National Minimum Wage

Debate between Lord Field of Birkenhead and Chuka Umunna

Wednesday 15th October 2014 Commons Chamber

[Mr Umunna]

I will address precisely all three points the hon. Gentleman makes, which I have read and heard the Minister make in the media, but the issue is how we evolve what we have to tackle the fact that, despite the minimum wage, more than 5 million people are in low pay. When we introduced the minimum wage and when, as I have said, the hon. Gentleman’s Conservative colleagues opposed its introduction, people were earning as little as £1 an hour in some parts of the economy. We helped to do away with extreme low pay—[Interruption.] I will come to tax if the hon. Gentleman is patient. We now want to move things to address the bigger, broader issue of the large body of people in our country who are in low pay.

[Mr Frank Field (Birkenhead) (Lab)]

When the Opposition are developing policy, we should consider that there are clearly some sectors of industry that could pay substantially above the national minimum wage. When we go into the election, should we not only advocate an increase in the national minimum wage, but encourage those sectors that could pay higher wages without unemployment effects to do so?

[Mr Umunna]

I will come to my right hon. Friend’s point on different sectors if he bears with me for a moment.

How will Labour improve on the current arrangements? When the Labour Government established the national minimum wage, we tasked the Low Pay Commission with the discrete and technical job of setting the minimum wage within existing economic parameters. My right hon. Friend was one of the Ministers involved in its introduction. The Low Pay Commission’s job was to play the hand it was dealt, not to attempt to change the game. Over the years, it has played its hand well, but it has remained relatively hands-off. In that sense, those who say that it is more akin to a minimum wage commission as opposed to a Low Pay Commission are right.

Labour wants to transform the Low Pay Commission into a proper, official low pay watchdog, setting out what it believes we need to do tackle low pay, monitoring progress and making recommendations on how to boost productivity and make a higher minimum wage possible in different sectors. My vision for the Low Pay Commission is for it to be far more active. If we give it a bigger, more active role, it can not only challenge the Government more, but challenge different sectors. I would like it to have a much bigger standing in the national consciousness. Currently, I believe that it has around six to seven staff, who are mainly focused on statistical analysis, but I can see it becoming a big, low pay watchdog, playing a big part in the national conversation.

[Mr Field]

I rise merely to say how much I welcome that statement, because it relates to the work of the shadow Work and Pensions Secretary and other Opposition Front Benchers. If we are to control the welfare bill in a civilised way, making people who could pay higher minimum wages pay their due, rather than relying on taxpayers, is a crucial part of the strategy.

[Mr Umunna]

My right hon. Friend is absolutely right. I could not agree more with him.

My second point is that, up to now, the minimum wage has been set with a view to its short-term impact over the coming year. The Low Pay Commission is asked to describe the labour market as it is when it sets the rate, six months before the rate comes into force. It sets the context and gives the rate, but it does not give any guidance on how a higher level can be reached. Therefore, a Labour Government will set a target to increase the minimum wage from its current level of 54% of median earnings to 58% of median earnings by 2020, to be implemented by the Low Pay Commission during the next Parliament.

Forecasts show that that will take the minimum wage from £6.50 this year to £8.00 in October 2019—I can see the hon. Member for Hexham (Guy Opperman) looking up at me, but I will come to his point on the forecasts of £8.06. That long-term target will give businesses time to plan and to adapt their business models to boost productivity to support the higher level. The international evidence shows that countries can support minimum wages with such a measure, which could give us a similar level to that in Australia and other EU countries.