Living Wage

Albert Owen Excerpts

Thursday 6th November 2014 Commons Chamber

[Chris White]

I think that both parties have to work very closely on that. I believe that when contracts are being tendered there is certainly an opportunity that we should not miss. It is not right for either party to look for the lowest cost contract by excluding the living wage from the discussion.

[Albert Owen (Ynys Môn) (Lab)]

I congratulate the hon. Gentleman on securing the debate. He is making an important point about Government Departments paying the living wage through agencies. It is also the case—I am finding this with private companies as well as the public sector—that those agencies can be paid an equivalent of more than the living wage, when their costs are combined. Is that not something that the Government and other commissioners should look at, because the companies are not getting a great deal, and neither are their employees?

[Chris White]

I am grateful to the hon. Gentleman for that thoughtful intervention. If payment is made with the intention of paying staff the living wage, that increase should feed through directly to the employees. One reason for promoting this discussion today is to see how such employers can be embarrassed into making the right decisions for the people who work so hard doing these jobs, which sometimes we do not notice, but we would if they were not done. I pay tribute to all the people who work under these circumstances. Their tremendous work should be recognised.

Here in the House, the living wage is paid to staff. That is a leading example of doing the right thing, not least in my office, where an intern worked for me. He was paid the London living wage until I took him on on a full-time contract. He is probably watching this speech, and I congratulate him on his excellent work.

The living wage logo, which some of us, probably inappropriately, are wearing in the Chamber this afternoon, is a badge of honour for many employers. I am pleased to note that when, like me, they finally get the badge, a number of MPs have stated that they would be happy to support and promote it.

The best way to illustrate some of the positive impacts of the living wage is to highlight examples of employers and staff who have directly benefited from it. The Living Wage Foundation has compiled a list of employees and employers who have spoken of the benefits and the effective results that they have experienced through paying, and being paid, the living wage. Most employees speak of a reduction in stress and anxiety about financial pressures. Employers point out that paying a higher wage may attract better staff whom it rewards for their hard work. There is obviously ultimate value for their businesses as a whole.

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[Hywel Williams (Arfon) (PC)]

Thank you for calling me, Madam Deputy Speaker; I will be quick.

It is a pleasure to follow the hon. Member for Hexham (Guy Opperman), and I agree with a great deal of what he said. I congratulate the hon. Member for Warwick and Leamington (Chris White) on securing this debate. It is right that we should be debating this matter in living wage week. I launched my party’s policy on raising the minimum wage in line with the living wage in September, and Plaid Cymru was recently awarded living wage employer status.

The scale of the problem of low wages is, of course, enormous. The number of people on incomes below the living wage in Wales is 261,000, which is 24% of the population, as compared with 22% for the UK in general. Wales is just a little behind Northern Ireland, at 27%, the north-east of England, at 25%, and Yorkshire and the Humber, at 25%, and we are equal to the east midlands, at 24%. By contrast, 17% of the population in London live below the living wage, while in the south-east the figure is 18%. That means that the percentage in Wales is a third higher than in the most prosperous part of the UK. Among local authorities in Wales—I am sure the hon. Member for Ynys Môn (Albert Owen) will be interested in this—32% of the population of Conwy and Powys live below the living wage, which is nearly a third of the population, while the figure is 30% in Monmouthshire and 29% for Gwynedd, my local authority. That contrasts with Cardiff, where it is 18%, which is equal to the proportion in London and the south-east.

Around a quarter of people in Wales, and more in my constituency, are in low-paid work. Establishing the living wage would be a great benefit to them. [Interruption.] Pardon me for coughing. The UK rate of low pay, at 22%, is a scandal in one of the world’s wealthiest countries and points to the inequality of distribution of income across the UK. [Interruption.] Pardon me. The UK is one of the most unequal countries in the world, and certainly in the European Union. Gross value added per head in inner-London west is 12 times what it is in west Wales and the valleys. That is the scale of the contrast, but that unenviable pattern is also repeated within Wales. Rates of low pay in Cardiff are less than two thirds what they are in adjacent areas. There are areas close to Cardiff to which one can easily travel within less than an hour where a large proportion of people are on low pay.

[Albert Owen]

I am being helpful by intervening on the hon. Gentleman, who may want a drink of water. He is quite right about periphery areas in the United Kingdom suffering from this problem. Does he agree that there should be a concentration of effort on the low-paid areas? One way for the Government to do that—I make an appeal that I have made regularly—is to move quality Government jobs to periphery areas to help to boost those economies.

[Hywel Williams]

I agree with the hon. Gentleman, but we also need to support small businesses, particularly in rural Wales, which are after all the engine of economic prosperity in such areas.

Some calculations—they are not mine, but those of the Social Mobility and Child Poverty Commission—have shown that the current proposals will not have a huge effect on the percentage of people on very low pay. I note that the Labour party has said that the minimum wage should be £8 by 2020, which is unambitious to say the least.

Raising the minimum wage so that it is in line with the living wage makes economic sense. The Treasury currently subsidises businesses for paying poverty wages by topping up wages with tax credits. The model of having very low wages topped up the Government is unsustainable in the long term, and we should try to move away from it. After all, if the minimum wage was raised to the level of the living wage, the Treasury would be better off by not having to pay tax credits. Landman Economics calculates that that amount would be £1.5 billion per annum. That money should be reinvested in support for further employment. On the basis of some of the figures I have seen, reinvesting that amount would—using a multiplier of 0.9—provide 2,475 new jobs in Wales. Paying the living wage would therefore save the Government money, and investing that money would create more jobs and higher tax receipts.

I said earlier that businesses, particularly small businesses, have concerns about the living wage, as they did before the introduction of the minimum wage. They are concerned that business costs will go up, and that employment will go down. In the worst-case scenarios in analyses that I have seen, 160,000 jobs might be lost across the UK, including 8,000 in Wales. However, we must see that in the context of the growth in private sector jobs during the past three and a half years of fairly sluggish growth. In Wales, we have had 100,000 extra jobs. We might lose 8,000 jobs, but that has to be seen in the context of the large growth in private sector jobs.

There are other answers, of which the most obvious is economic growth. The UK Government say that the UK economy is growing—in difficult circumstances, I concede—and I think that it is fair, in times of growth, for the working poor to be among the first to benefit. I strongly believe that the concerns of businesses need to be addressed. My party’s policy includes support for small businesses, including through business rate relief, and an increase in local public procurement. We reckon it would create about 50,000 jobs if local authorities bought more cleverly and more locally. We also want a business bank for Wales to ensure that lending is more effective, and a private sector-led industrial development authority.

I want to refer in passing to a policy that has been available for a long time. In 2008, ECOFIN decided it was permissible to reduce VAT in certain labour-intensive sectors. Small businesses such as tourism and the building industry in my constituency would certainly benefit from a reduction in VAT to the 5% level that is allowed. I will not pursue that point now, but it is clearly one answer to the problems that small businesses face.

Lastly, increasing the purchasing power of lower-paid workers would be very good for local businesses. If people have an increase in their wages, they tend to spend the money locally, and there is a multiplier effect when such money circulates and multiplies. Plaid’s focus is on a Welsh economic recovery driven by investment and the creation of jobs that pay enough for people to live on. We will certainly be fighting for that between now and May.

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[Albert Owen (Ynys Môn) (Lab)]

It is a great pleasure to follow the thoughtful speech of my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). I have known and worked with him for many years and know how hard he has fought for those on low wages throughout the country. I congratulate the hon. Member for Warwick and Leamington (Chris White) on the thoughtful way he opened this debate, and the Living Wage campaign on its work. This is the living wage week, which brings together a cross-section of employers, employees, campaigners and communities under the umbrella of Citizens UK.

Unfortunately, low pay and in-work poverty are rising. We all see it in our constituencies. There has been a squeeze on wages. With wages being held down and energy and fuel costs rising, many families are really struggling. As has been said, the next Labour Government will introduce incentive measures to help businesses introduce the living wage through make-work-pay contracts, which is a positive way forward. We need to go back to the pioneering days of 1997 when we as a Government introduced the minimum wage legislation. I raise this as someone who has been involved in low pay issues. Before I was elected to this House, I was a manager of a centre for the unemployed in an area of high unemployment. I saw at first hand how dignity was taken away from people and their families.

When the national minimum wage was first introduced in my area, more than 2,000 families saw their wages doubled. That liberated those people. They went from £1.80 an hour to £3.60 an hour—a huge increase.

I have many friends in small businesses, particularly in the catering industry. They were worried about the impact that this would have on their businesses. But they told me a short period afterwards that their staff who had received this increase in pay were spending more in their premises. There was already a big impact on the economy and unemployment did not go up. I am sorry to have to make some party political points about this, but as an activist I remember the debates in this House when it was said, as the hon. Member for Bedford (Richard Fuller) did, that there would be a huge rise in unemployment. The Leader of the House warned that the minimum wage would increase unemployment by a million. The opposite happened. Employment grew by 1 million, because the economy was stimulated. That economic stimulus has been lacking in the last few years.

Conservative Members have made thoughtful contributions, and I agreed with much of what they said. They talk about raising income tax thresholds, but at the same time they have increased VAT, which is a regressive tax. That disincentivised people from spending in the economy. Let us be honest, if we ask people on that threshold whether they want an adequate living wage so that they can pay income tax to contribute to the welfare state and to services for their families and communities, or to be held down, not paying tax, we know that the answer will be that they want to contribute and pay income tax into a better community and a better society.

We have heard jibes—the hon. Member for Arfon (Hywel Williams) is not here—about Labour lacking ambition. Again, I have to say that when the minimum wage legislation was going through the House, it was not the nationalists who did the heavy lifting. They were absent. I was a candidate at that time and an activist, and in my constituency, Plaid Cymru was saying one thing to the small businesses and another to the trade unions. We have to be brave and bold to lift people out of poverty. The incoming Labour Government set that direction. They raised the minimum wage as part of a suite of measures to encourage businesses and local authorities to do likewise and to pay the living wage throughout the country.

Authorities have to take the lead, and Labour authorities are beginning to do so. For example, Islington and York, which I visit, have living wage zones. This is real action, and the local authorities encourage that. Shop windows in those zones are proud to display the badge worn by many hon. Members today. I do not see many badges in the window saying, “I don’t pay the living wage.” The living wage instils competition and good will, and other businesses follow suit.

[Jeremy Corbyn (Islington North) (Lab)]

I am pleased that my hon. Friend mentioned Islington. My borough council has been assertive in ensuring that all suppliers and contractors pay the living wage, and that has now been achieved in the domiciliary care services and it has a knock-on effect in the wider community. It is a great achievement and I thank my hon. Friend for mentioning it.

[Albert Owen]

I was going to mention only York, but I saw my hon. Friend so I added Islington to the list, having done my research beforehand. He is absolutely right. We all want to incentivise companies to do this. Small businesses do have fears, but we must allay those and give them help.

The tax credit system worked. It became cumbersome and technical and there were problems with it, but it was there to help people into work. At the end of the day, if we want to restore dignity to people throughout the UK, we need a higher living wage for people. In areas, such as my own, on the periphery, the Government have a role. As part of real devolution they can move jobs out. We talk about academic devolution, but real devolution is the Government, where they have a role, moving jobs and paying high wages so that others will follow suit. We will then have less in-work poverty, greater decency and a better society. A living wage improves the country that we are proud to live in.

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[The Minister for Skills and Equalities (Nick Boles)]

It is a pleasure to reply on behalf of the Government to this thoughtful and interesting debate. I congratulate my hon. Friend the Member for Warwick and Leamington (Chris White) not only on securing this debate during living wage week, but on his work, month in, month out, as deputy chair of the all-party group on poverty.

This has been an exemplary Backbench Business Committee debate. It has been polite, well researched, thoughtful and subtle, except when we were subjected to the ritual of Labour Members and nationalist party Members from other nations in our fine Union taking lumps out of one another. That is always a source of light relief for Government Members, so I make no objection.

It is fair to say that there is not a single Member of the House who does not want everyone in the country to command at least the living wage for their work. We share that goal, so the questions that we have debated so well today are how we get there, and how we ensure that the steps we take make progress and do not put at risk everything we have achieved.

We must remember that this country and economy were subjected to the most appalling shock. We lost 6% of our GDP as a result of the financial crash and the great recession that followed. The Low Pay Commission has not been able to recommend significant increases in the minimum wage until this year—it is important for me to say to the hon. Member for Banff and Buchan (Dr Whiteford) that this year the increase was higher than the average increase in wages, but she is right that this is the first time for a few years that that has been possible. The Low Pay Commission has been unable to make such a recommendation until this year because of the weakness of the economy and the massive increase in unemployment.

Fortunately, that situation has improved—it is by no means perfect, but it has improved. We have a strong and stable growing economy. This economy has created 2 million jobs. In the past year, we have seen the largest fall in unemployment ever. I say that not just to blow the Government’s trumpet, as Ministers always do—a little trumpet blowing is part of the job—but because nothing makes a better backdrop for achieving sustainable increases in the minimum wage and the living wage than a stably growing economy that creates employment.

Once a person is in a job, it is far more likely that they will be able to secure increases in wages than if they are receiving unemployment benefit—it is much less likely that someone can go to an employer and say, “I do not want that job at that wage,” and persuade them to increase the wage. If someone is in a job and has worked well for a number of months, and if the employer looks around and sees that there are not quite so many people eager for that job, the ability of every employee and the unions who represent them to secure sustainable increases in wages is far greater. The most important thing, therefore, is a strong and stable economy that creates jobs.

The second most important thing is for those who can afford to pay more than the minimum wage to lead the way and set an example. Many hon. Members have mentioned the role of the Government, Departments, local authorities and major businesses in our economy. Others mentioned examples of businesses that can afford to pay more than the minimum wage and should, and that perhaps should know better, not least the premiership football clubs mentioned so eloquently by the right hon. Member for Tottenham (Mr Lammy).

I make no pretence that I had anything to do with this because I have only recently been appointed, but I am delighted to be able to say that the two Departments in which I am a Minister—the Department for Education and the Department for Business, Innovation and Skills—are living wage payers for all their direct employees. That is important. The Department for Education also ensures that agency workers are paid more than the living wage. However, as hon. Members have pointed out, under some contracts—often cleaning or security contracts—we cannot guarantee that everybody receives more than the living wage.

We need to work on that, but we should not fool ourselves by thinking there is a simple lever we can pull. I believe almost any contract, if it is thought about intelligently, can be reconfigured in such a way that an equivalent level of service can be achieved without increasing the number of people employed, and that therefore productivity improvements can be sought that will make it possible for a contractor to pay a very slightly higher wage. I therefore do not believe there is necessarily a choice between lower service from contractors or lower wages. It is possible to maintain or even improve services and pay better wages, but it is not simple and it is not easy. The way to do it is by working with one’s contractors, explaining to them one’s hopes, ambitions and aspirations and hearing from them other ways we can perhaps change our demands as employers and contract letters, so that they can afford to pay those wages.

We heard examples from many hon. Members, not least my hon. Friend the Member for Hexham (Guy Opperman), of major companies that found a striking improvement in their ability to motivate and retain staff after they agreed to pay them the living wage. It is fantastic that companies such as KPMG and Costco are now willing to come out on the record and say that this is their experience. It is, however, very important that we understand that those companies may be in a position where they can do that, and that not every small and medium-sized business in the country is in that situation. It is through argument and example that the case is best made, not by imposition. That is why the Low Pay Commission does not believe that imposing a living wage, or making the national minimum wage rise to the level of the living wage, would be sensible.

Finally, before I give my hon. Friend the Member for Warwick and Leamington a chance to sum up, it is important for us to be very careful about what we say about the minimum wage and how increases are projected or promised. One of the reasons that the fears raised by my party on the minimum wage were not realised—Members were right to say that it was very controversial when it was introduced—and why most business groups in the country now support the national minimum wage is the way it has been constructed. The Government submit evidence to the Low Pay Commission, which produces recommendations, and the Government normally follow those recommendations. It is very important that we stick with that approach and do not start imposing on the Low Pay Commission politically driven expectations that cannot be delivered in our economy.

[Albert Owen]

On the national minimum wage, is the Minister saying that his party in local government, and many other parties where they are in control, should introduce this and build it in where they are not bound by the Low Pay Commission?

[Nick Boles]

Wherever they responsibly can, yes. Forgive me, but I must let my hon. Friend the Member for Warwick and Leamington sum up.