Taxation (Living Wage)

Debate between Catherine McKinnell and Paul Uppal

Tuesday 22nd January 2013 Westminster Hall

[Paul Uppal (Wolverhampton South West) (Con)]

That point is well worn and made continually, and I am sure that all Members are aware of the top rate of tax being cut, but there is an element of financial amnesia here. As even people who only have a rudimentary understanding of economics will appreciate, the main way that wealthy people accumulate wealth is through wealth creation, rather than income, which is always variable. If we look at capital gains tax, the current rate is 28%, which is in stark contrast to the previous Labour Government, where venture capitalists were paying capital gains tax at a rate of 10%—often much lower than the cleaners who were cleaning their offices.

[Catherine McKinnell]

I appreciate the hon. Gentleman’s point. We always have to support business growth and creation. Unfortunately, many of the Government’s policies are impacting on individuals and on consumers who will buy the goods that such companies make. In reality, that is resulting in stagnation and no growth in the economy, which is taking the country backwards, not forwards, but I take his point on board.

I suggest that a simple and effective way of pulling off an image neutralisation attempt would be by not going ahead with that tax cut for the rich, and by not pushing through real-term cuts for people in work, but on low pay. The hon. Member for Harlow has put forward his alternative argument—the restoration of the 10p rate of income tax on income between £9,205 and £12,000. However, as he notes in his early-day motions, restoring the 10p rate of income tax would move workers on the minimum wage only

“about halfway towards earning the Living Wage”,

and that would be at a cost to the Exchequer of around £6 billion a year, according to the Library. I can see alarm bells potentially ringing in the Minister’s head at that prospect, particularly when the Government are forecast to borrow £212 billion more than they planned to borrow two years ago and are failing one of the key economic tests that they set themselves.

In conclusion, the Government have repeatedly stated that they support the living wage and encourage businesses to take it up where possible. That is laudable, and the Opposition agree that the living wage should not be mandatory, but we encourage as many companies as possible to implement it. I would be grateful if the Minister could provide us today with examples of measures that the Government have taken to encourage the uptake of the living wage, as well as specific examples of what firms are now doing as a consequence of the Government’s actions.

I know from my work on apprenticeships that the use of the public procurement system in encouraging take-up has been a particular area of interest for the hon. Member for Harlow. My right hon. Friend the Leader of the Opposition has suggested that we can learn from local government procurement to see whether central Government can use their buying power to insist that large firms winning major public contracts commit to being a living wage employer. I suspect that the Minister may cite EU procurement rules as preventing that from becoming a reality, but the European Commission has stated:

“Living-wage conditions may be included in the contract performance clauses of a public procurement contract ‘provided they are not directly or indirectly discriminatory and are indicated in the contract notice or in the contract documents’.”

Will the Minister clarify whether the Government have any intentions of taking that idea forward?

Finally, I would be grateful if the Minister outlined which Departments are now living wage employers and which are not. It is absolutely vital that the Government show leadership on that issue. Will he clarify whether the Treasury pays the living wage to all its staff?

Once again, I applaud the hon. Member for Harlow for securing the debate, and for highlighting the plight of low-paid workers and the squeeze on families in these straitened times. I am interested to hear the Minister’s response to the suggested approach; how that can be reconciled with the squeeze on low-paid workers that his Government forced through Parliament last night; and what his Government will do to encourage more businesses to pay their workers the living wage.