National Living Wage

Lord Callanan Excerpts

Monday 17th January 2022 Lords Chamber

[Lord Sentamu (CB)]

In asking this Question, I declare my interests. I chair the Living Wage Commission and led a debate in your Lordships’ House on 5 May 2020, when 52 Members of the House asked the Government to take action on income inequality and sustainability.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, on 1 April 2022, the Government will increase the national living wage by 6.6% to £9.50. Following this increase, the annual earnings of a full-time worker on the national living wage will have increased by around £5,000 since 2015. The Government are committed to further increasing the national living wage in line with their manifesto commitment to equal two-thirds of median earnings by 2024, and we are on track to achieve this ambitious target.

[Lord Sentamu (CB)]

My Lords, I thank the Minister for that Answer, but given that it was in September 2016 that the Living Wage Commission published its findings, that the Government took six years to raise the minimum wage to the recommended living wage, and that national insurance contributions will increase in April, are the Government, in their levelling-up agenda, going to match their rhetoric on income inequality?

[Lord Callanan (Con)]

I pay tribute to the work that the noble and right reverend Lord does on these matters, and it is important that he raises them; we are grateful for that. As the noble and right reverend Lord is aware, we take advice from the Low Pay Commission—comprising business representatives, worker representatives and independent members—on the appropriate increases, taking into account all the various issues: what is affordable for business, rates of inflation, et cetera. I am proud of the record that we have in increasing the national minimum wage.

[Baroness Lister of Burtersett (Lab)]

My Lords, families with children have been suffering some of the worst in-work poverty and hardship. As wages cannot and should not take account of family size, what are the Government doing to make good the cuts in financial support for children, including child benefit, since 2010?

[Lord Callanan (Con)]

Of course, we are here discussing the national minimum wage. As the noble Baroness is aware, benefits, universal credit, et cetera, are a separate issue—it is important, but it is a separate issue. On increases in the national minimum wage, since it was introduced in 2016 it has given the lowest earners the fastest pay rise in almost 20 years, something this Government are very proud of.

[Baroness Kramer (LD)]

My Lords, some 9,000 employers across the United Kingdom pay the real living wage as calculated by the Living Wage Foundation. From April it will be 40p more an hour than the Government’s national living wage. What steps are the Government taking to persuade more employers to pay the real living wage, which virtually everyone accepts is much closer to reality in assessing the cost of living, especially at a time of inflation?

--- Later in debate ---

[Lord Callanan (Con)]

Of course, I completely agree with the noble Baroness that, where it is possible to do so, employers should pay the higher rates for the living wage that she referenced. We want to see as many employers as possible doing that, but when the Low Pay Commission makes recommendations—and it has representations from all sides of the industrial sectors—it takes into account business affordability. I am sure the noble Baroness would not want to see the rise in unemployment that might result from unrealistic increases in the minimum wage.

[Lord Hannan of Kingsclere (Con)]

My Lords, of course, any increase in wages tends to get passed on to customers. Is my noble friend the Minister aware of studies that show that these increases are disproportionately felt by people on low incomes? If you have a higher wage cost which pushes up prices in a fast food joint, it is not generally investment bankers who are impacted. At a time of rising living costs, what assessment have the Government made of the inflationary impact of repeatedly raising the living wage faster than wages generally?

[Lord Callanan (Con)]

My noble friend makes an important point. I am disappointed by some of the responses from the Opposition Benches. As always with these matters, it is a question of getting the balance right. Of course, we all want to see the lowest paid in society paid more—nobody would want to see that more than I would and I am sure my noble friend feels the same way—but we have to bear in mind the importance of considering whether it is affordable for business. That is why we have the independent Low Pay Commission that makes recommendations on the maximum level of increase that can be afforded without undue inflationary impacts and is affordable for business.

[Lord Lennie (Lab)]

I remind noble Lords—before the Minister takes too much credit for it—that it was the Labour Government who introduced the national minimum wage and that it was introduced against universal hostility from the Tory Opposition. Given the doubling of energy prices expected in April, does the Minister believe that the rise in the minimum wage to £9.50 an hour will be sufficient for ordinary household budgets to cope?

[Lord Callanan (Con)]

Indeed, I am happy to pay credit to the Labour Government of the time for introducing the national minimum wage and I am happy to take credit for the biggest increases in the national minimum wage that we, as a Conservative Government and a Conservative-led Government, have implemented since we came to power. As I said, these are difficult issues. We all want to see it increasing; that is why we have the independent Low Pay Commission to provide independent advice to the Government on what is affordable for business. We are working towards the manifesto commitment to increase the level to two-thirds of national median pay.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I am absolutely delighted to see this rise in the national living wage, but is the Minister aware that if one works a 35-hour week at £9.50 an hour, that makes a weekly total of £332.50? If it is the national living wage, has anybody in the Government actually tried living on it for a week?

[Lord Callanan (Con)]

I know the noble Baroness feels passionately about this and, as I said in response to earlier questions, I think the whole House is united in wanting to see increases in the minimum wage and the living wage as much as possible. However, it benefits nobody if it drives people into unemployment and further poverty. We want to see increases in the national minimum wage, but we want to see them on a sustainable basis.

[Lord Forsyth of Drumlean (Con)]

My Lords, listening to these questions, is my noble friend satisfied that the Bank of England is correct in assuming that inflation is going to be a transient phenomenon? Was it not a mistake that it continued with its programme of QE even when the economy was growing rapidly? If people push for wage increases, that is how inflation takes off, and it will be very difficult for the Bank of England to control it.

[Lord Callanan (Con)]

My noble friend also makes an important point. Inflation has a pernicious impact on the economy and, of course, it impacts most on the lowest paid. I am sure the Bank of England wants to take all these factors into account. I will not stand here and give it advice on this matter, but it is important that we take account of inflation in calculating the minimum wage, and that is exactly what the Low Pay Commission does.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, to protect fixed incomes, people’s savings and to prevent poverty, what are the Government doing to put downward pressure on inflation? Perhaps the Minister could provide us with some of the detail.

[Lord Callanan (Con)]

The original Question was about the minimum wage. The points the noble Baroness raises are important but they are matters for the Treasury—I would be very happy to speak to Treasury officials and get her a proper answer on that.

[Lord Grocott (Lab)]

I am grateful to the Minister for reminding us that it was a Labour Government who introduced the national minimum wage. He did not remind us that it was done in the teeth of Tory opposition, and neither did he remind us that the principal argument used by the Tories at the time was that any introduction of a national minimum wage would inevitably result in a huge increase in unemployment— 2 million, I think, was the figure most frequently quoted. Will he now acknowledge at least that whoever was doing the Tory forecasting at the time had not the faintest idea what they were talking about?

[Lord Callanan (Con)]

Obviously I was not in government at the time but, looking back at the debate, a lot of independent economists were concerned about the possible impact. As I indicated in previous answers, nobody wants to see rises in unemployment. At the end of the day, low pay is better than no pay at all. But I am delighted to say that with the increases in the national minimum wage—and our record on this is second to none—we have seen the national living wage outpace the rate of inflation by over 20 percentage points since we have been in power. That is a good thing: it has not resulted in a rise in unemployment, and I think that is something we should all welcome.

[Lord Watts (Lab)]

My Lords, the Minister takes credit for the increases the Government have introduced. Given the cost of energy and foodstuffs to low-income families, does he think the increase that he is taking credit for will compensate those families for the increases they now face?

[Lord Callanan (Con)]

We take credit because the Government accepted the recommendations of the Low Pay Commission, which, as I have indicated, was set up to consider all these matters. But I agree with the noble Lord: it is going to be difficult—the cost of living is going to increase substantially, probably, over the next few months, with food and energy prices. It comes back to the points made by some of my noble friends earlier: it is important that we get a grip on inflation because that is something that affects the lowest paid the most.