National Minimum Wage

Guy Opperman Excerpts

Wednesday 15th October 2014 Commons Chamber

[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.

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[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.

[Guy Opperman]

Will the hon. Gentleman give way?

[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.

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[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.

[Guy Opperman]

Is not the most crucial point, as well as raising the minimum wage, the need to address and examine the issue of tax? This coalition Government have raised the minimum threshold and actually given people on the minimum wage more money in their pockets. Will he set out in detail the effect it will have when we elect a Conservative Government and introduce a £12,500 tax threshold?

[Matthew Hancock]

Of course, it is post-tax income that matters to families. Having raised the threshold to £10,500, we are proposing to raise it to £12,500, meaning that no one working full time on the national minimum wage would pay any income tax at all. That is the sort of action we can get only if we have the grit to deal with public spending and leave more money in people’s pockets, thereby supporting the low-paid.

True supporters of the minimum wage also know that it is a partnership with business.