Living Wage

Meg Hillier Excerpts

Wednesday 9th January 2013 Westminster Hall

[Kwasi Kwarteng (Spelthorne) (Con)]

I am pleased to serve under your chairmanship, Mrs Main.

I agree with many of the remarks made by my hon. Friend the Member for Christchurch (Mr Chope), who put his case trenchantly. We are having a very simple argument: it boils down to whether we want free enterprise and a free market system or whether we think that state intervention is the way to achieve better economic outcomes for the people of this country. It seems to me that this debate has been taking place for years in Britain. Until recently, there had been a general presumption in favour of the markets.

I am pleased that the hon. Member for Birmingham, Erdington (Jack Dromey) referred to May day as a great rallying point, because of course it was a great socialist parade. Those of us who remember the cold war will recall that May day was the Soviet Union’s big day, when tanks drove through Red square; it was very much something that the Soviet Union celebrated. I am sure that the hon. Gentleman would love to go back to those days, but many of us have moved on. I make the point perhaps a little flippantly, but there is a serious argument about whether one feels that better outcomes can be achieved through state diktat.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The hon. Gentleman is talking about state intervention. Many people in my constituency and across London must effectively be subsidised through in-work benefits because of their low wages. There is therefore state subsidy and a cost to the state with the current regime.

[Kwasi Kwarteng]

We could have a separate argument about the efficacy of—[Interruption.] Let us stick with this theoretical idea.

--- Later in debate ---

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Thank you very much, Mrs Main, for calling me to speak. It is a pleasure to serve under your chairmanship.

I congratulate my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) on securing this debate on a very important issue. I represent a constituency in the part of London—east London—that was the birthplace of the living wage campaign. I think that we would all agree—Labour Members would certainly agree and perhaps even some Government Members would agree— that a fair wage for a fair day’s work is something that we support. I was slightly disturbed by the hon. Member for Christchurch (Mr Chope) seemingly comparing people abroad working for £1 an hour or less with people here in Britain, as though that was an option for people here. I hope that he did not mean it quite that way, but that is how it came across.

Let us remember that it was the Conservative Government of the ’80s who abolished the mechanism for setting fair pay, the wages council. I am very proud that I am a Labour MP and that it was a Labour Government who introduced the minimum wage because of the abysmal failure of having a complete free rein on wages.

[Kwasi Kwarteng]

Is the hon. Lady suggesting that we go back to the ’70s and the kinds of industrial relations that we had then?

[Meg Hillier]

I cannot understand how the hon. Gentleman makes a jump to reach that conclusion from my suggesting that we do not want to go back to a complete free rein on pay. That is not what I am saying at all, as he well knows. It is mischievous of him to suggest that I am saying that.

[John McDonnell]

Can I suggest that what the hon. Gentleman is saying is that he wants a free market but he does not want free trade unions?

[Meg Hillier]

I think that we can certainly infer that from the hon. Gentleman’s comments.

[Several hon. Members]

rose—

[Meg Hillier]

I will just make a little progress before I take interventions.

I am also delighted that it is my party that is seeking to ensure that, in constituencies such as my own, a living wage will enable people to work. Let us be clear about something, before we run away with the idea that a living wage will be very damaging to lots of small businesses. A living wage is not something that a Labour Government would force upon business, or certainly not upon small businesses. There are businesses such as Moo.com in Tech city, which employs people in its warehouse in EC2, providing good, valuable jobs locally. Those people are on the minimum wage for the first part of their contract, until they have been there for a while, and then the company increases their wage. Flexibility is built into the Labour policy to ensure that the system will work.

I will offer one word of caution. We need to look at the hourly gross rate of pay. That is obviously important, because it reflects the day-to-day money that people take home to live on, but we also need to consider pensions and other work benefits. When we assess what is fair pay, those benefits need to be brought into the round. My point is that, if a company pays a little lower than the living wage but pays a pension, we need to be watchful. As a Labour Government, we will need to be clear that the pressure, or indeed the kudos, of paying the living wage does not lead to the erosion of other benefits that are a type of payment in kind. My hon. Friend the Member for Hayes and Harlington (John McDonnell) made some very good points about that.

[Kwasi Kwarteng]

rose—

[Meg Hillier]

I will give way one last time.

[Kwasi Kwarteng]

I am very grateful to the hon. Lady for giving way; she is being very generous in allowing interventions. What would she think about a Member of Parliament, for example, or someone else advertising for an apprentice at £3 an hour, which I understand one of her colleagues on the Labour Benches has done?

[Meg Hillier]

I would be appalled, and indeed I am appalled. I am part of the campaign in Parliament to ensure that all of us—from whatever party—pay people in our offices a fair rate. I like to think that I lead by example on that; in fact, I know I lead by example on the issue, alongside a number of my other colleagues. I think that we can all agree that what the hon. Gentleman just referred to is not something that we would want to see in the mother of Parliaments.

Let me relate this debate to real life, because we could have a theoretical discussion in Parliament about the economics of the issue. A kitchen porter came to my surgery and he was very upset. Being a kitchen porter is low-wage employment, but he was seeking work because he was out of work. However, his jobcentre was asking him to travel further afield in order to take a job as a kitchen porter. One could say that that was quite reasonable. However, because of the low wages for that type of job, the extra costs to travel out of the borough and the extra child care needed because of the longer hours spent travelling, it was not a viable option.

Let us be clear—that man is no shirker. However, the hon. Member for Christchurch suggests that the market would solve that problem, perhaps by single people taking that work. However, my constituent has a family to support; he wants to support them but is unable to do so under the current regime, except that the state will subsidise matters to a degree by providing benefits. So we are talking in the round here. There is always a cost to the state, whichever way we do things, and actually giving people the dignity of earning a living wage with which they can support their family and make choices for their family on their own is very much at the heart of Labour’s policy in this area.

I could add to that kitchen porter many other of my constituents, even some on higher salaries. The tube price hikes and the bus fare hikes by the Mayor of London, and the cost-capping—we had the vote yesterday in Parliament on in-work benefits—all put pressures on people’s ability to pay their costs of living. That is why a living wage gives people the dignity of being able to make their own choices.

We also need to look at national insurance contributions. That is something that we will need to work through as a party, as we flesh out the policy on the living wage. NICs are now more than 13% of total gross pay for small employers, which is more than employees contribute. The on-costs for a small employer are significant and we need to think about how we might want to encourage and support small employers, to get people into work, yes, but also to increase their pay gradually so that they are on a living wage. There is a real interest for business, but some of those start-ups in my constituency will be worried if they foresee a suggestion that overnight they will have to increase wages. We need to handle that issue carefully, because the jobs that are being created in my constituency and elsewhere are important.

I am proud that my local council, Hackney council, is one of those councils that are accredited as paying the living wage, because we in Hackney see the impact on people’s lives of that policy. We are living what is happening. However, it was interesting that when I asked the Deputy Prime Minister at Prime Minister’s questions in November how many Liberal Democrat councils were paying the living wage, answer came there none.

[Mr Iain Wright]

Where are the Liberal Democrats?

[Meg Hillier]

Indeed. Today, not a single Liberal Democrat MP is here in Westminster Hall, even though the Deputy Prime Minister has pledged his support for the policy of a living wage; he has pledged his support, but words can be very empty.

As I say, there is not a single Liberal Democrat MP here in Westminster Hall today, but since November I have discovered that there is actually one small Liberal Democrat-run district council that pays the living wage. In a show of cross-party support, we should congratulate that council on that and hope that it has some influence on the party leader in ensuring that a living wage system is rolled out more widely.

We also need to look at the most profitable companies, which in London are being subsidised—as I mentioned earlier—by taxpayers through tax credits and benefits. There is not a nil cost to lower pay. In fact, it was the current Chief Whip of the Government, the right hon. Member for North West Hampshire (Sir George Young), who talked about housing benefit “taking the strain” back in the ’90s. Housing benefit has still been “taking the strain” despite attempts by both the last Labour Government and this Government to change the approach. It is housing benefit that subsidised so many people in their lifestyle, because wages are not high enough.

In London, we cannot raise wages enough to cover all housing costs; I recognise that, before Government Members leap up and suggest that that is what I am saying. I am not saying that, but we must recognise that people need to be paid a rate that they can actually afford to live on and that there is no nil cost to the Exchequer.

Labour’s voluntary model is a moderate one. It says to companies, “Publish. Be transparent about who you’re paying and what you’re paying them.” People can then make judgments for themselves. We have already seen some companies, such as KPMG, lead by example, and if some can do it why not all of them?