National Minimum Wage

Debate between Steve Rotheram and Dan Jarvis

Tuesday 16th December 2014 Westminster Hall

[Dan Jarvis (Barnsley Central) (Lab)]

Thank you, Sir Alan. It is a pleasure to serve under your chairmanship. I begin by thanking Mr Speaker for granting this debate. It should really have taken place a fortnight ago, on Friday 28 November, the date for the Second Reading of my private Member’s Bill—the Low Pay Commission (National Minimum Wage) Bill. That is a Bill to make work pay: to strengthen the national minimum wage, to give greater powers to the Low Pay Commission and to tackle the scourge of low wages, which blights the lives of too many people across Britain today. Regrettably, we did not have an opportunity to debate my Bill. Two hon. Members, both of whom are known throughout the House as long-standing campaigners to undermine the minimum wage—I believe that one of them even voted against it in 1997—spoke for more than two hours to sabotage the earlier debate on a Bill to tackle revenge evictions, blocking my Bill as a result. Given that we were deprived of a debate that day and given that this issue means so much to so many across our country, I have called this debate to say now what I would have said then and to give the House the opportunity to debate the important matter of low pay.

Choosing the subject of my Bill was a difficult decision. I had no shortage of helpful suggestions, but ultimately it was the story of one woman that made up my mind. I wanted to make a difference to people such as Catherine. Catherine is a cleaner and housekeeper in my constituency. She juggles six different jobs, working in six different locations across Barnsley. She works more than 50 hours a week on the minimum wage. Like many people, Catherine struggles to make ends meet. Her pay packet does not stretch as far as it used to, especially as the real-terms value of the minimum wage has declined since 2010. When I asked her how that had affected her life, she said that she had had to cut down on what she described as “luxuries”. Soon I realised that she meant that she could not afford essentials such as clothes. “I just work to exist,” she said, “I can’t afford nice stuff. I just work to keep my head above water.”

Catherine does not have time to take notice of polls or political pundits, but what happens in our politics, what goes on in this place and the Governments we choose to serve us here will shape her life more than most. It is easy now to take it for granted that Catherine earns a national minimum wage at all. Before 1997, many workers like her were expected to work for as little as £1 or £2 an hour. In its first months of existence, the Low Pay Commission found appalling cases of factory employees earning only £1.22 an hour, care home workers taking home just £1.66 an hour and even a chip shop worker from Birmingham forced to make do with 80p an hour.

It took a Labour Government to end that scandal. Their efforts were led by Sir Ian McCartney, the former Minister of State at the Department of Trade and Industry, who piloted the Bill that became the National Minimum Wage Act 1998 through the House, and by my right hon. Friend the Member for Derby South (Margaret Beckett), the former Secretary of State. The national minimum wage was one of Labour’s greatest achievements, but its path to becoming law included a record sitting in the House of 26 and a half hours as Members, mainly from the Conservative party, sat through the night, opposing the Bill line by line, to stand in the way of working people getting a decent wage for a hard day’s work. Today, their fears have failed to materialise. They were on the wrong side of history then, and the scourge of low pay explains why the Government’s plan to balance the nation’s books is failing now. A generation on from the national minimum wage becoming law, the low pay challenge for our country has changed. The national minimum wage did help to root out exploitation and extreme examples of poverty pay, but today we have huge numbers of people across Britain who do a hard day’s work and are still living on the breadline.

Catherine, whose story I shared earlier, is just one of more than 5 million people across Britain who are stuck on low pay. The number is up from 3.4 million in 2009 and is at an all-time record. Women and young people are being hit hardest. One third of all working women and nearly two fifths of 16 to 30-year-old employees do not earn a decent wage. Nearly two thirds of children living in poverty now live in families with someone in work. If we look at the proportion of our work force that is low paid, we see that Britain is towards the bottom of the pile, coming 25th out of 30 OECD countries.

Moreover, the real-terms value of the minimum wage is losing ground. The Low Pay Commission has acknowledged that its relative value has dropped significantly since 2004, and job creation in the lowest-paid sectors has exploded at double the rate of the rest of the economy since 2010. That partly explains why the Government now spend more on tax credits and social security for families in work than they do for the unemployed. It is why the Government have been forced to spend an extra £900 million on tax credits to top up low wages, and it is part of the reason why Ministers have had to spend £1.4 billion more than planned on housing benefit for people who cannot afford a roof over their head.

John Maynard Keynes famously once said:

“When the facts change, I change my mind.”

My central argument today is that as the challenge has changed, our approach to tackling low pay needs to evolve with it. Many of our country’s leading business voices have already called for the minimum wage to increase faster than it has done in the recent past. They include Sir Ian Cheshire, chief executive of Kingfisher, and Steve Marshall, executive chairman of Balfour Beatty. Professor Sir George Bain, the first chair of the Low Pay Commission, has described the organisation as a “child of its time” and has called for an ambitious target to bring the minimum wage closer to average earnings. We need the Government to put that into action.

Labour’s plan to tackle low pay—a plan mirrored in my Bill—preserves everything that has helped to make the Low Pay Commission such a success. I am referring to decision making based on strong research; a balance between the need for wage growth and concerns about the impact on employment; and a partnership approach between the employers who create the jobs and the employees who work the shifts. Let me run through the key points.

First, we need to give a mandate to the Secretary of State to set a target for the national minimum wage to increase over a Parliament at a rate higher than that for median earnings. I did not include a specific target in the Bill. Different people will have their own views on that. We as the Opposition have already expressed our ambition for a minimum wage closer to 58% of median earnings. The important point is that the act of setting a target alone would deliver a more ambitious approach to tackling low pay and a greater focus on what progress we are making. A clear long-term target such as that would give firms certainty and time to adapt their business models to boost productivity and support higher wages. It would also bring us closer to other countries such as Australia and European economies such as Belgium and Germany, where all the evidence shows that it is possible to support a higher minimum wage without any negative impact on employment.

The Low Pay Commission would keep its leadership role in delivering on the target and would set out a plan for how it could be achieved; and flexibility could be retained in the system. We know that the success of the minimum wage has been built on an approach that works hand in hand with industry and takes into account the state of our economy, so in the event of significant economic shocks, the Low Pay Commission could be required to present compelling evidence to the Government and to Parliament, setting out why it is not possible to meet the target during the proposed time frame. The Low Pay Commission could then make further recommendations to get progress towards the target back on track.

[Steve Rotheram (Liverpool, Walton) (Lab)]

I am grateful to my hon. Friend for bringing this vital issue to the attention of the House. The rate of the national minimum wage is important, especially to those who receive it. Does he agree that it is a shocking indictment of the Government that unscrupulous employers who are paying less than the national minimum wage are getting away with it because such a small number have been prosecuted?

[Dan Jarvis]

My hon. Friend makes an important point, and the figures bear out what he has said. I would be interested to hear what the Minister has to say on that point, but I agree that the tiny number of rogue employers who have been prosecuted for paying people less than the national minimum wage is a disgrace. That reflects poorly on the Government’s record.

I believe that the proposal I have just outlined regarding the Low Pay Commission is straightforward and reasonable, and that it is the right thing to do. I would be grateful if the Minister would respond directly to that point.