House of Commons Hansard Debates for 9 Jul 1991

Mr. David Winnick (Walsall, North) : In view of what my hon. Friend said about the junior Minister, does he agree that it is extremely obnoxious for a would-be Tory Member of Parliament to try to trivialise poverty by living on income support for a week? The real issue is the hundreds of thousands, indeed millions, of our fellow citizens who must live on income support for months and, in some cases, through no fault of their own, for years. Those people have no opportunity to go back to their two homes and substantial income after just a week.

Mr. Meacher : Lady Olga Maitland is well known as a Tory with a closed mind. She is proving nothing by living on income support for one week when, as my hon. Friend correctly says, people have to live on it for months and years without hope and in despair. I wonder how many right hon. and hon. Members on the Conservative Benches known the level of income support on which Lady Olga and others seek to live. I know that some Conservative Members have learnt the answer since I raised it before, but I wonder how many Tory Members realise that income support means living on £39 a week for a single person and £62 for a married couple. That is just about the amount that many Tories would spend on a modest meal in their clubs.

Mr. Riddick rose--

Mr. Meacher : No, I shall not give way.

Column 790

Mr. Speaker : Order. I have already asked hon. Members to bear in mind that this is a half-day debate and that a great many hon. Members want to participate. We must get on.

Mr. Meacher : I will not detain the House, but I want to draw attention to some other relevant information.

The recent research of Richard Wilkinson showed that, the greater the gap between rich and poor, the worse the overall standard of health and the lower society's life expectancy. That is not surprising, but it needs to be said. Other research by Mike Lake, Buckinghamshire's senior educational psychologist, showed a clear link between poverty and poor educational achievement.

That is why poverty matters, and why our indictment, using the EC's definition of the poverty line as 50 per cent. of average national income, is that the Government's policies have more than doubled the number of people who are forced to subsist on a standard of living that the EC regards as poverty. That is why poverty and low incomes are firmly back on the political agenda.

Mr. Butterfill : Will the hon. Gentleman give way?

Mr. Meacher : One dog, one bite.

It is clear that the Government have no strategy, no intention and no desire to tackle the issue. In contrast, we will do so. We will raise pensions by £5 a week for a single pensioner and by £8 a week for a married couple, including for those on income support. We will restore the real value of child benefit to its 1987 level, after three years of Tory freeze. We will pay £9.55p a week, at today's values, for each child, including to recipients of income support. We will introduce a minimum wage to combat poverty, at a rate of-- Mr. Riddick rose--

Mr. Speaker : Order. The House should get on. Many hon. Members wish to participate in the debate.

Mr. Meacher : We have made it clear that we will introduce--

Mr. Butterfill : On a point of order, Mr. Speaker. The hon. Gentleman accused me of giving wrong information to the House. He should explain that he did not use the table in the Select Committee's report, which shows a figure of 9.5 per cent.

Mr. Speaker : If the hon. Gentleman feels that he has been misunderstood, he should seek to raise that matter when he is called to speak later in the debate.

Mr. Meacher : We have made it clear that we will introduce a minimum wage to combat poverty pay, which is widespread, at a rate of about £3.40 an hour, which will benefit more than 4 million workers. No wonder the Tories are so hostile to the idea, when, of 100,000 firms that have been caught underpaying their employees in the past decade, only 67 were prosecuted. That is why I say that the Tories believe in low pay. No wonder the Government are so hostile to the idea of fair wages, when the Secretary of State has assisted in cutting the numbers of the wages inspectorate to a mere 71. Each inspector is now supposed to inspect more than 5,500 workplaces, which is ridiculous.

No wonder the Tories are so partial to exploitative employers, when we see advertisements in the newspapers that say :

Column 791

"Job would suit a person on family credit."

Social security payments and lost tax from low pay cost British taxpayers more than £1 billion a year. A recent EC report said that poverty is

"particularly high in the poorer countries of the EC--Portugal, Greece, Spain, Ireland and the UK."

What an indictment. The Government have certainly done their best to align our low pay to the lowest pay there, and I suppose that that is what the Tories mean by convergence.

But low pay is not only socially unjust. It is also socially and economically damaging. As another recently published EC report stated :

"Europe cannot hope to occupy a leading position at world level if it bases its competitiveness on low wages."

That is exactly the Government's strategy. Their record on low pay--on poverty pay--is one of complacency and complicity. Only a change of Government will restore the combination of economic competence and social justice that Britain desperately needs. 4.20 pm

The Secretary of State for Employment (Mr. Michael Howard) : I beg to move, to leave out from "House" to end of the Question and to add instead thereof :

"congratulates Her Majesty's Government on its policies which have made possible real increases in expenditure on vital public services including social security, education and health ; welcomes the recent recognition by the Social Security Select Committee that real incomes rose across the income scale between 1979 and 1988 ; and deplores the commitment of Her Majesty's Opposition to a National Minimum Wage which would destroy jobs, thereby reducing opportunities and living standards for up to two million people."

The speech of the hon. Member for Oldham, West (Mr. Meacher) explained clearly why every member of the Cabinet is envious of my right hon. Friend the Secretary of State for Social Security having the hon. Gentleman as his shadow. I do not propose to follow the hon. Gentleman down the statistical byways along which he led the House ; my right hon. Friend has exposed the fallacies in the hon. Gentleman's approach time and again and will do so yet again tonight.

I wish to pay tribute to the hon. Gentleman. He is a man who believes in being loyal to his friends. For years he has been sponsored by the Confederation of Health Service Employees and his policies have always faithfully reflected that close relationship. As the Labour party's employment spokesman, he went round trade union conferences promising everything they wanted. As a result, he committed one blunder after another, leaving his successor in the soup. He told the Transport and General Workers Union that he would fight with it to stop the abolition of the national dock labour scheme--a step now universally recognised as a boon for the ports industry--and he hinted that Labour would restore the scheme. The hon. Member for Sedgefield (Mr. Blair) has kept very quiet about that. The hon. Member for Oldham, West told the trade unions in November 1988 :

"workers approve of the closed shop."

Less than a year later, his successor admitted that Labour would no longer openly oppose the abolition of the closed shop.

Worst of all, the hon. Gentleman bowed to the demands of the National Union of Public Employees and COHSE, and signed his party up to its commitment to a national statutory minimum wage. He was the employment spokesman in May 1989 when the commitment to a

Column 792

national statutory minimum wage was written into "Meet the Challenge, Make the Change," Labour's key policy document. He was the man who stuck that albatross around the necks of the occupants of the Opposition Front Bench, and I doubt whether they will ever forgive him for it.

Mr. Brian Wilson (Cunninghame, North) : If this is old lags' corner, I am sure that I have seen the Secretary of State somewhere before. Indeed, I recall seeing a lot of him. I remember him as the Minister who was supportive in propagating every dot and comma of the poll tax legislation-- [Interruption.] --and he did that more assiduously and with more devotion than any other Minister round him. Can a Minister who was so responsible in that respect and who thereby was intimately involved in wasting billions of pounds of taxpayers' money on that folly, now tell the great British public that we cannot afford to pay people £140 a week?

Mr. Howard : It was obvious from the moment the hon. Gentleman got to his feet that he would go to any lengths to divert discussion from the national minimum wage issue-- [Interruption.] --but he will not succeed in that enterprise. We shall keep to the subject during the debate.

I return to the exquisite relationship between the hon. Members for Oldham, West and for Sedgefield. They are the Laurel and Hardy of the Labour party. Their conversations, which are increasingly frequent, always end with the refrain of the hon. Member for Sedgefield, "This is another fine mess you've got me into."

Last week the hon. Member for Oldham, West made an extraordinary speech in which he said that Labour would dismantle the links within the Employment Service between those who help people to find jobs and those who ensure that they receive the correct benefit. The implications of that are startling and far reaching. Does the hon. Gentleman mean to abolish the integrated offices which enable unemployed people to receive their benefit and search for work at the same place? Would he stop the new system, which I introduced, which ensures that unemployed people are seen by the same person whenever they come into one of the Employment Service's offices? Or does he intend merely to make it much easier for false claimants to rip off the taxpayer?

The Organisation for Economic Co-operation and Development has been very clear in its advice. It said in its 1990 report, "Progress on Structural Reform", that future reforms should continue to include "social transfer programmes which continue to tighten links between income support and participation in education and employment programmes"

and called for

"promoting and reorienting specific income transfer programmes towards linking eligibility increasingly to job search, education and retraining".

The hon. Gentleman's suggested changes would defy international advice, undermine the progress towards better quality and value for money in our services towards the unemployed, and benefit only the benefit fraudsters.

Ms. Short : The Secretary of State may not be aware that the Government have progressively used the income support system to force people who are unemployed into lower and lower-paid jobs. That is what we are against.

Column 793

Mr. Howard : The hon. Lady is entirely wrong. This Government have made available a wider range of services to help unemployed people than any other Government have ever done.

The hon. Member for Oldham, West referred several times to unemployment. That is understandable. However, for some unaccountable reason he failed to mention that unemployment is also rising in France, the newly united Germany, Denmark, Greece, Ireland, the European Community as a whole, Sweden, Switzerland, the United States, Canada, Australia and even in Japan. The hon. Gentleman has a touching faith in the powers available to a British Government, but surely even he cannot believe that unemployment is rising in all those countries because of our actions.

Of course, with the benefit of hindsight, it is now feasible to see that the fear of a slump on the scale of the 1930s led interest rates to be cut too far after the stock market crash of 1987. What was the shadow Chancellor of the Exchequer saying at the time? It is not difficult for him to remember. It is not as if he has a wide repertory of comments on such matters. The right hon. and learned Gentleman calls for an immediate reduction in interest rates more often than the average parrot says "pieces of eight", and that was exactly what he was calling for in the autumn of 1987. It is clear beyond argument that, if the Opposition had been in office at that time inflation would have got higher, the measures needed to overcome it would have been more painful and the difficulties that we face today would be very much greater. That is a fact.

The hon. Gentleman also unaccountably failed to point out that every Labour Government since 1929 have doubled unemployment. That is a track record which Labour is still determined to match. It is still the case that Labour policies would sharply worsen unemployment, as I shall show in a moment.

Mr. Riddick rose --

Mr. Howard : Given the refusal of the hon. Member for Oldham, West to give way to my hon. Friend the Member for Colne Valley (Mr. Riddick), it is clear that I must give way.

Mr. Riddick : I am grateful to my right hon. and learned Friend for allowing me to make the point that I had hoped to make to the hon. Member for Oldham, West (Mr. Meacher). Did my right hon. and learned Friend see the latest survey of pay trends by the Reward group, as reported last week in The Times ? That group pointed out that a policy of a minimum national wage

"would force up costs more in the Midlands and the North" and that that was

"likely to create further job losses in areas with the highest unemployment rates."

Did not the hon. Member for Oldham, West refuse to give way to me because he did not want me to point out that fact?

Mr. Howard : My hon. Friend is right. The hon. Member for Oldham, West did not want to give way to him because the hon. Gentleman knows that my hon. Friend is the true spokesman for the north of England on these matters. My hon. Friend speaks for his constituents in the north of England and knows what devastating effect Labour party policies would have on that area.

The hon. Member for Oldham, West wholly fails to acknowledge that the link between low pay and low

Column 794

income is tenuous. According to the family expenditure survey for 1987--the latest year for which figures are available--only 8 per cent. of those in the bottom tenth of the earnings distribution are in the poorest tenth of the population. More than 50 per cent. are in the richer half and, indeed, 5 per cent. are in the richest tenth. Unemployment is much more likely than a low-paid job to lead to low income. Only 15 per cent. of the poorest tenth of the population are in households headed by a full-time worker whereas more than twice as many are in households headed by someone who is unemployed. The conclusion is obvious : the way to help those on low incomes is to help them get and keep a job, not to destroy hundreds of thousands of jobs by introducing a national statutory minimum wage. One does not help people on low pay by giving them no pay.

I accept that people on low pay, particularly those with family responsibilities, may need help, and we provide that help on a more generous and extensive scale than ever before. In just the past three years, the Government have tripled spending in cash terms on family credit. Since 1979, spending on benefits for families dependent on low-paid work has increased by 10 times in real terms. Today the average family credit payment is more than £30 a week.

The hon. Member for Oldham, West is usually keen to promise increases in every benefit under the sun, but he has been more than usually coy about the one benefit that is specifically targeted to help families whose main breadwinner is in a low-paid job--family credit. I hope that the hon. Gentleman will take this opportunity to enlighten the House. Does he plan, as the hon. Member for Holborn and St. Pancras (Mr. Dobson) said, to let family credit wither on the vine? Will the hon. Member for Oldham, West now answer a straight question? Would a Labour Government continue to pay family credit? I am prepared to give way to him so that he can answer.

Mr. Meacher : The right hon. and learned Gentleman makes a fantasy point. Of course we will continue with family credit--we have never said that we will not--but it is far better to have a minimum wage to increase the take-home incomes of those in work. The right hon. and learned Gentleman accuses us in relation to benefits. Will he apologise to the House for the £30 billion cuts in benefit that the Government have made during the past 10 years?

Hon. Members : Answer.

Mr. Howard : I shall answer the question. At last, the hon. Member for Oldham, West has made clear his party's policies on family credit. I am interested in the hon. Gentleman's figure of £30 billion. Perhaps he will enlighten me. I was not aware that he had obtained the sanction of the shadow Chief Secretary to use the figure of £30 billion in relation to benefits that the Labour party would restore. Unless and until the hon. Gentleman gets the sanction of the shadow Chief Secretary to talk about such figures, his best course is to show a discriminating silence on these matters, rather than to toss figures about.

The Labour party is fond of praying in aid the OECD. However, even the hon. Gentleman must be aware that the OECD's latest annual report on France expressly says :

"in general it would be preferable for equity issues to be clearly separated from the functioning of the labour market and handled directly through the tax-transfer system".

That is precisely what we are doing. Indeed, we have taken the OECD's advice not only by introducing and increasing

Column 795

family credit, but by sharply raising the income tax thresholds by 27 per cent. faster than inflation, taking 2 million low-paid people entirely out of direct tax.

We know from the Leader of the Opposition that the Labour party has no intention of reducing the tax burden and has no interest in taking people out of tax. Will the hon. Member for Oldham, West now confirm, therefore, that when the Leader of the Opposition stressed that the Labour party would put all the fruits of economic growth--if there are any--into public spending and none into tax cuts, he was committing the Labour party to a refusal to raise tax thresholds at any level faster than inflation? Will he admit that that means calling a halt to the process of taking millions of low-paid people out of income tax liability altogether?

Ms. Short : Will the Secretary of State give way?

Mr. Howard : I have already given way to the hon. Lady once and it was not an enlightening experience for the House, so I am not inclined to do so again.

The Labour party's vendetta against the low paid does not stop there. Labour is wholly committed to the social charter and the social action programme. In its latest policy document it promises to accept and implement the whole lot the moment it gets into office. That would include the draft directive on part-time and temporary work. The hon. Member for Sedgefield nods enthusiastically--he has supported that draft directive time and again. Under the provisions of that directive--it is important that everyone understands this--liability to pay national insurance contributions would be triggered not as now, when someone's earnings exceed £52 a week, but as soon as someone worked for more than eight hours a week. The result of that Labour party commitment is that 1,750,000 of the lowest-paid people--all earning less than £52 a week but working more than eight hours a week--would instantly and automatically become liable to pay national insurance. How does the hon. Member for Sedgefield expect that proposal to help the low-paid? Has he thought about it? Does he care? Perhaps he has at last got his own back and dropped the hon. Member for Oldham, West in it for a change. The Labour party claims that its national statutory minimum wage would "benefit" over 4 million low-paid people. It would do nothing of the sort. Rather, it would wreck our economy, smash job prospects and, as always with the Labour party, the lowest paid would be the first to suffer.

My Department has estimated that the second stage of the Labour party's minimum wage policy could destroy up to 2 million jobs. The hon. Member for Sedgefield does not like it when I mention that figure, as well he might not.

Miss Joan Lestor (Eccles) : Is the right hon. and learned Gentleman aware that those of us who represent constituencies where unemployment has been relentlessly rising in the past few months feel insulted by what he is saying? Will he now deal with the problem of unemployment rising in Eccles, where there is no minimum wage? Will he explain to the House why it is rising? What does he intend to do about the 3 million children who are now living on or below the poverty line?

Mr. Howard : Does the hon. Lady seriously think that a word that she has uttered justifies the introduction of a policy that could destroy up to 2 million jobs? Does she

Column 796

expect the House to take that contention seriously? She should reflect on what she has said before blindly supporting a policy that would have such drastic consequences.

I have published the assumptions from which the figures of up to 2 million jobs has been calculated. I have invited the hon. Gentleman to publish his own figure of how many jobs would be destroyed by his policy, and the assumptions behind that. I have offered to have his estimates checked by my officials so that we can apply the same methodology to both. I am waiting for the hon. Gentleman to take advantage of that offer.

The hon. Gentleman claims that his policy would cost no jobs, but in a letter to The Independent he wrote :

"I have not accepted that the minimum wage would cost jobs I have simply accepted that econometric models indicate a potential jobs impact".

Mr. Tony Blair (Sedgefield) : Would the Secretary of State complete that quote to the end of the paragraph, please?

Mr. Howard : I am happy for the hon. Gentleman to read to the end of the paragraph if he wishes. I have given the House the essence of the quote. If he wishes to read the whole of the paragraph, including the weasel words that I have just uttered, I am happy to give way to him.

Mr. Blair : It just so happens that I have the rest of the paragraph with me. I go on to say :

"Although nothing remotely bears out Mr. Howard's claims, I rest my case on the empirical evidence of the impact of what has happened elsewhere, the balance of which is overwhelmingly positive." That is what the Secretary of State missed out.

Mr. Howard : How the hon. Gentleman thinks that what he has said detracts in any way from the weasel words that I quoted earlier, which he could not bear to utter when I invited him to quote the whole paragraph, is absolutely beyond belief.

Mr. Burns : If the hon. Member for Sedgefield (Mr. Blair) is reluctant to take up the kind offer of my right hon. and learned Friend the Secretary of State that Department of Employment statisticians could look into the matter, perhaps my right hon. and learned Friend should suggest to the hon. Gentleman that he should have a word with Mr. Bill Jordan, Mr. Eric Hammond and Mr. Bill Morris to find out exactly what figures they put on the number of job losses from the national minimum wage.

Mr. Howard : My hon. Friend is entirely right, and I shall have a word to say about that aspect of the matter in a moment or two. I remind the hon. Member for Sedgefield of what independent experts say about the consequences of the policy. Only last week, two new independent reports were added to the chorus of condemnation which the minimum wage meets everywhere. UBS Philips and Drew reported that the first stage of Labour's minimum wage would add 400,000 to the unemployment figures and a full point to inflation. It said that the second stage would increase unemployment by 1.25 million and push up inflation by 2.4 percentage points.

The Reward group, to which my hon. Friend the Member for Colne Valley (Mr. Riddick) referred, when speaking on behalf of his constituents in the north of England, stressed that the minimum wage would have a devastating effect on the regions, and singled out the west

Column 797

midlands as a district that would be desperately hard hit. That comes on top of the many other estimates of job losses that the minimum wage would cause. They range from those of the National Institute of Economic and Social Research, which reckons that 166,000 jobs would be destroyed by stage one, to the university of Liverpool, which believes that 1.4 million jobs would be wiped out by stage two.

The Liverpool study also estimates that the second stage of the minimum wage would lower Britain's gross domestic product by 6.8 per cent. What is the hon. Gentleman's answer to that? What flights of rhetoric would he reserve to denounce that size of a downturn in our economy? How on earth does he think that that would help the low-paid?

Mr. Winnick : The Secretary of State referred to the west midlands and tried to justify his argument against a minimum wage by the loss of jobs. How can he pursue that argument when tens of thousands of jobs have already been lost in the west midlands and, unfortunately, are still being lost as a direct result of the Government's economic policies? The west midlands needs no lecture from the Secretary of State on the loss of jobs.

Mr. Howard : We can debate economic policies whenever the hon. Gentleman wishes to do so, but the question that he cannot escape is how his views on the Government's economic policy--whatever those views may be- -justify the introduction by the Labour party, if it ever came to office, of a policy that would add up to 2 million people to the ranks of the unemployed. That is the question that the hon. Gentleman must face. He cannot shut his eyes to it and escape it. Yesterday, the hon. Member for Oldham, West published his extraordinary calculations about the effects of the introduction of a national statutory minimum wage. He claimed that such a policy would save the taxpayer £1.3 billion a year. If he really believes those figures, why is he being so modest? If the minimum wage will be such a boon, why limit it to a half and then to two thirds of average earnings? Why not set it at 75 per cent., 100 per cent. or 150 per cent. of average earnings and let the money roll in? The fact is that the hon. Gentleman's figures are entirely bogus and he knows it. I hope that he will make clear the basis of his calculations.

Mr. Butterfill : While my right hon. and learned Friend is referring to bogus figures, may I take him back to the statement made by the hon. Member for Oldham, West (Mr. Meacher) on real income increases during the past 10 years? Is it not curious that the figure that he chose came from table D.2 of the Select Committee report, which is the figure after allowing for housing costs, rather than from table A.2, which is the figure before housing costs--9.5 per cent.--which the Select Committee states in the preface to its report is a much better measure of living standards?

Mr. Howard : My hon. Friend is entirely right to make that important point, which I know will be taken up by my right hon. Friend the Secretary of State for Social Security, who is the master of such issues, when he replies to the debate.

Will the hon. Member for Oldham, West confirm that his remarks yesterday referred, at best, to gross savings to

Column 798

the taxpayer, not to net savings? Will he confirm that he has taken no account of lower profits which lead to lower corporation tax or of the £1.5 billion cost of applying the minimum wage to the public sector? Is he aware that even that estimate of the cost of the minimum wage to the public sector is simply the cost of applying it to full-time workers over the age of 20, and includes no figure for restoring the differentials of public sector workers?

Even on the assumptions of the hon. Member for Oldham, West, the minimum wage would not save a penny, but would cost the taxpayer at least £200 million a year to implement. Will the hon. Gentleman confirm that his figures assume that the introduction of the minimum wage would produce no increase in unemployment, which is contrary to the view of every independent expert who has considered the matter? If, for the purposes of argument, we take the figure which the Labour party always uses as the cost to the taxpayer of every unemployed person, £8,000 a year, and apply it to UBS Philips and Drew's independent estimate that Labour's national statutory minimum wage would increase unemployment by 1.25 million, we find that, far from making a huge saving, Labour's policy could result in the taxpayer facing an extra bill of up to £10 billion a year. I wonder whether the hon. Gentleman has cleared that spending pledge with the shadow Chief Secretary? It is an unsustainable burden, the product of economic illiteracy and a testament to the fact that the Labour party is totally unfit to govern this country. It is for that reason that the head of the independent Institute for Fiscal Studies has said of the minimum wage :

"If the point is to avoid people being poor, this is an extraordinarily stupid way of doing it".

However, embracing extraordinarily stupid policies has become the stock in trade of the hon. Member for Sedgefield.

The last Minister in a Labour Government to have responsibility for low-pay policy, Mr. John Grant, reckons that, at a "modest estimate", the minimum wage would add £40 billion to the national wage bill. Of course, he is no longer a member of the Labour party, but there are plenty of people who are still socialists and have comprehensively denounced the minimum wage. Joe Haines of the Daily Mirror has written :

"the minimum wage proposals won't work and if they do, won't help".

The socialist Fabian Society has published a pamphlet which, despite all the wriggling of the hon. Member for Sedgefield and its author in recent days, is quite unequivocal in its denunciation of stage two of Labour's policy. The hon. Member for Birkenhead (Mr. Field), who I am delighted to see in his seat, has also expressed his doubts. The hon. Member for Sedgefield always gets terribly excited when I quote the hon. Member for Birkenhead, but he cannot deny that the hon. Member wrote, in an article in The Times in 1984 : "I calculate that the higher minimum wage target"--

that is, stage two of Labour's policy--

"could result in a loss of more than 400,000 women's jobs, a 4.4 per cent. rise in the total wage bill, together with a 2 to 2.5 per cent. rise in prices".

Mr. Frank Field (Birkenhead) : I am grateful to be able, for the first time, to lean over the Dispatch Box and repudiate what the Secretary of State has said.

Next Section

Home Page