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Destitution: Low Median Wage

Volume 834: debated on Thursday 23 November 2023


Asked by

To ask His Majesty’s Government what steps they intend to take to address the UK’s low median wage and its contribution to the level of destitution presently under consideration by the UN Special Rapporteur on Extreme Poverty and Human Rights.

My Lords, boosting economic growth is the only sustainable way to increase wages. This Government have overseen significant falls in poverty since 2009-10, with 1.7 million fewer people in absolute poverty after housing costs. Supported by the national living wage, the proportion of low-paid jobs fell to 8.9% in 2023, from 21.3% in 2010.

I thank the Minister for her Answer. While extortionate price increases have recently moderated, the real value of wages has been static since 2007—a nominal 6.2% increase in median wages last year translated into a 1.2% drop in their real value, according to the ONS. Half the working population earns less than £29,600. The Joseph Rowntree Foundation reports that 19.2 million people live below the minimum required to be warm, dry, clean and fed, with 3.8 million in destitution. The increase in the national minimum wage still leaves it, in real terms, no higher than it was 20 years ago. Wages need to rise. Only extensive collective bargaining can achieve that. Will the Minister make that happen?

I fundamentally disagree that collective bargaining will be the way to lift wages; I believe that economic growth will be the way to lift wages. What I would like to say—and I would criticise this Government and previous Governments for not making the most of this—is that, when we look at the national living wage, the increases we made yesterday mean that, next year, someone working full time on the national living wage will see their real after-tax take-home pay go up by 30% since 2010. I think that is a very significant achievement.

My Lords, I welcome the noble Baroness to her new spokesperson role. The Chancellor was very pleased to pull the reduction in national insurance from his chancellorial hat at the end of his speech, and has been going around touting that very much. There is one statistic that I hope the noble Baroness can help me with. The Resolution Foundation notes that the top fifth of earners will receive five times the benefit from that cut than the bottom fifth of earners. Can she confirm that statistic?

What we did yesterday—and we were absolutely clear about this—was to reward workers. It is critical that we reduce work-related taxes, because by doing so we increase the number of hours worked, which will lift the number of full-time equivalents by 94,000. We think that the cut yesterday was absolutely the right thing to do.

My Lords, we on these Benches welcome a number of aspects of the announcements yesterday in the Autumn Statement, not least the rises in the living wage and in pensions. There is an issue, though, over structural pay gaps which hide even greater disparities: pay gaps to do with gender, disability, social mobility and regional disparities, which are vital as we think about our levelling-up strategy. Can the Minister give us some indication of how the Government hope to address those structural pay differentials and gaps?

What we are trying to do here is boost the entire economy by ensuring that everybody has good work. It is the case that, between the Spring Budget of 2023 and the package that we announced yesterday, there will be more than 200,000 more jobs, but what we are also trying to do is boost the economy in general such that those jobs are well paid. The right reverend Prelate mentioned those who might be sick or disabled. Again, we have to support those people back to work when they can, because we know that work is the best way out of poverty; it can have social and health benefits. At the moment, there are 2.4 million claimants of incapacity benefit, and that has gone up by 700,000 since May 2019. I cannot believe that the nation is getting significantly more sick, and we need to help those people back to work.

Does the Minister agree that there are actually an enormous number of people in this country who are the working poor? I was with a whole group of them last week—with the King—who are out there trying to get food. They are trying to get food because, whatever the Government are doing, they seem to be a bit tinkering and not profound in their commitment to end a low-wage economy.

This Government are absolutely committed to ending a low-wage economy, and that is why we have just introduced the largest ever rise in the national living wage. Also, it is not just about the national living wage; I absolutely accept that there will be people who are living on benefits—that may be for a temporary period—and that is why we uprated benefits by 6.7%, which was the September CPI, versus a forecast inflation rate next year of 3.1%, so people will see more pounds in their pocket.

My Lords, should we not express the hope that yesterday’s measures will represent a real turning point in the economic life of our country, opening the way for sustained growth and greater prosperity for all our people?

I absolutely agree with my noble friend. It is an absolute turning point. It is about the long-term decisions that have to be made, and that is about investing not only in businesses but also in our people. From a business perspective, the full expensing has been widely welcomed across the economy. It will add an extra £3 billion of new investment. We already have the lowest corporation tax in the G7 and now, with full expensing, that will bring in the investments that my noble friend Lord Johnson really needs to see.

My Lords, I join others in again welcoming the noble Baroness to her new role. Yesterday’s Autumn Statement saw growth down and inflation up every year for the next three years, debt rising every year for the next three years and the tax burden rising every year for the next five years, making this the biggest tax raising Parliament ever. Even after yesterday’s announcements, households are £1,900 worse off. Against this backdrop, what advice does the Minister have for the 11 million people with barely any savings as they now try to withstand the biggest ever fall in living standards since records began?

Yesterday did bring out some very important statistics, as indeed has the entire year. The noble Lord will know that, in terms of growth, it is true that the forecasts have been revised down. However, the actual assessment of the size of the economy has been revised up; indeed, it has been revised up by 2%, which is an enormous amount—that is the equivalent of the aerospace industry. On inflation, the OBR was absolutely clear that the discretionary fiscal policy measures introduced in the Autumn Statement do not have a material impact on the path of inflation. We have already halved inflation and by 2025 it will be at 2%. On tax, the noble Lord may have forgotten, but this Government intervened enormously during Covid, including £400 billion to support lives and livelihoods and, in our support for cost of living, £100 billion to support households through some very difficult economic shocks. Those things have to be paid for, but the things we introduced yesterday in terms of tax brought down the tax burden by 0.7%.

My Lords, I think that in answer to an earlier question the noble Baroness said that the reduction in national insurance rates would mean that people work longer hours. What evidence does she have to support that assertion?

It is the case that of course those are assessments made by people far cleverer than me, within the OBR and the Treasury, but that is the analysis. Of course, people will be able to choose whether they work longer hours, but the simple point is that if somebody does work longer hours, they get more pounds in their pocket, so it is not beyond the wit of man to understand that they might want to do more hours.

My Lords, as we advance into winter, will everything possible be done to assist those charities who are doing everything they can to get people off the streets and into proper accommodation? Can my noble friend give the House an absolute assurance that those who provide tents will not be fined for doing so?

This Government have a laser-like focus on homelessness and, of course nobody wishes for anybody to be homeless. That is why we have a range of cost of living payments which are yet to be paid: 8 million households on means-tested benefits will get two £300 payments in autumn and in spring; pensioners will get their £300 in the winter; and of course 6 million people on disability benefits will receive an additional £150.