DRAFT National Minimum Wage (Amendment) REGULATIONS 2017

Owen Smith Excerpts

Tuesday 14th March 2017 General Committees

[Owen Smith (Pontypridd) (Lab)]

It is a great pleasure to serve under your chairmanship today, Sir Alan.

One might have thought that I would have learned in the summer that it is a big mistake to try to get one up on one’s elders and betters on the Front Bench, but I absolutely cannot resist. I will go back not to the 1980s and 1990s, but to 1910, when my great-great grandfather, Dafydd Humphrey Owen, was a Cambrian Combine stay-down striker in south Wales, striking for a living wage as part of the Labour movement. Members will no doubt remember from their history that the colliers were crushed by a future Conservative Prime Minister, who was then a Liberal. The Tory party at the time wholly opposed the introduction of a living wage of any sort.

Scrolling forward a few years to April 1999, when the last great Labour Government introduced the living wage, the Tory position had not changed one iota. They were still opposed to it and argued that 2 million jobs would be lost in this country. I remember that extremely well. Of course, we did not lose 2 million jobs. We did not lose a single job as a result of the introduction of the minimum wage, but we did increase the pay of more than a million low-paid people in this country by 15% overnight, lifting 1 million people in this country out of poverty at a stroke.

Playing forward to where we are today, the Tory party has ostensibly recanted, as my hon. Friend the Member for Birmingham, Erdington said, and supports measures to increase the pay of the lowest paid in this country. As last week’s Budget yet again illustrates, the reality, if we look through the rhetoric and beyond the soundbites, is a Tory party that still seeks to balance the economy on the backs of the poorest.

Not only is this not a real national living wage—I will not even indulge in the argument about the nature of the wage, as we all know that it is a minimum wage—but the Tories are not even honouring the commitment they made just a few months ago for it to rise to £9 over this period. It will rise only to £8.75, well short of the £10 that the Labour Opposition say we should be aiming for. Add that to the fact that low-paid workers in this country have already seen dramatic cuts to their income in the past few years, the latest being the increase in national insurance contributions for self-employed workers introduced just a few days ago. When we add that to the cuts to the work allowance and universal credit, low-paid workers in this country—people earning £15,000 or £16,000 a year, working 36 hours on the minimum wage—will be between £2,000 and £3,000 worse off as a result of the budgetary changes made by this Tory Government. That one fact blasts out of the water all the nonsense we have heard about the Tories being in favour of a proper national living wage in this country. The plain fact is that they are not providing living wages for people.

The Budget last week once more showed working people being asked to pay the price. The reason the Government are having to do that even more now, of course, is Brexit. What we saw in that Budget last week, beyond all the complacency and the quips and smirks from the Chancellor, was a devastating report on the state of our economy by the Office for Budget Responsibility.

In the past 11 months, the OBR has uprated the amount of borrowing it says this country will need over the spending period by £100 billion. If a business or some sort of public body had its forecast wrong to the tune of 100 billion quid, it would be in serious trouble. Just 12 months ago, the Government projected that we would see rising growth rates throughout the spending period, and then the OBR came back and downgraded growth in every single year out of the next five. If a business did that, its investors would start to look askance at the business plan.

Having seen that massive increase in borrowing and the projections for lesser growth over the next five years, did the Conservative party choose to prioritise the incomes of working people? Did the Government say, “What we really need to do is make sure that people at the bottom end of the income scale are the people who are protected from the downturn in our economy that the OBR is predicting”? No, they did not. They carried on with cuts to corporation tax. They pushed through the cut to inheritance tax. They did not reverse the cuts they had made to the top rate of tax.

They did not do anything that would ask those people with the broadest shoulders in our economy and society to bear the largest burden. Instead, they chose to take more money from the working people of this country by slowing the rate of growth in the national so-called living wage, meaning 1,400 quid less by the end of the period for average working families. They chose to push through the NICs changes, which will mean reductions of between 30 and 250 quid on top of the thousands of pounds in reductions in income that universal credit cuts have brought about.

The Opposition will take no lectures from the Tories about their intention to support working people in this country, because they have illustrated over a century and more that they do not.

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[Stella Creasy]

Exactly. It is completely inconceivable that age rather than proficiency should define someone’s employability.

There is an issue for us here about whether the statutory instrument will help Britain. We have to acknowledge a word that seems to be missing from the Government’s vocabulary but will in fact define these issues: Brexit. Our economic position is so uncertain. The chances are that inflation will continue to rise; that is clear to the Opposition. The question of what difference £2 makes will be all the more important in the years ahead that the legislation provides for.

In 4 million households in this country people are in work but in poverty. The point behind the living wage campaign, which I am so proud to have been a small part of in my part of town in east London, where all the best things come from—I will fight you all for that—is that it is not simply about living to work or working to live, but living a life worth living. That is why having a living wage makes a difference. This is about the cost of living. Just as inflation has risen and wages have not—for the first time wages have not kept up with growth in our country—so the costs of living are extraordinary.

I have the dubious distinction of representing the part of the country with the most estate agents per square mile. My part of town has had the highest rise in house prices of any part of the country. The Minister looks shocked, but Kirstie and Phil are the harbingers of doom for many people in my community because the cost of living, which their wages have to cover, is going up and up. That is why having a real living wage matters. Not having one means that we as a society have to deal with the consequences in a number of ways. We have to try to help people cover the cost of living, keep a roof over their head, feed their kids, put money in their electricity meter and take their kids to school. We also have to deal with the consequences of debt that we are now seeing in our country.

I look at these proposals in the context of the impact: 24% of people in this country now have mental health issues because of their personal finances and 41% of families are worried about their debt and whether their wages are going to cover such costs. One in six of those people is worried because they have borrowed money from a family friend or member. There are real human consequences to not having a real, genuine living wage: families are torn apart.

[Owen Smith]

I am sure my hon. Friend was about to come on to this. She is making a powerful speech and a powerful point about private debt in this country, but was she as gobsmacked as me during the Budget to see that public debt is now scheduled to go up to £1.9 trillion by the end of the spending period? That is a 150% increase in our public debt since the Tories came to power. Does she think for a moment that they can ever again use the line about not saddling our children with debt when they have saddled this country with such debt?

[Stella Creasy]

I was very taken with the point that my hon. Friend made about these regulations in his speech. If the financial director of a company came to their board seven years in a row having got their sums wrong, we would expect somebody to get the sack. The Chancellor and the Prime Minister certainly bear some responsibility for this.

We know that the Government expect private debt to pay the cost of that public debt, so the people who are on low wages and are going to get into more debt because we are not paying them the living wage are the very people who are going to pick up the tab for the debt that my hon. Friend describes. I want to understand why the Minister thinks we should celebrate at this point in time when we see that personal debt is rising.

People are struggling. The 36% of people in my community who are paid less than the living wage need that extra £2. We need them to earn that extra £2 so we do not have to pick up the cost, not just because we are going to face a very expensive bill for Brexit and because of the way in which the Government are managing the public finances but because of the human cost and the effect on talent and creativity. We know that families with children living in poverty struggle harder to achieve. We know that the next generation needs a better shot than the current generation if it is to contribute to the global land of milk and honey that Brexit will deliver for us. We know, therefore, that it is not enough to claim that this is a living wage. Call it a minimum wage. It is wonderful that there has been a damascene conversion to the idea that this is of economic and social benefit, but do not call it a living wage when so many people are not able to live on it.

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[Peter Kyle (Hove) (Lab)]

rose—

[Owen Smith]

rose—

[Stella Creasy]

rose—

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[Margot James]

The hon. Gentleman makes the point very well indeed. That is why we are trying as a Government to build a more inclusive society, in order to ensure that, as he says, people who are talent-rich but asset-poor get a fairer start in life. That is also why we are investing hugely in skills and infrastructure to try to bring better-paid jobs to all. It is not just about the minimum wage; it is also about the architecture of the economy surrounding people for whom there are few opportunities at the moment or opportunities just for low-paid work.

To correct the impression given by the hon. Member for Airdrie and Shotts in his remarks, real wages have grown every month for more than two years now. The average rate of growth across the economy of real wages was 2.6% over the last 12 months.

[Owen Smith]

Will the Minister give way?

[Margot James]

For the last time.

[Owen Smith]

I am very grateful. The impression that the Minister is giving and the Government have given repeatedly is that wages have really bounced back. The truth is that there has been a welcome bounce back in wages for the last 18 months or so, as she points out but, as the OBR said last week—five days ago—average wages will not reach their pre-2007 height until 2022. We are living through a decade-long recession in wages.

[Margot James]

As I said, real wages have risen every single month for the last 22 months.

[Owen Smith]

It is a blip.

[Margot James]

That is a fact—I am sorry if it displeases the hon. Gentleman. I accept what he says about the future projections—I am not going to start arguing with the OBR—but I am afraid that if he has his way and brings in a national minimum wage of £10 an hour overnight, that will result in more unemployment, which would set people’s chances back.