National Living Wage

Philip Davies Excerpts

Monday 18th April 2016 Commons Chamber

[Philip Davies (Shipley) (Con)]

I want to make a few brief points in the time available. The first—we have to have a few home truths here—is that the whole concept of a national living wage is intellectual nonsense. The amount that people need to earn to cover their living costs depends on all sorts of factors. It depends on their housing costs. It depends on how close they live to their workplace and how much it costs them to get to work—the cost is obviously a lot less for somebody who lives right next to their place of work than for somebody who lives a considerable distance away. The idea that one national living wage can apply to everybody in the country, irrespective of their personal circumstances, is therefore nonsense, and we should make that clear from the start. What we are talking about with the living wage is an increased minimum wage, so let us just be honest about our terminology.

The right hon. Member for Enfield North (Joan Ryan) made the usual mistake of thinking that every employer in the country is some rich baron who lives in a huge mansion, drives around in a Bentley and has all the goods in the world. Actually, the vast majority of businesses in this country are small and medium-sized enterprises. I advise her speak to a few shop owners down her local high street, because she will actually find that many are struggling to earn a living. In fact, many of the people she is talking about do not earn the minimum wage or the living wage—whatever anyone wants to call it—themselves. She berates them for trying to do down their staff, when many of them are working desperately long hours to keep their staff in employment because their staff matter to them.

[Wes Streeting]

The hon. Gentleman is throwing up all sorts of straw men, but what we heard from my right hon. Friend the Member for Enfield North (Joan Ryan) were concrete examples of large companies that have the ability to pay their staff properly but are not doing so. When will the hon. Gentleman engage with the facts rather than straw men?

[Philip Davies]

I am engaging with the facts—these are home truths the hon. Gentleman should appreciate.

When people ask, “Do you think everybody should get a pay rise to £9, £10 or £11 an hour?”, everyone of course says yes. I think it was Norman Tebbit who said that if we ask people, “Would you like a Rolls-Royce?” they will all say yes, but if we say, “You’ll have to live in a tent for the rest of your life to pay for it,” the answer will be no.

We have to realise that there are consequences to increasing the minimum wage. We all know that if we want to reduce the consumption of something—if we want less of something—we increase its cost. If the Government want fewer people smoking, one of the tools they use is to put the price up. If we want fewer people drinking, we put the price up. The same rules apply to employment: if we put up the cost of employment, we will find fewer people employed—that is just an economic fact.

[Mr George Howarth]

I am grateful to the hon. Gentleman for giving way, but the binary choice he presents of a Rolls-Royce or a tent is not the living reality of most of our constituents.

Last year, the Big Help Project’s food bank in Knowsley helped to feed 6,000 people, 3,500 of whom were children, for three days. Does the hon. Gentleman not accept that cutting people’s wages will mean that even more people are dependent on food banks? Is that the 21st century, or is he harking back to the 19th century?

[Philip Davies]

The right hon. Gentleman should be aware that what is more likely to send people to a food bank is not having a job at all.

When the Chancellor announced the higher rate of the minimum wage, the Office for Budget Responsibility estimated that 4 million hours a week would be lost, half resulting from reduced hours for workers and half resulting from the loss of 60,000 jobs. The great thing about the OBR is that at least we are now able to understand the consequences of such a policy.

There are a lot of advantages to having a higher minimum wage. A lot of low-paid people have found themselves in higher-paid jobs, and I very much welcome that. However, Labour Members who praise the policy should at least be honest about its consequences.

[Mr Howarth]

rose—

[Philip Davies]

I have already given way to the right hon. Gentleman; he can have another go in his own speech later.

Labour Members have to face the consequences of the policy: the OBR has made it clear that it will result in fewer people being employed. The right hon. Member for Enfield North mentioned companies such as B&Q and Morrisons. When I worked for Asda, every employee was given a 10% discount card. I have no idea what Asda’s policy is today—it may well be the same—but it used to employ a lot of people with families, and a 10% discount card was a very valuable commodity to them. We should be wary about forcing employers to put up pay, because the inevitable consequence will be that some benefits might have to go if they want to keep the same number of people employed in their stores. These decisions have consequences, and we cannot pretend that increasing people’s pay will not have consequences.

The right hon. Lady mentioned care homes and the care sector. We need to think carefully about what the consequences will be for them. In my constituency, in Bradford, a very small proportion of the extra 2% that is being levied on council tax is being passed on to independent care homes. I thought it was designed to help them with the costs of things such as the national living wage. This high-minded policy is motherhood and apple pie. It enables people to look good and argue, “I think that, whatever people earn, they should get more, and that even when they do get more, they should get even more than that,” but an awful lot of care homes around the country could close as a consequence. Is that really what we want to happen in the UK? It would happen not because employers are mean, nasty people, but simply because they cannot afford to pay the national living wage at the rates that the councils are giving them for care home fees. That is the economic reality, whether people like it or not.

I met a number of employers recently, and they pointed out that the policy takes no account of differentials. When the pay of people at the bottom is raised to a higher rate, they are not the only ones to get a pay rise, because everyone else in the organisation will say, “Hold on a minute, I was paid £1 an hour more than they were, so if their pay’s being increased by £1 an hour, I want an extra £1 an hour as well to maintain that differential.”

Anybody who knows anything about running a business will know that, particularly for employers who run small businesses on the high street in small towns in our constituencies, there is not a never-ending pot of money to pay higher wages to everybody and to protect those differentials. Something has to give: either those differentials disappear, much to the unhappiness of the people who had them before, or fewer people will be employed, or people will be employed for fewer hours.

[Mr David Nuttall (Bury North) (Con)]

Will my hon. Friend give way?

[Philip Davies]

I am afraid that I cannot give way, because there is not much time left.

Finally, I have two very quick points to make. First, the increased national minimum wage will almost certainly lead to even more people from the European Union coming to the UK if we do not leave the EU in the forthcoming referendum. That is a basic fact. Secondly, a higher minimum wage is great for people who are already in work and getting paid. However, it can be as high as we like, but it will be of very little use to those who do not have a job. Many people in this country already find it very difficult to get on the jobs ladder, for all sorts of reasons.

I have made this point before and got into terrible trouble for it, but the fact, whether people like it or not, is that too few disabled people in this country are employed. It would not be good if they were put further away from the jobs ladder, and I want the Government to think about what they are going to do, when wages are higher, to help disabled people find a job, including subsidising employers to bring them up to the living wage. Something has to be done. We cannot just leave people on the scrapheap unable to get a job because the first rung of the jobs ladder was too far away to give them a chance in the first place. We have to think through the consequences of all these high-minded policies.

--- Later in debate ---

[Kevin Brennan (Cardiff West) (Lab)]

I pay tribute to my right hon. Friend the Member for Enfield North (Joan Ryan), who has been more than a super-sub for my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) today. We all wish my hon. Friend the Member for Mitcham and Morden a speedy recovery. My right hon. Friend the Member for Enfield North gave the House some good examples of people who could lose out despite the fact that the so-called national living wage was intended to increase pay for those on low incomes. We have heard a lot of very good contributions.

We heard a contribution from the hon. Member for Shipley (Philip Davies), who appears to have read, in his book on microeconomics, of the impact of increasing wages, but not to have got on to the volume on the impact of labour as a derived demand and the impact of higher wages on aggregate demand in the economy. As we discovered when we introduced the national minimum wage, increasing pay for the less well-off can result in a more prosperous economy because of their higher propensity to consume.

[Philip Davies]

I just want to know on what basis the hon. Gentleman feels more qualified than the Office for Budget Responsibility, which made it very clear that 4 million hours and 60,000 jobs would be lost.

[Kevin Brennan]

I will come to my concerns about the way in which this policy is being introduced in due course. There is plenty of evidence from the introduction of the national minimum wage that if it is done correctly, increasing pay for the lowest paid workers can result in an increase in aggregate demand, and in greater productivity and prosperity for the economy.

We have heard contributions from my hon. Friends the Members for Bradford South (Judith Cummins), for Rochdale (Simon Danczuk), and for Burnley (Julie Cooper). We have also heard from the hon. Member for Lanark and Hamilton East (Angela Crawley), my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) and my hon. Friend the Member for Halifax (Holly Lynch), whose reference to Adele and the importance of paying younger people sounded convincing to someone like me.

We also heard from the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), who talked about his experience as a council leader. We heard from my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley), and from the hon. Member for Glasgow Central (Alison Thewliss). My neighbour, my hon. Friend the Member for Cardiff Central (Jo Stevens), made a pertinent point about seafarers. It is important to remember that seafarers are exempt from this legislation, and we need to bring in new protections for them. My hon. Friend the Member for Heywood and Middleton (Liz McInnes) told us about her partner spending a lot of time at B&Q. If her household is anything like mine, that is no doubt a result of his being told that he has to go to B&Q and do certain DIY jobs. This happened to me so much in years gone by that we used to call it “Be in the Queue” because I was down there so much. We also heard from the Scottish National party Front-Bench spokesperson, the hon. Member for Banff and Buchan (Dr Whiteford).

Today’s debate has been rather peculiar. On this side of the House, there has been general support for the idea of the so-called national living wage that the Chancellor announced in his Budget, but there has also been criticism of its implementation and its potential to make some people worse off. That is the purpose of today’s debate. However, the only contribution from a Back-Bench Conservative Member seemed to be against the Government’s policy altogether, so it has been a peculiar debate in that respect.

As has been highlighted, the national minimum wage was introduced by the Labour Government in 1998. It was opposed tooth and nail by the Conservatives, but the Minister for Skills has previously and rather generously acknowledged that they were wrong to do so, just as they were wrong to oppose other progressive achievements of Labour Governments, such as the NHS. He has acknowledged that fact on the record in my presence in this House, and I am grateful for his generosity in doing so.

I referred to the “so-called national living wage” because, as has been pointed out many times today, it really is not a new concept. It is a symptom of the Chancellor’s inability to do anything that might be worth while without trying to extract the maximum political advantage from it. This was highlighted when the former Work and Pensions Secretary resigned, saying that the Chancellor was always seeking to do something that was

“distinctly political rather than in the national economic interest”.

The Chancellor could have said, “I want to increase the national minimum wage for the over-25s”, which is in effect what this policy does. Instead, he chose to pinch the name “living wage” from those who have worked on devising and calculating it, who have brought together the evidence based on need to formulate the concept of a living wage, and who have campaigned for it right across the country with great success. He nicked that name for his policy, which, it has been pointed out, will not introduce a true living wage based on the concept of the evidence of need as developed by the Living Wage Foundation.

Similarly, the Chancellor could have done the thorough preparation that a policy such as this requires. He could have put the policy through a proper stress test, as was done by Ian McCartney and others when the national minimum wage was first introduced. However, that would have spoilt his piece of political theatre in the Budget, and the Great Osborno would not have been able to pull a rabbit out of his hat to the delight of all his misdirected audience on the Conservative Benches. The problem of some workers potentially being worse off could have been avoided if we had a Chancellor who was more interested in the substance of making policy work than in the smoke and mirrors of political presentation.

It is illegal for employers to pay less than the national minimum wage, yet figures provided by the Department for Business, Innovation and Skills show that the numbers of employers being fined for doing so have actually increased in recent years. We would like to know what measures will be put in place to ensure that we do not have a repeat of this deliberate lawbreaking and undermining when the so-called national living wage is more established. Will these companies be named and shamed? Will there be financial penalties?