National Living Wage

Barbara Keeley Excerpts

Monday 18th April 2016 Commons Chamber

[Joan Ryan]

I would indeed. Part of what we are doing today is asking the Government and the Chancellor to address these issues. There are strengthened penalties for employers who do not pay the national living wage, but I suggest that alongside those should go penalties for employers who deliberately circumvent the national living wage in this way.

My hon. Friend the Member for Mitcham and Morden was grateful for the fact that her speech during the Budget debate last month offered a great platform to get this issue the recognition it deserves. She was especially grateful for the interest shown by the Minister for Small Business, Industry and Enterprise, which doubtless brought further attention to this issue, and I am pleased to see her here. My hon. Friend’s speech highlighted how illogical and unfair it was to claim that Britain was getting a pay rise while hard-working employees across the country were being hit by such pay cuts. She reminded the Government that the week before, the Prime Minister and the Chancellor had been unwilling to promise that nobody who works on the shop floor would be taking home less money after 1 April. Last year, the Chancellor said he was committed to a higher-wage economy. He said:

“It cannot be right that we go on asking taxpayers to subsidise…the businesses who pay the lowest wages.”

He promised that the change would have only a “‘fractional’ effect on jobs”, and that the cost to business would be

“just 1% of corporate profits.”—[Official Report, 8 July 2015; Vol. 598, c. 337 to 338.]

That was a cost he offset with a cut to corporation tax.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

I congratulate my right hon. Friend on this opening speech, and on the way in which she is making it. May I raise the issue of care providers? The care sector is faced with a bill of £330 million for implementing this legislation—this is money that the Government have not provided—and I hope to be called today so that I can talk about the impact the change is having on wages and conditions there.

[Joan Ryan]

That is a crucial point, because the cost to business is offset by the reduction in corporation tax, and smaller businesses will also benefit from increased business rate relief and higher national insurance allowances. In terms of care homes, there is also a significant impact on local authorities, and that has not been taken into account.

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[Barbara Keeley (Worsley and Eccles South) (Lab)]

I pay tribute to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for her work in preparation for the debate, and to my right hon. Friend the Member for Enfield North (Joan Ryan) for the way in which she opened it.

I want to focus on the impact that the Government’s so-called national living wage is having, and could have, on the care sector, following the theme raised by the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry). The care sector is under increasing financial pressure, and many organisations have warned that the Government’s failure to provide additional funding for the national living wage could result in a number of care providers becoming financially unviable. It will also have an impact on the pay and working conditions of care staff.

The Local Government Association has estimated that introducing the Government’s national living wage will cost home care and residential care providers at least £330 million this year. A number of Members have mentioned the social care precept. In my local area of Salford, the precept can raise only £1.6 million, but the cost of the national living wage increase to the care sector is £2.7 million. It has clearly been left to taxpayers to pay for, with a mechanism that is not even sufficient.

Care England says that the Government’s national living wage announcement

“places additional, unfunded pressures on the care sector that it cannot cope with. Care providers have already had to fund the National Minimum Wage increase of October 2015, plus standard Cost of Living increase in contracts from local authorities, and increases in Care Quality Commission regulatory fees…The aggregate impact of all of these increases is substantial: providers estimate that this will cost them a 5% rise in the wage bill in the first year, and 7% each year thereafter.”

I have already been told that, like other businesses, some care providers have altered their employment contracts and conditions as a way of coping with those changes, meaning that additional costs from the national living wage are being paid for by careworkers themselves. As we have heard, many careworkers are already underpaid. The National Audit Office has reported that up to 22,000 home care workers in England are illegally paid below the national minimum wage, and I believe the actual figure is much higher.

In HMRC investigations of care providers between 2011 and 2015, more than four out of 10 were found not to be complying with the national minimum wage. The Resolution Foundation has calculated that careworkers are collectively cheated of £130 million a year due to pay levels below the minimum wage. That is done through a variety of mechanisms, such as careworkers not being paid adequately for travel time, despite statutory guidance. As one careworker has said:

“In order to earn a full time wage, the carers in our company usually start work at 7 am and work until 9 pm five/six days a week, with gaps throughout the day where we wait in the car until due at the next client.”

Some careworkers are paid as little as £3.50 per hour when lack of pay for travel and waiting time is considered.

[Mr George Howarth]

In response to a point that I raised earlier, the hon. Member for Shipley (Philip Davies) said that he thought the biggest cause of more people going to food banks would be if people lost their jobs. As I know he is aware, the facts show that the majority of people who use food banks are those in low-paid and insecure employment.

[Barbara Keeley]

Very much so. We are talking about people who are paid £3.50 an hour, and their hours are being cut. Careworkers on zero-hours contracts complain about not getting the hours they want and are finding it hard to make ends meet, so my right hon. Friend is quite right. In a recent Channel 4 “Dispatches” programme, an undercover reporter employed as a careworker confirmed the point about staff being paid way under the minimum wage. He was being paid just £3.89 an hour, working in a London borough.

Rather than improving pay, the introduction of what the Government call the national living wage is having an adverse effect on the working conditions of some careworkers. I have heard reports of one domiciliary care provider in the north-west raising the wages of care staff to £7.75—fair enough—but balancing the increase by introducing other changes that have a negative impact on employees. Sick pay, which was previously two weeks on full pay and two weeks on half pay, has ended. The hours during which careworkers must be available for work now run from 7 am to 11 pm. Mileage claims no longer include the first 10 miles of each day’s journeys—and staff are already paid only 20p a mile, which is well below HMRC’s recommended rate of 45p a mile. Workers at that care provider believe they are effectively paying for their own pay rise.

I have heard of a care provider in the east midlands cutting staff allowances and charging more for services in order to implement the national living wage. I am sure we will see much more of that up and down the country. As a result of the mileage allowance being cut by 15p to 20p a mile and the first and last seven miles of travel each day being excluded, 35% of the workforce at that care provider will lose out. Some workers have reported that they will lose up to £1,000 a year. That is shameful. It is just like the B&Q workers my right hon. Friend the Member for Enfield North talked about.

The introduction of what the Government call the national living wage was supposed to improve employees’ living standards, but it appears that some careworkers are receiving little or no benefit from the changes and that some might even be worse off. If careworkers continue to suffer because of unpaid travel time, care visits that are too short and unfair working conditions, it will have a detrimental effect on their work and the wellbeing of the people they care for. In fact, the Social Care Institute for Excellence has warned that stress and low morale resulting from how care staff are treated can have a direct impact on care service quality.

I believe that care work is a demanding job and requires skilled workers who are compassionate and have the time to provide good-quality care. It is completely unacceptable that a job that has historically been undervalued is being so exploited today and that careworkers are not being paid the basic wage for the job they do. Given the examples I have quoted, will the Minister tell us what the Government will do to ensure that careworkers are not worse off as a result of the national living wage?

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[The Minister for Skills (Nick Boles)]

This has been an excellent debate. My, how we have missed the hon. Member for Mitcham and Morden (Siobhain McDonagh). We are all agreed on that. If she is listening, I hope that she is enjoying the hospital grapes. We look forward to her rejoining us and adding great wisdom to our deliberations. However, she was well represented by the right hon. Member for Enfield North (Joan Ryan), who brought equal passion to her argument for working people in her constituency and across the land, who, as we all agree, deserve a pay rise.

I was struck by the fact that most Opposition Members failed to recognise the significance of the achievement. Call it a national minimum wage or a national living wage—I do not really care—but please recognise that it is a significant increase in the legal minimum hourly rate for workers across the country. I would have hoped that there might be a little more recognition of that, although I acknowledge that the right hon. Member for Enfield North and the hon. Member for Heywood and Middleton (Liz McInnes) were gracious enough to call it a step in the right direction. Indeed, the hon. Member for Cardiff West (Kevin Brennan) did the same from the Front Bench, even if there was a little sting in the tail, as there always is with him.

However, none of the Opposition contributors recognised why the Government are able to do this now, namely because of the steps that we have taken to ensure that the economy is strong. If the economy was weak, unemployment was rising and business failures were increasing, such an intervention would have been profoundly damaging to the British economy and to the interests of the working people whose pay we would like see increase. There would have been millions of job losses and a far greater loss of income than gain. The reason why we have been able to do this now is because of the difficult steps—every one opposed by the Opposition—that we have taken to secure a strong economy and to create the platform from which we were able to make this intervention.

[Barbara Keeley]

As the Minister is talking about the strength of the economy, will he comment on my points about the care sector, which is not strong? It is being hit with a bill of £330 million, but the Chancellor has refused even to bring forward funding from later years, as requested by the LGA, to meet the bill. In the meantime, we have people earning £3.50 or £3.89 an hour. That is the tragedy.

[Nick Boles]

I do not accept the hon. Lady’s analysis. A total of £3.5 billion of extra revenue is being provided through the social care precept and the Better Care Fund, which is more than adequate to cover the cost of the living wage.

[Barbara Keeley]

Will the Minister give way?

[Nick Boles]

I will not give way again.

We agree that we want everyone to benefit from the pay rise that that national living wage represents. I want to be clear about how we will ensure, as a Government and as Members of Parliament, that that is the case. The first and most important thing is to ensure that all employers fulfil, in full and in every case, their legal obligation to pay the national minimum wage at whatever level it is set for those under 25 and the new national living wage for those over 25.

I can report to the House that we are enforcing the national minimum wage more robustly than any previous Government and will be enforcing it more robustly every year. In 2015-16, Her Majesty’s Revenue and Customs identified more than £10 million of arrears for more than 58,000 workers across the economy—three times the arrears identified in 2014-15 and for twice as many workers. I am delighted to be able to share with hon. Members that we will increase the HMRC enforcement budget to £20 million in 2016-17, which is up from £13 million in 2015-16 and from only £8 million in the last year of the Labour Government. Spending on enforcement of the national minimum wage and the national living wage next year will be more than double what it was in the last year of the Labour Government.