National Minimum Wage

Karen Buck Excerpts

Wednesday 15th October 2014 Commons Chamber

[Mr Umunna]

That is right. On that 38% figure, I must say that I have a similar situation in parts of my constituency. I agree with my hon. Friend but I would add that I think so much of our economic debate takes part around the GDP figures, statistics and data, and of course that is right—we should look at the data—but the question is the lived experience of people in this country: do they think they have never had it so good? When we listen to the rhetoric from Government Members, that is often what we would be led to believe.

[Ms Karen Buck (Westminster North) (Lab)]

Has the Conservative party not got it completely the wrong way round? Is not strong economic growth dependent upon strong earnings growth, which in turn will help us to make sure we have a sustainable recovery that is shared among all the people?

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[Ms Karen Buck (Westminster North) (Lab)]

Three important pieces of news frame our debate on the minimum wage today. First, we heard the good news about the continuing fall in unemployment. Our politics, like those of most hon. Members, are motivated by wanting to see people in work, and any fall in unemployment is therefore extremely welcome. However, we also heard that the squeeze on incomes is continuing. Alongside that, we saw the data released by the End Child Poverty campaign, which mapped child poverty figures in every constituency in Britain. The figure for my central London constituency of Westminster North—of all places—confirms that 43% of all children there are now living in poverty.

Those three pieces of news are all connected. They show us what happens when people’s housing, energy and travel costs, along with all their other costs, go up but their incomes do not. Pay has been squeezed for years at every level in this country, except the boardroom. Only last week we also heard that FTSE chief executives enjoyed a 21% increase in their incomes over the past year, at the same time as the average increase in all pay and bonuses was a mere 0.7%. I do not begrudge those of great skill and entrepreneurial talent a good reward for their labours—I really do not. However, I do not see how it is possible to justify a 21% increase at the top end of the earnings scale when in my borough we had to fight to get recognition for carers—people carrying out the most intimate and personal care and support—of elderly and disabled people. These carers were not even guaranteed the minimum wage for their labours because, unfortunately, their travel time between care appointments was not counted in their earnings and therefore they were not able to enjoy the basic statutory protection for low wages. That is truly shocking.

The big story of events in the past few years is the shift to working poverty, which is when a job simply does not pay enough to lift someone over the poverty line. Some 6.7 million people who are in poverty, or half of all those in poverty, live in a family where at least one person is working. Scandalously, that figure rose by half a million in the past year. The proportion of jobs that are low paid also rose and although it is popularly supposed that that burden falls on the young—and they have had a particularly hard time in recent years—60% of all low-paid people are over 30. This is not just a phenomenon affecting the young.

[Richard Fuller]

Many of the employees on those low incomes are obtaining tax credits, which increases the amount of money they have at their disposal, with the companies therefore benefiting from the subsidy those tax credits provide. What is Labour’s policy on tax credits?

[Ms Buck]

I will talk about tax credits in a moment, because they are extremely important, but, as we have heard from Labour Members, there is no excuse for tax credits being a substitute for employers paying a decent wage.

The number of people paid below the living wage rose in the past year from 4.6 million to 5 million, so we have seen that problem getting worse. I want to talk a little about London, because this vastly successful city, which includes a massive concentration of wealth and some of the best paid people in the country, has a scandalous problem with low pay, and it has been getting worse. Almost one in five jobs in London are low paid and the number of low-paid jobs—those below the London living wage—increased by 45,000 last year to 600,000. The number of low-paid people in London has increased from a total of 420,000 just before the global economic crisis. In 2013, almost one in five London jobs were low paid. That figure has risen from 12% in 2009, so we have a worsening problem of low pay in London.

That problem is not spread equally across people or across all sectors. We know there is a particular problem in the retail and wholesale sector and that one in five low-paid jobs are in the hospitality sector—in hotels and restaurants. Together those two sectors account for nearly half of all low-paid jobs in London—again, that proportion has risen since 2010. We know that low pay particularly affects those working part-time, particularly women. The number of women working part-time on low pay in London has increased by 67,000 since 2009-10. Women are particularly at risk of being trapped in low pay.

Worryingly, we know that there is a particular crisis of low pay affecting black and minority ethnic communities. The Bangladeshi and Pakistani communities are at particular risk of being low paid, and that is also true of black African workers in the capital. We also know that low pay has spread from inner London, which has historically had some of the worst concentrations of poverty, out into the suburbs. They have seen the fastest increase in low pay, with the proportion of low-paid jobs being highest in boroughs such as Harrow and Bexley. They were traditionally regarded as among the more affluent communities in London, so the whole pattern is changing and, unfortunately, in the past few years it has not been changing in a good way.

What does all this actually mean? It means three things, one of which is that people are worse off. We know that, on average, working people are worse off by £1,600 a year. Paul Gregg, of Bath university’s institute for policy research, said in a report that the wages of Britain’s working people are almost 20% lower than they would have been had trend wage continued at its level before the global economic crisis hit us.

[Mr McKenzie]

My hon. Friend makes a good point about the £1,600 that people find themselves down each year in real-terms pay. That £1,600 would be spent in the local economy, thus promoting more jobs and sustaining more business.

[Ms Buck]

My hon. Friend is absolutely right about that. We know that the £1,600 fall in income in cash terms and the fact that wages are 20% lower than they would have been if wage growth had been consistent with its level before the global economic crash—before 2008-09 and beyond–—means several things for the wider economy. Obviously, low-paid people invest their money in the local economy; they spend it, and that has a beneficial effect on the shops, services and communities where they live. It also means that some of those people who would have been paying tax are no longer doing so, which has a beneficial effect for low-paid people coming out of tax but means that total tax revenues are undershooting dramatically, as the Office for Budget Responsibility has confirmed. Indeed, the problem of low pay and tax revenues is a contributing factor to not being able to reduce the deficit, which of course the Conservative party told us would be completed by the next financial year. That has been a complete public policy failure, with a reduction of only a third compared with a target of almost total elimination.

Other issues arise from low pay. It damages work incentives, and we hear a great deal from the Conservative party about those. It is as if it were the party that discovered the idea of work incentives and making work pay. In fact, we all want to see work pay and for that to be an incentive for people going into work. Let us accept that that is universally shared. The trouble is that the worsening scandal of low pay, including in cities such as London, means that work simply does not necessarily guarantee a route out of poverty and it traps people on benefits. That is partly because wages have fallen, as we have heard, but also because they have fallen, particularly in places such as London, relative to soaring housing costs and rising rents. The rise in rents in London means that many households simply cannot work enough hours at the kind of pay that is being offered to get free of benefit tapers. That is particularly true for lone parents and couples with children.

Let me return to the question I was asked by the hon. Member for Bedford (Richard Fuller) about tax credits. It is very important to put on the record just how crucial they are, because whatever one does about the tax threshold and taking people out of tax completely, it simply will not be enough to make sure that people with children are earning enough to make ends meet. The tax credit policy is not a substitute for tax thresholds; it is an essential complement to them, particularly for parents.

[Richard Fuller]

The hon. Lady rightly says that tax credits are a necessary policy addition to tax thresholds We are clear what the Government’s policy is on tax credits, but can she tell us what Labour’s policy is on them for the next five years?

[Ms Buck]

We heard from the Chancellor at the Tory party conference about what he wanted to do in that area. We are yet to have any specific proposals brought to this House and we will consider them when they are put in front of us. When we were asked to vote in favour of a freeze on tax credits—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Members for Bedford (Richard Fuller) and for Streatham (Mr Umunna) should listen to the hon. Lady.

[Ms Buck]

When we were asked to consider what the Government’s freeze on tax credits was going to do in the earlier part of this year, we drew attention to exactly that fact and opposed the Government on that particular freeze for this year because we knew it would hit working people. We hear all the rhetoric from the Conservatives about work incentives, but we do not hear what impact that has on low-income working people.

[Richard Fuller]

I am trying to try to find some common ground. Does the hon. Lady agree that when we are talking about what to do with incomes for the low-paid, it is important that we do not try to sell them this idea that an increase in their wage will necessarily lead to an increase in their full income unless we are clear about what the policy will be on tax credits?

[Ms Buck]

I think I understand the point. We will consider, and make a decision on, those proposals that are put in front of us. They will not necessarily be the proposals that have been put in front of us by a Conservative party conference. It is extremely important to look at tax credits in the round as well as at other changes to the tax system to ensure that we are helping not just those on low incomes through tax thresholds but those who have children so that they have a chance of a decent standard of living too.

Another related point is that low pay has caught people in in-work benefits and added to the benefit bill. The low-wage economy has led to an enormous increase not only in the number of working people claiming in-work benefits such as housing benefit, but in the total expenditure. For example, we have seen a £4 billion increase in housing benefit— that is despite the fact that the Government have made cuts to the total level of housing benefit—as more people are forced into making claims to make ends meet. Indeed, the number of working households needing housing benefit has already increased by 22% and is expected to double over the coming years.

To ensure that we have a sustained recovery and that we tackle the cost of living crisis, help people on low pay and cut the benefits bill, we need to do something about low pay. That is why I so warmly welcome what my hon. Friends on the Front Bench have said about tackling the minimum wage, delivering the “make work pay” contracts, and helping and supporting employers to pay the London living wage, which was set at £8.80 in 2013-14. That will ensure that Londoners can enjoy the full fruits of economic growth as it now belatedly returns.

Where possible—we know that this will not apply to every single sector of the economy—employers should be able to pass on the benefits of the recovery to employees, and in so doing ensure that the additional costs of in-work benefits are offset, so that we can make a contribution to the Treasury. We know that the minimum wage is only one component in a package that will do something to end the cost of living crisis. I welcome the proposals that will ensure rent stability for London renters who have been dealing with this enormous burden of increased housing costs, and the measures to tackle energy costs that have so burdened low-income households over the past few years. The minimum wage may be only one component of the package, but it is a vital one. I very much welcome today’s motion and look forward to voting for it.

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[Heather Wheeler]

I completely agree with the hon. Lady. All work should be worth doing and worth paying. There is no difference between us on that. How depressing would it be if ever, God forbid, Labour got into power? That is what its mantra is about. Ours is not about that; ours is about sunny uplands.

[Ms Buck]

Does the hon. Lady not accept the fact that the number and proportion of people in low pay has increased since her party has been in government? It is all very well telling people to lift their horizons, but in fact the crisis of low pay has intensified over the past four and a half years.

[Heather Wheeler]

I will have some difficulty in accepting that. The point is that 1 million fewer people are unemployed. There are more people in employment now than ever before. There are more women employed than ever before. I want people to understand that getting a job and looking after their family is their No.1 priority, and that is happening.

Obviously, I have looked at the statistics for South Derbyshire. Fewer than 7% of workers in South Derbyshire are on the minimum wage. That is because we have made a real effort to get manufacturing in South Derbyshire and to get a supply chain for the manufacturers. We have made a real effort to get apprenticeship training schools in South Derbyshire. We have worked like—let me find a nice phrase for this. We have worked very hard to ensure that people do not just say, “Do you know what, I do that because my dad and my grandfather used to do that.” It is about lifting horizons.

I totally agree that we need all our public services to ensure that we have clean streets, bins that are emptied and street lights that stay on. People should understand the value of working. I find it so depressing that all we ever get from Labour is this business of layering on regulation and doom and gloom. The right ideas that we heard at conference include raising the tax threshold to £12,500. The horizon of my hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) is to raise it to more than £14,000. We are not talking about people being grateful that we are only going to tax them at 10%. We want everybody lifted up out of that level. It is outrageous that people should even contemplate that that might be in a Labour manifesto.

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[Heather Wheeler]

The difficulty that the hon. Gentleman slightly skates around is the fact that this would be such a burden for companies that are not doing well. That is where we have the problem. We need our companies not to have regulation, to have aspiration and to have 20% corporation tax, so that they can pay their employees well.

[Ms Buck]

By that same logic, does the hon. Lady think the cost of in-work benefits, which is soaring because of the rise in the payment of low wages and because of falling wages, is a burden on the taxpayer?

[Heather Wheeler]

I want to turn the whole argument the other way around. I feel that companies need to understand that we expect them to look after their employees. We need only to think about what has happened with the taking on of pensions. It has been a huge success. Again, all the naysayers said that nobody would take it up and it would not work, but it has been one of the best successes because good employers have loyal employees who stay and work for them. That is what I want to see in the future for our country. Goodness forbid that Labour get in next May. I do not want that to happen because I feel that the economy is just turning around, as people are understanding that we are manufacturing so much more than we ever used to and that that is the way forward. It is about aspiration, education, apprenticeships, good living and good wages. I see all of that in South Derbyshire and I do not want it to be put under threat.