National Minimum Wage

Baroness Hollis of Heigham Excerpts

Thursday 6th November 2014 Lords Chamber

Asked by

[Baroness Hollis of Heigham]

To ask Her Majesty’s Government, in the light of the fall in value in real terms of the National Minimum Wage since 2010, what assessment they have made of any additional cost to the Exchequer in tax credits and other benefits.

[Lord Newby (LD)]

My Lords, in the evidence that it submitted to the Low Pay Commission in January this year, the Treasury looked at the impact of increasing the national minimum wage to £7. It estimated that overall net borrowing would be reduced by between £30 million and £70 million. The figure is relatively low because there would be an increase in social security spending as a result of fewer jobs, higher prices and lower corporation tax receipts.

[Baroness Hollis of Heigham (Lab)]

My Lords, last year HMRC failed to collect more than £250 million as a result of the failure to keep pace with the minimum wage. Work is no longer the route out of poverty; the majority of those in poverty are now in work. This is living wage week and the living wage is, rightly, voluntary, but it would save HMRC more than £3 billion a year in reduced benefits and increased tax revenues and, above all, it would make work pay. DWP pays the living wage but HMRC, with 25,000 fewer staff, does not. Why not?