David Lammy
Main Page: David Lammy (Labour - Tottenham)(11 years, 9 months ago)
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Teresa Pearce (Erith and Thamesmead) (Lab)
It is very welcome to be serving under your chairmanship, Mrs Main. I think that this is the first time that I have done so. I thank everyone for attending what I believe is a timely debate.
The campaign for the introduction of a living wage unites many organisations, charities and people in pursuit of social justice. There is a clear moral case for a living wage: as a society, we should ensure that the minimum wage that workers are paid allows them to lead a decent life, a life with dignity, and does not require people to have, as some in my constituency do, two or three jobs to try to make ends meet, leaving them no time for their children or the rest of their family, or to contribute in any other way to society.
At the same time, there is increasing recognition of the business benefits that being a living wage employer can bring. Many living wage employers see it as almost a fair trade mark: it marks them out as separate from other employers and indicates that they are employers of choice. I think that that is very welcome. A living wage employer also attracts better-quality staff and gains a reputation for good corporate social responsibility. Paying the living wage also reduces absenteeism and staff turnover. It is about giving workers the respect and the pay that they deserve for the work that they do.
I am pleased to say that many people are now paying the living wage, including some councils, such as Lewisham council and Birmingham city council, and private sector employers, such as Aviva and my old employer, PricewaterhouseCoopers, as well as KPMG. They have already volunteered to adopt the living wage and, if the press reports from late last year are correct, three Departments are also now considering introducing it. Late last year, Labour said that it was looking at making public sector contracts conditional on workers being paid at least the living wage and possibly naming and shaming companies that pay their workers less. More MPs are also advertising internships that pay the living wage, which is a very welcome development, as we should be leading the way on fair employment practices. We should lead by example. I do not want to be part of an organisation that says, “Do as I say, not as I do.” For that reason, I do not use unpaid interns and always pay interns at least the living wage. I am very pleased that that is now becoming the practice in the House. Those have all been welcome steps towards making the living wage the norm in our labour market and they make the debate particularly timely.
However, there is one angle to the debate about introducing the living wage that I think needs to be given greater consideration and discussed. If one of the large and vastly profitable supermarket chains or fast food chains had their electricity bills paid by the taxpayer or their advertising costs greatly subsidised by the general public—the same general public who purchase goods in their stores and from whom they make their massive profits—we would expect tabloid headlines and a massive public outcry at the unfairness of it. However, week in, week out, such companies get an enormous subsidy to help with one of their major overheads—staffing costs. That is because many employees—often the majority—in these large and successful companies are paid only the minimum wage, and because the current minimum wage is not a living wage, nearly everyone on it has to claim tax credits to be able to make ends meet.
The number of working families receiving tax credits to top up their meagre incomes has risen by 50% since 2003. A Joseph Rowntree Foundation report estimates that 3.3 million people now have to claim tax credits to top up their wages because they are on the minimum wage. Those tax credits are funded by the Government—by the taxpayer. That means that the public purse has to subsidise the low-paid employees of many of our household names so that they make their high profits rather than pay their workers a decent wage.
Mr David Lammy (Tottenham) (Lab)
My hon. Friend is making a fantastic point. She will recognise also that there are some supermarkets where the CEO is on 500 times more than the individual on the shop floor. That must be unacceptable if they are not paying a living wage and are expecting the state in effect to pick up the bill.
Teresa Pearce
I thank my right hon. Friend for his intervention; I totally agree. When we compare the top and the bottom level of pay, there is often a massive difference. We need to look at getting that balance right. If a company is making that sort of profit, it is inexcusable for it not to pay a decent wage and for the taxpayer to have to subsidise its wage bill.
I am not against tax credits, but I think that more people need to understand that in many sectors the taxpayer is subsidising the wage bill of some of the biggest employers. We need a national living wage to put an end to the deeply unfair situation in which we are all subsidising poverty pay and the profits of large—often global—companies. The Secretary of State for Work and Pensions recently wrote an article about in-work benefits in The Daily Telegraph. He was blaming Labour’s payments to supplement working families’ incomes for the fact that the public finances are at “breaking point”. Although I agree that the Government should not have to subsidise low wages and in effect subsidise the profits of large companies, I disagree that the solution is to cut the only payment standing between many low-paid workers and destitution. There have been many debates in the House, and I am sure that there will be many more, about why the public finances are the way they are. Is it because we have had to bail out the banks? Is it the Government’s politics of austerity? Is it the lack of growth? Whatever side of the argument we are on, I think that we would all agree that it is not the fault of the worker in my local supermarket or the waitress in the pizza restaurant. We are not in this situation because the Government intervened to prop up poverty wages. It is not the fault of tax credits.
Nevertheless, there is some agreement across the parties that the situation needs to change, even if very different solutions are proposed. We could do as the Government plan to do and place a cap of 1% on uprating benefits such as working tax credits, far below predicted inflation, which will tip thousands more families and children into grinding poverty; or we could consider raising the national minimum wage to a level at which the extensive use of working tax credits would not be necessary.
A recent report by the Resolution Foundation and the Institute for Public Policy Research estimated that widespread use of a living wage could save the Government £2 billion a year. About £3.6 billion of the extra money paid out in higher wages under a universal living wage would go straight to the Government, in the form of extra income tax and national insurance payments, along with reduced spending on benefits and tax credits for the lowest-paid. As some of those workers would be in the public sector, their wages would cost the Government an extra £1.3 billion. However, that would still leave the Treasury with an extra net income of £2 billion.
The living wage should be adopted sooner rather than later as the national minimum wage. I do not think that it is too much to ask that workers at the bottom of the income ladder should at least be able to make ends meet. A legal minimum living wage is necessary, because although campaigners have been successful in increasing voluntary take-up, the numbers of people affected by what we are discussing are so high that they warrant more drastic action. About 5 million people are paid less than the suggested living wage and 3 million households contain at least one adult who is paid below that level. The Institute for Fiscal Studies predicts that a further 1 million children will fall into relative poverty by 2020, and that prediction was made before last night’s vote. With a living wage, we could at least try to undo some of the damage.
I realise that many people will object to what I am saying. They will say that I am anti-business. I am not, but I am anti-exploitation. If a business depends on cheap labour while making massive profits for its shareholders, there should be a mechanism—I do not think that it is beyond the wit of man to come up with one—whereby the numbers of minimum wage jobs at a profit-making company are reported to Her Majesty’s Revenue and Customs and a levy can be charged via the tax system to refund some of the subsidy. There is an argument for helping small firms or those that provide a necessary public service, but I do not believe that supermarkets and giant retail companies, which are making billions of pounds each year in profits, deserve or warrant state subsidy, because that is what this is.
People will say that I am anti-jobs, but that is nonsense. I ask them to consider the proposition that the next time one of these firms issues a press release saying that it is creating 5,000 jobs, what it really means is that it is creating increased profits while the rest of us pay part of the staffing cost for those 5,000 jobs. If a business is being operated in a modern European democracy, the people working for it and helping it to make that profit should surely earn enough to be able to live in that modern European democracy without relying on state benefits.
People will say that I am anti-free market on the basis that if employers are forced to pay decent wages, they will go out of business, but if we are realistic, we will admit that we do not really have a free market economy when companies need to be subsidised by the benefits system, when institutions such as banks are not allowed to fail because of the effect on the UK economy and when private companies contracted by Departments to provide services fail and have to be propped up financially to ensure that essential services are protected. Companies are taking the profit without bearing the risk. That is hardly a free or fair market.
Profitable employers who say that they cannot afford to pay a living wage or who depend on cheap labour do not have the business model on which we can build a recovery. We need proper, clear, informed, rational discussion. The public need to understand the extent to which such companies are helped by public funds. We need to stop calling them wealth creators and start calling them state-subsidised industries, because that is what they are. If we are serious about making work pay, the first step is to get those making and taking the profits to pay the wage bill of their own workers, who are often the true, unsung wealth creators.
Mr Christopher Chope (Christchurch) (Con)
It is a pleasure to participate in this debate. I congratulate the hon. Member for Erith and Thamesmead (Teresa Pearce) on securing it. I am delighted that the Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon), is responding, because he and I belong—or belonged—to the school that believes that it is much better to leave such issues to the market than allow Government intervention, let alone legislation or regulation.
The starting point is that, if people want to prescribe a living wage and some employers wish to pay what they describe as a living wage, they should be free to do so in a free market. There is no issue. The agenda that underlies the hon. Lady bringing forward the debate is that she would like the Government to specify and introduce what has been set out as a living wage.
Mr Chope
I have consistently articulated the same arguments on the minimum wage. I had the pleasure of introducing the Employment Opportunities Bill, fundamental to which was the principle that people should be able to opt out of the minimum wage, thereby increasing the number of employment opportunities. I have been consistent. In fact, I argue that I have probably been more consistent than my party in saying that in this area we should allow individuals and the marketplace to do what they wish to do and we should not intervene.
I make only one concession. The argument about the living wage in a sense embraces one of my criticisms of the minimum wage. The living wage is supposedly £1 or £1.50 higher in London than it is outside London, and yet people, and the party of the right hon. Member for Tottenham (Mr Lammy) in particular, espouse the idea that a national minimum wage needs to be the same across the country. It is recognised that the living wage is different in London. The costs of living in London are higher, so the living wage in London is higher than the living wage outside London. In a sense, the argument opens up the debate about whether to have national regulation or, if there is to be regulation at all, allow regional variation. I am pleased to see some recognition on the part of the Labour party that regional variations are important.
Whether a wage is a living wage depends on who receives the wage. I would like to draw Members’ attention to Donald Hirsch’s “Working paper: uprating the out of London Living Wage in 2012”, which updates the Centre for Research in Social Policy calculations on the living wage outside London. It uses the basis first set out in 2011, produced at the request of the Living Wage Foundation, and draws on the minimum income standard for the United Kingdom. It explains the basis for the outside London living wage level announced by the Living Wage Foundation on 5 November 2012, coinciding with the updating of the London living wage as calculated by GLA Economics.
I will not take Members through all the calculations, which start by calculating minimum living costs in 2012, translate that into a wage requirement, and consider the application of a cap limiting the increase in an applied living wage in any one year. When one looks in detail at the calculations, one sees the fallacy in the hon. Lady’s argument. After carrying out all the calculations for the different types of family, living in different types of accommodation, with differing child care needs, it concludes:
“The following summarises the composition of the costs as set out above, and how this translates into wage requirements”—
in other words, what the hon. Lady would describe as a “living wage”. The hourly wage requirement is £8.38 for a single person and £6 for a couple without children or dependants—significantly below the national minimum wage.
Mrs Anne Main (in the Chair)
Order. Will the right hon. Gentleman sit down?
Mr Chope
I will not give way to the right hon. Gentleman again, because lots of people want to participate in the debate.
Even the figures produced by supporters of the concept of a London living wage demonstrate the variation in living wage—£6 an hour each for members of a couple with no dependants, rising to £18.57 for a single parent with three dependant children. That is an annual wage requirement of £36,319 a year—pretty close to the level at which they would have to pay higher rate tax and lose their child benefit under the wholly misguided benefit arrangements the Government have introduced. That is a side story to what we are discussing.
If an individual wishes to employ someone, they offer a wage for the job and it is up to individuals applying for the job to decide whether it is worth while to undertake it at the wage offered. I hope the Minister will endorse that in his summing up. If employers just offer wages in line with the national minimum wage, they cannot differentiate between the person one might describe as the “honest plodder” and the person with a little more enterprise, flair and, potentially, loyalty to the organisation. That is why it is often in the best interests of a company to offer higher wages, and indeed why I offer gap-year students in my office significantly more than the minimum wage. I recognise that in that way I am more likely to get gap-year students who will stay the course, be conscientious and turn up for work on time than if I offer either zero wages or an internship rate.
I operate in a marketplace myself, and all I am suggesting is that other employers should be encouraged to operate in the marketplace. We should not sleepwalk into having a system of nationally set minimum wages that supposedly amount to a living wage.
Kwasi Kwarteng
We could have a separate argument about the efficacy of—[Interruption.] Let us stick with this theoretical idea.
Kwasi Kwarteng
No, I have given way once, and I need to proceed. The notion that one can improve outcomes simply by passing laws about the level of pay is false. The one way—