Living Wage (Reporting)

Heidi Alexander Excerpts

Tuesday 3rd February 2015 Commons Chamber

[Heidi Alexander (Lewisham East) (Lab)]

I beg to move,

That leave be given to bring in a Bill to require listed companies to report annually on the percentage of their staff paid below a Living Wage; and for connected purposes.

I am introducing the Bill because we need to be more open about the problem of low pay in our economy. Many of the UK’s largest, most well known companies pay wages which people cannot afford to live on. Millions of shop workers, care assistants, cleaners and catering staff are paid so little that the only way they can make ends meet is with the help of tax credits and the payment of in-work benefits. Put simply, the state is supplementing the incomes of the low-paid while subsidising the wage bill of their employers. I believe that companies that can afford to pay the living wage have a responsibility to do so, and we should have a right to know when they do not pay it. Greater transparency is needed to raise public awareness of the problem and to encourage big companies to do the right thing.

We are approaching the end of the first Parliament since the 1920s in which people will be worse off at the end than they were at the beginning. This is a country where 4.9 million workers earn less than the living wage—the income necessary to achieve a minimum acceptable standard of living. That is one in five British workers who do not earn a fair day’s pay for a fair day’s work. The living wage is not just about having enough money to eat and pay the rent and the bills; it gives workers the means to live a dignified and decent life. For many of my constituents, the living wage means everything from being able to afford a family holiday now and again to peace of mind at the end of the month. It means being able to get home in time to see their children because they are not struggling to hold down two jobs. These are not unreasonable expectations, but they are being denied to far too many people by poverty-level pay.

In May 2010, the Prime Minister declared that the living wage was

“an idea whose time has come”.

Sadly, under his Government, we are still waiting. In the past five years, the number of people earning less than the living wage has soared by an additional 1.4 million. The majority of working-age households living below the poverty line now have at least one adult in work. In my constituency, there are over 10,000 people whose hard work is rewarded with a pay packet which does not give them enough to live a decent life. The recovery may have reached some in the City of London, but for those struggling on low pay in Lewisham, it has yet to materialise.

Every fortnight at my advice surgery I meet people who simply cannot afford to live off their earnings. They are often employed by some of our country’s biggest companies—the large supermarkets, for example. These are people who are doing the right thing—working hard and contributing—but they are not earning enough to pay the bills. I have been shown payslips where take-home wages are less than £1,000 a month, and I am asked what people are meant to live off when they have to pay £700 a month in rent. At the same time, their employers may make hundreds of millions of pounds a year in profit, much of which will go straight into the pockets of their shareholders.

The irony is that this is not just bad for our country’s living standards; it is bad for the Treasury too. This Government’s failure to meet their own deficit reduction targets has proved that low pay is a drain on our public finances. The wages of under-paid staff routinely have to be topped up by Government through the payment of tax credits and in-work benefits. In the circumstances, this support for the low paid is the correct approach, but it means that at the end of the day it is the taxpayer who is subsidising the wages bill of large private companies. Low pay is driving up the benefits bill and making it harder to get the deficit down.

The truth is that low pay stifles our economy, stunts taxes coming into the Treasury and ends up in more Government borrowing, which we can ill afford. That may be an economic plan of sorts, but it does not sound to me like one that is working. So something needs to change. In the UK, the living wage stands at £7.85 an hour, and the London figure is £9.15. I see no reason why big companies making significant profits should not pay it. If they choose not to do so, why should they not have to be up-front about that decision, and tell us?

This Bill would not compel anyone to pay a living wage. What it would do is give the public and workers a mechanism by which they can find out who pays it and who does not. Listed companies are already required to produce annual remuneration reports, but these focus on directors’ pay. The Bill would provide some balance—a focus on the bottom as well as the top. The data required to comply with the Bill could be generated relatively simply by the companies in question, but their impact would be significant: they would end the silence on poverty pay that allows many of our biggest companies to inflate their profit margins at the expense of their staff and of every taxpayer.

I have heard it said that low pay can in some ways be good for business. I guess the argument goes that increased profits should mean more money ploughed back into enterprise, meaning more economic growth. There are many assumptions in such an argument, and I am not so sure that it always stacks up. Low pay may sometimes mean higher short-term profits, but it can also mean demoralised staff who are preoccupied with their daily struggle to try to make work pay.

Paying workers a wage that supports a decent standard of living is not just the responsible thing to do; the research shows that there are also clear business benefits. Low pay has high costs, in reduced productivity, higher absenteeism and lower staff retention. It is for those reasons that over 1,000 companies have now signed up to be accredited living wage employers, from the energy company SSE to Chelsea football club.

Many public sector bodies are also leading the way. I was proud to be a member of Lewisham council when we became the first local authority to become a living wage employer, and I commend the determination of Lewisham’s mayor, Sir Steve Bullock, to roll out the living wage to even more contracted staff, despite a very tough financial outlook. I also commend you, Mr Speaker, for your efforts to make this House an accredited living wage employer.

Big and small employers alike now pay a living wage. The south London-based Jane Jefferson Cleaning, whose tagline is “The Only Way is Ethics”, is the only domestic cleaning company to be recognised by the Living Wage Foundation. If a small cleaning company can pay the living wage, why can firms that have multi-million pound salaries at the top not pay it at the bottom? A director in a FTSE 100 company now earns, on average, 130 times more than their average employee, and 300 times more than the living wage, yet only 18 of those 100 companies pay the living wage. The Government’s policy of “wait and see” on low pay has clearly failed. Legislating for greater transparency would celebrate the best employers and expose injustice to public pressure.

Britain cannot continue on its current path. The Government have failed to create the decent jobs and decent wages that we need for the next generation. Instead, they have preferred a silent race to the bottom, masked by loud trumpeting of falls in unemployment without a care for the nature and pay conditions of the jobs created. The next Labour Government will make the problem of low pay a national priority. We will increase the minimum wage to £8 an hour and give a tax break to companies that sign up to become living wage employers in the first year of the next Parliament.

Decent pay requires the British economy to generate better jobs, with improvements in skills and support for investment in cutting-edge industries, but it also needs more honesty about the sources of low pay, putting pressure on large companies to meet their responsibilities to their workers and the taxpayer as well as to their shareholders.

In conclusion, it might be entirely legal for large companies not to pay their staff a living wage, but that does not make it right. The Bill is not about forcing our largest employers to pay a wage above the statutory minimum; it is about encouraging them to make the right choices about the pay of the people they rely on. This simple Bill would introduce a simple reporting requirement. It would allow the public to recognise those companies that go above and beyond their legal obligations, enabling the consumer to identify those businesses that want to build a fairer economy as well as a stronger one. I commend it to the House.

Question put and agreed to.

Ordered,

That Heidi Alexander, Paul Blomfield, Lisa Nandy, Sarah Champion, Mr Steve Reed, Jenny Chapman, Natascha Engel, Teresa Pearce, Bridget Phillipson, Mr David Lammy, Nick Smith and Karl Turner present the Bill.

Heidi Alexander accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 27 February, and to be printed (Bill 165).