National Minimum Wage

Debate between Vince Cable and Alec Shelbrooke

Wednesday 15th January 2014 Commons Chamber

[Vince Cable]

I think hon. Members have had a chance to debate that already. I am a great advocate of the new model developed by Handelsbanken of relationship banking and no bonuses—that is what we ought to have—but I suspect that even their branch managers are paid above the minimum wage.

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

Does my right hon. Friend share the incredulity of Government Members that for all the talk of bankers not having been affected, not one person has condemned the fact that trade union leaders have been getting double-digit pay rises in the same period?

[Vince Cable]

I suspect that that is also true, but I am trying to get away from the tribal debate that the shadow Secretary of State was so keen to launch.

To return to the thread of the argument, we have had a major shock, and it has reduced real earnings and the real minimum wage. I fully acknowledge that; it is a matter of fact. The question is: what is being done to mitigate the effects? Two major changes have taken place. First, the Government have recognised that earnings are not the same as take-home pay and disposable income, and we have therefore concentrated our tax policy on lifting low earners out of tax. As a result, 2.7 million low earners now pay no income tax. Those working 28 hours a week on the minimum wage pay no income tax, while those on 35 hours pay only one third of the income tax they paid at the beginning of this Government. We have therefore considerably reduced the impact of the squeeze on real incomes by using tax policy.

The second highly relevant issue is the level of unemployment. After the great crash in 1929, unemployment rose to 20%. In the recent financial crisis, countries less affected than the UK have had considerably higher unemployment—I am talking about France and Sweden, among others. We reached a peak of 8.5%; it has now gone down to 7% and is falling. We have record numbers of people in work, while the number of jobs has increased by 1.3 million, in the wake of this enormous economic crisis. Now, why has that happened? It has happened because millions of individual workers, realising that there is a choice to be made between jobs and pay, have wisely decided that it is much more important to keep the employment.

The Low Pay Commission, speaking for the country as a whole, rather than for individuals, has reinforced that assessment. In its 2012 report, it explained its analysis in the following terms—let us remember this is not the Government, but an independent commission representing unions, employers and independent assessors. It said its aim was a minimum wage that helped

“as many low-paid workers as possible without any significant adverse impact on employment or the economy.”

That became the mandate—the remit—that I have used, and it is virtually identical to the remit used by my Labour predecessor. I simply ask Labour Members what they object to in that remit. Do they seriously think that the Low Pay Commission and the Secretary of State should ignore the state of the economy or the level of employment? What do they think is fundamentally wrong with the remit?

--- Later in debate ---

[Vince Cable]

I must tell the hon. Gentleman that it is an argument to which the trade unions on the Low Pay Commission fully subscribe. This is the first time that I have heard Members seriously question the competence of the Low Pay Commission and challenge the whole principle of its remit. I am appalled and alarmed that they should want to tear up and politicise a basically good system which has worked well under the last Government and under this one, in different circumstances. That really is very dangerous.

[Alec Shelbrooke]

What I find strange—I am sure that my right hon. Friend agrees with me—is that the subject of the living wage keeps popping up on the Opposition Benches. Today’s debate is about the minimum wage, and the Labour motion does not call for the Low Pay Commission even to consider the issue of the living wage.

[Vince Cable]

Indeed. Admittedly the issue of the living wage is now part of the public debate, and of course I believe that if employers are profitable they should adopt it—particularly if they are taking advantage of their work forces—but we must be clear about the fact that making the living wage mandatory, either directly or indirectly, would have enormous implications for jobs.