Families: Cost of Living

Baroness Donaghy Excerpts

Thursday 31st October 2013 Lords Chamber

[Baroness Donaghy (Lab)]

I thank my noble friend Lady Prosser for introducing this debate. I think that it is very appropriate that we are having this debate on Halloween, described in the dictionary as the “eve of All Saints Day”, which is observed by dressing up in disguise, party turns, et cetera.

The noble Lord, Lord Newby, will be responding to the debate, no doubt in his usual balanced and intelligent way, and he will be the treat. Unfortunately, he will also be the disguise for some extremely nasty tricks from the majority in the coalition Government. The key test for any Government is the resilience of families to withstand the hard times. I maintain that we have a higher proportion of people in the UK who have no safety margin in the hard times, or even in the good times. I want to focus my contribution on inequality and low pay—in particular its impact on women.

Women have been clobbered by this Government—not surprising as they have been virtually barred from the Cabinet. On female employment, the UK performance ranks 15th in the Organisation for Economic Co-operation and Development. The Commission on Living Standards said that this,

“underperformance stems from a toxic mix of unusually high childcare costs, a lack of high quality part-time work and a poorly designed tax and benefit system”.

It continues,

“patchy and inadequate social care prevents many over 55s from working, as they care for elderly parents or partners”.

The report concludes:

“Compared with the best performing economies, around 1 million women are missing from the UK workplace”.

If policies do not change, a typical low-income household in 2020 will have 15% lower income than the equivalent household in 2008. I am not saying that solutions are easy, but this prediction is avoidable. We need to be far more active in promoting increased wages, employment and working hours in low to middle-income households. Today’s workplace is polarised, with employment growing in highly skilled jobs and in low-skilled, low-status service sector roles, but declining in middle-skilled jobs. While it is only part of the solution, we need massive investment in intermediate skills in tackling basic literacy and numeracy levels.

Let me turn, as other noble Lords have, to the issue of low pay. I am proud to be a founder member of the Low Pay Commission. It is 14 years since we set the first statutory national minimum wage of £3.60 but more importantly, its framework, which has stood the test of time. The figure was very modest because we wanted to establish a national minimum wage safely and securely.

The adult rate has increased by 72% since its introduction in April 1999. I am aware that the Low Pay Commission works within tight constraints and the fact that the hourly rate has increased by more than the increases in average earnings or prices is commendable. However, despite the increase this month to £6.31 an hour, it still means that the national minimum wage has not even doubled in 14 years. This is no criticism of the Low Pay Commission. It should have a wider remit, as has been said, and I welcome the statement by the Secretary of State, Vince Cable, that he is inviting the LPC to extend its expertise in this area. Let us hope it will come to something.

We need not only to extend its remit but to be much tougher on compliance. Research commissioned by the Low Pay Commission showed that around 6% of the bottom decile of adult earners in the UK were not receiving their entitlement to the national minimum wage. Areas of non-compliance are found in apprenticeships and internships; among those on work experience; in social care, especially domiciliary social care; and among hotel cleaners and home workers. The LPC recommended that more needs to be done to ensure that all available tools are fully utilised. It expresses disappointment that after two years only one non-compliant business has been publicly named.

Let me give a couple of examples of non-compliance. A company can show in its books that it pays the national minimum wage to its employees, but they then work substantial amounts of overtime at a lower rate off the books, bringing the total earnings to below the statutory minimum. We met complainants but they were not willing to raise the matter with their employer; they knew they would never get another job in the industry because of the close communications within it. We met home workers who were being paid 50p per pleated skirt whose circumstances prevented them going out to work. They were reluctant to complain because they knew that there was a huge queue of women waiting to take on the work.

One way to assist compliance is to have effective, clear and accessible guidance on all aspects of the minimum wage. However, the Government replaced the guidance which previously existed with a website which lacks the depth and breadth of that which appeared on the previous Government’s sites—the LPC’s words, not mine. Although the Government accepted the LPC’s recommendation about an improved information site, unfortunately it has not been implemented. There is no point in beefing up the national minimum wage if no one knows about it. Stakeholders have confirmed that the existing site does not meet their needs.

We should not forget that the floor provided by the national minimum wage is not intended to be a substitute for a low pay strategy—the two are entirely different. Too many employers rely on low pay rather than a skilled workforce and the taxpayer foots the bill for low pay. In-work benefits have been slashed by the Government, making the prospects for low-paid families far worse and saving money only in the short term. However, low pay will still be a cost to taxpayers because of the absence of savings and pensions to cushion any rises in the cost of living—not least because of increased debt, arrears and homelessness—which will eventually cost the Exchequer.

According to a Which? survey, 28% of men say that they are living comfortably on their incomes, but only 19% of women say they are. The gap between wealth and poverty continues to be obscene. When it comes to total disposable income, 45% is enjoyed by the highest earning fifth of the population and a mere 5% by the bottom fifth. The irony is that there has been a reduction in income inequality because of the recession but, as the Institute for Fiscal Studies has said, it is a temporary phenomenon.

I wonder how many in government have a clue about how difficult life is for those on low incomes. They seem to be invisible to this Government. It is a hand-to-mouth existence and includes people running from low-paid job to low-paid job, probably consuming gas and electricity via meter, the most expensive way, and being told they have a spare bedroom, which gives them either less money or less flexibility in managing their family life. Crocodile tears from the Liberal Democrats do not wash when they consistently troop through government Lobbies, cutting health services, health and safety, and welfare. I ask the Minister: when will his Government stop wagging their finger at the low paid and start to actually do something about it?