National Living Wage

David Nuttall Excerpts

Monday 18th April 2016 Commons Chamber

[Philip Davies]

I have already given way to the right hon. Gentleman; he can have another go in his own speech later.

Labour Members have to face the consequences of the policy: the OBR has made it clear that it will result in fewer people being employed. The right hon. Member for Enfield North mentioned companies such as B&Q and Morrisons. When I worked for Asda, every employee was given a 10% discount card. I have no idea what Asda’s policy is today—it may well be the same—but it used to employ a lot of people with families, and a 10% discount card was a very valuable commodity to them. We should be wary about forcing employers to put up pay, because the inevitable consequence will be that some benefits might have to go if they want to keep the same number of people employed in their stores. These decisions have consequences, and we cannot pretend that increasing people’s pay will not have consequences.

The right hon. Lady mentioned care homes and the care sector. We need to think carefully about what the consequences will be for them. In my constituency, in Bradford, a very small proportion of the extra 2% that is being levied on council tax is being passed on to independent care homes. I thought it was designed to help them with the costs of things such as the national living wage. This high-minded policy is motherhood and apple pie. It enables people to look good and argue, “I think that, whatever people earn, they should get more, and that even when they do get more, they should get even more than that,” but an awful lot of care homes around the country could close as a consequence. Is that really what we want to happen in the UK? It would happen not because employers are mean, nasty people, but simply because they cannot afford to pay the national living wage at the rates that the councils are giving them for care home fees. That is the economic reality, whether people like it or not.

I met a number of employers recently, and they pointed out that the policy takes no account of differentials. When the pay of people at the bottom is raised to a higher rate, they are not the only ones to get a pay rise, because everyone else in the organisation will say, “Hold on a minute, I was paid £1 an hour more than they were, so if their pay’s being increased by £1 an hour, I want an extra £1 an hour as well to maintain that differential.”

Anybody who knows anything about running a business will know that, particularly for employers who run small businesses on the high street in small towns in our constituencies, there is not a never-ending pot of money to pay higher wages to everybody and to protect those differentials. Something has to give: either those differentials disappear, much to the unhappiness of the people who had them before, or fewer people will be employed, or people will be employed for fewer hours.

[Mr David Nuttall (Bury North) (Con)]

Will my hon. Friend give way?

[Philip Davies]

I am afraid that I cannot give way, because there is not much time left.

Finally, I have two very quick points to make. First, the increased national minimum wage will almost certainly lead to even more people from the European Union coming to the UK if we do not leave the EU in the forthcoming referendum. That is a basic fact. Secondly, a higher minimum wage is great for people who are already in work and getting paid. However, it can be as high as we like, but it will be of very little use to those who do not have a job. Many people in this country already find it very difficult to get on the jobs ladder, for all sorts of reasons.

I have made this point before and got into terrible trouble for it, but the fact, whether people like it or not, is that too few disabled people in this country are employed. It would not be good if they were put further away from the jobs ladder, and I want the Government to think about what they are going to do, when wages are higher, to help disabled people find a job, including subsidising employers to bring them up to the living wage. Something has to be done. We cannot just leave people on the scrapheap unable to get a job because the first rung of the jobs ladder was too far away to give them a chance in the first place. We have to think through the consequences of all these high-minded policies.

--- Later in debate ---

[Simon Danczuk]

The hon. Gentleman is absolutely right. That is a real concern for local authorities, and there is disparity across the country. That is a good point.

The other point about business rates is that there is an issue with the fact that the relief will not be introduced until 2017. Small businesses will struggle for a whole year before they receive the relief that is in the Budget. As I have already mentioned in this Chamber, the retail business rate relief grant has been stopped this year for small business owners as well. Small businesses employ 35% of the nation’s workforce, but they employ more than half of those who are on the minimum wage. From 1 April, small businesses will be dealt a double whammy of increased wage bills and a reduction in support from business rate grants. They will be under real financial pressure for a whole year.

[Mr Nuttall]

Will the hon. Gentleman give way?

[Simon Danczuk]

I am going to make a little bit of progress. Larger retailers will be able to offset their costs by reducing the benefits that they pay out, such as Sunday pay, as we have seen from the examples that the hon. Member for Mitcham and Morden has raised in the media recently. Smaller businesses will have to put up prices, slow recruitment or perhaps downscale their operations. Some will have to shut down because they are unable to shoulder the costs until 2017 after having struggled for years. The truth is that the new national living wage should have coincided with the changes to the business rate system.

Next I want to mention the pressures facing the social care sector, which has faced a wave of pressure from the Government over the last few years. We have heard much recently about the social care precept, which enables councils to raise council tax by 2% to pay for care costs. Senior members of Rochdale Borough Council have told me that with the introduction of the national living wage, the precept will provide very little extra funding, if any. Poorer areas such as Rochdale—this is similar to the point made about business rates—will raise only just over £1 million from the precept, because of the council tax bands of the properties in the borough. Even the Conservative-led Local Government Association has warned that the national living wage will put adult care services at breaking point.

The new change is even more worrying in view of the fact that many in the care sector are not even paid the minimum wage. Work by Unison has shown that pay structures, such as not paying travelling time, mean that those who care for our elderly loved ones are not being paid for the vital work that they do. If we want to give careworkers the wage that they deserve, it must be adequately funded. They are some of the most hard-working people, and they deserve to earn at least the minimum wage. Unless the appropriate funding is in place, that simply will not happen.