Budget Statement

Lord Blencathra Excerpts

Tuesday 21st July 2015 Lords Chamber

[Lord Blencathra (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Scriven. I can tell him that I have lived in Cumbria for 30 years, and I welcome the Budget. I suspect that most of my former constituents would have welcomed it as well.

I also congratulate the noble Baroness, Lady Kramer, not only on her work as a coalition Minister but because today is her birthday. Even if I could remember her age as printed in the Times, I would not dare say it—I do not want to suffer like Sir Tim Hunt and be driven out of the club for some inappropriate sexist remark—but I congratulate the noble Baroness.

I want to concentrate on the minimum wage. Fifteen years ago, I opposed the minimum wage and thought it would damage job creation and was an unnecessary interference with business. I was wrong and so were my Conservative colleagues, and we acknowledge that. The minimum wage was the best thing Tony Blair ever did, and since its introduction I thought the minimum wage was working quite well and I did not pay much attention to it.

However, two years ago I was appalled to discover that some of our largest and most profitable companies were paying the minimum wage to their employees, and that the taxpayer was having to top up those wages with housing benefit and tax credits. Okay, I know that most of your Lordships knew that long before I caught up with what was happening in the workplace. I found it obscene—and I find it obscene—that low-paid workers who are paying their taxes are subsidising many highly profitable companies who are earning their profits on cheap wages.

I became an immediate convert to the living wage and I am delighted that the Chancellor has set out a programme to implement it by 2020. I know that some critics will rightly say that it is still not enough to live on—that it is not a real living wage—but at least we are heading in the right direction, and in politics if you have the direction right and the concept right, that is not a bad start.

All my political life, the CBI has been a whinging organisation, never satisfied with any Government. As a teenager, I remember CBI spokespeople slamming the Callaghan Government in 1976, 1977 and 1979, and then a few months later, after Margaret Thatcher was elected, they were slamming her equally hard, too. What did they have to say on the living wage plans in the Budget? They said:

“To increase the minimum wage on average by 6 per cent a year in this parliament is quite a gamble for businesses, which will struggle to leverage the productivity to pay for it”.

But what did Simon Walker, the director-general of the Institute of Directors say? He said:

“There will be a bit of gulping but I think it’s right and I think our members can actually manage it”.

Quite so, and once again we see in the CBI the unacceptable face of capitalism—willing to take another cut in corporation tax but not wanting to reward the lowest-paid workers who have made the profits.

Indeed, I urge the Chancellor to go further and faster with the living wage. I know my noble friend the Minister cannot dare to comment on this in his wind-up or he will be drummed out of the club, but I suggest that all companies with profits over £500 million or with executives earning more than £5 million or handing out dividends of more than 4% per annum should be made to reach the £9 per hour by 2018. Examples of companies paying more than 4% in dividends are: GlaxoSmithKline, Shell, Wm Morrisons, Sainsbury’s, BP, Anglo American, Centrica and a dozen other large companies. It is interesting, looking at the website for London, that the companies paying the living wage in London are mainly small and medium-sized enterprises. Last year, Sainsbury’s, Morrisons and Tesco had combined profits of £3.8 billion—okay, they were down from the £3.9 billion that they made in 2013 and the £4.1 billion in 2012—yet pay only the minimum wage.

The salaries of CEOs and executives in the FTSE 100 rose by 15% in 2014 and the gap between the highest-paid executives and their lowest-paid employees has never been wider. In 1998, chief executive salaries were 57 times larger than the average worker’s; now, they are 178 times larger. And there is no correlation whatsoever between huge salary increases for executives and company worth, company growth or company profits. So I say to Mr Cridland of the CBI, who has just retired: if you think your companies will struggle to pay their lowest-paid workers a 6% per annum increase, they seem to have had no difficulty paying their directors 15%. Not to be left out, of course, last year BBC staff got a 2% pay rise, but their so-called stars got 22%. So even that lovely left-wing organisation treats its workers no better than the capitalists do.

Before my noble friends think I am making a bid to be Mr Jeremy Corbyn’s policy guru, I must state that I do not believe in capping top pay, but I do believe in everyone in a company sharing in its success. That is proper capitalism, and we see it practised by John Lewis and Waitrose, which already pay above the minimum wage. As has already been said, yesterday IKEA announced that it would pay more than the minimum wage. The founding boss of Iceland Foods said last weekend as he slammed big retailers who pay only the minimum:

“Of course this is going to be painful but we’ll do it with a smile on our face. I’m all in favour of this living wage and if everyone has to pay it then it’s better all round”.

He went on to describe the claims of some supermarkets that staff discounts made up for low pay as “brainless”, and said that they had a moral duty to pay higher wages.

I turn briefly to apprenticeships. I agreed with every single word that the noble Lord, Lord Bhattacharyya, said on the apprenticeship levy. I say to my noble friend the Minister that if we can appoint the noble Lord, Lord Adonis—whom I think the Secretary of State for Transport appointed to a committee on HS2— I hope we can consult the noble Lord, Lord Bhattacharyya, or find a role for him in advising on how the levy could work. I applaud the levy for apprenticeships provided that it does not lead to the recreation of all those bureaucratic industry training boards we had in the 1970s. The CBI again criticised it, saying:

“A volunteer army is always better than conscription”.

That is not true, as we discovered in the Second World War. It would be foolish for the Chancellor to intervene if all the businesses were coming forward and training the workers we need but they are not, and it is not fair that some companies do no training and poach workers from others. So since the volunteer army of willing employers has not materialised, it is time to try conscription—but keep it simple.

When we introduce the Bill on Sunday trading, leaving aside other arguments about Sunday trading, if the big shops are to get a chance to open for longer on Sundays, I hope the Chancellor will say, “If you open for longer on Sunday and make extra profits, then you pay the full minimum wage for your Sunday workers”.

In conclusion, capitalism is the only system that works. Socialism has been tried in many countries over the past 90 years or so and has always brought poverty, famine and devastation. Free trade, private enterprise and responsible capitalism improve the living standards of everyone and make the world a safer place, but periodically it needs a harsh reminder of what responsibility is. If I may use a less vulgar anatomical word, I rather liked the comment of the unnamed Cabinet Minister who said that the Budget,

“was designed to give British industry a kick up their lazy”,

backsides. I look forward to the day—I think the right reverend Prelate the Bishop of Birmingham hinted at this—when a person working a 40-hour week gets a wage from an employer that the person can actually live on without taxpayer support. I know we are still a very long way away from reaching that goal, but this Budget has started the journey and I commend it.