House of Commons Hansard Debates for 22 Mar 1995

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The Bill is not only fatally flawed logically and blames the unemployed for their predicament but fails to create one single extra job to put people back into work. I am pleased to see the President of the Board of Trade--or the new leader of the Conservative party--coming into the Chamber.

The Bill also perpetuates the state's and the taxpayer's subsidising of low pay. I was interested to hear the hon. Member for Finchley (Mr. Booth) talk about how family credit can come into play to alleviate low pay. He is absolutely right; it does. It would be far better if employers who paid poverty wages were not subsidised by the taxpayer. There should be an obligation on employers to pay reasonable wages. It is not up to the taxpayer to subsidise poor employment practices, whether by private employers or by the Employment Service itself. In-work benefits cost the taxpayer many millions of pounds, as my hon. Friends have already said. The Bill is not only flawed logically; it could be flawed legally. The United Kingdom has been before the European Court of Human Rights 47 times and has suffered 23 losses in 16 years. The Government could be heading for another defeat in relation to the Bill. At best, the Bill shows ignorance of the plight of the unemployed. At worst, it shows the Government's determination to cover up their own failures, to blame the unemployed for that and, in an unlawful manner, to impose on the unemployed penalties for problems which they have not caused and for which they should not expect to stand the price.

Mr. Terry Rooney (Bradford, North): I am conscious of the time and the wide range of the debate so far, but certain points need to be made about the minimum wage. The absence of a minimum wage certainly contributes to economic inefficiency. The history of the textile trade--which is close to the hearts of the people of west Yorkshire--in the 1950s, 1960s and 1970s was of an industry that tried to compete on wage levels with the far east, with the consequence that hundreds of companies went out of existence and 57,000 jobs were lost in west Yorkshire. The textile companies that survived, prospered and remain today invested in technology, machinery, equipment and human capital--in training people and enhancing their skills- -to increase their companies' capacity.

Low wages encourage the black economy. Anyone with experience of contract cleaning or contract packing companies knows that the names on the payrolls come from Disneyland. The vast majority of people working in those industries are colluding in a black economy, in which the employer does not pay national insurance contributions and employees often have alternative occupations.

Low wages also set the poverty trap, because people in receipt of family credit and living in rented accommodation are liable to a 94 per cent. clawback of any increase in their income. A person earning £120 per week and receiving family credit must increase his wages to more than £200 before enjoying any benefit. The Government are considering extending family credit to childless couples, which will broaden the net of the poverty trap.

During the passage of the Trade Union Reform and Employment Rights Act 1993, the right hon. Member for Stirling (Mr. Forsyth), who was the present

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Under-Secretary's predecessor, took part in almost a Dutch auction in a debate on the abolition of wages councils, when it was said that a wage of £2.75 per hour, or £2 or £1.50, was acceptable. It was only when the figure reached 70p per hour that the right hon. Member for Stirling wavered. He did not say that was bad, but if the figure had dropped to 60p, he would probably have been on our side.

Compare that with Home Office policy. Anyone in Britain with a spouse living abroad whom he seeks to bring into this country must have an income of £160 a week, and an additional £40 per week for each child involved. The Home Office requires a couple with two children to have an income of £240 per week. The right hon. Member for Stirling thought that an income of £28 a week for someone working 40 hours was acceptable. It is disgraceful that such policies operate. The Home Office supports the minimum wage, but the Department of Employment supports the opposite. A minimum wage brings dignity, economic prosperity and security to the employed, saves taxpayers' money and is economically efficient.

Mr. Chisholm: Unfortunately, time is again short. The new clause attacks the heart of the Bill, which is why there is no possibility of the Government accepting it. The Bill's apparent purpose is to reduce public expenditure by attacking benefits for the unemployed, but its underlying reason is to drive people into low-paid employment and, by increasing the pool of people in such employment, to drive low wages even lower.

Conservative Members get excited because figures are not quoted, but the principal question is whether there is to be a floor to wages. The Government have refused to put in a floor. The absence of one is bad for workers, bad for public finances, bad for demand in the economy, bad for economic efficiency and bad for jobs. We will take on the Conservatives over all the nonsense they talk about jobs being lost through a minimum wage. Many statistics prove how bad it is for workers not to have a wages floor, and I recommend that people read the new Labour party document published last week, which shows that 328,000 people earn less than £1.50 per hour for their work. Women are particularly badly affected. Three quarters of the 3 million people who earn below the national insurance threshold are women.

8.45 pm

The absence of a minimum wage is also bad for public finances. Conservatives make a fuss about our attitude to family credit. Of course it will not be abolished, but more of the strain should be taken by employers. The Conservatives are supposed to favour privatisation, so why do they not privatise family credit? That way, more would be paid by employers and less by the Government. That should appeal to the Government, because it would reduce public expenditure.

If more people earned more at the bottom of the income scale, that would increase demand in the economy, which would, in turn, create more jobs. Low wages also cause high staff turnover, which serves as a disincentive to train. Why should employers train staff who will not stay with them long? Low pay is a substitute for training and for developing new processes and products. That was the point of Winston Churchill's famous quotation in support of a wages floor 90 years ago.

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We will continue until the general election to challenge the assertion that a wages floor is bad for jobs. It is bad for jobs not to have one. At the last general election, the Government peddled their lies, and no doubt the same lies are all ready for the next general election. When that time comes, we will dissect and demolish those arguments. I do not have time tonight, but I can offer a foretaste.

The Government assume that a minimum wage will bring changes at all income levels, but many studies have shown that segmentation of the labour market will not necessarily have knock-on effects for other wage levels. The methodology of some theoretical studies that say there will be job losses can be challenged. They merely add the amount of money necessary for a minimum wage as an increase in the average wages level and feed it into the computer, to produce job losses. If that were true, when equal pay legislation was enacted in the 1970s, there would have been declining employment; instead, there was a slight increase. Women's wages increased a little and more women were working.

The same is true of the agricultural wages board. Even the Government accept that, and studies by the London School of Economics show that a minimum wage level had no effect on jobs. That applies equally to wages councils. The Library background paper refers to studies by the LSE and others that show that the existence of those councils did not hold back employment. My hon. Friend the Member for Birmingham, Northfield (Mr. Burden) told us what happened after the wages councils were abolished. There is evidence that there were fewer jobs--18,000 in retailing and catering in the period immediately following the abolition of wages councils. At the same time, wages fell--which was, of course, the purpose of the legislation. Europe was also mentioned, as was the Under-Secretary's letter following the question asked by my hon. Friend the Member for Rotherham (Mr. MacShane). Again, the Under-Secretary seemed to think that he disproved the point, because the figure for employment growth in the UK between 1980 and 1990 was 6.4 per cent.

It is interesting to look at the employment growth from 1980 through to 1993, which was what the question asked by my hon. Friend the Member for Rotherham was about. According to the Organisation for Economic Co- operation and Development, there is a slightly negative figure for the UK. Every other country about which my hon. Friend asked had a positive figure. In other words, all the countries that had some form of minimum wage legislation had a better employment growth record in that period.

I note that the same letter also makes the point about the low level of the minimum wage in the US. At least the US has accepted the principle, which is all we are asking the Government to do. A figure of $4.25 is quoted. If hon. Members refer to the study paper from the Library, they will find reference to another paper. Quite a lot of research on this has been done in America. When New Jersey, I believe, increased its minimum rate from $4.25 to something over $5, and the neighbouring state--I believe it is Pennsylvania--did not, there was a job increase in the state that increased its minimum wage. So why does the Conservative party not look at evidence from throughout the world, and, indeed, from this country, with agricultural wages boards and the wages councils, and see what has happened in practice, instead of inventing all the figures and feeding them through its computers?

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There are, perhaps, reasons why that has happened in America, where minimum wages have increased, because in certain circumstances it is rational for employers not to hire new workers. Sometimes, it is rational for employers to keep output below the optimum, because sometimes they also have an interest in keeping wages low, and therefore having a pool of unemployed people in the labour market. We in the Labour party are saying that there must be a floor for wages. There will be a market failure in our economic system if we do not have that floor. It will not cost jobs, and we shall go on saying that until the general election. We know that the Government do not have many cards to play in the next general election, so they will be scaring the electorate about the minimum wage as well as about Scotland, where I come from. We know all the scares that we will hear, but the Labour party started its campaign last week to tell the British people the truth about the minimum wage. That is the message that we shall get across so that the Government will not be able to scare people into voting for them again.

Miss Widdecombe: The standard of debate has deteriorated through the evening. We started off with an entirely sensible debate about disability provisions. We then had a debate which was total confusion and chaos because Opposition Members did not understand what was being proposed. Now, in our final debate, we have heard a rant of unreconstructed 1970s socialism from just about every Opposition Member who has contributed.

The first point to get across in this debate--although one might have been forgiven for wondering whether that is what it is--is about a proposed amendment which would write in that there must be specified levels of remuneration. The hon. Member for Dunfermline, West (Ms Squire) asked whether we would imitate countries that had child labour, low wages and so on. In fact, what we are going to imitate is our own existing system. In question 18 in relation to the jobseeker's allowance, the claimant is asked:

"What is the lowest wage you are willing to work for?" The Opposition talk as if we were introducing something scandalous in the Bill. By the end of the evening, we even heard about it being "unlawful" to introduce that under the Bill. Yet under the "Helping you back to work" plan that the Employment Service currently operates, question 27--I appreciate that the Opposition may have had difficulty getting as far as that--asks:

"What is the lowest amount before stoppages, etc. that you are willing to accept?"

There is absolutely no change.

Ms Eagle: Will the Minister give way?

Miss Widdecombe: I shall give way presently as I sympathise with the hon. Lady's obvious affliction, but I need to leave the hon. Member for Makerfield (Mr. McCartney) time to respond, so there is some pressure. I will take the hon. Lady's intervention presently, but first I want to finish this statement because it is crucial that people should understand-- I believe that they have been badly misled by the Labour party, both in the House and outside--that this does not represent a change.

Ms Eagle: I thank the Minister for her generosity in giving way. I shall be quick. What would be an acceptable answer to question 18, which asks:

"What is the lowest wage you are willing to work for?"

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What would be an acceptable answer to avoid an individual applying for the jobseeker's allowance being denied benefit for making an unreasonable claim on wage levels? Will the Minister answer that simple question?

Miss Widdecombe: I refer the hon. Lady to clauses 7 and 8, which are about reasonableness. I shall come to that presently. What is being suggested by the Opposition today is that we could even get down as far as having no pay. The hon. Member for Makerfield actually said that. Given that this is a straight carrying over of the present system, how many people are currently offered nothing and then lose their benefit? The only incidence that I know of somebody being offered nothing was when a jobcentre displayed a vacancy on behalf of the hon. and learned Member for Leicester, West (Mr. Janner), the Chairman of the Select Committee on Employment, when he was advertising for an assistant. I do not suppose for one moment that it would have been regarded as unreasonable if somebody had turned down that job on the basis that no pay was being offered. That is the whole point.

The Opposition are the scaremongers in this. They want people to believe, first, that there is a change and, secondly, that the policy would be unreasonably operated.

Mr. Burden rose --

Miss Widdecombe: This will be the last intervention that I shall allow, so is the hon. Gentleman sure that he wants to intervene at this point?

Mr. Burden: I am very sure indeed. Is the Minister now saying, unlike what she said on 21 February, that pay could constitute a reason for refusing an offer of work?

Miss Widdecombe: What I was saying then--I understand that the hon. Gentleman may not have clicked on as quickly--was that no pay would constitute a clear reason. The hon. Member for Makerfield said specifically several times in his opening rant that nothing would count for these purposes.

One other thing that I have to correct concerns the hon. Member for Birmingham, Northfield (Mr. Burden), but he has just had his intervention, so that is bad luck. What he did not read out when quoting from my letter was the postscript, in which I said that it was a pity that he had not bothered to ask the Employment Department for an explanation before going public with his horror story. There is no question whatever of the purpose of that circular being to deny people their employment rights. The policy of the civil service since 1870--there have been a few Labour Governments since then--has been that recruitment to permanent posts in the civil service is to be done through fair and open competition. To that end, the guidance for the civil service is that for temporary workers, after one year of employment, their employment must cease and the job must become open to fair and reasonable competition from outside--in which they, of course, can compete. The hon. Gentleman can show me no part of employment law in which 51 weeks is significant. It has nothing to do with employment law, but everything to do with civil service fair and open competition.

The hon. Gentleman then came to the other quote about managers ensuring that people have not accumulated two years. He read it as though it were something sinister. It cannot have escaped the hon. Gentleman's attention that

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people who had accumulated two years would have the full rights of permanent employees, which would cut off opening their jobs up to fair and open competition. The hon. Gentleman has endeavoured to raise a storm in a teacup, but it is cruel, misleading and a sign of how desperate the Opposition must be if they cannot come up with anything better than that.

Let me explain what will actually happen under our proposals, as opposed to the dreadful stories put about by the Opposition. As I have said, I do not think it reasonable for pay normally to constitute a ground for refusing an offer of work--but I emphasise the word "normally". Clause 16 continues the concept of the "permitted period" that the Government introduced in 1989: a claimant with a usual occupation has up to 13 weeks to refuse work outside that usual occupation and the rate of pay that he or she used to receive. The claimant will not be subject to a sanction in such circumstances. 9 pm

That system works in a sensible way. After the permitted period, claimants should start to widen their job search. I explained clearly in Committee that we were not interested in introducing a "cliff edge"; we do not suggest that, after 13 weeks and one day, someone who used to be a senior manager, for instance, should immediately seek work as a gardener, or take some other job that is wholly removed from his previous occupation. Of course unemployed people should be given a reasonable time in which to review their prospects. If the senior manager whom I have cited is still unemployed at the end of his permitted period, he might then be expected to start looking for a junior management or senior clerical position; but that is not to say that he must immediately take any job at any level. Obviously, the Employment Service will be offering jobs and operating sanctions. Hon. Members' objections can be interpreted to mean only that they do not trust the ordinary individuals in the Employment Service who will implement the rules. I assure the House, as I have done before, that the Employment Service will not set out to offer people inappropriate jobs.

Having discussed the amendment, perhaps I can now examine the amazing claims that we have heard from the Opposition. First, they have consistently refused to tell us what the minimum wage will be. The Trades Union Congress wants to know what it will be; Conservative Members want to know what it will be; the country wants to know what it will be; businesses want to know what it will be; but still the Opposition will not tell us. Why is that? It is because they know that as soon as they do, the proper calculations on job losses will be done, and we shall then be able to estimate the size of what the deputy Leader of the Opposition has described as a shake-out. What will be shaken is people, and what they will be out of is jobs. The Opposition have ignored the Government's creation of 1.5 million jobs over a complete employment cycle. They have ignored the fact that we have 40 per cent. of all inward investment into the European Union from the United States and Japan--and why is that? It is because we have a flexible labour market. The Opposition have ignored the OECD report, which said that the reason for the investment was our flexible labour market. They have ignored the report by the International Monetary Fund, which said that Europe should be considerably more flexible. They have ignored the fact that the take-home pay

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of the bottom 10 per cent. of full-time wage earners is 23 per cent. higher in real terms than it was in 1979. Indeed, the figure fell between 1975 and 1979.

Will the Opposition apologise for their record? Will they look happy, for once, about the 36 per cent. rise in average disposable income that has taken place since we came to power? Will they welcome the fact that, following the abolition of the main wages councils, the pay of employees covered by those councils increased by 3.7 per cent.? Will they look at the facts? Will they welcome what we have achieved? Will they tell us what their minimum wage will be, and what the number of job losses will be? If they are not prepared to do that, will they at least stop spreading horror stories, start telling the electorate the truth and start preparing for the same fate at the hands of the electorate as they have suffered since 1979?

Mr. McCartney: As is her wont when she is in trouble, the Minister ranted and raved. The fact is, however, that the Government's record on low pay is the worst in Europe. Ours is the only Government in Europe who make excuses for the ability of employees in privatised industries to earn £1 million overnight while others are forced to work for £1 an hour or less in other parts of the economy. The Minister failed to give any answers about the Government's intentions in regard to the Bill. Before dealing with her speech, however, I should thank my hon. Friend the Member for Dunfermline, West (Ms Squire) for her eloquent testimony to the Government's abandonment of the defence communities in Dunfermline and other parts of Scotland. Her speech was a brilliant expose of the Government's attack on workers who have contributed thousands of pounds in national insurance, and who then lose their right to benefit when they are made unemployed. In the Bill, the Government are taking the first steps towards abolition of the contributory benefits system. The hon. Member for Hertfordshire, North (Mr. Heald) served on the Standing Committee and he served his Government well during those eight weeks. He had only one problem today: like many barristers, he tried to make a good job of a bad brief--a Conservative central office brief. He failed to accept that, according to the Government's own figures, between March and December last year 78 per cent.--eight out of 10--jobs created in the British economy were part-time jobs. In the past decade, the Government have destroyed 3 million full-time jobs. They are the only Government in the western world to have seen no net employment gain during that period: indeed, there has been a net loss.

My hon. Friend the Member for Birmingham, Northfield (Mr. Burden) presented a compelling argument in relation to the Government's proposals on low pay, and the way in which they are trying to use the unemployed to regulate the market by forcing down wages and allowing employers to engage in illegal practices and offer poverty pay. The Government's only purpose in abolishing the wages councils was to allow employers to pay wages which had previously been illegal. Under the present Government, poverty pay is legal: an employer can now pay £1.50 an hour without facing sanctions.

My hon. Friend the Member for Bradford, North (Mr. Rooney) made a well- researched speech about investment in training-related research and development. He also made a good point about family benefits and benefit

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clawbacks. Rather than taking people out of absolute poverty in work, the Government have left people in poverty while subsidising bad employers. That is the difference between the Labour party and the Government. We shall use family credit and in-work benefits to lift people out of absolute poverty. The Government use that to maintain them there and to provide subsidies for cowboy employers. We shall put an end to that situation.

My hon. Friend the Member for Edinburgh, Leith (Mr. Chisholm) argued eloquently for the principle of a wages floor in the economy. He was an articulate and enthusiastic supporter of a minimum wage, arguing that low pay was unfair and inefficient, and that a minimum wage was fair and efficient. The Minister, in her usual way, continued to dodge the issue. She has had several opportunities to respond and I ask her yet again: will she fix a wages floor?

Miss Widdecombe: No.

Mr. McCartney: I am glad that the hon. Lady said that. She fell for the trap, which was set in Committee. The refusal to set a wages floor will mean--and she has admitted it--that under the jobseeker's agreement people will lose their benefit if they turn down a job that pays £1 an hour. No wages floor has been set at jobseeker's allowance level, at income support level, or at unemployment benefit level--not even £2.70 per hour, which was the level set by the Under-Secretary of State for Employment in his letter to the Financial Times . The Minister has made it clear that the Government intend to ensure that people will be driven from the unemployment register into the hands of employers paying £1 an hour or less. I call on my hon. Friends to reject the Government's position on poverty pay and unemployment, to vote for the amendment and to support the unemployed and people on low pay.

Question put, That the amendment be made:--

The House divided: Ayes 259, Noes 279.

Division No. 110] [9.10 pm

AYES

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Abbott, Ms Diane

Adams, Mrs Irene

Ainger, Nick

Ainsworth, Robert (Cov'try NE)

Allen, Graham

Alton, David

Anderson, Donald (Swansea E)

Armstrong, Hilary

Ashton, Joe

Austin-Walker, John

Banks, Tony (Newham NW)

Barnes, Harry

Barron, Kevin

Battle, John

Bayley, Hugh

Beckett, Rt Hon Margaret

Beggs, Roy

Beith, Rt Hon A J

Bell, Stuart

Benn, Rt Hon Tony

Bermingham, Gerald

Berry, Roger

Betts, Clive

Blunkett, David

Boateng, Paul

Bradley, Keith

Bray, Dr Jeremy

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Brown, N (N'c'tle upon Tyne E)

Bruce, Malcolm (Gordon)

Burden, Richard

Byers, Stephen

Caborn, Richard

Callaghan, Jim

Campbell, Mrs Anne (C'bridge)

Campbell, Ronnie (Blyth V)

Campbell-Savours, D N

Canavan, Dennis

Cann, Jamie

Carlile, Alexander (Montgomery)

Chidgey, David

Chisholm, Malcolm

Church, Judith

Clapham, Michael

Clark, Dr David (South Shields)

Clarke, Tom (Monklands W)

Clelland, David

Clwyd, Mrs Ann

Cohen, Harry

Connarty, Michael

Corbett, Robin

Corbyn, Jeremy

Corston, Jean

Cousins, Jim

Cummings, John

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