Chuka Umunna
Main Page: Chuka Umunna (Liberal Democrat - Streatham)Department Debates - View all Chuka Umunna's debates with the Department for Education
(10 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Chuka Umunna (Streatham) (Lab)
I beg to move,
That this House notes that the value of the National Minimum Wage has been eroded since 2010 as working people have been hit by the cost-of-living crisis and are on average £1,600 a year worse off; recognises that the fall in the real value of the minimum wage since 2010 is now costing the public purse £270 million a year in additional benefit and tax credit payments; further notes that the Chancellor of the Exchequer cruelly misled working people by saying he wanted to see a minimum wage of £7 while the Government has no plans to reach this goal; calls on the Government to set an ambitious target for the National Minimum Wage to significantly increase to 58 per cent of median average earnings, putting it on course to reach £8 before the end of the next Parliament; supports action to help and encourage more firms to pay a living wage through “make work pay” contracts to boost living standards and restore the link between hard work and fair pay so that everyone shares in the UK’s wealth, not just a few at the top; and further calls on the Government to set a national goal of halving the number of people on low pay by 2025.
We are a great country with some of the most hard-working and creative people in the world, but there are challenges and problems that must be addressed. We are the sixth largest economy in the world, yet too many people do not have secure, fulfilling jobs that provide dignity, respect and a wage that they can live on. Most people who are living in poverty in this country have a job. If people do the right thing, play by the rules and work hard, day in, day out, they should not have to live in poverty in this country; but the reality in 2014 is that they do. More than 5 million people do not earn a decent wage.
We can see the economic data and, yes, on paper, GDP growth is better than it was two years ago, but the reality of people’s lived experience suggests otherwise. Just in the past fortnight, the much respected Resolution Foundation has produced research that paints a different picture. Tens of thousands of people are trapped in low-paid jobs with little hope of a pay rise. Among those minimum wage employees who have been employed for at least five years, a record one in four has failed to progress off the minimum wage for the entirety of that period. That compares with just one in 10 minimum wage workers a decade ago.
That is the background to our motion. What each party says it will do to address that situation and to make work pay will provide the context in which the next general election is fought. Before I set out what the Labour party would do if elected next year, I will remind people what we have already done. I have said it before and I will say it again: in 2010, this party left the country in an immeasurably better state than we found it in 1997. [Interruption.] If the Minister waits, he will get his time in a moment. One of the many reasons for that was our utter determination to end the outrage of people being exploited at work, which led to our establishment of the national minimum wage in the face of opposition from Conservative Members.
In 1997, the current Secretary of State for Work and Pensions—I note that he is not here—told the House that if we introduced the national minimum wage, it would
“negatively affect, not hundreds of thousands but millions of people.”—[Official Report, 4 July 1997; Vol. 315, c. 526.]
In the same year, the current Defence Secretary told the House that the Conservative party had “always resisted” the minimum wage and that he thought there were “other better solutions” to extreme low pay. Then, of course, there was the Conservative party leader—now the Leader of the House—who said that a minimum wage would be
“either so low as to be utterly irrelevant or so high that it would price people out of work.”—[Official Report, 17 March 1997; Vol. 308, c. 618.]
They and their Conservative colleagues made those claims and arguments to justify inaction at a time when some people in this country were earning as little as £1 an hour.
We had the good sense to ignore the Conservatives, and in my view establishing a national minimum wage was one of our greatest ever achievements. As a consequence, between 1997 and 2001 extreme low pay fell from 6.9% to 1.5% of the work force, and we are proud of that. All the evidence shows that the minimum wage boosted earnings considerably, without causing the unemployment that we were told would follow. So when people say that we are all the same, I point to the establishment of the minimum wage to illustrate our very different instincts as parties, our different approaches and the kind of difference that a Labour Government make when in office.
Mr Russell Brown (Dumfries and Galloway) (Lab)
I served on the Committee that considered the National Minimum Wage Bill, and the only other person in the Chamber who did that is you, Mr Speaker. We spent many long hours through the night—
Mr Umunna
I thank my hon. Friend; that is interesting and I look forward to hearing his comments on who took what position at that time.
Yesterday, I revisited an interview with the great Sir Ian McCartney, a former Member of this House, who was the Minister at the Department of Trade and Industry and pushed the National Minimum Wage Bill through the House. He said that he would have “died in the ditch” to ensure that we got it through, and—my hon. Friend the Member for Dumfries and Galloway (Mr Brown) will remember this—we had a record sitting of the House to get the national minimum wage through in the face of resistance from Conservative Members.
I distinctly remember Sir Ian McCartney at a press conference with the Westminster lobby, explaining why we were doing what we were doing. He was a former kitchen worker and earned poverty wages. I remember seeing the news report of him weeping at that press conference, explaining how he was paid something like 1p or 2p per potato that he put in a bag in that kitchen, and asking the lobbying journalists, “How can you defend that in our country in this day and age?”
As I said, Labour Members are rightly proud of the national minimum wage, and we make no apologies for reminding people of the resistance that we met when we introduced it, and of the difference that a Labour Government make to people’s lives.
Andy Sawford (Corby) (Lab/Co-op)
My hon. Friend is right to highlight the stark choice around fairness that people faced in this country all those years ago in 1997, and the different positions that the Labour and Conservative parties took on the minimum wage. Does he agree that today that choice is perhaps best symbolised by the support of Conservative Members for the bedroom tax, which makes me think that they have learned nothing from their opposition to the minimum wage?
Mr Umunna
I completely agree with my hon. Friend, and in my constituency I have seen the stress, upset and angst caused by the bedroom tax, causing people to have to leave an area in which many of them have grown up and love so much. My hon. Friend is right: the bedroom tax shows the instincts of our different parties.
Although we are, of course, proud to have established the national minimum wage, which helped to end exploitation and extreme low pay, it did not end low pay per se. Under this Government working people have experienced their wages dropping by an average of more than £1,600 a year. The 1 October rise in the minimum wage is the first real-terms increase during this Parliament, and it is still 4.1% below its 2008 peak and just 2p above its equivalent value in 2005. Therefore, if we are elected next year, our goal will be to halve the number of people on low pay in our country. To achieve that, we need the minimum wage to evolve to address the broader problem of low pay, which is the purpose of the motion.
Andrew Gwynne (Denton and Reddish) (Lab)
We need that proposal, but we also need effective enforcement of the national minimum wage. Is my hon. Friend appalled, as I am, to learn that as many as 300,000 people in this country are still being paid below the national minimum wage and yet, in the past four years, there have been only two prosecutions?
Mr Umunna
I am appalled by that. My hon. Friend is right to mention enforcement. I will come to that, but I pay tribute to his work—I have been to his constituency—on ensuring that those who work hard get a decent day’s pay, in addition to his work on training and apprenticeships, which he has talked about a lot.
Mrs Anne Main (St Albans) (Con)
In the interests of fair pay for a fair day’s work, does the hon. Gentleman share my concern that so many right hon. and hon. Members, including many Opposition Members, pay absolutely nothing to some of the young people who work in this place? He should campaign to ensure that all hon. Members pay a fair wage for a fair day’s work.
Mr Umunna
I do not know to whom the hon. Lady refers, but in my experience, my Labour colleagues have always sought to ensure that those who work for them are paid a decent wage. I am sure that she, like others, might occasionally, as I do in my constituency office, have sixth-formers who are work experience students. Their situation is different from those whom hon. Members employ, but if hon. Members employ somebody to work for them, they should be paid a decent wage.
I spoke of the evolution of the national minimum wage and what Labour wants to do. With that in mind, we asked the former deputy chair of KPMG, Alan Buckle, to consult business, trade unions and others on how we can strengthen the minimum wage and restore its value. In so doing, Mr Buckle consulted many companies extensively. There is a growing body of opinion that the value of the minimum wage should rise. Sir Ian Cheshire, chief executive of Kingfisher, Jeremy Bennett, chief executive officer for Europe for Nomura, and Steve Marshall, the executive chairman of Balfour Beatty, are among those who are calling, as the economy recovers, for the minimum wage to increase faster than it has in the recent past. They say that that will benefit businesses and improve the public finances—the fall in the real value of the minimum wage since 2010 now costs the Exchequer £270 million a year in additional benefit and tax credit payments, a point that my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Work and Pensions Secretary, will build on later.
Guy Opperman (Hexham) (Con)
Does the hon. Gentleman accept that the minimum wage has risen, both by reason of the Government’s increase and the increase in the tax threshold, whereby the tax take from the minimum wage earner has decreased, and that the Government’s projections show that the minimum wage will rise to £8.06 by 2020?
Mr Umunna
I will address precisely all three points the hon. Gentleman makes, which I have read and heard the Minister make in the media, but the issue is how we evolve what we have to tackle the fact that, despite the minimum wage, more than 5 million people are in low pay. When we introduced the minimum wage and when, as I have said, the hon. Gentleman’s Conservative colleagues opposed its introduction, people were earning as little as £1 an hour in some parts of the economy. We helped to do away with extreme low pay—[Interruption.] I will come to tax if the hon. Gentleman is patient. We now want to move things to address the bigger, broader issue of the large body of people in our country who are in low pay.
Mr Frank Field (Birkenhead) (Lab)
When the Opposition are developing policy, we should consider that there are clearly some sectors of industry that could pay substantially above the national minimum wage. When we go into the election, should we not only advocate an increase in the national minimum wage, but encourage those sectors that could pay higher wages without unemployment effects to do so?
Mr Umunna
I will come to my right hon. Friend’s point on different sectors if he bears with me for a moment.
How will Labour improve on the current arrangements? When the Labour Government established the national minimum wage, we tasked the Low Pay Commission with the discrete and technical job of setting the minimum wage within existing economic parameters. My right hon. Friend was one of the Ministers involved in its introduction. The Low Pay Commission’s job was to play the hand it was dealt, not to attempt to change the game. Over the years, it has played its hand well, but it has remained relatively hands-off. In that sense, those who say that it is more akin to a minimum wage commission as opposed to a Low Pay Commission are right.
Labour wants to transform the Low Pay Commission into a proper, official low pay watchdog, setting out what it believes we need to do tackle low pay, monitoring progress and making recommendations on how to boost productivity and make a higher minimum wage possible in different sectors. My vision for the Low Pay Commission is for it to be far more active. If we give it a bigger, more active role, it can not only challenge the Government more, but challenge different sectors. I would like it to have a much bigger standing in the national consciousness. Currently, I believe that it has around six to seven staff, who are mainly focused on statistical analysis, but I can see it becoming a big, low pay watchdog, playing a big part in the national conversation.
Mr Field
I rise merely to say how much I welcome that statement, because it relates to the work of the shadow Work and Pensions Secretary and other Opposition Front Benchers. If we are to control the welfare bill in a civilised way, making people who could pay higher minimum wages pay their due, rather than relying on taxpayers, is a crucial part of the strategy.
Mr Umunna
My right hon. Friend is absolutely right. I could not agree more with him.
My second point is that, up to now, the minimum wage has been set with a view to its short-term impact over the coming year. The Low Pay Commission is asked to describe the labour market as it is when it sets the rate, six months before the rate comes into force. It sets the context and gives the rate, but it does not give any guidance on how a higher level can be reached. Therefore, a Labour Government will set a target to increase the minimum wage from its current level of 54% of median earnings to 58% of median earnings by 2020, to be implemented by the Low Pay Commission during the next Parliament.
Forecasts show that that will take the minimum wage from £6.50 this year to £8.00 in October 2019—I can see the hon. Member for Hexham (Guy Opperman) looking up at me, but I will come to his point on the forecasts of £8.06. That long-term target will give businesses time to plan and to adapt their business models to boost productivity to support the higher level. The international evidence shows that countries can support minimum wages with such a measure, which could give us a similar level to that in Australia and other EU countries.
Mr Umunna
I will give way to the hon. Gentleman after I have addressed his point, which, as I have said, has been raised in the media by the Minister. I read in The Sun earlier this month some nonsense from him. He suggested that the minimum wage was on course to be more than £8 by 2020 in any event, as the hon. Member for Hexham said, and therefore that Labour’s commitment to get the minimum wage to £8 by the end of the next Parliament would mean cutting it. That is desperate stuff. Let me be clear that, under the Labour’s plans, there would be nothing to stop the Low Pay Commission from setting the rate beyond £8. In any event, The Sun pointed out that the Treasury estimates on which the story was based relied on a significant recovery of earnings growth. Not many subscribe to those estimates. My point is that Labour Members are not prepared to sit on our hands and just hope for that earnings growth to come about. We are determined to do what we can to ensure it happens by setting that target.
Guy Opperman
I took good note of what the hon. Gentleman said, and if I understood him correctly, he said his plan is predicated upon raising median earnings from 54% to 58%. Surely that is only possible by having a strong economy, for which, of course, he would need a long-term economic plan. Surely that means he agrees with us.
Mr Umunna
I think the hon. Gentleman will probably have to wait for the reshuffle. [Interruption.] He gets the prize for mentioning the long-term economic sham, which is his party’s plan. I do not disagree, however, with the point he—[Interruption.] The hon. Gentleman keeps shouting at me. If he will let me reply, I will engage with his point. Is the national minimum wage on its own a panacea for ensuring that people can earn a wage they can live off and have security? No, it is not a panacea, but it is a very important part of the equation. Of course a strong economy is important in this respect, however. I would not disagree with him about that. Anyway, he has got in a reference to the long-term economic plan that he wanted to mention, and I am sure the Whip present, the hon. Member for Croydon Central (Gavin Barwell), will have taken note of that.
Mr William Bain (Glasgow North East) (Lab)
Is my hon. Friend aware that in my constituency 38% of children are now growing up in poverty? Their parents are working harder, but have a lot less to show for it. Does that not demonstrate that the Low Pay Commission needs to take a long-term view and have an ambitious target to raise low pay, and does he regret the Government’s failure to adopt one?
Mr Umunna
That is right. On that 38% figure, I must say that I have a similar situation in parts of my constituency. I agree with my hon. Friend but I would add that I think so much of our economic debate takes part around the GDP figures, statistics and data, and of course that is right—we should look at the data—but the question is the lived experience of people in this country: do they think they have never had it so good? When we listen to the rhetoric from Government Members, that is often what we would be led to believe.
Ms Karen Buck (Westminster North) (Lab)
Has the Conservative party not got it completely the wrong way round? Is not strong economic growth dependent upon strong earnings growth, which in turn will help us to make sure we have a sustainable recovery that is shared among all the people?
Mr Umunna
I could not have put it better myself; I completely agree with my hon. Friend. We know we have a productivity issue in this country. If people are earning more—if they get better pay—they are more productive. All the research shows that.
I wanted to add a point in respect of our target. Of course the economy might be subject to economic shocks—we had the crash in 2008-09—and the LPC might therefore take the view that the target cannot be met without risk to the economy, and we will build flexibility into the system to account for that.
Mr Dennis Skinner (Bolsover) (Lab)
Is it not the plan to get rid of evil zero-hours contracts as well, like those in my constituency—at Sports Direct, Mike Ashley? If that happens, it will considerably add to the wages of more than 1 million people in Britain, and that figure is growing as the unemployment statistics supposedly fall. All that put together makes it an even better package.
Mr Umunna
I completely agree with my hon. Friend, and the point he makes about zero-hours contracts shows that, in some respects, the big difference between the two sides of the House is that—[Interruption.] The Minister will have his time in a moment. From our point of view, of course people having work is the absolute priority, and having a job is of course better than not having a job, but we have got to be more ambitious than that given the nature of the work that so many people in our economy are doing.
Mr Iain McKenzie (Inverclyde) (Lab)
What does my hon. Friend think of this Government’s lacklustre approach to, and lack of enthusiasm for, naming and shaming employers who pay under the living wage?
Mrs Main
I can accept that there are some abuses of zero-hours contracts but, as someone who formerly worked as a supply teacher I would caution against getting rid of all zero-hours contracts. Our health and education services rely on people picking up casual contracts—if that is how the hon. Gentleman wants to put it—so that we fill in the gaps when there are shortfalls. It is not always a demon policy to have zero-hours contracts.
Mr Umunna
I hear what the hon. Lady says about some zero-hours contracts—if memory serves me correctly, I may have been on one myself when I was a student—but the point is that we are seeing far too many exploitative zero-hours contracts. That is the problem, and we are not going to sit on our hands when we are faced with that situation.
John Glen (Salisbury) (Con)
Is it not very important that Government take seriously the failure by employers to act responsibly, and that is why the hon. Gentleman should welcome this Government’s move to increase fourfold the fines on employers who are paying below the minimum wage? That did not happen under the previous Labour Administration. We take those breaches very seriously. What does he have to say about that?
Sheila Gilmore (Edinburgh East) (Lab)
Will my hon. Friend comment on the experience of my constituent whose fixed-hours part-time job, which fitted in with school hours, was changed recently by a very respectable employer—a large department store, not some unscrupulous employer—to a zero-hours contract in order to make her terms more flexible? She had to stop work because she could not find the child care to help her. That is surely the sort of contract we must do something about.
Mr Umunna
Well, that is it, and that is precisely why we will introduce a far tougher package than the sole measure we have seen on zero-hours contracts from the Government, which is basically just a do-away with exclusivity on those contracts. That is simply insufficient given the story that my hon. Friend has just told—and I would be very interested to know who the employer was.
The third point I want to make on the changes we need is that, when the minimum wage was introduced, the hope was that it would have a ripple-effect causing wages to rise up the income scale, but that has not turned out to be the case. Frankly, it is becoming the going rate in some sectors, as my right hon. Friend the Member for Birkenhead (Mr Field) alluded to. This explains why 1.2 million employees currently just earn the legal minimum. That is up from just over 600,000 in April 1999, so we have seen a considerable increase in the number of people on the minimum. Therefore, in its beefed up role, we will ask the LPC to advise on what sectors of the economy could afford to pay more than the minimum wage and how that could be achieved.
Finally, enforcement has been mentioned, and much more needs to be done on that, as the hon. Member for Salisbury (John Glen) said. There has in some respects been a systematic failure in the way the minimum wage has been policed. To address that, we will give local authorities, working alongside Her Majesty’s Revenue and Customs, powers to enforce the law, and we will increase the fines tenfold for rogue companies that do not meet their obligations. In this way, we will evolve the national minimum wage so that it moves beyond the narrow task of setting a minimum wage to avoid extreme low pay to a broader mission to reduce low pay in Britain. As far as the Minister’s party is concerned, I discern no desire to move beyond the status quo and the current arrangements.
Andy Sawford
On my hon. Friend’s point about where the Government stand, I had an assurance from the Prime Minister in February that they would name and shame those employers who had been found out and fined for not paying the minimum wage in my constituency. They still have not done that. Does that not show there is no real commitment on this from the Conservative party?
Mr Umunna
My hon. Friend’s remarks illustrate a point I have been making.
The Minister has said he would like to see the minimum wage strengthened, but his party has set out no plans whatsoever on how it will make that happen. It is all very well picking holes in, and raising issues with, the suggestions we have put forward, but I do not see any coming from Government Members. All we have seen—as the Minister’s boss the Secretary of State, who I know is away in India, said in June—is the Chancellor, in talking about the minimum wage increasing to £7 earlier this year, simply explaining the arithmetic of what would happen if a real minimum wage were restored; commentary from the Chancellor, but no action.
Mr Gregory Campbell (East Londonderry) (DUP)
The hon. Gentleman talks about how we best deal with the scourge of low pay. Does he not agree that a combination of raising the minimum wage, which he has alluded to, and raising the thresholds at which people begin to pay tax is the answer, so that the people earning £200 or £250 a week retain all of that as their take-home pay?
Mr David Winnick (Walsall North) (Lab)
Is it not a fact that it is often said that the House of Commons is rather remote from the lives of many people outside? Surely one of the ways we can combat the idea that MPs do not care is to do everything possible to overcome the poverty that so many people, and certainly many of my constituents, suffer week after week because of low wages. Of course, had it not been for a Labour Government, as my hon. Friend says, there would have been no national minimum wage.
Mr Umunna
My hon. Friend makes a very good point and it makes me reflect on the 2010 general election. In the polling districts covering the most deprived estates in the two most deprived wards in my constituency—Brixton Hill and Tulse Hill, which were most impacted by our introduction of the national minimum wage—the turnout was more than 70%, and sometimes 80%. That is because the people on estates such as the Tulse Hill estate had been directly impacted by our introduction of the national minimum wage: it helped to reduce poverty in those areas. My hon. Friend is absolutely right.
The hon. Member for East Londonderry (Mr Campbell) talked about tax and thresholds. The Minister has said that, in addition to thinking about the national minimum wage, we should consider the impact of tax on the low- paid. I agree. That is why we will introduce a starting rate of tax of 10%, paid for by abolishing the Government’s ill-conceived married couples allowance.
The Minister will no doubt refer to the increases to the personal allowance—[Interruption.] I thought that might provoke a reaction. I will give way to the hon. Member for Elmet and Rothwell (Alec Shelbrooke) in a moment. I am sure the Minister will no doubt refer to the increases in this Parliament to the personal allowance to seek to show that he “gets it”, as my hon. Friend the Member for Walsall North (Mr Winnick) mentioned. I doubt, however, that the Minister will mention the fact that any benefit the low paid derived from the increase in the personal allowance was wiped out by the Government’s hike in VAT and the benefit and tax reductions that we have seen for working people in this Parliament.
Alec Shelbrooke (Elmet and Rothwell) (Con)
Will the hon. Gentleman clarify the thresholds at which the 10% rate and the 20% rate would be paid?
Mr Umunna
We will set out in detail the plans we have on the 10% rate nearer to the general election. I cannot give the hon. Gentleman the exact thresholds right now, but I am sure that the Whip will have noticed that he asked the question.
On enforcement, I am sure the Minister will refer to their so-called “name and shame” policy, which the Government announced. [Interruption.] The Whips have already noticed that the hon. Member for Hexham (Guy Opperman) has mentioned the long-term economic plan, so he can quieten down. [Interruption.] I will take no lectures from any Government Member on tax rates, or anything else, when they have made a £7.5 billion unfunded tax commitment. I will take no lectures from them whatsoever. I will return to the point I was making about their “name and shame” policy. Only 25 firms have been named, and even that will be worthless unless Ministers beef up enforcement.
I agree with the Minister on the points I have heard him make about productivity. Increasing productivity enables companies to pay more. As I said before, it is key that we invest in human capital to increase productivity, and that means more investment in skills and training.
Before I wrap up, I just want to say something about the living wage. My hon. Friend the Member for Walsall North talked about what people think of Parliament. We should, on all sides of this House, be proud that the parliamentary estate pays everybody who works here, including contractors, a London living wage. It is very important that we set an example in that respect, and I am pleased to hear that that is happening here.
Mr Winnick
There was a campaign on that in the previous Parliament and I am glad if the issue has been rectified. Cleaners who were not in regular employment but contracted from outside were certainly not getting the same wage as those who were in regular employment in the House of Commons. If that has been rectified, Mr Speaker, I am pleased. The conditions and circumstances in which cleaners worked here in the Palace of Westminster were absolutely disgraceful. They reminded one of Charles Dickens’s times. I hope all that has been rectified.
Mr Umunna
I do, too. No doubt Mr Speaker will be able to give us more details. I can only talk about my understanding of the London living wage. It is very important that we set an example in this House on paying a living wage. I also think it is very good that this House has set an example in not using zero-hours contracts for people working on the estate.
Mr Umunna
I am just going to make a little more progress, because I sense that I have been going on for a while.
The minimum wage is set by reference to economic factors, including growth levels, the labour market, economic forecasts and so on. The living wage is calculated by looking at the basic cost of living and the salary needed for an individual to meet their own or their family’s basic day-to-day needs, including housing, food, clothing and so on. We recognise it is very challenging for employers to pay a living wage, so we would not impose it on them by having a statutory living wage. Instead, a future Labour Government will encourage employers to pay the living wage through new “make work pay” contracts. Firms that sign up to becoming living wage employers in the first year of the next Parliament will benefit from a 12-month tax rebate of up to £1,000, and an average of £445, for every low-paid worker who gets a pay rise. This will help firms towards a higher-productivity, higher-wage model. The measure will be funded entirely from the increased tax and national insurance revenue received by the Treasury when employees receive higher wages. Additional savings in lower tax credits and benefit payments, as well as increased tax revenues in future years, will cut social security bills and help pay down the deficit. Not just ensuring people are in work but that they get a decent salary when they are working, is the most effective way to reduce the social security bill.
In conclusion, I would like to go back to where I started. This area—what people are paid at work and the nature of the work they do—will be a key battleground at the next general election. That is why we have come out with the most detailed proposals, both in respect of wages and security at work, that will make a difference to people’s lives. Instead of mocking us, and instead of coming forward with proposals of their own, we see Government Members sitting on their hands while we carry on in the situation in which too many people who work hard do not earn a wage that they can live on. Ultimately, that is why the only way to do anything about this is to elect a Labour Government next year. I commend this motion to the House.
Matthew Hancock
The hon. Lady needs to look at the economic statistics: there was no double-dip recession and ours is the fastest-growing economy in the G7. Economic growth has been strong, the number of jobs is growing at a record rate, our economy is turning around and we have the fastest growth in the G7. Labour might want to deny it, but we want to support the plan and, crucially, ensure that economic growth reaches all parts of the country and that all can benefit. That is why we support and are strengthening the minimum wage. We know that the only route to higher living standards is not through more borrowing, more taxes and more debt, but through fair pay for a job well done.
Today was another test of Labour’s economic credibility, and yet again it was found wanting. Instead, the true supporters of the national minimum wage now reside on the Government Benches. First and foremost, a strong minimum wage requires a strong economy.
Matthew Hancock
I will give the hon. Gentleman a couple of examples. We have increased the budget for enforcement by 15%, while the Small Business, Enterprise and Employment Bill, which I am leading through the House, backs up those resources with tougher penalties for those who break the law. While we are at it, we are also tackling the scourge of zero-hours contracts—something Labour failed to do after 13 years in office.
If anybody has ever queried the idea that the plight of the low-paid is linked to the health of the economy, all they have to do is study what happened as a consequence of the great recession. When the economy shrank after 2008, the incomes of the lowest-paid took a hit, through jobs lost, hours cut and wages frozen, and our nation’s finances shrank by 6%, which inevitably had a profound impact on people’s incomes—after all, national income is merely the aggregate of individuals’ incomes. The need to turn that around is why our long-term economic plan is so vital.
The evidence shows that the plan is working. Record numbers of jobs have not been created by accident, but because the economy is growing, but we are keenly aware of the risks that remain and the costs that would be paid, especially by the low-paid, if we abandoned the plan. Those who truly support the minimum wage also support the plan to tackle the deficit and repair the health of the economy, and that is why Government Members are the true supporters of the national minimum wage.
Matthew Hancock
Yes, of course, everybody who is in work should be paid the minimum wage.
Mr Umunna
I must say that the comments to which my hon. Friend the Member for Glasgow North East (Mr Bain) referred were absolutely disgraceful and that Minister must answer for them. The Minister talked about how the Low Pay Commission does things and how it works through the tripartite model and we absolutely want to see that go forward into the future. The Minister did not say it, so I will: the issue that some people worry about is the possible politicisation of the Low Pay Commission. I think that can be avoided, in much the same way that having a 2% target for the Monetary Policy Committee did not lead to the politicisation of that process.
Matthew Hancock
Unfortunately, the hon. Gentleman says one thing and his party then proposes something quite different. The Low Pay Commission was set up to support that consensus, to ensure that the minimum wage has the support of both employers and employees and to ensure that the low paid are not priced out of work. When politicians such as the hon. Gentleman’s boss get on a soapbox and undermine the Low Pay Commission consensus by clearly stating an amount that should be achieved by 2020, they undermine the very people they claim to support. As the Federation of Small Businesses says—the hon. Gentleman can address this when I give way to him,
“the decision on what the rate is should be set only after consultation with the Low Pay Commission.”
Labour’s proposal, according to the FSB, “does the opposite”.
Mr Umunna
As I said, I believe it is possible to move towards a new framework without leading to politicisation and to address the concerns that some have raised. I am taken aback when the Minister says that the Leader of the Opposition’s talk about achieving a certain rate for the national minimum wage undermines the Low Pay Commission, when that is precisely what the Chancellor of the Exchequer did when he talked about a £7 rate.
Matthew Hancock
No, because every year the Government present evidence to the Low Pay Commission of what level of pay the economy can support. In fact, I can go further. Today, we are publishing the economic evidence that is going in to the Low Pay Commission. It shows what level of pay the Government believe can be supported. It shows that the recovering economy is creating jobs, with unemployment falling faster than any country in the G7. Indeed, the Low Pay Commission has said that it can raise the national minimum wage in real terms this year only because of that recovering economy. Government analysis underpinning today’s evidence projects that on the Office for Budget Responsibility’s economic earnings forecast, the minimum wage is set to reach £8.06 by 2020—only because of the recovering economy.
Matthew Hancock
I was going to come on to that. The hon. Member for Streatham made an important admission today. I think it is the first time that Labour has admitted that if the £8 target was going to damage the economy, there would be “flexibility”, as my hon. Friend said. Within a month the hon. Gentleman has completely undone the promise that was made with such loud cymbals at the party conference. It was a promise made for a party conference by a desperate party leader who is struggling to get his message across. Today, it has been completely undermined by the man who wants to replace him as party leader after Labour loses the next election.
Mr Umunna
I have to say that this is really desperate stuff from a desperate Minister. In the same way as there is flexibility for the Monetary Policy Committee in setting the interest rate target, there would be flexibility in our system. The Minister talks as if this were some new revelation. What I have said is absolutely no different from what the Leader of the Opposition has said. The Minister can pick holes in what we have suggested, but he has come forward with no proposals whatever to evolve or move on the national minimum wage—none.
Matthew Hancock
I certainly can pick holes in what the hon. Gentleman said, and I intend to do exactly that. I would say that today’s admission that there is no £8 target from the Labour party because there will be “flexibility” around it shows that Labour has nothing to say on low pay, just as it has nothing to say on any other area of economic policy. The grin of the hon. Member for Streatham as he came to the Dispatch Box after the discussion about who will be the leader of the Labour party after the next election demonstrates, I think, that undermining his leader was part of his job today—and he has done it brilliantly.
Matthew Hancock
I have said that everybody should be paid the minimum wage. That has been our policy throughout the whole period of this Government and it will continue. In fact, we are strengthening it—an issue I want to come on to. We have rejected the Opposition’s advice that the national minimum wage should be limited to £8 by 2020, not least because, on the central projection from the OBR’s earning figures as reported in The Sun, the national minimum wage will, under the Government’s plans, reach £8.06 by 2020—but only so long as we continue the economic recovery and not if we put that recovery at risk by adopting Labour’s plans.
Matthew Hancock
On the contrary, Government analysis underpinning today’s evidence projects that, on the OBR’s earnings forecasts, the minimum wage is set to reach £8.06 by 2020.
Alec Shelbrooke
I do not disagree with a single word of what the hon. Lady has just said. It is absolutely true, and that is why it falls to this place to start looking at the way in which employers have been abusing a flexibility which does work for certain people.
When I was between contracts and doing manual labour, did I want to be wondering whether I would have a kitchen or bathroom to fit in the following week, or did I want a constant supply of work? The fact is that I could not demand that the work would be there. I could not say, “Sorry, Mr Shelbrooke, you will be on a permanent contract whether the work is there or not.” There must be flexibility, but what we must legislate for is stopping the abuse. That is what my party is trying to do now, and my hon. Friend the Minister is working to address these very issues in his Small Business, Enterprise and Employment Bill.
Let me now deal with the minimum wage, which, after all, is what the debate is mostly about. I want to go further than our £12,500 tax threshold. My hon. Friend said that people in full-time work who are paid the minimum wage would not pay tax, but I want to maximise the benefit. If anything, I am a politician of aspiration. I want to make sure that someone who wants to work 42 hours a week, 52 weeks a year, will not have to pay any tax. That gives us a figure of £14,196 at today’s minimum wage rate, and that is my ambition. It is not a new policy. We have seen members of a newly formed political party leap up and say that they want the threshold to be raised to that level. Let me remind them that, back in the 1980s, Nigel Lawson said that no one should be taxed until their income had reached the rate at which it was not necessary to give the money back to them. That is the really important point when we are talking about how we can empower people. We must ensure that they have not only the motivation to go to work but the ability to keep the money they earn. If we have a minimum wage, surely we have to have minimum taxation. That taxation should not start until people start to earn more than the minimum wage full time. That is my ambition for this Government. Yes, I am delighted with our policy regarding £12,500 but I personally would like to go further.
The Opposition Front-Bench spokesman, the hon. Member for Streatham (Mr Umunna), said that there was not enough certainty in our policies. He made a good, considered opening speech but when he was pushed on the detail of where the 10% tax threshold would come in, he had no answer. That worries me. I worry that the policy of increasing the threshold from £10,500 to £12,500 would involve people paying 10% tax. We do not know whether that is the case; the policy is not there. I accept his argument that he cannot answer the question today, but this worries me none the less. I am worried about what these policies on wages for the lowest-paid workers actually mean. I worry that these policies could be inflationary if they are not carefully considered.
Alec Shelbrooke
The Chancellor of the Exchequer and the Prime Minister made it perfectly clear in their speeches that there would be more reductions in certain areas of public spending. We are looking at a 0.3% further reduction, which can be found. The point that the Opposition do not understand is that if we grow an economy by building on solid foundations, we end up with a growth rate that far outstrips those of the EU or the USA. More importantly, this is in stark contrast to the economy of France, whose policies the Opposition were telling us only three years ago we should be adopting. Their plan B was to follow the French President’s economic proposals, yet that country’s economy is now collapsing round its ears and dragging a lot of the EU down with it. This is simple: we must grow the economy healthily, and the hard-working people of this country who help to grow the economy do not deserve to come home after a day’s work to discover that the Government are taking more of their money. We need to ensure that increases in the minimum wage do not simply involve people doing more work for the same money.
The living wage is an important development. I have gone on record in this Chamber as saying that I do not support a statutory living wage. If we try to chase a living wage simply by upping wages by statute, we will increase inflation, thereby putting the living wage out of reach. The figure for a living wage has gone up since we last had this debate, but the way to reach it is to grow the minimum wage by cutting taxes on business and growing the economy. We cannot do it by imposing stealth taxes on business. We should be saying to employers, “Don’t give the money to the Government so that we can do all the things we want to do. Instead, give it directly to the people who are creating the wealth.” That is a policy that we should be proud of, and that everyone on these Benches will get behind. We want the highest wage figures that we can get in this country, and we want to ensure that people are not being exploited. When new phenomena such as the exploitation of zero-hours contracts are created, it is important that we legislate on them in a way that still allows flexibility for people who are trying to put together a living.
I am worried that Opposition day debates are often simply about electioneering. That is the wrong thing to do in this Chamber. The Opposition have talked about taking things seriously and being the party that truly represents the lowest-paid workers in society, but I must remind the House that they opposed my ten-minute rule Bill to outlaw unpaid internships. The Division was called by Opposition Members. I am still a strong believer that nobody in this country should work for more than four weeks without pay. Work experience has its place, but employing people for months at a time with no pay, claiming that they are gaining experience as interns, is morally wrong. That is why I introduced my Bill.
In that context, we have to look at what we are really discussing. We need to ensure that the poorest in society—those who are working at the bottom and in the most economically sustainable way—see their wages increase without having to give the money back to the Government just so that they can be grateful when the Government then give it back to them. We need to ensure that a good day’s work is properly rewarded. As we grow the economy, we need to ensure that businesses give the money to the people doing the work and not to the Government. When we discuss the minimum wage, we must ensure that we have in place a strong economy and strong policies, and that we are willing to legislate against those who abuse workers in this country. We must ensure that we represent everybody; that is what a one-nation party is all about.