National Minimum Wage

William Bain Excerpts

Wednesday 15th January 2014 Commons Chamber

[Vince Cable]

I welcome the hon. Gentleman’s support and I know that it is shared among his colleagues. This is a historical issue: it has now been laid to rest. I will talk a little more about the mandate of the Low Pay Commission and the fact that successive Secretaries of State, including me, have respected its judgment, which is non-political, non-partisan and represents both the union and employer standpoint.

Let me talk about the wider economic consequences. The shadow Secretary of State talked with a real sense of righteous indignation about things that are, frankly, blindingly obvious. We have had a massive financial crisis, the biggest in our history—certainly in modern times. As a result, the country is poorer. That is a matter of fact. It is not a polemical point: the country is poorer, and that has been translated into lower earnings. That is simple economic reality and nobody is disputing that.

In the wake of the economic crisis in 2008-09, we now know that British GDP fell by 7.5%. That was more than after the great crash in 1929 and worse than in any other western country. I am not going into the business of who did what when; I am just recording a matter of fact. Recession inevitably followed the financial disaster and real earnings have been affected. The shadow Secretary of State is right on simple matters of fact: real earnings fell by 7% and the minimum wage fell by 5%. That is a matter of fact. What I find so very difficult to understand is that the Opposition Front Benchers—it is not just her; her colleagues are the same—have seen the greatest economic disaster in modern economic history and apparently not noticed it, and they have not taken any account of the inevitable economic consequences. What matters is that the Government of the day seek to mitigate those effects.

[Mr William Bain (Glasgow North East) (Lab)]

Does the Secretary of State accept that while he has been in office, the real-terms value of the adult national minimum wage has declined by 50p an hour since May 2010? It is his responsibility to review the remit of the Low Pay Commission. Why is he acting so slowly on this, given that 28% of part-time workers in his constituency are earning less than the living wage? Does that not show the failure he is presiding over on poverty pay across the whole country?

[Vince Cable]

I do not know about the numbers, but certainly the minimum wage, in real terms, has declined by 5%, as a result of my predecessor on two occasions and me on three occasions following the advice of the Low Pay Commission.

--- Later in debate ---

[Mr William Bain (Glasgow North East) (Lab)]

Nothing speaks more to how the economy simply does not work at the moment for ordinary people in this country than this Government’s record of dither and inaction on low pay. It should be genuinely shaming for every Member of this House that the United Kingdom had the fifth worst levels of poverty pay in the OECD in 2013. We should also remember today the tireless work of living wage campaigners, trade unions and those enlightened employers across the United Kingdom who accept that our country has no future as a low-skill, poverty-wage economy and who have achieved fairer deals for workers from the financial services sector through to local government.

Now the Government must meet their share of the responsibilities by using the procurement system more effectively to secure the living wage for workers through Government contracts wherever that is possible, because although the burden of poverty pay falls most heavily on the working poor, who are now using food banks in record numbers, it is paid for by every single taxpayer in this country. They are subsidising, through the tax and benefit systems, unacceptable levels of low wages paid by bad employers. That also damages the interests of good employers.

Over the past three decades, the share of growth finding its way into the pay packets of ordinary workers on the lower half of the income scale has slumped to just 12p in every £1 of GDP growth generated. Having denied for months that there is a cost of living crisis in our country, the Business Secretary and the Government now ring their hands, for ever pledging change in the future but failing to take the action needed now to enforce the minimum wage properly, to reverse its real-terms fall in value under this Government, or to produce any long-term plan to restore the broken link between growth, productivity and wage growth, which is vital to generating a lasting uplift in living standards for millions of people across our country.

The Chancellor has been sending out mixed messages over the past few weeks ahead of his Budget. He has briefed some newspapers that a significant uplift in the minimum wage is on the way, but other newspapers have received a different story. Whatever he announces on 19 March will be weighed against the fact that under his stewardship since May 2010 the real-terms value of the adult minimum wage has fallen by 50p an hour. He is also launching a £600 million stealth raid on work incentives for the low-paid through the freeze in the work allowance of universal credit for the next three years. A single parent with children will be up to £230 a year worse off as a result of that sneaky change buried deep in the documents that accompanied the autumn statement.

Business investment is flatlining, exports are poor, productivity is weak, the squeeze on wages is extending into 2015, and people are working longer hours than they did in 2008 but have a lot less to show for it. This is not a Government who can say that they have a credible long-term plan to boost the living standards of ordinary working people in Britain.

The Government should be enforcing the minimum wage better. The hon. Member for East Dunbartonshire (Jo Swinson) said that bad employers would be named and shamed, but we have seen nothing of that so far. The Office for National Statistics told me at the end of last month that nearly 300,000 people across our country are being paid less than the minimum wage, including 17,000 in Scotland, yet we have seen only two prosecutions over the past four years, and the average fine for each breach was only £1,500.

[Mel Stride]

Does the hon. Gentleman not welcome, as I do, the fact that we are moving from a fine of up to £5,000 per company to a fine of up to £20,000 per employee who does not receive the minimum wage? If 50 employees in a company were affected, presumably the fine could be as much as £1 million.

[Mr Bain]

I am grateful to the hon. Gentleman for his intervention, but that would simply mean that the maximum fine was only 40% of the maximum fine for fly-tipping in this country. Is he genuinely saying that there should not be an equivalence between the maximum fine for fly-tipping and the maximum fine for failing to pay the national minimum wage? I urge him to think again.

[Mr MacNeil]

Does the hon. Gentleman agree that minimum wages must have some link with productivity? Productivity is like a cake, with workers and CEOs each getting a slice, and that is what is making the difference to equality in this country.

[Mr Bain]

Unusually, I find myself in agreement with the hon. Gentleman; I will try not to make this a bad habit. He is right that industrial policy has a big part to play.

We need to be creating better-skilled jobs to replace those lost over the course of 30 years. We also need a transformation in skills in the workplace, because evidence from this country and from the OECD shows that an uplift in skills gives people the ability to progress in a job, to get new jobs, and to see a lasting increase in their wage levels across their career. That is what we need to be doing across our country in our industrial policy.

The scale of the crisis is being felt in every part of the United Kingdom. A written answer that I received from the Cabinet Office last Thursday, at column 250W of Hansard, shows that according to the most recent survey of wages and hours worked, conducted last April, over 16% of my constituents were paid less than the hourly rate for the living wage. Startlingly, in Chingford and Woodford Green, the constituency of the Work and Pensions Secretary, work is not paying under this Government, because 43% of workers are earning less than the living wage, including two in every three male part-time workers. That shows the scale of what is happening even in the constituencies of members of the Cabinet such as the Work and Pensions Secretary.

The case is clear: there has to be an increase in the minimum wage. We can work towards the living wage through Make Work Pay contracts, but the Government should be fulfilling their responsibilities in saying to the Low Pay Commission that low-wage Britain needs a pay rise, and needs it now.