National Minimum Wage

Rachel Reeves Excerpts

Wednesday 15th October 2014 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

This has been a valuable and instructive debate. At a time when too many people in the country feel left behind by our economy and left out of our politics, it is important that the House of Commons devotes its attention to the issues faced by millions of people in our country who work just as hard as everyone else, doing jobs that are vital to our economy and country—as Members, including my hon. Friend the Member for Bolton West (Julie Hilling) have pointed out—but who are not getting a fair share of the prosperity that they help to create.

Millions of people put in the shifts and clock up the hours, sometimes in two jobs or more, often when the rest of us are still asleep in the morning or when we have already gone to bed at night, yet when they get their payslip at the end of the month, their pay is not enough to cover the bills or the rent, or to buy simple things that anyone should be able to afford for themselves and their family. Those people think that something has gone seriously wrong with our economy and our country, and they are right. That is why we need a plan to put it right. That is what the debate is about.

I am proud that the Labour party has called the debate. Our party is founded on our belief in the dignity of work, born of the earliest struggles of working people against extreme exploitation, as my hon. Friend the Member for Corby (Andy Sawford) has said. We are proud of the part that we have always played in improving working conditions and winning for working people a fairer reward for their effort and contribution.

A minimum wage was the aim of our movement for more than a century. I pay tribute to my predecessor as Member of Parliament for Leeds West, who, in 1988, laid before the House a Bill calling for a statutory minimum wage. John Battle noted that, at that time, a primary cause of poverty was

“the persistence, even in what is heralded by the Government as a booming economy, of low pay.”

He told the House of jobs advertised in Bramley in my constituency, including a catering assistant post at £2.10 an hour, five cleaning jobs with hourly rates starting at £1.70 an hour, and a security guard job at £1.50 an hour working for 60 hours a week. He said:

“To generate a low-wage economy for a large minority in our society alongside the current economic boom for the rest of us is grossly unjust. It is pricing people into work at the expense of their families.”

He concluded:

“Without a commitment to a national minimum wage, we perpetuate the conditions that manufacture poverty in our society alongside the wealth of others… The way to prevent poverty is to pay decent wages and not force families into the benefit system.”—[Official Report, 18 May 1988; Vol. 133, c. 951-2.]

Needless to say, the Tory Government of the time did not support my predecessor’s Bill; but 10 years later, the Labour Government and the Department of Trade and Industry, in which he served alongside the former Member for Makerfield, Sir Ian McCartney, to whom others have rightly paid tribute in the debate, established the Low Pay Commission and legislated for a national minimum wage, one of the greatest achievements of Labour’s period in office, and now widely accepted as an essential institution of our economic life. It has made a huge difference to millions of working people—two thirds of them are women—with no negative impact on employment, despite the dark warnings we heard at the time from members of the Conservative party.

Even today, some Conservative Members want to turn the clock back and, rather than strengthen the minimum wage, undermine it. We learned today that that reaches into the heart of the Government, with a serving Minister in the Department for Work and Pensions questioning whether some disabled people are worth paying the minimum wage. He even suggested that it should be possible to pay them £2 an hour. Like the rest of us, disabled people deserve a floor below which their wages cannot fall. They should not be paid £2 an hour. They should be paid the minimum wage, and the minimum wage should increase. Disabled people who heard what the Minister said will be horrified. Labour Members, too, are shocked and disappointed. He should not be serving in the Government, and least of all in a Department that is responsible for work and policies for disabled people. Apparently, he has apologised this afternoon, but he says one thing to the Tory party conference and Tory party members, and another thing in public. That is not acceptable and he should not be in his job.

We have heard excellent speeches in the debate from hon. Members on both sides of the House about the cost of living crisis faced by people at the hardest end of the labour market and about the damage that that does to our economy and our society. We heard from my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) about his work campaigning with cleaners in our Houses of Parliament to get the living wage paid to them.

We heard from my hon. Friend the Member for Westminster North (Ms Buck) about people in work in poverty, and particular problems both in London—not just in inner-city London, but growing into the suburbs—and faced by black and minority ethnic communities, especially the Bangladeshi community, as well as the growing problem of low pay and the pressure that puts on in-work benefits.

We heard from my hon. Friend the Member for Dumfries and Galloway (Mr Brown) about the economic recovery not being felt by everybody across the country, and he is right. I pay tribute to him for his work on the Bill Committee that considered the national minimum wage. He spoke about the Bill Committee sitting from 4.30 pm on a Tuesday until 1 pm the next day, and then on the Thursday from 4.30 until 6.30 the next day; but, as he said, it was really worth it, because the minimum wage was set then at £3.60 an hour and has been rising until today, and will rise again, I hope, under a Labour Government in the future. He spoke about a man in Lockerbie working 50 hours a week but taking home just £112 a week—just over £2 an hour. That is the difference a Labour Government made for such men and women across our country.

My hon. Friend the Member for Middlesbrough (Andy McDonald) spoke about a security guard in his constituency working before the introduction of the minimum wage who, as well as not being paid a wage that he could afford to live on, was told that he had to bring his own dog to work.

The hon. Member for Banff and Buchan (Dr Whiteford) spoke about businesses’ worries about the costs of the minimum wage, but pointed out the huge benefits to the economy and to society, as well as the fiscal benefits of a minimum wage.

I also pay tribute to the hon. Member for Bedford (Richard Fuller) who spoke powerfully about the importance of the minimum wage and the importance of it rising. I hope that he will support the motion, because, as he argued and as we put in our motion, the national minimum wage should be pegged to average earnings, so that it increases and regains its value. He also spoke about the importance of the living wage in local government contracts, and I pay tribute to the local authorities—the Labour local authorities—that are now living wage employers, and not just for their directly employed staff, but also for their contracted-out staff. [Interruption.] If the Minister would like to mention the Tory councils that pay a living wage and also pay all their contracted staff a living wage, I look forward to hearing from him.

My hon. Friend the Member for Bolton West (Julie Hilling) also paid tribute to Sir Ian McCartney, as well as talking about the importance of enforcing the minimum wage, particularly for migrant workers and carers, who are so often exploited.

The lesson we should draw from that success of the national minimum wage is not to rest satisfied, but to raise our ambitions higher, because today we face new challenges that require a new plan. This Government have presided over an historic squeeze on wages that has been a key cause of the cost of living crisis our country faces today. Workers are on average £1,600 a year worse off than when the Prime Minister took office in 2010.

Today’s labour market figures confirmed that wages are still losing ground compared with prices, with wages rising by just 0.7% and inflation running at 1.2%. One in five British workers are low paid according to standard international definitions. That is one of the highest proportions in the developed world, placing us 25th in an OECD league table of 30. That is not good enough, and that is why this motion today is so important.

Today, half of people in poverty, and two thirds of children in poverty, live in working households. We need to do more to make work pay by increasing the value of the minimum wage, to ensure we all benefit as the economy grows. It is a damning indictment of an economy that is not working for working people where the link between hard work and reward urgently needs to be repaired.

Change cannot come soon enough for all the people my hon. Friends mentioned in this debate, and it cannot come soon enough either for my constituent, Alice. She works three shifts a day as a cleaner to support her family, but ended up trying to survive on rolled over payday loans and had to come to me to ask for food vouchers because she had to wait months for the tax credits she was entitled to. Our welfare state was built to protect working people who fell on hard times, not to provide a permanent subsidy to profitable companies paying poverty wages. That is why the minimum wage—and increasing it—is so important.

As shadow Secretary of State for Work and Pensions, I know that this simply is not sustainable, with the loss in the real value of the minimum wage since 2010, taxpayers are now paying out an extra £170 million a year in tax credits, an extra £60 million a year in housing benefit and another £40 million a year in other means-tested benefits because of the fall in the real value of the minimum wage since 2010.

Unless the value of the minimum wage increases, there will be further pressure on our social security system. We need to tackle the root causes of the rising social security bill by building homes, ending exploitative zero-hours contracts and increasing the value of the minimum wage.

That is why Labour has set a goal to halve the number of people on low pay by 2025. We have the plans to deliver it. A key plank of that plan is our target to raise the value of the minimum wage over five years to 58% of median earnings from the current 54%, which would bring it to £8 before the end of the next Parliament. We will also get more workers paid a living wage by sharing the savings that the taxpayer makes from reduced social security expenditure. Every pound employers pay in increasing the value of the wages paid to the lowest-paid saves the Treasury 32p in higher tax revenues and national insurance contributions and 17p in lower social security payments. We would allow employers to claim back as a tax rebate 32p in extra tax revenue for the first year only to help their businesses shift to models to make investments in their staff. These measures form part of a comprehensive plan to build a stronger economy that works for all working people: strengthening vocational education, taking tough action on youth and long-term unemployment with our compulsory jobs guarantee and ending the exploitative use of zero-hours contracts.

The House has a clear proposal before it this afternoon: a plan to raise the national minimum wage and to get it properly enforced; a plan to get more people paid the living wage; a plan to halve the number of those on low pay; and a plan to ensure that work pays, so that everyone in our country, not just a privileged few, benefits from the economic prosperity that we all help to create. That is the choice before us this afternoon—a choice that I hope Members on both sides of the House will support. If they do not, that will be the choice that the country faces at the general election next year.