National Living Wage

Debate between Philip Davies and George Howarth

Monday 18th April 2016 Commons Chamber

[Philip Davies]

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.

[Mr George Howarth]

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?

[Philip Davies]

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.

[Mr Howarth]

rose—

[Philip Davies]

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.