon. Friend agree that that is unacceptable and that they should commit to the spirit and the law of the legislation?
Siobhain McDonagh
My hon. Friend has anticipated my next paragraph, which was to congratulate her on the work she has been doing at local employer Bradgate Bakery, which is part of Samworth Brothers. Somebody doing the Saturday night shift at Bradgate this week will earn 30% less in three years’ time than they will this Saturday. How can that happen in the 21st century? Over the way in Grimsby, the Seachill fish factory, which works for The Saucy Fish Co, has cut overtime payments, despite the fact that overtime work is written into the employees’ contract.
Smaller benefits are also being ruthlessly got rid of. I hope Members will excuse the way I pronounce the name of the next company, but Le Pain Quotidien, where a cup of tea will set you back £3, cut paid breaks this year, while Zizzi has cut the range of free food options available to staff. Caffè Nero baristas are no longer eligible for free food on their lunch breaks, which saves the company about £3.60 per staff member. It seems that all retailers are racing to the bottom and cutting everything they possibly can to save a few pennies here and there.
It looks like the John Lewis Partnership—the top retailer on our high streets—will be the next big employer to cut staff pay, potentially going the same way as M&S and B&Q. Having already got rid of Sunday and bank holiday premiums for new starters, its chairman has outlined plans to “review historic pay structures”. In other words, it, too, will potentially cut the terms and conditions of the oldest and most loyal employees.
Each of those cases demonstrates that we desperately need to tackle in-work poverty and the unscrupulous pay practices and governmental inaction that lead to its entrenchment. Years ago, a typical family in poverty would be out of work, but now they are far more likely to be in work on low pay. According to the Resolution Foundation, almost a quarter of UK workers earn less than the real living wage—the equivalent of £16,500 a year for a full-time week outside of London, and £19,000 in London. A staggering 1.5 million workers earn only the statutory minimum wage of £7.20 an hour—that is just £15,000 a year for a 40-hour week.
Bob Stewart (Beckenham) (Con)
I thank the hon. Lady for allowing me to butt in. Her theme has been the cutting of wages in a number of companies. Is there a macro-reason for why that is happening right now, particularly in companies such as M&S and John Lewis?
Siobhain McDonagh
There seems to be an issue in retail and I completely understand that, but it appears—contradictorily and counterintuitively—that the living wage has precipitated companies looking at issues other than the hourly rate. The hourly rate has become king and everything else is being cut, but I am absolutely convinced that that was not the Government’s intention.
Not everybody’s pay is being cut or terms and conditions undermined. It is a completely different story for our country’s chief executives. The High Pay Centre has shown that the UK’s top bosses earned an average of £5.5 million each last year. That means that chief executive officers enjoyed a 10% pay rise last year, while wages for low-paid workers rose by just 2%, according to the Office for National Statistics. On average, FTSE 100 CEOs now earn 129 times more than their employees, when we take into account pensions and bonuses. The UK’s top bosses could take a page out of the book of Berkshire-Hathaway’s CEO, Warren Buffett, who paid himself a much more modest salary of $100,000 in 2015.
All of that demonstrates that the link between productivity and remuneration is breaking. It should be common sense that those who make a company’s profits possible should receive a decent day’s pay. They certainly should not be rewarded for their years of loyal service by a receiving a pay cut.
I share the Prime Minister’s sentiments when she said earlier this year that
“there is an irrational, unhealthy and growing gap between what these companies pay their workers and what they pay their bosses.”
I just hope that she will act on those words and encourage companies to think about a whole company pay policy and how much they pay their poorest employees.
Tristram Hunt (Stoke-on-Trent Central) (Lab)
I, too, pay tribute to the great leadership that my hon. Friend has shown. On the issue of raising wages, the average salary in my constituency is the fifth lowest of anywhere in the west midlands, with a median average salary of £22,000. Having a proper, real and decent living wage will make an extraordinary difference to some of the lowest paid in our communities.
Siobhain McDonagh
I completely agree with my hon. Friend. I ask the Government not to renege under any circumstances on their promise to ensure that the national statutory minimum wage will reach £9 by 2020. The British public were promised £9 an hour, so that should be the minimum they receive. The Government must also act to tackle the unscrupulous employment practices of employers who cut staff pay to offset the higher per-hour rate. In the words of the former Chancellor, the right hon. Member for Tatton (Mr Osborne), although such practices may be legal, they are not in the “spirit of the law.” Given the Prime Minister’s vocal desire to champion the situation of the poorest in the UK, I sincerely hope that she will review the ease with which employers can scrap long-standing and historical terms and conditions.
Companies have a responsibility to show a lot more respect to their loyal, long-standing staff. Company boards should count among their members not only lawyers and accountants but ordinary employees. Whether they are HR representatives or shop-floor workers, those who make a company’s profits possible deserve a place at the table.
I welcome the Prime Minister’s forthcoming employment review led by Matthew Taylor, a man who is known to many Labour MPs. I am pleased that the review will consider the issues I have raised over the past year. We need a public discussion that considers more than just pay per hour. We need to consider how the world of retail is changing, leaving many employees behind and offering less and less in the way of career progression. For instance, at B&Q and M&S, new members of staff with little or no professional experience will now receive the same per-hour pay as much more experienced members of staff. Where is the incentive to work hard if someone cannot work their way up? As the fourth industrial revolution beckons, what will happen to communities that have, until now, relied on retail work? What repercussions will that have for the way in which we educate and train citizens and the skills with which we equip them for the world of work?
We also need to consider the repercussions of the new gig economy. Over the last few months, we have seen how employers such as Hermes and Uber mistreat their self-employed workers to keep costs to a minimum. I was extremely pleased that the hard work of the GMB paid off with its win in a monumental employment case against Uber. But the Government need to be more proactive and champion the rights of the self-employed and the responsibilities of employers; the Government should not just pick up the pieces when things fall apart.
We have called out these actions, and our words in this place have been heard. They have been heard by top corporate executives who have flocked to me after debates to try and explain away their companies’ behaviour. Our words have been heard by thousands of staff nationwide whose pay has been cut unscrupulously and who have felt alone and ignored. Our words have been heard by countless employers who have been deterred from pursuing such changes for fear of the reputational damage that they would cause. Today, I hope these words will also be heard by the Prime Minister and the Government, and that we will all realise that a society in which the poorest flourish is one in which we all benefit.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. We have to move immediately to a time limit for Back-Bench speeches of five minutes.
Paul Scully (Sutton and Cheam) (Con)
I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing this debate via the Backbench Business Committee. It is not the first time I have supported her application for a debate. This is another example of an issue that she has raised about which we can agree on a significant amount.
Living Wage Week provides a good opportunity to raise the issue of low pay with employers, and to encourage them to pay their employees a fair wage and thus reduce employers’ dependence on Government subsidy of their payroll costs through in-work benefits such as tax credits. The living wage is paid voluntarily by employers and set according to the cost of achieving an adequate standard of living. I question whether it is a real living wage, but it is a living wage as judged by the Greater London Authority for people in London, and by the Centre for Research in Social Policy at Loughborough University for those outside London.
I have employed people, on and off, for the last 20 years or so. As, I hope, a responsible employer, I try to pay more than the market rate if possible. People are more than commodities; they are the shop window, the engine room and the support team of any business. Investing in their people should be a top priority for any employer. I hope that my parliamentary staff, who may be tuning into this debate, will not be too inclined to raise a quizzical eyebrow at what I have just said.
Satisfaction at work is not all about pay. It is about conditions; it is about how bosses, managers and colleagues relate to and value an individual; and it is about career development. In this debate, we are focusing on the lowest-paid in our society—the people who are struggling to pay their bills and who are having to make difficult daily choices to be able to survive, let alone thrive. The Government have made a lot of progress since 2010 in improving the circumstances of low-paid employees. We will lift another 1.3 million people out of income tax altogether, while basic rate taxpayers will be more than £1,000 better off than they were five years ago. A full-time low-paid worker aged 25 or over now earns about £900 more than they did last year.
The national living wage means that earnings have risen for the lowest-paid workers at the fastest rate since records began. The Office for Budget Responsibility estimates that in total up to 6 million people could receive a pay rise as a result of the ripple effect that causes pay to rise further up the earnings distribution. By increasing the national living wage, taking millions of people out of tax and making welfare reforms, the Government are ensuring that it always pays to be in work.
Joan Ryan
Is the hon. Gentleman aware of the Joseph Rowntree Foundation evidence that a third of families earn less than they need for a decent standard of living? Given that, does he agree, as he supports a living wage, that the Government should provide firm guarantees that no employee will earn less as a result of the national living wage?
Paul Scully
I will deal in a second with what the Government are doing and the manifesto commitments we made last year, but I agree that we can always do more to lift the low paid out of poverty and low pay. It is very important that we continue to move to a higher wage, lower tax and lower welfare society, building a more productive country, because we must give families the security of well-paid work. It is important for the Government to help businesses to offset the costs of the national living wage, including the ripple effect that I have mentioned. Corporation tax will therefore be cut and businesses will benefit from a 50% increase in the employment allowance.
Siobhain McDonagh
Does the hon. Gentleman accept that the problem is that businesses sometimes do not pay corporation tax? When I made such a point to Kingfisher, the owner of B&Q, it said that the cut was of no help because it did not pay any corporation tax last year.
Paul Scully
It is important to encourage businesses to pay their fair share of taxes. Despite what the hon. Lady says, many companies pay a significant amount in corporation tax, and I know that businesses value lower taxes and the employment allowance. I benefited from employment allowance in the company I ran before I was elected in that it allowed me to create another job.
The Low Pay Commission is charged by the Government with recommending the level of the national living wage premium each year, to increase the national living wage to 60% of median earnings by 2020. According to independent OBR forecasts, the Government expect it to reach £9 by 2020. I have heard nothing that implicitly or explicitly suggests that the Government are wavering in that commitment. I will be interested to hear the Minister reaffirm that, as I am sure she will, when she sums up.
Beyond supporting pay initiatives, the Government have sought to boost jobs and apprenticeships by involving businesses in the design of new apprenticeship standards and offering grants of £1,500 for businesses with up to 1,000 employees to take on new 16 to 24-year-olds as apprentices if they have not taken one on in the past year. That has been extended for another year. From this April, employers have not had to pay employer’s national insurance contributions for apprentices under the age of 25.
I know that the Government understand the ripple effect on companies, which I have mentioned, and that Ministers—including the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Stourbridge (Margot James), who is in her place—have pushed companies to implement the national living wage in the spirit in which it was introduced. For that reason, the examples raised by the hon. Member for Mitcham and Morden are very important. I am sure that the company that is having its board meeting tomorrow and the others she talked about will listen to what is said in this debate.
We should also hold up good examples of where the national living wage has worked well, because such companies are the beacons to which others can aspire. Such examples show the positive effect of valuing employees by paying that little bit extra and offering other benefits. That happens in higher-paid, graduate employment. We hear about companies such as Mars, KPMG and Aldi that are very good employers for graduates. We should look for great examples of employers who take on a significant number of lower-paid employees, to show how doing so can very much work for the company, as well as for the individual and their family. Let us get other companies to emulate fair pay, great conditions, excellent career prospects and very productive work. We should look to the two types of example, good and bad. The hon. Lady has started a very significant campaign that I hope employers will listen to.
Holly Lynch (Halifax) (Lab)
I too start by thanking my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for the leadership and tenacity she has shown on this issue and for securing this debate with the support of the Backbench Business Committee.
Although I have been surprised at and saddened by at the variety of ways workers in receipt of the living wage have had other terms, conditions and benefits revoked or reduced, I will focus today on those who are potentially not even receiving the living wage at all—workers under the age of 25. In June, I secured a Westminster Hall debate on age discrimination and the national living wage. The Government have failed to respond to some of the points raised by myself and others in that debate, so I welcome the opportunity to discuss the issue again.
The decision to deny the Government’s so-called living wage to under-25s means that from 1 April this year, many workers under the age of 25 will have discovered that their pay packet is substantially less than that of their older colleagues. As things currently stand, those between the ages of 21 and 24 are paid 50p less per hour than the living wage. The margin is greater again for those between 18 and 21, who are paid £1.90 less an hour; those under the age of 18 are paid just £3.87 an hour, which is £3.33 less per hour than the new living wage.
I am sure that the Minister will accept that many young workers, who were already demoralised at being left behind, felt that salt had been rubbed in their wounds by the comments of the then Minister for the Cabinet Office and Paymaster General, the right hon. Member for West Suffolk (Matt Hancock)—now the Minister for Digital and Culture—at last year’s Conservative party conference. Outlining the rationale for the decision to pay under-25s less, he said:
“Anybody who has employed people knows that younger people, especially in their first jobs, are not as productive, on average.”
As someone who was doing three part-time jobs at the age of 17 while studying for my A-levels, I can sympathise with those workers under 25 who find that sweeping generalisation grossly unfair.
We hear that young people are not as productive, so how are the Government measuring productivity? I asked in a written question for their figures on the productivity of young workers. I was told that they had absolutely no evidence to support the claim. In his answer, the then Minister for Skills, the hon. Member for Grantham and Stamford (Nick Boles), told me that
“there are no official statistics estimating the productivity of workers by their age.”
So we know that the Government cannot give evidence to support the reasoning of the right hon. Member for West Suffolk. I accept that those embarking on a new role often require training and support from their employers and perhaps therefore initially represent a reduced return on investment for an employer, but that could be said of any employee, of any age, taking on a new role or returning to the workplace. Up and down the country there are countless examples of young people who give it their all and are a huge asset to their firms, yet now face the demoralising prospect of unequal pay.
Recently, it feels as though the Government have moved on from the productivity argument and are instead arguing that the ability to pay under-25s less will incentivise firms to hire young workers. Indeed, when I asked the former Leader of the House for a debate on this issue at business questions, he replied:
“I…think it is important to do everything that we can to incentivise employers to take on young people.”—[Official Report, 28 April 2016; Vol. 608, c. 1564.]
We all want to see youth unemployment addressed, yet organisations, including the Federation of Small Businesses, have pointed out that the Government’s approach could see employers wandering into legally precarious territory. An employer that actively seeks to recruit under-25s to cut wage costs will almost certainly fall foul of age discrimination legislation. The Equality Act 2010 prohibits discrimination on a number of grounds; section 5 of the Act recognises age as one of those characteristics. It is direct discrimination if, because of a protected characteristic, one person is treated less favourably than another. The House of Commons Library has confirmed that to recruit workers on the basis of their age would constitute direct age discrimination.
In evidence to the Low Pay Commission, the Federation of Small Businesses said that
“our survey data suggests that some businesses may focus their recruitment on the under 25s. However by doing this they run the risk of potentially breaching age discrimination legislation, which should lead many employers to re-evaluate this stance.”
Will the Minister clarify the Government’s intention on the threshold for 25-year-olds as a financial incentive, and respond to the advice of the FSB? If, as a result of the Equality Act, the threshold for under-25s is not permitted to serve any purpose in boosting youth employment rates, why have a lower rate at all?
Having campaigned on the issue, I joined my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) earlier this week to meet a number of young workers who were brought together by the GMB trade union—I thank them for their work on the campaign. Those young workers told their stories, including a testimony from a 20-year-old retail worker called Rebecca, who said:
“Earning less than older workers stops me from socialising with friends, studying part time to get a better job and I can’t afford to have driving lessons or even think about owning a car. I’m frustrated at the fact that I am expected to live on so little, whereas if I was older I would automatically be paid more.”
I hope the Minister reflects on Rebecca’s story and many others, and rewards under-25s for their hard work by extending the living wage.
James Berry (Kingston and Surbiton) (Con)
I thank the hon. Member for Mitcham and Morden (Siobhain McDonagh) for bringing the debate to the House. I enjoy working with her on human rights in Sri Lanka, and I enjoyed hearing her comments in the debate. I welcome the speech of the hon. Member for Halifax (Holly Lynch), whom I am following for a second day running.
The national minimum wage was introduced by the Labour Government in 1999 at £3.60 an hour for those aged over 22. Successive increases based on recommendations from the independent Low Pay Commission meant that it reached £6.70 by last year. I commend the Labour Government for introducing the national minimum wage, but this progressive Conservative Government introduced the national living wage, increasing the lowest rate of pay for those aged 25 and over to £7.20 this April, and to £9.35 from April 2020.
That was significant for at least three reasons. First, some had often wrongly characterised the Conservative party as an opponent of statutory minimum wages, which was clearly not the case. Secondly, the 2016 rate represents a 7.5% increase, or a 10.8% year-on-year increase, which is the largest cash increase ever to a living wage. Thirdly, the independent Low Pay Commission concluded that the real value of the new national living wage would restore and surpass the value lost in the economic downturn. I was therefore delighted when the Government announced the national living wage, as were many of my constituents in Kingston and Surbiton who were among the 1.8 million workers in the UK benefiting from the introductory wage increase.
I was concerned about the effect of the national living wage, particularly in sectors such as nursing homes. Members on both sides of the House raise the issue of the high cost to councils of placements in nursing homes, and the high costs to private users of nursing homes, which I thought would only go up if the minimum wage was increased. I discussed that with a number of care home owners in my borough of Kingston, who pointed out that they were either already paying in excess of the then proposed national living wage or planning to do so—there was such a shortage of nurses and healthcare assistants willing to work in nursing homes that they had to pay the additional amount to get quality staff.
Jim McMahon (Oldham West and Royton) (Lab)
The hon. Gentleman has started a very curious train of thought. Let us say that the employers had said that the increase would have an impact. Would his view have been that the staff who look after some of the most vulnerable people in his community should not be allowed the increase?
James Berry
My concern was that the cost would be passed on to the customer, which would either be the council or private payers, who often have to shell out a huge amount to pay for the care of their parents or loved ones. As it happens, as far as I have seen, that has turned out not to be the case. In fact, I have seen no significant evidence of widespread transfers of the cost of the national living wage to customers.
How have the costs been absorbed? Some companies have absorbed them by taking a hit to their profits. Others are doing the very things that the hon. Member for Mitcham and Morden listed, many of which are absolutely disgraceful—I have no quarrel with her about that. There are other examples of companies forcing staff to buy their own uniforms or pay for their training, which I similarly condemn, as I am sure she would.
What action are the Government taking? First, with minimum wage enforcement, an employee can take their employer to an employment tribunal for breach of contract. Secondly, when there is non-payment of a minimum wage, including the national living wage, the employee can complain to Her Majesty’s Revenue and Customs, which investigates every single case and can require repayment of the underpayment. Following changes made by the Government in April, a fine amounting to 200% of arrears can be levied. There is also provision for naming and shaming, which is popular in this context at least, as 687 companies have been named and shamed so far. As far as I am aware, there have been no complaints of this action not being taken when it has been demanded of HMRC.
What happens when the rule is not breached, but the spirit of it is? I hope that the Government will continue to criticise employers that do not follow the spirit of the rules in exactly the way the hon. Members for Mitcham and Morden and for Halifax and my hon. Friend the Member for Sutton and Cheam (Paul Scully) have taken the opportunity to do today so that we, as customers, can also take direct action by not shopping at Marks & Spencer this Christmas if we are not happy about how it treats its staff.
What we did not hear from the hon. Member for Mitcham and Morden was any suggestion of how the Government could do more to deal with employers who do not behave according to the spirit of the rules without wrapping them up in regulation after regulation. If I had an answer to that, I would certainly give it to the House, but I have not heard of one yet. I am pleased there are regulations in place to tackle those who breach the letter of the rules. I hope that hon. Members and the Government will continue to call out those who breach the spirit of the rules; I will continue to do that, too.
Helen Goodman (Bishop Auckland) (Lab)
I congratulate my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) on running an excellent campaign over many months and bringing to light a significant problem. I think the hon. Member for Kingston and Surbiton (James Berry) is well intentioned, but he is perhaps a little over-optimistic about how easy it is for people to get into conflict with their employers, especially now that tribunal fees have been increased. My hon. Friend motivated me to find out what is going on in my constituency. I have heard stories very similar to those that she told about Marks & Sparks and B&Q from the GMB trade union with respect to Asda, but the story that shocked me most was what is going on at Morrisons.
Morrisons made an increase to its basic hourly rate of £1.27, taking the figure from £6.93 to £8.20. A person working 20 hours mid-week would therefore appear to gain £25.40 a week, or more than £1,000 a year. To pay for that, however, paid breaks became unpaid, at a cost of £2.05 for each break lost. Morrisons also abolished the Sunday premium of time and a half. Instead of being paid £12.30 an hour, people received a pay cut from £10.39 to £8.20. This has had a particularly bad impact on those who regularly work weekend shifts. One of my constituents gained a miserly £1.64 a week from these changes. Their partner told me that this had caused a lot of “heartache”—that was the word she used. One very unpleasant aspect of this, of course, is that it sets workers against each other. One person’s pay rise is literally at the expense of another person’s pay cut. It is not necessary, because the people I have spoken to who work for the Co-op have not been treated in this way.
Morrisons no doubt told its employees that this was all that it could afford, so hon. Members will imagine my astonishment at a parallel development in my constituency. They might know that I have an extremely large constituency of 300 square miles, with very contrasting communities at either end. At the same time as Morrisons was cutting the pay of its Sunday workers, William Morrison was buying a castle at the other end of my constituency for more than £3 million.
When most of us buy a house, we haggle to get the price down—not Mr Morrison. He saw the advertisement for the castle, priced at £3 million, in Country Life. He was so keen to have it that he offered a quarter of a million pounds more. As is recorded by the Land Registry, he paid £3.24 million. The increase is more than enough to buy a family house in my constituency. Of course people are free to spend their money as they like, but I am afraid that this paints a picture of modern capitalism that is ugly and exploitative. I am not sure what his great grandfather would have made of all this, but there seems to be something very Victorian about the rich man in his castle and the poor man at his gate.
The Morrison family shareholding is now worth some £270 million. Over the past two years, the dividend payments have been 20p per share, so the family has been getting about £24 million on their shareholding. In real terms, the pay deal for Morrisons’ Sunday workers has been a cut. This inequality is not necessary. It is not efficient, it is not just and it is wrong. There is really only one word to characterise what has been going on—greed. That is why people need Labour’s real living wage, independently set and properly enforced.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)
I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing this important debate. I also welcome the hon. Member for Birmingham, Erdington (Jack Dromey) to his shadow ministerial position; this is the first time that we have faced each other across the Dispatch Box.
I congratulate everyone involved in the Living Wage Foundation on all that they have done to promote the concept of a living wage and to motivate more companies to pay it. As the Minister for small business, I was pleased to see that research carried out by the Universities of Middlesex and Liverpool about the adoption of the living wage by SMEs showed that 70% of respondents said that becoming a living wage employer had had a positive effect on their brand and corporate image.
I am proud to be part of a Government who have introduced the first national living wage, so let me take some time to acknowledge the magnitude of this change for workers. New earnings data released last week by the Office for National Statistics shows that 1.5 million workers will have seen a pay rise this April. The introduction of the national living wage meant that a full-time, low-paid worker working 35 hours a week would be earning about £900 more this year than last year, and even more workers will benefit as we make our way towards 2020.
As my hon. Friend the Member for Sutton and Cheam (Paul Scully) set out, new data have confirmed that wages have continued to grow by more than inflation. That is even more the case for the lowest paid, for whom the gains are by far the largest this year. I listened carefully to what hon. Members said about certain companies, but the overall impact of the new living wage has seen gross weekly pay for the lowest paid growing by 8.6% between 2015 and 2016. That is significantly higher than the growth at the median, which was just 3.2%. Despite what we heard this afternoon, wages rose well over twice as much for the low paid as they did for those on average or higher pay. The national living wage is now the highest minimum wage that the country has ever seen—not just in cash terms, but when inflation is taken into account.
Siobhain McDonagh
The Minister refers to the lowest-paid people gaining an increase of 8.2%, but that does not compare well with the top FTSE 100 chief executives, whose pay increase was 10%. My fear is not just for the lowest paid, but for the group of people just above them, who are finding that the introduction of the living wage is stripping out all the other benefits, leading to an overall reduction in their pay.
Margot James
I shall be dealing later with some of the points that the hon. Lady made in her speech about other benefits, and the overall impact on wages and take-home pay, but she should bear in mind that 8.2% is not very dissimilar to 10%. That does not mean that I am defending what many people have described as excessive pay rates at the top end. Indeed, the Prime Minister has asked my Department to produce a discussion paper on corporate governance. She has made it clear that she expects some of that top-end remuneration to come under the microscope, especially when it does not seem to reflect improved corporate performance.
I have listened carefully to representations about the level at which Governments should set the national living wage and the way in which overall pay should be managed. Higher pay needs to be affordable for employers, because if they cannot afford to pay it they will not hire workers and, worse still, may even lay workers off. The Low Pay Commission is led by an expert panel and is absolutely independent of the Government. We will continue to take its expert and independent advice, which will help us to set the national living wage. The commission will make its recommendations after careful consideration of the state of the economy to ensure that we can afford to make the living wage as high as possible without costing jobs. It will gather extensive evidence across the economy from workers, their representatives and employers, and will then reach an independent view.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
As the Minister will know, the merchant marine service has been one of the most difficult areas of employment when it comes to enforcement of the national minimum wage. When will we have the updated guidance on the application of the minimum wage to seafarers that we were promised?
Margot James
I will ask Her Majesty’s Revenue and Customs, which is the enforcement body for the minimum wage, what stage its investigation has reached. As one of my hon. Friends pointed out earlier, HMRC investigates every single complaint for underpayment, but it also mounts sector-based inquiries into such matters as the circumstances of seamen.
Let me now deal with some of the overall issues raised by the hon. Member for Mitcham and Morden. I share some of the concerns that have been expressed today. We know that employers are responding to the national living wage in a range of ways, depending on the markets in which they operate and the current state of their businesses. The extent to which they may be able to absorb the extra costs from profits, pass them on in the form of increased prices, increase the productivity of their staff or reduce other costs will vary between and within sectors. We think it essential for employers to ensure that their reward packages are competitive, and that they reward staff for their work in order to retain and develop workers who are fundamental to their success.
Ultimately, however, although we can set the minimum wage, it is for employers to decide how to manage those increases in their costs. Any changes in contracts must be agreed with workers, and must be in line with the law at the very least. Any instances of unfair dismissal that might result are, of course, a serious matter, and would be dealt with through employment tribunals, but employees could always contact the Advisory, Conciliation and Arbitration Service for guidance at the same time.
It is worth noting that changes in pay structures in the retail sector can reflect long-term changes to introduce greater consistency, perhaps the sort of changes that we have heard about this afternoon. Some may be coincident with, but not a consequence of, the introduction of the national living wage, and I do not accept that they are in any sense loopholes. The Government will continue to set a minimum hourly wage, and remuneration over and above that rate is a contractual matter between the employer and the employee.
Margot James
I will give way one last time. I am aware that many other Members wish to speak.
Joan Ryan
I thank the hon. Lady for giving way. She talks about going to ACAS or a tribunal in a way that makes that sound extremely easy. However, companies only have to have a 90-day consultation, and when that is finished they can take the measures they wish to take that lower wages by reducing overtime and bonus payments, despite the fact that they are implementing the Government’s national living wage. Surely this is a loophole and the Government should act; otherwise, what is the point of any of the Government’s measures?
Margot James
I do not see these matters as loopholes because there is no proof of a connection between the introduction of the national living wage and some of the cases we have heard about this afternoon.
I object to the automatic assumption that the changes that Marks & Spencer has made to its contracts and conditions are exploitative or a direct result of the national minimum wage. The hon. Member for Mitcham and Morden stated that Marks & Spencer had scrapped its pension scheme. It has not done so; like a host of other firms—the vast majority of private sector firms—it has moved from a defined benefit scheme to a defined contribution scheme. Indeed, the hon. Lady herself pointed out that the John Lewis Partnership had moved in such a direction several years ago, and it is not surprising when we consider what has happened to some of our large corporations’ defined benefit schemes in recent years. In August alone the deficit of those schemes increased by a massive £100 billion—and that was just in one month.
These pension schemes have to be sustainable; otherwise, we are going to see a calamity unfold over the next decade. Marks & Spencer has, along with the vast majority of other corporations, taken the entirely reasonable decision to move over, after consulting their employees at length and after putting in place a compensation programme to cover a three-year transitional period.
I took the precaution of talking to Marks & Spencer representatives to find out about the wider impact of some of these changes on employees of one of our most famous high street stores. I found that a rather different picture emerged from what we have heard from some Members in this debate. The company has put in place a Marks & Spencer living wage of £8.50 as a minimum for all store staff from April next year, and all those staff will receive a pay rise for every hour worked, and longer serving employees, who I agree have had to give up premium rates for Sunday and bank holiday working, will at least receive a lump sum in compensation. The conclusion is that approximately 90% of M&S employees will receive higher pay as a result of all the changes, which staff are free to accept or reject. M&S has also undertaken a very lengthy consultation covering all its store staff.
Margot James
I will; I did say I would not give way again, but it is the hon. Lady’s debate.
Siobhain McDonagh
As I have always done, I am specifically referring to those long-standing loyal members of staff who have worked at Marks & Spencer since before 2002—they have worked for at least 14 years for the store. Thousands of those members of staff are going to lose thousands of pounds each year. There is a two-year lump sum to be had. They have no choice; the 90-day consultation has taken place. If they reject their new contract, they will be sacked for another substantial reason. Does the Minister, on behalf of the Government, believe that that is a fair way to treat thousands of long-standing loyal staff who have gone into work at weekends and on bank holidays to keep the company they love going?
Margot James
I do not accept that that is a fair representation of what Marks & Spencer is doing at the moment, for many reasons. I note that the hon. Lady said that if staff did not accept the terms, they would be sacked for another reason. That would be illegal and I do not believe that Marks & Spencer would go down that road. I think it has been much—
Siobhain McDonagh
On a point of order, Mr Deputy Speaker. What the Minister has just said is legally and factually incorrect. The law states that if a company has a 90-day consultation with its staff about changes to terms and conditions, it can then issue a new contract. If a member of staff refuses to sign that contract, they can be sacked for another substantial reason.
Mr Deputy Speaker (Mr Lindsay Hoyle)
That is not a matter for the Chair, but the hon. Lady has put it on record for people to see.
Margot James
I think I will move on—[Interruption.] I do not accept what the hon. Lady has said. The 90-day consultation period ended with Marks & Spencer still having a few people not agreeing to the contract, and those people are still employed by Marks & Spencer. Also, 99% of employees have accepted the contracts. The other point that I would contest in what the hon. Lady accuses Marks & Spencer of doing—[Interruption.] I make no apology for trying to set the record straight. Hon. Members are free to speak in this House without fear or favour, and I make no apology for trying to set the record straight when I feel that a company, or perhaps an individual, in the outside world has been maligned unfairly. I make no apology whatever for that.
I shall conclude my remarks, because time is marching on. The national living wage has brought immense benefits to the workforce in this country and I am absolutely delighted that, for the first time in many years, wages have risen more than twice as much for the low paid as they have for those on average or higher pay around the country. That is to the credit of companies and workers alike, and for that reason among many others, I am delighted to support the whole notion of the national living wage.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
I am pleased to have this opportunity to contribute to this important debate, and I pay tribute to the hon. Member for Mitcham and Morden (Siobhain McDonagh) for securing this time from the Backbench Business Committee. I am grateful for the many examples that she and others have brought to the House today. I do not in any way seek to diminish those examples when I say that the people I am about to speak about would probably bite your hand off if they were offered the terms and conditions that the hon. Lady and others have described. I want to talk about the pay levels and employment practices on offer to our seafarers that are all too common in the maritime sector in the United Kingdom.
The recent detention of two vessels operating in the North sea—the Malaviya Seven and the Malaviya Twenty in Aberdeen and Great Yarmouth respectively—lifted the lid on payment and employment practices that are frankly scandalous, and from what I hear from many of those who work in our merchant marine in the North sea, this is just the tip of the iceberg. These practices are much more widespread and there is much more to be found. To put it bluntly, if these practices were happening on dry land, enforcement action would be taken immediately. They would not be tolerated. Because they are happening at sea, however, they are somehow out of sight and out of mind. I hope that when the Minister speaks to representatives of HMRC, she will impress it upon them that that attitude has to change.
I want to bring to the House’s attention the situation regarding two ferries that run lifeline freight services to my constituency from Aberdeen. The Helliar and the Hildasay are operated by Seatruck Ferries, but they are on contract to Serco, which operates the Scottish Government-funded lifeline ferry service. The RMT tells me that in 2014, when it last had sight of the contracts, some 20 ratings on the two ferries were being paid £3.66 an hour. The ferries’ journeys start in Aberdeen and finish in either Orkney or Shetland in the Northern Isles, but the company is able to pay that rate because it is deemed to be operating wholly outside UK waters. It beggars belief. It is wrong not only for the ratings, most of whom are probably Estonian nationals, but for UK seafarers whose jobs and livelihoods are being undercut by such employment practices. It is outrageous that a taxpayer-funded service is being operated in a way that undermines the opportunities of British seafarers to get working conditions and employment rates to which they would otherwise be entitled.
Seatruck Ferries recently said:
“Seatruck Ferries operates in a worldwide shipping market where NMW”—
national minimum wage—
“application in isolation would place the company at a serious disadvantage in relation to its competitors.”
It would appear that what it is doing is illegal, but, frankly, that is sheer sophistry. It is a scam that the Government could stop if they were minded to take the necessary action to stop it. That is why the point about the Government guidance on the application of the national minimum wage that I made in an intervention on the Minister is not just important, but extremely urgent. The practice may be bad, but from what I hear an awful lot worse is going on in the North sea on ships that have been chartered to the oil and gas industry.
I will not detain the House much longer because I do not have the time, but in evidence to the Energy and Climate Change Committee I challenged the chair and chief executive of the newly created Oil and Gas Authority to bring the operation of the maritime sector in the North sea within its remit, but they flatly refused. It seems to me as though they knew that there was something nasty underneath the stone and for that reason they were not prepared to lift it.
Jim McMahon (Oldham West and Royton) (Lab)
I thank my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for securing this important debate. The fact that the time limit that has now been applied is testament to how many Members wanted to speak.
I will talk about the national minimum wage, in particular its impact on young workers over 18-years-old. A fair society should recognise hard work and contribution. In doing so, it should ensure that work pays a decent wage in return. In this country, it should be about more than just getting by; people should be paid enough to get on and do well.
I took exception to the living wage brand being hijacked by the Government, who tried to claim it for what is basically a discounted living wage that is not enough for people to live on. Putting that cynical, cheap ploy to one side, now that the brand has been adopted—some commentators say “stolen”—by the Government, it is important that a genuine fist is made of trying to ensure that it is enough for people to earn a decent living. That will be good not only for workers and their employers, but for society and the Government, too.
To realise that ambition, we must move to a real living wage. Much has been said about the Government needing to honour their existing commitment, but even that does not go far enough. A real living wage by today’s standards is about £10 an hour. I commend the work of the Living Wage Foundation and our trade unions, and I am proud to be a member of the GMB, particularly at this moment in time, when it is leading the “£10 Now” campaign. That is about recognising the real cost of living and the real cost involved in people having a decent lifestyle as a result of their hard work and toil.
The situation is even more unfair for the under-25s. Younger workers can be working alongside someone slightly older who is doing the same job in the same location, for the same employer and with the same commitment, yet they can be paid between 3% and 23% less. That cannot be fair or just in a decent world. The current estimate is that 3.4 million people are in exactly that circumstance, where they are working for less than the national living wage.
I want to bring to the Chamber my own experience. I have always been a hard worker, and when I left school I worked as an apprentice during the daytime and as a delivery driver in the evening. On Saturdays, I worked in a newsagent’s, which I did just so that I could run a car. My shock came when we discovered that our first son was on his way. I was earning very little at the time, but it was enough to get a mortgage, which we did. I was 21 when Jack came along. I was 21 and paying a mortgage and council tax; paying for utilities; and trying to keep the food stocked up in the fridge and the cupboards. Under the current proposals, in today’s world, I would be earning far less than somebody doing the same job with the same expenditure, and I cannot see how that can be right or fair. If it was not for the University of Manchester taking me on as an apprentice technician, I would be in that same circumstance today, as many of my friends and family have found themselves. I would like to believe that in a just society and a fair society today they can achieve far more than just getting by.
I wish to read out an important quote, which comes from Rebecca Pitchford, a young 20-year-old retail worker. She says:
“Because of my age the Government says I can live on £5.55 an hour whilst my colleague earns £7.20 an hour for doing exactly the same job. Rent and living expenses are exactly the same, so why aren’t the wages?”
Let us give Rebecca the answer. More importantly, let us give Rebecca and the 3 million people like her a solution and pay them a decent wage.
Liz McInnes (Heywood and Middleton) (Lab)
First, I thank my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for securing this debate and for her exceptional work on this issue since the Government’s national living wage took effect. She has campaigned tirelessly for the rights and wages of workers, to make sure companies do not renege on their contractual commitment to the rate of statutory pay by reviewing and diminishing their staff benefit and reward structures. She has held firms such as B&Q and Marks & Spencer to account. They have tried to offset the cost of the national living wage by cutting Sunday pay, bank holiday pay, company pension contributions and unsocial hours. I echo the words of the right hon. Member for Tatton (Mr Osborne): that is not
“in the spirit of the law.”
I commend my hon. Friend’s unshakeable belief in following through on this undertaking, persistently raising this issue inside the Chamber and relentlessly campaigning outside the House. I am sure the thousands of affected workers would also like to thank her, too.
Many of those people are in my constituency. This week, I received a letter from a constituent, Lynn, who works for Marks & Spencer and has done so for 34 years. These are her words:
“I feel I have been blackmailed and threatened to sign the form to accept the small pay-out because I was told I would not receive this; also they would change my contract and that would mean I would have to start working Sundays and work all bank holidays. No matter what they say the loyal long service worker has been sold down the river and threatened.”
Lynn clearly feels that she has been forced into an “agreement”, despite the warm words from the Minister, and that she has been blackmailed—those are her words, not mine. It is disappointing to hear reports like this from employees of stalwarts of our high streets, which really should be striving to be seen as exemplar employers. While all this has been going on, Marks & Spencer has reported a 4.3% increase in profits; the total is £689 million in the UK and £1.1 billion internationally this year alone.
As we are all aware, this week is Living Wage Week—the real living wage, as determined by researchers at Loughborough University, not the Government’s misnamed “national living wage”, which is a new national minimum wage, no more, no less. The real living wage is good for the individual, good for the family, good for society and good for business itself. Two thirds of employers who pay the living wage—the real living wage—reported a significant impact on recruitment and retention. They also saw a sharp fall in absenteeism. More than 80% reported improvements in staff performance. It was my privilege yesterday to visit the living wage event held in Parliament and to talk with many small and medium-sized enterprises about the benefits of having living wage status and what it brings to their businesses. Large companies such as Marks & Spencer could learn a lot from them.
The former Prime Minster said that the genuine living wage was
“an idea whose time has come”,
and yet here we are, six years on of Conservative rule, and it has not been implemented.
James Berry
Instead of making tendentious points about the name of this living wage, perhaps the hon. Lady will explain why her party’s manifesto at the last election did not include bringing the living wage up to the level of the London or national living wage?
Liz McInnes
I believe that my party’s manifesto championed a decent standard of living for all workers. [Interruption.] I will have to go back to the 2015 manifesto and see what we actually said and get back to the hon. Gentleman.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I do not think that we will be debating the manifesto.
Liz McInnes
I have no intention of debating the manifesto, but I appreciate the warning.
The time is now upon us to commit to making work truly pay. I hope that the current Prime Minister will not fall short on her promise to make
“Britain a country that works for everyone.”
I will give the last words to Lynn, my constituent. She wants the Government to step in and stop Marks & Spencer, as well as other companies, reducing their employees’ rates of pay via benefits just so they can pay the national living wage. I hope that this Government will rise to this challenge and do the right thing for Lynn, and for workers up and down the country. What “party of the workers” could refuse that?
Patricia Gibson (North Ayrshire and Arran) (SNP)
I thank and congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on bringing this debate forward.
We are celebrating Living Wage Week, which is about raising awareness of the vital need for all those who go out to work to earn enough to meet the cost of living and to applaud those employers who have signed up to this scheme, committing to pay their staff the living wage. Of course I am talking about the real living wage of £8.45 an hour, which has just come into effect. It is not the same as the UK Government’s “pretendy” national living wage, which is set at £7.20 for people over the age of 25.
The national living wage relates to average earnings, not living costs. Therefore, it should not be called the living wage and it is disingenuous to call it so. By contrast, the living wage is calculated according to the basic cost of living and so takes account of adequacy of household incomes for achieving what everybody should aspire to have—an acceptable minimum standard of living. It cannot be too much to ask employers to pay their staff literally enough on which to live.
Mr Deputy Speaker
Let me explain. The Minister had probably 18 minutes in which to speak. The Front-Bench speeches are down to six or seven minutes. It is not fair. It is up to Patricia Gibson whether she wishes to give way.
Patricia Gibson
On the basis of what you have just said, Mr Deputy Speaker, I will proceed so that others can get in.
In the light of all that I have said, how can we not conclude that the UK Government’s so-called national living wage is not a living wage at all? By contrast, the Scottish National party Government have long championed the payment of the living wage and they see the real benefits to our economy of treating working people much more fairly.
Paying the real living wage—not the pretendy one—makes economic sense for employers. It increases productivity, reduces staff absence and reduces staff turnover. All the research on this area bears that out. Some 80% of employers felt that their staff delivered better quality work after paying the living wage and 75% of employees agreed that their work improved after receiving it. We know that low pay is a driver of in-work poverty, so with around 20% of Scotland’s workforce still earning less than the living wage, there is still much more work to do. However, the UK Government’s so-called national living wage also creates problems because it discriminates against people under 25. People aged 24 do not have a cheaper lifestyle than those aged 25, so the distinction is false and spurious.
The real living wage pays all workers over 18 years old the same pay. I am proud that Scotland has the highest proportion of employees paid the living wage—some 79.9%. A job should help people out of poverty, not keep them there. It is important that we understand that a real living wage makes a real difference to the lives of working people. It ought not to be controversial that workers earn a wage that they can live on. I wish the UK Government would take a leaf out of the Scottish Government’s book. The Scottish Government have long championed the living wage, understanding that it is important and it is a matter of social justice that people earn a minimum standard of living, not a wee pretendy national living wage, as the Government try to tell us.
Several hon. Members rose—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The two Front-Bench speakers have nine minutes each.
Chris Stephens (Glasgow South West) (SNP)
It is a pleasure to take part in this debate. I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing the debate. I know that she has been a tenacious campaigner on the issue and has contacted many MPs about it. I am pleased to support the motion in her name.
It has been an excellent debate. I look forward to the hon. Member for Bishop Auckland (Helen Goodman) telling us on a future occasion what the pay rates of the butlers and housekeepers are in Mr Morrison’s castle. I want to pick up on some of the themes in the speeches of the hon. Members for Halifax (Holly Lynch) and for Oldham West and Royton (Jim McMahon) in particular.
As others have said, the UK Government’s national living wage is not a living wage, but an additional tier of the national minimum wage. The national living wage does not benefit those under 25, who still face the lower rates of the national minimum wage. I view that as direct discrimination against young people. Differential pay for young workers is not acceptable and our long-term aspiration should be that the living wage becomes the norm across the board. There is no justification for paying people in their early 20s 25p an hour less than those who are younger.
Let us take the example of two workers in a fast food outlet, one aged 17 and the other aged 37. If they are both flipping hamburgers in that fast food outlet, surely they should be paid the same, but they are not. One is paid £4 an hour and the other is paid £7.20 an hour. Because of the way the Government have done the calculation and added the living wage to the national minimum wage, for someone who enters employment at 16 or 17 and stays with that employer, it will take eight or nine years to qualify for the highest minimum wage rate. No employer in the UK would keep a worker on a grade for that length of time before they reached the top of their pay scale. This is clearly discrimination against young workers, and it is one of the reasons why today’s young generation is likely to be poorer than generations before them.
There has been no adequate explanation in this debate of why the living wage applies only to those aged 25 or more. More importantly, as the hon. Member for Mitcham and Morden pointed out, the real issue is the enforcement of minimum wage rates. The National Audit Office confirmed last year that 209,000 workers were not paid the national minimum wage. That is a scandalous figure, and the pernicious practices of rogue employers who are trying other means to get round paying the living wage should be investigated. These are multinational companies that should be paying their tax and are not doing so. That should be addressed.
I support the comments of the right hon. Member for Orkney and Shetland (Mr Carmichael), who made the very serious point that somehow seafarers are exempt from the living wage and the national minimum wage. I hope Members will consider signing early-day motions 231 and 516 on this subject. The information that I have from the RMT is that seafarers are paid less than £2 an hour, which starkly illustrates the issue.
The so-called national living wage relates to average earnings, not living costs, and therefore cannot be a living wage. It is calculated according to the adequacy of household incomes for achieving an acceptable minimum living standard.
In Scotland the SNP continues to set the bar on fair work. On Monday 31 October the First Minister welcomed the new rate of the real living wage of £8.45 an hour, which will benefit thousands of workers in Scotland, and urged more Scottish organisations to sign up as accredited living wage employers. Peter Kelly, director of the Poverty Alliance, said on Monday:
“Today’s announcement of the new, increased, Living Wage rates of £8.45 brings a welcome pay rise to thousands of workers across Scotland. 430,000 people in Scotland still earn less than the wage they need to get by. This is an increase on the number of people struggling since last year’s figures. That’s why it’s more important than ever for leading employers to join the growing movement of businesses and organisations that are going further than the government minimum and making sure their employees earn enough to cover the real cost of living.”
The knowledge exchange project, carried out by the University of Strathclyde and the Living Wage Foundation, has found that implementing the real living wage encourages businesses to re-evaluate their approaches to staffing and payment, leading to more effective and efficient working patterns. Implementing the real living wage encourages businesses to re-evaluate their business model and increases skills development, staff performance, job satisfaction and staff retention.
According to the New Economics Foundation, one study found that when employers transitioned to paying staff at least the real living wage, they experienced significantly lower rates of staff turnover, reputational benefits, a reduction in sick leave, better motivated staff and an increase in productivity. A massive 80% of employers felt that their staff delivered better quality work after paying them the real living wage, with 75% of employees agreeing that their work was improved. One major UK firm found that paying contractor staff the real living wage cut staff turnover by half, saving it £75,000 on the value of a single contract.
There are now more than 624 Scots-based living wage accredited employers paying the real living wage, and the SNP Government have set a target of 1,000 by autumn 2017. I want to thank those living wage employers in Glasgow South West, including housing associations, Money Matters, Ypeople, Lifelink and Agripa, which is a local printing company.
Jack Dromey (Birmingham, Erdington) (Lab)
I welcome the Minister to the Front Bench. I congratulate my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) on her fierce advocacy of the living wage, and on exposing those who seek to avoid their responsibilities, rightly naming and shaming employers such as Marks & Spencer. She is right that I have met employees in my constituency who are affected in exactly the same way, so I think that the Minister—I say this with respect—will have to be careful not to sound like an apologist for Marks & Spencer. I hope that tomorrow Marks & Spencer will hear this debate and do the right thing.
Fifteen years ago I was a founding member of the drive for the living wage, together with what was then TELCO, which became London Citizens, which became Citizens UK. I ran the organising department of the Transport and General Workers Union. In what was a moral alliance with TELCO, faith groups and community organisations, we organised and won the living wage for 3,000 cleaners in Canary Wharf and the City of London, tackling the obscenity of cleaners on the minimum wage cleaning the toilets and boardrooms of those who earn millions.
Next, I am proud to say that I organised the first ever strike in the history of the House of Commons to win the living wage. I have in my office to this day a cartoon from The Times showing, in a wonderful parody of Black Rod at the state opening of Parliament, a cleaner with a mop in one hand and a bucket in the other, knocking down the doors of this place. We won the living wage.
I am proud to say that Birmingham, the city I represent, is now the most advanced in the country. We have 4,000 directly employed people on the living wage, with cleaners such as Elaine Hook saying it has transformed their lives. She said:
“I can now afford the little things in life that have made such a difference to my life.”
The same is true of care workers, with the council now rolling out the living wage and saying, “Why should we pay the least to those who care for those we love the most?” There is also a whole raft of private sector employers, such as National Express and Aviva, that have said that the living wage is right for them and right for their business.
I say with respect to the Minister, who talks about what we “can’t afford”, that the evidence we now have after 15 years of experience shows that the living wage is good for workers—of that there is no doubt—because it ends working poverty and contributes to the dignity of labour. It is good for the employer and for business in terms of productivity, flexibility and reduced staff turnover. It is good for the family, and I remember one of the Canary Wharf cleaners saying to me, “Mr Jack”—he kept calling me Mr Jack—“previously I had to sleep on buses between jobs. I did between three and four jobs to make ends meet, and I bitterly regretted it because I never saw my kids.” It is good for the local economy, because if the low paid get an increase, they do not salt their money away in Swiss bank accounts; they go out and spend it locally. And it is good for the national economy, because the workers concerned pay more tax and claim less in benefits. Quite simply, it is good for our society, and this is about what kind of country we want to be. The kind of country we need to be to succeed in the 21st century is one with an economy that is not based on low pay and low productivity, but that recognises, crucially, that how we treat workers is vital to the quality of the service they provide and the product they produce.
Three issues have been identified today. First, my hon. Friend was absolutely right to talk about the industry of avoidance, which ranges from bogus self-employment in the gig economy—now exposed by the successful GMB test case last week—to companies such as Fujitsu that should know better. Right now, there is a dispute there involving my union, Unite. Last year, Fujitsu made £85 million in profit; it paid one director £1.4 million. Yet it has been resisting the living wage. Now that it has started—finally—to concede, it has been doing exactly the same as Marks & Spencer, cutting bonuses for the employees concerned. It is a case of now you see it—the living wage—and now you don’t. People lose so much money that they end up worse off. When my hon. Friend the Member for Bishop Auckland (Helen Goodman) said that this was about greed, she was absolutely right.
Secondly, we need to tackle age discrimination. Together with my hon. Friend the Member for Halifax (Holly Lynch), I met those young GMB workers earlier this week. It is simply wrong that someone who can join the Army or get married is not entitled to the living wage until they are 25. That is unacceptable age discrimination, and it needs to end. My hon. Friend quoted Rebecca, and the point that came out of that discussion was that this was somebody who was coming out of university and who had built up all sorts of money they had to pay back, including tuition fees, but who was not able to earn the living wage. In addition, there was Thomas, another young worker. He said:
“In the end I had to take more jobs and borrow money from my family which has now put me into debt, all because my work is apparently worth less than if I was born before 1991.”
That is unacceptable age discrimination, and we are determined to stand up for the young people of this country and their entitlement to the living wage.
Thirdly, this is about the real living wage. With respect to the hon. Member for Kingston and Surbiton (James Berry), who may have had a damascene conversion on these issues, I remind him that the Conservative party resisted the national minimum wage every step of the way, year in, year out. The conversion is welcome, but I need to put history right.
The real living wage matters because, sadly, not least as a consequence of Government policies, we have had a low-wage, low-investment, high-debt economy, in which productivity has stagnated. We have an economy of grotesque contrasts. Andrew Haldane of the Bank of England has exposed that, whereas 30 years ago £10 in every £100 would go on company dividends, the figure is now £60 to £70 in every £100, with labour and investment being increasingly squeezed. Average weekly earnings are not expected to return to pre-crash levels until 2020, following the longest fall in wages since world war two. Between 2007 and 2015, wages in the UK fell by 10.4%—a drop equalled only in Greece. According to the ONS report, 3.9 million people in the UK are in persistent poverty. The Trussell Trust gave out more than 1 million three-day emergency food supplies through a network of 424 food banks in 2015-16.
Working poverty is quite simply shameful in 21st-century Britain. My hon. Friend the Member for Oldham West and Royton (Jim McMahon) was absolutely right to say that we are determined not only to enforce the existing national living wage properly and to prevent employers from taking other money away from employees who enjoy it, but to fight for a higher national living wage and ultimately to win. That is why we have set out a more ambitious approach than the Government of £10 an hour by 2020.
In conclusion, I pay tribute to all the hon. Members who have stood up today for the working poor and a proper living wage. I also pay tribute to the whole range of players from the public and private sectors who have been involved nationwide over the past 15 years, but in particular to Citizens UK. Had it not been for its work, we would not be where we are now. It has made and changed history with an idea that is in our blood in the Labour party, which is that no one should endure working poverty. The dignity of labour is paramount, and that means a wage with which someone can enjoy life with their family and kids, without having to scrimp and save, which has been the case for too long, and which still endures, in this country.
Siobhain McDonagh
I thank the Backbench Business Committee and all the Members who have contributed to this great debate. This, in essence, is about fairness. If someone is promised a pay rise, they should receive a pay rise. There are employers—large, well known, respectable companies—that are simply not doing that. They can dress it up whichever way they like, but that is what is happening, and we as politicians of all parties need to call it out. The vote for Brexit was in part a cry from people that life is not being fair—that they are not having the opportunity to get on; that there is no connection between productivity and pay; and that a fair day’s work does not get a fair day’s pay. If we are to keep our country together and get everybody to act as one, we need to ensure that that happens, and it will happen only if we do what we say and take on all those companies, well known or otherwise.
Question put and agreed to.
Resolved,
That this House recognises Living Wage Week which began on 31 October; believes that the use of the introduction of the national living wage to drive down conditions and take-home pay is against the spirit of the law; calls on the Government to close down those loopholes which make this possible; and further believes that any move to reduce the value of the national living wage to a level below the promised £9 per hour in 2020 is unacceptable.