Living Wage

Stephen Timms Excerpts

Thursday 6th November 2014 Commons Chamber

[Guy Opperman (Hexham) (Con)]

I wholeheartedly congratulate my hon. Friend the Member for Warwick and Leamington (Chris White) on securing the debate and I thank the Backbench Business Committee. Some would say that Parliament does not often have important debates, but with the debate on Iran and now this debate on the living wage, I cannot think of a more important day to be in Parliament. I am delighted to be here to support my hon. Friend.

I was delighted, too, to have been part of a briefing that took place with the all-party group on poverty this morning with the good people from the Living Wage Foundation and Citizens UK, who came to the House of Commons and met several hon. Members, from many different political parties, to brief them on the living wage and to hear some of their experiences. I thank Emma Kosmin and Stefan Baskerville for coming in, along with the Rev. Angus Ritchie, Mike Kelly and Nana-Ben, who is the cleaner I mentioned earlier from the Department for Transport.

This is not just a debate about the living wage but a debate about tax thresholds and tax credits, but one must start with the wonderful news that the living wage has risen again this week. I was pleased to see the Mayor of London going to Kaffeine, a coffee shop in Great Titchfield street, to celebrate and support it. The Evening Standard pictured him with a large cake, which I am not sure is quite the message we are trying to get across, but the point is that he has been an enthusiastic and vocal supporter of the living wage, and quite right too.

I am sure the Minister will make the point that it is fantastic that it is this Government—acting as a coalition, to be perfectly fair—who have raised the tax threshold, which makes a massive difference to the pennies and pounds in the pockets of people earning a living wage or a minimum wage. That is the first direct impact. Clearly, there is a legitimate and correct debate about tax credits and how one takes them forward. I will leave others to discuss that in more detail, although I did set out my views on that in fairly lengthy detail in an article for the New Statesman in July 2013.

[Stephen Timms (East Ham) (Lab)]

I enjoyed reading that article, in which I think the hon. Gentleman described himself as an old-fashioned left winger. I think he would acknowledge that the advantages of an increase in the tax thresholds he describes are significantly undermined for people on the lowest incomes by the fact that tax credits are withdrawn to such a large extent.

[Guy Opperman]

I am delighted that the right hon. Gentleman, who sits on the Opposition Front Bench, is taking advice and instruction from me, a humble Back Bencher in this House since only 2010, but I take his point. The Government clearly need to address how taxing the individual is dealt with to avoid the problems he identifies so eloquently. I do not think it is quite as simple as he sets out. I accept and endorse the approach of the Chancellor: I think the fundamental is the tax threshold and then how we deal with tax credits. The harsh reality, as the right hon. Gentleman will know from the article he read, is that we have the bizarre situation where the Government step in and provide tax credits to the tune of approximately £4 billion for a variety of individuals when they should be encouraging an increase in wages and taking away tax. I will, however, leave that debate for another day.

We can provide local leadership. I am proud to wear the badge of the Living Wage Foundation, and I am a living wage employer in the House of Commons. I would like the foundation to accredit MPs who pay the living wage in order to incentivise us not only to talk the talk but to walk the walk. In addition, particularly in living wage week, I would urge all Members, if they have not done so already, to visit the living wage employers in their constituencies. I have met several of mine.

My hon. Friend the Member for Aberconwy (Guto Bebb) asked about small employers, particularly in rural locations, but, as is well known, the Federation of Small Businesses supports payment of the living wage on a voluntary basis. I can give some local examples. Aquila Housing, in Gateshead, and several churches in my constituency have shown the benefits, and Mike Joslin, an employer in the north-east and across the country, would eloquently set out the benefit it has brought to his relatively small business. However, my best example is the fine coffee shop Tea and Tipple, in Corbridge, which has barely three or four members of staff. When the snows fell—they fall through to May in Northumberland—his staff fought through the snow to get to work and open the coffee shop. There was clearly a sense of camaraderie, loyalty and commitment to the business that he might not have seen had he not been a living wage employer. He went the extra mile for his staff, and they went the extra mile for him.

Of course, we should be pushing the large employers too. Today, I met Mike Kelly of KPMG, and the human resources directors of companies such as Barclays. We need to ask the large employers in our cities and regions why they are not living wage employers. When KPMG did the transfer in 2005-06, it found that approximately 700 members of staff were not being paid the living wage, but when it compared the turnover of non-living wage staff with that of living wage staff, it found that the turnover dropped from 47% to 24% in one year.

In my New Statesman article, I cited the example of Costco. Craig Jelinek, its chief executive, who pays the living wage in America, said:

“We know it’s a lot more profitable in the long term to minimise employee turnover and maximise employee productivity, commitment and loyalty.”

I think he is right. Last year, when I spoke to Dominic Johnson, Barclays’ HR director, he was clear that it made sense for business.

When I go to my local Barclays in Hexham or any other branch, I am told that when cleaning staff are paid the living wage—traditionally it is the cleaning staff who slip through the net—capitalism takes over and, market forces being what they are, everyone wants to be a cleaner for Barclays, staff turnover drops through the floor, everyone feels much more valued and the offices are cleaned faster. Bizarrely, therefore, paying people more ends up costing the business less, and the quality of the product—the cleanliness of the offices—is improved.

There are, then, examples from big businesses and small businesses, and I am pleased that the public sector and the various Government Departments are leading the way. Some are quick to criticise Departments for not moving quickly enough, but it is extraordinarily difficult for some—the NHS, for example, has a vast array of subcontractors and private finance initiative contracts—to change.

But if I can move on, in the limited time we have, to allow others to speak—

--- Later in debate ---

[Stephen Timms (East Ham) (Lab)]

We have had a very good debate. Like others, I congratulate the hon. Member for Warwick and Leamington (Chris White) on securing it and thank the Backbench Business Committee for enabling it to take place during this living wage week.

In 1996, together with 1,300 other people, I was at the launch in York hall, Bethnal Green of the East London Communities Organisation—TELCO—which has rightly been mentioned a number of times. That was, and is, a coalition of the kinds of groups listed by my right hon. Friend the Member for Tottenham (Mr Lammy)—faith groups, schools, trade union branches, and community groups. Five years after it was established, it took the view—we should point out that it drew on 100 years of Catholic social teaching—that a living wage was the answer to big social problems facing our community in east London. It recalled the decisive intervention of Cardinal Manning in the London dock strike in 1889. In 2001, TELCO, together with Unison, which has also been mentioned in this debate, established the family budget unit at York university, which calculated the initial level needed for the living wage to support an east London family with an acceptable standard of living—it was £6.30 at the time. In 2004, Ken Livingstone established the living wage unit at City hall and its work has been maintained, I am pleased to say, by the current Mayor.

My hon. Friend the Member for Birmingham, Erdington (Jack Dromey) gave some telling examples of the impact on individuals of the adoption of the living wage. In the Living Wage Commission’s final report in June, the commission chair and Archbishop of York, John Sentamu, wrote of one young man the commissioners had met that he

“and his children could be a family again.”

I think it was that potential to support and enable family life that first attracted TELCO members in my constituency and elsewhere in east London to the idea.

As we have been reminded by the hon. Members for Hexham (Guy Opperman) and for Newark (Robert Jenrick), employers have found that paying the living wage can make good business sense, generating savings by boosting productivity and improving morale. Adam Marshall of the British Chambers of Commerce and Guy Stallard of KPMG, which has been mentioned a number of times in this debate, have served with the Archbishop of York and the TUC general secretary Frances O’Grady on the Living Wage Commission.

The problem of low pay has worsened sharply over the past few years. The value of the national minimum wage has fallen in real terms—the hon. Member for Banff and Buchan (Dr Whiteford) was right to remind us of that—and average annual wages have fallen by more than £1,600 in four years. The number of people paid less than the living wage has gone up, as my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) reminded the House, and low-paid workers, their families and communities are struggling as a result. As we have also been reminded, that also piles up costs for the Exchequer, as more people in work have to rely on the social security system to make ends meet.

Last month, the Resolution Foundation published its report “Low Pay Britain 2014”, which presents a great deal of information. It points out that

“Britain continues to stand out as having one of the highest incidences of low paid work in the OECD”.

We define low pay as less than two thirds of the median. Some 21% of full-time employees in the UK are in low-paid work, the highest proportion, jointly with Ireland, in the European Union. The figure is 18% in Germany, 10% in Italy, 9% in Switzerland and 5% in Belgium. This is a big problem and it is getting worse. We need a major change in direction and a concerted national effort to address the challenge of low pay. That is what Labour wants to deliver.

Alan Buckle, the former global deputy chair of KPMG, produced his independent report “Low Pay: The nation’s challenge” for the Labour party this May. He called for

“a national mission to tackle low pay and build an economy with fewer low skill, low paid jobs and more high skill, high paid jobs.”

He set out 10 recommendations for that national mission, including a five-year target to raise the minimum wage to a higher proportion of median earnings and looking at a higher rate for sectors that could afford it.

Since then, as we have been reminded, my right hon. Friend the Leader of the Opposition has proposed that the Low Pay Commission be given the forward guidance advocated by my hon. Friend the Member for Glasgow North East (Mr Bain) to set a target to increase the national minimum wage from 54% to 58% of median earnings by 2020. That is forecast to increase it to £8 an hour by October 2019, which will be a very important step towards the national goal of halving in-work poverty by 2025 and building an economy that works for all. Such a clear, long-term target will give businesses time to plan and adjust.

I did not agree with the hon. Member for Arfon (Hywel Williams), although, like other Members, he made a thoughtful speech. He said it would be a good idea to raise the national minimum wage to the level of the living wage, but I think we would lose a large number of jobs if we did that. However, Alan Buckle does argue for the Government to support and promote the living wage, recognising not least that the Exchequer gains when pay rises. He supports Labour proposals for the “make work pay” contracts referred to by my hon. Friend the Member for Ynys Môn (Albert Owen) and the hon. Member for Bedford (Richard Fuller), under which companies that sign up to become living wage employers would gain a first-year tax rebate of up to £1,000 for every low-paid worker who gets a rise, effectively repaying to the employer the first-year Exchequer gain in tax take from the increase as an incentive.

Buckle also suggests that all central Government Departments should become accredited living wage employers as a first step towards a requirement to paying the living wage to all staff working on Government contracts, and he tentatively suggests that firms bidding for contracts above a certain size might also be required to pay the living wage. He proposes that the Low Pay Commission be given a broader remit, for example to look at the causes and impacts of low pay, and make recommendations to the Government on how to tackle it. He advocates improving enforcement of the national minimum wage, and estimates that a quarter of a million people are still paid less than that, despite the law. He calls for the Low Pay Commission to assess annually the effectiveness of enforcement, and rightly calls for local authorities to have enforcement powers for the national minimum wage, alongside HMRC. My local authority—Newham—is among those arguing that pay below the statutory minimum is closely linked to other nuisance activity by non-compliant businesses, and that national minimum wage enforcement powers would sit well alongside other local authority powers.

The hon. Member for Warwick and Leamington rightly pointed out the variety of positions taken by local authorities on this matter. Labour councils have been leading the way in supporting and promoting the living wage—28 Labour-led councils have become accredited living wage employers, paying their in-house and subcontracted staff a living wage. As we have heard, dozens more authorities are paying the living wage to their employees, or have committed to move towards doing so.

We have heard about local authorities in York and Islington organising living wage zones, where people come together to plan strategies to support local private sector employers in the area to move towards a living wage. This week, in a particularly noteworthy move, Brent council became the first council to offer discounts on business rates to firms that commit to paying their employees the living wage.

From its roots in east London, the living wage campaign has won impressive support among employees, trade unions, community groups and employers. The Living Wage Foundation—the initiative established by Citizens UK—now accredits more than 1,000 living wage employers. The hon. Member for Warwick and Leamington pointed out that the number of FTSE-accredited employers has risen from four to 18—a dramatic rise—and that has been a striking success. However, the Government also need to address the challenge of low pay. It is not enough for Ministers to sound sympathetic; we need a concerted national effort, with the Government, employers, local authorities and communities working together. In that way we can build an economy that works not just for a few at the top, but for all working families.