National Minimum Wage

Alec Shelbrooke Excerpts

Wednesday 15th January 2014 Commons Chamber

[Vince Cable]

I think hon. Members have had a chance to debate that already. I am a great advocate of the new model developed by Handelsbanken of relationship banking and no bonuses—that is what we ought to have—but I suspect that even their branch managers are paid above the minimum wage.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

Does my right hon. Friend share the incredulity of Government Members that for all the talk of bankers not having been affected, not one person has condemned the fact that trade union leaders have been getting double-digit pay rises in the same period?

[Vince Cable]

I suspect that that is also true, but I am trying to get away from the tribal debate that the shadow Secretary of State was so keen to launch.

To return to the thread of the argument, we have had a major shock, and it has reduced real earnings and the real minimum wage. I fully acknowledge that; it is a matter of fact. The question is: what is being done to mitigate the effects? Two major changes have taken place. First, the Government have recognised that earnings are not the same as take-home pay and disposable income, and we have therefore concentrated our tax policy on lifting low earners out of tax. As a result, 2.7 million low earners now pay no income tax. Those working 28 hours a week on the minimum wage pay no income tax, while those on 35 hours pay only one third of the income tax they paid at the beginning of this Government. We have therefore considerably reduced the impact of the squeeze on real incomes by using tax policy.

The second highly relevant issue is the level of unemployment. After the great crash in 1929, unemployment rose to 20%. In the recent financial crisis, countries less affected than the UK have had considerably higher unemployment—I am talking about France and Sweden, among others. We reached a peak of 8.5%; it has now gone down to 7% and is falling. We have record numbers of people in work, while the number of jobs has increased by 1.3 million, in the wake of this enormous economic crisis. Now, why has that happened? It has happened because millions of individual workers, realising that there is a choice to be made between jobs and pay, have wisely decided that it is much more important to keep the employment.

The Low Pay Commission, speaking for the country as a whole, rather than for individuals, has reinforced that assessment. In its 2012 report, it explained its analysis in the following terms—let us remember this is not the Government, but an independent commission representing unions, employers and independent assessors. It said its aim was a minimum wage that helped

“as many low-paid workers as possible without any significant adverse impact on employment or the economy.”

That became the mandate—the remit—that I have used, and it is virtually identical to the remit used by my Labour predecessor. I simply ask Labour Members what they object to in that remit. Do they seriously think that the Low Pay Commission and the Secretary of State should ignore the state of the economy or the level of employment? What do they think is fundamentally wrong with the remit?

--- Later in debate ---

[Vince Cable]

I must tell the hon. Gentleman that it is an argument to which the trade unions on the Low Pay Commission fully subscribe. This is the first time that I have heard Members seriously question the competence of the Low Pay Commission and challenge the whole principle of its remit. I am appalled and alarmed that they should want to tear up and politicise a basically good system which has worked well under the last Government and under this one, in different circumstances. That really is very dangerous.

[Alec Shelbrooke]

What I find strange—I am sure that my right hon. Friend agrees with me—is that the subject of the living wage keeps popping up on the Opposition Benches. Today’s debate is about the minimum wage, and the Labour motion does not call for the Low Pay Commission even to consider the issue of the living wage.

[Vince Cable]

Indeed. Admittedly the issue of the living wage is now part of the public debate, and of course I believe that if employers are profitable they should adopt it—particularly if they are taking advantage of their work forces—but we must be clear about the fact that making the living wage mandatory, either directly or indirectly, would have enormous implications for jobs.

--- Later in debate ---

[Robert Halfon (Harlow) (Con)]

The hon. Member for Leeds West (Rachel Reeves), who opened this debate, is right about one thing: it was a mistake for my party to have opposed the minimum wage. I am glad that we support it now. If we are honest about our mistakes, the Opposition need to be honest about what went on: that it was a mistake to abolish the 10p income tax rate; that median real wages stopped rising from 2003; and that the value of the minimum wage did not decrease from 2010 but from 2008. All of us have made mistakes in these areas, and the Opposition should have welcomed the fact that we have taken 2 million lower earners out of tax altogether.

[Alec Shelbrooke]

Does my hon. Friend agree that it was also a mistake to put in petrol price rises year after year—Labour would have added the equivalent of 64p a gallon by this time—which dig directly into hard-working people’s pockets?

[Robert Halfon]

My hon. Friend is right; our party has a relentless focus on helping the lower paid. We should support the minimum wage because we are the party of aspiration and working people, and increasing the minimum wage eliminates the poverty trap, cuts the benefits bill and encourages more people to get back into work. If we do just one thing, it should be to increase the minimum wage at least to reflect the increase in inflation over the past few years.

I also urge the Government to institute a regional minimum wage—in addition to the national minimum wage, not as a substitute for it—because of the different costs of living in different parts of the country. I am talking about the differing costs not just from north to south, but within regions. That has been done in other countries, such as Canada and the United States, where individual states can set minimum wage rates above the federal minimum. We need to consider such an approach seriously.

--- Later in debate ---

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

As I recently outlined, I am not in favour of a statutory living wage, but I am in favour of raising the minimum wage.

A rise in the minimum wage, as national wage growth returns, fundamentally leads to a smaller state, as has been outlined by Labour Members. Now that the Government have reduced business taxes—national insurance, corporation taxes and small business taxes—and brought in last year’s rebate, the time is right to look at how we can create a sustainable growth in the wages of the lowest-paid by giving the taxation that the Government were taking back to the people who are creating the wealth in companies. That means that the potentially inflationary pressures will not occur because the Government are not taking tax from a company just to give it back to a worker.

[Robert Halfon]

My hon. Friend talks about the Government cutting business taxes. Does he agree that they have also raised taxes for the rich by increasing capital gains tax from 18% to 28% and increasing to 45p the 40p rate that existed in the 13 years under Labour?

[Alec Shelbrooke]

My hon. Friend puts it most eloquently, as always.

This is an uncomfortable truth for Labour Members. [Interruption.] They have been yelling and shouting this afternoon, and they are at it again now as soon as they do not want to hear an inconvenient truth. The hon. Member for Vale of Clwyd (Chris Ruane) put forward the false premise that Government Members are saying we should increase wages for the people at the top and cut them for those at the bottom—no Government Member has ever made such a comment; it was a disgraceful thing to say—but failed to mention that under his party’s Government, the noble Lord Mandelson said that he was perfectly comfortable with people getting “filthy rich”.

[Mr MacNeil]

Is not this debate about the division of the spoils of productivity? We are looking for a division that is more like that of the 1950s, when those at the bottom were given a larger percentage than they get at the moment and those at the top got a smaller percentage. We now have a share-out of the spoils that is creating a level of inequality between sectors of society that we have not seen since the 1920s.

[Alec Shelbrooke]

I am grateful to the hon. Gentleman for giving me that extra minute. I will come to my own history lesson in a moment. He will of course welcome the fact that under this Government the gap between the poorest and the richest in society is the smallest it has been for 30 years, having grown under the previous Labour Government.

Let us talk about the problems of falsely increasing wages and go back to the 1970s. In 1975, my parents, who were young teachers, were given a 25% pay rise under Harold Wilson and were delighted with it. Twelve months later they suffered a 3% pay cut, because inflation had gone up to 28%. We also remember the then Labour Chancellor, Denis Healey, demanding wage restraint at the Labour party conference, only to be booed by the floor. Having listened to this afternoon’s speeches, I am sure that some Members present would boo him now, too.

Wage inflation creates a real problem for people on fixed incomes who have worked hard their entire lives and paid into private pension funds, only to then see them eroded by inflation running out of control. For example, in 1965 my great uncle retired at the age of 65 on what was then a very reasonable pension of £15 a week. By the mid-1970s it was absolutely worthless.

If we go ahead with wage inflation in the way suggested by the Labour party without linking it to cutting taxes for business and making sure that it is sustainable, we will end up, as Neil Kinnock said, with a Labour council running around the city in taxis, giving out redundancy notices.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

The problem for people on the minimum wage, though, is that it simply has not kept pace with inflation. Those people would each have been £675 better off had the minimum wage kept pace with inflation, even over the past five years.

[Alec Shelbrooke]

I entirely agree with everything the hon. Lady has just said. She is absolutely right. The minimum wage has not kept pace with inflation, but neither has anybody else’s wage, because of the devastation that the Labour party caused to the economy. It is going to take decades to get this country back on track, but what we are seeing now is a long-term, credible economic plan that is leading to real growth in business and GDP.

It is fundamentally evil to introduce policies that create inflation which people who are on fixed incomes and who have worked hard all their lives are unable to keep up with. Such policies must sound very good to the Islington elite as they sit around their dinner tables and say, “Let’s talk about a living wage. We must have a living wage.” It is notable, however, that Labour’s motion does not encourage the Low Pay Commission to look at a living wage.

[Mr Dave Watts (St Helens North) (Lab)]

Will the hon. Gentleman give way?

[Alec Shelbrooke]

I have already given way quite a lot, so I am afraid that I will not use up any more time. Having listened to the contributions of Labour Members, it seems to me that every single one of them has a different idea of what to do with a living wage.

Conservative Members accept the lessons of the past. Our party accepts that it was wrong to oppose the minimum wage. The Chancellor, the Prime Minister and many Conservative Members have made that clear. Indeed, we are a party of young people from normal backgrounds these days. As the previous Member for South Shields said, the trouble is that the Conservative party is the party with working-class people in it and the Labour party is full of failed polytechnic lecturers. The fact is that their philosophising and great ideas that sound good around the table have a real impact on the lives of people at the bottom of society.

Those who cannot afford to keep up with inflation because their income may not rise with it need proper, sustainable policies. One such policy is the opportunity we have taken in this economic climate to cut taxes on business and cut the national insurance contributions of business leaders and employers, followed by making sure that those tax cuts go back to the people who create the wealth in the first place. That is a sustainable and sensible policy and a long-term economic plan. For all those reasons, I urge the House to support the amendment in the name of my right hon. Friend the Prime Minister.