Living Wage

Hywel Williams Excerpts

Thursday 6th November 2014 Commons Chamber

[Hywel Williams (Arfon) (PC)]

Thank you for calling me, Madam Deputy Speaker; I will be quick.

It is a pleasure to follow the hon. Member for Hexham (Guy Opperman), and I agree with a great deal of what he said. I congratulate the hon. Member for Warwick and Leamington (Chris White) on securing this debate. It is right that we should be debating this matter in living wage week. I launched my party’s policy on raising the minimum wage in line with the living wage in September, and Plaid Cymru was recently awarded living wage employer status.

The scale of the problem of low wages is, of course, enormous. The number of people on incomes below the living wage in Wales is 261,000, which is 24% of the population, as compared with 22% for the UK in general. Wales is just a little behind Northern Ireland, at 27%, the north-east of England, at 25%, and Yorkshire and the Humber, at 25%, and we are equal to the east midlands, at 24%. By contrast, 17% of the population in London live below the living wage, while in the south-east the figure is 18%. That means that the percentage in Wales is a third higher than in the most prosperous part of the UK. Among local authorities in Wales—I am sure the hon. Member for Ynys Môn (Albert Owen) will be interested in this—32% of the population of Conwy and Powys live below the living wage, which is nearly a third of the population, while the figure is 30% in Monmouthshire and 29% for Gwynedd, my local authority. That contrasts with Cardiff, where it is 18%, which is equal to the proportion in London and the south-east.

Around a quarter of people in Wales, and more in my constituency, are in low-paid work. Establishing the living wage would be a great benefit to them. [Interruption.] Pardon me for coughing. The UK rate of low pay, at 22%, is a scandal in one of the world’s wealthiest countries and points to the inequality of distribution of income across the UK. [Interruption.] Pardon me. The UK is one of the most unequal countries in the world, and certainly in the European Union. Gross value added per head in inner-London west is 12 times what it is in west Wales and the valleys. That is the scale of the contrast, but that unenviable pattern is also repeated within Wales. Rates of low pay in Cardiff are less than two thirds what they are in adjacent areas. There are areas close to Cardiff to which one can easily travel within less than an hour where a large proportion of people are on low pay.

[Albert Owen]

I am being helpful by intervening on the hon. Gentleman, who may want a drink of water. He is quite right about periphery areas in the United Kingdom suffering from this problem. Does he agree that there should be a concentration of effort on the low-paid areas? One way for the Government to do that—I make an appeal that I have made regularly—is to move quality Government jobs to periphery areas to help to boost those economies.

[Hywel Williams]

I agree with the hon. Gentleman, but we also need to support small businesses, particularly in rural Wales, which are after all the engine of economic prosperity in such areas.

Some calculations—they are not mine, but those of the Social Mobility and Child Poverty Commission—have shown that the current proposals will not have a huge effect on the percentage of people on very low pay. I note that the Labour party has said that the minimum wage should be £8 by 2020, which is unambitious to say the least.

Raising the minimum wage so that it is in line with the living wage makes economic sense. The Treasury currently subsidises businesses for paying poverty wages by topping up wages with tax credits. The model of having very low wages topped up the Government is unsustainable in the long term, and we should try to move away from it. After all, if the minimum wage was raised to the level of the living wage, the Treasury would be better off by not having to pay tax credits. Landman Economics calculates that that amount would be £1.5 billion per annum. That money should be reinvested in support for further employment. On the basis of some of the figures I have seen, reinvesting that amount would—using a multiplier of 0.9—provide 2,475 new jobs in Wales. Paying the living wage would therefore save the Government money, and investing that money would create more jobs and higher tax receipts.

I said earlier that businesses, particularly small businesses, have concerns about the living wage, as they did before the introduction of the minimum wage. They are concerned that business costs will go up, and that employment will go down. In the worst-case scenarios in analyses that I have seen, 160,000 jobs might be lost across the UK, including 8,000 in Wales. However, we must see that in the context of the growth in private sector jobs during the past three and a half years of fairly sluggish growth. In Wales, we have had 100,000 extra jobs. We might lose 8,000 jobs, but that has to be seen in the context of the large growth in private sector jobs.

There are other answers, of which the most obvious is economic growth. The UK Government say that the UK economy is growing—in difficult circumstances, I concede—and I think that it is fair, in times of growth, for the working poor to be among the first to benefit. I strongly believe that the concerns of businesses need to be addressed. My party’s policy includes support for small businesses, including through business rate relief, and an increase in local public procurement. We reckon it would create about 50,000 jobs if local authorities bought more cleverly and more locally. We also want a business bank for Wales to ensure that lending is more effective, and a private sector-led industrial development authority.

I want to refer in passing to a policy that has been available for a long time. In 2008, ECOFIN decided it was permissible to reduce VAT in certain labour-intensive sectors. Small businesses such as tourism and the building industry in my constituency would certainly benefit from a reduction in VAT to the 5% level that is allowed. I will not pursue that point now, but it is clearly one answer to the problems that small businesses face.

Lastly, increasing the purchasing power of lower-paid workers would be very good for local businesses. If people have an increase in their wages, they tend to spend the money locally, and there is a multiplier effect when such money circulates and multiplies. Plaid’s focus is on a Welsh economic recovery driven by investment and the creation of jobs that pay enough for people to live on. We will certainly be fighting for that between now and May.