National Living Wage

Debate between Julie Cooper and Stephen Doughty

Monday 18th April 2016 Commons Chamber

[Julie Cooper (Burnley) (Lab)]

I pay tribute to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for securing a debate on this important topic, and I wish her a speedy recovery. I also congratulate my right hon. Friend the Member for Enfield North (Joan Ryan) on the way in which she has led the debate.

Like so many Members in the House, I welcomed the news in last year’s Budget that the Government would introduce a new national living wage, as a result of which workers aged 25 and over would receive £7.20 an hour in April—an increase of 50p from October 2015, when the minimum wage was set at £6.70. I also welcomed the plans for it to rise to £9 per hour by 2020. Both those measures are important steps towards securing a real living wage, which the Labour party continues to campaign for. After years of workers enduring the bulk of the Government’s austerity agenda, a pay increase for 1.8 million workers is welcomed, even though it does not go far enough.

For me, this is a local issue, that affects the lives of many of my constituents. According to the House of Commons Library, 19% of people in my constituency will benefit from the living wage this year. That figure will rise to 27% by 2020. I understand that the changes will have a disproportionate impact on small businesses, which employ 35% of the adult workforce and 52% of Britain’s minimum wage workers, and that it will be concentrated in the hospitality and retail sectors, which account for more than 46% of minimum wage jobs. I also note the concerns coming particularly from the social care sector, which is already underfunded. The Government urgently need to do more to address the shortfall in funding.

In the recent weeks leading up to the implementation of this new wage, a campaign of fear has been put out by large employers that simply do not want to pay their employees a fair wage. Some have claimed that a living wage will lead to job losses. Others have had the gall to say that raising wages is in effect a tax targeted at businesses using low-skilled workers. The truth is that the taxpayer has had to pay to top up the pay of workers to the tune of £11 billion a year. Prior to this wage rise, the four big supermarkets alone—Tesco, Asda, Sainsbury’s and Morrisons—cost £1 billion a year in the tax credits and extra benefit payments their underpaid staff received.

I have found disturbing and, quite frankly, shameful the way in which some large employers in the service sector have used the introduction of a living wage as an excuse to cut basic work entitlements. In the face of the changes, some employers have cut holiday pay, lunch hour pay and sick pay, and have cut contracted hours. As has already been mentioned, the retailers B&Q, Tesco and Wilko have all cut premium holiday pay and other benefits while reluctantly raising pay. Staff at Tesco face a cut to night-time and holiday bonuses, as do staff at Wilko and Morrisons. One Tesco worker has said that the loss of pay will amount to £75 a month, which could be the difference between making next month’s rent and being kicked out on to the streets.

[Stephen Doughty]

My hon. Friend is outlining what I regard as very underhand practices that are hurting such workers. Will she join me in paying tribute to the work of trade unions such as the GMB, USDAW, Unison and Unite, which have played a key role in exposing a lot of these problems during the past few months? That underlines why trade unions are so crucial in standing up for workers in workplaces, such as the care sector or the retail sector that she mentions.

[Julie Cooper]

I am very happy to agree with my hon. Friend and pay tribute to the trade union movement, which has done so much to stand up for the rights of workers when faced with such threats from some big companies.

Eat, the café chain, has reportedly stopped paying staff during lunch breaks. Caffè Nero has told staff that it cannot afford to pay the national living wage and allow their workers a free panini at lunch time, despite the fact that its profits grew by 8.5% to £241 million in the 12 months to last May and that the company has not paid corporation tax since 2007. As was mentioned earlier, B&Q has demanded that employees sign away rights to a range of in-work benefits worth more than a £1,000 a year or face the prospect of being sacked. This intimidating and bullying of staff should not be tolerated in any workplace.

The Low Pay Commission has warned that some employers may decide to label employees as apprentices or self-employed to avoid having to pay them the living wage. Other suggestions floated by large retailers include cutting the number of staff or speeding up the implementation of technology to replace staff, such as using more self-checkout tills in supermarkets. These regressive actions are in complete contradiction to the aims of the living wage, as the Government pointed out when they introduced it. They said it would prompt employers to invest in training and technology to make their workers more productive and break the low-pay, low-productivity cycle. I do not see how cutting in-work benefits will make employees more productive, or break the cycle of low pay and insecure work.

Costa Coffee, Next and other high-profile companies have said that they will increase prices to cover the change in wages by passing the price directly on to the consumer. I was astonished to hear a member of staff in a small chain in my Burnley constituency tell a customer that the price of bread had gone up because of the change to wages. These companies can afford to pay and should pay a living wage off the back of the profits that they produce. This should not be a system in which employers can choose between holiday pay and a living wage, or between raising prices and sacking staff.

Those guilty of such actions show their contempt for their customers, for this Parliament and the law and, most importantly, for their staff—the very individuals who give their sweat and blood, and their time and effort, so that those at the top can receive large salaries deducted from record profits. If such large companies employing thousands of people across the UK can afford to pay their lawyers and accountants large fees to cut their tax bill and avoid paying corporation tax, I do not see how they cannot afford to pay their employees a real wage that they and their family can live off.

The Government estimate that the total cost to employers of implementing the national living wage in 2016-17 is £1.1 billion. Yet last year, according to Her Majesty’s Revenue and Customs, tax fraud cost £16 billion, with tax evasion alone meaning that the Government collected £4.4 billion less in tax. The money lost to the economy could easily cover the cost of the implementation of a real living wage.

Some claim that a living wage will lead to job losses. In the face of much of the scaremongering about job losses, it is worth pointing out that there has been little to no negative impact on our economy or jobs since the introduction of a minimum wage in 1999, despite the fact that the same people made the same arguments then. I am happy to say that some employers have welcomed the wage rise. Some have gone further by paying all their staff, irrespective of age, a higher wage than the Government’s living wage.

This debate is not simply about the cost of a living wage; ultimately, it is a wider reflection of an increasingly divided society. I am running out of time, but I would like to share with hon. Members my own experiences. For 24 years, I owned and ran a successful small business in which I employed 10 people. Through all that time, I recognised that the staff were a real asset, helping to build the success of the business. They worked hard and contributed much, and they were valued highly. I was proud to pay them a real living wage, and they certainly deserved no less. Similarly, when I was leader of Burnley Borough Council, I was pleased to introduce the real living wage for all employees. Not only is this the fair and decent thing to do, but it makes sound economic sense, because when people have more money in their pocket, they create demand for more and better services and shops. Thus the living wage, far from damaging business, actually acts as a boost.

I call on the Government to protect workers’ rights that are clearly being undermined. It should be made clear, through legislation if necessary, that employers should not see the living wage as an opportunity to cut back on holiday pay or other hard fought for entitlements—