Examination of Witnesses (Questions 240
- 258)
TUESDAY 6 FEBRUARY 2007
MR PETER
KELLY AND
MS CAROL
YOUNG
Q240 Mr Wallace:
On this do you feel there should continue to be a threshold between
small and medium sized companies and larger companies when it
comes to examining the minimum wage because what is interesting
is we are talking about all these companies and super-rich people
sucking money out of everywhere. My understanding is that manufacturing
is at the lowest ebb it has been for many, many years. Small and
medium-sized enterprise companies are going out of business at
a faster rate than they have ever been in the last decade and
I am not sure that there are hundreds of small businesses going
around making millions. Yes, there are a number of people making
a lot of money but there are also other businesses tottering by,
and I am afraid the figures show a lot of them are not. Should
there be a threshold where we say that seed companies, start-up
businesses, et cetera, do not have the same amount of regulation
as the Royal Bank of Scotland, for example?
Ms Young: From our point of view
we would more advocate a system of targeted support from government
to businesses rather than advocating that any business should
have a lesser responsibility to its employees because of its own
size or its own particular make-up. Certainly there are industries
that should be protected that we need and we would not like to
see any of those suffer because of employment legislation, but
from our point of view that is more about giving support then
differentiating on responsibility.
Q241 Mr Wallace:
Given that a wage bill is always the biggest percentage of a business's
turnover, what do you mean specifically by "support"?
Would you like to see discounted business rates or a reduction
in overheads elsewhere so that that money could be passed through
to wage rates? What are the specific measures?
Ms Young: I think it would be
for government to decide what would be the most efficient way
to do that, but an example that we would come up with would be
the discussion we had earlier about the potential for subsidising
certain employers who could not afford a particularly high hike
in the national minimum wage. There are various ways in which
employers could be supported and should be supported but that
is probably a matter for economists rather than myself.
Q242 Chairman:
What should be the criteria—the number of employees a company
has or rural area businesses, tourism businesses or manufacturing
businesses? What is your suggestion to the Government?
Ms Young: I think again that would
be something there would need to be more work done on with people
who specialise in that kind of area. From our point of view, I
can certainly take the point that was made earlier about some
employers, frankly, not running a successful business and therefore
perhaps should they be allowed to take part in the process of
natural wastage, or whatever the economic term is for that type
of thing, but it would be unfortunate if there were businesses
that are needed in this country that went out of business purely
for want of support.
Mr Kelly: Just to come back to
the issue of subsidies, and I think this started with a discussion
about tax credits and how they represented a subsidy to low paying
employers, I have a lot of sympathy with the idea that if an employer
cannot pay a living wage without the help of tax credits or some
other form of support then are they fit to be in business, but
I think the reality is for different family types and so on tax
credits are now part of the architecture, if you like, of how
we support people and it is always going to be there. I think
we definitely need to look at ways of putting additional pressure
on employers to increase wages beyond the minimum wage. If we
accept at the moment that the minimum wage is not a living wage,
which I think many of us would do, we need to look at other ways
of exerting some pressure, and that applies to big employers as
much as it does to small employers. One thing that had come up
years ago, I remember, was around the Investors in People scheme
and I think employers put quite large store in having that kite
mark on their company but to the best of my knowledge it takes
no account of whether you are paying a decent wage or a living
wage. Perhaps that is a way through the enterprise sector we could
put pressure on some employers to start looking at their wage
rates. Similarly, the other area—and I do not have absolutely
up-to-date figures for this—but local authority workers
or employees of the state, a goodly portion of them, are in what
I think the Low Pay Unit would regard as low paying jobs. There
is a role there in looking at their own practices in terms of
lifting people out of poverty or lifting people out of low paid
jobs. Similarly, in terms of contract compliance for the people
that local authorities are working with, I am not even sure if
that is legal any more, but there must be ways where we can institute
approaches for local authorities to make sure the people they
are contracting to are paying living wages and are complying not
only with the minimum wage but with the whole raft of employment
legislation as well.
Mr Davidson: I think it would be helpful
if you considered this a little further and gave us a note along
these lines. Some of these things you are doing off the top of
your head and from memory. I think it would be helpful if we gave
you the opportunity to reflect. The other thing is I think it
would be helpful if you gave us a note indicating ways in which
you thought we could be pursuing the bad employers. I know Jim
has mentioned the unions but for circumstances where there are
not unions available, are there mechanisms in addition to those
that are there already that the Government could utilise, in your
experience, to follow up these sorts of issues?[23]
Danny Alexander: If you are doing such
a note it would be helpful to see your calculations on the raising
of the minimum wage and the effect that would have. We have talked
quite a lot about low pay but our inquiry is into poverty in Scotland
and it would be helpful to see what effects such changes in the
minimum wage would have on poverty because it seems that part
of what you are talking about is, in a sense, much of the impact
of raising the minimum wage because of the way the welfare system
works at the moment would actually be to reduce tax credit bills.
That may be worthwhile in many other ways but for example you
mentioned single mums earlier and because of the interaction of
the benefits and tax credit system you could raise that person's
wages but for every extra pound you raise their wages by they
keep only four and a half pence of it in the worst-case scenario
so it is not having a great impact on poverty because of the way
the welfare system works. If you are doing a note on this issue
I think it would be very helpful to see some figures setting out
what impact raising the minimum wage to different levels would
have on poverty, which is the fundamental subject of this inquiry.
I would be very interested to see measures that are being taken
to tackle bad employers because that has to be a big issue for
us as well.[24]
Q243 Mr McGovern:
Peter, the Poverty Alliance submission states that the Social
Fund crisis loans have not really done much to combat debt although
you do say that the Social Fund could have an important part to
play. How do you feel the Social Fund could better provide support?
Mr Kelly: One of the things that
has come out of the work that we have done is partly about the
lack of knowledge about the Social Fund and crisis loans and the
opportunities that might be there but also people's bad experience
with them, of being rejected for crisis loans and the money having
run out as well for them. I do not have particular proposals.
I think in the Scottish Affairs Committee's last inquiry into
poverty in Scotland[25]
you suggested that there needed to be a review of the system and
it seems to me that given what we have discussed already around
debt and over-indebtedness, the Social Fund should be a way of
steering people away from those kind of lenders that we would
regard as bad, whether they are high street lenders that are charging
exorbitant rates or more illegal forms of lending, but I think
the key thing is that the system overall needs reviewed and I
think again one of the things that came out of Get Heard
was the level of loans that were available were not sufficient
to get people over what was often just a bump which was often
a gap in their income, so I think the system overall needs to
be looked at.
Q244 Mr Davidson:
Is there any reason to believe that the Social Fund loan system
works any less well in Scotland as compared to either the UK as
a whole or any bits of the UK? I can see how we would pass that
recommendation on to somebody else to look at unless there is
some specifically Scottish aspect to it.
Mr Kelly: I do not have evidence
on that. I will look into that.
Q245 Mr Davidson:
The question then I was meant to ask you was about the illegal
money lending units the DTI have introduced. Have you any experience
of these? Has it been positive or is it too soon to tell?
Mr Kelly: I have to say I do not
have experience of them and it is not something that has come
up to us from the work we have done at the moment.
Q246 Chairman:
But do you accept that financial institutions and these loan sharks
are a major contributory factor to poverty in Scotland and in
the UK? I have many constituents who have approached me: they
borrowed money, it might be a couple of thousand pounds, and in
a year or two years' time it is £15,000 or £20,000 and
then those people ended up losing their house and losing everything.
What can be done to stop that?
Mr Kelly: I think over-indebtedness
is a huge problem and again we mentioned it earlier on in the
session. There is an acceptance of debt and personal levels of
debt that was unheard of 15 or 20 years ago. I think there is
an issue there about the impact of extremes of wealth in our society
now and the aspirations that people have and the kind of consequences
of that in terms of over-indebtedness. I think there are practical
things that are being done. One of them is around financial literacy
and financial education so obviously very practical, front-line
money advice is important to help people deal with the worst effects
of high levels of debt. I think we also need to be looking at
financial education for younger people. Again from these seminars
we have been doing, we have been picking up that there are good
practices going on around the country in schools where young people
are being taught the facts about debt and what it actually means,
but this is not part of the curriculum generally so it is not
something that all young people are getting. So I think there
is possibly something to be looked at there. There are also issues
at the UK level in terms of the credit industry. Again we have
certainly supported debt on our doorstep in the past, raised issues
about doorstep lending and about putting more controls on those
doorstep lenders and also putting interest rate caps—and
I know there are a lot of mixed views about the benefits of interest
rate caps which have been successful in other areas -but I think
there is still a role there. We were dealing with an issue of
debt just on Monday with Scottish Power which I feel is important
for me to mention now that we are here: the issue of token meters,
which I am sure some of you have come across before, and the high
levels of debt that people were getting into there. There are
things that the companies—and Scottish Power is a slightly
different issue obviously than the general credit industry—to
ensure that people are not getting into the high levels of debt.
I think we need to find ways to make companies who are providing
credit facilities more responsible.
Q247 Chairman:
You mention an interest rate cap. Obviously the banks and building
societies rather than making huge money from the big businesses
they are making money from the less well off who are most vulnerable
who need help and they are charging them 15% or 20% rates of interest.
Do you not think that there should be some kind of guidelines
by government to ensure that these banks and building societies
have a limit which they can charge people?
Mr Kelly: We have certainly advocated
in the past interest rate caps but I know that some people would
argue that interest rate caps deal with, if you like, legitimate
high street lenders even though they may be charging exorbitant
rates, and we can all imagine the kinds of shops we are talking
about where they charge very high levels of interest. Possibly
the downside of that is if you remove those kind of lenders from
the market you then push people into other more illegal and more
risky forms of credit. I am not fully convinced of the arguments—you
would need to speak to somebody who is better versed—but
I think there definitely needs to be more pressure put by government
on the credit industry. I know there have been reforms in the
last year in terms of publishing better information for people,
even about APR and things like that, on your credit statement
so that people know what they are paying. I think there is then
still an issue about people understanding the information they
are getting, so there is a combination of financial literacy and
more pressure on the companies themselves. We can see that it
works with the banks. They have had to take some of the issues
seriously about how they work with low income customers and we
can see that in terms of the increase in the number of folk with
basic bank accounts, the work that is being done with Citizens
Advice Scotland in terms of getting free auto tellers in certain
communities, so putting pressure on that way I think is a useful
way forward.
Q248 Mr Walker:
That also leads on to my question. There has been a suggestion
that work should not be the only route out of poverty. One of
the specific aspects of that is that more money advice for parents
should be provided, which I imagine would be along the lines you
are talking about—financial literacy and how to manage a
family budget—and that this should also incorporate better
advice on benefit entitlement, and this is not quite connected
but an equal minimum wage for young workers should be introduced?
The question is, should there be more money advice for parents
to help alleviate poverty; would improved benefit take-up help
alleviate poverty; and should an equal minimum wage for young
workers be introduced to alleviate poverty?
Mr Kelly: In terms of benefits
advice, I think this is becoming a crucial issue. I know you have
already had input from Citizens Advice Scotland. I think the benefits
system that we have now is incredibly complex. I know any time
that I have to give a comment on the detail of the benefits system
I have to go to an adviser and make sure that I am saying the
right thing. It is incredibly complicated, so I think more advice
around the benefit system would always be helpful and more advice
through the voluntary sector. Again, one of the things that came
out of Get Heard was the confidence that people have in
the independent advice sector. They feel more confident in using
those kinds of services. So I know that those services are getting
a good deal of support, particularly Money Advice Scotland, from
the Scottish Executive. I think we need to look at more support,
particularly as new welfare reforms come through and things like
the Cities Strategies and so on where the local provision of benefits
can be different from the national picture. That is going to put
quite a pressure on local advice services I would imagine, so
they are going to need more support in that respect. I think on
benefits take-up there is always an issue there. There is always
more that local authorities could do. I know that you have had
already good discussions about the role of local authorities and
local authority front-line staff in terms of encouraging take-up
and signposting people to advice agencies who can support that.
I think that is always something that should be part of local
authorities' poverty strategies. It is crucial to make sure that
the people are getting what they are entitled to. One of the things
that came up when you were mentioning the impact of the incentive
or disincentive with the minimum wage going up, if it was just
reducing the amount of tax credit people were getting, was that
not everyone is claiming tax credits who should be, which makes
it important that the minimum wage is seen on its own as well,
that it is addressing low income on its own.
Ms Young: I think as far as the
minimum wage issue certainly we have advocated for a long time
that we believe there should be a flat rate minimum wage that
applies to people of all ages. Another issue that ties in with
that is the exemption for apprentices. We have seen a lot of ill-effects
from that in our work either because people are unable to take
up the apprenticeships because they will be pushed into poverty
if they do so right down to things like when people qualify as
an apprentice the employers then refuse to give them wages on
the grounds that they trained them, so we have people who are
time-served former apprentices still sitting on the minimum wage
where people who are coming in from outside doing the same job
are on £8 plus an hour, so from that point of view we think
that the minimum wage system could do with a bit of tightening
and bit of simplifying as well.
Q249 Mr Davidson:
What would be the single most important thing that the UK Government
could be doing to try and reduce poverty in Scotland? If you had
to pick one what would be the suggestion that we should be making
in our report?
Ms Young: No prizes for guessing
what I am going to say but from our point of view definitely uprating
the minimum wage would be the number one priority.
Mr Kelly: I think the issue that
has come up over and over again is about the adequacy of incomes.
I think we need the Government to address seriously the issue
about how do we answer the question about what is an adequate
income and how does that relate to the kind of benefit levels
we have. I think I said earlier that increases in benefits are
going to be crucial to reaching child poverty targets and I think
we really need to grasp that one now. I think the UK Government
needs to grasp that. It is fundamental to making progress.
Q250 Mr Davidson:
How do we deal with the dilemma in a sense that if we increase
the minimum wage it is a mix of disincentives for people to work
because if you raise the benefit levels why should people bother
working, and it undermines support for the whole system and so
on. Have you got a simple answer that we could understand?
Mr Kelly: I wish I did. Simple
answers are always good but when we are talking about benefits
it is usually not possible. There are disincentive effects but
I think we over-emphasise them in the UK. We have traditionally
over-emphasised the disincentives we have, otherwise we would
not have people going out and working on low wages, we would not
have hundreds of thousands of people across the UK doing that.
There is no lack of a work ethic in people to get out there. I
know that there will be a minority of people who, for one reason
or another, may not want to take up work and that may well always
be an issue, but I guess my plea is that the Government has been
very strong up until now both in Scotland and at the of UK level
on tackling unemployment and that is absolutely right. Any of
us who were active in the 1980s know that is absolutely a priority
in tackling unemployment. Giving people a right to a job is absolutely
fundamental, but we need to then also look at, as we have discussed
this afternoon, the quality of those jobs and whether those jobs
themselves are lifting people out of poverty. There are always
going to be people who for one reason or another are going to
be reliant on benefits in the long-term and a job is not going
to be right for everyone so we do need to look at adequacy. Even
on that basis we need to look at adequacy. It is a fundamental
part of an anti-poverty strategy. It may come up with some unpalatable
answers for us that might cause us to have to re-think radically
our approach to welfare and how we pay benefits and so on, but
I think that is one of the things we have to do. I guess other
countries have higher rates of benefit levels and fairly high
levels of employment rates and so on. I think it can be done.
I am not saying it is easy.
Q251 Mr Davidson:
There is not a model in particular that you would say that is
what we should pick?
Mr Kelly: I do not think it is
as straightforward as just applying a model. I think there are
elements from different European systems that we could probably
look at. It does mean a change, I think, in a whole range of things
to look at adequacy of benefits. To reach the child poverty targets
we are talking about, I think that was going to my second point—I
just remember my second point of the big things that the UK Government—
Q252 Mr Davidson:
The second of the one big thing?
Mr Kelly: The second of the one
big thing, yes, sorry, is that we need to raise the level of public
discussion about this. One of the big breaks in making progress
on poverty is the fact that a lot of people do not think we can
do it and probably even more people do not think we have done
anything over the last ten years. Whatever has been going on,
regardless of your political opinion, I do not think there is
an understanding that child poverty, regardless of how you look
at the figures, has fallen so the Government must "go public"
(was the phrase that Joseph Rowntree were using a couple of years
ago) about the anti-poverty strategy and that also means the other
political parties falling in behind that and saying, "This
is what we will do and this is the approach we will take to ending
child poverty." A big part of that is addressing income adequacy.
Q253 Chairman:
Do you believe that any time in the future we will be able to
eradicate poverty? If it is possible I am sure you will agree
it can only be possible under Labour!
Mr Kelly: I think you will know
that I cannot comment on that.
Danny Alexander: Does the witness disagree
with that statement?
Q254 Chairman:
Poverty will always be with us?
Mr Kelly: I think to the first
part of your statement the answer is yes, we can definitely eradicate
poverty. We can discuss what we mean by eradication. At the moment
I think in Government policy, certainly in its child poverty policy,
eradication means being amongst the best in Europe and that means
having a child poverty rate of maybe around 5%. If that is our
goal for 2020 that is our goal but I think it is going to require
serious commitment and serious expenditure. I think it is possible
but that political will issue is fundamental.
Q255 Mr Davidson:
How is that profile right? One of the issues about raising the
profile of poverty as a political issue is the fact that the poor,
by and large, disproportionately do vote and therefore they do
not make nearly as much complaint as the sort of people who will
end up being penalised by road pricing who are vocal. How do you
manage to break through that?
Mr Kelly: That is an enormous
question but I think there are a whole variety of ways of doing
that. There are social justice issues. In the example of the Make
Poverty History Campaign a couple of years ago you motivated people
to address poverty issues. I am not saying it is going to be easy
to do the same thing here but that is the scale of the approach.
You need to be in a position of saying to people having a fifth
of people in the UK living on local incomes is not just bad for
them, it is bad for you, it is bad for your whole society. You
complain about the number of people in prison, about the degradation
of your local environment, about the fact that you cannot get
a plumber because there is no one doing apprenticeships. It is
about perhaps personalising some of the arguments. It is about
the amount of money we spend on the Health Service because of
health inequalities. It is about making the arguments in that
way. Maybe it is a bit ruthless to say that it all comes down
to affecting people in the pocket but there is a variety of ways
and unless we make the arguments and make them really quite forcefully
then we will not make the kind of progress we need to.
Q256 Mr McGovern:
Can I make one brief point, going back to the exploitation of
low paid migrant workers, it is my understanding that the three
major trade unions—Amicus, GMB and T&GW—have searched
specifically to recruit and represent migrant workers, so there
is certainly a recognition that that is a problem.
Ms Young: From what we hear it
certainly seems to be the case that it has been quite successful.
I think we are going to have that problem again of reaching migrant
workers who are working in the rural areas. I think that is still
going to be a problem and there are a lot of calls we get that
that is the case.
Q257 Mr Davidson:
One of the things that we touched on in Inverness was whether
or not we ought to have a small inquiry just into that particular
area. Do you think there is enough evidence? The suggestion was
that there is no evidence there, there are all these allegations
and so on but there is no firm evidence. Do you think there is
enough firm evidence to sustain an investigation?
Ms Young: There is certainly enough
anecdotal evidence. I know that Citizens Advice Scotland have
collected a lot of information on the problems faced by migrant
workers and it may be that would give you a pointer in the right
direction. One of the problems that we have had with following
up cases is a lot of the time migrant workers have only come for
a short period and they have actually gone home before the outcome
of their case is decided and obviously for confidentiality reasons
it cannot be disclosed to us whether an employer has been found
guilty of a misdoing. It can only be disclosed to the person who
has now gone home. It might be challenging but I definitely think
it is worth a try.
Danny Alexander: Speaking as an MP who
has done a surgery specifically for migrant workers with a Polish
translator present so that people could come and raise those issues
directly, I would agree with the last point you made which is
that there is quite a lot anecdotal evidence, some which I have
gathered myself and passed on to the relevant authorities, and
I think it is worth saying we as a group of MPs do have a responsibility
to these people as well. Even if they are not able to vote in
Westminster parliamentary elections, that does not lessen our
responsibility for the issue and I would support the idea.
Q258 Chairman:
Can I thank the witnesses for their attendance. I am sure your
evidence will be very useful for us and it was very informative
and will be used when we compile the report. Before I declare
the meeting closed, would you like to say something in conclusion
perhaps on areas that we have not covered or where we have missed
any questions?
Ms Young: I have just one point
that I would like to make. I have become quite concerned over
the past few years about the issues of stigma that are facing
people in poverty and I think this is an area where government
at all levels can make a really great difference. I think Peter's
point earlier about publicising the issue of poverty is very relevant
but I think it is also changing the perception of poverty. Things
like the adverts that we currently have on TV in Scotland about
benefit fraud certainly might help to reduce levels of benefit
fraud but then there is a knock-on effect from that that the general
public gets the impression that everyone on benefits is a scrounger.
I am not saying that we should not use measures to tackle benefit
fraud but certainly there has to be a flipside of that where we
educate the better-off people who are socially isolated from people
on benefits and people on low incomes that these are people who
are going through a rough time and not people who are in it for
themselves.
Chairman: Thank you very much.
23 See Ev 91 Back
24
See Ev 91 Back
25
See Scottish Affairs Committee First Report, Session 1999-2000,
Poverty in Scotland, para 103. Back
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