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does not follow that such negative effects would flow from a targeted minimum wage of the type being administered by the wages councils. Pending the implementation of an integrated tax and benefit system, my colleagues and I believe that a reformed wages council system would be and should be an effective tool in tackling low pay while minimising any negative effects of a full-blown minimum wage policy.My party opposed the 1986 reforms and queried how it could make sense, for example, to set a single overtime rate regardless of whether overtime was worked for an extra half hour at the end of a working day or for six hours on a Saturday. We were highly sceptical of the job creation potential arising from young people being excluded from the scope of wages council legislation. There is claim in the consultative document that
"the rate of youth unemployment has declined dramatically" since 1986. No evidence was presented to show that that decline has anything to do with sectors covered by wages councils. Also, there is no claim that the rate of youth employment has gone up. That might have been a far more relevant claim if taking young people out of the scope of wages councils had the effect that the Government are claiming. That is the hallmark of the consultative document. It is full of bold and bald statements. For example, the very first paragraph refers to the White Paper "Employment for the 1990s." It states :
"Job growth in the 1990s will depend on pay arrangements which reflect a great deal of responsiveness to local labour market conditions ; changes in product markets and technology ; differences in performance, merit, and skills ; the continuing profitability of the enterprise ; and international competitiveness."
The White Paper suggests that wages councils are incompatible with such concepts and practices.
Speaking on the subject of low pay in a debate on 15 February 1984, the right hon. and learned Member for Monklands, East (Mr. Smith) drew attention to conclusions that had been arrived at by a group of Cambridge economists who had been asked by the Government to look at the effects of wages councils on the economy. That group of economists found
"no evidence of direct benefit from the abolition of wages councils. We found no evidence of any increase in economic efficiency, of any increase in total numbers of jobs in the industry and yet, at the same time, there was significant evidence of an extension of low pay".
Such quantitative research is more significant in a debate such as this--I do not doubt that one of his constituents went to the hon. Member for Thurrock--but it is more likely that there will be no real impact on job creation by the abolition of wages councils. Mr. Janman rose --
Mr. Wallace : The hon. Gentleman spoke for well over 20 minutes. There is some evidence that the volume of trade is far more important than pay in determining employment levels. Eighty six per cent. of workers in sectors that operate under wages councils are in markets in which there is no international competition. That is significant. It means that, therefore, all companies are operating within the same rules. It is not as though they have been disadvantaged by foreign competition.
It is difficult for me to try to find 10 or 15 minutes to have a haircut. I do not believe, therefore, that, after 1992, and the completion of the Channel tunnel, hairdressers or barbers in London or in Cornwall or Shetland will be in
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competition with barbers in Calais, or even barbers in Seville. The argument that companies affected by wages councils would be competitively disadvantaged does not stand up.Hon. Members must examine the Government's own admissions in the consultative document. They tell us that the 1986 legislation required councils determining minimum rates to consider the employment effects of their decisions in areas where workers are generally paid below the national average for their trade or occupation. In other words, since that became law, wages councils have been obliged to consider the employment effects. Yet the same consultative document complained that the 1986 changes had not had the desired effect because in the first year the average increase in wages council settlements was 8.6 per cent. and in the second year it was 6.3 per cent. The Government are not complaining because the figures are too low. Surely, having given regard to employment effects, the wages councils have decided that they have no effect on unemployment ; or the wages councils have not been fulfilling their statutory duty. If that is the Government's allegation, they should have the guts to make it in a more forthright manner.
The Government have a blinkered approach, in spite of everything that has been set up to keep up the charade of consultation. The whole document has one conclusion--that the Government are intent on abolishing wages councils. Paragraph 16 refers to anomalies. There are anomalies in respect of people who work in laundries. They are covered if washing is done manually, but not if it is done by machine. The Government's attitude is to abolish the wages councils to resolve the anomaly. No Conservative Member has thought to say, "There is something wrong with the pay of those who work in launderettes. Should not the argument be to extend the scope of wages councils?"
The one statement with which I agree is that :
"The world of the 1990s will be very different from that of 1909." Although I agree with that statement, I draw some different conclusions.
The hon. Member for Oldham, West (Mr. Meacher) has already quoted Winston Churchill on the introduction of wages councils. The Secretary of State's response was pretty feeble. He could at least have tried to explain that away by saying that at that time Churchill was a Liberal. Nevertheless, ever since then, Conservative Administrations have followed the policies that the 1909 Bill introduced.
Mr. Ian Bruce : Can the hon. Gentleman name a single wages council whose minimum wage is generous or even average? Surely all wages councils have helped to ensure that low wages are perpetuated and institutionalised.
Mr. Wallace The hon. Gentleman misses the point. Obviously one would wish to see even higher wages, but if we abolish wages councils the chances are that wages will be driven even lower. Even the CBI, responding to the 1985 proposals, expressed fears about the abolition of wages councils because it foresaw companies undercutting companies and small businesses undercutting small businesses, leading to job losses rather than job creation, and implicit in that was the driving down of wages.
In 1909 Churchill saw wages councils as being a means of protecting those whom we believe to be the most vulnerable and most likely to receive low pay. The work
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patterns of the 1990s will undoubtedly produce employees who fall into that category, not least the young, those in part-time employment, home-based workers and the new army of low-paid cleaners employed by private companies to clean our hospitals and local authority premises. Rather than considering the abolition of wages councils, we should be considering their strengthening and extension.Any hon. Member, particularly any Conservative Member, who doubts whether we still have vulnerable and low-paid people as we approach 1990 should read an article in the Financial Times on 14 October 1988 by Mr. Jimmy Burns. It describes the plight of a woman whom he cannot even name for fear that her employer would find out. That woman works at home in Birmingham as a seamstress for about 56 hours per week and receives £20 to £25. She was unsure of her employment rights and even who her employer was.
Mrs. Mahon : I can top that example. I am involved with a group of home workers who have been receiving as little as 24p an hour for packing Christmas cards for Woolworths. To date, Woolworths is refusing to see them, even though those workers have been trying to arrange a meeting for three months.
Mr. Wallace : The hon. Lady underlines the point that we still have in our midst vulnerable people who, because of their position, can be exploited by means of low pay.
Just before the passage quoted by the hon. Member for Oldham, West, Winston Churchill said :
"It is a serious national evil that any class of His Majesty's subjects should receive less than a living wage in return for their utmost exertions."--[ Official Report, 28 April 1909 ; Vol. 1V, c. 388]
All Opposition Members would endorse that sentiment.
If one were to ask, as I think the hon. Member for Dorset, South (Mr. Bruce) tried to do, whether the abolition of wages councils would help improve the circumstances of those people to whom I and the hon. Member for Halifax (Mrs. Mahon) referred, I could not agree that they would be helped in any way. The economic case for abolition has been asserted by the Government, but as a Scots lawyer I would not even be generous enough to give them the verdict of not proven. They have come nowhere near to backing up their assertions with any well-argued economic case.
The existence, even in 1989, of vulnerable low-paid workers is argument enough not only for the retention of reformed wages councils but for their extension, backed up by a well-resourced inspectorate so that their orders can be guaranteed. In that way we can try, albeit in a small way, to raise the level of expectations of pay of many people in Britain who are still paid a ridiculously low amount and who, if the economy is succeeding as well as the Government claim, deserve to share that much more in the benefits of it.
8.14 pm
Mr. John Redwood (Wokingham) : My right hon. Friend the Secretary of State rightly concentrated on the progress that has been made thanks to the economy's vitality under the Government's enterprise policy. The 30 per cent. real increase in earnings at the lower level is in stark contrast to the 1 per cent. or 2 per cent. real decline recorded in the Labour years in the 1970s. But what matters most is whether people believe their take-home pay is fair and, most especially, whether they believe the
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stoppages out of their gross pay are fair, taking into account the need for public services and relative income levels within society. One reason why there has been such progress in improving the take-home pay of people in the lower pay bands is that the Government have been prepared to cut taxes across the board and, in certain Budgets, to concentrate on cutting them in ways which help those at the lowest end of the income scale.Ms. Short : We all know that the hon. Gentleman prides himself on being a great intellectual. Therefore, I am sure that he will confirm that the Government's tax take since they came to power in 1979 has increased. It has simply moved from income tax to VAT and national insurance. I am sure that the hon. Gentleman knows that that is true and will confirm it.
Mr. Redwood : The hon. Lady is missing the point. I am talking about incentives to work and the level of stoppages from pay. I am about to illustrate that there has been substantial progress, as she should know.
The standard rate of income tax has been cut from 33p in the pound to 25p in the pound. A new level of national insurance contribution has been brought in at only 5 per cent. on lower earnings--a big improvement on the position when the Labour Government left office. There has also been a substantial increase in the real value of thresholds before people start to have to pay income tax. Those three elements create incentives to work. They create more jobs and enterprise in the economy. That is why there is so much growth in the economy which has enlarged the prosperity of everyone and has produced startling increases in real take-home pay after allowing for all kinds of taxation in the economy and its impact upon purchasing patterns.
I want to urge the Government to continue in two directions. First, I agree that we should not give up on deregulation. That is an important part of the enterprise policy. It is the way to create jobs or to avoid the destruction of more jobs--jobs that were destroyed by the policies pursued by the Labour Government.
Secondly, I want to see the Government pursue the policy, between the Department of Employment, the Department of Social Security and the Treasury, of cutting taxation, especially for those on lower pay, in the next Budget.
I want to illustrate my point by showing the current system and then sketching out some ideas for improving it still further. I preface my statement about the current position with the overriding comment that at every level of income, especially those affecting the lower paid, the position is so much better today than it was in 1979.
Mrs. Mahon : May I challenge the hon. Gentleman on that by citing an example of one group of 250 workers in my constituency who, because of the Government's privatisation policies in the NHS, lost one quarter of their pay when they were taken over by a private company and they also lost out on holiday pay, pension rights and sickness benefit. They had a reduction in pay of 25 per cent. and the work force was halved. Does the hon. Gentleman agree that they are not better off than they were in 1979?
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Mr. Redwood : I would need more information on their rates of pay in 1979, their agreements, the nature of the incentive and bonus arrangements, and so on. However, the hon. Lady is straying from my point. I am talking about the tax system and the marginal rates of tax that hit people with different levels of income.
Under today's system, people earning up to £43 a week are not taxed. At £43 a week people start to pay a 5 per cent. national insurance contribution over the full range of their earnings. At £53.37 a week a single person starts to pay 30 per cent.--25 per cent. income tax and 5 per cent. national insurance. At £75 per week, the national insurance rate increases by two points, producing a new overall rate of 32 per cent. At £115 per week, one reaches the full rate, before reaching the higher rate of tax, of 34 per cent. While those rates reflect an improvement on 1979, this year's Budget will give scope for more progress along the road of reducing the level of stoppages for the lowest paid. The best way of doing that, targeted most accurately at the lowest paid, is to raise the threshold at which national insurance is payable. The answer I received from the Treasury is most illuminating. I asked what would be the revenue costs of raising class 1 contributions from £43 to £55 per week. I was told that, given the way in which the rebate system worked, there would be no loss to the Treasury.
Another way of helping the lower paid that is often urged upon the House is raising thresholds and the level at which one begins paying income tax. That approach is not as well targeted because increasing the threshold helps people on high salaries more as they benefit from a reduction linked to the 40 per cent. tax rate rather than the 25 per cent. rate.
Another way of helping everyone, including the low paid, is to reduce the standard rate of tax. My own estimates and Treasury costings indicate that, this year, we could have £4,000 million to give back to taxpayers and still run a very prudent budget--by which I mean repaying more than £10,000 million of public debt, which is what we ought to do for other economic reasons.
Such an approach would give us scope to raise thresholds by between 7 and 10 per cent. If we raised tax thresholds by 10 per cent., it would cost only £2,000 million in 1989-90. It would enable us to cut the standard rate of tax by another 1p on the road to a rate of 20p in the pound, which I hope we shall reach in 1991. It would also leave us free to make a substantial increase in the national insurance threshold. Why not increase it to £70 or £75 per week? We could certainly raise it to £55 or £60 without creating any great revenue problems.
As for income tax, it is important to continue stressing that lower income tax is good for the economy as a whole, is good for incentives, and means that people at all but the lowest income levels can keep more of the money that they earn. Lower tax rates affect the pattern of part-time employment, and attitudes towards bonuses, promotion, and seeking better job opportunities. We wish to continue fostering an enterprising and prosperous economy in which people will take the opportunities that are now so visible across the width and breadth of the country, in the north as well as the south, the east as well as the west.
The type of scheme I have outlined would mean that people earning up to £50 or £60 per week would pay no tax or national insurance. Above that level, they would begin falling into the income tax net at a rate of 24p in the
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pound. At a higher level still, they would begin paying national insurance at the rate of 5 per cent.--a combined rate of 29 per cent. The maximum rate, until they achieve the highest income levels, would be 33p in the pound--but that point would not be hit until they were earning well over £100 per week.Such an arrangement would give people more incentive and have an impact on the labour market. It would encourage more people to enter part-time work. That is particularly relevant at a time when many women wish to return to work. They do not necessarily wish to be employed full time, particularly if their children are still at school, but are deterred from working for as many hours as they would like, or from working at all, by the impact of national insurance contributions and taxation on their take-home pay.
The changes I suggest would have pleasant conse-quences for the problems of the National Health Service. As many right hon. and hon. Members know, over the next 10 to 15 years, the Health Service will have to confront the problem of an insufficient number of male and female school leavers to enter nursing. Recent figures show that the Health Service will have to attract an unrealistically high proportion of school or college leavers. The nursing work force will have to expand by drawing on part-time labour among married women wishing to return to the profession, or who may wish to train for it for the first time. They should be welcomed, and that necessary process of adjustment could be helped by suitable changes in the tax regime.
The message is : so far, very good. There has been progress for the lower paid of a kind not seen in the 1970s. There has been progress for the enterprise economy as a result of our sticking to our guns and going for deregulation, freeing of the labour market, and lower taxation. Now that the economy has such enormous strength, as measured by the large public sector surplus, let us by all means have a prudent Budget--but one that serves the lower paid by taking more of them out of the tax net altogether and continues the progress made towards a still lower rate of taxation.
8.25 pm
Mr. Ron Leighton (Newham, North-East) : The House must be struck by the growing disparity and the widening extremes between wealth and poverty that disfigure our society, and by the growing divide between those at the top who have too much and cannot possibly justify what they take out of society, and those at the bottom, who suffer deprivation to an extent that disgraces a modern economy. I approach this matter not just in economic terms but as a question of morality. There is no economic justification for such contrasts of income, which do not reflect how hard a person works. I shall give an example that might appeal to the Secretary of State. Ex- Cabinet Minister Sir John Nott received--I shall not say earned--more than £870,000 in 1987. Presumably, this year the figure will be about £1 million. What contribution has he made to society to deserve that income? Are we to assume that he worked 20 times as hard as a Cabinet Minister? Does Sir John work 20 times as hard as the Secretary of State? If not, why is he paid 20 times as much?
It seems that what people take out of society bears little relation to what they put into it. Nowhere is that more glaringly obvious than in the case of the low paid. They
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live in poverty, yet often they are among the hardest working of all. They are fellow citizens who earn their poverty, and it is wicked that deliberate divisions of society are being deliberately exacerbated.We have already seen the abolition of the fair wages resolution and of schedule 11 to the Employment Protection Act 1975. We have seen the low level of YTS allowances and the young workers' scheme, which actually subsidises employers to pay low wages--putting the young generation in a straitjacket of low pay. To all of that is added the attack on wages councils. The Government's official policy is to force down wages, to price the poor into jobs. It is no wonder that social divisions are growing wider. The poorest one fifth of wage earners earn less, relative to the average wage, than they did 100 years ago, whereas the better off enjoy a continued improvement. Since 1979, income increases for the highest paid fifth of men have been 50 per cent. higher than those for the lowest fifth. The better off--and this will appeal to the hon. Member for Wokingham (Mr. Redwood)--have seen tax cuts lavished on them. Last year saw tax cuts for the rich and benefit cuts for the poor. Last year also, Hay Management Consultants, which is a division of Saatchi and Saatchi, reported that, on average, executives earning an average of £87,000 per year saw their salaries increase by more than 31 per cent. These ugly divisions disfigure our society. They create poverty amidst plenty.
The rewards of society are increasingly being unequally divided--and that has been particularly true since 1979. The low-paid need large increases if they are to return to the relative standing, in relation to the better off, that they had when the Government took office. But what will they get? The abolition of wages councils, which is bound to depress the wage levels of the low paid even more. That is a scandal and a disgrace. I suppose that the people who dream up such ideas go to church on Sunday.
The Opposition have had to give up their Supply day and valuable debating time to defend the weak and vulnerable at the bottom of the pile, who at present are afforded a measure of protection by wages councils.
From the consultative document, it is clear that the Government propose scrapping wages councils. We have been round this course before. The Government did exactly the same in 1985. Because of opposition from the Select Committee which examined the matter, from many employers, from many Conservative Members and from others, the Government backed off. They made changes instead. In the Wages Act 1986 they excluded young people and they restricted the wages councils to setting a single minimum rate and a single overtime rate.
Now, three years later, they are back with a second attempt to abolish wages councils. Why? It is for the express purpose of forcing down some of the lowest wages. What are these rates? They are set out in the consultative document. The lowest rate is £1.88 an hour, which I worked out as £75.20 for a 40-hour week ; the top rate is £2.38 an hour. Is it not nauseating for Cabinet Ministers earning £1,000 a week to suggest that these poverty wages are too high? Yet the only purpose of abolition is to make it legal to push these pitiful rates down further. The consultation paper makes it clear in paragraph 14 :
"Moreover, a substantial proportion of workers covered by the councils-- probably as many as one third--continue to be paid on the minimum rate. Such clustering of pay levels around a particular figure is evidence that council minima continue to be above the levels required to fill jobs."
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That is the reproach and criticism of the consultative document. That is the Government's reason for scrapping wages councils. It is deliberate Government policy to depress these pitiful poverty wages even further. It is wicked and immoral.The crude, loony Right, ideological argument against wages councils is that they are an institutional intervention in the labour market, raising wages above the clearing rate. But nearly all pay is determined by institutional intervention setting minimum rates. For most people it is called collective bargaining. Why should only the lowest paid, those in wages council industries, be singled out for such treatment? For example, the pay of admirals, generals and judges is set not by the law of supply and demand but by institutional intervention, no doubt with regard to fairness and equity. What of Members of Parliament? There is a huge supply queuing up which greatly exceeds the demand for 650 jobs. What would be the market clearing rate? It would probably be nil. Instead, the pay of hon. Members, like that of most other people, is decided by institutional intervention. How hypocritical it would be to single out only the lowest paid for this grotesque ideological extremism.
In 1985 a Select Committee investigated the matter thoroughly and recommended against abolition. There is no evidence that wages councils have caused unemployment or inflation. No one can say that the pay of workers in the wages council sector has risen relative to the pay of others. The reverse is true. I am sure the Secretary of State knows that the CBI said, in its recent review of the working of the Wages Act 1986 :
"For the most part, the minimum rates set by wages councils and wages boards rose no faster, and in many cases slower, than average basic earnings across the economy as a whole statutory minimum rates declined from 58.9 per cent. to 57.5 per cent. of the average basic earnings for manual men across the economy as a whole between 1980-81 and 1987-88."
When the Select Committee examined the position, it could not find any clear or unambiguous evidence that scrapping wages councils would create more jobs. Wages are lowest in those parts of the United Kingdom where unemployment is highest, and vice versa. Wages are higher in successful industries. If low wage rates create jobs and economic success, why do our most successful competitors pay higher wages than we do? I studied all the evidence in 1985 and it is clear that there is no intellectual case for abolition. It would be a triumph of dogma and ideology over evidence, facts and common sense. All this has to be seen as part of a package of measures to depress the pay of the poorest, including a requirement on local government to put contracts for services out to tender to private firms. The abolition of the fair wages resolution, schedule 11 and now wages councils will prevent local authorities from insisting that firms observe fair wages and decent employment practices. This will permit a spiral of wage cutting, with firms competing to see which can pay the lowest wages. We want competition right across the economy but on efficiency and levels of service, not on which firms can pay the lowest wages.
What happens if wages are forced down so low that workers feel that they can no longer tolerate their jobs? The Government have legislated for that. If a worker leaves, it will be considered as a voluntary action and he--or more probably she--wll be disqualified from
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unemployment benefit for long periods. Therefore, the less-scrupulous employer can force down wages, knowing that many workers dare not leave. All the cards are being stacked against the poor, the low paid and those at the bottom of the pile. Instead of giving them a helping hand, the Government will push them down even lower.Those on low pay are not the people who are causing problems for the economy. Instead, they need and deserve the protection of Parliament. In pre-Thatcherite times Parliament sought to give protection to those who could not protect themselves, such as people in wages council trades. Those people are overwhelmingly women, so this is a major women's issue. Often they are part-time workers ; often they are from ethnic minorities ; often they are in scattered small units, weak and vulnerable, with no union or collective agreements.
For a long time, under legislation brought in by Winston Churchill, Parliament sought a level beyond which the poor would not be exploited. The object was to safeguard weak employees, and equally important responsible employers who sought to maintain decent business standards from unfair competition based on wage undercutting. Everyone who works for a living has the right to a wage which safeguards health and human dignity. To carry out the destruction of wages councils the Government have had to denounce convention 26 of the International Labour Organisation. We are now virtually alone in the industrialised world. We are the only country in Europe without minimum wage protection.
It is sometimes said that wages councils are old fashioned and an anachronism, established to deal with the sweated trades, and that they are unnecessary in modern times. Alas, that is not so. The sweatshops of the east end of London employed successive flows of immigrants, at one time Jewish. We have had immigration more recently. Coming from the east end of London, I can assure the House that there are sweatshops there now. We are not talking about distant history.
Recently, we had the report of the Auld committee which was set up by the Government to study shops legislation. It strongly recommended the retention of protection for shop workers because
"of the strong likelihood of exploitation of some shop workers in the form of lower wages, particularly for unsocial hours, and possibly in the longer working week."
Although it was not asked to look at wages councils, the Committee volunteered some information. I remind the House that this was recently, and not when Winston Churchill brought in the legislation. The Auld committee, appointed by the Government,
"set great store by the preservation of the role of wages councils in fixing holidays and holiday pay for the retail trade." So there can be no doubt about the need for wages councils in modern Thatcherite Britain, especially for women, for part-timers, for home workers, or for those working in hotels, catering, retailing, clothing or hairdressing.
When we last considered the matter, the hon. Member for Banbury (Mr. Baldry), who is not in the Chamber, produced a pamphlet for the Bow Group which made a recommendation against the abolition of wages councils. He argued, among other things, that if the Government abolished wages councils, that would be construed as an excuse for the next Labour Government to introduce a statutory minimum wage. He made a good point, for one of the main duties of a new Labour Government will be to
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bring in a proper statutory minimum wage and employment protection for this badly exploited section of the work force.8.40
Mr. Ian Bruce (Dorset, South) : I was interested to hear the hon. Member for Oldham, West (Mr. Meacher) say that Labour Members were passionately interested in the problems of the low paid and were willing to give up their time to debate the subject. It is nice to see eight Members on the Labour Back Benches. At least they feel the need to be in the Chamber to debate a subject chosen by their party for debate today.
Ms. Short : There are more of us than there are on the Government Benches.
Mr. Bruce : I have always believed--even when I thought I was a Socialist--in a high wage, high productivity economy. [Interruption.] When I thought I was a Socialist I was very young ; some of us grow out of such feelings. As a lad of 12 or 13 years working in the sweat shops, I thought that possibly the way forward would be via the wonderful mechanisms to which the unreformed Socialists on the Opposition Benches still cling, as though, like children playing with baubles, such mechanisms will achieve their aims. We are told by Labour Members that the present state of affairs facing the low paid has been in existence for years. Not one Labour Member is able to say that a wages council negotiated rate of pay is even an average rate of pay. They are all low rates of pay.
Mr. Bruce : Very well, very low rates of pay. I have to agree with Labour Members, and that is why, when I believe in a free enterprise, high wage, high productivity economy, I must consider what sort of mechanisms work and how we should go forward. How do businesses in a free enterprise economy start and develop?
Mr. Wallace : The hon. Gentleman will have heard the hon. Member for Newham, North-East (Mr. Leighton) quote from paragraph 14 of the consultative document, which said :
"Such clustering of pay levels around a particular figure is evidence that council minima continue to be above the levels required to fill jobs."
That means that, without wages councils, wages would be even lower. Is that the outcome the hon. Gentleman wishes to see?
Mr. Bruce : I speak as a wet-behind-the-ears new Member. But for a dozen years I ran an employment agency and dealt with staff, some of whom had the so-called protection of wages councils and some of whom had not, and I can best answer the hon. Gentleman's question by considering which of those groups was better off.
Hopefully, all hon. Members believe that people in receipt of low pay need to be helped-- [Interruption.] I dare say that many Labour Members believe that passionately, even if at present they are in the Tea Room.
My hon. Friend the Member for Wokingham (Mr. Redwood) spoke about helping the low paid, and we must consider how to improve their situation. I am surprised that Opposition Members do not spring to their feet to declare that the 30 per cent. real increase in the wages of
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the low paid is good but that we need to do better. I could go down that road with them. But they constantly criticise a Government who, while they may not have done brilliantly for low-paid people, have achieved 30 per cent. more for them than the policies of the unreformed Socialists were able to achieve. Having achieved a 30 per cent. improvement, let us consider how we can further improve matters for this group of workers.Hon. Members have quoted from documents prepared by employers' organisations. Who will now say, "We don't worry too much about the existence of wages councils because they do not make much of a problem for the wages market or artificially inflate wages"? I agree that they do not artificially inflate wages ; one need only look at the rates of pay that they achieve.
Mr. Robert N. Wareing (Liverpool, West Derby) : The wages are depressed.
Mr. Bruce : Yes, they depress them. I have got through to the hon. Gentleman, who is occupying a position on the Labour Front Bench. He agrees that wages councils depress wages.
Mr. Bruce : I apologise to the hon. Gentleman. I thought he was agreeing with me.
We must consider what wages councils have achieved and why employers think that they are not worth doing away with by the Government. The Government have not announced that they are abolishing wages councils, despite many of my hon. Friends and I urging them to do so. They have decided not to do away with them at this stage because they do not believe, from a philosophical point of view, that there is much to be gained from taking that step. They do not feel that the actions of wages councils are distorting the economy enormously.
I believe that wages councils are depressing wages and are institutionalising people in low-paid groups. That must be true because of the way in which wages are low under wages councils. [Interruption.] Labour Members have been saying all day that wages are low under wages councils, and then they defend wages councils for defending the low paid.
I had the good fortune of running an employment agency in Yorkshire for 12 years during a time when many people were being put out of work. Many of those with whom I was dealing worked in the aerated water industry--fizzy pop to us--and they were "protected" by wages councils. I know from practical experience about the way in which wages were negotiated for the temporary staff I was putting into those companies compared with temporary and permanent staff who were going into other companies.
Unfortunately, employers sometimes wear blinkers. They consider negotiations for a minimum wage that go on year after year knowing that all such negotiations tend to work on the basis of seeing what can be paid by an employer who is not making much profit. People get together in wages councils and say, "We cannot go too high because this company is not doing too well, so it cannot afford this or that." Accordingly, they allow a small increase, perhaps just ahead of inflation--but never much ahead of it --to reward and keep the work force.
An employer would come to me, aware of young workers' terms and conditions, and say, "We would like
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you to recruit people of a lower age because we can pay them a lower rate and you can quote a lower rate to us." That was an employer talking to an agency, negotiating freely on the basis of an institutionalised form of wage negotiation.I contrast that state of affairs with one of my other large groups of workers, secretarial staff who worked for me in Huddersfield. When I first opened my employment agency in that town I had to pay my staff unacceptably low rates of pay ; to be competitive, I had to go against others in the same town, though I was able to pay my staff perhaps 10p an hour more than my rivals down the road. By slashing my margins and being efficient and working hard, I was able to put these people out into the market place at approximately the same rates that employers were paying previously. I was successful in putting my rivals out of business.
What did I do then? Did I screw down the wages of my staff? No, I could go to my staff and say, "We can increase your wages that much more this year." As an agency, over two or three years, we increased our rates every three or six months. We moved the market place upwards. We could go to employers and tell them the going rates. We made more profit and our employees received more money. Those companies did not have as a reference point the rate specified by that nice wages council. They could not say, "Hang on a minute, the wages council says you should give them £1.50 an hour. How dare you give them £1.70?"
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