I beg to move,
That this House has considered promotion of the living wage.
I am sure that the House is grateful to you, Madam Deputy Speaker, for your clarification with regard to the noises outside the Chamber.
The second debate this afternoon is on a very important, but more domestic topic, on which I am pleased to say that there is a great deal of cross-party support and consensus. Despite the fact that not as many Members are in the Chamber as I would have wished, I am sure that they are working hard in their constituencies, or particularly hard in one constituency.
We can all agree on the importance of a fair day’s pay for a fair day’s work, and there is a sincere commitment on both sides of the House to ensure that hard-working people are rewarded for their efforts. I look forward to contributions to the debate from both sides of the House.
Today’s debate is also timely, taking place as it does during living wage week. As Members are no doubt aware, earlier this week the UK living wage was raised to £7.85, and the London living wage to £9.15. The new figures represent an increase of 2.6% on the 2013 rate and will improve the take-home pay of some 35,000 people, who are among the lowest paid workers in the country.
Since 2013, more than 60,000 people have been given a pay rise through the living wage. This year, the number of FTSE 100 companies that have signed up to the living wage has increased significantly from four to 18. I lay down the challenge as to which will be the next.
I congratulate my hon. Friend most wholeheartedly on securing such an important debate in living wage week and welcome the work that he is doing, especially on behalf of the all-party group on poverty. Does he agree that those companies that adopt the living wage are bound to see not only a dramatic improvement in their staff retention and a reduction in their turnover but an increase in the productivity of their staff? That has been demonstrated by Costco in America, and Barclays, and KPMG in this country?
I am glad that the hon. Gentleman has brought forward this debate today, along with other colleagues. But we must get real. It is also a fact that under the Government whom he supports, the number of people below the living wage has risen from 3.4 million to 4.9 million in this country, so we need to think how to move forward. Does he agree that we need to get to a situation where every worker employed by Government or local government, or contracted to Government or local government, should be paid at the very least the living wage?
I am grateful to the hon. Gentleman for his comments and I certainly will deal with how we can encourage other Government Departments to lead the way on this.
I am delighted to have the opportunity to lead the debate. The all-party parliamentary group on poverty is most ably chaired by the hon. Member for Stretford and Urmston (Kate Green), and I as the vice chair and other members have been strong advocates of increasing and supporting the living wage. I take this opportunity to thank the hon. Member for North East Derbyshire (Natascha Engel) and the Backbench Business Committee for scheduling the debate today.
The all-party group has done a great deal of work, alongside the Living Wage Foundation, to promote the living wage and the benefits that it has for business, employees and society in general. According to a recent report by KPMG, an estimated 5.24 million people in the UK earn below the living wage.
The hon. Gentleman should be congratulated on bringing forward this debate. As large numbers of people are paid below the living wage, surely we should review the benefits system that seems to subsidise employers who pay very low wages. Should that not be looked at?
The hon. Gentleman makes an important point. How we improve the take-up of the living wage will address some of his concerns. I hope that some of my right hon. and hon. Friends will show how this can be a benefit not just to employees but to society in general.
Despite the comments made so far, there is a positive trend in the number of employees receiving the living wage. Research from Queen Mary university of London has shown that the total number has grown significantly during the last decade. The benefits of paying staff the living wage have been widely documented. Research shows that those working in organisations that are signed up to the living wage have better psychological well-being than those working for non-living wage employers. This research also found that two thirds of employees on the living wage reported improvements in their work, family life or finances.
Businesses have reported positive effects. London Economics found that 80% of employers noticed an increase in productivity. Further research revealed that employers reported improvements in staff retention and well-being. The Living Wage Foundation research found that 75% of employees reported increases in their work quality as a result of taking up the living wage. Also, half of employees felt that the living wage had made them more willing to implement changes in their working practices.
As many in the House will be aware, the Living Wage campaign began 15 years ago as Citizens UK. It felt there was a need to respond to the levels of deprivation being experienced by people despite the fact that they were in full-time work. Although record numbers of people are in work, the Low Pay Commission found that the majority of those in poverty had a job.
In 2010-11, the Living Wage Foundation was established to develop a system through which to recognise those employers who were paying their staff a living wage.
Accreditation is awarded to companies that pay the living wage to all directly employed staff and those regularly working on their premises.
In the private sector, provision of the living wage has become a key part of many organisations’ corporate social responsibility agendas and—dare I say it?—the social value agenda. I refer hon. Members to my private Member’s Bill—now the Public Services (Social Value) Act 2012—which Members across the House supported, and I pay tribute to the work it has achieved. In Monday’s edition of The Guardian—that shows how consensual I am being—an article by Matthew Jackson specifically referred to the potential use of that Act in encouraging the uptake of the living wage:
“The living wage should be embedded into the way councils commission and procure goods and services. Councils can link procurement to strategic priorities to address low pay. They can have contracts that state potential suppliers must pay the living wage and they can use the Social Value Act…to encourage and cajole suppliers.”
That is an idea well worth pursuing.
This week it was announced that more than 1,000 companies now pay their staff the living wage—another milestone—which is more than double the number at the same time last year. It is an impressive result, and one that I hope marks a tipping point and the beginning of a cultural change.
I am pleased to note that the living wage campaign has consistently enjoyed cross-party support. This Government believe that work is the surest way out of poverty, and I share that view, as does the Living Wage Foundation. Government Departments have signed up to pay the living wage and Whitehall is now leading the way. The Department for Work and Pensions and HM Treasury are two of the Departments doing that. However, there is still some discrepancy between the pay received by contract staff, particularly cleaners, within Government Departments. I would like to take this opportunity to call on all Departments to follow the example of those that pay their contract staff the London living wage.
At the meeting of the all-party group on poverty this morning, along with the Living Wage Foundation and Citizens UK, I was lucky enough to meet a young man called Nana-Ben, one of the cleaners at the Department for Transport. He is not paid the living wage, and he spoke very eloquently of the problems he suffers as a result. The fair point to be made, however, is that he is one of 45 cleaners employed by Amy Cleaning, a large corporation that provides services to the Government. Do not those companies, as well as Government Departments, need to look at what they are doing so that we can get the change we all wish to see?
I think that both parties have to work very closely on that. I believe that when contracts are being tendered there is certainly an opportunity that we should not miss. It is not right for either party to look for the lowest cost contract by excluding the living wage from the discussion.
I congratulate the hon. Gentleman on securing the debate. He is making an important point about Government Departments paying the living wage through agencies. It is also the case—I am finding this with private companies as well as the public sector—that those agencies can be paid an equivalent of more than the living wage, when their costs are combined. Is that not something that the Government and other commissioners should look at, because the companies are not getting a great deal, and neither are their employees?
I am grateful to the hon. Gentleman for that thoughtful intervention. If payment is made with the intention of paying staff the living wage, that increase should feed through directly to the employees. One reason for promoting this discussion today is to see how such employers can be embarrassed into making the right decisions for the people who work so hard doing these jobs, which sometimes we do not notice, but we would if they were not done. I pay tribute to all the people who work under these circumstances. Their tremendous work should be recognised.
Here in the House, the living wage is paid to staff. That is a leading example of doing the right thing, not least in my office, where an intern worked for me. He was paid the London living wage until I took him on on a full-time contract. He is probably watching this speech, and I congratulate him on his excellent work.
The living wage logo, which some of us, probably inappropriately, are wearing in the Chamber this afternoon, is a badge of honour for many employers. I am pleased to note that when, like me, they finally get the badge, a number of MPs have stated that they would be happy to support and promote it.
The best way to illustrate some of the positive impacts of the living wage is to highlight examples of employers and staff who have directly benefited from it. The Living Wage Foundation has compiled a list of employees and employers who have spoken of the benefits and the effective results that they have experienced through paying, and being paid, the living wage. Most employees speak of a reduction in stress and anxiety about financial pressures. Employers point out that paying a higher wage may attract better staff whom it rewards for their hard work. There is obviously ultimate value for their businesses as a whole.
I congratulate my hon. Friend on securing this debate. Does any of the evidence collected relate to very small businesses? In my constituency, a lot of small businesses would be keen to pay the living wage, but they are concerned about the impact on their very small profit margins. Does any of the research undertaken indicate a benefit for those smaller businesses in communities such as mine?
I will come to some of the data that have been provided by the Federation of Small Businesses, which paint a picture that is perhaps rosier than my hon. Friend might think.
I should like to recognise the organisations in my constituency that have been accredited as living wage employers: Alsters Kelly solicitors, St Margaret’s church in Whitnash, and Warwick Gates community church. I pay particular tribute to WAYC—the Warwickshire Association of Youth Clubs—of which I am a trustee.
I call on local authorities that are not accredited living wage employers to follow the example of many across the country that are. Too few local authorities have committed to paying their staff the living wage. This might seem a naive question to the Minister, but I wonder why some do and some do not. Local authorities that do not pay their staff a living wage should speak to those that do, and see at first hand the benefits that it can provide.
Take-up of the living wage has grown exponentially, but we need to think about how it can go further. We can achieve that by encouraging employers, sharing case studies and best practice, and generally promoting the benefits that I have stated. The voluntary nature of the living wage scheme is currently working well. At this stage, as we see the numbers increase, encouragement is perhaps a better start than compulsion. The Government are committed to raising the minimum wage and, through a provision in the Small Business, Enterprise and Employment Bill, cracking down on employers who are evading their statutory responsibilities by significantly increasing—from £5,000 to £20,000—fines for underpaying staff. I note that the Living Wage Foundation does not recommend the introduction of a statutory living wage on the basis that a strong minimum wage protects workers from exploitation. Instead, it seeks a position for the living wage as a voluntary, stretching target that employers can aspire to and on which they should be challenged, encouraged, and supported to achieve at a level beyond their statutory obligations.
I appreciate that it is not possible for all employers to pay a living wage. Its provision depends on many factors, including the size of the company. Some companies are in a position to take on the required increase in staff costs. Employers should not be unfairly criticised if they cannot afford to pay their staff the living wage. As the Institute of Directors has pointed out, we must be wary of stigmatising such companies. Nevertheless, as a general principle everyone should be able to share in economic growth. Employers who can afford to pay the living wage should be encouraged to do so. Perhaps the Minister can help with that.
Since the last election, businesses have created more than 2.1 million new jobs. Those businesses deserve our support and encouragement for their hard work and dedication in boosting our economy. Research by the FSB found that 77% of small firms pay all staff above the minimum wage and 53% pay them above the living wage. Another key statistic revealed by that research was that seven in 10 small firms expected to increase staff pay in 2014.
That brings me back to the purpose of this debate: the promotion of the living wage, which is good for employees, good for business and good for society. Businesses need to be encouraged, supported and shown the benefits. Let us have an ambitious target for the living wage next year. My final question to the Minister is: how can we encourage more employers to adopt the living wage so that many more can share in the proceeds of growth?
May I congratulate the hon. Member for Warwick and Leamington (Chris White) and the Backbench Business Committee on bringing this vital issue before the House in living wage week? It is right that this week we welcome the forward-looking approach of many employers across the United Kingdom who now pay the living wage and have more productive and happier work forces as a result. We should also pay tribute to the tireless work of living wage campaigners in the trade unions, the Churches, the growing number of food banks and in broader civic society in Scotland, in common with civic society right across the United Kingdom. They have never settled for second best and envisage a country where a decent day’s work is rewarded with a wage that can give people dignity and the chance of a better life.
It is not just in this country that the living wage movement is thriving. Although, sadly, the Democratic party suffered badly in the US mid-term elections this week, propositions for a big rise in the minimum wage were carried by voters in four traditionally Republican-voting states, meaning that a total of 14 states have this year adopted large rises in the minimum wage.
The low pay crisis, which this debate will shed new light on, means that the gap between the wealthiest and the working poor in our society is getting larger. That gap becomes a chasm when we consider what it means for child poverty. In my constituency, some 38% of children grow up in households that fall below the minimum acceptable income standards. I think of the mums who have to budget harder than any Chief Secretary to the Treasury ever will to buy new shoes for their children to wear to school. I think of the workers on completely unregulated zero-hours contracts, worrying about when they will be able to pay that heating bill which is still outstanding. I think of the mothers not able to get the child care that would mean taking a job that would leave them genuinely better off.
That picture of what poverty means for 5.3 million people in this country who are paid less than a living wage—the figure has risen by 150,000 in the past year alone—should spur all of us in this House to act. British workers are twice as likely as those in Switzerland and Belgium to earn below the low pay threshold. Wealth inequality in Britain has risen four times faster in the seven years after the financial crash compared with the seven years before it.
Low pay is not just crippling for social mobility or living standards; it is also terrible for our public finances. Some £21 billion was spent on tax credits to help 3 million working families with children in 2012-13, and the cost of in-work housing benefit claims doubled in real terms in the four years to this April. A low-pay economy is a symptom of a low-productivity, low-skilled economy. It is the young, female workers, those in lower skilled jobs, and part-time and hospitality workers who suffer most with that kind of economy, and that must change.
Across the country there are record levels of anxiety over poverty pay. According to the Joseph Rowntree Foundation, one in three people this year has said that low pay is the biggest issue affecting the country. Fewer than one in five voters expect to benefit from any increase in economic growth this year. As we know, the link between productivity and wage growth was broken some time ago and needs to be restored if we are to have a sustained rise in living standards over the next decade.
Sadly, it is no longer the case that the main route out of poverty is a job. Many people across the country juggle several part-time jobs but are still poor. Two-thirds of children in poverty are in households where someone is in work. Hourly pay is now a bigger predictor of the chance of being poor than hours worked. The Government must focus on taking a stronger approach to improving social mobility through our education and skills systems across these islands, taking action on the quality and security of the jobs created in the economy, but also being far more proactive in boosting pay rates through forward guidance on the minimum wage—as adopted by the Low Pay Commission—and expanding the coverage of the living wage to as many people as we can. We also need a combination of action through policies to boost pay, but with the support of the tax and social security system. Although rising pay cuts reliance on state top-ups of income and brings in more tax revenue, the right approach for working families on low incomes is rising pay supported by a strong tax credit system.
I am listening intently to the hon. Gentleman. Does he agree that no one on either Front Bench has been confident or assertive enough in spelling out what policies they can adopt to improve wages for low earners? Would he like more clarity from those on the Front Benches about what they will do with tax credits if people’s incomes rise?
The hon. Gentleman raises an interesting and important point. Before his intervention I was saying that we should consider the impact of such measures on a lone parent in work. If she were to take a low-paid job—perhaps just above the minimum wage—the tax credit system effectively gives her an average hourly rate of £13 to £14. If wages paid not just by public sector employers but by the private sector increase, the tax credit system will still have an important role in topping up people’s income, but reliance on the state will be somewhat less. That will relieve pressure on the taxpayer and lead to a more affordable social security system in the decades to come.
Does my hon. Friend accept that most people in this country do not pay taxes just to subsidise some fast food merchant or security company, and it is about time that we were better at getting that message across? When the centre right spoke a few years ago about “Broken Britain”—incidentally, I think the response from the centre left on that was inadequate—we forgot how such matters were dealt with on a corporate level, and we have to deal with that issue as well.
My hon. Friend is entirely correct. The proportion of company profits paid in wages has declined in the past 15 to 20 years, but it has declined particularly in the period since the financial crisis and in the four and a half years of this Government. Companies must be forward looking if they want to retain staff and if they want staff to develop. Employees want a job that becomes a career—they want progression in that firm or that profession. Paying higher wages benefits not just the employee, but the employer. Many countries are demonstrating that.
How can we act to end the low pay crisis? First, every level of government, whether a council, a devolved Government, a regional government in England through local enterprise partnerships, or central Government, should commit to using whatever policy levers they have to advance the living wage, to show an example to the private sector and the rest of society. It was therefore disappointing that the Scottish Government yesterday rejected the Labour party’s offer in the Scottish Parliament to extend further the use of the living wage through procurement policies. I hope they will reconsider. With 264,000 women in Scotland earning less than the living wage, it was wrong for the Scottish Government to reject that practical and helpful suggestion yesterday. The living wage is too big a prize for us to be deflected by partisan considerations. People expect all politicians to use every tool at our disposal to extend it to the widest possible number of people. I hope that devolved Governments, central Government and councils use those powers and achieve precisely that aim.
We know that Labour’s tribal hatred of the Scottish National party is part of Labour’s problem in Scotland, but does the hon. Gentleman not recognise that the Scottish Government pay the living wage to all public sector employees? They also have no compulsory redundancies. That is the SNP’s record. In government, the Labour party could not even match the minimum wage with inflation. That is Labour’s record.
The hon. Gentleman knows that the hand of friendship is always extended between Labour and Scottish National party Members. I have reiterated that to him on many an occasion. It is wonderful to see him in his place, but I gently point out that Labour Members strived and sat up night after night in order to introduce the minimum wage in the first place. All my Labour party colleagues in the Scottish Parliament were asking in their proposal yesterday was for the Scottish Government to do what the UK Department of Energy and Climate Change does. I would have thought that that was a commendable approach, and I hope the Scottish Government will decide to adopt it.
Secondly, the remit of the Low Pay Commission needs to be shifted from simply setting a floor for wages to examining scope for raising low pay across the board. Different models have been suggested. We could change the commission’s remit so that it offers forward guidance on the scale of future rises in the minimum wage, or, as Labour Members have suggested, we could peg the minimum wage to around 58% of median wages by 2020.
The third tool that I ask the Government and the House to consider is incentivising employers to move to the living wage using the tax system in those sectors of the economy in which that can be afforded. The evidence is that, when employers pay a living wage, they experience long-lasting benefits in productivity and reduced staff turnover. We should use all the levers of fiscal policy. We should see what tax concessions can be given to businesses if they start paying the living wage. We should pump prime the system. I believe that employers and employees will benefit.
The fourth way to solve the low pay crisis is by making the right investments in skills to ensure that people do not remain stuck in low-paid jobs for ever. Important research from the Resolution Foundation establishes that 80% of low-paid workers never escape from low-paid work. There is therefore a premium on government at all levels, whether the UK Government, the Scottish Government or local councils, using the whole range of their powers to have the skills revolution that is needed in the UK.
Never let anyone say that voting does not matter when there are families who can be helped by the Government, the Low Pay Commission and employers acting together to secure a decent pay rise for millions of people. Never let anyone say democracy does not count when by our actions the UK could become a living wage country by 2025, as the child poverty and social mobility commission recommended last month. Never let anyone say that the right to vote means nothing when it can help to deliver the right to more decent work that genuinely pays a living wage.
We know what has to be done to end the scourge of poverty pay in this country. The question is whether we have the determination to do it. In supporting the motion before the House today, I hope we can say we must and we will.
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.
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.
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—
Order. Perhaps I can give the hon. Gentleman some guidance about how limited the time is. We have to conclude the debate so that we can hear the wind-ups within 50 minutes. I currently have seven other speakers, so I am going to ask people to be disciplined, so that nobody is squeezed out. The hon. Gentleman might bear that in mind, given that he has already been speaking for 10 minutes.
I will take barely a minute more, Madam Deputy Speaker.
The living wage is a campaign that unites all faiths. It unites Christians, Muslims, Jews and those of other faiths, and quite rightly so. When this was first looked at, it was decided that it was an idea whose time had come. I cannot endorse that more strongly.
I thank the hon. Member for Hexham (Guy Opperman). I suggest to hon. Members that if each speaker takes approximately seven minutes, nobody will be squeezed out before the end of the debate. I am not going to impose a time limit; I am going to ask each Member to watch the clock—telling the time is not that difficult, really.
Thank you for calling me, Madam Deputy Speaker; I will be quick.
It is a pleasure to follow the hon. Member for Hexham (Guy Opperman), and I agree with a great deal of what he said. I congratulate the hon. Member for Warwick and Leamington (Chris White) on securing this debate. It is right that we should be debating this matter in living wage week. I launched my party’s policy on raising the minimum wage in line with the living wage in September, and Plaid Cymru was recently awarded living wage employer status.
The scale of the problem of low wages is, of course, enormous. The number of people on incomes below the living wage in Wales is 261,000, which is 24% of the population, as compared with 22% for the UK in general. Wales is just a little behind Northern Ireland, at 27%, the north-east of England, at 25%, and Yorkshire and the Humber, at 25%, and we are equal to the east midlands, at 24%. By contrast, 17% of the population in London live below the living wage, while in the south-east the figure is 18%. That means that the percentage in Wales is a third higher than in the most prosperous part of the UK. Among local authorities in Wales—I am sure the hon. Member for Ynys Môn (Albert Owen) will be interested in this—32% of the population of Conwy and Powys live below the living wage, which is nearly a third of the population, while the figure is 30% in Monmouthshire and 29% for Gwynedd, my local authority. That contrasts with Cardiff, where it is 18%, which is equal to the proportion in London and the south-east.
Around a quarter of people in Wales, and more in my constituency, are in low-paid work. Establishing the living wage would be a great benefit to them. [Interruption.] Pardon me for coughing. The UK rate of low pay, at 22%, is a scandal in one of the world’s wealthiest countries and points to the inequality of distribution of income across the UK. [Interruption.] Pardon me. The UK is one of the most unequal countries in the world, and certainly in the European Union. Gross value added per head in inner-London west is 12 times what it is in west Wales and the valleys. That is the scale of the contrast, but that unenviable pattern is also repeated within Wales. Rates of low pay in Cardiff are less than two thirds what they are in adjacent areas. There are areas close to Cardiff to which one can easily travel within less than an hour where a large proportion of people are on low pay.
I am being helpful by intervening on the hon. Gentleman, who may want a drink of water. He is quite right about periphery areas in the United Kingdom suffering from this problem. Does he agree that there should be a concentration of effort on the low-paid areas? One way for the Government to do that—I make an appeal that I have made regularly—is to move quality Government jobs to periphery areas to help to boost those economies.
I agree with the hon. Gentleman, but we also need to support small businesses, particularly in rural Wales, which are after all the engine of economic prosperity in such areas.
Some calculations—they are not mine, but those of the Social Mobility and Child Poverty Commission—have shown that the current proposals will not have a huge effect on the percentage of people on very low pay. I note that the Labour party has said that the minimum wage should be £8 by 2020, which is unambitious to say the least.
Raising the minimum wage so that it is in line with the living wage makes economic sense. The Treasury currently subsidises businesses for paying poverty wages by topping up wages with tax credits. The model of having very low wages topped up the Government is unsustainable in the long term, and we should try to move away from it. After all, if the minimum wage was raised to the level of the living wage, the Treasury would be better off by not having to pay tax credits. Landman Economics calculates that that amount would be £1.5 billion per annum. That money should be reinvested in support for further employment. On the basis of some of the figures I have seen, reinvesting that amount would—using a multiplier of 0.9—provide 2,475 new jobs in Wales. Paying the living wage would therefore save the Government money, and investing that money would create more jobs and higher tax receipts.
I said earlier that businesses, particularly small businesses, have concerns about the living wage, as they did before the introduction of the minimum wage. They are concerned that business costs will go up, and that employment will go down. In the worst-case scenarios in analyses that I have seen, 160,000 jobs might be lost across the UK, including 8,000 in Wales. However, we must see that in the context of the growth in private sector jobs during the past three and a half years of fairly sluggish growth. In Wales, we have had 100,000 extra jobs. We might lose 8,000 jobs, but that has to be seen in the context of the large growth in private sector jobs.
There are other answers, of which the most obvious is economic growth. The UK Government say that the UK economy is growing—in difficult circumstances, I concede—and I think that it is fair, in times of growth, for the working poor to be among the first to benefit. I strongly believe that the concerns of businesses need to be addressed. My party’s policy includes support for small businesses, including through business rate relief, and an increase in local public procurement. We reckon it would create about 50,000 jobs if local authorities bought more cleverly and more locally. We also want a business bank for Wales to ensure that lending is more effective, and a private sector-led industrial development authority.
I want to refer in passing to a policy that has been available for a long time. In 2008, ECOFIN decided it was permissible to reduce VAT in certain labour-intensive sectors. Small businesses such as tourism and the building industry in my constituency would certainly benefit from a reduction in VAT to the 5% level that is allowed. I will not pursue that point now, but it is clearly one answer to the problems that small businesses face.
Lastly, increasing the purchasing power of lower-paid workers would be very good for local businesses. If people have an increase in their wages, they tend to spend the money locally, and there is a multiplier effect when such money circulates and multiplies. Plaid’s focus is on a Welsh economic recovery driven by investment and the creation of jobs that pay enough for people to live on. We will certainly be fighting for that between now and May.
This is a great opportunity for me to support the Living Wage Foundation. I am grateful to my hon. Friend the Member for Warwick and Leamington (Chris White) for securing the debate, in which I want to make a few brief observations. I support the living wage, and I am thankful that one of my councils, Newark and Sherwood district council, has just become a living wage employer, which is a very good and progressive step.
I want to talk briefly about wages more generally and to make a few observations about conversations I have had with employers in my constituency since becoming an MP, drawing on my previous experience as a business man, growing up in a small business family. I have believed in the minimum wage for a long time—indeed, I believed in it before my party adopted it. In recent years, I have come to believe that the minimum wage is too low and that there is room in many sectors and many regions for it to grow to somewhere between the current minimum wage and the current living wage. Sadly, I do not believe that the living wage of £7.85 is doable for many businesses, particularly those in the midlands and the north—in areas such as the Nottinghamshire constituency that I represent—but there is room to bridge the gap. I hope that our Government and future Governments will work on that and become more ambitious than they have been before.
Secondly, it may not be a matter entirely for today, but I think this country has not only a low-wage issue; the primary issue is one of tax poverty. We have taxed the working poor too heavily for far too long, and reducing the taxation on current wage levels will provide a better standard of living. It may not be a standard of living to which many will aspire, but it is certainly a priority. This is not lost on the present Government, and I do not believe it is lost on the Opposition either. We have further to go along that route. If we can increase the tax allowances and improve the thresholds, we might be able to get all workers close to, if not quite at, the living wage. That should be a priority, as was said by my hon. Friend the Member for Hexham (Guy Opperman).
There is clearly a problem—I am not immune to it in my own constituency, although much of Newark is relatively affluent—with wages. Wages have been very slack for a long time, particularly in certain sectors and in the midlands and the north. Only yesterday, I met a group of manufacturers in the heating industry in my constituency, and they reported that there has been very little pressure on wages in recent years. Many businesses were offering a small rise in wages purely to keep their work force happy and motivated—not because of significant market forces.
It has to be said that the No. 1 reason mentioned by the employers I have met to explain why wages have been kept low is immigration, mostly from continental Europe. With that, of course, come benefits such as keeping our economy competitive and keeping businesses going during the recession, but it is the primary explanation of why wages are unacceptably low for so many in this country. It is a problem, and I am concerned about the long-term prospects of low-skilled or lower-skilled workers. It is difficult to come up with easy answers to how to increase the wages of the sort of workers I meet at some of the larger manufacturing businesses in my constituency.
That said, there is scope for many businesses, even in the midlands and the north, to increase wages. I have met manufacturing businesses and SMEs that want to offer the living wage, but find it slightly too high. However, they could accommodate, as I suggested, somewhere between the national minimum wage and the living wage.
I am delighted that Newark and Sherwood district council is supporting the introduction of the living wage for its employees. There is clearly a role for public sector contracts, and I met a number of businesses that want to see local authorities making decisions—where there is some discretion on price—to promote employers who pay better wages, be it the living wage or somewhere slightly below it. They want businesses that pay more than the national minimum wage to be respected. I have encountered a number of examples of companies in direct competition with each other, with one paying just the minimum wage without trying to go any further, and the other at least trying to go further, along the lines I suggested.
Finally, I want to make a broader cultural point. On the basis of my experience in a small manufacturing business, I certainly found that one of the biggest impediments to raising wages was the cultural difference between the shop floor and the office. I have met a number of employers in whose businesses it is accepted that manual labour or shop-floor work, even if it is skilled or semi-skilled, is somehow inferior to jobs in the office next door. For many companies, that is the biggest impediment to their raising the wages of their lowest-paid workers just a little bit, to the living wage or something close to it.
We all overstate the difference between office workers and managers and those on the shop floor. I suspect that that has become worse over the last 20 years as more of us who become managers in businesses have been to a university and have no experience of life on the shop floor. Many see it as being slightly inferior. We underestimate the value of the skills involved in manual and shop-floor work. As time goes by, those workers build up very valuable skills. There is room for many ambitious companies with some imagination to raise the pay of their workers who receive the lowest wages, without necessitating increases for everyone else in the business. The biggest fear of many employers is that raising the lowest wages will mean that everyone else’s wages will have to rise proportionately. Good, imaginative managers will be capable of carrying the work force with them, and convincing office-based and higher-income workers that it is right to recognise the skills and commitment of their lower-paid colleagues. Unions will have a role in promoting that, working closely with employers.
All of us, in politics and in wider society, should try to change the attitude that has grown up and end the division between people who are on the shop floor, doing important manual labour, and people in offices. That is a message we should all convey to businesses in our constituencies.
It is a pleasure to follow the thoughtful contribution from the hon. Member for Newark (Robert Jenrick).
I congratulate the hon. Member for Warwick and Leamington (Chris White) on securing the debate. Like other Members, I am pleased that we are able to engage in it during national living wage week. I also welcome research findings that were published earlier this week by KPMG, documenting the extent and scale of poverty pay across the United Kingdom. In-work poverty is one of the biggest challenges that we face, and the knock-on impacts of low pay are a major factor in rising levels of child poverty and growing inequality. A large number of people in my constituency work in low-paid jobs, so I read KPMG’s report with great interest. It states that about 414,000 workers in Scotland are currently paid less than the living wage—about 19% of the work force.
Just under two thirds of those people are women—an issue that needs to be much further to the fore in this debate. We cannot tackle the problem of low pay without understanding the reasons why women are significantly more likely than men to be earning less than the living wage. The report contains a paragraph that notes the gender differentials in relation to low pay, but it does not offer any detailed analysis. We know that there is still a substantial pay gap between women and men throughout the labour market, not just in low-paid occupations. Arguably, however, the consequences are more acute at the low-paid end of the income spectrum, and have more detrimental knock-on social impacts.
In my view, the disproportionate number of women who earn less than a living wage is only partly attributable to the greater number of women who work part time. It is also due to persistent tendencies towards occupational segregation in certain job sectors. Lower-paid jobs in, for instance, catering, cleaning and cashiering are disproportionately taken by women. Some of those jobs are also in sectors in which there has been a huge drift towards zero-hours contracts in recent years. It tends to be women who take on responsibility as primary carers for dependants, which can also limit their availability, mobility and flexibility at work. All that is before we even think about the under-employment of women in the work place. Obviously, the issue of gender inequality is much wider than the scope of today's debate, but it is clearly both a driver and a consequence of low pay, and we need to take it much more seriously.
Many low-paid workers are in the service sector, and the vast majority are in private sector jobs. Left to its own devices, the market tends not to ensure that those workers receive adequate wages. If the Government are really serious about ending poverty pay, they need to consider how they can move the minimum wage towards a living wage. Legislating for a minimum wage that actually reflects the cost of living, and actually makes work pay, is the single most important thing they could do to tackle the problems associated with low pay.
The truth is that the minimum wage has not risen in real terms in nearly a decade, and every year since 2008 it has failed to keep pace with the cost of living. Had it done so, those in minimum wage jobs would have been more than £600 a year better off. If the living wage rises in line with projected rises in the consumer prices index, it will reach £8.57 an hour by 2019. We need to be realistic about that and more ambitious in ensuring that the minimum wage genuinely makes work pay for people. Let us make no mistake: we have heard proposals in recent weeks from the Labour party about raising the minimum wage to £8 an hour by 2020, but that is a pretty feeble increase, which will leave millions of people in poverty pay, below the living wage.
I would like to see responsibility for employment policy, including the minimum wage, devolved to the Scottish Parliament as part of the Smith commission process. I therefore ask the Minister to outline the Government’s view on that in his response to the debate. The Scottish Government are the only Government in the UK who have made a living wage an integral part of their public sector pay policy. They have ensured a living wage of £7.65 an hour for all direct employees across all Departments, and during the recent years of pay restraint they have ensured a minimum pay rise of £300 for those earning less than £21,000 per annum. I welcome the news that this will rise to £7.85 an hour in next year’s pay awards, in line with this week’s announcement.
There was some discussion earlier about challenges in respect of contracts that Governments issue to other suppliers, and there are constraints from existing legislation in other areas, including EU law.
I respect what the hon. Lady’s party has done on this issue. In my local council, the Labour-Scottish National party administration together have adopted a living wage in Edinburgh. There are obviously legal arguments about what can be done, but the Scottish Government should do more on the issue of workers employed on contracts for which they are responsible. We have done something, but so far only 50 have actually improved. We must try to get agreement across the parties. A lot more needs to be done for these people, many of whom are among the lowest paid in the country.
I thank the hon. Gentleman for his intervention. Steps have been taken, and the launch of a fair work convention in Scotland in the last few weeks shows one way forward. On contracts, the Scottish Government have also at an early stage been encouraging procurement to take account not just of pay, but of other conditions. Councils that have faced the same legal constraints have been working to try to ensure this is built into contracts, and I believe some UK Government Departments, including the Department of Energy and Climate Change, have taken a similar approach in the absence of a mandatory process, trying to encourage suppliers to meet living wages for those workers.
Given that 93% of low paid workers are working for private sector employers, it is heartening to see increased numbers of employers signing up to the living wage accreditation scheme. In Scotland, the Poverty Alliance has been promoting take-up of the scheme and has succeeded in trebling the number of accredited employers over the last six months. However, there is scope for a lot more action on that front.
As has been said, there is a strong business case for private sector employers paying a living wage. As the authors of the KPMG report point out, the improvement in staff retention and morale associated with decent wages can easily outweigh any increase in the wage bill, and consequently can have a positive impact on productivity and help reduce business costs.
There is a fundamental dignity in having the living wage—a fair day’s pay for a fair day’s work. Conversely, something has gone very wrong in our economy when people who are working long hours in sometimes physically demanding jobs are simply not earning enough to support themselves or their children. The Government must explore how they can bring the minimum wage up to a more realistic level—towards a living wage—and we also need to tackle the underlying inequalities that perpetuate poverty pay.
It is a pleasure to follow the hon. Member for Banff and Buchan (Dr Whiteford), and may I join other Members in congratulating my hon. Friend the Member for Warwick and Leamington (Chris White) on securing this debate? Earlier today I was at a meeting of social enterprises in Birmingham, where people were also singing his praises, so he is having a very good day indeed.
This is an important—the living wage is important to my constituents in Bedford and Kempston—and timely debate because the wages of unskilled people in this country have been affected by the globalisation of our economy and have failed to keep pace with average earnings and, in many instances, with prices. The living wage is one of the useful tools that is now available to provide Governments and policy makers with insights into tackling that long-term trend.
Working tax credits and other elements of the general taxation system were introduced with the best of intentions to tackle the disparity in wages, but they have created unintended consequences of their own that need to be addressed. We now have a massive form of corporate welfare that provides disincentives to employers to increase wages. In some circumstances, it also creates disincentives for people to progress in their careers because what they gain in income can be lost through a reduction in benefits. The hon. Member for Banff and Buchan mentioned the complete lack of ambition on both sides of the House to tackle this pervasive issue. We are struggling to gee ourselves up to find policies that will attract people’s attention as well as being economically sound.
I fear that we shall hear the usual waffle from those on the two Front Benches today. I usually prefer the waffle from my own Front Bench, and the Minister for Skills and Equalities, my hon. Friend the Member for Grantham and Stamford (Nick Boles) is not known to be the most waffly of Ministers when it comes to speaking the truth. However, there is a tendency for policy makers to talk about the good stuff and not to look at the hard consequences of their actions. So I shall put some questions to my hon. Friend and to the right hon. Member for East Ham (Stephen Timms) in the hope that they will address them when they sum up. I hope that they can be honest about their policies in this area in the run-up to the election.
If we increase wages, it is highly likely that unemployment will increase as a result. If that were to happen, what amount of unemployment would those on the Front Benches be prepared to accept as they pursued a policy of increasing the wages of unskilled workers? The hon. Member for Glasgow North East (Mr Bain) talked earlier about how people look at the amount of money they have in their pocket at the end of each month. That comprises income, minus the bit that is taken out in taxes, plus the bit that is added on for tax credits. I have heard a number of hon. Members today trying to spend the same pound twice. They have claimed that the living wage would give people an increase in real wages while also helping to reduce the deficit because of the decrease in tax credits that would be required. Will my hon. Friend the Minister and the right hon. Member for East Ham make it clear what their mathematics are in this regard? How much would they be prepared to give in the form of an increased push on pay, and how much would they expect to recoup from that in the form of reduced benefits?
One of the most powerful ways of enhancing the living wage is to get local authorities to procure on the basis of contractors paying it. They need to be honest in their procurement to ensure that the employees providing the services they are contracting for can be paid the living wage. In this period of limited public expenditure, however, increasing the cost of providing such services while having the same budget will result in fewer services being provided. I again ask those on the two Front Benches what their honest policy would be on pushing local authorities to pay the living wage for the procurement of services. Would they be prepared to accept either an increase in expenditure or a cutting back of services?
We all want to provide employers with incentives to pay the living wage. As my hon. Friend the Member for Warwick and Leamington said, this wonderful campaign was started by Citizens UK, a fantastic organisation. The greatest difficulty is that, although we can roll out this policy in the public sector, it will need to bite in the private sector as well, and we have to be honest and admit that the fiscal tools that we have to incentivise private companies are quite limited. Labour party policy seems to involve a one-year hit that would bring forward reductions in employers’ national insurance contributions enabling them to pay the living wage in that year. Perhaps that would work, and perhaps not, but we do not have many tools. Again, I would be grateful if those on the two Front Benches could tell me what tools they are considering as they try to move more people on to the living wage. How will they persuade employers that that is a good thing to do?
On Monday, at the launch of living wage week in Birmingham, a young apprentice, Ben Jordan, walked up to the platform with a bounce in his step and a smile on his face, and told the story of what life was like on the minimum wage in his previous job and what life was now like on the living wage, working as an apprentice for Unity Trust bank. He said, “Before, I had to work seven days a week. I never had a weekend off. I struggled to see my friends or to go to see my football team. Now, I have a better standard of living and I’ve got time off at the weekend. I cannot tell you what that has meant for me.”
The event in Birmingham was remarkable and Citizens UK is a remarkable organisation; we had all the faiths and those of no faith. We had imams quoting from the Koran and Catholics quoting from the Bible, but everyone was making the moral case for the living wage. We had several of the 100 employers who have now signed up to the living wage; these are accredited employers in Birmingham, including the Witton Lodge Community Association, in my constituency. Crucially, the council is involved, including its deputy leader, Ian Ward. I am proud to say that the first thing the new council did in 2012 upon being elected to office was to introduce the living wage for all its directly employed employees. Subsequently, it introduced it for those working for schools and now ours is the first council in the country to insist that in future all contracts for care will be let on the living wage. As he has said, “Why is it that, historically, we have paid the least to those who care for those we value the most?” On Monday, we also saw an ambitious objective being set: 100 employers now is to become 1,000 employers this time next year. But we are an ambitious city and that is what we will achieve, not least because more and more employers are speaking out and saying, “This is right and it makes good business sense.”
In a previous debate on low pay, I referred to the fact that I am proud to have been a founder member of the drive for the living wage in London, working with what was then called TELCO—the East London Communities Organisation—and subsequently called London Citizens. I ran the union’s organising department. At first, we had 10 organisers—ultimately we had 12—who were cleaners themselves, and they were organising 4,000 cleaners in Canary Wharf and the City of London who were cleaning the boardrooms and toilets of those earning millions when they themselves were on the minimum wage. We also organised the cleaners of the House of Commons, and that led to the first strike in the history of the House of Commons, in order to win the living wage. I am delighted that now, under your leadership, Madam Deputy Speaker, and that of the Speaker, the House of Commons is an accredited living wage employer, so setting an example to the rest of the country.
Through that experience I saw at first hand just what life was like on the breadline. I met the cleaner who said, “I have to do three or four jobs from Canary Wharf. I sleep on the bus from one job to the next. I never see my kids.” I met the cleaner here in the House of Commons who, when we were going outside during the campaign to win the living wage, said, “I’d prefer not to, Jack.” When I asked why, he said, “I don’t want my community—my people—to know that I am but a minimum wage cleaner.” More recently, I sat down with three women in the Erdington food bank, two of whom were on the minimum wage. One said, “I am trying to bring my kids up. I work hard, day in, day out, but it is so tough for me because I am on the minimum wage. Jack, for me, it is not a life. I simply exist.”
The case for the living wage is overwhelming. I pay tribute to the hon. Member for Warwick and Leamington (Chris White) for initiating this debate, in which we have heard some thoughtful contributions from across the House, including those from the hon. Members for Newark (Robert Jenrick) and for Bedford (Richard Fuller). We need to make the argument with force. First, the living wage is right for the worker, as it is about dignity at work. Secondly, it is right for the worker’s family, because it is about giving the worker more time to spend with their family. Thirdly, it is right for the taxpayer. We have nearly 120,000 working poor in Birmingham who have to claim housing benefit to pay their rent, because they are on low wages. Fourthly, it is right for the local economy. Low-paid workers who earn more spend their money locally, and that helps to boost local economies. Fifthly, it is right for the employer. All my experience in the trade union movement tells me that the living wage reduces turnover, induces greater co-operation, facilitates greater productivity and reduces absenteeism. Some employers I have met have been initially reluctant to take on board the concept of a living wage, but when they have seen it work in practice, they have said, “The living wage is good for business.”
Action is necessary, not least in the city that I am proud to represent. One in three women in Erdington earns less than the living wage—in the midlands, the figure is one in four. But progress is now being made. It is how we drive it forward to the next stage. I welcome the Labour Front-Bench team’s proposals, which include not only incentivising employers to introduce the living wage but using public procurement power. It is crucial that we give a clear lead on the matter, because this is also about the kind of country that we wish to live in. Do we really want to live in a country where workers sleep on the bus between jobs and where workers never see their families? Those workers pay a very heavy price for existing on poverty pay.
In conclusion, let me pay tribute to those pioneers of the living wage—the remarkable people of TELCO, London Citizens and now Citizens UK—because they have served this nation well. Crucially, we want a great national will that says that we do not want to live in a country characterised by poverty pay. Our country best succeeds on the basis not of a low wage, low productivity economy but of a high wage, high productivity economy.
It is a great pleasure to follow the thoughtful speech of my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). I have known and worked with him for many years and know how hard he has fought for those on low wages throughout the country. I congratulate the hon. Member for Warwick and Leamington (Chris White) on the thoughtful way he opened this debate, and the Living Wage campaign on its work. This is the living wage week, which brings together a cross-section of employers, employees, campaigners and communities under the umbrella of Citizens UK.
Unfortunately, low pay and in-work poverty are rising. We all see it in our constituencies. There has been a squeeze on wages. With wages being held down and energy and fuel costs rising, many families are really struggling. As has been said, the next Labour Government will introduce incentive measures to help businesses introduce the living wage through make-work-pay contracts, which is a positive way forward. We need to go back to the pioneering days of 1997 when we as a Government introduced the minimum wage legislation. I raise this as someone who has been involved in low pay issues. Before I was elected to this House, I was a manager of a centre for the unemployed in an area of high unemployment. I saw at first hand how dignity was taken away from people and their families.
When the national minimum wage was first introduced in my area, more than 2,000 families saw their wages doubled. That liberated those people. They went from £1.80 an hour to £3.60 an hour—a huge increase.
I have many friends in small businesses, particularly in the catering industry. They were worried about the impact that this would have on their businesses. But they told me a short period afterwards that their staff who had received this increase in pay were spending more in their premises. There was already a big impact on the economy and unemployment did not go up. I am sorry to have to make some party political points about this, but as an activist I remember the debates in this House when it was said, as the hon. Member for Bedford (Richard Fuller) did, that there would be a huge rise in unemployment. The Leader of the House warned that the minimum wage would increase unemployment by a million. The opposite happened. Employment grew by 1 million, because the economy was stimulated. That economic stimulus has been lacking in the last few years.
Conservative Members have made thoughtful contributions, and I agreed with much of what they said. They talk about raising income tax thresholds, but at the same time they have increased VAT, which is a regressive tax. That disincentivised people from spending in the economy. Let us be honest, if we ask people on that threshold whether they want an adequate living wage so that they can pay income tax to contribute to the welfare state and to services for their families and communities, or to be held down, not paying tax, we know that the answer will be that they want to contribute and pay income tax into a better community and a better society.
We have heard jibes—the hon. Member for Arfon (Hywel Williams) is not here—about Labour lacking ambition. Again, I have to say that when the minimum wage legislation was going through the House, it was not the nationalists who did the heavy lifting. They were absent. I was a candidate at that time and an activist, and in my constituency, Plaid Cymru was saying one thing to the small businesses and another to the trade unions. We have to be brave and bold to lift people out of poverty. The incoming Labour Government set that direction. They raised the minimum wage as part of a suite of measures to encourage businesses and local authorities to do likewise and to pay the living wage throughout the country.
Authorities have to take the lead, and Labour authorities are beginning to do so. For example, Islington and York, which I visit, have living wage zones. This is real action, and the local authorities encourage that. Shop windows in those zones are proud to display the badge worn by many hon. Members today. I do not see many badges in the window saying, “I don’t pay the living wage.” The living wage instils competition and good will, and other businesses follow suit.
I am pleased that my hon. Friend mentioned Islington. My borough council has been assertive in ensuring that all suppliers and contractors pay the living wage, and that has now been achieved in the domiciliary care services and it has a knock-on effect in the wider community. It is a great achievement and I thank my hon. Friend for mentioning it.
I was going to mention only York, but I saw my hon. Friend so I added Islington to the list, having done my research beforehand. He is absolutely right. We all want to incentivise companies to do this. Small businesses do have fears, but we must allay those and give them help.
The tax credit system worked. It became cumbersome and technical and there were problems with it, but it was there to help people into work. At the end of the day, if we want to restore dignity to people throughout the UK, we need a higher living wage for people. In areas, such as my own, on the periphery, the Government have a role. As part of real devolution they can move jobs out. We talk about academic devolution, but real devolution is the Government, where they have a role, moving jobs and paying high wages so that others will follow suit. We will then have less in-work poverty, greater decency and a better society. A living wage improves the country that we are proud to live in.
I congratulate the hon. Member for Warwick and Leamington (Chris White) on securing this very good debate. There will be Members of the House who, like me, grew up in a home in low pay, by which I mean that there were moments when we did not have 50p for the meter—utilities in homes like ours were metered back in the ’70s and ’80s—so the electricity went off and we lit a candle. It was not always clear that the fridge would be full. I remember at age 12, when my father left our home, focusing on my mother’s salary, which was just above £12,000 at the time, and realising that it would be a struggle to survive on that amount. That was in the mid-1980s, and here we are in 2014.
We are talking about the prospect of a good life, not being wealthy or having lots of money, and about people doing typical jobs, so not just cleaners and security guards, but secretaries and people working in shops. Those are the kinds of jobs for which the call for a living wage has become hugely important and desperately needed in our country. I remember when the cleaners who worked in my local college came to see me. They were women who looked like my mother, and they were pleading with me to help them retain their jobs because the college had said that in order to increase their pay to the living wage, which was their demand, it would have to cut their hours to such an extent that they would be working only 32 weeks a year. Those women did not know how they would survive. Because of the fight along with the GMB union, we got them the living wage.
I also think of the paradox in my constituency of a premiership football club that spent £103 million on new players after Gareth Bale left last summer but still cannot manage to pay its bar staff, caterers, security guards and cleaners the living wage. I do not want to single out my local club, because that is true of the entire premiership, in which we see millions of pounds spent week after week, and in which some players can earn as much in two hours as someone on the living wage earns in a whole year. That is the country in which we are living in 2014. Frankly, it shames our nation that we are having this debate so long after the birth of the welfare state.
In these times we must recognise—Opposition Members, too, must recognise this—that it cannot be right that in our last year in office we were spending £21.5 billion on housing benefit. Why should British taxpayers top up the incomes of people living in homes when surely it is British employers who should be paying that sum? This is a profound debate that has begun in relation to a living wage, but it also cuts to much bigger questions about the kind of society we live in, and the kind of society that we must surely become, in this first part of the 21st century.
Linked to that is the reason why there are people in Britain who increasingly want to travel off to fringe political interests, because when politicians use phrases such as “affordable housing”, they do not see housing that is in any sense affordable. In Kingston and Richmond, here in London, rents have gone up 40% in two years. In my borough of Haringey they have gone up by 20% in two years. The idea that £1,400 a month is affordable is a joke to most families in this city. It takes the lion’s share of the little money that they have. Of course, it is spent in another way, because these parents, as my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) highlighted, are unable to spend time with their children. As a consequence, many children are raising themselves in their homes, with all the disastrous outcomes that can meet them along the way. Paying the living wage is therefore essential.
This also speaks to the nature of our economy. Here in London, 88% of the economy is in the service sector. The phrase, “the service sector”, sounds kind of nice when we say it, but when we peel it back we see that a smaller and smaller proportion is in the public sector. It is shrinking because of cuts to local government and the health service—the public services that we all recognise. The lion’s share of the service sector is retail. Lots of folk are trapped in jobs that not only do not pay well but do not allow them to be clear about their journey to a job that can pay well. I grew up in a house where my mother made that journey—her salary went from up £12,000 to the £20,000s over a 15-year period. I am very grateful to Unison for helping her with the early Unionlearn schemes and to the shop stewards who pushed her by saying “Rose, you can do better by these kids—you can move on.” I remember the City and Guilds certificate on our wall. Indeed, I have still got it somewhere in the loft; I will have to dig it out after this debate.
Skills are essential. Yet when we look across the country at further education and listen to debates on it in this House, it is predominantly about young people. Where are the night schools? Where are the FE colleges that are open at 10, 11 or 12 o’clock at night when ordinary working people can skill up in that way? Is it simply that these jobs have left our economy because that is the nature of the hourglass economy? Yes, we call for a living wage because it is essential, but we must also ask profound questions about why our economy seems to be leaving so many people in work but in poverty.
London has the biggest inequality of all the regions of the country. This city has 640,000 families on low pay. That is a major challenge to its future prospects that we will surely need to do something about over the coming years, and we can do it only if we ask challenging questions about the economy. Over the coming months and years, we must push employers hard and firmly to meet their obligations on a living wage. We must see many, many more join this fight.
I applaud Citizens UK for all its work. I applaud the unions, the Churches and the faith communities for pushing and pressing for more. However, we in this House will have to heed what the public are telling us if we do not want to see fringe parties occupying this debate with a very simple message: “Blame it on the immigrants; we’ll solve the problem by pulling out of Europe.” I wish it really were that simple. The problems are deep and profound, and we must meet this need as quickly as possible.
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.
It is a pleasure to reply on behalf of the Government to this thoughtful and interesting debate. I congratulate my hon. Friend the Member for Warwick and Leamington (Chris White) not only on securing this debate during living wage week, but on his work, month in, month out, as deputy chair of the all-party group on poverty.
This has been an exemplary Backbench Business Committee debate. It has been polite, well researched, thoughtful and subtle, except when we were subjected to the ritual of Labour Members and nationalist party Members from other nations in our fine Union taking lumps out of one another. That is always a source of light relief for Government Members, so I make no objection.
It is fair to say that there is not a single Member of the House who does not want everyone in the country to command at least the living wage for their work. We share that goal, so the questions that we have debated so well today are how we get there, and how we ensure that the steps we take make progress and do not put at risk everything we have achieved.
We must remember that this country and economy were subjected to the most appalling shock. We lost 6% of our GDP as a result of the financial crash and the great recession that followed. The Low Pay Commission has not been able to recommend significant increases in the minimum wage until this year—it is important for me to say to the hon. Member for Banff and Buchan (Dr Whiteford) that this year the increase was higher than the average increase in wages, but she is right that this is the first time for a few years that that has been possible. The Low Pay Commission has been unable to make such a recommendation until this year because of the weakness of the economy and the massive increase in unemployment.
Fortunately, that situation has improved—it is by no means perfect, but it has improved. We have a strong and stable growing economy. This economy has created 2 million jobs. In the past year, we have seen the largest fall in unemployment ever. I say that not just to blow the Government’s trumpet, as Ministers always do—a little trumpet blowing is part of the job—but because nothing makes a better backdrop for achieving sustainable increases in the minimum wage and the living wage than a stably growing economy that creates employment.
Once a person is in a job, it is far more likely that they will be able to secure increases in wages than if they are receiving unemployment benefit—it is much less likely that someone can go to an employer and say, “I do not want that job at that wage,” and persuade them to increase the wage. If someone is in a job and has worked well for a number of months, and if the employer looks around and sees that there are not quite so many people eager for that job, the ability of every employee and the unions who represent them to secure sustainable increases in wages is far greater. The most important thing, therefore, is a strong and stable economy that creates jobs.
The second most important thing is for those who can afford to pay more than the minimum wage to lead the way and set an example. Many hon. Members have mentioned the role of the Government, Departments, local authorities and major businesses in our economy. Others mentioned examples of businesses that can afford to pay more than the minimum wage and should, and that perhaps should know better, not least the premiership football clubs mentioned so eloquently by the right hon. Member for Tottenham (Mr Lammy).
I make no pretence that I had anything to do with this because I have only recently been appointed, but I am delighted to be able to say that the two Departments in which I am a Minister—the Department for Education and the Department for Business, Innovation and Skills—are living wage payers for all their direct employees. That is important. The Department for Education also ensures that agency workers are paid more than the living wage. However, as hon. Members have pointed out, under some contracts—often cleaning or security contracts—we cannot guarantee that everybody receives more than the living wage.
We need to work on that, but we should not fool ourselves by thinking there is a simple lever we can pull. I believe almost any contract, if it is thought about intelligently, can be reconfigured in such a way that an equivalent level of service can be achieved without increasing the number of people employed, and that therefore productivity improvements can be sought that will make it possible for a contractor to pay a very slightly higher wage. I therefore do not believe there is necessarily a choice between lower service from contractors or lower wages. It is possible to maintain or even improve services and pay better wages, but it is not simple and it is not easy. The way to do it is by working with one’s contractors, explaining to them one’s hopes, ambitions and aspirations and hearing from them other ways we can perhaps change our demands as employers and contract letters, so that they can afford to pay those wages.
We heard examples from many hon. Members, not least my hon. Friend the Member for Hexham (Guy Opperman), of major companies that found a striking improvement in their ability to motivate and retain staff after they agreed to pay them the living wage. It is fantastic that companies such as KPMG and Costco are now willing to come out on the record and say that this is their experience. It is, however, very important that we understand that those companies may be in a position where they can do that, and that not every small and medium-sized business in the country is in that situation. It is through argument and example that the case is best made, not by imposition. That is why the Low Pay Commission does not believe that imposing a living wage, or making the national minimum wage rise to the level of the living wage, would be sensible.
Finally, before I give my hon. Friend the Member for Warwick and Leamington a chance to sum up, it is important for us to be very careful about what we say about the minimum wage and how increases are projected or promised. One of the reasons that the fears raised by my party on the minimum wage were not realised—Members were right to say that it was very controversial when it was introduced—and why most business groups in the country now support the national minimum wage is the way it has been constructed. The Government submit evidence to the Low Pay Commission, which produces recommendations, and the Government normally follow those recommendations. It is very important that we stick with that approach and do not start imposing on the Low Pay Commission politically driven expectations that cannot be delivered in our economy.
This debate has been about the promotion of the living wage, and thanks to the contributions from both sides of the House, we have very much had that debate. I am grateful to Members who shared their experience and supported the development of this very important discussion. We have heard evidence of how important and good the living wage is for individuals, businesses and society. I think we all realise that we need to go further. It is important to remind ourselves that this is not just about living wage week; we need to be discussing and thinking about the living wage all year round. To all Members who took part, thank you very much indeed.
Question put and agreed to.
That this House has considered promotion of the living wage.