Living Wage

Joan Ryan Excerpts

Thursday 3rd November 2016 Commons Chamber

[Siobhain McDonagh]

Absolutely, and I thank my hon. Friend for her involvement in the campaign. She will know that 11,000 employees were adversely impacted by the changes. Of those, 2,700 have lost at least £1,000 a year, 700 have lost at least £2,000 a year, and a significant proportion will lose up to £6,000 a year.

The human cost of those actions is huge. Literally hundreds of employees from across the country have contacted me in desperation. Let us consider just two examples. There is a gentleman—we will call him Connor to keep his identity secret—who has worked for M&S for more than 20 years, mainly on night shifts. He told me:

“I have enjoyed those years... getting satisfaction from delivering our goals and feeling like I was contributing greatly to achieving our targets. But as you are aware, M&S are cutting my night premium, Sunday premium and bank holiday, totalling several thousand pounds worth of shortfall in my wages per annum. On top of that, they suggest I also start to contribute into a pension. How am I going to be able to do that? I am sick but have a wonderful, large family to support, as well as a mortgage. I stand to lose everything... I have nothing to fall back on. I have given my best years to M&S... I feel cheated and betrayed.”

Let us consider Ms Smith from Yorkshire, a hard-working, low-paid mum. As a result of B&Q’s contractual changes, she is going to receive a staggering 30% pay cut and will lose £2,000 a year from 2018. She told me:

“How exactly am I going to make up this wage deficit? I have a young son to support, and next year is looking very bleak for us…I am worried about how I will support my family...I am heartbroken that the company I have worked so hard for, done 16-hour shifts for, come in on days off for, and valued greatly, has treated me like this.”

Two companies, one sad pattern of hard work and loyalty being punished. Thousands of employees at these two companies will never earn again what they earned in April. Indeed, the general public have been shocked by these actions, with a quarter of a million people signing Change.org petitions against these practices.

What is so shocking is the ease and speed with which these companies have legally cut staff pay. Both companies launched 90-day consultations, which is the statutory minimum. Neither recognises a trade union. Both targeted those workers on older contracts, and both conducted consultations that ended with these pay cuts being pushed through, regardless of the employees’ heartache and the reputational damage the companies have faced.

The consultations are a foregone conclusion. In fact, M&S’s head of retail told me that the company had been planning these changes for 18 months. M&S’s board will meet tomorrow to finalise these contractual changes, and it will be issuing notices a few weeks before Christmas to staff members who refuse to sign their new contracts. I ask the Minister to address that point in summing up.

[Joan Ryan (Enfield North) (Lab)]

I commend my hon. Friend for her tireless campaign on this issue. Given that a Resolution Foundation survey of employers found that there was no evidence for the claim that the national living wage leads to job losses, does she agree with John Hannett, the general secretary of the Union of Shop, Distributive and Allied Workers, that

“employers must not be allowed to blame higher wages for every job loss, every cut in hours and every change to terms and conditions”?

[Siobhain McDonagh]

I completely agree with my right hon. Friend, and I will go on to say how cuts in pay never seem to apply to those at the top of an organisation or to impact on its profits.

Steve Rowe, the chief executive of Marks & Spencer, still refuses to meet MPs to discuss these changes, and he has not accepted that he should have a pay cut in solidarity with his shop-floor staff. I hope Members will bear all this in mind when they are doing their Christmas shopping at M&S next month.

The fact that this happens at the same time as low-paid workers have been promised a pay rise by the Government is incredible. In many ways, B&Q and Marks & Spencer have just been unlucky in being singled out, because there are many more doing the same thing.

--- Later in debate ---

[Paul Scully (Sutton and Cheam) (Con)]

I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing this debate via the Backbench Business Committee. It is not the first time I have supported her application for a debate. This is another example of an issue that she has raised about which we can agree on a significant amount.

Living Wage Week provides a good opportunity to raise the issue of low pay with employers, and to encourage them to pay their employees a fair wage and thus reduce employers’ dependence on Government subsidy of their payroll costs through in-work benefits such as tax credits. The living wage is paid voluntarily by employers and set according to the cost of achieving an adequate standard of living. I question whether it is a real living wage, but it is a living wage as judged by the Greater London Authority for people in London, and by the Centre for Research in Social Policy at Loughborough University for those outside London.

I have employed people, on and off, for the last 20 years or so. As, I hope, a responsible employer, I try to pay more than the market rate if possible. People are more than commodities; they are the shop window, the engine room and the support team of any business. Investing in their people should be a top priority for any employer. I hope that my parliamentary staff, who may be tuning into this debate, will not be too inclined to raise a quizzical eyebrow at what I have just said.

Satisfaction at work is not all about pay. It is about conditions; it is about how bosses, managers and colleagues relate to and value an individual; and it is about career development. In this debate, we are focusing on the lowest-paid in our society—the people who are struggling to pay their bills and who are having to make difficult daily choices to be able to survive, let alone thrive. The Government have made a lot of progress since 2010 in improving the circumstances of low-paid employees. We will lift another 1.3 million people out of income tax altogether, while basic rate taxpayers will be more than £1,000 better off than they were five years ago. A full-time low-paid worker aged 25 or over now earns about £900 more than they did last year.

The national living wage means that earnings have risen for the lowest-paid workers at the fastest rate since records began. The Office for Budget Responsibility estimates that in total up to 6 million people could receive a pay rise as a result of the ripple effect that causes pay to rise further up the earnings distribution. By increasing the national living wage, taking millions of people out of tax and making welfare reforms, the Government are ensuring that it always pays to be in work.

[Joan Ryan]

Is the hon. Gentleman aware of the Joseph Rowntree Foundation evidence that a third of families earn less than they need for a decent standard of living? Given that, does he agree, as he supports a living wage, that the Government should provide firm guarantees that no employee will earn less as a result of the national living wage?

[Paul Scully]

I will deal in a second with what the Government are doing and the manifesto commitments we made last year, but I agree that we can always do more to lift the low paid out of poverty and low pay. It is very important that we continue to move to a higher wage, lower tax and lower welfare society, building a more productive country, because we must give families the security of well-paid work. It is important for the Government to help businesses to offset the costs of the national living wage, including the ripple effect that I have mentioned. Corporation tax will therefore be cut and businesses will benefit from a 50% increase in the employment allowance.

--- Later in debate ---

[Margot James]

I will ask Her Majesty’s Revenue and Customs, which is the enforcement body for the minimum wage, what stage its investigation has reached. As one of my hon. Friends pointed out earlier, HMRC investigates every single complaint for underpayment, but it also mounts sector-based inquiries into such matters as the circumstances of seamen.

Let me now deal with some of the overall issues raised by the hon. Member for Mitcham and Morden. I share some of the concerns that have been expressed today. We know that employers are responding to the national living wage in a range of ways, depending on the markets in which they operate and the current state of their businesses. The extent to which they may be able to absorb the extra costs from profits, pass them on in the form of increased prices, increase the productivity of their staff or reduce other costs will vary between and within sectors. We think it essential for employers to ensure that their reward packages are competitive, and that they reward staff for their work in order to retain and develop workers who are fundamental to their success.

Ultimately, however, although we can set the minimum wage, it is for employers to decide how to manage those increases in their costs. Any changes in contracts must be agreed with workers, and must be in line with the law at the very least. Any instances of unfair dismissal that might result are, of course, a serious matter, and would be dealt with through employment tribunals, but employees could always contact the Advisory, Conciliation and Arbitration Service for guidance at the same time.

It is worth noting that changes in pay structures in the retail sector can reflect long-term changes to introduce greater consistency, perhaps the sort of changes that we have heard about this afternoon. Some may be coincident with, but not a consequence of, the introduction of the national living wage, and I do not accept that they are in any sense loopholes. The Government will continue to set a minimum hourly wage, and remuneration over and above that rate is a contractual matter between the employer and the employee.

[Joan Ryan]

Will the Minister give way?

[Margot James]

I will give way one last time. I am aware that many other Members wish to speak.

[Joan Ryan]

I thank the hon. Lady for giving way. She talks about going to ACAS or a tribunal in a way that makes that sound extremely easy. However, companies only have to have a 90-day consultation, and when that is finished they can take the measures they wish to take that lower wages by reducing overtime and bonus payments, despite the fact that they are implementing the Government’s national living wage. Surely this is a loophole and the Government should act; otherwise, what is the point of any of the Government’s measures?

[Margot James]

I do not see these matters as loopholes because there is no proof of a connection between the introduction of the national living wage and some of the cases we have heard about this afternoon.

I object to the automatic assumption that the changes that Marks & Spencer has made to its contracts and conditions are exploitative or a direct result of the national minimum wage. The hon. Member for Mitcham and Morden stated that Marks & Spencer had scrapped its pension scheme. It has not done so; like a host of other firms—the vast majority of private sector firms—it has moved from a defined benefit scheme to a defined contribution scheme. Indeed, the hon. Lady herself pointed out that the John Lewis Partnership had moved in such a direction several years ago, and it is not surprising when we consider what has happened to some of our large corporations’ defined benefit schemes in recent years. In August alone the deficit of those schemes increased by a massive £100 billion—and that was just in one month.

These pension schemes have to be sustainable; otherwise, we are going to see a calamity unfold over the next decade. Marks & Spencer has, along with the vast majority of other corporations, taken the entirely reasonable decision to move over, after consulting their employees at length and after putting in place a compensation programme to cover a three-year transitional period.

I took the precaution of talking to Marks & Spencer representatives to find out about the wider impact of some of these changes on employees of one of our most famous high street stores. I found that a rather different picture emerged from what we have heard from some Members in this debate. The company has put in place a Marks & Spencer living wage of £8.50 as a minimum for all store staff from April next year, and all those staff will receive a pay rise for every hour worked, and longer serving employees, who I agree have had to give up premium rates for Sunday and bank holiday working, will at least receive a lump sum in compensation. The conclusion is that approximately 90% of M&S employees will receive higher pay as a result of all the changes, which staff are free to accept or reject. M&S has also undertaken a very lengthy consultation covering all its store staff.