National Minimum Wage

Rachel Reeves Excerpts

Wednesday 15th January 2014 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House celebrates the 15th anniversary of the introduction of the National Minimum Wage, which falls this year, and the contribution it has made to making work pay, boosting living standards and tackling in-work poverty; notes that, before the National Minimum Wage was established, poverty pay was widespread and that the Conservative Party and many Liberal Democrat hon. Members opposed its introduction; further notes that families are on average £1,600 worse off a year and that the National Minimum Wage is now worth less in real terms than in May 2010; further notes that the Government has not backed up its promise to name and shame firms not paying the minimum wage; calls on the Government to strengthen enforcement of the National Minimum Wage, including by increasing fines for non-payment of the National Minimum Wage and giving local authorities enforcement powers; and further calls on the Government to encourage employers to pay a living wage and take action to restore the value of the National Minimum Wage so that the UK can earn its way out of the cost of living crisis and to help control the cost of social security.

For me, the proudest achievement of the previous Labour Government was the introduction of the national minimum wage. It was important because, as we know, the best way out of poverty is work and because taxpayers should not have to pick up the bill of subsidising bad employers. Making work pay is also vital to getting the social security budget under control and we will not allow the Government to let the national minimum wage wither on the vine.

Fifteen years ago, on 1 April 1999, the national minimum wage took effect. We should and do celebrate the difference it has made to millions of people. We have also called this debate today, at a time of difficulty for so many low-paid workers and with low pay a growing problem across our country, to call on the Government to take action to strengthen the minimum wage, crack down on rogue employers and restore the value that the minimum wage has lost over the past three years. We call on them to do more to build a stronger economy that enables people to earn their way out of the cost of living crisis.

[Ms Karen Buck (Westminster North) (Lab)]

Social care workers do one of the most important jobs in our society. Does my hon. Friend share my concern that in my borough, Westminster, and, I am sure, in others, social care workers are not even guaranteed the minimum wage as the travelling time between appointments is not counted for the purpose of payment?

[Rachel Reeves]

An investigation by the Low Pay Unit looked at pay rates before the national minimum wage was introduced and back then one worker in a residential care home was paid just £1.66 an hour. I agree that today, too, people working in that sector are too often exploited and that their employers get round the legislation.

The Low Pay Unit considered pay before 1997 in a range of industries. I mentioned residential care but it also came up with other examples, such as a factory worker who was earning just £1.22 an hour in 1997 and a person working in a chip shop in Birmingham who was earning just 80p an hour. That is sheer exploitation. It is poverty pay and it was taxpayers who picked up the bill.

Let us also remember what Government Members said back then. The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), now Secretary of State for Work and Pensions, said in 1997 that a minimum wage would

“negatively affect, not hundreds of thousands but millions of people.”—[Official Report, 4 July 1997; Vol. 297, c. 526.]

The right hon. Member for Richmond (Yorks) (Mr Hague), now Foreign Secretary, said back then that a minimum wage would have to be

“so low as to be utterly irrelevant”

otherwise

“it would price people out of work.”—[Official Report, 17 March 1997; Vol. 292, c. 617.]

The right hon. Member for Sevenoaks (Michael Fallon), now the Minister of State responsible for business and enterprise, said that a minimum wage

“will add costs to British business”.—[Official Report, 11 July 1997; Vol. 297, c. 1240.]

And the right hon. Member for Witney (Mr Cameron), now Prime Minister and then a parliamentary candidate in Stafford, darkly predicted in 1997 that a minimum wage would lead to a rise in unemployment.

[Mark Tami (Alyn and Deeside) (Lab)]

Conservative Members are very keen on calling for us to apologise for things. Does my hon. Friend think that it is time for them to apologise for such comments?

[Rachel Reeves]

It is not just the Tories who should apologise; the Government’s junior coalition partners should apologise, too, because they were worried back then as well about the impact of the minimum wage. In 1994, their then leader attacked Labour’s

“umbilical attachment to a national, high-rate minimum wage”

and said that

“a national minimum would…force many on to the dole”.

The Liberal Democrats went into the 1997 general election with a manifesto commitment not to a national minimum wage but to a

“regionally variable, minimum hourly rate.”

Let us be grateful that they did not get their way. Despite the then Opposition fighting the legislation tooth and nail, line by line, clause by clause, using every trick in the book to slow, frustrate and obstruct its progress, the national minimum wage became law.

[Caroline Dinenage (Gosport) (Con)]

I am grateful to the hon. Lady for her fascinating history lesson. I wonder whether her bit of paper also says that 500,000 people lost their jobs under the previous Labour Government and whether she agrees that the announcement made this morning demonstrates the Government’s absolute commitment to ensuring that no employer will be able to exploit their employees by paying unfair wages.

[Rachel Reeves]

Two million jobs were created under the last Labour Government and employment reached a record high, so I am not sure where the hon. Lady gets her statistics from.

I have quoted the former leader of the Liberal Democrats but, back then, where was the Secretary of State for Business, Innovation and Skills, the right hon. Member for Twickenham (Vince Cable)? He was nowhere to be seen in the debates. He was nowhere to be seen on the voting record. On Second Reading and Third Reading, he failed to vote. Apparently, he abstained because he had reservations about a minimum wage. Perhaps he will stand up today to profess his concern for the plight of the low-paid. I am happy to take an intervention from the right hon. Gentleman if he wants to make one.

[Ian Mearns (Gateshead) (Lab)]

Although the Secretary of State for Business, Innovation and Skills had reservations about the minimum wage, many of my neighbours who worked in the security industry on 90p or £1 an hour back then are eternally grateful for the Labour Government’s action in introducing the minimum wage. It made a massive difference to their lifestyle.

[Rachel Reeves]

I thank my hon. Friend for that intervention, which reminds me of a story that my predecessor as MP for Leeds West told me. He saw a job advert in our constituency for a security guard back in the mid-1990s that said, “Pay, 90p an hour. Uniform provided. Bring your own dog.” Those were the sort of jobs that existed back then, but members of this Government opposed the national minimum wage legislation. I look forward to hearing what the Secretary of State for Business, Innovation and Skills has to say later, but people will be entitled to ask him where he was when we abolished the scandal of jobs paying less than £1 an hour and when British workers won the right to be paid a decent minimum wage.

[Grahame M. Morris (Easington) (Lab)]

Notwithstanding the Secretary of State’s reservations about the minimum wage, what does my hon. Friend think about the reservations of ordinary working people about the Government’s plan to give 100% bonuses to bankers at the Royal Bank of Scotland? Will that be well received?

[Rachel Reeves]

Many people earning £6.31 an hour will be shocked and outraged to find out that bankers this year will get bonuses worth more than they earn, but they will be even more shocked to find out that they are the ones who are paying for those bonuses.

[Alex Cunningham (Stockton North) (Lab)]

I am suspicious about a tomato company that is expanding in my constituency. It appears to be replacing Stockton workers with people from overseas and paying them the minimum wage. I am told that those foreign workers are charged accommodation costs, so reducing the value of that wage. The company will not answer my letters. Does my hon. Friend understand my suspicions?

[Rachel Reeves]

I will come to that point shortly because the number of firms that are getting out of paying the minimum wage is incredibly worrying. We suggest increasing the fine to £50,000 for not paying the minimum wage, but there is no point in having such a fine if the legislation is not enforced.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Today’s Glasgow Herald reports that the fine will go up to £20,000 from where it is today. Surely, that is not nearly enough, given that hundreds of thousands of people are not even paid the very minimum wage of £6.31 an hour.

[Rachel Reeves]

At the Labour party conference, my right hon. Friend the Leader of the Opposition called for the fine to be increased to £50,000, and I support that. It is also important that companies that get out of paying the minimum wage are prosecuted, and we are not seeing that under this Government.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

With regard to the advert about the security guard and the dog, I remind my hon. Friend that the RSPCA refused to allow the dog to work, yet the security guard had to do so.

My hon. Friend is running through a list of the abstentions in the vote on the minimum wage. Please do not leave out the separatists in Scotland, who I think were washing their hair that night.

[Rachel Reeves]

I thank my hon. Friend for drawing the attention of the House to the voting record of other Members of Parliament on that night.

Thanks to Labour Members of Parliament and a Labour Government, for the first time in history, in England, Scotland, Wales and Northern Ireland, British workers had a legal floor below which their hourly pay could not fall. Slowly but surely during the following years the rate rose. It was attacked every step of the way by many Government Members and, in 2003, when the Labour Government announced a 16% increase in the minimum wage over two years, the right hon. Member for Twickenham attacked the policy directly, saying that it would set a dangerous precedent.

The result of the minimum wage was to boost the wages of nearly 2 million low- paid workers, two thirds of whom were women. It helped to lift 1 million children out of poverty and every authoritative economic study concluded that it brought no negative employment effects, despite the warnings of Government Members. No wonder that a survey of academic policy experts conducted by the Institute for Government judged the national minimum wage to be the greatest policy success of the past 30 years. It is now a policy supported by the CBI and the TUC, whose nominees work together on the Low Pay Commission. It is seen by the British people as a vital British institution, underpinning basic rights and decency in the way our economy works.

[Mr David Hanson (Delyn) (Lab)]

rose—

[Susan Elan Jones (Clwyd South) (Lab)]

rose—

[Rachel Reeves]

I give way to my hon. Friend the Member for Clwyd South (Susan Elan Jones).

[Susan Elan Jones]

When Members are a little shy, they should have a little encouragement from the rest of us. I worry that some Government Members are a little shy. They are not usually frightened of defending their party in government. Would they like to do so now, and will my hon. Friend allow them to do so?

[Rachel Reeves]

I have already made the offer to the Secretary of State, but we have not yet heard from him. All Members are welcome to make interventions, but in the meantime I will take an intervention from my right hon. Friend the Member for Delyn (Mr Hanson).

[Mr Hanson]

I confess that I was here when we voted for the minimum wage. I did vote for it, having stayed up most of the night, because I was kept up by the Conservative and Liberal Democrat Members who ensured that we did have to support that with our votes.

Does my hon. Friend accept that the additional spending power given to many millions of people, including in my constituency, which was spent locally, helped to boost jobs in retail, on the high street and in locally produced goods?

[Rachel Reeves]

I congratulate my right hon. Friend on his work in helping to put the national minimum wage on to the statute book. He is absolutely right to suggest that one of the contributions to the cost of living crisis that we see today is that the national minimum wage has not kept pace with the increase in prices during the last few years. The introduction of the minimum wage did indeed help to boost the spending power of workers.

[Julian Smith (Skipton and Ripon) (Con)]

rose—

[Mr Brooks Newmark (Braintree) (Con)]

rose—

[Rachel Reeves]

I am so shocked. We have two interventions from Government Members. I will happily give way to not one, but two Government Members.

[Julian Smith]

As a fellow Yorkshire Member, I thank the hon. Lady for allowing me to intervene. Will she welcome this week’s announcement on inflation at 2%, and will she accept that this, as well as the Government’s phenomenal job creation results, are a key part of the package of getting people better paid in this country?

[Rachel Reeves]

For 41 of the 42 months that the Prime Minister has been in office, prices have risen at a faster rate than wages, and that continues to be the case. The only month that it was not the case was in April last year, when bank bonuses were deferred from March to April to take advantage of the cuts in the top rate of tax from 50p to 45p. [Interruption.] That is the only month in which prices grew at a slower rate than wages, not for ordinary workers, but the privileged few who the hon. Gentleman’s party always supports.

[Mr Newmark]

Will the hon. Lady—[Interruption.]

[Mr Newmark]

I fear that the hon. Lady’s answer might have frightened my colleague away. I promise that I will not run away after she answers me. Will she at least acknowledge that this Government, by raising to £10,000 the level at which tax hits, thereby taking 2.7 million people out of taxation altogether, have indeed helped the low-paid?

[Rachel Reeves]

Work by the Institute for Fiscal Studies has shown that, taking account of all the changes to taxes, tax credits and benefits since the Government came into office, the average worker is now £850 worse off. The hon. Gentleman points to one thing, but the VAT increase means that people are worse off, as do the tax credit changes. Overall, when all those things are added up, people are worse off, not better off. I hope that he will stay a little longer than his colleague to hear a bit more of the debate.

We know that we need to build on the success of the national minimum wage, because today we face a new challenge: getting our economy working for working people and tackling the worst excesses of insecurity and exploitation in our labour market.

[Mel Stride (Central Devon) (Con)]

Further to the point made by my hon. Friend the Member for Braintree (Mr Newmark), does the hon. Lady not accept that the pressure on living standards is a function not just of wages, but of the costs that average families face? Will she thank the Government, as I do, for having frozen council tax during the period we have been in office, unlike her party, which doubled it during its period in office?

[Rachel Reeves]

If the hon. Gentleman looks at what has happened to living standards, he will see that the average worker is £1,600 worse off than they were in 2010. I am surprised that he applauds what the Government are doing—I certainly do not—because workers in his constituency are worse off, not better off, after three and a half years of Conservative government.

[John Robertson (Glasgow North West) (Lab)]

Does my hon. Friend agree that Government Members, after giving up attacking us on the minimum wage, have now moved on to more sinister things, such as workers’ right, zero-hours contracts and a vast increase in the number of people in part-time employment, to mask the fact that people are so much worse off than they ever have been? The outlook for those people now is something we never saw until the Government came to power.

[Rachel Reeves]

I thank my hon. Friend for that intervention. The reality is that under this Government we have seen record numbers of workers on zero-hours contracts, record numbers of people who want to work full time having to work part time, and wages failing to keep up with prices. The average worker is now £1,600 a year worse off and the number of people being paid less than the living wage is up from 3.6 million in 2010 to more than 5 million today. The value of the minimum wage has fallen by 5% over the past three and a half years. For a full-time worker that means a real-terms pay cut of £13 a week.

[Mr David Hamilton (Midlothian) (Lab)]

Is my hon. Friend as surprised as I am that Government Members are not supporting good employers? There are good employers in my constituency who are arguing very clearly that undercutting the minimum wage is affecting their business. They want good employers, not bad ones.

[Rachel Reeves]

I thank my hon. Friend for that intervention. We saw similar things when Labour introduced the national minimum wage in the first place, because in many cases those who benefitted were the good employers who wanted to pay their workers a decent wage and who were being undercut by the cowboys.

[Jim Shannon (Strangford) (DUP)]

I congratulate the Opposition on bringing this matter before the House for consideration—we all have an interest in it. Does the hon. Lady share my concern about those in long-term apprenticeships who are not receiving the minimum wage? That has been brought to my attention on a number of occasions. They are glad to have the experience and a vocation at the end of it, but in my opinion they also deserve the minimum wage, which many of them do not receive.

[Rachel Reeves]

There is an apprentice rate for the minimum wage, which is important, but we need to ensure that more people are doing good-quality apprenticeships so that at the end of them they can get jobs not only at the minimum wage, but above it. My worry is that too many of the current apprenticeships do not offer the decent training that will enable people to get a good-quality job.

[Steve Rotheram (Liverpool, Walton) (Lab)]

My hon. Friend is making an excellent speech. Does she agree that while it was a brave Labour Government who brought in the national minimum wage, they were working in conjunction with the unions, which were pivotal to bringing in the policy? It will be the unions, working together with the Labour Government in 2015, that will introduce a living wage.

[Rachel Reeves]

I thank my hon. Friend for that intervention. Trade unions, including the Union of Construction, Allied Trades and Technicians, of which he is a member, did a huge amount of campaigning for the introduction of the minimum wage and campaign today to ensure that more people are paid a living wage. I will say a little more about what we are willing do in government to ensure that more people are paid a living wage above the national minimum.

[Mr Jim Cunningham (Coventry South) (Lab)]

The freeze in council tax, which was mentioned earlier, looks good on the surface, but councils are not being compensated for it, and they are stacking up a problem for two or three years down the road, when there will be massive cuts to services.

[Rachel Reeves]

My hon. Friend is absolutely right. Many councils, including mine in Leeds and his in Coventry, have been hard hit by the cuts to the local authority grant, which are affecting some of the services that the most vulnerable people rely on.

[Guy Opperman (Hexham) (Con)]

Can we get to the nuts and bolts of policy? Will the hon. Lady give the House an assurance that policies such as the petrol duty freeze and the council tax freeze—[Interruption] I am sorry, but the hon. Member for Rhondda (Chris Bryant) is chuntering so much that it is hard to hear him—would be continued under a Labour Government were they to be elected?

[Rachel Reeves]

I suggest that Government Members look at what we are debating: the national minimum wage. I know they do not want to talk about it, because they did not support it in the first place, but it would be nice if they could talk about its impact on their constituencies. However, I think we may have to wait for another occasion.

We have a Government who opposed the national minimum wage when it was introduced and who are not enforcing the legislation properly today. Thanks to an investigation by the independent Centre for London, we know that as many as 300,000 workers are being paid less than the minimum wage. We have reports of workers having the costs of uniforms, accommodation, transport or training illegally deducted from their pay packets. We have shocking accounts of working conditions for some people in sectors such as elderly care which hurt not only employees but vulnerable people who need a reliable and good-quality service from people who are paid a decent wage. There are stories of legal loopholes being used to bring in migrant workers who are, as my hon. Friend the Member for Stockton North (Alex Cunningham) said, forced to work at exploitative rates of pay that also undercut and undermine the pay and conditions of all workers.

Despite that, the number of enforcement cases opened or registered has fallen in every year of this Tory-led Government, and it is now at less than half the level it was in the last year of the Labour Government. Since this Government came into office, just two prosecutions have been brought for non-payment of the minimum wage. They have repeatedly said that they will name and shame firms that are flouting the legislation, but they have not named a single one.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

My hon. Friend is making a very powerful speech. Does she agree that perhaps one of the reasons the national minimum wage has not been enforced is that Government Members are not 100% committed to it? For example, the hon. Member for South Northamptonshire (Andrea Leadsom) has called for businesses with three employees or fewer to be exempt from the national minimum wage, as well as from regulations on maternity and paternity rights.

[Rachel Reeves]

Not only are Government Members not 100% behind the national minimum wage; they cannot even bring themselves to say “national minimum wage”.

[Charlie Elphicke (Dover) (Con)]

The Government are asking the Low Pay Commission to review the minimum wage with a view to increasing it. Does the hon. Lady welcome that—yes or no?

[Rachel Reeves]

The hon. Gentleman is a little behind the curve. That is what the Low Pay Commission does: that is what we set it up to do.

The failure to enforce the legislation properly has contributed to a worrying rise in in-work poverty. It used to be thought that if someone got a job, put in the hours and put in the effort, they would be paid enough to keep them and their family out of poverty and have a decent standard of living—that was the deal. But today, for the first time since records began, the majority of people in poverty are in work and the majority of children in poverty are brought up in working households. It is just not good enough that in today’s Britain an honest day’s work does not bring in a decent day’s pay.

[Dame Anne Begg (Aberdeen South) (Lab)]

Does my hon. Friend agree that perhaps the best way to make savings in the welfare bill would be to make sure that people are not just in work, but in well-paid work, so that they would not have to depend on welfare?

[Rachel Reeves]

I could not agree more with my hon. Friend. If more people were paid a living wage, if the minimum wage were enforced and if more people who want to work full time were doing so rather than working part time, all those things would help bring down the rising costs of social security.

A Britain where people who are putting in the effort and the hours still cannot make ends meet cannot be right and it is not fair. A Britain where parents who want to spend more time with their family and children but can hardly see them because they have to take on a second job is not right and it is not fair. A Britain where a young worker who wants to go to evening classes to improve their prospects but cannot because they have to take on an extra shift in the evening just to make ends meet is not right and it is not fair. A Britain where a woman cleaning the offices of well-paid executives before they arrive in the morning and who is still at work in the evening serving on the supermarket tills is not right and it is not fair.

This is not just an injustice to those families. It is, as my hon. Friend has said, imposing cost on the rest of us as well, because lower pay means more money spent on tax credits and housing benefit. The bills of in-work poverty are rising faster than this Government can cut people’s entitlements. It also means less tax and national insurance going into the Government’s coffers. If we want to get the costs of social security under control and if we want to put our public finances on a sustainable footing, we need to get our economy working for working people, so that we can all earn our way out of the cost of living crisis that this Government have created.

What solutions do Government Members have to offer? As my hon. Friend the Member for Feltham and Heston (Seema Malhotra) has indicated, the hon. Members for Christchurch (Mr Chope), for Wellingborough (Mr Bone), for Cities of London and Westminster (Mark Field), for Windsor (Adam Afriyie), for Clacton (Mr Carswell) and for Bury North (Mr Nuttall) sponsored a Bill that would have enabled employees to agree with their employers that they should not be paid the minimum wage. The hon. Member for South Northamptonshire (Andrea Leadsom) has said that people working for businesses with three employees or fewer should not have to be paid the minimum wage. The hon. Member for Esher and Walton (Mr Raab) has said that 16 to 21-year-olds should not have to be paid a minimum wage. The hon. Member for Shipley (Philip Davies) has said that disabled workers should not have to be paid the minimum wage. Shame on them and shame on the Conservative party. It is the same old story from the same old nasty Tories. Their only answer to our economic problems is to cut taxes for the richest and cut pay for the poorest.

[Andy Sawford (Corby) (Lab/Co-op)]

The push to stop a minimum wage for 16 to 21-year-olds is appalling at a time when the Government have made life so difficult for that group of people in our society through their changes to the education maintenance allowance and the increase in tuition fees, which the Liberal Democrats, of course, promised would not happen. It is absolutely wrong and we must fight it.

[Rachel Reeves]

I could not agree more with my hon. Friend. With almost 1 million young people out of work—250,000 of them for more than a year—hitting them further by saying that they should not be entitled to a minimum wage is doubly unfair, cruel and callous.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Is not a further point that there are many threats to wages in rural communities in particular—where the cost of living is higher—not least as a result of this Government’s shameful decision to abolish the Agricultural Wages Board, which protected the pay of many low-paid people?

[Rachel Reeves]

I thank my hon. Friend for that intervention and for his work on these issues as a shadow Environment, Food and Rural Affairs Minister.

Labour Members know that a strengthened minimum wage and practical policies to promote the living wage are essential to building a recovery that works for working people and to securing rising standards of living for the future. That means stronger penalties and effective enforcement against rogue employers who flout the minimum wage. It means plans to restore the value of the minimum wage, which has been lost over the past three and a half years. It means the Government doing their bit to support the campaign for a living wage by setting an example with their own employees and contracts, as Labour councils are doing up and down this country, and it means the Government sharing the savings to the Treasury with employers who commit to paying the living wage, as we will do with our Make Work Pay contracts.

The national minimum wage is one of Labour’s proudest achievements. It was opposed by the Tories every step of the way, while their coalition partners tried to water it down and frustrate its purpose, and the current Business Secretary sat on his hands. That is why we cannot trust the Tories or their Liberal Democrat supporters to protect the minimum wage, why we cannot trust the Tories to enforce or strengthen it, and why we cannot trust them to deal with the cost of living crisis.

It therefore again falls to Labour to protect and strengthen the national minimum wage by increasing fines for those who exploit workers; investigating rogue employers and enforcing the law properly; restoring the value of the national minimum wage and catching up the lost ground of the past three years; and encouraging employers who can do so to go further and to pay the living wage.

I suspect that when the Secretary of State gets to his feet, he will tell us how he now supports the minimum wage and wants it to be increased and to be enforced better. If that is his way of apologising for his past sins, so be it, but I must warn him and his Government that we will be watching. Working people who are struggling to earn a living and to survive the cost of living crisis need more than warm words and liberal promises; they need action, and only a Labour Government will deliver that.