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Living Wage

Volume 749: debated on Wednesday 6 November 2013


Asked by

To ask Her Majesty’s Government what steps they are taking to promote the adoption of the new rate of the living wage.

My Lords, the Government support the living wage and encourage businesses to pay it when it is affordable and not at the expense of jobs. We recognise that these are challenging times. We applaud companies that have chosen to pay higher wages. We too are concerned with low pay. That is why we have frozen council tax, cancelled the rise in fuel duty, and by 2014-15 will have taken 2.7 million people out of income tax altogether.

My Lords, the living wage is good for the country in terms of wealth creation and saving money on welfare bills; it is good for business, as KPMG and the Resolution Foundation have observed; and it is clearly good for individuals who have been hit by the cost of living crisis, some of whom have had to resort to food banks. Do the Government have any understanding of the number of people regularly using food banks who are in full and part-time work? If not, what plans do the Government have to collect this information?

We see that the right way forward—the only way forward—to achieve sustainable increases in living standards is through focusing on economic growth and employment. This is exactly what the Government are doing, with a particular focus on SMEs. As we know, 99% of all businesses are SMEs, with 14.4 million employees. With changes to the tax allowance, low-wage workers who have been squeezed through inflation and low earnings growth can take home much more of their income. We have taken 25 million people out of income tax; they have had a cut.

My Lords, does my noble friend agree that surely the first priority is to ensure that the minimum wage level is properly implemented across the whole United Kingdom; and that, secondly, the threshold at which anybody in this country pays tax should rise? It is to the credit of Her Majesty’s Government that the Chancellor has enabled that level to be raised in each of the last few budgets. On top of that, does my noble friend recognise that the dreadful situation that we inherited from the Labour Government—

Noble Lords can say what they like over there. We were told by one of their senior Ministers that the cupboard was bare. It is only my right honourable friend the Chancellor’s policies that have ensured we get the growth that we are beginning to get now. As I understand it from my noble friend—

No, I am sorry; you have to listen to this. As I understand it, my noble friend is quite clear: the benefits of the growth that we establish will be for all sections of society.

My noble friend has made some strong and passionate points and I agree with the gist. However, I should say that our key policy is to support the low-paid through the national minimum wage. It is set at a level that helps as many low-paid workers as possible, but without damaging their employment prospects. My right honourable friend Vince Cable has asked the Low Pay Commission to look at what economic conditions would be needed to allow the national minimum wage to rise in the future by more than current conditions allow, without having an adverse impact on jobs.

My Lords, I am sure that the noble Viscount is aware of the benefits that the living wage have already demonstrated. He referred specifically to SMEs in his response. I advise him that many SMEs, particularly those in the engineering and technical sectors, already pay well above the minimum wage. They feel that it is the right way forward because they benefit from the commitment of their employees.

The noble Baroness makes a good point. Unlike the national minimum wage, which aims to maximise support for the low-paid without damaging their employment prospects, the living wage is derived from an assessment of households’ living standards. Although that is important, it focuses on household expenditure rather than the income and affordability of companies.

My Lords, does the Minister accept the recently published findings of the Resolution Foundation in relation to a minimum living wage? Its contention is that if a payment of £8.80 per hour in the London area or £7.65 per hour outside London were made to all public workers, there would be a net saving to the public purse of no less than £2 billion per annum? Do the Government accept those figures? Have they made their own calculations, and if not will they now do so and publish them?

I remind the House that the living wage is a voluntary rate of pay, above the national minimum wage, proposed by the Living Wage Foundation. It is very much up to employers and employees through their contracts to decide what the rate of pay should be. However, I note the noble Lord’s point.

My Lords, does the Minister agree with the Mayor of London, Boris Johnson, who said only on Monday that more employers in the capital were recognising the benefits of the living wage for their workforces by specifically helping low-paid families to make ends meet, as well as promoting economic dividends for employers and boosting growth and productivity? Does the Minister share the mayor’s wish to spur more employers on to do the right thing?

I certainly share that wish and the mayor has made his views clear. I said earlier that I also applaud what companies are doing, provided that they can afford it. But to help households manage the costs of their bills—I have said already that I recognise that there is a squeeze on them—this Government have already frozen council tax and cancelled the rise in the fuel duty escalator. We are encouraging competition and that consumers switch to get the best deals. Moreover, advice is available from citizens advice bureaux and the Money Advice Service.

My Lords, does my noble friend accept that the first priority of a business is to stay profitable and in business if it is to employ anyone at all? It would be a bit odd if the wages paid to a worker were based not on his value to the business, but on his various commitments and obligations. Surely that cannot be right.

It is certainly true that businesses, particularly small and medium-sized ones, need to decide whether they should increase pay from the national minimum wage to the living wage, but it is very much up to them. Certainly there has been quite a lot of negative media coverage about the Labour Party’s policy, in that small and medium-sized businesses felt that they would not be able to take more people on if they decided to increase pay from the minimum wage to the living wage.