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Wednesday, 4 February 2015

Labour claim 'Tory failure' on wages and low pay could cost £9 billion more in benefits

Labour are claiming that 'five more years of Tory failure' on wages and low pay could cost £9 billion more in social security benefits. In a major speech at Bloomberg later today, the Shadow Work and Pensions Secretary, Rachel Reeves, will warn of the huge cost to taxpayers from another five years of Tory failure on low pay.

She will say that if the 'Tory failure on wages' in this parliament is repeated in the next:
  • Social security bills could rise by £9 billion according to new Labour Party Analysis of OBR figures, verified by the House of Commons Library.
  • This is the equivalent of a £337 bill for every household in the country.

Labour claim that David Cameron has presided over the largest fall in wages since the 1870s, with working people on average £1,600 a year worse off than in 2010 and those in full time work £2,000 a year worse off. The number of people earning less than a living wage has rocketed from 3.4 million in 2009-10 to 4.9 million according to the latest figures. 

However Labour's figures do not include the tax changes the Coalition have made, a few examples are the Liberal Democrat policy of increasing the income tax threshold, which the Treasury say has benefited 26 million working people. The basic rate threshold was £6,475 in 2010 and will be £10,600 this April. Labour also don't include the Conservative freezes in the Council tax or fuel duty, by freezing fuel duty the Government say they have cancelled Labour's planned rises which would have added 20p extra a litre by the end of in this parliament. 

In her speech, Rachel Reeves will set out further details of Labour’s plan to Make Work Pay with a high-wage, high-skill economy. Labour will halve the number of people on low pay by 2025 and drive up living standards by helping businesses to boost skills, productivity and pay.

Rachel Reeves is expected to say: “The Tories’ failure to make work pay, and their failure to deliver their promises on the deficit, are two sides of the same coin. The government’s failure to make work pay has meant they are struggling to keep social security spending under control. Last week the IFS confirmed that, for all David Cameron and George Osborne’s rhetoric, social security spending will be no lower next year than it was when David Cameron took office.”

On rising costs to taxpayers of the Tory low-wage economy, Rachel Reeves is expected to say: “The number of working people reliant on Housing Benefit to keep a roof over their head will have more than doubled over the decade at a cost of over £14 billion.” (by 2020 on current projections). “According to new analysis we are publishing today from the House of Commons library, five more years of Tory failure to make work pay, with wages falling short of expectations to the same extent in the next parliament as they have in this, will mean we face another £9 billion in social security spending on top of that already projected - a £337 bill for every household in the country.”

On the choice facing the country in May, Rachel Reeves is expected to say: “The choice we now face is clear the Tories’ low wage, low skill economy driving up benefit bills and undermining tax revenues or Labour’s plan: a plan to help businesses create and fill more productive, high skilled jobs. The Tories will leave us paying the bills of in-work poverty for years to come. Only Labour will make work pay.”