Low Pay

Anas Sarwar Excerpts

Wednesday 30th October 2013 Westminster Hall

[Mr Bain]

That is a very good idea. We should be considering what is available in fiscal terms and what we can do through procurement. As I will describe, local authorities and other parts of the public and voluntary sectors have a good record of addressing low pay, but that needs to be extended to the private sector. Procurement is one means by which we can do that.

My hon. Friend the Member for Glasgow Central (Anas Sarwar) is here today. He will know that the Procurement Reform (Scotland) Bill, presented by the Scottish Government, is particularly disappointing and simply does not meet the test of ending low pay in Scotland.

As many as 220,000 direct care workers may be paid less than their legal entitlement to the national minimum wage. That is a national scandal, and the Government must act to end it. Worse, poverty pay is creating an even larger burden on the state because it is one of the biggest drivers of the increasing costs of housing benefit and tax credits. The recent report of the Social Mobility and Child Poverty Commission found that 84% of the public agree that employers should do more to pay wages that better reflect the cost of living.

It is becoming increasingly clear that, if there is to be a wage-led recovery that reaches all the people of the United Kingdom, further action on the national minimum wage is needed now. According to the 2012 labour force survey, low pay is more prevalent in the private sector, with sole traders, partnerships and companies reporting rates of low pay at 47%, 35%, and 26% respectively. That compares with a low pay rate of only 15% in local government.

Although the tax credit system cushioned living standards between 2003 and 2008, and remains an important means of improving work incentives now, the case for building on the success of the national minimum wage has never been stronger. We should support councils and other parts of the public sector that pay or use procurement rules with the voluntary and private sectors to extend a living wage to more and more people. The Government should at last support the recognised living wage accreditation scheme, which would be a splendid way to mark national living wage week next week, but we also need to understand that a rise in the national minimum wage will help substantially more workers than even a voluntary expansion of the living wage by employers.

We also need better enforcement of the minimum wage to stop the exploitation of unpaid interns for months on end and should back the superb campaign led by Intern Aware. Equity highlights the ongoing issue with performers and arts organisations in relation to the exemption in section 44 of the National Minimum Wage Act 1998.

It is particularly shameful that the maximum penalty for fly-tipping is 10 times the penalty for not paying a worker the legal minimum rate for an hour’s work and that the average fine per breach of the minimum wage rules was just over £1,000 in the last financial year. There were just two successful prosecutions of employers last year for failing to pay the minimum wage rate, according to information provided to me by the Treasury. The Government can do a great deal more on enforcement, and I hope the Minister will outline the next steps.

As I said to the hon. Member for Hexham (Guy Opperman), increasing the personal tax allowance does not in itself end the crisis of low pay. Many low-paid workers do not earn enough to pay income tax and so would not benefit from further rises in the personal allowance. For lone or couple households with children, the interaction between a rising minimum wage and the help provided by the tax credit system will do the most to raise living standards.

We also need to be mindful that the introduction of universal credit will mean that what low-income taxpayers may gain from a higher personal allowance will be lost through the new tax credit system, which is assessed on after-tax income. New research by Gingerbread published this morning shows that the Government’s current plans for universal credit will make it far harder for low-income lone parents to make work pay beyond 20 hours a week, as the incentives rapidly taper away.

[Anas Sarwar (Glasgow Central) (Lab)]

I congratulate my hon. Friend on securing this important debate. He rightly says that having a job is not an automatic route out of poverty. For example, 50% of people who use a food bank in my constituency are in work. Does that not demonstrate that we need to create not only employment but a quality level of income so that people can lift themselves out of poverty and give opportunities to their children?

[Mr Bain]

My hon. Friend is entirely correct. He represents a constituency in which nearly half—44%—of male part-time workers are earning less than the living wage and in which nearly a third of all part-time workers are in the same predicament. We both see, therefore, the costs that that has on society, with people unable to make their salary or wages last the week or the month, so that they are forced in increasing numbers into using food banks, just to feed their families. That is wrong and shameful, and we can collectively do something about it.

The Resolution Foundation has shown recently that once workers, women in particular, are trapped in jobs paying the minimum wage, they find it hard to progress out of them. The Government need to do a lot more on skills in the workplace, to help progression and allow people to advance within a job and have the potential to earn a larger salary as a result. The truth is that the low rate of the national minimum wage is acting as a ceiling, rather than as a springboard, to higher living standards. The Government must do more on workplace skills to ensure that people can progress in their jobs.

I have some specific points, which I hope the Minister can deal with. In what ways might the Government change the remit of the Low Pay Commission? Are they looking to what Gavin Kelly of the Resolution Foundation has termed “forward guidance” on future rises in the national minimum wage as the economy, we hope, continues to grow?

What particular issues has the Minister asked the Low Pay Commission to examine in looking at how, sector by sector, national minimum pay rates might be increased? In sectors such as finance and banking, it has been established that higher pay rates might be affordable now, at no or relatively little cost to those employers, whereas for hotels and restaurants a more phased approach to raising wage rates might work best, to maximise employment.

The prize for employers is real: higher productivity, higher job satisfaction and reduced staff turnover. For workers, the Government and society, tackling chronic low wages could restore the principles that work will pay and that low-income Britain should share more fairly in the wealth that it generates for this country. Such a policy should commend itself not only to Opposition Members, but to every shade of political opinion in the House. It is time for this Government to do the right thing for once, and to support giving low-wage Britain a much-needed pay rise.