Living Wage

Richard Fuller Excerpts

Thursday 6th November 2014 Commons Chamber

[Mr William Bain (Glasgow North East) (Lab)]

May I congratulate the hon. Member for Warwick and Leamington (Chris White) and the Backbench Business Committee on bringing this vital issue before the House in living wage week? It is right that this week we welcome the forward-looking approach of many employers across the United Kingdom who now pay the living wage and have more productive and happier work forces as a result. We should also pay tribute to the tireless work of living wage campaigners in the trade unions, the Churches, the growing number of food banks and in broader civic society in Scotland, in common with civic society right across the United Kingdom. They have never settled for second best and envisage a country where a decent day’s work is rewarded with a wage that can give people dignity and the chance of a better life.

It is not just in this country that the living wage movement is thriving. Although, sadly, the Democratic party suffered badly in the US mid-term elections this week, propositions for a big rise in the minimum wage were carried by voters in four traditionally Republican-voting states, meaning that a total of 14 states have this year adopted large rises in the minimum wage.

The low pay crisis, which this debate will shed new light on, means that the gap between the wealthiest and the working poor in our society is getting larger. That gap becomes a chasm when we consider what it means for child poverty. In my constituency, some 38% of children grow up in households that fall below the minimum acceptable income standards. I think of the mums who have to budget harder than any Chief Secretary to the Treasury ever will to buy new shoes for their children to wear to school. I think of the workers on completely unregulated zero-hours contracts, worrying about when they will be able to pay that heating bill which is still outstanding. I think of the mothers not able to get the child care that would mean taking a job that would leave them genuinely better off.

That picture of what poverty means for 5.3 million people in this country who are paid less than a living wage—the figure has risen by 150,000 in the past year alone—should spur all of us in this House to act. British workers are twice as likely as those in Switzerland and Belgium to earn below the low pay threshold. Wealth inequality in Britain has risen four times faster in the seven years after the financial crash compared with the seven years before it.

Low pay is not just crippling for social mobility or living standards; it is also terrible for our public finances. Some £21 billion was spent on tax credits to help 3 million working families with children in 2012-13, and the cost of in-work housing benefit claims doubled in real terms in the four years to this April. A low-pay economy is a symptom of a low-productivity, low-skilled economy. It is the young, female workers, those in lower skilled jobs, and part-time and hospitality workers who suffer most with that kind of economy, and that must change.

Across the country there are record levels of anxiety over poverty pay. According to the Joseph Rowntree Foundation, one in three people this year has said that low pay is the biggest issue affecting the country. Fewer than one in five voters expect to benefit from any increase in economic growth this year. As we know, the link between productivity and wage growth was broken some time ago and needs to be restored if we are to have a sustained rise in living standards over the next decade.

Sadly, it is no longer the case that the main route out of poverty is a job. Many people across the country juggle several part-time jobs but are still poor. Two-thirds of children in poverty are in households where someone is in work. Hourly pay is now a bigger predictor of the chance of being poor than hours worked. The Government must focus on taking a stronger approach to improving social mobility through our education and skills systems across these islands, taking action on the quality and security of the jobs created in the economy, but also being far more proactive in boosting pay rates through forward guidance on the minimum wage—as adopted by the Low Pay Commission—and expanding the coverage of the living wage to as many people as we can. We also need a combination of action through policies to boost pay, but with the support of the tax and social security system. Although rising pay cuts reliance on state top-ups of income and brings in more tax revenue, the right approach for working families on low incomes is rising pay supported by a strong tax credit system.

[Richard Fuller (Bedford) (Con)]

I am listening intently to the hon. Gentleman. Does he agree that no one on either Front Bench has been confident or assertive enough in spelling out what policies they can adopt to improve wages for low earners? Would he like more clarity from those on the Front Benches about what they will do with tax credits if people’s incomes rise?

[Mr Bain]

The hon. Gentleman raises an interesting and important point. Before his intervention I was saying that we should consider the impact of such measures on a lone parent in work. If she were to take a low-paid job—perhaps just above the minimum wage—the tax credit system effectively gives her an average hourly rate of £13 to £14. If wages paid not just by public sector employers but by the private sector increase, the tax credit system will still have an important role in topping up people’s income, but reliance on the state will be somewhat less. That will relieve pressure on the taxpayer and lead to a more affordable social security system in the decades to come.

--- Later in debate ---

[Richard Fuller (Bedford) (Con)]

It is a pleasure to follow the hon. Member for Banff and Buchan (Dr Whiteford), and may I join other Members in congratulating my hon. Friend the Member for Warwick and Leamington (Chris White) on securing this debate? Earlier today I was at a meeting of social enterprises in Birmingham, where people were also singing his praises, so he is having a very good day indeed.

This is an important—the living wage is important to my constituents in Bedford and Kempston—and timely debate because the wages of unskilled people in this country have been affected by the globalisation of our economy and have failed to keep pace with average earnings and, in many instances, with prices. The living wage is one of the useful tools that is now available to provide Governments and policy makers with insights into tackling that long-term trend.

Working tax credits and other elements of the general taxation system were introduced with the best of intentions to tackle the disparity in wages, but they have created unintended consequences of their own that need to be addressed. We now have a massive form of corporate welfare that provides disincentives to employers to increase wages. In some circumstances, it also creates disincentives for people to progress in their careers because what they gain in income can be lost through a reduction in benefits. The hon. Member for Banff and Buchan mentioned the complete lack of ambition on both sides of the House to tackle this pervasive issue. We are struggling to gee ourselves up to find policies that will attract people’s attention as well as being economically sound.

I fear that we shall hear the usual waffle from those on the two Front Benches today. I usually prefer the waffle from my own Front Bench, and the Minister for Skills and Equalities, my hon. Friend the Member for Grantham and Stamford (Nick Boles) is not known to be the most waffly of Ministers when it comes to speaking the truth. However, there is a tendency for policy makers to talk about the good stuff and not to look at the hard consequences of their actions. So I shall put some questions to my hon. Friend and to the right hon. Member for East Ham (Stephen Timms) in the hope that they will address them when they sum up. I hope that they can be honest about their policies in this area in the run-up to the election.

If we increase wages, it is highly likely that unemployment will increase as a result. If that were to happen, what amount of unemployment would those on the Front Benches be prepared to accept as they pursued a policy of increasing the wages of unskilled workers? The hon. Member for Glasgow North East (Mr Bain) talked earlier about how people look at the amount of money they have in their pocket at the end of each month. That comprises income, minus the bit that is taken out in taxes, plus the bit that is added on for tax credits. I have heard a number of hon. Members today trying to spend the same pound twice. They have claimed that the living wage would give people an increase in real wages while also helping to reduce the deficit because of the decrease in tax credits that would be required. Will my hon. Friend the Minister and the right hon. Member for East Ham make it clear what their mathematics are in this regard? How much would they be prepared to give in the form of an increased push on pay, and how much would they expect to recoup from that in the form of reduced benefits?

One of the most powerful ways of enhancing the living wage is to get local authorities to procure on the basis of contractors paying it. They need to be honest in their procurement to ensure that the employees providing the services they are contracting for can be paid the living wage. In this period of limited public expenditure, however, increasing the cost of providing such services while having the same budget will result in fewer services being provided. I again ask those on the two Front Benches what their honest policy would be on pushing local authorities to pay the living wage for the procurement of services. Would they be prepared to accept either an increase in expenditure or a cutting back of services?

We all want to provide employers with incentives to pay the living wage. As my hon. Friend the Member for Warwick and Leamington said, this wonderful campaign was started by Citizens UK, a fantastic organisation. The greatest difficulty is that, although we can roll out this policy in the public sector, it will need to bite in the private sector as well, and we have to be honest and admit that the fiscal tools that we have to incentivise private companies are quite limited. Labour party policy seems to involve a one-year hit that would bring forward reductions in employers’ national insurance contributions enabling them to pay the living wage in that year. Perhaps that would work, and perhaps not, but we do not have many tools. Again, I would be grateful if those on the two Front Benches could tell me what tools they are considering as they try to move more people on to the living wage. How will they persuade employers that that is a good thing to do?