Low Pay

Guy Opperman Excerpts

Wednesday 30th October 2013 Westminster Hall

[Mr William Bain (Glasgow North East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hood.

Growth may be making an overdue return to the UK economy, but the continuing slump in real wages is forecast by the Office for Budget Responsibility to extend into 2014, and the UK currently has the highest inflation rate in the European Union, both of which contribute to the cost of living crisis. The Office for National Statistics confirmed this morning in its November economic brief that real disposable household incomes have not risen in a sustained way under the Government’s policies.

Despite employees working more hours than before the economic crisis began, the recovery is not making its way into the pockets of ordinary workers. Workers in the lower half of the income scale, particularly low-paid workers, are falling even further behind the top 1% of earners in our society. There has never been a more important time for this House to discuss the issue of low pay and how together, as a Parliament and a society, we can tackle what is now a crisis.

As the report of the Social Mobility and Child Poverty Commission recently made clear, poverty pay blights the outcomes in life of millions of men, women and children across our country. Every week, those of us with the honour of representing our great cities such as Glasgow meet those who suffer the effects of being trapped in low pay for long periods. According to the Poverty Alliance, 870,000, or 17%, of the population in Scotland live in poverty. A fifth of all children in Scotland are below the breadline.

This afternoon I will show that low pay is a problem not only in urban parts of the UK; there are pockets of truly shocking poverty in rural parts of Britain, too. If we are to come up with the right answers on low pay, we must first acknowledge how serious and widespread a social evil this now is across our country.

[Guy Opperman (Hexham) (Con)]

I congratulate the hon. Gentleman on securing this debate, and I endorse his comment that low pay affects rural areas such as mine as much as urban Glasgow. However, does he accept that the decision to raise tax thresholds provides the best possible support to low-paid workers?

[Mr Bain]

I am grateful for that intervention; I will be considering that point later in my speech. However, I must point out to the hon. Gentleman that those on the lowest earnings will not gain a penny from further increases in the personal allowance. I can direct him to the research that the Resolution Foundation has produced on the subject. It has looked at the matter in detail.

There are also issues—I shall also come to this point later—about the effects that universal credit will have, particularly in relation to any future increases in the personal allowance. Sadly, given how the Government are designing the credit, what they give with one hand, they may be taking away with another, and that is an important consideration.

The hon. Gentleman has a good record on the subject. I am sure that is borne out of his own experience in his constituency, where 47% of part-time workers are earning less than a living wage. He is absolutely right to campaign on the subject—more power to him for doing so from the Conservative Benches.

As I grew up in Glasgow, the real life experiences of people paid less than £1 an hour for security work were a scar on my conscience and a powerful spur to action on poverty pay. The success of the minimum wage in raising pay rates for the most disadvantaged working poor households is shown by the fact that the Conservatives who opposed it, and the Liberal Democrats and members of the Scottish National party who did not vote for the legislation, now would not dare abolish it.

Indeed, several Ministers in the Department for Business, Innovation and Skills, including the Secretary of State and the Minister for Skills and Enterprise, who I am pleased to see in his place, claim that they want to build on the success of the national minimum wage. It is important that today we see precisely how the Government anticipate changing the remit of the Low Pay Commission to that end.

According to the latest data from the Office for National Statistics in response to a parliamentary question I recently submitted, the average gross median wage in Britain in 2012 was £405 a week, which is almost 7% down in real terms from 2010. For the low paid, the situation is even more desperate, given that higher energy, housing and food costs affect them with even greater severity.

More worryingly, the argument that having a job is enough on its own to lift a family out of poverty has lost much of its potency, because two thirds of the 3 million children living in poverty in this country today live in households in which at least one adult is in work. October’s rise in the main rate of the national minimum wage to £6.31 an hour was the fourth successive uprating below the rise in prices. The minimum wage has lost a fifth of its value in real terms over the past decade, and we must begin to reverse that.

Under-employment and the low-skilled, low-paid work that has been created in an increasingly hourglass-shaped labour market in the past few years have made the cost of living crisis worse for millions of the working poor. The Resolution Foundation has established that 4.8 million people, or one in five across the UK, earn less than the living wage rate set by the Joseph Rowntree Foundation. That figure is up by 1.4 million in the past four years alone.

[Mr Bain]

My hon. Friend is right, and she speaks with great passion on behalf of her constituents. Some 57% of her constituents in part-time work earn less than the living wage, so she will be seeing on a weekly basis the real effects of poverty on the living standards of people in Llanelli.

Other analysis that I recently received from the ONS shows that in parts of the north-east of England between a half and two thirds of part-time workers are earning less than the living wage. In parts of Northern Ireland and the south and south-west of England, poverty pay among part-time employees is equally endemic. Even in the constituency of the Secretary of State for Work and Pensions, more than two in every five part-time workers take home less than the living wage. With women more likely to be in part-time work than men, extreme low pay, particularly in the social care sector, represents not only economic injustice but gender inequality.

[Guy Opperman]

I am grateful to the hon. Gentleman for giving way to me for a second time. I know he is a passionate advocate of the living wage in Glasgow, where there has been some success. Does he agree that, for the living wage to gain greater traction and to have the take-up that we all want without the statutory empowerment that nobody wants, the key issue is trying to find ways to incentivise businesses, particularly in low-wage economies—the hospitality sector being an obvious example? Does he accept that, and does he have any ideas about how that should be done?

[Mr Bain]

That is a very good idea. We should be considering what is available in fiscal terms and what we can do through procurement. As I will describe, local authorities and other parts of the public and voluntary sectors have a good record of addressing low pay, but that needs to be extended to the private sector. Procurement is one means by which we can do that.

My hon. Friend the Member for Glasgow Central (Anas Sarwar) is here today. He will know that the Procurement Reform (Scotland) Bill, presented by the Scottish Government, is particularly disappointing and simply does not meet the test of ending low pay in Scotland.

As many as 220,000 direct care workers may be paid less than their legal entitlement to the national minimum wage. That is a national scandal, and the Government must act to end it. Worse, poverty pay is creating an even larger burden on the state because it is one of the biggest drivers of the increasing costs of housing benefit and tax credits. The recent report of the Social Mobility and Child Poverty Commission found that 84% of the public agree that employers should do more to pay wages that better reflect the cost of living.

It is becoming increasingly clear that, if there is to be a wage-led recovery that reaches all the people of the United Kingdom, further action on the national minimum wage is needed now. According to the 2012 labour force survey, low pay is more prevalent in the private sector, with sole traders, partnerships and companies reporting rates of low pay at 47%, 35%, and 26% respectively. That compares with a low pay rate of only 15% in local government.

Although the tax credit system cushioned living standards between 2003 and 2008, and remains an important means of improving work incentives now, the case for building on the success of the national minimum wage has never been stronger. We should support councils and other parts of the public sector that pay or use procurement rules with the voluntary and private sectors to extend a living wage to more and more people. The Government should at last support the recognised living wage accreditation scheme, which would be a splendid way to mark national living wage week next week, but we also need to understand that a rise in the national minimum wage will help substantially more workers than even a voluntary expansion of the living wage by employers.

We also need better enforcement of the minimum wage to stop the exploitation of unpaid interns for months on end and should back the superb campaign led by Intern Aware. Equity highlights the ongoing issue with performers and arts organisations in relation to the exemption in section 44 of the National Minimum Wage Act 1998.

It is particularly shameful that the maximum penalty for fly-tipping is 10 times the penalty for not paying a worker the legal minimum rate for an hour’s work and that the average fine per breach of the minimum wage rules was just over £1,000 in the last financial year. There were just two successful prosecutions of employers last year for failing to pay the minimum wage rate, according to information provided to me by the Treasury. The Government can do a great deal more on enforcement, and I hope the Minister will outline the next steps.

As I said to the hon. Member for Hexham (Guy Opperman), increasing the personal tax allowance does not in itself end the crisis of low pay. Many low-paid workers do not earn enough to pay income tax and so would not benefit from further rises in the personal allowance. For lone or couple households with children, the interaction between a rising minimum wage and the help provided by the tax credit system will do the most to raise living standards.

We also need to be mindful that the introduction of universal credit will mean that what low-income taxpayers may gain from a higher personal allowance will be lost through the new tax credit system, which is assessed on after-tax income. New research by Gingerbread published this morning shows that the Government’s current plans for universal credit will make it far harder for low-income lone parents to make work pay beyond 20 hours a week, as the incentives rapidly taper away.

--- Later in debate ---

[Matthew Hancock]

Absolutely; it is vital that work always pays for every hour, and that is why having a consistent withdrawal rate in universal credit matters. It is valuable that this debate is not particularly partisan, but I draw the hon. Gentleman’s attention to the fact that, with tax credits as they were, withdrawal rates were sometimes more than 100%, so in some cases—not in large numbers—people were taking home less when they worked harder. Universal credit will put an end to that, which should be welcomed in all parts of the House.

[Guy Opperman]

Does the Minister accept that the true way to engineer people out of low pay is to provide them with the skills to do a better job and to make progress? Last week, I opened an engineering academy in Hexham, and shortly we hope to welcome to the north-east the skills funding pilot of the Department for Business, Innovation and Skills. Does he accept that skills are the real secret for the future of the low-paid?

[Matthew Hancock]

Yes, of course. As the Skills and Enterprise Minister, everyone would be amazed—I would not be doing my job—if I did not support that argument, which I do.