National Living Wage

Stephen Doughty Excerpts

Monday 18th April 2016 Commons Chamber

[Joan Ryan (Enfield North) (Lab)]

I beg to move,

That this House agrees with the Chancellor of the Exchequer that Britain deserves a pay rise and commends his introduction of the national living wage; notes, however, that some employers are cutting overall remuneration packages to offset the cost of its introduction, leaving thousands of low-paid employees significantly worse off; and calls, therefore, on the Government to guarantee that no worker will be worse off as a result of the introduction of the national living wage.

My hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) has been campaigning tirelessly on the implementation of the national living wage, and has been fighting for all workers to truly benefit from the new proposals. Unfortunately, as Mr Speaker said, she is in hospital and cannot be with us today. I am sure that Members from across the House will join me in wishing her a speedy recovery. [Hon. Members: “Hear, hear.”] I have spoken to her today, and she is on the road to recovery. I understand that she will be listening and possibly watching our proceedings.

I had intended to speak in support of my great friend and colleague’s work, but I am proud to be a signatory to the motion, and I am honoured to have been asked to present her speech and lead this important debate on her behalf. She is delighted that the debate can go ahead without her. She thanks the Backbench Business Committee for granting time for the debate, and the Speaker’s Office and the Table Office for allowing me to lead the debate on her behalf.

When my hon. Friend made her application to the Backbench Business Committee, she had no idea just how huge the issue would be. It all started a few months ago, when a friend of hers approached her with his payslip from B&Q. He said, “Siobhain, B&Q has given me new terms and conditions, which it says I have to sign or I’ll lose my job. It is cutting back my Sunday and bank holiday pay, as well as my summer and winter bonuses. I think I might have my pay reduced.” How right he was. Indeed, my hon. Friend was shocked when she calculated that he would lose up to £50 a week, or about £2,600 a year. The saddest thing was that this was happening after his basic pay had been increased by the introduction of the national living wage. To be clear, this was a pay cut after the Chancellor guaranteed that Britain was getting a pay rise.

After raising the matter at Prime Minister’s questions—frankly, the Prime Minister did not have much of an answer for her—my hon. Friend started receiving dozens of emails from B&Q employees from around the country. From Exeter to Aberdeen, she was contacted by staff at all levels and from all walks of life who would also lose out.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I pass on my best wishes to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh), who has done tireless work on this issue. Does my right hon. Friend share my concern about the fact that, as I have heard myself, because of the differential whereby under-25s are not eligible for the living wage, others are losing out on overtime and other hours, which are given to younger workers who can be paid less? Not only are younger workers losing out because they are paid less, but other people are not getting the overtime or extra hours that they might have thought they would.

[Joan Ryan]

My hon. Friend makes a valid point. This is a double whammy for some workers; not only are they losing out because their employers are altering their terms and conditions, but they are losing these valuable other hours. Many of these workers absolutely depend on being able to work extra hours and overtime.

B&Q, like so many companies nationwide, has made all employees sign new terms and conditions under a variation of contract. Those new terms scrapped double time for Sundays and bank holidays, as well as seasonal bonuses and other allowances that staff relied on to top up their income. These pay cuts were much greater than the gains of the national living wage, which is why so many employees are losing out.

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[Judith Cummins (Bradford South) (Lab)]

Thank you, Mr Deputy Speaker, for calling me to speak in this important debate. In opening, may I place on the record my sincere thanks to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for her efforts in securing this Back-Bench business debate? She is a fearless campaigner and a credit to this place. I wish her a speedy recovery, which I know she will achieve through sheer force of willpower. I also thank my right hon. Friend the Member for Enfield North (Joan Ryan) for stepping in.

When I sat in this Chamber alongside many other hon. Members not so many months ago and heard the Chancellor say that he was going to increase the pay of the lowest paid, I was speechless. The glib tagline was, “A pay rise for Britain”. Throughout my political life, I have fought for improved pay and conditions for the working people of this country, especially the lowest paid. One of the proudest moments in my political life was seeing a Labour Government, in this very place, introduce the national minimum wage as one of their first acts—a move that was strongly opposed by the Conservatives.

Despite my understandable cynicism, I was delighted that the Chancellor had undergone his own damascene conversion and had finally seen the light by belatedly understanding that every worker in this great and prosperous country, not just those at the top of the ladder, deserved to be paid fairly. But—and there is always a “but” with this Government—my initial delight soon dissolved as I rapidly discovered that my cynicism was not misplaced but very much spot on. As the now former Secretary of State for Work and Pensions, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), recognised, the Chancellor’s glib tagline about giving Britain a pay rise was devoid of substance and nothing more than hot air and bluff. His Budget announcement was the stuff of fairy tales. When we scratch beneath the thin veneer of the so-called national living wage, it swiftly becomes clear that the low-paid workers of this country are being hammered, just as they always are by this Tory Government.

Despite the Chancellor’s embarrassing U-turn on tax credits, he has ploughed ahead with cuts to the successor scheme, universal credit. Cuts introduced this very month mean that tens of thousands of low-paid working families who are in receipt of universal credit are expected to lose up to £200 a month from their pay packets. That is the first attack by this Tory Government. The second attack, and the topic of today’s debate, is the Chancellor’s spectacular failure to ensure that big business funds his so-called national living wage off its own back and through its profits, rather than off the backs of workers.

My hon. Friend the Member for Mitcham and Morden, the Union of Shop, Distributive and Allied Workers and the Daily Mirror newspaper, through its coverage in recent weeks, have shown that, when given the choice, big business has seized on the cheapest method to fund a pay rise for its workers by heartlessly cutting their overall pay and benefits package. That is simply shameful.

[Stephen Doughty]

My hon. Friend is making a very strong speech. Many businesses, particularly in the care sector, have got away with not paying the minimum wage and used all sorts of tactics such as clipping and not paying for travel time. An even greater number of them now use tactics such as cutting tea breaks and lunch breaks, in order to get away with it on an even greater scale. The Government failed to enforce the original minimum wage, and the situation is now being compounded further.

[Judith Cummins]

I thank my hon. Friend for giving that very good example. My right hon. Friend the Member for Enfield North mentioned the glaring example of B&Q, which has asked its workers to sign a contract that reduces a number of their benefits. It is believed that the overall result will be that many will lose thousands of pounds. The company’s response has been to introduce a temporary scheme, for just two years, to protect the value of its workers’ overall packages. That is simply not good enough, particularly as it has been reported that the parent company of B&Q, Kingfisher, may pay its chief executive officer a total package of up to £3.6 million. The numbers are jaw-dropping, as is the hypocrisy. Once again, this Tory Government are presiding over the shameful exploitation of those who are least able to make ends meet, least able to make their voices heard and least able to stand up and tell the Government that what they are doing is simply unfair and unacceptable, and that it cannot go on.

The Chancellor cannot even plead ignorance and suggest that this shameful episode is an unexpected by-product of his noble and good deeds. A ministerial answer to a written question by my hon. Friend the Member for Ashfield (Gloria De Piero) on 21 March revealed that the Government were aware of the possibility that big business would choose to fund their so-called national living wage through cuts to wider remuneration packages. The Government’s view was:

“It is for individual businesses to decide exactly how to respond to the introduction of the National Living Wage, appropriate to their circumstances. But any changes to contractual pay should be discussed and agreed with workers in advance.”

The Government simply do not get it. If the choice for workers is between unemployment and agreeing to changes designed to reduce their overall contractual benefits, most, if not all, workers—especially the lowest paid in society—will sign up.

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[Julie Cooper (Burnley) (Lab)]

I pay tribute to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for securing a debate on this important topic, and I wish her a speedy recovery. I also congratulate my right hon. Friend the Member for Enfield North (Joan Ryan) on the way in which she has led the debate.

Like so many Members in the House, I welcomed the news in last year’s Budget that the Government would introduce a new national living wage, as a result of which workers aged 25 and over would receive £7.20 an hour in April—an increase of 50p from October 2015, when the minimum wage was set at £6.70. I also welcomed the plans for it to rise to £9 per hour by 2020. Both those measures are important steps towards securing a real living wage, which the Labour party continues to campaign for. After years of workers enduring the bulk of the Government’s austerity agenda, a pay increase for 1.8 million workers is welcomed, even though it does not go far enough.

For me, this is a local issue, that affects the lives of many of my constituents. According to the House of Commons Library, 19% of people in my constituency will benefit from the living wage this year. That figure will rise to 27% by 2020. I understand that the changes will have a disproportionate impact on small businesses, which employ 35% of the adult workforce and 52% of Britain’s minimum wage workers, and that it will be concentrated in the hospitality and retail sectors, which account for more than 46% of minimum wage jobs. I also note the concerns coming particularly from the social care sector, which is already underfunded. The Government urgently need to do more to address the shortfall in funding.

In the recent weeks leading up to the implementation of this new wage, a campaign of fear has been put out by large employers that simply do not want to pay their employees a fair wage. Some have claimed that a living wage will lead to job losses. Others have had the gall to say that raising wages is in effect a tax targeted at businesses using low-skilled workers. The truth is that the taxpayer has had to pay to top up the pay of workers to the tune of £11 billion a year. Prior to this wage rise, the four big supermarkets alone—Tesco, Asda, Sainsbury’s and Morrisons—cost £1 billion a year in the tax credits and extra benefit payments their underpaid staff received.

I have found disturbing and, quite frankly, shameful the way in which some large employers in the service sector have used the introduction of a living wage as an excuse to cut basic work entitlements. In the face of the changes, some employers have cut holiday pay, lunch hour pay and sick pay, and have cut contracted hours. As has already been mentioned, the retailers B&Q, Tesco and Wilko have all cut premium holiday pay and other benefits while reluctantly raising pay. Staff at Tesco face a cut to night-time and holiday bonuses, as do staff at Wilko and Morrisons. One Tesco worker has said that the loss of pay will amount to £75 a month, which could be the difference between making next month’s rent and being kicked out on to the streets.

[Stephen Doughty]

My hon. Friend is outlining what I regard as very underhand practices that are hurting such workers. Will she join me in paying tribute to the work of trade unions such as the GMB, USDAW, Unison and Unite, which have played a key role in exposing a lot of these problems during the past few months? That underlines why trade unions are so crucial in standing up for workers in workplaces, such as the care sector or the retail sector that she mentions.

[Julie Cooper]

I am very happy to agree with my hon. Friend and pay tribute to the trade union movement, which has done so much to stand up for the rights of workers when faced with such threats from some big companies.

Eat, the café chain, has reportedly stopped paying staff during lunch breaks. Caffè Nero has told staff that it cannot afford to pay the national living wage and allow their workers a free panini at lunch time, despite the fact that its profits grew by 8.5% to £241 million in the 12 months to last May and that the company has not paid corporation tax since 2007. As was mentioned earlier, B&Q has demanded that employees sign away rights to a range of in-work benefits worth more than a £1,000 a year or face the prospect of being sacked. This intimidating and bullying of staff should not be tolerated in any workplace.

The Low Pay Commission has warned that some employers may decide to label employees as apprentices or self-employed to avoid having to pay them the living wage. Other suggestions floated by large retailers include cutting the number of staff or speeding up the implementation of technology to replace staff, such as using more self-checkout tills in supermarkets. These regressive actions are in complete contradiction to the aims of the living wage, as the Government pointed out when they introduced it. They said it would prompt employers to invest in training and technology to make their workers more productive and break the low-pay, low-productivity cycle. I do not see how cutting in-work benefits will make employees more productive, or break the cycle of low pay and insecure work.

Costa Coffee, Next and other high-profile companies have said that they will increase prices to cover the change in wages by passing the price directly on to the consumer. I was astonished to hear a member of staff in a small chain in my Burnley constituency tell a customer that the price of bread had gone up because of the change to wages. These companies can afford to pay and should pay a living wage off the back of the profits that they produce. This should not be a system in which employers can choose between holiday pay and a living wage, or between raising prices and sacking staff.

Those guilty of such actions show their contempt for their customers, for this Parliament and the law and, most importantly, for their staff—the very individuals who give their sweat and blood, and their time and effort, so that those at the top can receive large salaries deducted from record profits. If such large companies employing thousands of people across the UK can afford to pay their lawyers and accountants large fees to cut their tax bill and avoid paying corporation tax, I do not see how they cannot afford to pay their employees a real wage that they and their family can live off.

The Government estimate that the total cost to employers of implementing the national living wage in 2016-17 is £1.1 billion. Yet last year, according to Her Majesty’s Revenue and Customs, tax fraud cost £16 billion, with tax evasion alone meaning that the Government collected £4.4 billion less in tax. The money lost to the economy could easily cover the cost of the implementation of a real living wage.

Some claim that a living wage will lead to job losses. In the face of much of the scaremongering about job losses, it is worth pointing out that there has been little to no negative impact on our economy or jobs since the introduction of a minimum wage in 1999, despite the fact that the same people made the same arguments then. I am happy to say that some employers have welcomed the wage rise. Some have gone further by paying all their staff, irrespective of age, a higher wage than the Government’s living wage.

This debate is not simply about the cost of a living wage; ultimately, it is a wider reflection of an increasingly divided society. I am running out of time, but I would like to share with hon. Members my own experiences. For 24 years, I owned and ran a successful small business in which I employed 10 people. Through all that time, I recognised that the staff were a real asset, helping to build the success of the business. They worked hard and contributed much, and they were valued highly. I was proud to pay them a real living wage, and they certainly deserved no less. Similarly, when I was leader of Burnley Borough Council, I was pleased to introduce the real living wage for all employees. Not only is this the fair and decent thing to do, but it makes sound economic sense, because when people have more money in their pocket, they create demand for more and better services and shops. Thus the living wage, far from damaging business, actually acts as a boost.

I call on the Government to protect workers’ rights that are clearly being undermined. It should be made clear, through legislation if necessary, that employers should not see the living wage as an opportunity to cut back on holiday pay or other hard fought for entitlements—

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[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?

[Stephen Doughty]

Is my hon. Friend aware of the case of MiHomecare, a subsidiary of Mitie in the care sector? It has had to make a significant number of payments to workers in Wales and has been involved in out-of-court settlements for non-payment of the minimum wage, yet it was the Conservatives who gave Mitie’s chief executive, now Baroness McGregor-Smith, a peerage.

[Kevin Brennan]

I am aware of that case. My hon. Friend, who is my other parliamentary neighbour, accurately reflects the problems in the care sector that came up in the debate, and describes the connections to some of the companies that need to be looked into more carefully.

The action being taken by some employers may not be illegal, but it undermines the spirit of the law, which is to provide an increase in wages and living standards for British workers. Some of those taking this curmudgeonly path are in the sectors that might benefit most from workers having extra purchasing power in their pocket, such as tourism, retail and hospitality. As we have heard, the Low Pay Commission warned that some employers could label employees as apprentices to avoid having to pay the so-called national living wage.

We have heard examples involving various supermarket chains, retailers, restaurants and so on. In the interests of time, I will not name them or repeat what was said in the debate, but in a week when we have seen one loss-making chief executive officer try to secure a pay package of £14 million a year, it is obscene that an ultimate pay rate of £9 by 2020 is being undermined by the heads of some of these big businesses. Corporation tax has been reduced in recognition of the introduction of the so-called national living wage, leading to savings for businesses. Was that intended to compensate businesses for the phased introduction of the so-called national living wage? If so, does the Minister condemn the businesses using some of these practices?

Private sector businesses may have other opportunities to recoup increased costs by raising prices for goods and services, or by altering how labour, capital and profits are apportioned and rewarded. However, those options are not available to local government, as was pointed out, and the gap there is huge. Will the Minister agree to review the local government cuts in view of the impact of the national living wage?

Many hon. Members referred to young people, who have been deliberately excluded from the so-called national living wage. The Guardian recently highlighted the case of a worker at a well-known DIY store—I will put it no more strongly than that—who was on £7.20 before the introduction of the so-called national living wage and £6.70 after its introduction. He said:

“I’m getting less for doing the same job… I feel so worthless.”

What is the Minister’s reaction to that? What assessment has he made of the impact of the so-called national living wage on workers under 25? As was asked in the debate, what is the purpose of widening the differential between the under-25s and those who are older? Is it to increase demand for the under-25s, or does it reflect that the Minister somehow believes that the under-25s are worth less in productivity terms than those over 25?

The so-called national living wage could be celebrated on all sides of the House if it was introduced properly and if the letter and spirit of the law were upheld. If not, many workers could, as we have heard, be considerably worse off. The Opposition will be watching closely to ensure that that does not occur. The Government, with all their resources and power, should be introducing the change with real vigour. Will the Minister act to ensure that, as the motion demands, no workers are worse off as a result of Government policy? I invite him to tell the House how he will do that.

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[Nick Boles]

I will not give way again.

We agree that we want everyone to benefit from the pay rise that that national living wage represents. I want to be clear about how we will ensure, as a Government and as Members of Parliament, that that is the case. The first and most important thing is to ensure that all employers fulfil, in full and in every case, their legal obligation to pay the national minimum wage at whatever level it is set for those under 25 and the new national living wage for those over 25.

I can report to the House that we are enforcing the national minimum wage more robustly than any previous Government and will be enforcing it more robustly every year. In 2015-16, Her Majesty’s Revenue and Customs identified more than £10 million of arrears for more than 58,000 workers across the economy—three times the arrears identified in 2014-15 and for twice as many workers. I am delighted to be able to share with hon. Members that we will increase the HMRC enforcement budget to £20 million in 2016-17, which is up from £13 million in 2015-16 and from only £8 million in the last year of the Labour Government. Spending on enforcement of the national minimum wage and the national living wage next year will be more than double what it was in the last year of the Labour Government.

[Stephen Doughty]

Even if the situation were as rosy as the Minister paints it, which it is not, there are the underhand tactics of companies in cutting benefits aside from pay to offset the increase or even make workers worse off, which have been pointed out repeatedly in the debate. Will he respond to that? Does he consider those tactics underhand?

[Nick Boles]

If the hon. Gentleman will give me a moment, I will move on to discuss the enforcement of what I consider to be moral obligations that fall upon all employers capable of meeting them. First, let me remind him about the previous Labour Government, whom I am sure he supported. He was not in that Government—he was not yet in the House, and nor was I—but they spent only £8 million on enforcing the national minimum wage in 2009-10. At a time when they seemed able to spend unlimited amounts of money on almost everything else, they thought it rated only £8 million. We are going to spend £20 million next year, which is why the amount of arrears secured and the number of workers being helped is significantly greater now than it ever was before.

Furthermore, we have introduced the scheme of naming and shaming companies that do not pay the national minimum wage or the national living wage and do not have a good reason for explaining why. That has been an extremely effective approach. Hon. Members should see some of the letters I receive from employers trying to persuade me to exclude them from a naming and shaming round; they take it very seriously indeed, as they do not want their customers and suppliers, and indeed their neighbours, to know that they have broken the law. I do, however, agree with the hon. Gentleman that legal obligations are not enough—not for us as individuals and not for employers either. I welcomed the contribution of the hon. Member for Burnley (Julie Cooper), who talked about her experience in employing 10 people and insisting on paying them a proper living wage because that was good for them, for her as an employer and for the business. Without being too pompous about it, let me say that that is the kind of moral responsibility we would hope and expect every employer to seek to fulfil.

I recognise the point made by my hon. Friend the Member for Shipley (Philip Davies) that some small employers will find the national living wage very difficult. I do not criticise them for an instant if they are not able immediately to ensure that every aspect of an employee’s conditions is preserved in full, because I am sure we would all agree that if the alternative is to fire some people, we would prefer to have more people being paid the legal national living wage than to have people losing their jobs. However, I am clear that for larger employers there is simply no excuse for trying to evade the effect of the national living wage by cutting other benefits and premiums.