As a courtesy, I might mention to the House that the motion was to be moved by the hon. Member for Mitcham and Morden (Siobhain McDonagh). Unfortunately, she sustained an injury and had to go to hospital and was not, despite her willingness, allowed to be available to move the motion today. In the circumstances, I am sure colleagues will agree that is perfectly fitting and right that the motion should be moved instead by the right hon. Member for Enfield North (Joan Ryan), her good friend and colleague.
I beg to move,
That this House agrees with the Chancellor of the Exchequer that Britain deserves a pay rise and commends his introduction of the national living wage; notes, however, that some employers are cutting overall remuneration packages to offset the cost of its introduction, leaving thousands of low-paid employees significantly worse off; and calls, therefore, on the Government to guarantee that no worker will be worse off as a result of the introduction of the national living wage.
My hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) has been campaigning tirelessly on the implementation of the national living wage, and has been fighting for all workers to truly benefit from the new proposals. Unfortunately, as Mr Speaker said, she is in hospital and cannot be with us today. I am sure that Members from across the House will join me in wishing her a speedy recovery. [Hon. Members: “Hear, hear.”] I have spoken to her today, and she is on the road to recovery. I understand that she will be listening and possibly watching our proceedings.
I had intended to speak in support of my great friend and colleague’s work, but I am proud to be a signatory to the motion, and I am honoured to have been asked to present her speech and lead this important debate on her behalf. She is delighted that the debate can go ahead without her. She thanks the Backbench Business Committee for granting time for the debate, and the Speaker’s Office and the Table Office for allowing me to lead the debate on her behalf.
When my hon. Friend made her application to the Backbench Business Committee, she had no idea just how huge the issue would be. It all started a few months ago, when a friend of hers approached her with his payslip from B&Q. He said, “Siobhain, B&Q has given me new terms and conditions, which it says I have to sign or I’ll lose my job. It is cutting back my Sunday and bank holiday pay, as well as my summer and winter bonuses. I think I might have my pay reduced.” How right he was. Indeed, my hon. Friend was shocked when she calculated that he would lose up to £50 a week, or about £2,600 a year. The saddest thing was that this was happening after his basic pay had been increased by the introduction of the national living wage. To be clear, this was a pay cut after the Chancellor guaranteed that Britain was getting a pay rise.
After raising the matter at Prime Minister’s questions—frankly, the Prime Minister did not have much of an answer for her—my hon. Friend started receiving dozens of emails from B&Q employees from around the country. From Exeter to Aberdeen, she was contacted by staff at all levels and from all walks of life who would also lose out.
I pass on my best wishes to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh), who has done tireless work on this issue. Does my right hon. Friend share my concern about the fact that, as I have heard myself, because of the differential whereby under-25s are not eligible for the living wage, others are losing out on overtime and other hours, which are given to younger workers who can be paid less? Not only are younger workers losing out because they are paid less, but other people are not getting the overtime or extra hours that they might have thought they would.
My hon. Friend makes a valid point. This is a double whammy for some workers; not only are they losing out because their employers are altering their terms and conditions, but they are losing these valuable other hours. Many of these workers absolutely depend on being able to work extra hours and overtime.
B&Q, like so many companies nationwide, has made all employees sign new terms and conditions under a variation of contract. Those new terms scrapped double time for Sundays and bank holidays, as well as seasonal bonuses and other allowances that staff relied on to top up their income. These pay cuts were much greater than the gains of the national living wage, which is why so many employees are losing out.
Would my right hon. Friend think it a good idea for the UK Government to make a register of the companies that have undertaken such action, and bring them to a round-table meeting to explain that the purpose of the living wage was to improve, not reduce, people’s expenditure power?
I would indeed. Part of what we are doing today is asking the Government and the Chancellor to address these issues. There are strengthened penalties for employers who do not pay the national living wage, but I suggest that alongside those should go penalties for employers who deliberately circumvent the national living wage in this way.
My hon. Friend the Member for Mitcham and Morden was grateful for the fact that her speech during the Budget debate last month offered a great platform to get this issue the recognition it deserves. She was especially grateful for the interest shown by the Minister for Small Business, Industry and Enterprise, which doubtless brought further attention to this issue, and I am pleased to see her here. My hon. Friend’s speech highlighted how illogical and unfair it was to claim that Britain was getting a pay rise while hard-working employees across the country were being hit by such pay cuts. She reminded the Government that the week before, the Prime Minister and the Chancellor had been unwilling to promise that nobody who works on the shop floor would be taking home less money after 1 April. Last year, the Chancellor said he was committed to a higher-wage economy. He said:
“It cannot be right that we go on asking taxpayers to subsidise…the businesses who pay the lowest wages.”
He promised that the change would have only a “‘fractional’ effect on jobs”, and that the cost to business would be
“just 1% of corporate profits.”—[Official Report, 8 July 2015; Vol. 598, c. 337 to 338.]
That was a cost he offset with a cut to corporation tax.
I congratulate my right hon. Friend on this opening speech, and on the way in which she is making it. May I raise the issue of care providers? The care sector is faced with a bill of £330 million for implementing this legislation—this is money that the Government have not provided—and I hope to be called today so that I can talk about the impact the change is having on wages and conditions there.
That is a crucial point, because the cost to business is offset by the reduction in corporation tax, and smaller businesses will also benefit from increased business rate relief and higher national insurance allowances. In terms of care homes, there is also a significant impact on local authorities, and that has not been taken into account.
I should declare an interest as a councillor in the London borough of Redbridge. The Local Government Association and others have estimated that the amount put aside through tax increases—through the new social care levy—will barely cover the cost to local authorities of providing the living wage, as they should. This is once more a Government pledge being delivered through stealth tax rises, with the buck passed to local authorities.
I could not in any way disagree with my hon. Friend, and as ever, it is the most vulnerable and the needy who suffer the most.
Companies such as B&Q use the introduction of the national living wage to “reform their pay and reward structures”, as they put it. That is a euphemism for cutting staff pay. My hon. Friend the Member for Mitcham and Morden received a rather panicky email from B&Q requesting a meeting to clear things up. Indeed, B&Q’s chief executive officer and its head of human resources were eager to convey how much they appreciated their staff and how generous the reward package was. At the same time as my hon. Friend’s meeting with them, they announced that they would extend by an extra 12 months the period of compensation for those staff members who were going to lose out—an increase from 12 to 24 months. Of course that was because of the reputational pressure that B&Q was under. Although that is definitely a good step forward, achieved because of the considerable public pressure, lots of questions remain unanswered. What will happen to these employees after 24 months? Does B&Q hope that we will forget about the issue and quietly let these long-serving staff members lose out? Will it review its pay structures to guarantee that staff receive the pay they deserve?
Does my right hon. Friend think that the Chancellor’s decision to conflate the national minimum wage with the reality of the living wage was the gimmick at the outset that allowed these employers to think that this was not to be treated seriously, and that that is why we see these different actions by big chains and unscrupulous employers?
Undoubtedly that is the impression, especially as the real living wage recommended by the Living Wage Foundation is significantly higher than the one that the Chancellor proposed. We certainly could question it, as he could not have been unaware that what happened was always going to be possible.
Does my right hon. Friend agree that, welcome though the living wage is, the tendency of many employers—some of them with internationally high reputations—to introduce the casualisation of labour through zero-hours contracts and rolling contracts is likely to be accelerated? Does she also not agree that, in exposing these companies, the Government should go not just for a register, which would be welcome, but for regulating the way that these contracts are used, as they undermine wage rates and people’s security in employment?
Absolutely. There is no question but that low pay runs alongside job insecurity, and the situation is getting worse. What has happened absolutely demonstrates that terms and conditions and pay are inextricably linked. Again, as we have said with the care sector, people who are vulnerable and needy and who have the weakest voice are always the most affected. If it were not for the trade unions raising their voice, us raising ours, and my hon. Friend the Member for Mitcham and Morden focusing on the issue in such a forensic manner, awareness of this matter would probably have been nothing like it is. Whatever the outcome, it is clearly totally wrong that any company should cut wages of loyal, long-standing members of staff off the back of the national living wage.
Let us make no mistake about it: if a company as big and as well known as B&Q can do this, anyone can. When my hon. Friend met the chief executive, Michael Loeve, he told her that he was “a bit annoyed” that B&Q was being singled out. He said, “We’re a great employer, and we’re not the only ones making the changes.” We seem to be in the realm of two wrongs making a right. He is right, though, about not being the only ones, sadly. B&Q was just unlucky to have received so much attention. It was unlucky that my hon. Friend’s friend worked there, instead of for one of the many famous high-street retailers doing the same thing.
It is true that B&Q had been particularly thoughtless about the predicament of its staff. Let us consider a few of the people from around the country who contacted my hon. Friend in desperation about their situation at B&Q. There was a gentleman who works at a B&Q store in the south-east, where he has been employed for more than 15 years. To give him whatever protection we can, let us call him Mr Jones. He has a family—two children—and is the sole wage earner in his household. He works hard but part time because of the strains of his physical disability. He works every Sunday he can, as well as all the unsocial hours on offer, but from April, under the new contract that he has been coerced into signing, Mr Jones will lose £1,000 a year. Yes, it is true that he will not lose out for the next 24 months because of the one-off payments that B&Q has promised to employees who are set to lose out, but he will still lose out after this period, because B&Q has no contingency plan.
Let us also consider Ms Smith from Yorkshire. She is a hard-working, low-paid mum. As a result of her contractual changes, her total monthly wage will be reduced by a staggering 30% pay cut, and the two one-off payments that she will receive do nothing for the £2,000 a year that she will lose from 2018. She says:
“How exactly am I going to make up this wage deficit? I have a young son to support, and next year is looking very bleak for us. . . I am worried about how I will support my family next year. I am heartbroken that the company I have worked so hard for, done 16-hour shifts for, come in on days off for, and valued greatly, has treated me like this.”
Indeed. Compare that double whammy—loss now and loss of deferred income, which is pension income—with what happens to the companies: they gain from cutting pay, and from the reduction in corporation tax, which should offset the pay increase, not allow them to cut pay. Although B&Q says that it has rectified the sort of situation I have described, I defy B&Q senior management to place themselves in the shoes of Mr Jones and Ms Smith and honestly say that they feel optimistic about their future.
Let us turn our attention to other employers that we know are doing similar things. Bradgate Bakery is part of the group that owns famous brands that we all enjoy, such as Ginsters pies and Soreen loaf, but the pay that it is offering staff is a lot less tasty than its food. Bradgate has written to all its Leicestershire staff, detailing changes to their wages. Most shop-floor employees at Bradgate were earning just over £6.70 an hour before 1 April, so the introduction of the national living wage should have made quite a difference for them, but Bradgate, like B&Q, has found an opportunity to save money. That is because of the universal truth that companies will usually pay their workers a lot less than they can afford, if they can get away with it.
Does my right hon. Friend agree that part of the problem is that employers see the national living wage or minimum wage as a ceiling for payments, rather than a floor, and will always try to pay the least that they can get away with?
Thank you, Mr Deputy Speaker. I take your point.
Certainly, the national living wage does not mean that that is all that employers can pay. Bradgate Bakery, like B&Q, found an opportunity to save money, so it has changed staff terms and conditions to phase out double pay for Sundays by 2019. That means that while employees on the national minimum wage earned £13.78 per hour on a Sunday last month, by 2019 they will earn just £9 per hour. That is the national living wage according to Bradgate Bakery. Extra pay for night shifts, Saturdays and overtime are also being scaled back. In sum, Bradgate workers are being sold a lie: they are told that their pay is increasing, but what the Government are giving with one hand, Bradgate is taking with another. According to one very worried worker who approached my hon. Friend the Member for Mitcham and Morden, these cuts will affect the whole range of shifts that run in the factories. That means that by 2018 a production operative on night shift will be paid £2,778 less a year, while a night shift team leader will be paid £344 less.
I want to make a few things clear. First, increasing the minimum wage is not a bad thing. My hon. Friend the Member for Mitcham and Morden, myself, and indeed all hon. Friends, were proud to be part of the Labour Government who introduced it almost 20 years ago, and we wholeheartedly support moves to increase it. Our workers work hard and deserve every penny that they are entitled to. We quite agree with the Chancellor that Britain does deserve a pay rise.
Secondly, despite what they say, businesses can cope with the increase in the minimum wage. Every minimum wage rate rise since its introduction has been greeted with predictions of doom and gloom by a minority of employers, but their dire warnings have not come true.
Thirdly, we all know that businesses will tend to pay their workers less than they actually can, because that is what profit-making is all about, but businesses should not be cutting staff pay via terms and conditions to offset the costs. Despite what they say, there are alternatives: they could improve productivity and invest in the skills and talents of their employees; they could cut back shareholder pay just a little, so that those who work hardest get the remuneration they truly deserve; or, following the Chancellor’s suggestion, they could use the further 1% cut in corporation tax announced last month to fund the increase in the minimum wage.
Fourthly, I have discussed B&Q and Bradgate Bakery today, but there is an industry-wide problem. Huge supermarket retailers, such as Morrisons, cut their staff pay months ago, to little media attention. For instance, while hourly pay at Morrisons has now increased to £8.20, the firm simultaneously scrapped a raft of pay perks to save money. Only last week, we read reports of how popular, thriving café businesses, such as EAT and Caffè Nero, are cutting free staff lunches to claw back costs. That will save them about £3.60 per employee per day—less than the cost of one of their toasted paninis. According to media reports today, it looks like Waitrose will also be scrapping Sunday and overtime rates for new workers. This is all part of a worrying trend.
I am sure that my hon. Friends will agree that what we are asking for is not easy, but we truly believe that there is a precedent for cross-party support on this issue. Indeed, my hon. Friend the Member for Mitcham and Morden was delighted to receive the support of the hon. Member for Croydon South (Chris Philp) during their “Channel 4 News” interview on the subject last week. He joined her in calling for employers to guarantee that no one loses out. During the interview, my hon. Friend said:
“Any Member who wants to join me on calling for action from employers and the Government, from whichever side of the House they may be, is a friend of mine.”
The truth is that securing meaningful change is not beyond the Government’s ability. If the Chancellor promised everyone a pay rise, then everyone should receive one. If he promised that the Government would be radical on strengthening wages, then he needs to deliver radical change. A thriving economy is not built on low pay and unscrupulous employers; it is built on a proper day’s pay for a hard day’s work. It is time the Government gave hard-working people—the same people all political parties claim to represent—the outcome they truly deserve.
I want to make a few brief points in the time available. The first—we have to have a few home truths here—is that the whole concept of a national living wage is intellectual nonsense. The amount that people need to earn to cover their living costs depends on all sorts of factors. It depends on their housing costs. It depends on how close they live to their workplace and how much it costs them to get to work—the cost is obviously a lot less for somebody who lives right next to their place of work than for somebody who lives a considerable distance away. The idea that one national living wage can apply to everybody in the country, irrespective of their personal circumstances, is therefore nonsense, and we should make that clear from the start. What we are talking about with the living wage is an increased minimum wage, so let us just be honest about our terminology.
The right hon. Member for Enfield North (Joan Ryan) made the usual mistake of thinking that every employer in the country is some rich baron who lives in a huge mansion, drives around in a Bentley and has all the goods in the world. Actually, the vast majority of businesses in this country are small and medium-sized enterprises. I advise her speak to a few shop owners down her local high street, because she will actually find that many are struggling to earn a living. In fact, many of the people she is talking about do not earn the minimum wage or the living wage—whatever anyone wants to call it—themselves. She berates them for trying to do down their staff, when many of them are working desperately long hours to keep their staff in employment because their staff matter to them.
The hon. Gentleman is throwing up all sorts of straw men, but what we heard from my right hon. Friend the Member for Enfield North (Joan Ryan) were concrete examples of large companies that have the ability to pay their staff properly but are not doing so. When will the hon. Gentleman engage with the facts rather than straw men?
I am engaging with the facts—these are home truths the hon. Gentleman should appreciate.
When people ask, “Do you think everybody should get a pay rise to £9, £10 or £11 an hour?”, everyone of course says yes. I think it was Norman Tebbit who said that if we ask people, “Would you like a Rolls-Royce?” they will all say yes, but if we say, “You’ll have to live in a tent for the rest of your life to pay for it,” the answer will be no.
We have to realise that there are consequences to increasing the minimum wage. We all know that if we want to reduce the consumption of something—if we want less of something—we increase its cost. If the Government want fewer people smoking, one of the tools they use is to put the price up. If we want fewer people drinking, we put the price up. The same rules apply to employment: if we put up the cost of employment, we will find fewer people employed—that is just an economic fact.
I am grateful to the hon. Gentleman for giving way, but the binary choice he presents of a Rolls-Royce or a tent is not the living reality of most of our constituents.
Last year, the Big Help Project’s food bank in Knowsley helped to feed 6,000 people, 3,500 of whom were children, for three days. Does the hon. Gentleman not accept that cutting people’s wages will mean that even more people are dependent on food banks? Is that the 21st century, or is he harking back to the 19th century?
The right hon. Gentleman should be aware that what is more likely to send people to a food bank is not having a job at all.
When the Chancellor announced the higher rate of the minimum wage, the Office for Budget Responsibility estimated that 4 million hours a week would be lost, half resulting from reduced hours for workers and half resulting from the loss of 60,000 jobs. The great thing about the OBR is that at least we are now able to understand the consequences of such a policy.
There are a lot of advantages to having a higher minimum wage. A lot of low-paid people have found themselves in higher-paid jobs, and I very much welcome that. However, Labour Members who praise the policy should at least be honest about its consequences.
I have already given way to the right hon. Gentleman; he can have another go in his own speech later.
Labour Members have to face the consequences of the policy: the OBR has made it clear that it will result in fewer people being employed. The right hon. Member for Enfield North mentioned companies such as B&Q and Morrisons. When I worked for Asda, every employee was given a 10% discount card. I have no idea what Asda’s policy is today—it may well be the same—but it used to employ a lot of people with families, and a 10% discount card was a very valuable commodity to them. We should be wary about forcing employers to put up pay, because the inevitable consequence will be that some benefits might have to go if they want to keep the same number of people employed in their stores. These decisions have consequences, and we cannot pretend that increasing people’s pay will not have consequences.
The right hon. Lady mentioned care homes and the care sector. We need to think carefully about what the consequences will be for them. In my constituency, in Bradford, a very small proportion of the extra 2% that is being levied on council tax is being passed on to independent care homes. I thought it was designed to help them with the costs of things such as the national living wage. This high-minded policy is motherhood and apple pie. It enables people to look good and argue, “I think that, whatever people earn, they should get more, and that even when they do get more, they should get even more than that,” but an awful lot of care homes around the country could close as a consequence. Is that really what we want to happen in the UK? It would happen not because employers are mean, nasty people, but simply because they cannot afford to pay the national living wage at the rates that the councils are giving them for care home fees. That is the economic reality, whether people like it or not.
I met a number of employers recently, and they pointed out that the policy takes no account of differentials. When the pay of people at the bottom is raised to a higher rate, they are not the only ones to get a pay rise, because everyone else in the organisation will say, “Hold on a minute, I was paid £1 an hour more than they were, so if their pay’s being increased by £1 an hour, I want an extra £1 an hour as well to maintain that differential.”
Anybody who knows anything about running a business will know that, particularly for employers who run small businesses on the high street in small towns in our constituencies, there is not a never-ending pot of money to pay higher wages to everybody and to protect those differentials. Something has to give: either those differentials disappear, much to the unhappiness of the people who had them before, or fewer people will be employed, or people will be employed for fewer hours.
I am afraid that I cannot give way, because there is not much time left.
Finally, I have two very quick points to make. First, the increased national minimum wage will almost certainly lead to even more people from the European Union coming to the UK if we do not leave the EU in the forthcoming referendum. That is a basic fact. Secondly, a higher minimum wage is great for people who are already in work and getting paid. However, it can be as high as we like, but it will be of very little use to those who do not have a job. Many people in this country already find it very difficult to get on the jobs ladder, for all sorts of reasons.
I have made this point before and got into terrible trouble for it, but the fact, whether people like it or not, is that too few disabled people in this country are employed. It would not be good if they were put further away from the jobs ladder, and I want the Government to think about what they are going to do, when wages are higher, to help disabled people find a job, including subsidising employers to bring them up to the living wage. Something has to be done. We cannot just leave people on the scrapheap unable to get a job because the first rung of the jobs ladder was too far away to give them a chance in the first place. We have to think through the consequences of all these high-minded policies.
Thank you, Mr Deputy Speaker, for calling me to speak in this important debate. In opening, may I place on the record my sincere thanks to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for her efforts in securing this Back-Bench business debate? She is a fearless campaigner and a credit to this place. I wish her a speedy recovery, which I know she will achieve through sheer force of willpower. I also thank my right hon. Friend the Member for Enfield North (Joan Ryan) for stepping in.
When I sat in this Chamber alongside many other hon. Members not so many months ago and heard the Chancellor say that he was going to increase the pay of the lowest paid, I was speechless. The glib tagline was, “A pay rise for Britain”. Throughout my political life, I have fought for improved pay and conditions for the working people of this country, especially the lowest paid. One of the proudest moments in my political life was seeing a Labour Government, in this very place, introduce the national minimum wage as one of their first acts—a move that was strongly opposed by the Conservatives.
Despite my understandable cynicism, I was delighted that the Chancellor had undergone his own damascene conversion and had finally seen the light by belatedly understanding that every worker in this great and prosperous country, not just those at the top of the ladder, deserved to be paid fairly. But—and there is always a “but” with this Government—my initial delight soon dissolved as I rapidly discovered that my cynicism was not misplaced but very much spot on. As the now former Secretary of State for Work and Pensions, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), recognised, the Chancellor’s glib tagline about giving Britain a pay rise was devoid of substance and nothing more than hot air and bluff. His Budget announcement was the stuff of fairy tales. When we scratch beneath the thin veneer of the so-called national living wage, it swiftly becomes clear that the low-paid workers of this country are being hammered, just as they always are by this Tory Government.
Despite the Chancellor’s embarrassing U-turn on tax credits, he has ploughed ahead with cuts to the successor scheme, universal credit. Cuts introduced this very month mean that tens of thousands of low-paid working families who are in receipt of universal credit are expected to lose up to £200 a month from their pay packets. That is the first attack by this Tory Government. The second attack, and the topic of today’s debate, is the Chancellor’s spectacular failure to ensure that big business funds his so-called national living wage off its own back and through its profits, rather than off the backs of workers.
My hon. Friend the Member for Mitcham and Morden, the Union of Shop, Distributive and Allied Workers and the Daily Mirror newspaper, through its coverage in recent weeks, have shown that, when given the choice, big business has seized on the cheapest method to fund a pay rise for its workers by heartlessly cutting their overall pay and benefits package. That is simply shameful.
My hon. Friend is making a very strong speech. Many businesses, particularly in the care sector, have got away with not paying the minimum wage and used all sorts of tactics such as clipping and not paying for travel time. An even greater number of them now use tactics such as cutting tea breaks and lunch breaks, in order to get away with it on an even greater scale. The Government failed to enforce the original minimum wage, and the situation is now being compounded further.
I thank my hon. Friend for giving that very good example. My right hon. Friend the Member for Enfield North mentioned the glaring example of B&Q, which has asked its workers to sign a contract that reduces a number of their benefits. It is believed that the overall result will be that many will lose thousands of pounds. The company’s response has been to introduce a temporary scheme, for just two years, to protect the value of its workers’ overall packages. That is simply not good enough, particularly as it has been reported that the parent company of B&Q, Kingfisher, may pay its chief executive officer a total package of up to £3.6 million. The numbers are jaw-dropping, as is the hypocrisy. Once again, this Tory Government are presiding over the shameful exploitation of those who are least able to make ends meet, least able to make their voices heard and least able to stand up and tell the Government that what they are doing is simply unfair and unacceptable, and that it cannot go on.
The Chancellor cannot even plead ignorance and suggest that this shameful episode is an unexpected by-product of his noble and good deeds. A ministerial answer to a written question by my hon. Friend the Member for Ashfield (Gloria De Piero) on 21 March revealed that the Government were aware of the possibility that big business would choose to fund their so-called national living wage through cuts to wider remuneration packages. The Government’s view was:
“It is for individual businesses to decide exactly how to respond to the introduction of the National Living Wage, appropriate to their circumstances. But any changes to contractual pay should be discussed and agreed with workers in advance.”
The Government simply do not get it. If the choice for workers is between unemployment and agreeing to changes designed to reduce their overall contractual benefits, most, if not all, workers—especially the lowest paid in society—will sign up.
My hon. Friend is making an excellent speech. Does she agree that another group of workers, namely the self-employed, are also in a difficult position? I was recently contacted by a constituent whose partner works for a courier company. Once his petrol has been paid for, he is getting paid about £260 a month for working a 50-hour week. My constituent told me that she works on the minimum wage as a pizza delivery driver, and she earns about three times as much for doing half the hours that her partner works. Does that not show that a whole group of people is being forced into an invidious position?
I thank my hon. Friend for making that important point. Big business knows that the voice of the lowest paid is easily silenced, because the fear of unemployment is a powerful tool. The Government need to step up and legislate for big business to fund the so-called national living wage not through cuts to workers’ wider benefits but by, quite rightly, sacrificing a percentage of its own profits. That is not only fair but proper, given that tax on big business profits was cut in the Chancellor’s Budget. Soon, businesses will pay just 17% tax on their profits, down from 20%. I call on the Government to legislate to require big business to use the extra cash released through reduced corporation tax to fund the so-called national living wage, not to deliver larger dividends to its shareholders in the coming years, as I fear it will. The Government must step up. They must end this injustice. This simply cannot go on.
It is a pleasure to follow the hon. Member for Bradford South (Judith Cummins). I thank the hon. Member for Mitcham and Morden (Siobhain McDonagh) for helping to secure this vital debate, and I hope that she gets well very soon.
Britain certainly deserves a pay rise. It has been due one since 2010. If we listened to the rhetoric from the Government, we might be forgiven for believing that the new national living wage would end all the problems of those who are struggling to make ends meet. We have heard the radio adverts in which countless actors with differing regional tones deliver sonnets about what the new national living wage entails for them. In reality, this is not a real living wage—far from it. Although many will receive a step up, some in our society will face an uphill challenge from 1 April. As chair of the all-party group on small shops, I have spent the last couple of months talking to business owners, who fear that the increase in their wage bill will be the final nail in the coffin, because they will simply not be able to meet those costs. I will come on to some of the points raised by the hon. Member for Shipley (Philip Davies).
There were some promising features in the Budget on business rates, aimed at small businesses. From April 2017, small businesses will either be taken out of the rating system completely or have a smaller burden to pay. However, 2017 is the key point.
The hon. Gentleman is absolutely right. That is a real concern for local authorities, and there is disparity across the country. That is a good point.
The other point about business rates is that there is an issue with the fact that the relief will not be introduced until 2017. Small businesses will struggle for a whole year before they receive the relief that is in the Budget. As I have already mentioned in this Chamber, the retail business rate relief grant has been stopped this year for small business owners as well. Small businesses employ 35% of the nation’s workforce, but they employ more than half of those who are on the minimum wage. From 1 April, small businesses will be dealt a double whammy of increased wage bills and a reduction in support from business rate grants. They will be under real financial pressure for a whole year.
I am going to make a little bit of progress. Larger retailers will be able to offset their costs by reducing the benefits that they pay out, such as Sunday pay, as we have seen from the examples that the hon. Member for Mitcham and Morden has raised in the media recently. Smaller businesses will have to put up prices, slow recruitment or perhaps downscale their operations. Some will have to shut down because they are unable to shoulder the costs until 2017 after having struggled for years. The truth is that the new national living wage should have coincided with the changes to the business rate system.
Next I want to mention the pressures facing the social care sector, which has faced a wave of pressure from the Government over the last few years. We have heard much recently about the social care precept, which enables councils to raise council tax by 2% to pay for care costs. Senior members of Rochdale Borough Council have told me that with the introduction of the national living wage, the precept will provide very little extra funding, if any. Poorer areas such as Rochdale—this is similar to the point made about business rates—will raise only just over £1 million from the precept, because of the council tax bands of the properties in the borough. Even the Conservative-led Local Government Association has warned that the national living wage will put adult care services at breaking point.
The new change is even more worrying in view of the fact that many in the care sector are not even paid the minimum wage. Work by Unison has shown that pay structures, such as not paying travelling time, mean that those who care for our elderly loved ones are not being paid for the vital work that they do. If we want to give careworkers the wage that they deserve, it must be adequately funded. They are some of the most hard-working people, and they deserve to earn at least the minimum wage. Unless the appropriate funding is in place, that simply will not happen.
I understand that point, and I agree with it completely. Britain deserves a pay rise, not some public relations stunt from a Chancellor who is obsessed with political strategy. An increase in the minimum wage must be done properly, and small businesses must be helped so that they can afford it. Most importantly, it must enable individuals to support themselves. The minimum wage remains a great Labour triumph. By the look of things, we will need a Labour Government once again to give Britain a proper pay increase.
I pay tribute to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for securing a debate on this important topic, and I wish her a speedy recovery. I also congratulate my right hon. Friend the Member for Enfield North (Joan Ryan) on the way in which she has led the debate.
Like so many Members in the House, I welcomed the news in last year’s Budget that the Government would introduce a new national living wage, as a result of which workers aged 25 and over would receive £7.20 an hour in April—an increase of 50p from October 2015, when the minimum wage was set at £6.70. I also welcomed the plans for it to rise to £9 per hour by 2020. Both those measures are important steps towards securing a real living wage, which the Labour party continues to campaign for. After years of workers enduring the bulk of the Government’s austerity agenda, a pay increase for 1.8 million workers is welcomed, even though it does not go far enough.
For me, this is a local issue, that affects the lives of many of my constituents. According to the House of Commons Library, 19% of people in my constituency will benefit from the living wage this year. That figure will rise to 27% by 2020. I understand that the changes will have a disproportionate impact on small businesses, which employ 35% of the adult workforce and 52% of Britain’s minimum wage workers, and that it will be concentrated in the hospitality and retail sectors, which account for more than 46% of minimum wage jobs. I also note the concerns coming particularly from the social care sector, which is already underfunded. The Government urgently need to do more to address the shortfall in funding.
In the recent weeks leading up to the implementation of this new wage, a campaign of fear has been put out by large employers that simply do not want to pay their employees a fair wage. Some have claimed that a living wage will lead to job losses. Others have had the gall to say that raising wages is in effect a tax targeted at businesses using low-skilled workers. The truth is that the taxpayer has had to pay to top up the pay of workers to the tune of £11 billion a year. Prior to this wage rise, the four big supermarkets alone—Tesco, Asda, Sainsbury’s and Morrisons—cost £1 billion a year in the tax credits and extra benefit payments their underpaid staff received.
I have found disturbing and, quite frankly, shameful the way in which some large employers in the service sector have used the introduction of a living wage as an excuse to cut basic work entitlements. In the face of the changes, some employers have cut holiday pay, lunch hour pay and sick pay, and have cut contracted hours. As has already been mentioned, the retailers B&Q, Tesco and Wilko have all cut premium holiday pay and other benefits while reluctantly raising pay. Staff at Tesco face a cut to night-time and holiday bonuses, as do staff at Wilko and Morrisons. One Tesco worker has said that the loss of pay will amount to £75 a month, which could be the difference between making next month’s rent and being kicked out on to the streets.
My hon. Friend is outlining what I regard as very underhand practices that are hurting such workers. Will she join me in paying tribute to the work of trade unions such as the GMB, USDAW, Unison and Unite, which have played a key role in exposing a lot of these problems during the past few months? That underlines why trade unions are so crucial in standing up for workers in workplaces, such as the care sector or the retail sector that she mentions.
I am very happy to agree with my hon. Friend and pay tribute to the trade union movement, which has done so much to stand up for the rights of workers when faced with such threats from some big companies.
Eat, the café chain, has reportedly stopped paying staff during lunch breaks. Caffè Nero has told staff that it cannot afford to pay the national living wage and allow their workers a free panini at lunch time, despite the fact that its profits grew by 8.5% to £241 million in the 12 months to last May and that the company has not paid corporation tax since 2007. As was mentioned earlier, B&Q has demanded that employees sign away rights to a range of in-work benefits worth more than a £1,000 a year or face the prospect of being sacked. This intimidating and bullying of staff should not be tolerated in any workplace.
The Low Pay Commission has warned that some employers may decide to label employees as apprentices or self-employed to avoid having to pay them the living wage. Other suggestions floated by large retailers include cutting the number of staff or speeding up the implementation of technology to replace staff, such as using more self-checkout tills in supermarkets. These regressive actions are in complete contradiction to the aims of the living wage, as the Government pointed out when they introduced it. They said it would prompt employers to invest in training and technology to make their workers more productive and break the low-pay, low-productivity cycle. I do not see how cutting in-work benefits will make employees more productive, or break the cycle of low pay and insecure work.
Costa Coffee, Next and other high-profile companies have said that they will increase prices to cover the change in wages by passing the price directly on to the consumer. I was astonished to hear a member of staff in a small chain in my Burnley constituency tell a customer that the price of bread had gone up because of the change to wages. These companies can afford to pay and should pay a living wage off the back of the profits that they produce. This should not be a system in which employers can choose between holiday pay and a living wage, or between raising prices and sacking staff.
Those guilty of such actions show their contempt for their customers, for this Parliament and the law and, most importantly, for their staff—the very individuals who give their sweat and blood, and their time and effort, so that those at the top can receive large salaries deducted from record profits. If such large companies employing thousands of people across the UK can afford to pay their lawyers and accountants large fees to cut their tax bill and avoid paying corporation tax, I do not see how they cannot afford to pay their employees a real wage that they and their family can live off.
The Government estimate that the total cost to employers of implementing the national living wage in 2016-17 is £1.1 billion. Yet last year, according to Her Majesty’s Revenue and Customs, tax fraud cost £16 billion, with tax evasion alone meaning that the Government collected £4.4 billion less in tax. The money lost to the economy could easily cover the cost of the implementation of a real living wage.
Some claim that a living wage will lead to job losses. In the face of much of the scaremongering about job losses, it is worth pointing out that there has been little to no negative impact on our economy or jobs since the introduction of a minimum wage in 1999, despite the fact that the same people made the same arguments then. I am happy to say that some employers have welcomed the wage rise. Some have gone further by paying all their staff, irrespective of age, a higher wage than the Government’s living wage.
This debate is not simply about the cost of a living wage; ultimately, it is a wider reflection of an increasingly divided society. I am running out of time, but I would like to share with hon. Members my own experiences. For 24 years, I owned and ran a successful small business in which I employed 10 people. Through all that time, I recognised that the staff were a real asset, helping to build the success of the business. They worked hard and contributed much, and they were valued highly. I was proud to pay them a real living wage, and they certainly deserved no less. Similarly, when I was leader of Burnley Borough Council, I was pleased to introduce the real living wage for all employees. Not only is this the fair and decent thing to do, but it makes sound economic sense, because when people have more money in their pocket, they create demand for more and better services and shops. Thus the living wage, far from damaging business, actually acts as a boost.
I call on the Government to protect workers’ rights that are clearly being undermined. It should be made clear, through legislation if necessary, that employers should not see the living wage as an opportunity to cut back on holiday pay or other hard fought for entitlements—
I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing this debate, and I wish her well with her recovery. I am only sorry that she could not be in the Chamber to deliver her speech, but I thank the right hon. Member for Enfield North (Joan Ryan) for opening the debate.
As a signatory to this motion, I want to recognise that the idea of a living wage sounds positive and a great thing. In fact, it sounds like a boost for people on low incomes. Who would argue with an increase to the living wage or to any wage? However, the fact is that this is not a living wage. I do not often find myself agreeing with the hon. Member for Shipley (Philip Davies)—in fact, I do not think I ever have until today, when he stated that this policy is nothing more than an increased minimum wage.
The fact that we are already witnessing the unintended consequences of this policy—the reality of an adverse effect on workers’ benefits—only proves that this Government have once more undermined the role of workers in favour of businesses. Once more, the hard-working people of this country will pay, while the bankers, businesses and tax avoiders continue to profit. As employers seek to manage the impact of wage bills, the reality is that no business wants to lose profit. Reducing staff numbers, cutting hours, misusing or abusing zero-hours contracts and reducing employee benefits are just some of the ways in which businesses are managing to subvert the cost of paying people real living wages, while expecting more from their employees.
Let us be clear: the real living wage, as defined by the Living Wage Foundation, takes into account living costs, whereas this Government’s so-called living wage is calculated on median earnings and completely fails to take into account the cost of living. How can it actually be called a living wage?
I have listened to several speeches from Opposition Members and the hon. Lady is making the same argument. It is important to understand that the living wage should be seen in the context of hourly pay. She is right to say that employers look at the total wage bill and look for other changes, but she should not conflate the two. I think she wants to support the Government’s intention of increasing the hourly pay of workers. Does she agree?
We can agree that workers deserve a real living wage, but this is not a real living wage. To go back to my argument, it is merely an enhanced minimum wage. While I would welcome a living wage, this does not meet the mark. Sadly, this does not even apply to those under 25. Try telling a 17-year-old part-time worker that their work is of less value than that of someone who is a few years older. Is that really what we think of our young people? Is that really the value we place on the work of our young people, who are all too often forgotten in this Government’s priorities?
The term “living wage” is important. In Scotland, we recognise that. We set a target to have 500 real living wage employers by the end of this Parliament and we have already exceeded it. Last year, the Scottish Government announced that they had become an accredited living wage employer. The SNP Government have introduced a requirement to pay the real living wage as an integral part of the public sector pay policy. Since 2011, we have invested £1.5 million per year in paying the living wage rate across the parts of the public sector where the Scottish Government control the pay bill, directly benefiting 3,000 workers. Scotland has a higher proportion of workers who are paid the living wage than any other nation of the UK.
There are some positive examples in my constituency, such as Hamilton citizens advice bureau, Bluebird Care in Larkhall, the medical centre in Lanark and Emtec contractors in Uddingston, all of which are leading the way as real living wage employers and showing what can be achieved. In many ways, what the Government are doing will undermine the incentive for employers to achieve a real living wage.
Despite what the Government have said, they must do more to ensure that no worker is worse off as a result of this change. We have all seen the worrying reports about employers mitigating the cost of the new rate by cutting hours and premium rates for overtime and bank holidays. The hon. Member for Mitcham and Morden asked the Prime Minister whether he would guarantee that no worker would be worse off as a result of the national living wage, but she never received a response. Perhaps the Minister will give that commitment today.
I am depressed by the negativity of this debate. People who have come to me in my constituency are pleased that they will have £900 more in their pockets. Some 40% of people will get a wage rise. This is something that the Government have been speaking up for. People want more money in their pockets and they are going to get it. On the whole, businesses in my constituency are in favour of the national living wage. It is difficult, but they are for it.
Although it will always be welcome if people have more pennies in their pocket, the Government are not looking at the full picture. When cuts to universal credit outweigh any benefit from the so-called national living wage, how can it be defended as a national living wage at all?
My constituent, Andrew Larmour, sent me a message to say that although he got a pay rise on 1 April because of the living wage, he received a pre-printed letter on 31 March about a change of circumstances for his benefit entitlements, which indicated that he will not be better off but worse off.
I thank the hon. Gentleman for making that valid point.
Despite the Chancellor’s claim that the lowest-paid workers need a pay rise—indeed, they do deserve a pay rise—his actions will result in the rich getting richer while people in low-wage jobs see no real benefit. Indeed, they will experience an erosion of any employer benefits that they once had.
It is telling that the Government believe that women will benefit most from this change in policy, because it means that they recognise that women are more likely to be stuck in minimum wage, part-time, uncertain employment. That tells the story of gender inequality, whereby women are systematically paid less than men. It perpetuates the gender pay gap—something that the Prime Minister has pledged to end in a generation. His deeds do not appear to be matched by words. Once again, the Government know the cost of everything and the value of nothing.
I congratulate my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) on securing this important debate and my right hon. Friend the Member for Enfield North (Joan Ryan) on stepping in to introduce it in such an impressive manner.
Given that most of our constituents will at one time or another find themselves working for somebody else, we give far too little attention in this place to the reality of the world of work. To many, that reality involves insecurity, uncertainty and exploitation. This debate has exposed the level of exploitation that still pervades many workplaces in this country. Members have listed many examples of employers abusing their bargaining power to take away with one hand what the new minimum wage gives with the other.
I agree with Ian Hodson, president of the Bakers, Food and Allied Workers Union, whose members have seen this at first hand, that the way in which the new minimum wage has been introduced has allowed employers to force through changes to contractual entitlements. If it is the Government’s intention for the increase in the minimum wage to end the underwriting by the state of poverty wages, they surely cannot want that increase to be paid for out of the pockets of the very people the policy is intended to help.
On that point, the change in the living wage over five years will effectively mean a 30% increase in the labour costs for companies. I agree with the hon. Gentleman that the Government did not want that to result in people losing wages, but what would he say to the employers—the small business people that my hon. Friend the Member for Shipley (Philip Davies) spoke about—who have to meet that increase in costs? What is the alternative that the hon. Gentleman wants them to undertake—an increase in prices? What else would he like to see?
The hon. Gentleman is missing the point, which is that we have a very dishonest settlement whereby the Government are saying, “You’re going to get more money in your pocket,” but again and again we are seeing employers use unscrupulous methods to take that money back. We want the Government to come up with a much more clear and transparent way of dealing with this, so that employers end up paying what the Government have decreed is the minimum that people can live on.
Specifically on the point about small businesses, we know that if the lowest-paid workers, who often work for small businesses, have a pay increase, they tend to spend it locally, so the local economy grows. In addition, the Government have given tax cuts to businesses, so small businesses are not being deprived of any benefit.
My hon. Friend makes an excellent point. We have heard examples today involving large national chains. We can all use our spending power to go elsewhere and support local businesses, which are the lifeblood of our communities.
We should not be surprised by the way this policy is panning out, because this is the way in which some employers have always operated—they see every issue that affects their business as an excuse to whittle away at the terms and conditions of their staff.
The Minister for Skills said in a written parliamentary answer, which my hon. Friend the Member for Bradford South (Judith Cummins) referred to earlier, that any changes to terms and conditions should be discussed and agreed with workers in advance. I am sure that that advice will come as a surprise to the Secretary of State for Health, given his approach to the junior doctors dispute. I am afraid that the idea that employers will wait for an agreement on these issues is fanciful and bears no relation to the reality on the ground.
Those who are represented by a trade union at least have a fighting chance, but the reality is that employers can and do change terms and conditions fairly frequently. When they do so, it is almost always to the detriment of the people they employ. Once an employer gives a notice of change, the employee has very little redress. If legal redress is an option, the introduction of employment tribunal fees has made that a most unlikely route, given the 80% drop in employment tribunal claims since fees were introduced.
My constituency of Ellesmere Port and Neston is one of the top five living wage blackspots for women working part time across the north-west, according to the TUC, with 66% earning less than the living wage. Any increase in basic pay has to be a step in the right direction for that group of workers, as long as it does not come at the expense of other elements of the pay package.
It would be a mistake to claim that simply increasing basic pay means that there is now a fair workplace settlement. We know that many ruses and mechanisms are used to stop effective workplace protection, such as bogus self-employment and zero-hours contracts. This policy could even see the development of other scams. Some unscrupulous employers might sack people just before their 25th birthday just so that they can get someone on a cheaper rate. More apprenticeships that are apprenticeships in name only might pop up because they offer the chance for an employer to pay someone a lower rate for the same job. What will be done to tackle that?
Nearly half of all minimum wage jobs are in hospitality and retail—sectors that are both major employers in my constituency. I have conducted my own research into the practices of many of the national restaurant and fast food chains, which has revealed widespread abuse that the Government do not appear to be interested in tackling. The research, which was conducted at the end of last year, showed that 90% of the 9,000 outlets surveyed did not pay the real living wage. It also highlighted the widespread practice of what is known colloquially as “shift shafting”, whereby staff are sent home at the start or in the middle of a shift if the outlet is not busy, without any pay or compensation. More than 80% of respondents to the survey admitted that they would do that. It means that people can end up out of pocket simply by going to work, through being made to wait around without pay and then being sent home without even having their travel costs reimbursed. I hear a lot about the Government wanting to get everyone into work who is able to work, but I hear no condemnation from them of the blatant exploitation of people who are trying to do the right thing, and find themselves out of pocket through the very act of going to work.
Let us make every job reward people with a wage that they can actually live on, but at the same time let us put in place a proper system of workplace protection so that a Government policy is not allowed to be undermined by unscrupulous employment practices that take away other benefits so that people end up no better off, and in some cases actually end up worse off. To achieve that, we need a fundamental change in the Government’s approach, starting with the recognition that trade unions and collective bargaining have a significant role to play in the future prosperity of our nation. We need a fundamental change not only in the Government’s attitude but in the attitude of many employers, with a move away from the bean-counting philosophy that views the worker as a disposable item ready to be replaced by a machine that does not question, expect to be paid or belong to a union. For many people, being in work means vulnerability and uncertainty about their future. How can we tolerate a situation in which people in work can routinely not know whether they will have earned enough to put food on their family’s table at the end of the day?
We should not be fooled into thinking that this policy is a panacea. The Institute for Fiscal Studies estimated that even with the new minimum wage, people with children will be £700 a year worse off thanks to other changes introduced by the Government. The reality is that we are having this debate because the law and culture in this country place far too little emphasis on employment rights. Until this place resolves to do something about that, the kind of injustices that we have heard about today will continue.
I join colleagues in congratulating my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) on securing this important debate. I wish her all the very best for a speedy recovery. I thank my right hon. Friend the Member for Enfield North (Joan Ryan) for opening the debate in her absence.
One of the biggest challenges facing this Government has been the persistence of low-paid work. I welcome any and all measures to address that. I will focus on asking the Government to reconsider the decision to deny the national living wage to under-25s.
It is an absolute travesty that young people have been told that they are not worth £7.20 an hour. I ask the Government to think carefully about the message that sends to young people and their families. People between the ages of 21 and 24 are currently paid 50p less than the new living wage per hour, 18 to 21-year-olds are paid £1.90 less an hour, and those under the age of 18 are paid just £3.87 an hour, which is £3.33 less. It is frustrating enough for those under 25 to be missing out on the financial boost, but the Minister for the Cabinet Office and Paymaster General outlined his reasons for that decision as follows:
“Anybody who has employed people knows that younger people, especially in their first jobs, are not as productive, on average…It was an active choice not to cover the under 25s.”
What a blow to the next generation.
To give some perspective, Queen Victoria inherited the throne at the age of 18, Steve Jobs was 21 when he co-founded Apple, Mark Zuckerberg was 19 when he created Facebook, Adele was just 21 when she produced her Brit and Grammy award-winning album of the same name, and Roger Federer had won eight grand slam singles titles before he turned 25. Tales of William Pitt the Younger, Prime Minister at just 24, have no doubt made all of us in the Chamber feel like underachievers, but although that is far from being the norm, there is nothing new about young politicians and, dare I say it, the hon. Member for Paisley and Renfrewshire South (Mhairi Black) is doing a pretty outstanding job as the baby of the House at the age of 21. I accept that those embarking on a new role often require training and support from employers, and so perhaps initially represent a reduced return on the employer’s investment of wages, but that could be the case for any new employee, regardless of age.
I will give an example of how unjust the policy could be in practice. Let us imagine a young person who takes their A-levels at 18, and goes into training in the workplace or directly into employment. They could have been in their job for seven years before being entitled to the living wage, yet a new employee could start in the same role, sat at the next desk, and be paid the living wage—50p more an hour—with seven years’ less experience, simply because they are over 25.
Alternatively, a young person might study hard at school and decide to pursue an academic route by going to university. Research by Which? indicates that a typical student on a three-year course outside London might expect to graduate with around £35,000 to £40,000 of student loan debt. Most students on a three-year course graduate at the age of 21. The Office for National Statistics has identified that around 47% of graduates are employed in non-graduate roles, a trend that has steadily increased since the 2009 recession. A young graduate who has done all the right things—worked hard and got a degree—and who is saddled with up to £40,000 of debt as a result has only a 53% chance of securing a graduate job, and is not even entitled to the new living wage. That also means that they will not start paying their student loans back to the Government, which surely does not make sense for anyone.
When I graduated from Lancaster University at 21, I started working for an SME in my constituency, predominantly working in sales both overseas and across the UK. As one of the few employees who was young, was not married and did not have children, I was regularly asked to travel at short notice and do the out-of-hours engagements, working evenings and weekends. That reflects the experience of young people across the country. Young people are often asked to work harder and longer hours because of their youth—to work the longer shifts, lift the heavier packages and work the antisocial hours—and often oblige, through a desire to prove themselves and to move up the ladder, but also because sometimes their circumstances mean that it is easier for their employers to ask them, as a young person, rather than older members of staff who might have commitments at home.
Matt, who works in my parliamentary office, is 23. He graduated from Oxford University at 21. He works, in all honesty, like a Trojan, as do my other staff, who are over 25. It would be completely unfair and unjust to pay Matt less than my other members of staff simply because of his age.
There is also a danger that the omission of under-25s from the living wage makes those over 25 more vulnerable in the workplace, as it has the unintended consequence of making those under 25 more attractive to companies that have to deliver a service at the lowest possible cost. I hope that when summing up the Minister will outline what safeguards the Government intend to introduce for the living wage. In an economy where a few pounds is the difference between winning and losing a contract, how do we ensure that firms will not seek exploitatively to employ only under-25s, doing a disservice both to them and to those who are over 25 and will miss out as a result?
With that in mind, I ask the Government to reflect on their offer to young people. Citizens Advice recently published a report stating that young people from varied socioeconomic backgrounds are starting their adult lives with a significant and sometimes crippling amount of personal debt. Further figures from the Office for National Statistics confirm that as a result of lower pay, under-25s are being sucked into debt. According to the latest figures, 16 to 24-year-olds have the highest level of debt compared with income. It is double the debt level for the population as a whole. Would it not make sense to give that group a helping hand, and extend the national living wage to under-25s?
In response to a question from my hon. Friend the Member for Mitcham and Morden, the Prime Minister said:
“We want to see people taking home more money”.—[Official Report, 9 March 2016; Vol. 607, c. 276.]
However, we are once again on the wrong side of the debate on equal pay for equal work. I ask the Government to rethink their decision to deny under-25s the national living wage.
I too thank the right hon. Member for Enfield North (Joan Ryan) for her powerful introduction to the debate. I wish the hon. Member for Mitcham and Morden (Siobhain McDonagh) a speedy recovery and return to this place.
Let us be absolutely clear: what the UK Government have put forward is not a living wage. It is an enhanced minimum wage. We have heard that before, but it is important to stress it. The real living wage is some £8.25 in Scotland just now, not £7.20. The living wage calculation is made, as it should be, according to the basic cost of living and what is adequate for households to maintain an acceptable living standard. A higher minimum wage for the over-25s will help some of the low-paid, but has other consequences.
In January, the Resolution Foundation made it clear that the national living wage is not a real living wage. My hon. Friend the Member for Lanark and Hamilton East (Angela Crawley) and the hon. Member for Halifax (Holly Lynch) have made very important points about the differential in pay for young workers. The point about the unique effects that the introduction of the new so-called living wage—actually a new minimum wage—will have on young workers was particularly powerful. A differential in pay for young workers is simply unacceptable. Fair pay should be fair pay for the job done; there should be no exceptions. The UK Government are discriminating against those under 25. They have also brought into question the future role of the Low Pay Commission, which has been devalued by this exercise.
Back in 2011-12, the Scottish Government introduced the real living wage as an integral part of public sector pay policy, and they contribute more than £1.5 million per year directly to wages. They continue to require all employers covered by public pay policy to pay the real living wage, and as we have heard, those employers became accredited in 2015. The Scottish Government are encouraging the real living wage, which 80% of employees are now paid. Earlier we heard that 500 Scots- based living-wage employers are up and running in Scotland, and the target has been set to make that 1,000 by autumn 2017.
As I have said, the Scottish Government have introduced the real living wage. They have taken control so that proper safeguards are in place to ensure that people are treated fairly across the piece. The hon. Member for Burnley (Julie Cooper) said that as council leader she introduced the living wage for the council. That is laudable and something we have in common: as leader of the Highland Council, I was responsible for leading the charge to introduce the real living wage. Crucially, we included apprentices of all ages on that real living wage, and there was no discrimination against the under-25s. Young people received the same fairness, and that extended to arm’s length bodies, the Highland third sector interface, and Highlands and Islands Enterprise.
Councils in Scotland are helped by the Scottish Government to provide for careworkers, and support with the real living wage is provided for care homes and to those who provide care in the community. The Government are committed to making further progress on that. In 2015-16, the Scottish Government put £12.5 million into a tripartite agreement worth £25 million to improve the quality of care, create a fair workplace, and make progress on the real living wage. The First Minister of Scotland has said that from October 2016, thanks to Scottish Government decisions, the real living wage will be paid to social care workers across Scotland.
We have heard a lot about business from Conservative Members—the one thing that I and the hon. Member for Shipley (Philip Davies) agree on is his description of the UK Government’s living wage proposal as a minimum wage. He spoke about how business struggles with the living wage, but earlier I mentioned those Scots-based businesses that are now accredited living wage employers, and the target to go further. The independent Fair Work Commission framework was set up this year to
“deliver fair work by providing an effective voice, opportunity, security, fulfilment and respect.”
From experience, I know that implementing the real living wage for business pays dividends. It pays dividends in productivity, because people enjoy doing more for companies that respect them. There is better retention of staff—people are not looking around for the next job to help them scrape through the day because they are getting paid fairly. Companies are able to plan better. Team morale is fostered, and people are able to work better collegiately to achieve results for business. Companies can focus not just on survival or how they recruit and replace staff, but on growth. A real living wage paid by companies provides them with good results.
In conclusion, the list of living wage employers includes the Scottish Government, the Welsh Government, the Scottish Parliament, the House of Commons, the House of Lords, and the major political parties; the Scottish National party, of course, pay the real living wage in Scotland. However, there are a couple of notable omissions: the UK Government and the Conservative party. Something must be done to ensure fair pay across the piece. Those under 25 should not be excluded, and a real living wage should be put in place to ensure that people have a decent chance of an adequate standard of living.
I pay tribute to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for her work in preparation for the debate, and to my right hon. Friend the Member for Enfield North (Joan Ryan) for the way in which she opened it.
I want to focus on the impact that the Government’s so-called national living wage is having, and could have, on the care sector, following the theme raised by the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry). The care sector is under increasing financial pressure, and many organisations have warned that the Government’s failure to provide additional funding for the national living wage could result in a number of care providers becoming financially unviable. It will also have an impact on the pay and working conditions of care staff.
The Local Government Association has estimated that introducing the Government’s national living wage will cost home care and residential care providers at least £330 million this year. A number of Members have mentioned the social care precept. In my local area of Salford, the precept can raise only £1.6 million, but the cost of the national living wage increase to the care sector is £2.7 million. It has clearly been left to taxpayers to pay for, with a mechanism that is not even sufficient.
Care England says that the Government’s national living wage announcement
“places additional, unfunded pressures on the care sector that it cannot cope with. Care providers have already had to fund the National Minimum Wage increase of October 2015, plus standard Cost of Living increase in contracts from local authorities, and increases in Care Quality Commission regulatory fees…The aggregate impact of all of these increases is substantial: providers estimate that this will cost them a 5% rise in the wage bill in the first year, and 7% each year thereafter.”
I have already been told that, like other businesses, some care providers have altered their employment contracts and conditions as a way of coping with those changes, meaning that additional costs from the national living wage are being paid for by careworkers themselves. As we have heard, many careworkers are already underpaid. The National Audit Office has reported that up to 22,000 home care workers in England are illegally paid below the national minimum wage, and I believe the actual figure is much higher.
In HMRC investigations of care providers between 2011 and 2015, more than four out of 10 were found not to be complying with the national minimum wage. The Resolution Foundation has calculated that careworkers are collectively cheated of £130 million a year due to pay levels below the minimum wage. That is done through a variety of mechanisms, such as careworkers not being paid adequately for travel time, despite statutory guidance. As one careworker has said:
“In order to earn a full time wage, the carers in our company usually start work at 7 am and work until 9 pm five/six days a week, with gaps throughout the day where we wait in the car until due at the next client.”
Some careworkers are paid as little as £3.50 per hour when lack of pay for travel and waiting time is considered.
In response to a point that I raised earlier, the hon. Member for Shipley (Philip Davies) said that he thought the biggest cause of more people going to food banks would be if people lost their jobs. As I know he is aware, the facts show that the majority of people who use food banks are those in low-paid and insecure employment.
Very much so. We are talking about people who are paid £3.50 an hour, and their hours are being cut. Careworkers on zero-hours contracts complain about not getting the hours they want and are finding it hard to make ends meet, so my right hon. Friend is quite right. In a recent Channel 4 “Dispatches” programme, an undercover reporter employed as a careworker confirmed the point about staff being paid way under the minimum wage. He was being paid just £3.89 an hour, working in a London borough.
Rather than improving pay, the introduction of what the Government call the national living wage is having an adverse effect on the working conditions of some careworkers. I have heard reports of one domiciliary care provider in the north-west raising the wages of care staff to £7.75—fair enough—but balancing the increase by introducing other changes that have a negative impact on employees. Sick pay, which was previously two weeks on full pay and two weeks on half pay, has ended. The hours during which careworkers must be available for work now run from 7 am to 11 pm. Mileage claims no longer include the first 10 miles of each day’s journeys—and staff are already paid only 20p a mile, which is well below HMRC’s recommended rate of 45p a mile. Workers at that care provider believe they are effectively paying for their own pay rise.
I have heard of a care provider in the east midlands cutting staff allowances and charging more for services in order to implement the national living wage. I am sure we will see much more of that up and down the country. As a result of the mileage allowance being cut by 15p to 20p a mile and the first and last seven miles of travel each day being excluded, 35% of the workforce at that care provider will lose out. Some workers have reported that they will lose up to £1,000 a year. That is shameful. It is just like the B&Q workers my right hon. Friend the Member for Enfield North talked about.
The introduction of what the Government call the national living wage was supposed to improve employees’ living standards, but it appears that some careworkers are receiving little or no benefit from the changes and that some might even be worse off. If careworkers continue to suffer because of unpaid travel time, care visits that are too short and unfair working conditions, it will have a detrimental effect on their work and the wellbeing of the people they care for. In fact, the Social Care Institute for Excellence has warned that stress and low morale resulting from how care staff are treated can have a direct impact on care service quality.
I believe that care work is a demanding job and requires skilled workers who are compassionate and have the time to provide good-quality care. It is completely unacceptable that a job that has historically been undervalued is being so exploited today and that careworkers are not being paid the basic wage for the job they do. Given the examples I have quoted, will the Minister tell us what the Government will do to ensure that careworkers are not worse off as a result of the national living wage?
I thank the hon. Member for Mitcham and Morden (Siobhain McDonagh) for securing this debate and the right hon. Member for Enfield North (Joan Ryan) for speaking very well in her place.
The Chancellor announced the national living wage with great triumphalism, but as with so many aspects of Government policy, it was quickly exposed as nothing more than smoke and mirrors. As we heard earlier, it is not a living wage but a rebadging of the minimum wage. The real living wage is independently determined by the Living Wage Foundation and currently set at £8.25 an hour. If a person cannot live off it, it is not a living wage. The Government and the Minister should apologise to the Living Wage Foundation, to the many trade unions and employers that have legitimately taken up the real living wage and to the many campaigners who have fought for it over the years. It is a gross insult to those campaigners to appropriate their term, and it is bound to lead to misleading job adverts. It is not a real living wage if it is not an actual living wage for everybody.
It is also not a living wage if someone happens to be under 25. The Chancellor said:
“Britain deserves a pay rise and Britain is getting a pay rise.”—[Official Report, 8 July 2015; Vol. 598, c. 337.]
Interestingly, under-25s are clearly not “Britain”, because they are not entitled to the higher rate of the minimum wage. Their fair day’s work is not receiving a fair day’s pay. Since the minimum wage’s inception, it has contained an in-built aspect of age discrimination. It has been Scottish National party policy for some years to equalise the minimum wage—I was convener of the youth wing when my colleagues raised it in the party. I am proud to raise that point today, along with the hon. Member for Halifax (Holly Lynch). I have heard it said that younger workers lack experience, but the minimum wage is not based on experience; it is based on age. A person can start on a minimum wage job at 16 and work in it for nine years before they are legally entitled to this new pretendy living wage, which a 25-year-old would get on their first day at work. They could walk in the door and get the higher living wage.
As we heard from the hon. Member for Halifax, this new minimum wage has also exacerbated the differential in the wages paid to younger workers in this country. As my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) said, the most pronounced effect has been on apprentices. There are 54,000 apprentices in the UK who are not entitled to this living wage. They might have families and various other needs to meet, and they deserve fair pay as well. They cannot be expected to live off nothing. Discrimination of that sort is opposed in all other parts of society. This long-standing, state-endorsed age discrimination must end, and I call on the Government to take action. If they will not, I would like them to devolve employment law to the Scottish Government, who are making tremendous progress in promoting the uptake of the real living wage in Scotland.
The need to equalise the minimum wage has increased significance for younger workers on zero-hours contracts. I had a constituent in my surgery a few weeks ago who worked in a bar in Glasgow city centre. One day, she received a phone call from her employer saying that there was no need for her to come into work that evening because her services were no longer required. After getting over the shock of her sudden dismissal, she researched her options. Citizens Advice and ACAS both said she had no rights in her circumstances as a zero-hours worker. She suspects but cannot prove that she was let go because she was over 25 whereas her colleagues were under 25. I have heard the same thing anecdotally from friends who are over 25 and have seen their hours cut. They are now finding it difficult to make ends meet and to find another job in their sector.
I would be interested, but I would be more interested to hear what we can do to equalise the wage so that unscrupulous employers are not tempted to discriminate in the first place. The Cabinet Secretary for Fair Work, Skills and Training, Roseanna Cunningham, posted on her Twitter feed a photograph of a sign in a shop window advertising for a waitress but saying that applicants had to be under 24. That is illegal, but it is encouraged by the differential in the living wage. Particular attention needs to be paid to under-25s on zero-hours contracts, who are doubly discriminated against.
I wrote to the Minister asking who was enforcing the minimum wage. I had received figures in a parliamentary answer suggesting that a great number of people were not earning the wages to which they were entitled. There are 1,718,000 over-21s earning less than £6.50 an hour, 78,000 under-18s earning less than £3.87 an hour and, as I mentioned earlier, 54,000 apprentices earning less than £3.30 an hour. Despite those figures, which show that hundreds of thousands of people are not earning the wages to which they are entitled, according to the Minister’s letter there have been only nine successful prosecutions of employers since 2007. That is because the people affected are in a position of weakness, as they might lose their job if they complain. We have to do an awful lot more. His letter mentioned that the Government were taking on more staff and investigating more, but only nine prosecutions is absolutely woeful given the scale of the problem.
There is another way of dealing with this. The Scottish Government have worked with employers—it is not necessarily about imposing a real living wage on employers, because as the Scottish Government acknowledge, that might be difficult for small employers—and as a result 56,000 employees now earn the real £8.25 an hour living wage. In my constituency, they include employees of large organisations such as Barclays and SSE; small organisations such as An Clachan café, the Good Spirits Co and Locavore; organisations that provide services, such as Southside Housing Association and Glasgow Association for Mental Health; Glasgow Caledonian University; and supermarkets such as Aldi and Lidl. If they are all able to do it, there is no reason why other employers cannot work towards it as well.
The Scottish Government, through their Scottish business pledge, have moved dramatically towards getting more people on to the real living wage, and it has been a hugely successful scheme. They first ask employers to pledge to pay the real living wage, and employers then have to meet two of eight further elements of the pledge, which can include ending exploitative zero-hours contracts and investing in young workers. They must also work towards achieving all nine elements. It has been a very successful scheme, so I suggest that the UK Government take a leaf out of the Scottish Government’s book.
It is a pleasure to follow the hon. Member for Glasgow Central (Alison Thewliss). I pay tribute to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for securing this debate and to my right hon. Friend the Member for Enfield North (Joan Ryan) for standing in for her and opening the debate. I hope that my hon. Friend the Member for Mitcham and Morden makes a speedy recovery.
I shall focus my remarks on a specific group of workers—seafarers. These are the only group of workers who are excluded from the full protection of the national minimum wage legislation and equal pay legislation. Ships working in UK waters between UK ports and between UK and continental ports are crewed by staff on pay rates that are well below the national minimum wage. Increasingly, companies are recruiting outside the UK to crew their ships with non-UK seafarers, particularly ratings, in order to profit from sub-national minimum wage pay rates.
Allied to the rise of the flag of convenience vessels, these exploitative pay and employment practices are driving a decline in the number of UK seafarers. In the early 1980s, there were 28,000 officers and 30,000 ratings in the UK merchant navy, but by June last year, the total number of UK seafarers had dropped to 23,380—a fall of nearly 60%. The position for UK ratings, particularly deck and engine, has become exceptionally precarious, with 8,830 working at sea last year—a fall of over 25% since 2011 and over 70% in the last 30 years. Pay exploitation in the UK shipping sector is happening because non-EU seafarers are excluded from the full protection against nationality-based pay discrimination in the Equality Act 2010.
Following years of campaigning by maritime unions, the last Labour Government commissioned an independent assessment of the impact of nationality-based pay differentials in the shipping industry, which was known as the Carter review. It concluded at the end of the parliamentary term in May 2010 that there would be no adverse impact on the shipping industry or jobs and recommended the outlawing of all nationality-based seafarer pay differentials.
The last coalition Government, however, rejected the Carter recommendation, but the Government were forced, under threat of infraction by the European Union, to protect European Economic Area seafarers from nationality-based pay discrimination. In recent months, maritime trade unions have contributed, with the Government and industry, to a working group on the effect of the existing protections in the Equality Act 2010, and it will report in the summer.
At present, passengers and businesses are travelling on vessels crewed by seafarers who are earning as little as £2.40 an hour. This legalised exploitation has systematically undermined maritime jobs in the UK, damaging the skills base and driving up unemployment rates in seafarer communities across the UK.
The RMT trade union estimates that prior to the introduction of the increase in the national minimum wage, over 8,300 seafarer ratings working on UK-flagged or other vessels qualifying for the tonnage tax are likely to be earning hourly rates of pay below the national minimum wage. It stands to reason, therefore, that the introduction of a higher statutory minimum wage will put more seafarers below that threshold and more employers in breach of the national minimum wage legislation.
In its March 2016 report to the Government, the Low Pay Commission recommended that a stronger third-party complaints system be introduced for employers breaching the national minimum wage. That would be through the creation of a public protocol to govern HMRC’s investigation of third-party complaints. This would provide feedback to the complainant and could be a useful source of additional evidence on the rates of pay and contractual terms and conditions of employment for seafarers. The Low Pay Commission said:
“We recommend that the Government establishes a formal public protocol for HMRC to handle third party whistleblowing on breaches of the NMW, which should include arrangements for giving all possible feedback to relevant third parties and appropriate continuing involvement in any resulting casework.”
I urge Ministers to accept that recommendation. A strengthened third-party complaints procedure represents the most effective way to tackle pay rates in the shipping industry that fall below the national minimum wage because of the understandable reluctance of the affected seafarers to complain directly to the UK Government.
I thank my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for bringing this debate to the House and for the sterling work she has done to highlight this important issue. I am sorry that she cannot be here today, and I wish her a speedy recovery. I thank, too, my right hon. Friend the Member for Enfield North (Joan Ryan) for her eloquent introduction to the debate.
I have mixed feelings about the Government’s new living wage. Of course an increase in low-paid workers’ wages is to be welcomed, but what we have here is, in effect, a new national minimum wage. The real living wage, as other Members have mentioned, is set by the Living Wage Foundation and calculated by the centre for research in social policy at Loughborough University. The research looks in detail at what households need in order to have a minimum acceptable standard of living. The Government’s national living wage is not connected to those calculations. The Government rate is based on median earnings while the Living Wage Foundation rate is calculated according to the cost of living—and, at £8.25 an hour outside London and £9.40 inside London, it is considerably higher than the Government version of the living wage.
I have a particular interest in the real living wage. TUC figures published last year showed that my constituency of Heywood and Middleton was the second worst in the north-west for payment of the real living wage, with 40% of workers earning less than that. It would therefore be churlish of me not to welcome the Government’s version of the living wage as a step in the right direction. I wish it were called something different and I wish it were more, but for my constituents and for low-paid workers up and down the country, I welcome what should be a pay rise for around 1.9 million employees.
That is why I am so appalled by the methods used by one of our national retailers, B&Q, to try to wriggle out of paying its workers any more money as a consequence of the introduction of the Government’s new living wage. I almost have to grudgingly admire its ingenuity in the various ways it has employed in attempting to cut other areas of pay in order to save itself from having to pay its workers any more money. B&Q is a well-respected national retailer and it is regrettable to see the company behaving in this manner.
Here I feel I should declare an interest in that my partner is such an avid DIY-er that he contributes substantially to B&Q’s profits, but he, too, was shocked to hear that the staff who serve him so well and so frequently are being treated so shabbily. Thanks to the tireless campaigning of my hon. Friend the Member for Mitcham and Morden, B&Q has now announced a two-year protection period, for which I am grateful. Surely, however, for a major retailer whose parent company, Kingfisher, declared profits of £512 million last year, implementing the new living wage without attempting to offset the costs by cutting other elements of pay would have been the right thing to do and the actions of a good employer.
Yesterday, it was my pleasure to visit the beautiful village of Port Sunlight in the Wirral South constituency. Port Sunlight is a “model village” of architect-designed houses, originally built to house the workers in Lord Lever’s Sunlight soap factory. Lord Lever, a businessman and philanthropist, put into action his belief that good housing ensures a happy and healthy workforce. He also implemented a workplace pension scheme, thus ensuring that his workers could enjoy a comfortable retirement. I cannot help comparing and contrasting the altruism of Lord Lever in the 19th century and early 20th century with the antisocial attitude of some modern businesses, which appear to think only of profit and the shareholder and not of that vital asset, their employees.
However, not all businesses are villains. It was my pleasure recently to attend an event in Parliament, organised by the Living Wage Foundation, which showcased the work of small businesses that had signed up to be accredited living wage employers. Those employers told me that they had a much higher rate of staff satisfaction as a result of becoming living wage employers, and—importantly—that it had improved their status and standing as employers in the community. One of them said to me, “If you can't afford to pay the living wage, then, quite simply, you shouldn’t be in business.” That is a philosophy from which some of our larger employers could learn.
The Government’s tag line for the national living wage is “a step up for Britain”, but some companies are trying to take a step back from their commitments to workers’ rights. Where companies are trying to find a loophole to take remuneration from their employees, I ask all Members on both sides of the House to work together to stop that happening, and to protect low-paid workers. I hope that one outcome of the debate will be the ability of workers who fear that they cannot speak out against the imposition of new contracts for fear of losing their jobs to contact their local Members of Parliament and ask them to stand up and speak out in their support, so that not one constituent loses out as a result of the new so-called living wage. That, surely, was never the intention.
I, too, pay tribute to the hon. Member for Mitcham and Morden (Siobhain McDonagh), not just for her efforts to secure today’s debate but for the work that she has done in recent months, fairly consistently, on this issue. I am sorry to hear that she is not very well, and I wish her a swift recovery and return to the House. However, the right hon. Member for Enfield North (Joan Ryan) stepped up to lead the debate with aplomb.
I think that Members throughout the House should be disturbed about the fact that some companies are seeking to undermine the legislative provisions of the minimum wage increase by cutting other employee benefits, such as additional premiums for Sunday working, antisocial hours or working on bank holidays. I am glad that some of those firms have been named and shamed this afternoon, because there is no excuse for poverty pay, and trying to offset business costs on the backs of the very lowest paid workers is unacceptable. However, reputational damage has been shown in the past to have a fairly limited impact on such firms. I hope the Government will take the opportunity to set out the action that they intend to take to ensure that employers meet their obligations and do not erode the terms and conditions of those on the lowest pay and in the most insecure jobs. I ask them to look at the variation-of-contract procedures to see what can be done to ensure that companies do not try to get round what is, I believe, a well intentioned increase in the pay of those on the lowest wages.
Many people over 25 who are working hard in minimum wage jobs will have been pleased to learn that they would receive at least a modest pay increase, but that will have turned rather sour for those who have learned that they will be losing out. A number of Members have highlighted cases from their constituencies, many of them in the retail sector, but others in the social care sector and the hospitality industry. My hon. Friend the Member for Glasgow Central (Alison Thewliss), and the hon. Members for Halifax (Holly Lynch) and for Ellesmere Port and Neston (Justin Madders), made the key point that people under 25 were in a particularly vulnerable position when they reached that magic age, and suddenly became less attractive to their current employers because they would have to be paid more. It strikes me as an arbitrary age, because it does not seem to be based on anything more tangible than when people’s birthdays are. At 25, young adults are probably at the peak of their labour abilities and cognitive functions. Surely that should be recognised, and they should receive a fair day’s pay for a fair day’s work like every other employee.
We must not lose sight of the fact that the setting of a floor on wages has had enormous benefits for those working in low-paid sectors of the economy, the vast majority of whom are women. When we think back to the introduction of the minimum wage some years ago—and, indeed, to every occasion on which minimum pay has been introduced—we recall that a wide range of corporate interests lined up to warn that it would lead to higher unemployment, firms going out of business, and the economy going to hell in a handcart. The reality, however, has been quite the opposite. When people on low wages have had money in their pockets, they have tended to spend it, usually in their own communities, thus boosting their local economies. Not so much of it has ended up stashed in offshore bank accounts.
A number of other Members have referred to what has happened when the national minimum wage has been increased in the past, but does the hon. Lady accept that this is a different approach? In the past, increases in the minimum wage resulted from discussions and decisions on the part of the Low Pay Commission, in conjunction with business, whereas the introduction of the national living wage constitutes a Government-imposed increase.
I certainly acknowledge that the approach is different, but I think that we should all appreciate the work done by the Low Pay Commission in assessing the levels of pay increase that our economy can sustain without pushing up unemployment, and the possibility of gaining that optimal balance between the two. However, I fear that the commission’s role has been rather undermined by this process, although a significant pay increase is long overdue. I think that we need to recognise the benefits that the minimum wage has brought, and the need to bring wages into closer alignment with the real cost of living in the longer term.
I echo the point that was made so forcefully by my hon. Friend the Member for Lanark and Hamilton East (Angela Crawley), who welcomed the increase in the minimum wage for those over 25, but said that rebranding it as a national living wage did not make it an actual living wage. The so-called national living wage is significantly lower than the real living wage, which is calculated by the Living Wage Foundation on the basis of the cost of living. A national living wage of £7.20 an hour is well below the real living wage, which is £8.25 an hour, and more in London. That is what it actually costs to have an acceptable minimal standard of living in this day and age.
That issue becomes much more acute in the context of the shift away from tax credit towards the new universal credit, which was touched on earlier in the debate. For many low-paid workers, especially parents, the increases in the minimum wage and the personal allowance will not offset the reduction in income that will result from universal credit. Moreover, the real living wage has been calculated on the assumption that families will be receiving their full entitlement of tax credit. The cuts in tax credit, work allowances, housing benefit, and other benefits that help to make work pay for low-income families will not be replaced by the increase in the hourly rate of minimum pay, and thousands of families will be worse off overall. The hon. Member for Belfast East (Gavin Robinson), who is not in the Chamber at present, gave the example of a constituent who had found himself in exactly that position.
It is estimated that the total wage gain for low-paid workers resulting from the increase in the minimum wage will reach about £4 billion by 2020, whereas the estimated reduction in tax credit and other allowances over the same period is three times that amount. The notion that this will have a significant positive effect on the living standards of low-income households is misplaced. The fact that businesses will now be paying more of the real costs of labour will not be much help or consolation to the low-paid workers whose incomes will fall.
We have heard today that some low-income working families will indeed be badly hit. The TUC calculates that those who are set to lose out financially include families consisting of three children and two parents working on the minimum wage, one full time and the other part time. According to the Equality Trust, a single parent with two children, already working full time, would also lose out, and would have to find an extra 16 hours of work a month just to plug the gap. Meanwhile, the tax changes that were announced in the Budget mean that the wealthiest 15% of earners will be hundreds of pounds better off every year.
One issue on which I have pressed the Government in the past, and on which I have been given a less than satisfactory answer, is the question of whether the increase in the minimum wage should trigger a commensurate increase in the carer’s allowance earning limit. That is not uprated through the benefits uprating order, although I fail to see why it should not be. Instead, it is raised on an ad hoc basis. For those carers who are able to work, it is often important to keep in contact with the labour market, and for those in low-paid jobs, the increase to the minimum wage could have significant implications. Some might consider reducing their working hours, but that could cause problems for their employer and also create problems with their entitlement to tax credits. The net result would be a reduction in a carers’ incomes, which are already very low. I would be grateful if the Minister could address that point today, look at it more seriously and work out how he might ensure that carers’ incomes are not inadvertently squeezed by these increases.
I hope we all recognise the value of reducing wage inequality and ensuring that everyone gets a fair day’s wage for a fair day’s work. We can make a start in the public sector. As my hon. Friends the Members for Lanark and Hamilton East and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) pointed out, back in 2011 the Scottish Government introduced the requirement to pay the living wage as an integral part of public sector pay policy, and in 2015 they became an accredited living wage employer. That means that all employees on Scottish Government-controlled payrolls receive the real living wage, which is already well above the new minimum wage being talked about today.
The Scottish Government have also established an independent fair work convention and introduced the Scottish business pledge, as my hon. Friend the Member for Glasgow Central explained. Becoming a living wage employer is only one part of the process, however, and there are already ambitious plans for expanding those commitments. The Scottish Government are also working closely with local authorities and private sector care providers to fund improvements in pay in the social care sector. This has been mentioned frequently in the debate today, and it is pertinent to my own constituency, where a care home has closed as a result of staff recruitment and retention problems. Social care sector wages have traditionally been very low, and recruitment has been difficult because of the nature of the work, yet care assistants do an enormously responsible job. They look after people who can no longer fully attend to their own needs, often going into people’s homes. If we are moving towards fairer pay, this is a great place to start, and it will benefit not only the employees but the whole community as well as delivering better and more consistent care.
It is in everyone’s interest to move to a higher wage economy. It is quite right that the minimum wage has been raised to bring it closer to the cost of living, but this Government need to make it enforceable and to enforce it, as well as taking action to stop companies sidestepping their obligations. They could lead by example by seeking to become a living wage employer and ensuring that all Government employees earn the living wage. They could also do much more to encourage private sector firms to become living wage employers.
I pay tribute to my right hon. Friend the Member for Enfield North (Joan Ryan), who has been more than a super-sub for my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) today. We all wish my hon. Friend the Member for Mitcham and Morden a speedy recovery. My right hon. Friend the Member for Enfield North gave the House some good examples of people who could lose out despite the fact that the so-called national living wage was intended to increase pay for those on low incomes. We have heard a lot of very good contributions.
We heard a contribution from the hon. Member for Shipley (Philip Davies), who appears to have read, in his book on microeconomics, of the impact of increasing wages, but not to have got on to the volume on the impact of labour as a derived demand and the impact of higher wages on aggregate demand in the economy. As we discovered when we introduced the national minimum wage, increasing pay for the less well-off can result in a more prosperous economy because of their higher propensity to consume.
I will come to my concerns about the way in which this policy is being introduced in due course. There is plenty of evidence from the introduction of the national minimum wage that if it is done correctly, increasing pay for the lowest paid workers can result in an increase in aggregate demand, and in greater productivity and prosperity for the economy.
We have heard contributions from my hon. Friends the Members for Bradford South (Judith Cummins), for Rochdale (Simon Danczuk), and for Burnley (Julie Cooper). We have also heard from the hon. Member for Lanark and Hamilton East (Angela Crawley), my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) and my hon. Friend the Member for Halifax (Holly Lynch), whose reference to Adele and the importance of paying younger people sounded convincing to someone like me.
We also heard from the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), who talked about his experience as a council leader. We heard from my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley), and from the hon. Member for Glasgow Central (Alison Thewliss). My neighbour, my hon. Friend the Member for Cardiff Central (Jo Stevens), made a pertinent point about seafarers. It is important to remember that seafarers are exempt from this legislation, and we need to bring in new protections for them. My hon. Friend the Member for Heywood and Middleton (Liz McInnes) told us about her partner spending a lot of time at B&Q. If her household is anything like mine, that is no doubt a result of his being told that he has to go to B&Q and do certain DIY jobs. This happened to me so much in years gone by that we used to call it “Be in the Queue” because I was down there so much. We also heard from the Scottish National party Front-Bench spokesperson, the hon. Member for Banff and Buchan (Dr Whiteford).
Today’s debate has been rather peculiar. On this side of the House, there has been general support for the idea of the so-called national living wage that the Chancellor announced in his Budget, but there has also been criticism of its implementation and its potential to make some people worse off. That is the purpose of today’s debate. However, the only contribution from a Back-Bench Conservative Member seemed to be against the Government’s policy altogether, so it has been a peculiar debate in that respect.
As has been highlighted, the national minimum wage was introduced by the Labour Government in 1998. It was opposed tooth and nail by the Conservatives, but the Minister for Skills has previously and rather generously acknowledged that they were wrong to do so, just as they were wrong to oppose other progressive achievements of Labour Governments, such as the NHS. He has acknowledged that fact on the record in my presence in this House, and I am grateful for his generosity in doing so.
I referred to the “so-called national living wage” because, as has been pointed out many times today, it really is not a new concept. It is a symptom of the Chancellor’s inability to do anything that might be worth while without trying to extract the maximum political advantage from it. This was highlighted when the former Work and Pensions Secretary resigned, saying that the Chancellor was always seeking to do something that was
“distinctly political rather than in the national economic interest”.
The Chancellor could have said, “I want to increase the national minimum wage for the over-25s”, which is in effect what this policy does. Instead, he chose to pinch the name “living wage” from those who have worked on devising and calculating it, who have brought together the evidence based on need to formulate the concept of a living wage, and who have campaigned for it right across the country with great success. He nicked that name for his policy, which, it has been pointed out, will not introduce a true living wage based on the concept of the evidence of need as developed by the Living Wage Foundation.
Similarly, the Chancellor could have done the thorough preparation that a policy such as this requires. He could have put the policy through a proper stress test, as was done by Ian McCartney and others when the national minimum wage was first introduced. However, that would have spoilt his piece of political theatre in the Budget, and the Great Osborno would not have been able to pull a rabbit out of his hat to the delight of all his misdirected audience on the Conservative Benches. The problem of some workers potentially being worse off could have been avoided if we had a Chancellor who was more interested in the substance of making policy work than in the smoke and mirrors of political presentation.
It is illegal for employers to pay less than the national minimum wage, yet figures provided by the Department for Business, Innovation and Skills show that the numbers of employers being fined for doing so have actually increased in recent years. We would like to know what measures will be put in place to ensure that we do not have a repeat of this deliberate lawbreaking and undermining when the so-called national living wage is more established. Will these companies be named and shamed? Will there be financial penalties?
Is my hon. Friend aware of the case of MiHomecare, a subsidiary of Mitie in the care sector? It has had to make a significant number of payments to workers in Wales and has been involved in out-of-court settlements for non-payment of the minimum wage, yet it was the Conservatives who gave Mitie’s chief executive, now Baroness McGregor-Smith, a peerage.
I am aware of that case. My hon. Friend, who is my other parliamentary neighbour, accurately reflects the problems in the care sector that came up in the debate, and describes the connections to some of the companies that need to be looked into more carefully.
The action being taken by some employers may not be illegal, but it undermines the spirit of the law, which is to provide an increase in wages and living standards for British workers. Some of those taking this curmudgeonly path are in the sectors that might benefit most from workers having extra purchasing power in their pocket, such as tourism, retail and hospitality. As we have heard, the Low Pay Commission warned that some employers could label employees as apprentices to avoid having to pay the so-called national living wage.
We have heard examples involving various supermarket chains, retailers, restaurants and so on. In the interests of time, I will not name them or repeat what was said in the debate, but in a week when we have seen one loss-making chief executive officer try to secure a pay package of £14 million a year, it is obscene that an ultimate pay rate of £9 by 2020 is being undermined by the heads of some of these big businesses. Corporation tax has been reduced in recognition of the introduction of the so-called national living wage, leading to savings for businesses. Was that intended to compensate businesses for the phased introduction of the so-called national living wage? If so, does the Minister condemn the businesses using some of these practices?
Private sector businesses may have other opportunities to recoup increased costs by raising prices for goods and services, or by altering how labour, capital and profits are apportioned and rewarded. However, those options are not available to local government, as was pointed out, and the gap there is huge. Will the Minister agree to review the local government cuts in view of the impact of the national living wage?
Many hon. Members referred to young people, who have been deliberately excluded from the so-called national living wage. The Guardian recently highlighted the case of a worker at a well-known DIY store—I will put it no more strongly than that—who was on £7.20 before the introduction of the so-called national living wage and £6.70 after its introduction. He said:
“I’m getting less for doing the same job… I feel so worthless.”
What is the Minister’s reaction to that? What assessment has he made of the impact of the so-called national living wage on workers under 25? As was asked in the debate, what is the purpose of widening the differential between the under-25s and those who are older? Is it to increase demand for the under-25s, or does it reflect that the Minister somehow believes that the under-25s are worth less in productivity terms than those over 25?
The so-called national living wage could be celebrated on all sides of the House if it was introduced properly and if the letter and spirit of the law were upheld. If not, many workers could, as we have heard, be considerably worse off. The Opposition will be watching closely to ensure that that does not occur. The Government, with all their resources and power, should be introducing the change with real vigour. Will the Minister act to ensure that, as the motion demands, no workers are worse off as a result of Government policy? I invite him to tell the House how he will do that.
This has been an excellent debate. My, how we have missed the hon. Member for Mitcham and Morden (Siobhain McDonagh). We are all agreed on that. If she is listening, I hope that she is enjoying the hospital grapes. We look forward to her rejoining us and adding great wisdom to our deliberations. However, she was well represented by the right hon. Member for Enfield North (Joan Ryan), who brought equal passion to her argument for working people in her constituency and across the land, who, as we all agree, deserve a pay rise.
I was struck by the fact that most Opposition Members failed to recognise the significance of the achievement. Call it a national minimum wage or a national living wage—I do not really care—but please recognise that it is a significant increase in the legal minimum hourly rate for workers across the country. I would have hoped that there might be a little more recognition of that, although I acknowledge that the right hon. Member for Enfield North and the hon. Member for Heywood and Middleton (Liz McInnes) were gracious enough to call it a step in the right direction. Indeed, the hon. Member for Cardiff West (Kevin Brennan) did the same from the Front Bench, even if there was a little sting in the tail, as there always is with him.
However, none of the Opposition contributors recognised why the Government are able to do this now, namely because of the steps that we have taken to ensure that the economy is strong. If the economy was weak, unemployment was rising and business failures were increasing, such an intervention would have been profoundly damaging to the British economy and to the interests of the working people whose pay we would like see increase. There would have been millions of job losses and a far greater loss of income than gain. The reason why we have been able to do this now is because of the difficult steps—every one opposed by the Opposition—that we have taken to secure a strong economy and to create the platform from which we were able to make this intervention.
As the Minister is talking about the strength of the economy, will he comment on my points about the care sector, which is not strong? It is being hit with a bill of £330 million, but the Chancellor has refused even to bring forward funding from later years, as requested by the LGA, to meet the bill. In the meantime, we have people earning £3.50 or £3.89 an hour. That is the tragedy.
I will not give way again.
We agree that we want everyone to benefit from the pay rise that that national living wage represents. I want to be clear about how we will ensure, as a Government and as Members of Parliament, that that is the case. The first and most important thing is to ensure that all employers fulfil, in full and in every case, their legal obligation to pay the national minimum wage at whatever level it is set for those under 25 and the new national living wage for those over 25.
I can report to the House that we are enforcing the national minimum wage more robustly than any previous Government and will be enforcing it more robustly every year. In 2015-16, Her Majesty’s Revenue and Customs identified more than £10 million of arrears for more than 58,000 workers across the economy—three times the arrears identified in 2014-15 and for twice as many workers. I am delighted to be able to share with hon. Members that we will increase the HMRC enforcement budget to £20 million in 2016-17, which is up from £13 million in 2015-16 and from only £8 million in the last year of the Labour Government. Spending on enforcement of the national minimum wage and the national living wage next year will be more than double what it was in the last year of the Labour Government.
Even if the situation were as rosy as the Minister paints it, which it is not, there are the underhand tactics of companies in cutting benefits aside from pay to offset the increase or even make workers worse off, which have been pointed out repeatedly in the debate. Will he respond to that? Does he consider those tactics underhand?
If the hon. Gentleman will give me a moment, I will move on to discuss the enforcement of what I consider to be moral obligations that fall upon all employers capable of meeting them. First, let me remind him about the previous Labour Government, whom I am sure he supported. He was not in that Government—he was not yet in the House, and nor was I—but they spent only £8 million on enforcing the national minimum wage in 2009-10. At a time when they seemed able to spend unlimited amounts of money on almost everything else, they thought it rated only £8 million. We are going to spend £20 million next year, which is why the amount of arrears secured and the number of workers being helped is significantly greater now than it ever was before.
Furthermore, we have introduced the scheme of naming and shaming companies that do not pay the national minimum wage or the national living wage and do not have a good reason for explaining why. That has been an extremely effective approach. Hon. Members should see some of the letters I receive from employers trying to persuade me to exclude them from a naming and shaming round; they take it very seriously indeed, as they do not want their customers and suppliers, and indeed their neighbours, to know that they have broken the law. I do, however, agree with the hon. Gentleman that legal obligations are not enough—not for us as individuals and not for employers either. I welcomed the contribution of the hon. Member for Burnley (Julie Cooper), who talked about her experience in employing 10 people and insisting on paying them a proper living wage because that was good for them, for her as an employer and for the business. Without being too pompous about it, let me say that that is the kind of moral responsibility we would hope and expect every employer to seek to fulfil.
I recognise the point made by my hon. Friend the Member for Shipley (Philip Davies) that some small employers will find the national living wage very difficult. I do not criticise them for an instant if they are not able immediately to ensure that every aspect of an employee’s conditions is preserved in full, because I am sure we would all agree that if the alternative is to fire some people, we would prefer to have more people being paid the legal national living wage than to have people losing their jobs. However, I am clear that for larger employers there is simply no excuse for trying to evade the effect of the national living wage by cutting other benefits and premiums.
I will in a moment. First, I want to remind the House of the other measures the Government have put in place to benefit businesses, which are of substantial financial value to them.
We are cutting corporation tax from 20% to 17% in 2020, and the Chancellor announced an additional percentage point specifically to make up for the impact of the national living wage. Together, all our cuts in corporation tax since 2010 will be worth £15 billion a year to businesses. We have also introduced the employer allowance, which is now being extended from £2,000 a year to £3,000 a year. As many hon. Members mentioned, we have also expanded small business rate relief, and 600,000 small businesses will be paying no rates at all from 2017. We have taken a number of steps to ensure that businesses large and small can point to other savings that have come from the Government which they can use to fund in full the increase of the minimum wage, through the national living wage, without eroding other aspects of compensation.
Although I hope hon. Members will understand why I am not going to start naming names at the Dispatch Box, they will have observed that the work of the hon. Member for Mitcham and Morden and of my right hon. Friend the Minister for Small Business, Industry and Enterprise has been peculiarly effective. My right hon. Friend met one of companies that was much discussed and it has already shifted its position, and I know that other companies will do the same if the spotlight falls on them.
I wish to conclude by making this proposal to hon. Members in all parts of the House: please bring to me and my right hon. Friend any case of a company that seems to be trying to evade the spirit of the legislation in an unreasonable way. I am talking about companies that are profitable and will be benefiting from the dramatic cut in corporation tax, and companies that will be benefiting from the employer allowance or from the cut in business rates. Bring those cases to me and I promise hon. Members that we will use the full force of our office, little though it sometimes feels to be, to put pressure on those companies to live up not only to their legal obligations, which are our job to set out in making legislation in this House, but to their moral obligations, which are the ones we feel matter a great deal more.
I thank all Members for their contributions to the debate. Low-paid, hard-working employees in the UK are being sold the same lie they were sold last year. The Chancellor tells them that their lives will get easier, but from this month thousands of them know that that is not true, and that cannot be right. I hear what the Minister says, but the loophole is not being closed. He made a generous offer, and I am sure people will take it up, but it was about applying pressure. That was not the promise that the Chancellor made; the Minister cannot guarantee that all people will be better off and will get the pay rise.
Increasing the minimum wage is not a bad policy, but I know my Labour colleagues will share my view that £7.20 an hour is not nearly enough to live on. That is why the Living Wage Foundation calculates that a worker in London needs at least £9.40 an hour to achieve a basic standard of living. Although the £7.20 hourly rate is not nearly enough, it is a start. It is, however, fundamentally unfair that hard-working people—the same people this Government have claimed they care about—should earn less as a result of this policy. If the Chancellor meant what he said, and if he is genuine in his promise of a pay rise for Britain, he should join me in supporting the motion and closing the loopholes. It is a serious matter if the Budget can be so undermined. After all, who is running the country—is it the Government or companies such as B&Q? I call on the Chancellor and the Government to guarantee that no employee will earn less as a result of the national living wage; to close the loopholes; and to recognise the rights that people are entitled to under the announcements that the Chancellor made.
Question put and agreed to.
That this House agrees with the Chancellor of the Exchequer that Britain deserves a pay rise and commends his introduction of the national living wage; notes, however, that some employers are cutting overall remuneration packages to offset the cost of its introduction, leaving thousands of low-paid employees significantly worse off; and calls, therefore, on the Government to guarantee that no worker will be worse off as a result of the introduction of the national living wage.