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Monday, 19 May 2014

Ed Miliband: Labour will tackle the scandal of low pay

Labour leader Ed Miliband will today back 'radical' new proposals to raise the value and restore the ambition of the National Minimum Wage. He will say that Labour is determined to make the biggest changes to the National Minimum Wage since its creation 15 years ago so that it meets the challenges of the 21st Century where hard work must once again be the route to a decent life. Speaking at the launch of Alan Buckle’s independent Report on Low Pay, Mr Miliband will embrace its key recommendation for an ambitious plan over the course of the next parliament to increase the National Minimum Wage so that is gets closer to average earnings.

This will mean it needs to increase significantly over five years to ensure that low paid workers who put in a hard days’ work are rewarded for doing so and cut the costs of failure in our social security system. Mr Buckle’s report shows how the number of workers on low pay now stands at 5.2 million – one in five of all workers and one in three of women at work - up from 4.8 million in 2012 and 3.4 million in 2009. The cost of low pay to government finances is estimated at £3.23 billion. 

Poor enforcement in some sectors means that more than a quarter of a million people are still estimated to earn less than the NMW, while the UK has both higher levels of low pay and lower levels of productivity than many of our main international competitors.The report sets out a new framework for the Low Pay Commission, with a strengthened role in tackling poverty and raising productivity across the UK. It would be charged with implementing a five-year target and given a new role across sectors.

The Low Pay Commission would retain the capacity to take account of shocks to the economy in the level of the National Minimum Wage set. Other recommendations in the report which Labour is considering as part of the Policy Review include:Strengthening enforcement of the National Minimum Wage by extending the remit of HMRC to take action against employers that fail to pay workers for holidays non-payment of Holiday Pay and work closer with local authorities on inspection. 

Encouraging employers to pay the Living Wage by making it a condition of major central government contracts, requiring employers disclose numbers earning less than the rate, and offering temporary incentives to raise low pay. Raising productivity and wages in different sectors of the economy by empowering the Low Pay Commission to create taskforces with employers and employees to boost productivity and wages in low paid sectors, and see how those sectors which can afford to pay more do so.

Mr Miliband will say: "Some people here will remember what it was like in the 1980s and early 1990s. Even when the economy was doing well, so many people were left behind, exploited at the bottom of a brutish Labour market, paid as little of £2 or even £1 an hour. In 1997, a Labour government took action, with one of the proudest achievements of any British government: it introduced the National Minimum Wage and saved people from a level of poverty pay that shamed our country. It was controversial at the time. The Tories warned it would destroy millions of jobs. But Labour, working with British business, helped change lives and our economy for the better."

"Britain is still one of the lowest paid countries among the world’s advanced economies. So we have to go further, we have to write the next chapter in the history of Labour’s battle to make work pay. It is time to raise our sights again because Britain can do better than this. The next Labour government will restore the link between hard work and building a decent life for your family. And today, Alan Buckle’s Report begins to tell us how: it means promoting a Living Wage which is what our fantastic Labour councils are already doing. But most of all it means setting new ambitions for our country.

"That’s why today, I am proud to announce that the next Labour government will take new radical action against low pay: a new five-year ambition to restore the link between doing a hard day’s work and building a decent life for your family. A Labour government will establish a clear link between the level of the minimum wage and the scale of wages paid to other workers in our economy. We will say workers on the minimum wage must never be left behind because those who work hard to create our nation’s wealth should share in it. This mission to tackle low pay will be in England, Wales, Northern Ireland - and Scotland too - because social justice is best achieved by working together rather than competing against each other in a race to the bottom on wages, tax rates and aspirations for our country."

Professor Sir George Bain responded to Ed Miliband's announcement by saying: "As the first Chair of the Low Pay Commission, I am incredibly proud of what the National Minimum Wage has achieved in its fifteen-year history. In particular, it has abolished extreme low pay. In the 1990s, some people were paid as little as £1 an hour; since the introduction of the National Minimum Wage, the number of people paid extreme low wages (less than half of median pay) has been largely abolished.

"The problem today is the millions of people paid just above the minimum wage, but still too little to maintain a decent standard of living. I believe that the Low Pay Commission must evolve to meet this new challenge, and I am delighted that Alan Buckle's report supports one of the central proposals of the review that I chaired for the Resolution Foundation, namely that there should be a clear goal to increase the minimum wage over the life of a Parliament."

Respond for the to Mr Miliband's announcement for the CBI, their Deputy Director-General, Katja Hall said: "The national minimum wage has been a success in raising wages for the lowest paid because it's been left to the Low Pay Commission, not politicians, to set the rate. A government proposed target would undermine the Commission’s independence. The simplicity of the national minimum wage is one of its strengths, but ultimately pay must reflect productivity. Every business should pay the national minimum wage, so we support better enforcement. The living wage takes no account of a businesses' ability to pay, particularly smaller firms. That's why it should remain voluntary, and reporting on it therefore isn't appropriate.”

Left Unity says Labour’s plan to link the minimum wage to earnings is not enough, and is calling for the minimum wage to rise to a living wage. Bianca Todd of Left Unity said: “Any rise in the minimum wage is welcome, but we need to go further and make sure everyone has a living wage. That means linking the level of the minimum wage to the cost of living, making sure it is enough for a decent life. And being able to live shouldn’t just be a ‘reward for work’ – benefits should be set at a living level as well.”

The current living wage, as set by the Living Wage Foundation, is £7.65 an hour or £8.80 an hour in London. Left Unity voted to call for the living wage at its recent policy conference.