Asked by
To ask Her Majesty’s Government, further to the recent rise in
the rate of inflation, what plans they have to sustain the
increase in the national living wage.
(CB)
In asking this Question, I declare my interests. I chair the
Living Wage Commission and led a debate in your Lordships’ House
on 5 May 2020, when 52 Members of the House asked the Government
to take action on income inequality and sustainability.
The Parliamentary Under-Secretary of State, Department for
Business, Energy and Industrial Strategy () (Con)
My Lords, on 1 April 2022, the Government will increase the
national living wage by 6.6% to £9.50. Following this increase,
the annual earnings of a full-time worker on the national living
wage will have increased by around £5,000 since 2015. The
Government are committed to further increasing the national
living wage in line with their manifesto commitment to equal
two-thirds of median earnings by 2024, and we are on track to
achieve this ambitious target.
(CB)
My Lords, I thank the Minister for that Answer, but given that it
was in September 2016 that the Living Wage Commission published
its findings, that the Government took six years to raise the
minimum wage to the recommended living wage, and that national
insurance contributions will increase in April, are the
Government, in their levelling-up agenda, going to match their
rhetoric on income inequality?
(Con)
I pay tribute to the work that the noble and right reverend Lord
does on these matters, and it is important that he raises them;
we are grateful for that. As the noble and right reverend Lord is
aware, we take advice from the Low Pay Commission—comprising
business representatives, worker representatives and independent
members—on the appropriate increases, taking into account all the
various issues: what is affordable for business, rates of
inflation, et cetera. I am proud of the record that we have in
increasing the national minimum wage.
(Lab)
My Lords, families with children have been suffering some of the
worst in-work poverty and hardship. As wages cannot and should
not take account of family size, what are the Government doing to
make good the cuts in financial support for children, including
child benefit, since 2010?
(Con)
Of course, we are here discussing the national minimum wage. As
the noble Baroness is aware, benefits, universal credit, et
cetera, are a separate issue—it is important, but it is a
separate issue. On increases in the national minimum wage, since
it was introduced in 2016 it has given the lowest earners the
fastest pay rise in almost 20 years, something this Government
are very proud of.
(LD)
My Lords, some 9,000 employers across the United Kingdom pay the
real living wage as calculated by the Living Wage Foundation.
From April it will be 40p more an hour than the Government’s
national living wage. What steps are the Government taking to
persuade more employers to pay the real living wage, which
virtually everyone accepts is much closer to reality in assessing
the cost of living, especially at a time of inflation?
(Con)
Of course, I completely agree with the noble Baroness that, where
it is possible to do so, employers should pay the higher rates
for the living wage that she referenced. We want to see as many
employers as possible doing that, but when the Low Pay Commission
makes recommendations—and it has representations from all sides
of the industrial sectors—it takes into account business
affordability. I am sure the noble Baroness would not want to see
the rise in unemployment that might result from unrealistic
increases in the minimum wage.
(Con)
My Lords, of course, any increase in wages tends to get passed on
to customers. Is my noble friend the Minister aware of studies
that show that these increases are disproportionately felt by
people on low incomes? If you have a higher wage cost which
pushes up prices in a fast food joint, it is not generally
investment bankers who are impacted. At a time of rising living
costs, what assessment have the Government made of the
inflationary impact of repeatedly raising the living wage faster
than wages generally?
(Con)
My noble friend makes an important point. I am disappointed by
some of the responses from the Opposition Benches. As always with
these matters, it is a question of getting the balance right. Of
course, we all want to see the lowest paid in society paid
more—nobody would want to see that more than I would and I am
sure my noble friend feels the same way—but we have to bear in
mind the importance of considering whether it is affordable for
business. That is why we have the independent Low Pay Commission
that makes recommendations on the maximum level of increase that
can be afforded without undue inflationary impacts and is
affordable for business.
(Lab)
I remind noble Lords—before the Minister takes too much credit
for it—that it was the Labour Government who introduced the
national minimum wage and that it was introduced against
universal hostility from the Tory Opposition. Given the doubling
of energy prices expected in April, does the Minister believe
that the rise in the minimum wage to £9.50 an hour will be
sufficient for ordinary household budgets to cope?
(Con)
Indeed, I am happy to pay credit to the Labour Government of the
time for introducing the national minimum wage and I am happy to
take credit for the biggest increases in the national minimum
wage that we, as a Conservative Government and a Conservative-led
Government, have implemented since we came to power. As I said,
these are difficult issues. We all want to see it increasing;
that is why we have the independent Low Pay Commission to provide
independent advice to the Government on what is affordable for
business. We are working towards the manifesto commitment to
increase the level to two-thirds of national median pay.
(GP)
My Lords, I am absolutely delighted to see this rise in the
national living wage, but is the Minister aware that if one works
a 35-hour week at £9.50 an hour, that makes a weekly total of
£332.50? If it is the national living wage, has anybody in the
Government actually tried living on it for a week?
(Con)
I know the noble Baroness feels passionately about this and, as I
said in response to earlier questions, I think the whole House is
united in wanting to see increases in the minimum wage and the
living wage as much as possible. However, it benefits nobody if
it drives people into unemployment and further poverty. We want
to see increases in the national minimum wage, but we want to see
them on a sustainable basis.
(Con)
My Lords, listening to these questions, is my noble friend
satisfied that the Bank of England is correct in assuming that
inflation is going to be a transient phenomenon? Was it not a
mistake that it continued with its programme of QE even when the
economy was growing rapidly? If people push for wage increases,
that is how inflation takes off, and it will be very difficult
for the Bank of England to control it.
(Con)
My noble friend also makes an important point. Inflation has a
pernicious impact on the economy and, of course, it impacts most
on the lowest paid. I am sure the Bank of England wants to take
all these factors into account. I will not stand here and give it
advice on this matter, but it is important that we take account
of inflation in calculating the minimum wage, and that is exactly
what the Low Pay Commission does.
(Lab)
My Lords, to protect fixed incomes, people’s savings and to
prevent poverty, what are the Government doing to put downward
pressure on inflation? Perhaps the Minister could provide us with
some of the detail.
(Con)
The original Question was about the minimum wage. The points the
noble Baroness raises are important but they are matters for the
Treasury—I would be very happy to speak to Treasury officials and
get her a proper answer on that.
(Lab)
I am grateful to the Minister for reminding us that it was a
Labour Government who introduced the national minimum wage. He
did not remind us that it was done in the teeth of Tory
opposition, and neither did he remind us that the principal
argument used by the Tories at the time was that any introduction
of a national minimum wage would inevitably result in a huge
increase in unemployment— 2 million, I think, was the figure most
frequently quoted. Will he now acknowledge at least that whoever
was doing the Tory forecasting at the time had not the faintest
idea what they were talking about?
(Con)
Obviously I was not in government at the time but, looking back
at the debate, a lot of independent economists were concerned
about the possible impact. As I indicated in previous answers,
nobody wants to see rises in unemployment. At the end of the day,
low pay is better than no pay at all. But I am delighted to say
that with the increases in the national minimum wage—and our
record on this is second to none—we have seen the national living
wage outpace the rate of inflation by over 20 percentage points
since we have been in power. That is a good thing: it has not
resulted in a rise in unemployment, and I think that is something
we should all welcome.
(Lab)
My Lords, the Minister takes credit for the increases the
Government have introduced. Given the cost of energy and
foodstuffs to low-income families, does he think the increase
that he is taking credit for will compensate those families for
the increases they now face?
(Con)
We take credit because the Government accepted the
recommendations of the Low Pay Commission, which, as I have
indicated, was set up to consider all these matters. But I agree
with the noble Lord: it is going to be difficult—the cost of
living is going to increase substantially, probably, over the
next few months, with food and energy prices. It comes back to
the points made by some of my noble friends earlier: it is
important that we get a grip on inflation because that is
something that affects the lowest paid the most.
