National Minimum Wage

Angus Brendan MacNeil Excerpts

Wednesday 15th January 2014 Commons Chamber

[Vince Cable]

I have given way a number of times, and I should now like to finish what I have to say.

Along with the element of its remit that relates to the impact on employment, one of the key concepts in the work of the Low Pay Commission is what it calls the “bite”. That terrible bit of jargon refers to the relationship between the minimum wage and the median. It may be technical, but it is very important, because the closer the minimum wage gets to the median, the more likely it is that a big increase will displace employment. When the minimum wage was first introduced in 1999, it was about 46% of the median; now it is 53%, and there have been successive increases.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The median wage is falling.

[Vince Cable]

It did fall slightly last year—just slightly. However, the minimum wage is now significantly above that level.

That is a major issue for young workers and for apprenticeships. For young workers, particularly those aged 16 and 17, the so-called bite is close to 80%, which means that any significant increase in the minimum wage would have the unfortunate effect of displacing most of them from the labour force. That is a factor that has weighed very heavily with the Low Pay Commission when it has made its recommendations.

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[Vince Cable]

I have already said in the House on several occasions that the Government are now engaged in a public conversation about how we deal with zero-hours contract abuses. I think the hon. Gentleman has to be careful as the research that has been carried out suggests that very large numbers of people on zero-hours contracts like that model, but we must deal with the abuses, of course.

[Mr MacNeil]

rose—

[Vince Cable]

It would be remiss of me not to take at least one intervention from the Scottish nationalists, so I will do so.

[Mr MacNeil]

May I put in the right hon. Gentleman’s mind the words of Paul Krugman earlier this week? He spoke about unemployment insurance and how when money is in the hands of the poorest in society, that creates demand, which in turn creates jobs. The corollary of that is that the higher the minimum wage, the more money is put in people’s pockets and the more it circulates, and we return to a system, as in the 1950s, when inequality is reduced, rather than the situation now, when inequality is equivalent to what it was in the 1920s.

[Vince Cable]

Of course an increase in wages among other things increases demand, and that is one factor that has to be taken into account. That leads me on to the next point I want to make, which is how this year I have approached the issue of the mandate of the Low Pay Commission. Opposition Members have been questioning that and saying, “Why don’t you change the way we look at it?” I have done that, while respecting its independence. I have said the Government want a faster increase in the minimum wage, reflecting the fact we now have a real recovery, and in order to achieve that the LPC should look at a wider range of factors governing low pay. They include the fact that at the national economy level, the Governor of the Bank of England has now said that if unemployment falls to 7%, he would want there to be some tightening of monetary policy, as the environment will have changed. We would want to see what impact that will have on the cost of employment, which has been cushioned by the Chancellor’s decision to bring in the employment allowance—£2,000 for the first employee—as it significantly changes the cost of employment. We also need to look at the impact it would have on the Government, because there is an interaction with tax credits, tax yields and corporate taxation. There is the impact on take-home pay, too, and therefore we have to factor in our tax policy.

I have therefore asked the LPC to look at this problem in a much more holistic way. I do not know what it will conclude, and I will be respectful of its independent advice, but that is the way we are approaching this and we do now recognise that in a recovering economy low-paid workers should derive benefits, and that is how we are approaching this matter.

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[Chris Ruane]

No, I will not.

More than 7,000 people have visited me in Parliament since I was elected in 1997. Many have been schoolchildren and sixth formers. I always allocate a good period of time for questions and one of the most common questions is, “What are you most proud of from your 16 years as an MP?” I am most proud of this piece of legislation, which Labour introduced in 1998. It is totemic. It was an indicator at that historical time of what Labour was about and what the Tories were about. We were for the many and they were for the few. I welcome the massive U-turn that the Conservatives have made on that, but it is too little too late.

[Mr MacNeil]

rose—

[Chris Ruane]

I am afraid that I must make progress, as I am now using up my own time. I thank my hon. Friends the Members for Blaydon (Mr Anderson) and for North Ayrshire and Arran (Katy Clark) for their interventions as they gave me an extra two minutes, which I am eating into now.

The policy was resisted tooth and nail by the Tories. The House sat for two days in the Chamber and there were 70 hours of debate in Committee between 22 January and 17 February 1998. The Tories made the direst predictions about the introduction of the national minimum wage, predicting that 2 million jobs would be lost and every single person who received an increase would be sacked. That was absolute nonsense; an extra 2 million jobs were created.

The then Secretary of State for Wales, the right hon. Member for Richmond (Yorks) (Mr Hague), said:

“He is right: the adoption of a minimum wage and the social chapter would gravely inhibit employment opportunities in Wales. There is no question about that.”—[Official Report, 27 February 1997; Vol. 291, c. 461.]

What about when the Conservatives were closing down the steel mills and the coal mines in south Wales? Did that gravely inhibit employment opportunities in Wales? He said:

“Adoption of the social chapter and a minimum wage would price tens of thousands out of their jobs along with hundreds of thousands throughout the rest of the United Kingdom.”—[Official Report, 17 March 1997; Vol. 292, c. 609.]

He was on the mild side in referring to hundreds of thousands; the Conservative party nationally was predicting 2 million job losses. The Conservatives fought tooth and nail against the legislation, but it was passed. That is the proudest moment of my time here in the House.

In my constituency, we saw no job losses. We saw the number of people in employment go from 23,000 to 30,000. The St Asaph business park, which was built by the Conservatives in my constituency at the cost of £11 million, was empty for seven years. When Labour came to power, it was filled, and there are now more than 2,000 jobs on the park.

The national minimum wage legislation is fantastic, but we should not rest on our laurels. We need to move upwards and onwards to the next frontier, which, as has been mentioned by hon. Members, including shadow Ministers, is zero-hours contracts and a living wage. We need to push for better conditions and better payments for workers. That is in the best interests of those workers, their families and the economy.

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[Gordon Birtwistle]

The very profitable companies, such as the big engineering companies and the major multinationals, invariably pay well over the minimum wage. Many minimum wage payments occur, for example, in the care industry and those industries where low pay is accepted. I agree that if a company is profitable and doing well, it should recognise that its employees are creating not only wealth for the chief executive but wealth and security for themselves and for the country. I agree that companies should recognise what employees do, and the vast majority that do so pay a lot more than the national minimum wage.

[Mr MacNeil]

The hon. Gentleman is actually referring to the productivity gains that have been made. Studies in the United States of America show that the productivity gains have gone to the top 1%. The federal wage in the United States is about $7.25. Had that kept pace with the minimum wage in the 1960s and had the productivity gains been distributed at that level, the federal wage would have been treble the present rate. It is a fair bet that the same would be happening in other western countries, this one included.

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[Mr Bain]

I am grateful to the hon. Gentleman for his intervention, but that would simply mean that the maximum fine was only 40% of the maximum fine for fly-tipping in this country. Is he genuinely saying that there should not be an equivalence between the maximum fine for fly-tipping and the maximum fine for failing to pay the national minimum wage? I urge him to think again.

[Mr MacNeil]

Does the hon. Gentleman agree that minimum wages must have some link with productivity? Productivity is like a cake, with workers and CEOs each getting a slice, and that is what is making the difference to equality in this country.

[Mr Bain]

Unusually, I find myself in agreement with the hon. Gentleman; I will try not to make this a bad habit. He is right that industrial policy has a big part to play.

We need to be creating better-skilled jobs to replace those lost over the course of 30 years. We also need a transformation in skills in the workplace, because evidence from this country and from the OECD shows that an uplift in skills gives people the ability to progress in a job, to get new jobs, and to see a lasting increase in their wage levels across their career. That is what we need to be doing across our country in our industrial policy.

The scale of the crisis is being felt in every part of the United Kingdom. A written answer that I received from the Cabinet Office last Thursday, at column 250W of Hansard, shows that according to the most recent survey of wages and hours worked, conducted last April, over 16% of my constituents were paid less than the hourly rate for the living wage. Startlingly, in Chingford and Woodford Green, the constituency of the Work and Pensions Secretary, work is not paying under this Government, because 43% of workers are earning less than the living wage, including two in every three male part-time workers. That shows the scale of what is happening even in the constituencies of members of the Cabinet such as the Work and Pensions Secretary.

The case is clear: there has to be an increase in the minimum wage. We can work towards the living wage through Make Work Pay contracts, but the Government should be fulfilling their responsibilities in saying to the Low Pay Commission that low-wage Britain needs a pay rise, and needs it now.

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[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.

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[Chris Williamson (Derby North) (Lab)]

Last Wednesday was fat cat Wednesday—the day by which top executives in FTSE 100 companies had, two days after returning to work from the Christmas holidays, earned more money than the average worker, let alone someone on the minimum wage, will earn in the entire year.

Like my hon. Friend the Member for Vale of Clwyd (Chris Ruane), I undertook a job centre survey in 1996—in Derby—and I was absolutely shocked by the number of jobs on offer at £1 an hour or less. It had a hugely civilising effect on our country when the Labour Government, who were elected in 1997, introduced the national minimum wage and took millions of people up the income scale as a consequence.

We know that the national minimum wage was opposed by the Conservatives in this place and elsewhere in the country, and that the Liberal Democrats could not really make up their mind: some were in favour and some against. True to form, since returning to power, they have frozen the amount of resources available for its enforcement. That is utterly disgraceful, because the consequence of the freeze is to make it that much more difficult to bring to book exploitative employers who pay below the minimum wage.

I have to say that the Secretary of State for Business, Innovation and Skills was all over the place when he addressed the House. He said that the political process should not interfere with the Low Pay Commission, but he went on to say that he had interfered on some occasions, and let us remember that it was a political decision to bring in the national minimum wage in the first place. Given the Government’s parsimony in relation to ensuring that the necessary resources are available to the enforcement body, I want the Secretary of State to make a political intervention by conferring a formal third-party role on the trade union movement. Trade unions could help to monitor and enforce the minimum wage by ensuring, when they complain about non-compliance, that such complaints are investigated by HMRC as a matter of course, which would make a big impact.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Chris Williamson]

I will not take any interventions, if the hon. Gentleman does not mind, because I know that some of my hon. Friends want to speak and they may run out of time.

We certainly need better enforcement. It annoys me that the Conservative party is quite happy to use taxpayers’ money to subsidise the well-heeled in our society. Not enforcing the minimum wage and, indeed, not supporting the living wage is a case in point, because taxpayers’ money goes to subsidise low pay in our country. We therefore need not just support for the living wage, but greater penalties to ensure that the national minimum wage is enforced. It is welcome that penalties are being increased, but that is still not enough; more needs to be done.

Let us be clear that, as my hon. Friends have already said, when people on low incomes have more money in their pockets, they spend that money, which creates economic activity and growth, and helps to sustain and create jobs in other industries and businesses. In my view, that is really important.

Having listened to the Conservatives today and knowing their record from history, it seems to me that one thing is pretty clear: we cannot trust them—or, indeed, the Liberal Democrats—with the national minimum wage. It will take a Labour Government coming to power in 2015 to ensure that the national minimum wage is enforced, that appropriate penalties are imposed on recalcitrant employers and that we can move rapidly towards a living wage to bring all citizens up to a decent standard of living. We owe that to the people of this country, but it will take a Labour Government to achieve it.

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[Steve McCabe]

I am a fan of the living wage and I will mention it before I finish.

Forgive me, Mr Deputy Speaker, if I am a little cynical, but there is a consistent thread to Tory opposition. In 1983, they abolished the fair wage resolution. In 1993, they abolished wages councils. It took them until 2005 to give a manifesto commitment to retain the minimum wage. Of course, nobody told the hon. Member for Christchurch (Mr Chope), who has made successive efforts to sabotage it. All of that is probably why only 14% of people think the Tory party best represents low-paid, private sector workers. The sad truth is that the minimum wage has not kept pace with inflation and the early gains have been wiped out. In October, those on the minimum wage got a 12p rise while the Government were busy giving millionaire bankers a tax cut worth £100 million. It is funny how that poses so little threat to the economy. In fact, it apparently poses no threat at all, because they are about to give them another one.

[Mr MacNeil]

Given that the stories of doom about the minimum wage did not amount to anything, does the hon. Gentleman look back with hindsight, as openly and as honestly as he can, and think that the minimum wage could have started on a higher rate without any ill effects?