National Minimum Wage

Richard Fuller Excerpts

Wednesday 15th October 2014 Commons Chamber

[Matthew Hancock]

Of course, it is post-tax income that matters to families. Having raised the threshold to £10,500, we are proposing to raise it to £12,500, meaning that no one working full time on the national minimum wage would pay any income tax at all. That is the sort of action we can get only if we have the grit to deal with public spending and leave more money in people’s pockets, thereby supporting the low-paid.

True supporters of the minimum wage also know that it is a partnership with business.

[Richard Fuller (Bedford) (Con)]

My right hon. Friend has rightly talked about post-tax income, but for people on low incomes, what matters is post-tax and post-benefit take-home disposable income. The shadow Secretary of State did not say what his policies would be on tax credits. Does he agree that that is an important part of the debate about how we improve living standards?

[Matthew Hancock]

The shadow Secretary of State could not even explain his own tax policy when he was asked by my hon. Friend the Member for Elmet and Rothwell. On the other hand, we are clear about ours—[Interruption.]—and I am delighted every time the Opposition complain about it. They should put it on their leaflets. We will increase the threshold to £12,500 so that anybody on the minimum wage doing 30 hours a week will not pay a penny in income tax.

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[Jack Dromey (Birmingham, Erdington) (Lab)]

In the spring, my hon. Friend the Member for Leeds West (Rachel Reeves) and my right hon. Friend the Leader of the Opposition visited a remarkable woman, Rachel, on the Castle Vale estate in my constituency. She is a proud, working-class woman trying to bring up her child. She lost her job with the council as a consequence of the huge cuts that the Government are imposing on our city. She found a new job but she was on the minimum wage. She broke down in tears when she explained how difficult life is for her trying to bring up her kid with dignity and to pay her bills. She is a salt-of-the-earth working-class woman who works hard to get on. Sadly, she is typical of 30,000 people in Birmingham on the minimum wage.

I remember sitting down at the food bank run by the Baptist church on Erdington high street with three of the working poor. Two of them said exactly the same as Rachel, explaining in graphic detail what it was like to count every penny and to have their kids come home from school asking whether they could have something, only to be given an excuse for why it was not possible. One of them said—I will never forget her words—“Jack, I exist. For me this is no life.”

Before I came to this place, I was proud to serve the Transport and General Workers Union and then Unite. In the world of work, work forces showed me wage slips of £1.50, £2 and £2.50 an hour. A linen supply company in west London was supplying the swankiest hotels and restaurants and charging an arm and a leg for its services, but paying its workers £2 an hour. We unashamedly sought to organise an upward drive in pay and to end working poverty, and I remember the Conservative party’s bitter resistance to any serious steps to tackle low pay, particularly the notion that somehow the minimum wage would fundamentally undermine economic success in our country.

The national minimum wage is a landmark achievement and Labour’s legacy, but it is not good enough. The working poor are ambitious, and so are we. First, we want a much higher minimum wage and, secondly, its vigorous enforcement. When I was deputy general secretary of the Transport and General Workers Union, I chaired a coalition, which had all-party support across the House, that took the Gangmasters (Licensing) Bill into law. It was a remarkable coalition from plough to plate—from the National Farmers Union to the supermarkets. Even then, after the introduction of the minimum wage, when the Gangmasters Licensing Authority was up and running—it was a highly effective organisation—a company employing 1,500 strawberry pickers paid them, after deductions and charges, £20 or £25 a week for a 60 or 70-hour week. That is why vigorous enforcement of a higher minimum wage is crucial.

On the living wage, we are more ambitious than just wanting a minimum wage. We need a minimum wage for underpinning, but we are more ambitious, which is why we have championed the living wage. I am proud that I was a founder member of the drive for the living wage in London. I ran the union’s organising department. We had 100 organisers, 10 of whom were cleaners. With the East London Communities Organisation and London Citizens, we successfully mounted that campaign, which included 4,000 cleaners in Canary Wharf and the City of London. It was obscene to sit down with good men and women and to hear their stories about how they cleaned the toilets and boardrooms of bankers who were sometimes earning millions when they were on the national minimum wage. We won a living wage for them.

I am also proud that I led the first strike in the history of the House of Commons when we organised the cleaners here to achieve the living wage. To this day, I have their manifesto in my office. Good men and women were being paid a shameful wage in this mother of Parliaments.

[Richard Fuller]

It is a pleasure, Mr Deputy Speaker, to listen to the hon. Member for Birmingham, Erdington (Jack Dromey). I have never led a strike—at least not since school. Does he agree that one concern is that those on both Front Benches are too timid about raising wages and that they do not have the passion he had when he led his trade union to do more? The issue is not fiddling about with the figure of £8 or £8.50, or whether we hit it naturally, but the courage that those on both Front Benches should have to address the real problem of people throughout the country working for low wages.

[Jack Dromey]

The hon. Gentleman speaks in good faith. All that I will say is that timidity is the preserve of his party’s Front Bench, whereas passion and determination characterise our side of the House.

As the Member of Parliament for Birmingham, Erdington, I am proud to say that Birmingham has been taking a lead in driving the living wage, first for those directly employed by the council, then for those working in schools, and now—it is the first time that any council in Britain has done this—for those employed in all future care contracts. Birmingham is working with a range of good employers, who are coming together and saying “We believe that the success of our city can be best achieved if workers are paid properly and treated fairly.”

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[Ms Karen Buck (Westminster North) (Lab)]

Three important pieces of news frame our debate on the minimum wage today. First, we heard the good news about the continuing fall in unemployment. Our politics, like those of most hon. Members, are motivated by wanting to see people in work, and any fall in unemployment is therefore extremely welcome. However, we also heard that the squeeze on incomes is continuing. Alongside that, we saw the data released by the End Child Poverty campaign, which mapped child poverty figures in every constituency in Britain. The figure for my central London constituency of Westminster North—of all places—confirms that 43% of all children there are now living in poverty.

Those three pieces of news are all connected. They show us what happens when people’s housing, energy and travel costs, along with all their other costs, go up but their incomes do not. Pay has been squeezed for years at every level in this country, except the boardroom. Only last week we also heard that FTSE chief executives enjoyed a 21% increase in their incomes over the past year, at the same time as the average increase in all pay and bonuses was a mere 0.7%. I do not begrudge those of great skill and entrepreneurial talent a good reward for their labours—I really do not. However, I do not see how it is possible to justify a 21% increase at the top end of the earnings scale when in my borough we had to fight to get recognition for carers—people carrying out the most intimate and personal care and support—of elderly and disabled people. These carers were not even guaranteed the minimum wage for their labours because, unfortunately, their travel time between care appointments was not counted in their earnings and therefore they were not able to enjoy the basic statutory protection for low wages. That is truly shocking.

The big story of events in the past few years is the shift to working poverty, which is when a job simply does not pay enough to lift someone over the poverty line. Some 6.7 million people who are in poverty, or half of all those in poverty, live in a family where at least one person is working. Scandalously, that figure rose by half a million in the past year. The proportion of jobs that are low paid also rose and although it is popularly supposed that that burden falls on the young—and they have had a particularly hard time in recent years—60% of all low-paid people are over 30. This is not just a phenomenon affecting the young.

[Richard Fuller]

Many of the employees on those low incomes are obtaining tax credits, which increases the amount of money they have at their disposal, with the companies therefore benefiting from the subsidy those tax credits provide. What is Labour’s policy on tax credits?

[Ms Buck]

I will talk about tax credits in a moment, because they are extremely important, but, as we have heard from Labour Members, there is no excuse for tax credits being a substitute for employers paying a decent wage.

The number of people paid below the living wage rose in the past year from 4.6 million to 5 million, so we have seen that problem getting worse. I want to talk a little about London, because this vastly successful city, which includes a massive concentration of wealth and some of the best paid people in the country, has a scandalous problem with low pay, and it has been getting worse. Almost one in five jobs in London are low paid and the number of low-paid jobs—those below the London living wage—increased by 45,000 last year to 600,000. The number of low-paid people in London has increased from a total of 420,000 just before the global economic crisis. In 2013, almost one in five London jobs were low paid. That figure has risen from 12% in 2009, so we have a worsening problem of low pay in London.

That problem is not spread equally across people or across all sectors. We know there is a particular problem in the retail and wholesale sector and that one in five low-paid jobs are in the hospitality sector—in hotels and restaurants. Together those two sectors account for nearly half of all low-paid jobs in London—again, that proportion has risen since 2010. We know that low pay particularly affects those working part-time, particularly women. The number of women working part-time on low pay in London has increased by 67,000 since 2009-10. Women are particularly at risk of being trapped in low pay.

Worryingly, we know that there is a particular crisis of low pay affecting black and minority ethnic communities. The Bangladeshi and Pakistani communities are at particular risk of being low paid, and that is also true of black African workers in the capital. We also know that low pay has spread from inner London, which has historically had some of the worst concentrations of poverty, out into the suburbs. They have seen the fastest increase in low pay, with the proportion of low-paid jobs being highest in boroughs such as Harrow and Bexley. They were traditionally regarded as among the more affluent communities in London, so the whole pattern is changing and, unfortunately, in the past few years it has not been changing in a good way.

What does all this actually mean? It means three things, one of which is that people are worse off. We know that, on average, working people are worse off by £1,600 a year. Paul Gregg, of Bath university’s institute for policy research, said in a report that the wages of Britain’s working people are almost 20% lower than they would have been had trend wage continued at its level before the global economic crisis hit us.

[Ms Buck]

My hon. Friend is absolutely right about that. We know that the £1,600 fall in income in cash terms and the fact that wages are 20% lower than they would have been if wage growth had been consistent with its level before the global economic crash—before 2008-09 and beyond–—means several things for the wider economy. Obviously, low-paid people invest their money in the local economy; they spend it, and that has a beneficial effect on the shops, services and communities where they live. It also means that some of those people who would have been paying tax are no longer doing so, which has a beneficial effect for low-paid people coming out of tax but means that total tax revenues are undershooting dramatically, as the Office for Budget Responsibility has confirmed. Indeed, the problem of low pay and tax revenues is a contributing factor to not being able to reduce the deficit, which of course the Conservative party told us would be completed by the next financial year. That has been a complete public policy failure, with a reduction of only a third compared with a target of almost total elimination.

Other issues arise from low pay. It damages work incentives, and we hear a great deal from the Conservative party about those. It is as if it were the party that discovered the idea of work incentives and making work pay. In fact, we all want to see work pay and for that to be an incentive for people going into work. Let us accept that that is universally shared. The trouble is that the worsening scandal of low pay, including in cities such as London, means that work simply does not necessarily guarantee a route out of poverty and it traps people on benefits. That is partly because wages have fallen, as we have heard, but also because they have fallen, particularly in places such as London, relative to soaring housing costs and rising rents. The rise in rents in London means that many households simply cannot work enough hours at the kind of pay that is being offered to get free of benefit tapers. That is particularly true for lone parents and couples with children.

Let me return to the question I was asked by the hon. Member for Bedford (Richard Fuller) about tax credits. It is very important to put on the record just how crucial they are, because whatever one does about the tax threshold and taking people out of tax completely, it simply will not be enough to make sure that people with children are earning enough to make ends meet. The tax credit policy is not a substitute for tax thresholds; it is an essential complement to them, particularly for parents.

[Richard Fuller]

The hon. Lady rightly says that tax credits are a necessary policy addition to tax thresholds We are clear what the Government’s policy is on tax credits, but can she tell us what Labour’s policy is on them for the next five years?

[Ms Buck]

We heard from the Chancellor at the Tory party conference about what he wanted to do in that area. We are yet to have any specific proposals brought to this House and we will consider them when they are put in front of us. When we were asked to vote in favour of a freeze on tax credits—[Interruption.]

[Ms Buck]

When we were asked to consider what the Government’s freeze on tax credits was going to do in the earlier part of this year, we drew attention to exactly that fact and opposed the Government on that particular freeze for this year because we knew it would hit working people. We hear all the rhetoric from the Conservatives about work incentives, but we do not hear what impact that has on low-income working people.

[Richard Fuller]

I am trying to try to find some common ground. Does the hon. Lady agree that when we are talking about what to do with incomes for the low-paid, it is important that we do not try to sell them this idea that an increase in their wage will necessarily lead to an increase in their full income unless we are clear about what the policy will be on tax credits?

[Ms Buck]

I think I understand the point. We will consider, and make a decision on, those proposals that are put in front of us. They will not necessarily be the proposals that have been put in front of us by a Conservative party conference. It is extremely important to look at tax credits in the round as well as at other changes to the tax system to ensure that we are helping not just those on low incomes through tax thresholds but those who have children so that they have a chance of a decent standard of living too.

Another related point is that low pay has caught people in in-work benefits and added to the benefit bill. The low-wage economy has led to an enormous increase not only in the number of working people claiming in-work benefits such as housing benefit, but in the total expenditure. For example, we have seen a £4 billion increase in housing benefit— that is despite the fact that the Government have made cuts to the total level of housing benefit—as more people are forced into making claims to make ends meet. Indeed, the number of working households needing housing benefit has already increased by 22% and is expected to double over the coming years.

To ensure that we have a sustained recovery and that we tackle the cost of living crisis, help people on low pay and cut the benefits bill, we need to do something about low pay. That is why I so warmly welcome what my hon. Friends on the Front Bench have said about tackling the minimum wage, delivering the “make work pay” contracts, and helping and supporting employers to pay the London living wage, which was set at £8.80 in 2013-14. That will ensure that Londoners can enjoy the full fruits of economic growth as it now belatedly returns.

Where possible—we know that this will not apply to every single sector of the economy—employers should be able to pass on the benefits of the recovery to employees, and in so doing ensure that the additional costs of in-work benefits are offset, so that we can make a contribution to the Treasury. We know that the minimum wage is only one component in a package that will do something to end the cost of living crisis. I welcome the proposals that will ensure rent stability for London renters who have been dealing with this enormous burden of increased housing costs, and the measures to tackle energy costs that have so burdened low-income households over the past few years. The minimum wage may be only one component of the package, but it is a vital one. I very much welcome today’s motion and look forward to voting for it.

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[Mr Brown]

Absolutely. As my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) said earlier, low-paid workers do not salt the money away but go out and spend it, and that is what we need. I honestly believe that that is where the coalition Government, to a certain extent, have failed. They have taken money away from some of the poorest communities and households, and there is no doubt that if we had left money in their hands, it would have been spent.

[Richard Fuller]

rose—

[Mr Brown]

Mr Deputy Speaker is looking at me and I want to draw to a conclusion.

I want to mention “make work pay” contracts. In November last year, the Leader of the Opposition announced

“that a future Labour government would encourage employers to pay the living wage through new ‘Make Work Pay’ contracts.

Firms which sign up to become Living Wage employers in the first year of the next Parliament will benefit from a 12-month tax rebate of up to £1,000—and an average of £445—for every low paid worker who gets a pay rise.

This measure will be entirely funded from the increased tax and National Insurance revenue received by the Treasury when employees receive higher wages. Additional savings in lower tax credits and benefit payments, as well as increased tax revenues in future years, will cut social security bills and help pay down the deficit”—

as we all want to do. That, without a shadow of a doubt, is a commitment that an incoming Government would make the desperate moves that have to be made to reduce the deficit.

[Richard Fuller]

Will the hon. Gentleman give way?

[Mr Brown]

I am going to finish now.

I am proud that when I came into this House I was one of a team of people who took forward the National Minimum Wage Bill. I have always said that even if I do nothing else in life, I can say that I played that part in what that Labour Government did. With no doubt whatsoever, I will be supporting our motion. I would like to think that one or two Government Members who have spoken will support us too.

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[Dr Whiteford]

Thank you for that clarification, Mr Deputy Speaker. The first I heard of those outrageous slurs on the hon. Member for Harlow was today, but I hope that the record has been put straight and that he will continue to put it straight. I would feel much happier, however, if Government Members would dissociate themselves more firmly from what Lord Freud has said.

[Richard Fuller]

On a point of order, Mr Deputy Speaker. This is my first point of order so please give me some forbearance. At what point is it orderly to refer to comments that have not been made in this House and at what point is it not orderly to do so? Comments have been made about one Minister in one location, and other comments have been made about a Member of Parliament in another location. Which is orderly and which is disorderly to refer to here?

[Mr Deputy Speaker]

First, we are not going to worry about the Chair’s decision. My decision—I will be quite clear—is that a peer from another place has been mentioned, but I do not want to get into a debate about something that has been over the airwaves relating to two Members. That issue has been clarified in this Chamber and by another Member. I do not want the debate to centre on that. This is a debate, as we know, about the minimum wage and support for people.

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[Richard Fuller (Bedford) (Con)]

The motion recognises that there is a series of extremely important issues, but it fails on at least three fronts: in my view, it is too timid in its prescription; it lacks honesty in addressing the issue of how to meet competing ambitions; and, above all, the public have no confidence whatever in the ability of the shadow Treasury team and the leader of the party who tabled it to manage the country’s economy.

These issues are important because people want a pay rise. They want a pay rise because for many years now they have suffered from the consequences of the previous Labour Government’s debt-fuelled policies, which came crashing down in the economic collapse of 2007. That was seven long years ago, and we are still suffering the consequences of their failures. People understand that it takes time for the economy to be repaired. They are pleased to see that the Government have a long-term economic plan and are making progress in addressing the fundamental weaknesses of the economy. They understand that a stronger economy means stronger businesses, that stronger businesses mean more jobs and that an increase in employment will result in higher wages. However, they are impatient to feel that in their own pockets.

There is a lack of ambition in the proposals before us. There are several reasons why the motion and policy prescriptions from both sides of the House are too limited to meet the challenges that the economy faces. The first reason is that we are living through an era of massive corporate welfare. Vast sums of taxpayers’ money are funnelled into our private sector—or so-called private sector—companies year in, year out. One of the most substantial amounts of corporate welfare each year is paid out in the form of tax credits. I am not at all saying that we should scrap tax credits, but I think we need to be clear about how much taxpayers’ money can be paid to corporations to subsidise wages or provide other subsidies for what are otherwise private sector, free market activities.

The second reason is the conundrum that those of us in free economies do not value valuable work. We have heard comments from Members on both sides of the House about this, but if we asked the public to rate how important they think certain jobs are and what should be paid for such jobs, we would end up with substantially different outcomes from those that now exist. For a start, every Member of the House would be paid a whole lot less and bankers would not gain the millions of pounds that they achieve, but our nurses would earn more and, most importantly, our care workers would earn substantially more. In free economies, there is a conundrum: how do we get to a point somewhere between what the market delivers and the remuneration that people expect to be given for the work put in? There is no question but that the moves under the previous Labour Government in both introducing the national minimum wage and providing working tax credits—I might have concerns about the latter going too far—were steps in the right direction of trying to find solutions to that problem, which still persists.

The third major reason why today’s prescriptions are too timid is that there is a substantial underlying issue of demand in western economies. If we look at the risks faced by this country—it is a tremendous accomplishment that the UK economy is growing so strongly, despite the international headwinds—we still have to conclude that one of the most substantial risks is the insufficient demand in the real economy. There is quite a lot of demand in the financial products area, but there is not enough demand in the real economy. Providing a boost to real wages would address the issue of the absence of demand perhaps even more effectively than quantitative easing has managed to do over the past five years.

As I have said, the motion fails because it lacks honesty in tackling the existence of competing ambitions. Let me give an example in relation to the first issue. One sector with low pay is care, but a route out of that is to have transparency in commissioning. This week, I was very pleased to meet Citizens UK, which has been at the forefront of efforts on the living wage. It will have a manifesto for each of us as Members of Parliament or candidates at the next election to consider. It has looked at commissioning, and wants transparency in commissioning to show that care workers’ pay can be at or above the minimum wage or at or above the living wage. It says that that can be accomplished by providing a floor on commission pricing. If we are to be honest, we have to address the consequence of that. In an era of limited public expenditure, when it is necessary to bring the deficit down, what will we do when the average cost of care goes up? Will we expand the amount of care that is provided and expand the budget for it or will we reduce the amount of care to keep the expenditure the same? The Government and the Opposition need to be honest about what their proposals are on that.

The second issue, which I ask Opposition Members to address, is that in a number of the scenarios for increasing pay from the minimum wage to the living wage, the increase is offset nearly 100% by reductions in benefits. What are the proposals of the Opposition and the Government on that? They say to the public, “We will increase your pay and that will be a good thing,” but when tax and national insurance are taken away and the working tax credits, child tax credits, housing benefit and council tax benefit are added, are people actually going to be better off? If it is not possible for parties to demonstrate that there will be an increase in pay at that point, we are in danger of misleading people by saying that we are doing something that will make them better off in their pockets. That is compounded when Opposition Members say that they can achieve an increase in wages at the same time as reducing the deficit. The same pound cannot be spent in two different places. In her closing remarks, perhaps the shadow Secretary of State for Work and Pensions might provide some light—it might be too early to be too explicit—on how she sees that conflict playing out.

The third issue is directed more at my own party. I believe strongly that we need a strategy for wages. However, I understand that that will have consequences for employment. The Government have done a remarkable job of increasing employment during the country’s worst recession since the war. We now need to look at how we will balance that policy over the next few years with increasing wages.

May I make three suggestions? First, we should continue the work that the Department for Business, Innovation and Skills is doing to look at the national minimum wage. Secondly, we should consider whether there should be a cross-party agreement to peg the minimum wage to a percentage of average wages. That could become a norm within the Low Pay Commission’s role and responsibilities. Thirdly, we should promote the living wage through greater transparency requirements in all local government contracts, so that local authorities cannot parade the fact that they are doing the right thing by paying their own employees the living wage unless it is transparent that people in the private sector companies and charities that are commissioned to provide their services are being paid the living wage as well.