National Minimum Wage

Robert Halfon Excerpts

Wednesday 15th January 2014 Commons Chamber

[Robert Halfon (Harlow) (Con)]

The hon. Member for Leeds West (Rachel Reeves), who opened this debate, is right about one thing: it was a mistake for my party to have opposed the minimum wage. I am glad that we support it now. If we are honest about our mistakes, the Opposition need to be honest about what went on: that it was a mistake to abolish the 10p income tax rate; that median real wages stopped rising from 2003; and that the value of the minimum wage did not decrease from 2010 but from 2008. All of us have made mistakes in these areas, and the Opposition should have welcomed the fact that we have taken 2 million lower earners out of tax altogether.

[Alec Shelbrooke]

Does my hon. Friend agree that it was also a mistake to put in petrol price rises year after year—Labour would have added the equivalent of 64p a gallon by this time—which dig directly into hard-working people’s pockets?

[Robert Halfon]

My hon. Friend is right; our party has a relentless focus on helping the lower paid. We should support the minimum wage because we are the party of aspiration and working people, and increasing the minimum wage eliminates the poverty trap, cuts the benefits bill and encourages more people to get back into work. If we do just one thing, it should be to increase the minimum wage at least to reflect the increase in inflation over the past few years.

I also urge the Government to institute a regional minimum wage—in addition to the national minimum wage, not as a substitute for it—because of the different costs of living in different parts of the country. I am talking about the differing costs not just from north to south, but within regions. That has been done in other countries, such as Canada and the United States, where individual states can set minimum wage rates above the federal minimum. We need to consider such an approach seriously.

[Jackie Doyle-Price (Thurrock) (Con)]

My hon. Friend and I represent constituencies in Essex, where the cost of living is higher than it is in other parts of the country. Does he agree that we often see people trapped in a life on benefits because it does not pay to work as a result of the loss in housing benefit owing to higher property prices?

[Robert Halfon]

My hon. Friend makes an important point, and the Conservative party is the workers’ party. We are here to get people out of dependency and back into work, and the Labour party is the party of benefits.

Although it is important to support a fair wage, we must not hurt small businesses—the Secretary of State was exactly right on that. We should move towards a living wage, but there are ways of doing it. The important thing is to put the burden on government to achieve the living wage, not on businesses. I support the minimum wage and the living wage, but we have to make sure that they are not raised to unsustainable levels. Labour’s solution of offering companies tax breaks if they pay employees the living wage for a year is said with the best of intentions, but it has flaws because it does not fully offset the cost. Many companies would still be unable to meet the additional cost of paying their workers an extra £2 an hour. It would also only last a year, so many people would not benefit in the long term.

We should remember that 5 million low earners in Britain are earning less than £10,000 a year. To achieve the living wage, we need to look at two ends of the equation. First, we could reintroduce the 10p income tax band. That would halve the income tax bill for those on the minimum wage and significantly reduce the cash gap between the minimum wage and the living wage. It would also cost less than raising the personal allowance, and ensure that people continue to pay into the system while letting them keep more of their own money. Alternatively, we could continue raising the threshold of income tax. Those are the ways to get people up to a living wage, and I am happy with either solution.

National insurance is the one tax that is still taken directly out of lower earners’ pay packets. A worker who earns around £7,500, which is around half of what the Government say they need to live on, still pays national insurance. We should take a small step to help the lower paid by increasing the national insurance threshold, so that it is in line with income tax for employees. The 2020 Tax Commission found that nearly three-quarters of company bosses said that national insurance contributions curbed the rates they paid their staff.

A bigger step would be to remove altogether national insurance and income tax from the national minimum wage, which would mean that someone working 40 hours a week would be earning just £10 a week less than someone who is currently earning the living wage. If we did that, national insurance and income tax could be merged into just one tax.

Although some argue that we need to maintain national insurance because of the contributory principle, it effectively acts as a double income tax, and a contributory system could be transferred into any consolidated form. Such a system could have enormous benefits, such as a simplification of the tax system, greater transparency, fewer administration costs and it would leave workers with more money in their pockets. It would be costly, but there would be benefits, such as people spending more and being less reliant on the state for welfare and encouraging people back into work. It would benefit all low-paid workers, especially those who work just part time. It should be the long-stated aim of my party to try to introduce this over a number of years.

As Conservatives, we are on the side of hard-working people, which is why we capped taxes for 20 million-plus lower earners. It is right that the Government increased the personal allowance, but if the slogan “For hard-working people” is to mean something, we have not only to become the workers’ party but to shout from the roof tops our support for the minimum wage. A real-terms rise in the national minimum age, a regional top-up and raising the national insurance threshold would give us legitimacy as the party standing up for millions of workers.

--- Later in debate ---

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

As I recently outlined, I am not in favour of a statutory living wage, but I am in favour of raising the minimum wage.

A rise in the minimum wage, as national wage growth returns, fundamentally leads to a smaller state, as has been outlined by Labour Members. Now that the Government have reduced business taxes—national insurance, corporation taxes and small business taxes—and brought in last year’s rebate, the time is right to look at how we can create a sustainable growth in the wages of the lowest-paid by giving the taxation that the Government were taking back to the people who are creating the wealth in companies. That means that the potentially inflationary pressures will not occur because the Government are not taking tax from a company just to give it back to a worker.

[Robert Halfon]

My hon. Friend talks about the Government cutting business taxes. Does he agree that they have also raised taxes for the rich by increasing capital gains tax from 18% to 28% and increasing to 45p the 40p rate that existed in the 13 years under Labour?

[Alec Shelbrooke]

My hon. Friend puts it most eloquently, as always.

This is an uncomfortable truth for Labour Members. [Interruption.] They have been yelling and shouting this afternoon, and they are at it again now as soon as they do not want to hear an inconvenient truth. The hon. Member for Vale of Clwyd (Chris Ruane) put forward the false premise that Government Members are saying we should increase wages for the people at the top and cut them for those at the bottom—no Government Member has ever made such a comment; it was a disgraceful thing to say—but failed to mention that under his party’s Government, the noble Lord Mandelson said that he was perfectly comfortable with people getting “filthy rich”.