§ Mr. Arthur Bottomley (Middlesbrough)
I beg to move,That this House, recognising that little progress has been made towards the eradication of low pay, believes that the problem can be resolved only by the introduction by legislation of a national minimum wage.This week I celebrate 21 years as Member of Parliament for Middlesbrough. When I won the by-election in 1962 there was heavy unemployment. The then Conservative Government were very concerned and appointed a special Minister, Lord Hailsham, to look into the matter. There is no doubt that Harold Macmillan was responsible for that, because he often recalled, when he was the Member for Stockton, a constituency that adjoins mine, how shocked he had been to find high unemployment and poverty in the area. He told me once that it was an experience that he had never forgotten.
Today unemployment is higher than ever. Whatever sympathy is expressed by the present Government, they take no action to alleviate the situation.
Apart from unemployment, low pay is also a cause of great sacrifice in the area. However, the low pay problem is not confined to Middlesbrough; it is nationwide. The present Government's policies, combined with the effects of the economic recession, have caused a severe worsening of Britain's low wage problem. Today nearly a quarter of all those living on a poverty income below the supplementary benefit level are in families where the head of the household is employed full time. Were it not for the fact that many manage to escape poverty through a reliance on overtime working, or through the contribution of more than one wage to the family income, the number of families below the poverty line would more than quadruple. Since 1979, when the Conservatives took office, the number of families dependent on family income supplement to top up their wages has doubled.
Measured against the Low Pay Unit's target for a national minimum wage of £90 a week, or £2.25 an hour, the low paid now represent almost one third of the entire adult work force—7 million full-time and part-time workers, three quarters of whom are women. Those figures do not include young workers, home workers, or those who are not counted as part of the nation's labour force, such as people in sheltered workshops.
While the numbers of the low paid have been increasing, the Government have continued to argue that people are pricing themselves out of jobs. In that way, the Government have placed the blame for unemployment on the shoulders of the unemployed themselves. By their reasoning, the unemployed have probably been guilty of excessive wage claims. But unemployment does not strike hardest among the highly paid. The well-heeled are well cushioned against unemployement. The low paid carry the burden of that great social evil. Low paid, unskilled, manual workers are six times more likely to be unemployed than non-manual workers. They are not pricing themselves out of jobs; they are paying the price for poor demand made worse by the Government's low pay policies.
The Government's philosophy is job creation through low pay. In pursuit of that, they have gradually dismantled the few statutory protections for low paid workers. Our industry-based system of minimum wages—the wages 449 councils set up by Winston Churchill to protect against the worst excesses of wage-cutting competition—has been under attack since the Government took office and is threatened with abolishment by 1985. Not content to wait that long, the Government have chopped the wages inspectorate—those who police the minimum wages—by one third. That leaves only 114 outdoor inspectors at the last count, to inspect the wages of almost 3 million workers in shops, hotels, restaurants, clothing manufacture, hairdressing and other low-paid private sector industries. That is a small number. The average inspection rate for firms is about once every 14 years—hardly designed to strike fear into the heart of an under-paying employer.
But still the Government argue that wages councils are pricing workers out of jobs. As the Secretary of State for Employment said:There is, therefore, little doubt that the higher the level at which councils set minimum wages the fewer people will be employed".—[Official Report, 6 July 1982; Vol. 27, c. 139.]What are the rates that supposedly cause such damage? The recent proposals of the retail trades non-food wages council, which the Secretary of State openly condemned as inflationary, would entitle a full-time adult worker to a gross weekly minimum wage of £67.50. Due to the Secretary of State's intervention, they will now receive only £66.25 per week.
But even that paltry figure is the highest of the current wages council rates. A fully qualified hairdresser, after five years' training, is entitled to only £57 for a 40-hour week. Those who argue that such rates are excessive would not think so if they had to live on them.
Wages councils operate only in the private sector. In the public sector, the Government have their low pay policies. Low paid workers in the National Health Service and the Civil Service are finding their living standards substantially reduced because of the Government's arbitrary and discriminatory pay policy. How could it be justified to offer those groups of workers increases of between 4 per cent. and 7 per cent., while judges, generals and top civil servants received rises of between 17 per cent. and 21 per cent.?
A porter in a regional hospital takes home only £48.47 per 40-hour week. Many are forced to appeal to the same Government Department that employs them for an income supplement to save them from poverty. Public sector pay will be even further eroded by the Government's plans to contract out services wherever possible.
The fair wages resolution described by Harold Macmillan asthe protector certainly of the standard of living of the workers, but also of the standards of competence and honour of industry as a wholewill be abolished by the Government this year to make way for wage-cutting contractors. By that resolution, employees under Government contract were guaranteed the recognised rate of pay for the job, so that the lowest tender for Government work was not based on low pay. Ironically, some of the same contractors who have been barking at the door of privatisation are now calling for minimum standards to prevent other cowboy operators from gaining an advantage.
That illustrates a crucial point that the Government have failed to grasp—that minimum standards are not only important in protecting working people, but are good for 450 business. When asked its views on the proposed abolition of the fair wages resolution, the Institute of Personnel Management said:Where industry agreements exist it is in the interest of all parties to ensure compliance with these minimum terms. Such compliance protects the federated employer against unscrupulous undercutting on labour costs by a competitor … compliance also protects employees, particularly the low paid, by providing a minimum fall back provision.But the Government do not appear to be interested in good business. They cling tenaciously to their theory of job creation through low pay, despite all the evidence that that does not work. The young workers scheme, under which employers have been subsidised to pay low wages, is an example of how grotesquely off-track the Government have been. For every 100 jobs subsidised through the scheme, only seven new jobs have been created. The remainder have been deadweight jobs that would have existed anyway, or jobs in which subsidised workers displaced other workers. Every new job created for a young person has cost the Government £6,000. Would it not have been better to have spent that money on employing youngsters to work in some of the essential public services that the Government have been cutting?
Low pay is not the solution to unemployment. Abolishing the wages councils will not create new jobs. Getting rid of the fair wages resolution will not improve standards or practice, or provide a better service. Schemes such as the young workers scheme that encourage low pay will not provide jobs for unemployed school leavers. Pulling the plug from industry can mean only one thing—that jobs, standards and businesses all go down the drain.
It is my belief that a statutory minimum wage guaranteed to all workers would not only be the best way to ensure fair treatment to working people, but would contribute substantially to putting British industry back in business. Of course, I shall be told that calling for improvements in the position of the low paid at a time of mass unemployment is quite irresponsible and will create further unemployment and inflation. I have no doubt that the Minister will tell me that I have failed to understand basic economics. But it is the Government who have failed to understand basic economics. They fail to understand that low wages, as well as being a cause of poverty, hardship and injustice, also cause gross economic inefficiency.
Whole industries have come to rely on low wages as a way of life. In return, they have a high staff turnover and low productivity. They have little incentive to invest in training or improved techniques, so they must use the nation's scarce resources.
Perhaps the Minister has not yet had time to read the results of the research that was commissioned by his Department from the department of applied economics at Cambridge university. It was asked to see whether it was possible to abolish wages councils, but concluded that the Government should be going in the opposite direction through the establishment of a national minimum wage.
The department's findings, which were published last year, are relevant to today's discussions. It concluded that there are three main reasons for a national minimum wage. It said:First and foremost, the demands of justice and equity require that all should receive a reasonable reward for effort and no disadvantaged groups should be exploited. This is important to secure a fair and stable society and to ensure the most efficient use of labour resources. Second, it is impossible to eliminate 451 poverty and reduce inequality in living standards without establishing lower limits to wages. Third, the uninhibited exploitation of supplies of low paid labour has a destabilising and retarding effect on productivity levels in the economy and on its overall rate of growth".Justice and equity may not be at the top of the Government's agenda of priorities, but we may reasonably expect Ministers to be worried about economic costs associated with the maintenance of low pay. This is not a new argument. Winston Churchill established the minimum wages system of the wages councils, which the Government now plan to abolish, on the grounds thatdecent conditions make for industrial efficiency and increase rather than decrease competitive power".Many firms find themselves caught in a vicious spiral of wage undercutting. They can never plan ahead, pay reasonable wages, invest in training or improve efficiency for fear that "the little undercutting employer"—that is Harold Macmillan's phrase, not mine—will steal a short-term advantage by cutting costs through paying lower wages. The introduction of a minimum wage would provide the necessary stability to plan ahead. Moreover, it could help to protect firms and jobs from extinction. It would not destroy them, as many people assume.
We should not forget that the main cause of unemployment in Britain today, as most people now recognise, is the low level of demand in the economy. A minimum wage that raised the living standard and thereby the spending power of the poorest workers could provide a tremendous stimulus for jobs. Nor would a minimum wage cause inflation.
There can be little doubt that all of us benefit from lower prices because of the sacrifices of the low paid. Prices would not have to be much higher to ensure them an adequate wage. We should be prepared to pay a little more for goods and services to provide a reasonable living standard for working people. That increase in prices need not be enormous.
Economists have put the direct cost of raising everyone's income to two thirds of the average male wage at between 3 per cent. and 5 per cent. of the nation's wage bill. That is not an enormous price to pay. If all of us insist on an equivalent rise in our own pay to maintain our differentials, the cost would be considerably more, but I doubt whether Ministers of the Crown, Members of Parliament, judges, generals and company directors will clamour for extra pay because shop workers and farm workers and public employees have gained a decent wage. Indeed, I doubt whether many people on top salaries know what the lowest paid receive.
There is a common assumption among the better paid that no one really earns low wages and that those on low pay are working as apprentices or that, while basic pay may be low, guaranteed overtime and bonus payments top up wages with little added effort on the part of the worker. No one should have to work long or unsocial hours to earn a reasonable wage. I shall leave that point for the moment and examine the depth of low pay for many workers.
At the moment, more than 1 million full-time adult workers earn less than £70 a week before tax for a full-time week, including overtime and all the extras that they may receive. Hon. Members may have seen the report in the Daily Mirror earlier this week which cited the case of a woman who earns considerably less than that. Her total hourly rate of pay is just 78p for cleaning the house of a man who is now firmly in the news—Ian MacGregor. On 452 his British Steel salary of £48,500, one would have thought that there would be a little more flexibility in what the market could afford for her services.
We may also consider the example of the security guards in Essex who earn £1.20 an hour for 12-hour shifts, six nights a week. Is it any consolation to them that, by working 72 hours, they can earn £86.40? There is no excuse for low pay of that type. There ought to be a law against it.
Yet another example is that of a fellow member of the National Union of Public Employees. He is a voter in Darlington, a car park attendant, has a wife and two children and receives a take-home pay of £60.24. He can hardly buy the bare necessities of life. He is in debt to the local electricity board which has compelled him to make weekly payments to reduce that debt. He is a non-smoker and a teetotaller and finds consolation and comfort in being a regular churchgoer. Those examples should shake us all and make us realise that people in Britain are suffering because of poverty.
No doubt the Government will say that they did all that was necessary to help the low paid on Tuesday because the Chancellor increased personal allowances. We should not think that that is the end of the matter. Some hon. Members will have seen the post-Budget briefing that was issued by the Low Pay Unit, which shows that the Budget changes give back to the low-paid married couple only £2 of the extra £4.50 a week in direct taxes that they have been called upon to pay since the Government took office. They will know, as do Ministers, that even after the Budget there will be twice as many families with children who are caught in the poverty trap as there were in 1979. Measures to improve the earnings of the lowest-paid workers are essential if we are to deal with the poverty trap effectively.
If, as I hope, the motion is accepted, Britain will not be alone in having a basic mimimum wage. Indeed, an increasing number of countries such as Canada, the United States, Japan, Australia, Belgium, the Netherlands and France already have legal minimum wage systems. Evidence from those countries does not show the dreadful unemployment and inflation that many people predict if Britain were to do likewise. Our nearest neighbours, the French, have declared that they are well satisfied with their national minimum wage. According to the French embassy in London,The national minimum wage has proved to be a remarkably successful means of combating low pay while encouraging firms to improve their productivity. As such, it is strongly supported by trade unions and has long been accepted by employers.A minimum wage system has worked in other countries, which includes some of our major competitors, for years. There is no reason why we should! not also legislate against low pay. I therefore ask right hon. and hon. Members to support the motion, if not for the sake of fairness and equity, for the sake of efficiency arid as a means of increasing productivity and economic wealth for Britain.
§ The Minister of State, Treasury (Mr. John Wakeham)
I congratulate the right hon. Member for Middlesbrough (Mr. Bottomley) on raising this important subject for debate and on his clear opening speech. He has had a long and distinguished career in the House and has held several high positions of state. He still holds a high 453 position in the affairs of the House. Although much of his ministerial responsibility was for overseas affairs, he has always been concerned with this subject and has represented his constituents' interests conscientiously. He represents an area that has many low-paid workers.
It might be presumptuous of me to make any comparison between the right hon. Gentleman and myself, but he started his political career in Walthamstow and I made my first political speech in Walthamstow high street about 50 years after he was elected to the council of that borough in the late 1920s. I was advocating a different policy at the time, but the right hon. Gentleman has had a long career in the House and we are grateful to him for introducing this motion.
I am intervening early in the debate because I hope that it will be useful to set out some of the background information to the problem of low pay and perhaps to add a historical perspective to some of the statistics used in discussing the matter. I shall try not to be too controversial, although it may be impossible to avoid being so. My right hon. Friend the Minister of State, Department of Employment hopes to catch your eye later, Mr. Deputy Speaker, so that he can respond to the points that will be made.
It may be helpful if I say something about the tax position of the low paid. Indeed, it would be impossible to have a meaningful debate about the low paid without referring to tax, since the tax threshold for married men is about one third of average earnings. None of us can be happy about that. I shall explain later how that position arose. We must consider a broad perspective if we are to get to the root of the problem. I shall not criticise the Governments of which the right hon. Gentleman and his hon. Friends were members, because we have different approaches to solving the problem of low pay. That will no doubt come out later in the debate.
It is common ground that the United Kingdom is a relatively low-earning economy. The underlying reason for that is brought home by some international comparisons of gross domestic product—broadly, the wealth created in this country—per head. The figures were published recently by the Organisation for Economic Cooperation and Development. The data, which are at 1980 prices and exchange rates, are comprehensive and cover all 25 countries in the OECD. Such comparisons can never be perfect, but the figures paint an interesting picture and are central to what we are discussing today. It may be helpful if I give the more essential figures.
Whereas the United Kingdom in 1980 had a GDP per head of $9,340, we were poorer, or less productive, than almost every other major industrialised country and a few small ones besides. Our neighbours in France and Germany had a GDP per head of more than $12,000 and $13,000 respectively. The Benelux countries were all around the $12,000 mark. The position in Scandinavia was better still, with Denmark at nearly $13,000, Norway with more than $14,000 and Sweden among the highest in the OECD with $14,760; only Switzerland with $15,920 was higher. The United States of America, with which we are often compared in many ways, had a GDP per head of $11,360. The only countries poorer than us were Yugoslavia, Turkey, Spain, Portugal, Italy, Ireland and New Zealand.
454 This is not a new phenomenon. In 1970, our position relative to other countries was much the same, although our GDP per head was slightly higher than that of Japan and Austria. Even in 1963, when we would all agree that the problems of unemployment and inflation were much smaller than they are today, we were significantly below the OECD average for GDP per head. In the light of that, it is not surprising that the United Kingdom is a low-wage economy compared with other major industrial powers, and the statistics confirm it. The earnings of the average production worker in the United Kingdom on 1 April 1982 were £7,390. If the earnings of a comparable worker in other countries are converted into sterling, we find that those in France, at £6,018, and in Italy, at £5,296, are lower. But West Germany, at £8,285, the Netherlands, at £7,926, Sweden, at £7,673, and the United States of America, at £9,526, are all higher, and the Japanese are the highest in this comparison with an equivalent of more than £10,000.
The extent to which we became a low-output economy is revealed by statistics for the output of each employee in a year in different sectors of the economy. In 1980, the figure for manufacturing industry in the United Kingdom was $6,800 while the comparable figure for America was $16,800. These figures are measured in 1973 dollars. It is not only against America that the comparison is unfavourable. The Netherlands, France, Belgium, Germany, Italy and Japan were all considerably ahead of the United Kingdom. The position in most other sectors is not much more encouraging. In agriculture, the United Kingdom compares well with the other countries and only America and the Netherlands have a higher output per employee. However, we compare less favourably with most on construction, in the fuel and power sector and—this may surprise some hon. Members—in services, where the United Kingdom output per employee was worth $8,700 as against $10,900 for Italy and $14,700 for America.
That demonstrates the seriousness of the problem. Although I do not pretend that we have completed the job, some progress has been made, with manufacturing productivity increasing by 12·5 per cent. between the last quarter of 1980 and the last quarter of 1982.
I have tried to show that we are a low-wage economy because we are a low-output economy and we have low productivity growth. The problem of low pay must be seen in the context of the whole economy and is a manifestation of a wider truth. Under successive Governments since the second world war investment has been low, as has profitable output from the private sector. An improvement in those, taken together, could create worthwhile and well-paid jobs. Inflation and unemployment have increased with each economic cycle and, in the process, we have made ourselves the relatively poor nation that we are today.
§ Mr. George Cunningham (Islington, South and Finsbury)
The burden of the hon. Gentleman's argument, so far at least, is that as we have low production we cannot have high wage levels, which is a proposition of such monumental self-evidence that I wonder whether it is worth making. Does the Minister agree that when we talk about low pay we are talking in relative terms? We are talking about the very high proportion of those who are receiving well below average earnings, and whether the pattern of compensation for work should be different from 455 what it is now, which is the same as it has been for many decades. Will the Minister address himself to the problem of getting the lowest raised towards the average, whatever that average is?
§ Mr. Wakeham
The burden of what I am saying is that in a country that is a poor performer we are likely to have low incomes. The hon. Gentleman says that it was to him a statement of the obvious that we have for many years been a low economic performer, but when one is talking about average wages one is talking about some people being above and some being below—that is equally obvious. I shall address myself to the general arguments as to how wages are likely to go up and why we do not see a statutory minimum wage as the solution to that problem, and also some of the related aspects to do with tax and poverty and unemployment traps. I hope that by the time I have finished my speech I shall have covered almost all the points that the hon. Gentleman made, but, if I have not, no doubt he will catch your eye, Mr. Deputy Speaker, and make his contribution in the way that he thinks appropriate.
Low pay is a manifestation of a wider truth. We have had low productivity and low performance right across the economy for a long time. We were conscious of the need to make changes in the operation of the labour market where we wanted to eliminate unnecessary rigidities. It is our belief that improving the operation of the labour market is an important part of our strategy for economic growth, and hence for dealing with the problems of low pay. It was in keeping with that strategy that we legislated to control the closed shop and picketing, to encourage ballots before strikes take place, and to restrict many of the more startling examples of union immunities which were often out of line with the position in the countries with which we were competing.
These measures to make the labour market operate more freely fit in with the lifting of other controls in the economy, such as those on prices and dividends. I appreciate that the right hon. Member for Middlesbrough will not accept that analysis of the changes in our industrial relations law, but we believe that that is an essential part of increasing wages. Bearing this in mind, it will come as no surprise to the right hon. Gentleman that, although I share his concern about the existence of low pay, I cannot agree with him that the right solution is to legislate for a national minimum wage. My right hon. Friend the Minister of State, Department of Employment will be responding to this aspect of the motion in more detail later in the debate. I simply point out that a legal minimum wage would add to rather than reduce the rigidities in the labour market.
§ Mr. Reg Race (Wood Green)
Before the hon. Gentleman leaves the subject of the rigidities in the labour market, will he comment on the freedom of employers to pay low wages in non-wages council industries? For example, is he aware that there is a firm in my constituency that pays women workers £27 a week for a 40-hour week, with compulsory overtime on top of that, and never employs anybody for longer than 12 months because it is impossible to sack them afterwards? Will the Minister comment on the freedom of the labour market in that context?
§ Mr. Wakeham
It would be foolish of me to comment on the hon. Member's statement. There has been no 456 opportunity for me to consider it in detail, but if he will write to me with the full facts of the problem I shall give him a comprehensive answer. I should not be able to do so off the cuff and the hon. Gentleman would not expect to do so.
A legal minimum wage would become a benchmark above which all other wages would spread themselves, and existing differentials would be maintained and hence there would be higher wages generally, leading to higher job losses. It is that cycle that we have sought to break. It would also tend to reduce the freedom of choice—and it is a choice for some—between a low-paid job and no job at all.
I do not think that such attempts to legislate to increase wages are the way to a long-term solution, and I do not think that attempts to legislate are the right way to eliminate low pay. The Government's approach is a more radical one. Given that we have to accept low pay as a consequence of a poor economic performance, which will be with us until we achieve a substantial improvement in that performance, successive Governments have tried to tackle the consequence of low pay—poverty—through the social security system.
It is worth pointing out that, under successive Governments, actions on benefits have been of substantial value to the poor. For many of them, benefits are unfortunately the only basis even of a modest existence. Broadly speaking, over the past 25 to 30 years benefits have been a pretty constant proportion of average earnings. The result is that the benefits have risen substantially in real terms.
Let me give a few examples. Supplementary benefit for a single householder was about 17.5 per cent. of average earnings in 1950. Thirty years later it is about 18.5 per cent. of average earnings. This means that over the period it more than doubled in real value. Put another way, those relying on supplementary benefit in 1980 had doubled the living standard of those in 1950. The same picture emerges for a married couple. Their supplementary benefit was about 29.5 per cent. average earnings in 1950 and 30 per cent. 30 years later—again, approximately a doubling in real value. For unemployment benefit, the position is almost the same. The benefit has remained almost constant as a proportion of earnings over the 30 years. In this case the real value almost doubled, but not quite.
§ Mr. Frank Field (Birkenhead)
I have been listening carefully to the Minister. Can he explain what relevance benefits paid to those not in work have to a debate on the low paid? Will he direct his argument to the support given to those in work vis-a-vis the tax system and the social security system via child benefit?
§ Mr. Wakeham
I shall deal with that point, but I hope that I can advance my arguments in my own way.
For pensioners, the position of a man with a wife on his insurance much more than doubled in real terms. Their pensions went up from about 30 per cent. of average earnings to 37.5 per cent. over the 30 years. The point I am making is that the social security system can be and has been used to improve the position of those in need and hardship.
Unfortunately, as my right hon. and learned Friend made clear in the Budget statement, the overlap of the tax and social security systems produces distortions and rigidities of its own. It is worth spending a little time on 457 this matter as it is vital to an understanding of the overall position of the low paid. The distortions are the poverty trap and the unemployment trap. The unemployment trap can mean that people are little or no better off in work than out of work. The poverty trap affects people in work and can mean that an increase in their earnings results in little or no extra money in the purse or wallet. This position has developed over the past 25 to 30 years as the gaps between benefits levels and tax thresholds have been compressed.
An example may help. As I have already said, supplementary benefit for a married couple has been stable at around 30 per cent. of average earnings for the past 30 years or so. Over the same period the tax threshold for a married man has fallen from about two thirds of average earnings to about one third. This means that there is little or no gap between benefit levels and the income on which tax is paid.
Why has the tax threshold fallen in this way? The answer is that ever-rising levels of public expenditure have to be paid for by higher and higher levels of taxation. Public expenditure in 1980 was about 44 per cent. of GDP; in 1970 it was about 38 per cent.; in the late 1950s it was about 32 per cent. Unfortunately, figures for earlier years are not available on a consistent basis. The main programme responsible for the growth of total public expenditure is social security, expenditure on which has risen by about 5 per cent. of GDP since the mid-1950s. Expenditure on health, education and housing has shown significant increases.
In part this rising burden of public expenditure was genuinely unplanned. Successive Governments planned their expenditure on over-optimistic assumptions about economic growth. The expenditure went ahead but the growth did not materialise—so the money had to be found from somewhere and taxes were increased. Total tax receipts rose from about 30 per cent. of GDP in 1955 to about 37 per cent. in 1980.
The way in which this extra tax was levied was also important. Governments tended to increase direct taxes, not indirect taxes. In 1980, indirect taxes such as VAT and taxes on drink and tobacco were about the same percentage of GDP as in the mid-1950s and the early 1960s. Over the same period income tax receipts increased by the equivalent of 3 to 3.5 per cent. of GDP and social security contributions by 2.5 to 3 per cent. of GDP. On the whole, Governments found it easier to raise more income tax by failing to increase income tax thresholds than by raising rates of tax, so that the tax thresholds fell relative to average earnings.
Internationally, this same phenomenon has been at work throughout the OECD—public expenditure rising as a share of GDP and the tax burden tending to fall increasingly on income tax and social security contributions.
Play is often made with the claim that we in the United Kingdom start paying tax at a lower level of income and at a higher rate than in other countries. That is by no means a universal truth.
§ Mr. George Cunningham
The Minister of State is using figures which treat national insurance contributions as if they were a tax like income tax. That is most misleading. Why should the national insurance contribution that someone pays for his state retirement 458 pension be treated as part of the tax scene when the contribution someone makes to a private pension is not treated as part of the public scene? Expenditure on that private pension, when it comes to be paid, is not treated as public expenditure.
§ Mr. Wakeham
I have some sympathy with what the hon. Gentleman says. The national insurance contribution is not a tax. It is separate from tax because it is a contributory scheme. I hope that the rest of the House will support what the hon. Gentleman says. One must add the poverty trap and the unemployment trap together when considering the relative effects on the low paid.
§ Mr. Cunningham
I am making this point in relation to the Minister's assertion that the country's real trouble is the massive rise in public expenditure. The figures that he quoted to illustrate that included the expenditure on national insurance benefits. I am saying that that is illegitimate.
§ Mr. Wakeham
It is not illegitimate. I am not saying that the increase in public expenditure was a bad thing. I was not attempting to argue that. I was trying to give an historical analysis of what has happened and to explain why we are in difficulties in the hope that it will be of some help in the later stages of the debate and so that we can try to find a solution to this problem.
Play is often made with the claim that people in the United Kingdom start paying tax at a lower level of income and at a higher rate than in other countries. That is by no means a universal truth. The most illuminating international comparison is the starting point for income tax as a percentage of the average production worker's earnings in each country. On this measure the starting point for a single person in the United Kingdom is above that for Sweden, Japan, Germany and United States federal taxes. It is below that in Italy, France and Holland. For a married person, our starting point is higher that that for Sweden, Japan, Italy, Germany and United States federal taxes.
With regard to starting rates, it makes sense to consider both income tax and social security contributions together. I hope that the hon. Member for Islington, South and Finsbury (Mr. Cunningham) will agree with me that far. Many of these countries rely heavily on social security contributions as a means of raising revenue. On this basis, the rate of tax in the United Kingdom above the threshold is only a little above that in Germany and Holland. I do not suggest that the position is satisfactory—far from it—but it is not as bad as some people make out. The problem of low thresholds is widespread.
The other elements in the poverty trap are means-tested benefits—notably family income supplement and housing benefits. Successive Governments have used means testing to concentrate help where it is needed and to hold down the cost of social security. But means testing involves the withdrawal of benefits as income rises and so acts in the same way as a tax. The upshot is that people start paying income tax and national insurance contributions at income levels close to supplementary benefit. They pay tax while at the same time means-tested benefits are being withdrawn. That means that an extra £1 of earnings is both taxed and results in loss of benefit. A person can be handing over to the state 70 per cent., 80 per cent. or even 100 per cent. of the extra £1. This plays havoc with work incentives for those caught in the trap. 459 The corrosive effect spreads more widely. It finds its way into wage bargaining and so undermines competitiveness and destroys jobs—through much the same mechanism as the minimum wage legislation.
It is one thing to identify problems of this type, it is another to cure them. There are no easy answers. We need to open up the gap between the income levels at which benefits are paid and the income levels at which tax is paid. But raising tax thresholds is very expensive. The way forward is to reverse the trend that has got us there. This means reducing the tax burden by reducing public expenditure as a percentage of GDP. This, in turn, means restraining public spending while providing the conditions in which the economy can grow. This is the Government's policy and the strategy followed by my right hon. and learned Friend in his Budget.
The increases in income tax thresholds announced by the Chancellor are the fruits of our success. They represent a step in the direction of opening up a gap between the tax and social security systems. In 1983–84, 1.25 million fewer people will pay tax than if the thresholds had not been increased.
Some claim to have found other ways forward. The Social Democratic party produced a document some months ago—I am not sure whether the hon. Member for Islington, South and Finsbury was a member of the party at that time—claiming to have eliminated the poverty trap. I should like to comment on the document, not to criticise it but to show how difficult the problem is. What does the claim amount to? It amounts to a small reduction in the rate of tax—the rate of direct tax and reductions of benefit—for some people in the poverty trap. But the rate of tax for others in the same trap was increased. This can hardly be described as eliminating the trap. The SDP's claim rests on an artificially restricted definition of the trap.
The SDP says that the trap exists for people who have tax rates of over 100 per cent. but not if they have tax rates of 75 to 85 per cent. Under the proposals, a married couple with two children would have a marginal rate of tax of 45 per cent. on earnings up to £30 a week. From £30 to £45, the marginal tax rate would be 54 per cent. From £45 to £170, it would be over 80 per cent. Under the actual arrangements now in force, the corresponding figures are zero on earnings up to £30 a week, 9 per cent. on earnings between £30 and £45 a week, over 100 per cent. on earnings between £45 to £90 a week, 62 per cent. on earnings between £90 to £130 a week and 39 per cent. on earnings between £150 to £170 a week.
The upshot is that for a married couple with two children the trap at present hits those on a quarter to three-quarters of average earnings. The SDP proposals would extend this to those on all levels of earnings up to average earnings. For every one family that would have its work incentives improved by the scheme, 10 families would have their incentive to work worsened. I am seeking not to criticise, because this is a difficult problem.
There is a massive redistribution of some £5 billion but it will not achieve very much. The SDP plans to find this money by abolishing the married man's income tax allowance and letting inflation eat away at the value of the single person's tax allowance. The result is that every single person would lose money as a result of the SDP's scheme if they earned more than half average earnings. 460 Married people would lose if they earned average earnings and more, and, in some cases, even if they earned somewhat less than average earnings.
In terms of the number of households in the working population, 750,000 married couples without children would be better off as a result of the SDP's scheme but 3.75 million would be worse off. Some 2 million married couples with children would be better off but over 4 million worse off. Some 2 million single people would be better off but 4 million worse off.
§ Mr. George Cunningham
The Minister is giving much attention to a document that certainly deserves it, but he should try to be fairer. The hon. Gentleman is giving his figures about the number of people affected. Will he also include, if he has the information, the extent to which those people are affected? If he is examining this issue with any intellectual honesty he will recognise that the essential point is the number of people affected and the extent to which they are affected. Will he alter his figures to take that into account?
§ Mr. Wakeham
If one makes a redistribution where one-tenth of the population in any particular category benefits and nine-tenths lose, the one-tenth, by definition, will benefit substantially in direct proportion to the nine-tenths who will lose much less. This solution to the problem is financed by those who are on average earnings, and in many cases, below average earnings. That is the central point of the message that I want to get across. It is a very expensive way of dealing with the matter and one that will apply to the tax of many people who can be considered to have pretty low incomes. There are no easy answers.
I wish to deal now with an issue affecting the low paid that has been the subject of continuing debate for many years. I refer to the question whether a lower rate band of tax or an increase in tax thresholds is the better method of improving the financial position of the low paid. I start with a proposition—no one, I think will disagree—that we have at present a dual problem. Tax thresholds are too low, even though the substantial personal allowance increases in this year's Budget are a significant step in the right direction. Similarly, I think everyone would agree that the onset rate of tax is too high. It is by no means satisfactory that the first £1 of earnings above the tax threshold is taxed at a rate as high as 30 per cent.
The long-term objective must be to get tax thresholds up and the onset rate of tax down. The reintroduction of a lower rate band would be a means of reducing the onset rate of tax. The Low Pay Unit, in its pre-Budget memorandum, recommended the reintroduction of a lower rate band of 25 per cent. which would cover income ranges of £2,000. The first £2,000 of income above the tax threshold would be taxed at 25 per cent. instead of 30 per cent. This would cost over £2 billion.
The Low Pay Unit coupled this with a recommendation that the tax threshold should be increased by about 10 per cent. above the level of inflation. On tax thresholds, the Budget increase in personal allowances falls very little short of what the Low Pay Unit proposed but we adhered to the view that the lower rate band should not be introduced. In the Government's view, it would be totally irresponsible to spend an extra £2 billion on tax relief on top of what is proposed in the Budget. The reasons have been fully explained by the Chancellor and by my 461 Treasury colleagues in the Budget debates. There is no point in going over that ground now. I have no doubt that I shall have the opportunity to do so, as will other hon. Members, in debates on the Finance Bill.
For the purposes of this debate, I wish to address myself to priorities. Are the resources that are available for tax reduction better spent on reintroducing a lower rate band or increasing tax thresholds? To put the question another way, were the Government right this year to concentrate resources on increases in tax thresholds—one part of the Low Pay Unit's prescription—rather than to follow the other part of its prescription, and reintroduce a lower rate band?
I wish first to sketch in the historical background. There was at least one lower rate band, usually two or three rate bands, over the whole period from the end of the second world war until 1969–70. In that year, the first £260 of taxable income was taxed at a lower rate of 30 per cent. while the standard rate was 41.25 per cent. This was, of course, the time when earned income relief was still in operation, so the rate of tax on earned income was somewhat below these nominal levels of 30 per cent. and 41.25 per cent. The lower rate band was abolished in the 1970 Budget. A lower rate band was reintroduced in 1978. The first £750 of taxable income was chargeable at 25 per cent. with a basic rate of 33 per cent. where taxable income was above this point.
The Government abolished the lower rate band in 1980. Why did the Labour Government reintroduce the lower rate band in 1978? Why did we abolish it only two years later? The arguments on each side are of continuing relevance, so they are worth restating.
The reasons given by the Labour Government for reintroducing a lower rate band in 1978 were quite simply that this would give more benefit to the low paid than equivalent expenditure on tax thresholds. The main reason for our abolishing it was equally simple. We took the view then, and still hold the view now, that expenditure on tax thresholds is a better way of helping the low paid than expenditure on a lower rate band. In 1980 my right hon. and learned Friend was faced with the choice between retaining the lower rate band and holding the increase in tax thresholds below the previous year's inflation level, or raising allowances so as to compensate fully for the past year's inflation, but abolishing the lower rate band. My right hon. and learned Friend chose the latter course. There were a variety of reasons for concentrating resources on increasing tax thresholds by abolishing the lower rate band. One powerful argument—though by no means the most powerful, in my view—was that the abolition of the lower rate band simplified the tax system. The lower rate band was complicated for the Inland Revenue to administer. Equally important, it was complicated for employers to operate and for the public to understand. The result of abolishing the lower rate band was a direct saving of 1,300 Revenue staff.
The second reason for abolishing the lower rate band was that the threshold increases kept out of tax 500,000 people with low incomes who would have remained liable to tax if the lower rate band had been retained.
The third reason—an important one—is that the lower rate band gave less help to the very lowest paid. I can best illustrate this, I think, by saying what would happen if we were now to re-introduce a lower rate band on the same 462 lines as it was in 1979–80—that is, a lower rate band of 25 per cent. on the first £750 of taxable income. The figures I am going to quote are for 1982–83. Rt. hon. and hon. Members will forgive me for not being able, in the short time available since the Budget, to quote up-to-date figures. But, as hon. Members will appreciate, any slight difference in the detailed figuring does not affect the basis of the argument.
A £750 lower rate band at 25 per cent. would cost about £900 million. The same cost would finance an increase of about 5½ per cent. in the single and married man's allowances which would take about 500,000 people out of tax altogether. The lower rate band would be the marginal rate for 3 million to 3.5 million taxpayers. Most of these would be single people and married women. The lower rate band would give a greater financial benefit than the threshold to single people and earning wives with earnings of more than £540 above the single threshold—that is above 25 per cent. of average male earnings. It would give less benefit than a threshold increase to the lowest paid single people and earning wives. Significantly it would give less benefit than a threshold increase to all married men. So the effect of introducing a lower rate band would be to improve the financial position of most single people and working wives at the expense of the lowest paid single people and of all married men. In other words, low-paid families with children, whom the lower rate band is meant to help, would be better off with a tax threshold increase.
Perhaps I should explain how this comes about. There are two reasons for it. One is straightforward. It is that people get the full benefit from the lower rate band only if their incomes are above the basic rate threshold. For the lowest paid, some of the lower rate band is "wasted". By contrast, a threshold increase gives the same cash benefit to everyone—apart from higher rate tax payers—and gives the greatest proportional benefit to the lowest paid. In other words, the tax reduction is bigger as a proportion of their net income.
The second reason why a lower rate band disadvantages married men it is meant to help is that, compared with a threshold increase, the reintroduction of a lower rate band would shift the tax burden from single people—and working wives—towards married men. An across-the-board threshold increase of, say, 5 per cent. gives a bigger cash benefit to a married man than single people and working wives. The married man gets a £130 allowance increase, against the £80 increase for single people. A lower rate band, by contrast, has the same cash value for married men and single people. This explains why all married men would be worse off with a lower rate band than with a threshold increase, whereas the majority of single people and earning wives would be better off with a lower rate band. Since the loss of tax allowances hits the lowest paid married men hardest, the result of the introduction of lower rate bands would be to improve the position of single people at the expense of the lowest paid married men.
I might point out that the dilemma about whether to have a lower rate has been a dilemma for Governments of both parties. Six years ago the right hon. Member for Llanelli (Mr. Davies), who was then a Treasury Minister, was weighing up the arguments. He said:A reduced rate band, as distinct from an increase in the tax threshold, would not give most help to those on the smallest incomes. For the man on the tax threshold complete exemption for a few pounds is worth more than a lower rate of tax on a larger 463 band of income which he has not got. If the cost of the reduced rate band had to be met by keeping the tax threshold lower than it would otherwise be, it would widen the poverty trap by enlarging the overlap between tax liability and entitlement to means-tested benefit. If having a reduced rate band is at the expense of having less of an increase in allowances, it will not benefit people at the lower end of the scale as much as an increase in allowances."—[Official Report, 3 March 1977; Vol. 927, c. 747–8.]I do not criticise the right hon. Gentleman for saying this and then for deciding the following year that a lower rate band was appropriate. The issues are complicated, and this is why I have felt it appropriate to set out the Government's position in some detail.
The next question is whether a lower rate band would do more or less than an equivalent threshold increase to remedy the problems produced by the interaction of the tax and social security systems, the unemployment trap and the poverty trap, as they are now usually described.
Let us consider the unemployment trap first. The main issue here is how the take-home pay for married men with families compares with their income out of work. This is affected by how much of their gross income is taken in tax; in other words, the average rate of tax rather than the marginal rate. A tax threshold increase will take some people out of tax entirely. For the remainder of married men a threshold increase will give a greater reduction in tax bills—and hence a bigger increase in take-home pay—than equivalent expenditure on a lower rate band. It follows that a threshold increase should in general be more effective in dealing with the unemployment trap than equivalent expenditure on a lower rate band.
I now turn to the poverty trap. The problem here is with high marginal rates of income withdrawal for the low paid as the result of the interaction of means tested benefits and the lax system. A lower rate band would potentially reduce the marginal rate for those affected by the trap. However, a lower rate band of £750 would have a very limited effect because it would not be the marginal rate for most men with families. A study by the Institute of Fiscal Studies in 1979 concluded that only 10,000 of those with the 25 per cent. rate as their marginal rate were in receipt of family income supplement, and thus subject to the poverty trap. Some people said that this figure was too low, and that the number may be rather higher now. But it remains true that only a small proportion of married men in the poverty trap would have their marginal rate reduced by a lower rate band, unless the lower rate band was wide enough to affect most families in the poverty trap. A lower rate band of this size would cost billions of pounds, and it seems doubtful whether, even if this could be afforded, it would be more effective than an increase in the tax thresholds. The choice is between, on the one hand, a lower rate band which reduced the marginal rate by 5 per cent. for those affected by the poverty trap, and, on the other hand, a tax threshold reduction which will reduce the marginal rate by 30 per cent. for a smaller number of people by taking them out of tax entirely. There may be room for argument whether a lower rate band or an increase in tax thresholds would have a greater beneficial impact on the poverty trap, though in the long term the advantage seems to lie with threshold increases that would take the low paid out of tax entirely.
§ Mr. George Cunningham
From the detailed figures that the Minister has given, it would seem that he is making two assumptions: first, that the standard rate would still be 30 per cent. whatever lower rate band was 464 introduced, and secondly, that the lower rate band would cover only £750 of income, which is the amount that was covered by the 1978 proposal.
§ Mr. Wakeham
Those were the assumptions that I made for the purpose of my argument. Of course, one could do more calculations with wider assumptions, but I thought that I had probably spent as long as most hon. Members felt appropriate on this most important subject. However, if the hon. Gentleman wants wider figures, perhaps I may supply them to him another time. Of course, the widening of the £750 lower rate band would help, but it would also be an extremely expensive proposition.
I trust, therefore, that I have explained to the right hon. Member for Middlesbrough why we took the decision to abolish the lower rate band in 1980, and why it seems to us right to continue to put priority on increasing tax thresholds generally rather than reintroducing a lower rate band. In saying that I do not seek to diminish the importance of reducing the onset rate of tax. Nor would I rule out the possibility of reintroducing a lower rate band at some time in the future when the tax threshold is substantially higher as a proportion of average earnings than it is now. For the foreseeable future, I think that it must be clear that the most effective way of dealing with the problems of the low paid is to concentrate the available resources on increasing tax thresholds rather than diverting them to the reintroduction of a lower rate band.
I have set out the position of the low paid, how we compare with other countries, and how our tax system affects them. I have said that the only lasting solution to the problem of low pay is to create a healthier economy which will have soundly based jobs as a result of soundly based growth. That has been our aim ever since we took office. We need to achieve enduring changes in attitudes and expectations. The measures my right hon. and learned Friend the Chancellor of the Exchequer announced on Tuesday were part of this, but should not be seen as an isolated event. They are part of the Government's medium-term financial strategy and were accompanied by the fourth statement of that. The strategy is a comprehensive framework within which to continue reducing inflation, to secure a lasting improvement in the performance of the United Kingdom economy and to provide the foundations for sustainable growth in output and employment. Control of the money supply is central to that strategy and, in judging the appropriate rate for monetary growth, the Government will continue to take account of all the available evidence, including the exchange rate.
The strategy also includes illustrative fiscal projections which show how fiscal policy can he made consistent with the overall financial framework, given the public expenditure plans. As a proportion of gross domestic product the PSBR for 1982–83 is now estimated at 2.75 per cent.—among the lowest in all the major industrialised countries. In our medium-term projections a 2.75 percentage is retained for 1983–84 and thereafter it falls to 2.5 per cent. in 1984–85 and 2 per cent. in 1985–86.
The declining path of the PSBR over the medium term should leave room for lower interest rates as monetary growth comes down. Previous success in reducing the PSBR has already contributed to the reduction in interest rates while keeping within the 1982–83 target for monetary growth.
465 The medium-term financial strategy has also made an important contribution to reducing inflation well into single figures and the continued decline in the target ranges assumed this year is consistent with keeping inflation on a downward trend. Each of the Chancellor's Budgets has been part of a continuing programme. The macro-economic context is set out in the MTFS. This year's Budget, like last year's, combines tax cuts with a continuing responsible approach for money and borrowing. Relief for both persons and business is being provided to improve incentives and help restore a sound base for economic growth. That is the best way to tackle the problem of low pay as I have described it today.
§ Mr. Tom Pendry (Stalybridge and Hyde)
I first congratulate my right hon. Friend the Member for Middlesbrough (Mr. Bottomley) on his good fortune in coming top of the poll in the ballot. Secondly, I congratulate him on his choice of subject, which I know is one that is close to his heart. Thirdly, I congratulate him on the competent way—I am sure that the House would agree—in which he moved the motion. No hon. Member should be too surprised about that however, because my right hon. Friend, like me, is sponsored by the National Union of Public Employees. Hon. Members must know that many members of NUPE are among the lowest-paid workers in the country, although they perform a very valuable job. My right hon. Friend was a NUPE official before he became a member of Parliament and he worked for those low-paid workers. In the 36 years that he has been a Member of Parliament, he has raised the problems of the low paid several times. Therefore, I am sure that hon. Members will not be surprised that he chose this motion.
However, it must come as a surprise to many of those who heard the Minister's long speech that the motion seeks the adoption of a national minimum wage as the best means of tackling Britain's growing problem of low pay. My right hon. Friend the Member for Middlesbrough forcefully pointed out the consequences of low pay. He told the House that almost one third of the adult work force earns low wages and that low pay is not a problem that can be ignored or dismissed. It permeates our economy and our society. It scars the lives of many millions of workers and their families, and it is a major cause of poverty and injustice. We on the Opposition Benches, of course, do not expect such considerations to weigh heavily on the conscience of Ministers. Indeed, I have not even got the Minister's attention now. We do not know how closely he listened to my right hon. Friend's argument, because it did not come through in his speech. However, I am sure that the Minister of State, Department of Employment will have listened more closely to my right hon. Friend and no doubt he will give a more definitive view of the Government's stance later.
The Government have deliberately increased the problem of low pay. There can be no doubt about that. In their simplistic Grantham grocery shop approach to economics, it is the only way that they can see of reducing unemployment. History and economics tell us that it will not work. It did not work in the 1920s and 1930s and it certainly will not work today. As my right hon. Friend the Member for Middlesbrough also pointed out, Britain is out 466 of step with other countries in its approach to low pay. As the International Labour Organisation in Geneva has recently reported.In an expanding group of industrialised countries minimum wage regulation applies to almost all workers. Countries with a national minimum wage include Australia and New Zealand, Canada and USA, Japan, Luxembourg, France, the Netherlands, Spain, Portugal and Belgium.Therefore, the motion calls on the House not to adopt any new, radical and untried idea, but only to ensure that Britain moves into line with other countries in terms of the protection that it provides for the poorest workers. Indeed, we demand only that the Government should meet their international obligations. At present, Britain is in breach of international agreements requiring that Government should provide adequate minimum protection for the most vulnerable workers. Towards the end of last year the British Government were reported to the Council of Europe for failing to meet their obligations under the European social charter, which is intended to ensure that workers in member countries received a "fair remuneration" for their work; a remunerationsuch as will give them and their families a decent standard of living".The Council of Europe has defined "fair remuneration" as a wage of not less than 68 per cent. of the average earnings of men and women combined. This it describes as the "decency threshold", which is a good term. In Britain last year it would have stood at slightly less than £93 a week. How many people in Britain are below that decency threshold? The briefing issued to hon. Members by the Low Pay Unit shows that on the Department of Employment's own figures, there were more than 6 million adult workers earning less than £90 a week.
Moreover, the Government have made matters worse. In 1979, one in 10 male manual workers fell below the Council of Europe's decency threshold. Now the proportion is one in six. Two thirds of manual workers fell below the threshold in 1979. Now three quarters are receiving wages that the Council of Europe considers to be unfair. Of course, Conservative Members like to think of themselves as good Europeans—we often hear that—and good internationalists. But when European or international agreements require that workers get a better deal than, say, our farmers or employers, the Government ignore their obligations.
The Council of Europe is not the only body that specifies obligations on low pay. On Monday next, the Government will be reported by the Low Pay Unit for failing to observe ILO convention No. 99 requiring that adequate minimum wage machinery should be established in agriculture to ensure that farm workers receive a wage that allows themto maintain a suitable standard of living".Since about 11,000 farm workers' families are forced to rely on family income supplement to top up their poverty wages, it is clear that the Agricultural Wages Board, which is responsible for setting their wages, is in breach of that requirement. Moreover, in January the board awarded wage increases to farm workers of only 7 per cent., while recently farmers have announced income increases of 45 per cent.
§ Mr. Pendry
No, I shall not give way to the hon. Gentleman. The Minister took a great deal of our available 467 time, and I want to get through my speech as quickly as possible because I know that other hon. Members wish to contribute to the debate. I am sure that the hon. Member for Maidstone (Mr. Wells) will succeed in catching the eye of the occupant of the Chair during the debate.
I was saying that our farmers had increases of 45 per cent. Thus the wages board clearly is failing to provide equal treatment to both sides of the industry, as the ILO requires.
Hon. Members will be aware of the plans that the Government announced just before Christmas to abandon the century-old fair wages resolution requiring private contractors to pay fair wages and to maintain minimum conditions before they can obtain Government contracts. In doing so, the Government have to renounce ILO convention No. 94, which requires all signatory countries to place fair wages clauses into Government contracts.
The ILO has explained the purpose of this requirement. It isthe desire to isolate wages from excessive competitive pressures, the reasoning being that while producers should be free to compete in matters of price, design, quality of product and service, it is unfair for competiton to be based on a bidding down of workers' wages.That was said by the ILO in 1981.
It is evident that the Government are not interested in fair competition. In September last year, the Secretary of State for Employment wrote to the ILO saying that Britain no longer wished to be associated with convention No. 94. He did that without referring the matter to the House. It was almost three months later that the House had an opportunity even to discuss whether Britain should renounce one of its most important international obligations. This is a scandalous state of affairs.
The Government are also in contravention of ILO convention No. 26. I could go on, but this is the last one that I intend to quote as an example of the Government breaking ILO conventions. Convention No. 26 requires signatoriesto create or maintain machinery whereby minimum rates of wages can be fixed for workers employed in certain of the trades or parts of trades (and in particular home working trades)"—I am sure that my hon. Friend the Member for Eton and Slough (Miss Lestor) will try to catch your eye, Mr. Deputy Speaker, so that she can pinpoint some of the problems there, especially among women workers—in which no arrangements exist for the effective regulation of wages by collective agreement or otherwise and wages are exceptionally low.It requires that Governmentsshall take the necessary measures, by way of a system of supervision and sanctions, to ensure that the employers and workers concerned are informed of the minimum rates of wages in force and that wages are not paid at less than these rates in cases where they are applicable.The British Government are clearly also in breach of these requirements.
Most home workers have no protection against exploitation. A survey by the Department of Employment carried out in early 1980 found that half of all home workers were earning less than £1 an hour, but independent research shows that rates of pay of less than 20p an hour are common. Recently the Low Pay Unit has come across the case of one home worker employed to pack envelopes receiving an hourly rate of pay of 7p but having no legal redress. Even where home workers are covered by wages councils—and few of them are—illegal 468 underpayment is rife. When ACAS looked at the toy-making industry it found that 80 per cent. of home workers covered by the wages council were illegally underpaid.
But it is not only home workers who need the protection of the law. Some 3 million workers are covered by the wages councils and, even though the minimum rates that they provide are pitiful, a large and increasing proportion of employers have been found to be underpaying. When the Government came to office, the problem was bad enough, and the Opposition can take no credit for that. In 1979, 31.5 per cent. of firms inspected by the wages inspectors were found to be underpaying their workers. By 1981, the proportion had increased to 41.3 per cent., and the problem is probably greater still today.
The Government have actively encouraged underpayments by their cuts in the wages inspectorate. We all know how strong the Cabinet normally is on matters of law and order and how strongly the Government come down on people who are found to be abusing the social security system. The Chancellor of the Exchequer told the House on Tuesday that he had managed to cut the number of civil servants by 80,000. He did not mention that the number of civil servants employed to chase paltry sums of social security abuse was increased by 1,000 to 5,500 when his Government came to office.
The Government take a very selective approach to law and order. If I had travelled to the House on the Tube without paying the correct fare—I assure hon. Members that I did not—or if I had a television set and no licence—here again I am not guilty—I should risk a fine of up to £200 and possible imprisonment. If I ran a firm and paid my workers illegally low wages, the maximum fine that I should risk is only half that amount. Indeed, I should be very unlikely to be prosecuted, bearing in mind that there are only 114 wages inspectors throughout the country who check on the wages of 3 million people. Each firm can expect a routine visit from the inspectors only once in every 14 years, and, even when caught, only one in every 1,000 firms is prosecuted each year. So much for the even-handedness of this Government's approach to the problem.
The Government are not ensuring that workers receive their minimum entitlements, even under Britain's patchy minimum wages system of wages councils. Under the young workers scheme, as we heard from my right hon. Friend, firms may be able to collect a Government subsidy because they are illegally underpaying the young people whom they employ. Who says that crime does not pay under a Conservative Government?
For all these reasons, the British Government have been reported to the ILO on yet a third count, this time by the TUC, for a clear breach of convention No. 26. 1 said that I did not intend to refer to any more examples of ILO convention problems, and I apologise for doing so.
The information on which the TUC's case is based was supplied by the Society of Civil and Public Servants, the union representing Government wages inspectors. The Government have made it impossible for them to carry out their duties properly and to enforce the law on behalf of the most vulnerable group of workers. The ILO will report on the case in May, which perhaps is another reason why a June election is less than likely, because the report is expected to be extremely embarrassing for the Government.
469 The Government are fully aware that they are in breach of convention No. 26. That is why they plan to revoke the convention in 1985—if they are still in office—and then to abolish the wages councils altogether, as we have heard.
We shall make it our business at the general election to ensure that the electorate—and especially the 6 million or 7 million low-paid workers—know that a vote for the Conservatives is a vote for abolishing altogether the existing minimum wage protection against low pay. I hope that we shall be able to say that a vote for Labour will be a vote for an effective policy against low pay, including a national minimum wage.
In asking the House to accept the motion that was so ably presented by my right hon. Friend, I am demanding no more than the implementation of our obligations under international agreements. Britain's failure to observe those obligations is becoming an embarrassment to other countries which willingly abide by their commitments. Understandably, they resent the fact that Britain should fail to honour its agreements. Therefore, it would be as well if the House were to ensure that our commitments are fulfilled voluntarily before international bodies are forced to pronounce publicly against our actions.
I congratulate my right hon. Friend on bringing a very pressing and urgent matter before the House.
§ Sir Hector Monro (Dumfries)
I am glad to speak in a debate initiated by the right hon. Member for Middlesbrough (Mr. Bottomley) on the eradication of low pay, particularly because of his immense parliamentary experience and what he has done for the Commonwealth over many years. We are deeply grateful to him.
I was encouraged by the right hon. Gentleman's statement that, after 21 years as the hon. Member for Middlesbrough, this is the first occasion on which he has drawn a motion in the ballot. Having had no luck for 18 years, I shall keep trying, in the hope that perhaps in another few years I, too, may be successful. I believe that the right hon. Gentleman's proposals, although ably argued, are neither desirable nor practical at present.
I noted with great interest what the hon. Member for Stalybridge and Hyde (Mr. Pendry), with his great experience, said about our international obligations and about the Low Pay Unit. I have no doubt that the Minister will deal with the hon. Member's points in the reply to the debate.
As my hon. Friend the Minister of State said, there are no easy answers. I believe that it is important to get more people working before we contemplate a major upheaval in pay structure. The Government have made a major contribution by bringing down inflation to under 5 per cent. Low pay, pensions and fixed incomes are all affected by inflation. The lower the income, the greater the impact of inflation.
It is right that we should concentrate the whole economic effort of the Government on bringing down inflation. That should be the first priority, with many other important objectives not far behind. If we raise artificially the wages of the lowest earners, inevitably some of them will lose their jobs, and those who remain in work will clamour for greater differentials, so that there will soon be an inflationary spiral. That is already evident as a result of some of the decisions of wages councils, particularly in 470 relation to shop workers. The wages council has set minimum wages at rather too high a level over the past few years. Only this year, it set the figure at 8 per cent., when inflation was substantially lower. The result has been that young girls, in particular, have not been taken on as shop assistants. Shopkeepers cannot afford to pay them the high minimum wage set by the wages council. I believe that my right hon. Friend the Secretary of State for Employment was right to intervene and say that 8 per cent. was too high. The figure has now been corrected to 6 per cent.
My hon. Friend the Minister of State spoke in great detail about taxation, social security benefits, family income supplements and housing subsidy. It is valuable to have that information on the record. He showed that public expenditure in that sector, as a percentage of our gross domestic product, has increased over the years, and it is unfortunate that society now seems to accept it as inevitable.
I welcome the raising this year of the tax threshold, plus the important step forward concerning child benefits. Linked together I think that those measures will go some way in helping the low paid. In practical terms, it is the most effective step at the Government's disposal in the current financial year. The Chancellor of the Exchequer raised the threshold by 8 per cent.—above the rate of inflation—thus removing 1.25 million taxpayers from taxation altogether. We should all thank the Chancellor for that important step forward. It is the best way of disbursing the money available in that sector.
I am concerned that the Labour party would like to have a substantial devaluation—perhaps as high as 30 per cent. Devaluation is certainly a means of cutting costs by cutting real earnings and so directly cutting living standards. I do not think that that recommendation by the Labour party can possibly be welcomed by the low paid.
If wages are equal for all groups, the young, the school leavers and the inexperienced will have to compete one with another, as well as with those who have the skills and experience. The efforts of the trade unions and the wages councils to raise youth wages relative to the wages of adults can result only the young being priced out of work. High minimum wages in Denmark for those between 18 and 25 have resulted in that category now being the highest group of unemployed in Denmark. It would be unfortunate if we were to add an additional problem to the problems already experienced by school leavers.
One solution to the problem of youth unemployment is to make it easier for small businessses to engage young people and school leavers. That involves making it possible for employers to pay a realistic wage-I emphasise the word realistic—and not a wage that prices the goods out of the market or forces small firms out of business.
I have talked to many shopkeepers in my constituency who are gravely concerned because they want to take on young staff but cannot afford to do so because of the minimum wages set by the wages council.
The Government are making great efforts, through the youth training scheme, to give young people the skills that they do not possess when they leave school. The scheme is costing a great deal but in the present circumstances it is money well spent.
I do not think that the right hon. Gentleman sufficiently emphasised the advantage of obtaining a united front on some of the steps that should be taken to improve the 471 position of the low paid. Even Labour party leaders disagree about the step forward. Mr. McCluskie, the then chairman of the Labour party, said on 22 October 1982:Most trade unions have a strong practical objection to the idea of a national statutory minimum wage.Mr. Terry Duffy, the president of the Amalgamated Union of Engineering Workers said in 1982:The reason we are against a national minimum wage is because we will not accept any Government interference in wages.One wonders where are the friends of those who advocate the policy set out in the motion.
Over the years Scotland has had a reputation, not entirely deserved, for paying lower wages than in the rest of the United Kingdom. I am glad that recent figures show that low pay in Scotland is not significantly greater than it is in Great Britain as a whole. Average male earnings in Scotland reached the Great Britain level last year. Only figures for the south-east of England are above the average for Scotland.
It is good to know that Scottish manufacturing industries since 1979 have experienced growth in productivity substantially in excess of the United Kingdom average. That provides welcome competitiveness for Scottish industry. It is good news for Scotland that it can no longer be said that wages are lower in Scotland than in the rest of the United Kingdom. Scottish wages now compare with wages in the rest of the United Kingdom.
It is valuable to debate this important subject. That is why I am grateful to the right hon. Member for Middlesbrough for using his chance in the ballot to discuss the matter. Nevertheless. I am not sure whether it is possible, or even desirable, to take immediate legislative action to establish a statutory minimum wage. We must go forward slowly. We must first bring unemployment down and increase competitiveness and not price ourselves out of jobs by paying higher wages than the manufacturing or service sectors can stand. When we have achieved those objectives not only will low pay not be so pressing, but we shall be able to see more clearly the steps that we should take to implement the international responsibilities that the hon. Member for Stalybridge and Hyde mentioned—that is, if they are statutory obligations.
Wages certainly should not increase dramatically at present. We must keep them down to inflation level. The Government have shown by their achievements this year that the norm that they set is about right. Trade unions must respond to the effort to contain inflation and to keep wage increases near to that inflation level. They must be responsible in their wage claims. In that way I am sure that we can move towards increasing minimum wages voluntarily because the whole economy will give industries and small businesses the opportunity to pay a higher wage to all. That is the voluntary approach that I am sure is the right way forward in the immediate future. I commend the Govenment's efforts to that end.
§ Mr. George Cunningham (Islington, South and Finsbury)
I congratulate and thank the right hon. Member for Middlesbrough (Mr. Bottomley) for proposing this subject for debate. The subject does not often find parliamentary time compared with the surrounding facets of policy such as taxation and social security policy. In saying that I refer to the subject matter which I think that the right hon. Gentleman intended this debate to be about 472 and not the subject matter which occupied at least three-quarters of the marathon Budget speech by the Deputy Chancellor, the Minister of State, Treasury.
The subject matter that occupied three-quarters of the Minister of State's long speech is very important and very interesting but it is not supposed to be what we are debating this morning. Since he spent a lot of time on some of them I shall pick up one or two things from his speech. He commented, I shall say not too critically, upon the Social Democratic party's policy document on methods whereby our social security system and the relationship between benefits and pay can be better rationalised. He pointed out what I should have thought was pretty obvious, that if one is shifting resources from one lot of people to another one is playing a zero sum game. At any time when one is trying to alter the system—I am not talking about pumping more resources in—what one gives to Peter one must take from Paul. That is exactly the kind of task to which we should pay more attention.
The purpose of the SDP policy document was to talk about the system, the profiles and the pattern whereby we assist certain activities and to try to strike a better balance in providing that assistance. What is bad about the present arrangement is that there are sudden steps in the process. The suddenness and severity of those steps has a bad effect upon the behaviour of the people affected by them. If one tries to substitute for a step a slope or a ramp then, of course, there has to be a plus and a minus for the people affected.
That failure to appreciate the importance of addressing our minds to the system as against the pumping in of more money, the rates and so on, was manifested in what the Minister of State said about the taxation system and, in particular, about the possibility of reinstituting a lower taxation band. In reply to my intervention the Minister of State confessed that the figures that he had given me about the effects of introducing a lower rate band were based upon a presumption that the standard rate would remain at 30 per cent. and that the lower rate band would be in respect of the preposterous band of income—£750. That happened to be the band introduced in about 1978. It was introduced then not because of a genuine wish by the Labour Government but because the TUC attached enormous importance to it. The Labour Government did not want to do it, but the TUC pressed very strongly so it was done. That was the kind of relationship that existed in those days between the TUC and the Government.
I press hon. Members to pay more attention, as the SDP has, to trying to study the system and the profiles, as against the actual rates, because many of our difficulties stem from the nature of the system rather than the rates.
The Minister of State also tried to explain low pay as being attributable only to low production. We are talking once again of the profile of pay—the proportion of people who have, for instance, less than two thirds of average earnings. All the studies on the matter show that that profile has not significantly altered over many decades. The question is, do we want to alter the profile'? Do we want the steep line to become more horizontal, at least up to the point of average earnings? I am not falling into the silly trap of thinking that everyone can be on average earnings.
The Minister also referred to public expenditure as including expenditure on national insurance benefits. I stress that I am talking about national insurance benefits, and not the totality of social security benefits. I am talking 473 about the contributory benefits. Of course, for some purposes one has to include national insurance benefits as part of public expenditure. They are handled by the Government. However, in other important senses for the purpose of this debate, they are not public expenditure. They are not even really a transfer from one person to another. They are a transfer from one person at one time in his life to that same person at another time in his life, in much the same way as a transfer through a private pension scheme or deferred annuity. The relevance to this debate is that if one regards national insurance benefits as of that nature, the growth in national insurance benefit expenditure ceases to be something wicked which one has to try to limit, and becomes a very sensible means by which people during their period of work make adequate provision for their own period of life after they have ceased to work.
However, I welcome from the Minister of State, Treasury the declaration that he has made of two U-turns in Government policy. It must be said that they are based entirely on protestations not performance at this time, but if protestations are to the effect that performance will be the opposite of what has been achieved so far, at least that is something.
The Minister said that the intention was that the Government should spend less. I do not particularly welcome that, but the fact is that in their period of office the Government have actually spent more, contrary to their original protestations. So there is announcement number one of a U-turn. Secondly, and much more important—and to be welcomed—the Minister of State said that it was the Government's intention to enlarge or broaden the gap between benefits and pay in employment. Once again, during their nearly four years of office, the Government have actually narrowed that gap. So we have a declaration by the Minister of State that he will change his policy on that.
§ Mr. Cunningham
I entirely agree about that. But I do not think that the Government have got as far as deciding how they will do that. They have only got to the stage of saying that they intend to do the opposite of what they have achieved so far. So we have to give them a bit more time to think that out.
The real subject matter of this debate is not take-home pay. It is not social security benefits, but gross pay before those things are applied. The question is whether in this country there are too many people whose gross pay is too small in relation to that of the generality of those in employment. Those who are on such low gross pay divide up into a number of groups. Women are clearly one of the most disadvantaged groups. Young people in some sectors are one of the disadvantaged groups, although it must be said that there are some young people who have a considerable advantage, in that they are obtaining normal wages at a time when they do not have normal outgoings to meet. However, certain young people are a disadvantaged group.
474 Thirdly, and most important, there are quite simply certain jobs, certain sectors of the economy, in which low pay is chronic, and therefore many families where the wife has to go out to work, not to provide luxuries for the family, but in order to be able to pay the rent and have any decent minimum standard of living at all.
The economic effect of low pay has been a subject matter that has been much discussed over the years, and in our muddle-headed British way we have never clarified our minds as to which is the chicken and which is the egg. We often say that if there is lower pay this country will be more competitive. Ministers are constantly urging that pay settlements should be kept down in order to improve the competitiveness of this country. It should go without saying that wildly excessive pay rises harm the competitiveness of this country. The question is whether very low pay, well below average, assists in the competitiveness of this country. I suggest that very low pay encourages the exploitation of labour and the inefficient running of enterprises. It does not encourage the efficient running of enterprises.
It is right that employers should regard the money they spend on people in the form of wages as something that they have to husband. That should not mean paying low wages, but making sure that the work that is obtained, the value added by each worker, is high. There, of course, comes the rub. Where does the blame lie that we have low productivity in this country? The blame must surely lie on general attitudes, the general attitudes manifested in two quarters. On the part of the employers there is quite simple inefficiency of management. We have too many managements in this country which do not maximise the productivity of their enterprises. Then, of course, we have restrictive practices imposed by trade unions, and customary practices that have grown up over the years, which have the same effect. Once again, we are faced with the chicken and egg problem. If only the employers were more efficient and enterprising we might get a better response from the work force, and if only the work force realised that their interest was also in making the enterprise more efficient, they might get a more co-operative and helpful attitude from the employers. As in all these matters of attitudes, one can only improve things bit by bit, hoping that an improvement on one side will get a response on the other and that that will become an escalating process.
Unfortunately, in matters of that kind, there is no magic solution that can be introduced by legislation. It is a matter of attitudes of mind. One comes back to the apparently appallingly weak prescription that drawing attention to these matters, talking in these terms, making speeches in these terms, is most likely to assist. The solution to low productivity is not low pay. It is high productivity. Low pay can be actually detrimental in getting that higher productivity.
I have no desire to go into detail on many of the surrounding subjects that have been touched on in the debate. However, I would just like to say that in my view the activities of Government in relation to the economy are too easily exaggerated for their significance—exaggerated by Government and exaggerated by industrialists and employers generally. It is probably inevitable that that is so. It is Government activity—the introduction of VAT, the altering of the rates of VAT, the altering of the rates of other taxes—which hits the headlines. As a result, there is a tendency to feel that if British industry is not performing well it is primarily the fault of the 475 Government. Of course, in the past few years especially, it has been harder to argue that Government activity is marginal in its effects on the efficiency of our industry, because the extremeness of Government monetary policy has been such that that has clearly had a mighty effect on the performance of industry. The Government would claim that it has an effect for good; critics like myself would claim that it has had a major effect for the worse. But compared with previous years, it must be admitted that Government activity has been important in its effect upon industry's performance. Nevertheless, even in respect of the past few years, governmental activity is marginal in its effect on industry compared with the efficiency and enterprise displayed by all those involved in industry.
Unfortunately, our industrialists themselves behave as though they have fallen for the current attitude that Government activity is all that matters. That is serious because it leads them to blame the Government if there is a failure—they are not so keen to give credit to Government if there is a success—and it distracts them from looking to what they are doing to improve the competitiveness, the efficiency and the enterprise of their operations. The time is long overdue when industrialists need to be told that the main responsibility for making their enterprises competitive lies with them.
In referring to industrialists, I am talking not only about private industrialists but about those in the public sector. Government activity is important—sometimes very important—-but it is always marginal. When industrialists start to look at it in that way, and when they see that what we need is a high productivity, high wage economy, perhaps they will cease to think that paying low wages is the way to preserve jobs.
In considering the subject, we should look at the longer-term desirability of having a minimum wage. Of course, there will be massive problems at the point of transition if we shift from not having a minimum wage to having one. But the question is whether we can envisage a scenario with minimum wages that will be better than the one we have now. We do not have to make it a jump in one great leap. We can phase it in. As I said at the beginning of my speech, I hope that we can take a long-term view of these matters rather than constantly look at short-term devices.
§ Mr. John Farr (Harborough)
I hope that the hon. Member for Islington, South and Finsbury (Mr. Cunningham) will forgive me if I do not follow closely his well-reasoned argument. I congratulate the right hon. Member for Middlesbrough (Mr. Bottomley) not only on the subject that he has chosen, but on the format of his speech. As has already been stated, he is a long-standing Member who has played a prominent role. I have learnt to admire his work in the Commonwealth Parliamentary Association where he has been active and prominent. The debate that the right hon. Gentleman has initiated is, in its area, as important as his international work in the Commonwealth.
The motion has a number of pitfalls. It suggests the "introduction by legislation of a national minimum wage". Some of the pitfalls have been pointed out by my hon. Friend the Member for Dumfries (Sir H. Monro) in his interesting speech. He touched on one or two aspects of the motion, but did not deal in detail with one of the main drawbacks of having a minimum wage structure—the 476 resultant leap-frogging that would be stimulated by artificially raising the pay of low earners. That would prompt better paid workers to press for the restoration of differentials.
The Financial Times recently suggested that a basic minimum wage would be a springboard for more powerful groups to gain their proper place in the earnings league. One of the most important features of trying to attain a minimum wage structure is the combating of inflation. The Government have done that with great success, and it is a great incentive to wage stability. My hon. Friend the Minister of State, in his long and detailed speech, said that the Chancellor of the Exchequer in his Budget took a massive step towards helping to maintain the value of wages of the low paid by raising the tax thresholds by about 14 per cent.—which is about 8.5 per cent. above inflation.
Previous Labour Governments have suggested a minimum wage structure. Some years ago, a Labour Government contemplated introducing such a structure, but it never came into effect. One of the consequences of the motion, if it were adopted by the House, would be to have equal wages for everybody of all ages, however skilled or unskilled. Quite frankly, such a proposition would not be supported by the country.
The Government have taken a significant step towards improving the lot of many of the young unemployed. A costly youth training scheme has been introduced in recent months and is due to come into full effect this year at a cost of £1.5 billion. It will provide a real incentive to youngsters to go find a job after they have completed their training and further education in engineering and technical colleges.
The motion refers to low pay. How do we define low pay? How can we protect the value of pay, such as it is? Who are the low paid? It is agreed by experts, and certainly the TUC, that the commonly used yardstick for the interpretation of the low paid is those in receipt of two thirds of average male earnings. That is roughly equivalent to the amount that a two-child family must earn to be as well off at work as on supplementary benefit. That yardstick is accepted by most authorities. It shows that almost one third of the full-time adult work force-1.9 million men and 2.5 million women—were low paid last year, if overtime earnings are excluded. They include a number of important categories such as NHS and local authority workers.
The National Union of Public Employees represents about 700,000 low-paid workers in the National Health Service and local authorities. It has been pressing for a national minimum wage since the early 1970s but has failed to get either TUC or Labour Government backing. However, in 1975, the Labour Government adopted the minimum target which was set at two thirds of average male earnings. It is interesting to note that in 1975 members of NUPE received two thirds of average male earnings, which was then £30 a week. It is ironic that since 1975, despite the militant attitude of NUPE in wage negotiations, earnings have declined from the two thirds target to under 50 per cent. of average male earnings.
Many hon. Members have referred to the ideal of a national minimum wage. It has been pointed out that many European countries have a minimum wage structure. A survey of the minimum wage structures of seven western European nations and a comparison with what appertains in Britain has recently been carried out. The analysis 477 demonstrates three main reasons why a minimum wage structure should be established. The first is that such a structure would guarantee protection of workers in sectors where collective bargaining is weak or non-existent. Secondly, in some countries such as Belgium or Holland, minimum wage provisions exist alongside strong bargaining structures and have been introduced partly as a way of securing some income redistribution by narrowing the gap between the low paid and other wealthier sections of the community.
The scope of minimum wage provisions in the seven countries in the survey varies considerably. West Germany and Italy have chosen to limit their compulsory minimum wage structure to the utmost so that it covers only fairly small groups of employees such as home workers. Therefore, the impact of the provisions there is marginal. In Britain, we have the wages councils, with which I shall deal later.
The third reason for a minimum wage structure is shown by a group of countries where private sector and some public sector employees are directly affected by statutory minimum wage provisions. In France, Greece, Luxembourg, the Netherlands, Portugal and Spain, minimum wage provisions were initially laid down by Parliament. Minimum wage provisions cover the private sector and most of the public sector in France, Luxembourg and Spain. In those countries where the public sector is excluded from the standard system, it is covered by a system of minimum wage fixing which is broadly similar to that which prevails in the private sector in Belgium or a distinct system of public sector minimum wage regulation as is the case in Greece.
Seven western European countries have an automatic trigger mechanism which comes into effect when consumer price rises exceed a certain level. I shall not give all the examples, but in France, when the consumer price index rises by more than 2 per cent. since the minimum wage was previously fixed, the minimum wage is adjusted.
It is interesting to compare the minimum wage in the countries in the survey with their equivalent in sterling. The average minimum wage in Belgium is more than £70 a week. In France it is £60, in Greece it is only £30, in Luxembourg it is £80, in Holland it is £86, in Portugal it is £20 and in Spain it is £35. Those minima highlight some of the problems that Britain will face when Portugal and Spain join the EC. We already have Greece which is a low-cost producer, but some of the problems that our textile and footwear industries face will be multiplied when Spain and Portugal join. Both already have mature footwear industries and low minimum wages.
§ Mr. John Wells
Although I realise that the figures that my hon. Friend gave can be misleading because standards of living are different, I should be most grateful if he would give me the minimum wage in Greece.
§ Mr. Farr
It is £30 a week.
How do wages councils fit in? Their future role has been criticised by many hon. Members, especially on this side of the House. As I understand it, we must have them until 1985, but do we need them after that, and are they helpful to Britain, the industries that have them and the employees affected by them?
478 Wages councils still have a significant structure with 27 trade groups, 2.75 million workers and no fewer than 392,000 establishments covered by such councils. There are 26 councils, which is a reduction of 30 since 1969. The reduction was achieved sensibly, and will meet the approval of hon. Members on both sides of the House, by mergers and by superseding a wages council when it is no longer required, such as the pin, hook and eye and snap fastener wages council, which was abolished in 1980. In July 1981, seven clothing manufacturing wages councils were merged into one. It is important to rationalise them wherever possible, but one must take into account the benefit provided to lower paid workers in the 26 industries where the councils still exist. They range from aerated waters to unlicensed places of refreshment. If they did not have a wages council structure, the workers in some of those industries would be vulnerable. The most vulnerable are shop assistants and those who work in isolated areas.
However, we must bear it in mind that wages councils, at the latest figures, employ nearly 200 people at a cost of £3 million a year. On top of that, the cost of harassment and difficulties caused to many small traders by what they regard as yet another piece of red tape must exceed £3 million. My right hon. Friend the Minister of State, Department of Employment is right to say that wages councils should be retained for the time being and I agree that those in the vulnerable industries should still have the benefit of wages councils. However, 1985 is only two years away, and I hope that an in-depth analysis of the role of the wages councils will take place during the next two years so that the Government of the day will have the advantage of knowing whether we wish to abolish wages councils, to restructure them or to continue with the present system. The right hon. Member for Middlesbrough said in his interesting speech that Winston Churchill initiated wages councils. However, that was a long time ago, and the Government should find out their value to the country today and make the appropriate recommendations to Parliament, perhaps in a Green Paper, within 18 months.
I have much sympathy with the motion, but the right hon. Member for Middlesbrough might have paid tribute in his speech to the Government's achievement in reducing inflation. Many Labour leaders have stressed that one curse of being in the low-pay bracket is that the value of one's earnings is continually eroded. The Government have taken a major step forward in conquering inflation and in introducing financial stability. A continuation of the present policy will stand the Government in good stead for many years.
§ 12.4 pm
§ Mr. Eric G. Varley (Chesterfield)
It is apparent from the debate that Conservative Members are opposed to a minimum statutory wage and that they take a long time to tell us about it. The Minister of State, Treasury spoke for about 50 minutes, and the hon. Member for Harborough (Mr. Farr) took a long time to tell the House that he opposes a statutory minimum wage. I hope to detain the House for only 15 minutes, because I know that several hon. Members wish to speak on this important subject.
I congratulate my right hon. Friend the Member for Middlesbrough (Mr. Bottomley) not only on his good fortune in coming first in the ballot but on selecting this subject for debate. It is not generally known that, 24 years ago, because of the fickleness of the electors of Chatham 479 and Rochester, my right hon. Friend and I were both on the short list for Chesterfield. Fortunately for me, my right hon. Friend fought the by-election in Middlesbrough in 1962, so I obtained the nomination and stayed at Chesterfield until the 1964 general election. But for that my right hon. Friend might have been the Member for Chesterfield and I would probably be working for the National Union of Mineworkers, albeit at a higher salary than I receive as a Member of Parliament. However, I make no complaint about that.
It could not be more appropriate that this debate takes place in the same week as we heard the Budget statement. During the past four years not only have the low paid been worse off but the country as a whole is poorer. Our national wealth has been reduced by 5.5 per cent., or £13 billion a year, since the Prime Minister formed her Government. Manufacturing production is down by one fifth, investment has been cut by one third and our economy is weaker, not stronger, than it was in 1979. Factory after factory has closed, there are 3.5 million people unemployed and the lowest paid have been most vulnerable when redundancies take place.
After this week's Budget there is no prospect of real economic growth later this year. Contrary to what the hon. Member for Harborough said, inflation is set to increase again. The hon. Gentleman shakes his head, but perhaps we could have a little bet on the matter before the end of this debate. Every independent economic commentator has said that inflation will rise towards this end of the year. The social services, upon which the low paid rely more than most, and other groups have been damaged by the Government. It is against that background that we are debating the serious and worsening problem of low pay.
On the definition of the earnings equivalent of supplementary benefit used by the hon. Member for Harborough, one quarter of the adult full-time work force is in the low pay category. If we add part-time workers and men aged between 18 and 21, another 3 million people are low paid. No hon. Member has argued today that that does not matter and that it is a question of approach, but official figures point conclusively to the fact that low pay is one of the most serious factors in poverty in Britain. In 1979, it was estimated that 2 million people were living on an income below the supplementary benefit poverty line. Since the Government came to power, twice as many families have been forced to depend on family income supplement to prop up inadequate wages. The Central Policy Review Staff—the Think Tank—has reported that it would be four times worse than that but for the fact that some married women with families are forced to work to supplement the main breadwinner.
Low pay, in the sense of this debate, far from helping economic efficiency, only encourages a high labour turnover, reduces productivity, hampers adequate training facilities and under-utilises resources. The hardship suffered by families is bad enough, but the country as a whole bears a heavy price in lost production and efficiency. Any objective analysis shows that the position is getting worse. At the last general election, one man in 10 was low paid, but last year the position worsened and the ratio was 1:6. The position of low paid women, too, has deteriorated proportionately.
The Government have contributed to the deterioration. The central feature of the Budget on Tuesday was an increase in personal allowances. However, the low paid, who have experienced a relatively massive increase in 480 their tax burdens since the Chancellor's first Budget in June 1979, have been given back only half the increases that the Chancellor has imposed in the past four years.
There were three increases. First, there was the freezing of the tax thresholds in 1981, at a time when inflation had been pushed up to 15 per cent., and pushed up by unnecessary nationalised industry charges, one for gas which the gas industry did not want but had to have because the Government had imposed a tax on it. That pushed up the cost of living index. Secondly, there was the abolition of the reduced rate band of 25p in the pound in 1980. Thirdly, there was the increase in employees' national insurance contributions from 6.5 per cent. to 9 per cent.
The 1983 increase in personal allowances has helped the low paid, after freezing their tax threshold in 1981, but is is nowhere near sufficient to compensate them for the burden that the Chancellor imposed in his previous four Budgets. For example, since the last election in 1979, the real income tax burden on low paid married couples has increased by £1.79 a week, while national insurance contributions, taking into account next month's increase, will have gone up by £2.72 a week. On Tuesday the Chancellor gave back £2.02. That is still less than half the increase in the tax burden that he has imposed. The hon. Member for Dumfries (Sir H. Monro) said that 1.25 million fewer people would pay tax in 1983–84. That does not mean that the Chancellor has taken 1.25 million people who are low paid out of tax, as I am sure the hon. Member will be ready to admit. What has happened is that other people have been taken out of tax, and not necessarily the low paid. As the working population has decreased by 1.7 million as a result of unemployment, the proportion paying tax among those who remain in work has increased.
There was a very interesting article in the Daily Telegraph today, by a supporter of the Conservative party, Mr. Rodney Lord, which confirms all this detailed information. He says that it is not just the low paid who are paying more tax under the Government but everyone except the very rich will pay more tax. After Tuesday's Budget the Treasury trumpeted news that the increased personal allowance had decreased the number of families caught in the poverty trap by 10,000. However, it omitted to tell us that, even with this reduction of 10,000, the number still caught in the poverty trap has doubled since the Tory Government came into office.
The Prime Minister and the Secretary of State for Employment never tire of telling us that low wages are the answer to our economic problems, or moderating wage increases, or whatever phrase they use. They never lose an opportunity of attacking or dismantling the legislative framework for helping the low paid. In the first full parliamentary Session of the Conservative Government, they abolished schedule 11 of the Employment Protection Act. Towards the end of last year, as my right hon. Friend the Member for Middlesbrough told us, they rescinded the fair wages resolution. There was no clamour for its abolition and the Government received no representations about it. The measure had enjoyed all-party support for some 90 years and had been commended to the House just after the first world war by no less a person than Mr. Harold Macmillan. With the abolition of the fair wages resolution, the Government have given the green light to employers to cut wages to get Government contracts.
None of that deters the Secretary of State for Employment, who has now turned his attention to the 481 wages councils. He will not be satisfied until he has cut the wages of the 3 million poorest workers in laundries, hairdressers, cafes, the textile and clothing industries and shops. However, the Secretary of State was told by his officials a few months ago that he could not yet legislate for the abolition of the wages councils, and he could not use the massive Conservative majority in the House to bludgeon through legislative proposals to get rid of them.
The Secretary of State was sad and disillusioned and told the House:I cannot do anything about wages councils, because we are tied by our adherence to the treaty and the ILO convention, which cannot be renounced until 1985."—[Official Report, 8 March 1983; Vol. 38, c. 696.]The Secretary of State has told us that no mere legislative niceties or international conventions will get in his way. Characteristically, he is doing something about the matter. He is not waiting for 1985 and he has already allowed the number of wage inspectors to be cut by one third. As my right hon. Friend the Member for Middlesbrough said, the number is now down to 114. They will be able to cover every firm once every 14 years. We know that since 1979 illegal underpayments have increased by about 10 per cent.
The Secretary of State regards all this as serious, and considers that desperate measures are needed. When he heard that the retail trade (non-food) wages council had in mind an increase in shop workers' pay of 8 per cent., taking their minimum wage up to £67.50, he went berserk. For the moment, he stopped looking for somebody to paint his gate, and even stopped advising people to get on their bikes to look for work.
The £600-a-week Secretary of State for Employment decided that he would write a nasty letter to the chairman of the wages council asking it to reconsider; and it worked. The independent members of the wages council caved in and the "magnificent" sum of £67.50 a week before stoppages is to be reduced by £1.25. The 500,000 shop workers, as they take home what is left of their £66.25 a week, can thank our brave and fearless Secretary of State for Employment for not being allowed to wreck the country. All this comes from a Government who declared before the last election that they did not believe in an incomes policy.
Over the past few years, I have explained to the House that the Government have three incomes policies. They are called fear, diktat and cynicism. There is fear of mass unemployment in the private manufacturing sector. There is diktat in the public service sector—for example, in the NHS, the Civil Service, and teaching, the norm is issued and everyone has to adhere to it. There is an incomes policy of cynicism in what I call the public trading sector—water, electricity and gas. The message goes out from the Government, "Pay as little as you can but enough to avoid trouble."
After the wages council's intervention, there must be a fourth category of incomes policy—the threatening letter that the Secretary of State for Employment will now send out to the wages councils. The Secretary of State's intervention to deprive low-paid shop workers of £1.25 a week is despicable and squalid. I do not expect the Minister of State, Department of Employment, when he replies, to defend it, because it is indefensible. If the chairman and the independent members of the wages 482 council for shop workers have any self-respect left, they should tell the Secretary of State to—I had better not use an unparliamentary expression.
The central economic problem that every worker must acknowledge and from which all others flow is the fact that our economic performance is worse than that of most countries which compete with us. That has been true for a long time. That is more to do with lack of investment, more to do with not getting enough of that investment when it has taken place, and more to do with inadequate training and poor productivity. There is no point in blaming the low paid.
The Government's experiment of trying to control the economy by monetary methods, as outlined this morning by the Minister of State, Treasury, has been a gigantic failure. It is true that the policy has depressed the economy sufficiently to take pressure off wage bargaining arrangements in some areas of the economy, but perversely it has damaged the private manufacturing sector most of all. The record figure of company liquidations speaks for itself. It does not matter whether the firms have been traditionally high wage payers or low wage payers. In the textile and clothing industries, traditionally low payers, there have been well over 150,000 redundancies in the past three and a half years.
The way to overcome these formidable economic problems that afflict our nation is not to attack low pay but to adopt a realistic approach. It should be based on four pillars: first, an agreed basis for a planned and balanced growth in our economy; secondly, the development of a policy for maintaining stable prices and controlling excessive profits; thirdly, a basis for increasing real wages and salaries and overall purchasing power; and, fourthly, especially in the light of the motion that we are debating, a redistribution of incomes by taxation or by other means such as improving the social wage. The trouble is that the Government believe that the economy and wages are best controlled through the whip of mass unemployment and anti-trade union legislation or through rendering minimum wage protection inoperable. It is a policy of despair. It is a policy that is bound to fail, and it cannot last.
The offensive against low pay must be as I have outlined, it and the next Labour Government will embark on it. We will launch an offensive against low pay as part of our strategy for equality. The problem of low pay remains acute in both relative and absolute terms. If low pay at present is defined as less than two thirds of average male manual earnings, there are now 3 million full-time low-paid workers, of whom 2 million are women. If one adds to that figure young workers, part-time workers and home workers, the total is almost 6 million, the great majority of whom are women. We will work together with the unions to tackle low pay and to extend the concept of fair wages and arbitration. We will strengthen the Equal Pay Act 1970. We shall strongly emphasise the principles of fairness and of proper comparability and will ensure that the machinery is available for the trade unions to establish these principles.
I can give my right hon. Friend the Member for Middlesbrough this assurance. We shall discuss with the Trades Union Congress the possibility of introducing a statutory minimum wage. The TUC has a discussion document on whether a statutory minimum wage is practicable and feasible. Even within the trade union movement, as my right hon. Friend knows, there is some doubt whether that is practicable. But an incoming Labour 483 Government will take representations seriously with a view, if it is practicable, to introducing a statutory minimum wage.
With that pledge, I again congratulate my right hon. Friend on introducing his motion He has done a great service to the House and, above all, to the low paid.
§ Mr. John Wells (Maidstone)
I shall seek as briefly as I can to put forward a case in two sectors only. The right hon. Member for Middlesbrough (Mr.Bottomley), whom I congratulate on initiating the debate, and more still the hon. Member for Stalybridge and Hyde (Mr. Pendry) fell into the common trap of speaking about agricultural workers and low pay and then, particularly the hon. Member for Stalybridge and Hyde, pointed out that farm incomes had increased by 45 per cent. in the current period. I must remind the House that the bulk of farm workers are employed in the horticulture sector of the industry, which is heavily manned. In that sector the increase in farm incomes has been nothing like 45 per cent. Indeed, in the glasshouse sector of the industry, farm incomes would appear to have declined, as has been pointed out at Question Time after Question Time. Where most workers are employed, employers have less opportunity to pay more. I do not wish to develop that argument further because my right hon. Friend the Minister of State, Department of Employment and my hon. Friend the Under-Secretary of State for Employment are both well acquainted with the agricultural scene, but I wish to remind the House of the generality of the truth that horticulture is the most labour-intensive sector, where there is less opportunity for paying more.
My hon. Friend the Member for Harborough (Mr. Farr) gave statistics or percentages for minimum pay in certain Mediterranean countries and in particular I noted the figure that he gave for Greece. Those countries will be competing with our horticultural sector in the future. There are already considerable difficulties because of the knock-on effect of southern European produce moving into France, French produce moving into the Netherlands and Belgium, and produce from the Netherlands moving into Great Britain. I do not wish to develop that argument too far today except to remind the House that our horticulturists and our horticulture workers are at continuing risk because of the wage structures in those countries.
My hon. Friend the Member for Dumfries (Sir H.Monro) told the House that the wages council that covers shop workers had pitched its figure 8 per cent. too high in view of the current inflation level. I must declare an interest. I am a member of the board of the National Institute for Fresh Produce, a charitable organisation that seeks to bring improved standards and improved training to the fruit and vegetable industry. To date, the bulk of our effort has been devoted to wholesale markets, especially the great wholesale markets of the north and Covent Garden and elsewhere in London. We are now seeking to bring forward courses for people in the fruit and vegetable trade. We are desperately anxious to attract more young people into those industries. It is a pleasant form of work. It is clean. This is not, I assure you, Mr. Deputy Speaker, a commercial, but it is a pleasant and interesting form of work. If the housewife is to get produce to her table at a reasonable price, it is essential that we improve the training of young people.
484 I am concerned that statutory wages for young people will be pushed up to such a level that shopkeepers will be unwilling to employ more of them. It is a delicate balance especially in an industry with 25,000 small separate retail outlets, many of them family based. One wishes to protect family workers. However, the need to attract youngsters without paying them an inflated starting wage arid helping them through the training period is very dear to my heart and, I am sure, to the hearts of all hon. Members.
I wish to make one final point, out on a limb, which I trust will be conveyed to my hon. Friend the Minister of State, Treasury, who has now departed. Within the fruit picking sector there are many farmers and growers who employ fewer than 10 people on their holdings all round the year. However, in fruit picking time, they have an inflated staff of pickers running perhaps into hundreds. A neighbour of mine has nine people on his holding. At the height of the season, he has over 300 pickers. This is a phenomenal surge in the work force. I am not saying that pickers are low paid. They receive extremely good money for what they do. They are people from all walks of life who take the job willingly for a few weeks.
I want to put a particular point to Treasury Ministers. When the wage-paying mechanism of the grower is normally a single part-time unqualified accountant or even a wife, daughter, mother or aunt of the farmer, there can be special problems in dealing with a vast upsurge of PAYE employees. The National Farmers Union in my part of the world was a pioneer in making special arrangements with the local tax office for this tax and national insurance contribution liability. The empirical system that was worked out to overcome the difficulties has been widely accepted in all fruit growing areas of the country.
It now reaches my ears that, lamentably, an inspector of taxes in Hampshire is being too clever by half following, I suspect, a diktat—to use the word of the right hon. Member for Chesterfield (Mr. Varley)—from of the Treasury about maximising revenue. The inspector, I am told, is seeking to insist that all these part-time people pay 30 per cent. of their takings in income tax. All their coding is being vastly complicated. In the past, there has been a broad general understanding of what is realistic. The pickers have been able to make their own tax returns in the usual manner. Many of them are employed for only two, three or four weeks of the year. In that time they receive good money but over the year, they are probably not within the taxable bracket. If inspectors and collectors of taxes are to start being too clever, too many name rolls on farms will contain such important workers as President Reagan, Mickey Mouse and so on. These are names that occur, I believe, from time to time, in Fleet street. We should try to avoid getting those sorts of employees down on the farm.
§ Miss Joan Lestor (Eton and Slough)
I join in the congratulations to my right hon. Friend the Member for Middlesbrough (Mr. Bottomley) on having the good fortune to move the motion. I am sure that the hon. Member for Maidstone (Mr. Wells) will forgive me if I do not follow him in his remarks. We are more accustomed to growing Mars bars in Slough than some of the products to which he referred.
I have always been in awe of my right hon. Friend the Member for Middlesbrough since I can claim an intimate relationship in that he gave me a prize when I was at 485 school. Therefore, he showed good judgment. I have tried to live up to the expectations in the prize that he presented to me.
I have listened to what has been said during this debate. Hon. Members expect me, as the spokesperson for women's rights, to deal, to some extent, with the position of women and low wages. I know that my right hon. Friend the Member for Middlesbrough has already referred to that subject. He gave certain commitments and many women will be watching closely to ensure, when the Labour party are the next Government, that they are implemented. The truth of the matter is that despite the rises and falls in the fortunes of the economy in this country the position of the low paid, and especially women, has not improved with any of the benefits that a booming economy from time to time might well have shown. I am not sure what the opposite of a male chauvinist pig is, but I do not wish to be seen as a female chauvinist sow, or whatever the phrase may be.
The position of the low paid in relation to the fortunes or the misfortunes of the country has not greatly improved. In 1982 one tenth of the poorest manual male workers in the country earned 68.34 per cent. of the average male wage. In 1866—that was the first year for which figures were collected—the same type of male low-paid manual workers earned 68 per cent. of the average male wage. That shows that during that time there has been very little improvement among certain sections of low paid workers. In 1979, the best-paid one tenth of the male workers in the country received roughly 157 per cent. of the average wage. In 1982, the figure for the highest-paid had risen slightly, to 168 per cent. In terms of the low paid and those doing best out of the economy, the position of low-paid women and men has improved very little over the years.
It is important that we should be reminded, when Conservative Members speak about the fall in the rate of inflation and so forth, that the low paid do not benefit from such falls. That may be explained, in some instances, by the fall in the rate of mortgage interest. That may benefit me and a large number of hon. Members. However, many of the low paid pay rent and rates, which continue to rise at an alarming rate. They do not all qualify for rate rebates or rent subsidies.
The Chancellor made a great point, which was referred to in the debate, about the number of people being taken out of the tax threshold. My right hon. Friend referred to that and I want to underline it. This is vitally important if the House is to get a correct picture of what is happening to low pay and taxation. The Chancellor of the Exchequer said:It makes no sense that people on low incomes should be paying tax at all. And low paid tax thresholds are of course, an important part of the poverty and unemployment traps."—(Official Report, 15 March 1983; Vol. 39, c. 155.]He then went on to say that he was exempting the low paid from the burden of taxation. He claimed that as a result of the increases in personal tax allowances some 1.25 million fewer people would pay tax in 1983–84 than if thresholds had remained at their present levels.
There has been much confusion about this. That statement has been taken to mean something that it does not mean. It does not mean that 1.25 million of the low paid will be taken out of tax. It means that that is the additional number who would have been liable to pay tax 486 had the allowances not been increased. That is a different statement from the one that was made. In 1983–84, 500,000 fewer people will pay tax as a result of the indexation of the allowance. An additional 750,000 people will be exempt because of the increase in allowance in excess of inflation. All this is acceptable, but in 1978–79 there were an estimated 21.6 million income tax payers. Those are the Inland Revenue's figures.
In 1983–84 there will be an estimated 20.9 million taxpayers. Therefore, the number paying tax has fallen by about 750,000 since the Conservative party took office. However, since the working population has shrunk by 1.7 million as a result of unemployment, the proportion paying tax among those who are employed has, of course, increased. That must be borne in mind when considering the position of the low paid in relation to tax thresholds. It is impossible to leave out of account the many people who are either not paying tax or who have lost their jobs.
Today's edition of the Daily Mirror contains an interesting article which contrasts the descriptions of jobs for men and women. It points out that the way in which a job is described will attract a woman if it offers a low wage and a man if it offers a high wage. The job may be roughly the same, but the description will be slightly different. There is grave disquiet in the TUC and among many other groups about the way in which the Government allegedly intend to deal with these problems by an amendment to the Equal Pay Act. The Government will acknowledge that they have been forced to do that, but the way in which they intend to do it will take no account of the problems confronting those who suffer, or at least do not gain as a result of the Equal Pay Act.
We all know that in many of the occupations dominated by women, women earn less than the average wage for men. Often, women earn less than their male counterparts in those jobs. Ninety per cent. of nurses are women and average earnings are £93–90. If one goes down the list one finds near the end that, according to the classification, 100 per cent. of sewing machinists are women. They receive £66.40 per week. Sixty per cent. of canners and fillers are women, earning £75.50 per week. The Government's attitude to shop assistants is disgraceful. Seventy per cent. of them are women, earning £62.40 per week. Of cleaners, caterers and hairdressers, 55 per cent. are women earning £71 per week.
In other words, wages in most of the jobs in which women predominate are well below the average. The Government have made little effort in that regard. I think that it was the hon. Member for Dumfries (Sir H. Monro) who said that we could not afford to pay the low paid any more money. In effect, he was saying that we could not afford to pay women as much as men, because the overwhelming majority of the low paid are women. That is a condemnation of the present situation.
On Second Reading of the Equal Pay (No. 2) Bill the Prime Minister, then the hon. Member for Finchley, supported the Bill and said:pay increases for women would have to exceed those for men over the next five years. This is what we are committing ourselves to ֵ Unless this happens the Bill's objective will not be fulfilled. So many people have supported the idea of equal pay for so long that one wonders at the continuing inequality of payment between men and women ֵ I believe that the Bill will lead to better pay for many jobs and I support it as another step in the equal pay story."—[0fficial Report, 9 February 1970; Vol. 795, c. 1020–1027.487 Those are very robust words, which I totally support. However, under this Government the story of equal pay, especially for women, has been very sad. Although improvements were made soon after the Bill was implemented, the position of nurses, cleaners, home helps and hairdressers has, in recent years, lost ground. They have yet to break through to earn even 50 per cent. of average male earnings. In 1981 the average adult woman working full time was earning just 72 per cent. of the average male wage, which represents a 2 per cent. improvement since implementation of the Act. I could go on to point out how, despite the improvement immediately after implementation of the Act, things have now deteriorated.
It was unfortunate that, when the TUC and others commented on the failure of the Equal Pay Act, the Government were reluctant to take any action. The EOC itself said that it took no pleasure at the prospect of the British Government being compelled to comply with European law as the result of proceedings before the European court. But this fell on deaf ears and, as we know, the Government are being forced to update the Act. The tragedy for many is that there is grave doubt that the way in which it is being done will meet the needs of the present situation.
There is action that even this Government could take about low pay. One or two suggestions have been made already. It is easy for the Government to try to get away with the argument about tax thresholds. It is also easy for them to say that inflation has fallen and that this has assisted large numbers of people on low pay. But a great deal depends on a family's outgoings and on whether they are related to the areas which have been affected by the fall in inflation, such as the mortgage interest rate.
Large numbers of low-paid workers have been affected adversely by the increase in national insurance contributions since the Government came to power. Low-paid workers cannot be described as being better off because of lower taxation or inflation when, at the same time, they have become worse off because of the proportionate amount of money going from their wage packets into national insurance contributions. For employers, they increased by less than 1 per cent. For employees, the rate has risen from 6.5 per cent. to 9 per cent., and this has a proportionately larger effect on women, although I agree it affects some men.
Because this is a regressive wage tax, it hits low-income earners hardest. Women earning half the average male wage will pay 9 per cent. of their earnings in national insurance next year. Someone earning five times the average male wage will pay only 2.4 per cent. of his earnings in national insurance. It is those gaps and omissions that take away from any improvement in the position of low-paid workers in terms of inflation and tax thresholds. Next April, a woman earning £32.50 a week—thousands of women working very long hours earn as little as that—will pay more than £2.90 in national insurance.
The Low Pay Unit argues that the Government are using national insurance as a back-door wage tax on the low paid. It is a tax on the low paid that usually fails to surface. If the Government were really concerned about assisting the low paid, they would try to examine what could be done to ensure that people were not handicapped in that way.
488 Another factor affecting the benefits of the low paid is that many women workers employed on a seasonal or piece-rate basis have made contributions over the years which, because of their low wages and the high labour turnover in their industries, often do not entitle them to benefits. Thus we have many low-paid part-time and piece-rate workers now unemployed who made contributions but do not get benefits. The irony is that they are also taken out of the unemployment figures because only people in receipt of benefits are counted as unemployed.
We have heard a good deal about the fair wages resolution. I shall not go into that in too much detail, but I make a brief reference to the wages councils, because they could play a greater part and make a better contribution than they are doing and are likely to do in the future. They have not been as effective as many of us had hoped. They have been more effective than if they had not existed at all. In the absence of anything better, it would be a great pity if they were undermined. But the number of wages councils inspectors is to be reduced. The reply to a recent parliamentary question showed that the number of inspectors had been reduced from 177 in 1979 to 119. In 1979, even with that figure, which has now been reduced, they have visited only 10 per cent. of all workplaces. That does not show that they do not have a role to play; it shows that their role must he enhanced. The number of inspectors must be increased and the procedures must be simplified.
An average of one in 12 workplaces are visited in any one year. A substantial increase in the number of inspectors is required. As the Department of Employment has said, where wages councils are involved, most underpayments occur through ignorance of the regulations or failure to understand the legal language of the wage order.
The wages councils could have a very real role to play in ensuring that the areas of employment covered only by the fair wages resolution receive greater attention, so that the necessary procedures are properly enforced. Large numbers of employees in regard to whom minimum rates have been set are not obtaining them, either through their own lack of understanding or because the employers know that little or nothing is done about enforcement.
§ Mr. Richard Body (Holland with Boston)
Would the hon. Lady agree that there is another area in which the system breaks down? I refer to seasonal workers in catering and also in agriculture. There is great exploitation of men and women. Many thousands of women are in that category. Would the hon. Lady consider it feasible to extend the principle to seasonal workers?
§ Miss Lestor
In principle, the system could be extended to cover seasonal workers, but it could be done only if the Government were prepared to increase enormously the number of inspectors to ensure that the regulations were enforced. Now that the Government are cutting the number of inspectors, I do not think that it is realistic to expect the Government to extend the system to cover seasonal workers in agriculture. In all the areas concerned—piece-workers, seasonal workers, home workers, and many others where low pay predominates—an inspectorate is needed to safeguard workers from exploitation.
I have spoken predominantly about women because that is the brief that I hold for the Labour party in the House 489 of Commons, but low pay affects men and women. It affects women more, for the reasons that I have given, but large numbers of employees are sentenced to a standard of living that is very much on the poverty line, and their conditions will worsen.
I do not know whether the Government will accept my right hon. Friend's suggestion about a minimum wage but they could take some action. It could be taken effectively in relation to national insurance contributions, the equal pay legislation and the wages councils inspectorate. Unless some action is taken, the low paid will get poorer, and they will not be able to improve their position, or the standard of living of their families or themselves, under this Government.
§ Mr. Jim Lester (Beeston)
I am sure that the hon. Member for Eton and Slough (Miss Lestor) will not be surprised when I say that for a long time I have been longing to follow her in a debate, because we share the same initials and name. I hestitate to suggest that it leads to any intimate relationship. When I first entered the House I offered to pair regularly with the hon. Lady, and since then she has always resolutely refused my offer. It is a great pleasure to follow the hon. Lady in a debate of this importance. I thought that she took a very constructive line and I hope, as her namesake, to follow it.
I congratulate the right hon. Member for Middlesbrough (Mr. Bottomley) on initiating the debate. Conservative Members know well that his motives are always of the best. The subject of the debate has been a matter of concern for some time.
I shall not follow the narrow party polemics of the right hon. Member for Chesterfield (Mr. Varley). The prospectus that he put before the House was not supported or even trusted by the next Opposition speaker.
I shall follow the line taken by the hon. Member for Birkenhead (Mr. Field) who has been involved in the subject for a considerable time and who initiated a conference on minimum wages at the Policy Studies Institute, of which I am privileged to be a member. The conference examined the subject in a factual and proper manner. We looked at international comparisons, industrial base minimum wages, country base minimum wages, the non-minimum wage approach and the British question. It was a helpful conference which cast some light on a difficult subject.
We are trying to reconcile pay as an industrial function, the decency threshold and poverty as a social problem. The difficulty of reconciling those three elements is the reason why we have not instituted a statutory minimum wage but are still talking about it.
The issue involves preventing the exploitation of workers, particularly women and young people. We must also provide fair competition in similar industries and sectors so that there is no artificial competition through artificially low wages. We heard something about that in the international context earlier. There must also be a fair return for skill. We are trying to find a system which will provide those protections and ensure a reasonable standard of living for the work force.
490 Without the political and, indeed, the national will to share the resources available for incomes, no matter which system is employed, we are unlikely to achieve our objective.
I am impressed by what has happened in Norway where there is no minimum wage legislation, but where the trade unions' objective is to bring up low pay. They have succeeded in doing that, with the co-operation of the employers, by redistributing incomes already paid. I see no prospect of being able to do that here when the sole objective in life of some trade unions is to stay at the top of the wages tree. While they are using their industrial muscle and scarcity value to do that, it is difficult to talk about bringing up the wages of the low paid to 68 per cent. of average earnings. If we do that, we must have either a minimum wage which is so destructive of jobs that it has to be suspended, or a minimum wage so low that it has no effect. We are trying to reconcile differences in society—the difference betweenJacky shall have but a penny a day,Because he can't work any fasterand the parable of the vineyards in which the people who came in last received the same pay as those who sweated through the heat of the day. We are seeking to make statutory two elements in society.
I am not yet convinced that a statutory minimum wage is the right solution. So far as I am aware, it is not Government policy to abolish the wages councils. They represent 2.7 million people—14 per cent. of the work force. It is significant that the levels of pay that they fix are less then half the average national pay. I do not believe that if we pay even less, higher employment will result. That is a doubtful thesis.
I understand the pressure to ensure that wage increases are earned and are beneficial to the industry rather than inflationary and paid simply on the basis of the cost of living index and not what the industry can afford. The suggestion that we can lower wages significantly in the sectors coverd by the wages councils is not likely to carry much weight.
It is significant that the wages council inspectorate spends more time investigating complaints by individuals who think that they are not being paid enough than inspecting. The 2.7 million people covered by wages councils will not sit idly by if they feel that they are wrongly treated. Any suggestion of that kind leads directly to a debate, such as we are having, that the only alternative is a statutory minimum wage.
I am not convinced that a statutory minimum wage is the right answer. I believe that there are advantages in the wages council system, in which there are industry and sector-based negotiations between employers and trade unions with specific knowledge of the particular sector, and in which they can consider the problems of training and retirement. The statutory minimum wage, however it is fixed, would be incapable of doing that. It is a blunt instrument. It would have to be fixed, if it were to have any meaning at all, on the basis of hourly pay and, probably, the single worker. I see no other way in which a minimum wage could be realistic.
I support the call for a reform of the wages council system. Certainly it could be made more effective. We need to look at it, particularly in terms of amalgamations, but it would be foolish to cast away that system before we had a better chance to debate and think seriously about what would provide the best answer.
491 We cannot use wages to deal with poverty. The two do not go together. It is difficult to tune a statutory minimum wage to the variety of needs of any combination of families—low skill and many children, high skill and perhaps three children. We cannot tune a statutory wage to solve the poverty problem. As my hon. Friend the Minister suggested, we should proceed through the medium of tax thresholds in the short term—I support the change in tax thresholds, and I hope that it will continue as a policy—and the redistribution of benefits such as child allowance and housing benefit. The real reform in benefits would be to make it possible for low earners, who have low skill and high needs in terms of income, to be in a position to achieve that income without having to give up work, which would be nonsense, or to subsidise the employer, because it would be wrong to use the social security system, which endeavours to deal with poverty, to subsidise bad or low-paying employers.
The issue needs to be dealt with. In my opinion, it needs the voluntary approach. A good first step would be to have a conference of the kind that the hon. Member for Birkenhead instituted, which was attended by many people from abroad, although there were not many employers, trade unions or Members of Parliament. At such a conference trade union representatives could sift their motives and objectives, and employers could work alongside them in an attempt to achieve an agreement.
That is one way in which we could make progress. Perhaps the Government should bring out a Green Paper not on wages councils alone, but on the problems of wage councils and low pay. That would be a good way to open up the debate. The issue has to be dealt with. As I said earlier, it requires not so much legislation as a national will to share and to see that people, regardless of their abilities, do not earn less than society thinks is reasonable. We are a long way from achieving that at this stage.
§ 1.5 pm
§ Mr. Frank Field (Birkenhead)
I am pleased to follow the hon. Member for Beeston (Mr. Lester). He reminds me of the phrase that I have adapted of "no greater love can a man have than he be sacked from his Government for his views". Holding to one's views, whatever the consequences, is one of the highest forms of human activity. There is no greater compliment that I could pay to the hon. Gentleman.
I congratulate my right hon. Friend the Member for Middlesbrough (Mr. Bottomley), not only on his luck in coming top of the ballot, and on choosing an important topic, but on giving us an opportunity to compliment him not only on his stand as a parliamentary figure but on the skills, that he has brought to this debate.
The debate is largely, although not entirely, about women and their position in society. The unnecessary evil and curse of low pay blights the lives of so many. We must examine the Government's record in their attempt to combat low pay, for it has amounted to an attack on low-paid workers themselves.
The Minister spoke for almost an hour and I was reminded of Genesis, chapter 3, where Adam and Eve had eaten of the apple in the midst of the garden. At that stage they knew that they were naked and they sewed together fig leaves to cover their nakedness. The fig leaves that the Minister sewed together to hide the Government's nakedness and vulnerability were there for all to see. He said little about low pay.
492 The Government have warmly gripped the throat of the low paid since they took office in 1979. They have achieved an increase in their numbers. Whatever benchmark we take for the low paid, a greater proportion of workers and a greater number of them are now below that level. At a time when unemployment has been increasing, and those most likely to suffer are the low paid, there should have been a fall in their numbers—yet the Government have achieved an increase.
My hon. Friend the Member for Islington, South and Finsbury (Mr.Cunningham)—and I wish to call him my hon. Friend—rightly said that we are not comparing our wage levels with international wage levels or our output or gross national product with that of other countries. Although that is an interesting exercise, today's debate is essentially one about relativities—the rewards received by one person compared with those received by another.
Another Government achievement, if I can so describe it, is that, while the rewards of the lowest paid have been falling as a proportion of the average, those of the highest paid have been increasing. It cannot be claimed that the number of low-paid workers has increased because the recession has moved everyone down the incomes scale. There has been a polarisation of the higher paid drawing away with an increase in the number below any given poverty level. If those earning the lowest pay were earning the same proportion of average earnings today as they were towards the end of the 1970s, they would be £5 a week better off. Of course, that £5 a week would have to come from the rest of us who earn more. That is part of the argument that we have been having today.
The second way in which low-paid workers have been attacked by the Government is by way of an increase in their tax burden. I do not need to remind the House of the Government's pledges before the general election in 1979, nor that people who earn less than £300 a week are paying more tax now than they did in 1979. That burden is much more important if one is at the bottom of the scale than if one is at the top. But while there has been an increase in the tax burden on the low paid, there has also been a shift of that burden on to people with children. If one is low paid and has children, one has therefore suffered a double handicap under this Government. I have to admit that that same group has also suffered under previous Governments.
The third way in which the Government have attacked low-paid workers is their attempt to tear up or disband various protective mechanisms, which, while they may not have worked as well as we should have liked. at least provided some protection. Several hon. Members have already commented on the Government's attitude towards and actions against schedule 11 and what happened to the fair wages resolution. Hon. Members have also commented on the Government's direct interference in the settlements awarded by some wages councils.
The fourth way in which the Government have attacked low-paid workers is through their incomes policy I do not refer merely to the inconsistency of saying that people in the private sector can be governed by the market but that there will be an incomes policy in the public sector, as that always leads to unfairness. Rather I refer to the level of awards that are being made in the public sector.
We should compare the awards given to ancilliary hospital workers and nurses with those to people at the top of the Armed Forces and the judiciary. As Barbara Wootton commented wittily in another place recently, that 493 is not because there seems to be a great shortage of such people. Plenty of people are queuing up for the top jobs, yet the Government believe that the market should not work for them; rather that they should be rewarded irrespective of the market. Today's debate is about whether we can give that sense of importance to the work of those people who earn least and, if so, what is the best mechanism by which to achieve it.
I shall give three important ways in which the circumstances of the low paid can be improved. Although large numbers of people in the party to which I belong have been working honestly and diligently to come up with a policy which I hope will effectively combat low pay, we do not yet have such a policy in the form in which I should like to see it.
If we are interested in what the low paid can buy with their wages, we are immediately involved with their tax burden. This Government, or any future Labour Government, will not be able to do much about the tax burden on the lowest paid unless they are prepared to take account of the massive growth in what I call the tax benefit welfare state.
When the Chancellor drew up this year's Budget, he started from the assumption that more than 50 per cent. of personal income is exempted from tax through 100 or more tax allowances. If one allows those tax allowances to remain and, indeed, encourages their growth, as the Chancellor did by raising the level of mortgages which are eligible for tax relief, one is cutting the base of income on which one levies tax. The smaller the base, the higher will be the marginal tax rates.
If one abolished all tax allowances—I am not advocating that we should—it would be possible to have a standard rate of tax of 13p in the pound. Any Government who were serious about reversing the tax burden on the low paid and people with children must come up with a comprehensive policy on tax benefits. Neither my party nor the Conservative party has yet shown the will to do that.
Should we support a minimum wage? On balance, I favour the introduction of a minimum wage, but I must be honest and say that no Labour Government could pitch it at the levels that have been mentioned in this debate. Even if it is phased in during two or three years, the doubling of some people's pay to £90 a week in so short a period would have important employment repercussions. Although I want a Government who are committed to policies that will make a fundamental difference to the low paid and who will abolish low pay as we know it, I do not want them to follow a policy that will increase unemployment in the short term while allowing those who keep their jobs to be better off.
That does not mean that I am not in favour of a minimum wage pitched at a lower level. But here is the crunch question, because there is no point in having a minimum wage, or any other policy come to that, that improves the position of the lowest paid if, in the following year, everyone else wishes to use that advance to re-establish differentials. The message must go out that if parliamentarians, trade unionists or employers are serious about improving the relative position of those who earn least in our society—those at the bottom of the 494 pile—we must go without, and we cannot use their wage increases to support our claims for wage increases in the following year.
The sad thing about the Labour Government was not the effectiveness of the £6 policy—because it was a great advance for the low paid—but the fact that within 18 months the skilled workers had said that because differentials had been compressed they needed special increases to return to their old position. We have a great educational job in front of us. If a Labour Government are thinking seriously about a minimum wage, they must discuss with our trade union colleagues and employers, who must have a role in implementing the minimum wage, the level at which it is pitched. The hon. Member for Islington, South and Finsbury (Mr. Cunningham) said, in a good speech, that a minimum wage could be used to increase efficiency in British industry, but to achieve that we must have discussions with both sides of industry.
Nor must the trade unions leave everything to Government. More than a decade ago the trade union movement expressed great concern about low pay. While talking about the need to disengage from the wages councils, it drew attention to its difficulty in recruiting low-paid workers. The trade unions therefore came up with the idea that the costs of recruitment should be borne not only by those unions which tried to represent low-paid workers, but by the entire trade union movement. They proposed a development fund for this very purpose, but what has happened to that fund today?
How seriously do the unions consider the problem of low pay? Will they combat it by extending collective bargaining? Will they pay attention to the remarks of the hon. Member for Beeston, who described the position in Norway? I thought that he let the trade unions off lightly, because not only do the Norwegians have a low pay target, but the Norwegian trade unions levy their members each year so that there is a fund to help to make up the difference between the wages paid by employers and the minimum wage level. It would make a great difference if the British trade union movement came forward with such ideas and gave us that commitment. Perhaps some of the attacks that we have seen against the trade union movement in the past two or three years would have been more difficult to sustain if the trade union movement had built up as much support here as the Norwegian trade union movement has in Norway.
I know that the Government defend their approach by saying that it is important to increase efficiency and get people to stand on their own two legs, and that it is important for people to have the resources to get ahead. From the Opposition side of the House it is difficult to see that that is more than a policy of greed, clothed in the jargon of classic economics. I hope that we shall be going into the election with a different approach.
My right hon. Friend the Member for Middlesbrough referred to a worker in Darlington earning £60 a week whose Christian beliefs were very important to him. As my right hon. Friend said that, I was reminded of a comment made by Father Grocer, an east end priest of 50 years ago. He said about the British electorate that it has a conscience but the trouble with the politicians was that they rarely appealed to it. I hope that the Labour party will be going into an election with an appeal to the electorate's conscience. If it does so, at the centre of that appeal will be policies to help those who, in the present circumstances, earn their poverty.
§ Mr. Richard Body (Holland with Boston)
I apologise to the right hon. Member for Middlesbrough (Mr. Bottomley) for not being present to hear him introduce his motion. From what I have heard, I missed a valuable contribution.
The hon. Member for Birkenhead (Mr. Field) came to the House with a ready-made reputation on this subject. It is always rather dangerous to come to the House with such a reputation because one would wish that reputation to be enhanced. I shall not say—I would not dare do so—that the hon. Member diminished his reputation by what he said—on the contrary—but I was sorry that he criticised the Government as much as he did.
The hon. Gentleman said that there had been a polarisation between the highest and the lowest paid. It is right, and the fact is indisputable, that the gap is now wider than it was and should be. However, I wonder whether the hon. Gentleman has paid sufficient regard to one element. We are in the midst of a major technological revolution. That has two important elements. First, we are short of certain skills in technology and the demand for those skills is such that those who have them are able to command much higher salaries than would otherwise be the case. The other side of the coin is that technology displaces people. We know that, and it has played its part in causing unemployment. It also forces down the already low pay for those who do not have those skills.
The hon. Member for Birkenhead also criticised the Government for not allowing market forces to play their part to the full when it came to deciding top salaries, and in particular he mentioned the judges. I was at the Bar for 30 years and some of my contemporaries are judges. Others are not. I know them and I know why they are not judges. It is not because the Lord Chancellor has not made an offer to them but because they cannot, at this stage of their life—true, they have children whom they choose to educate privately, and it may be that that is part of the reason—afford, for a number of reasons, to accept a judgeship. They will be better off remaining at the Bar commanding the high fees that they do than they would be accepting a position on the bench.
Therefore, the Lord Chancellor's freedom to appoint those whom he thinks would be the best judges is limited. To that extent, the standard of judges in our courts has diminished. We have a number of weak judges. Trials can now go on for weeks, at tremendous cost to public funds, when they should take days, simply because judges have not the character, the experience or the strength to contain trials to the issues that should be tried. The hon. Member for Birkenhead should not have criticised the Government so severely on the salaries of top judges.
The lack of effectiveness of our wages councils has been touched upon by other hon. Members during the debate. It shows that, when Parliament makes laws that are not regarded as sensible, the British people find ways and means of evading them and take steps to nullify them. This has been the case particularly in two industries—the catering industry and agriculture.
Most hon. Members have clubs in their constituencies that they may visit. We know that each has a steward who is responsible for the day-to-day running of the club. Almost invariably there is a steward's wife who does as much work as the steward himself. She is never called a stewardess. If she is called a stewardess she has to be paid 496 the same wage as the steward and the clubs say that they cannot afford to do so. In days gone by advertisements called for a steward and a stewardess. Now advertisments call for a steward with a wife to help. The wife may receive just a few pounds a week, but she probably does as much work as the steward. In that way the catering wages councils' provisions are avoided.
I can speak more feelingly about agriculture. I have more farm workers in my constituency than any other hon. Member. I now have more unemployed farm workers than ever before. A great deal of harm has been done by the system of imposing minimum wages in agriculture. The system is self-evidently not working. The hon. Member for Birkenhead can speak with greater authority than I on this issue because I think I am right in saying that he had a hand in the publication of a paper by the Low Pay Unit in January 1981 entitled "Sowing the Seeds of Discontent". The paper showed that one in eight full-time workers was on low pay—£75 a week—as it was then defined. But in agriculture the figure was 35.5 per cent. More than one third of full-time farm workers were then on low pay, receiving less than £75 a week, despite the existence of a wages council. The hon. Member for. Eton and Slough (Miss Lestor) said that the wages councils would be more effective if there were more inspectors, but even if the number of inspectors for agriculture was quadrupled it would not alter by an iota the percentage of farm workers on low pay.
In the past 10 years no fewer than 90,000 full-time farm workers have lost their jobs. That is a very large proportion of the total. Many thousands of them are in my constituency where we now have an unemployment rate of 14 per cent., a little over the national average. That may not sound much to the right hon. Member for Middlesborough who represents an area where the percentage is far greater. However, mine is an area of traditionally low pay where people have not had the chance to build up the fat, the savings and the reserves on which to fall back when they lose their jobs. It is not a development area. There is no possibility of outside funds to provide fresh jobs. If an unemployed farm worker wants a job he has to drive 30 or 40 miles to Peterborough or Wisbech, a journey that he cannot afford even to contemplate at present.
It is a wretched fact that never before in the history of agriculture—an allegedly prosperous industry—has there been such a high level of unemployment. Even in the 1920s and 1930s, the situation was not as bad as it is now. I concede that one reason is the system of tax allowances. This plays a major part. A farmer, like any manufacturer, can purchase new plant and machinery and write off the whole cost against one year's income tax at a rate of 100 per cent.
According to the Annual Review of Agriculture, published a few weeks ago, farmers purchased new plant and machinery valued at £565 million—a large part of it, probably most, imported. Being able to write off that amount against income tax is an enormous benefit to the large-scale farmer who, almost by definition, is a larger employer than the small farmer. The result is that new machinery has displaced men.
I should like to give an example. For years, ever since Brussel sprouts have been grown commercially, they have been picked by hand. One would never have imagined a machine being invented that could do the job mechanically. That is, however, now the case. Such a 497 machine can be purchased for £30,000. A large farmer with an income of that amount can purchase a machine and write off the whole cost against one year's income tax. A small farmer obviously cannot do that. The machines are inevitably displacing a number of farm workers, both men and women, who formerly went into the fields to pick sprouts. As a result, the number of farm workers is diminishing rapidly. At the same time, there is an increase in the number of seasonal workers. These seasonal workers are outside the realm in which the agricultural wages council operates. It is an evil system. The House should know more about it.
Ten years ago, agriculture employed 78,000 seasonal workers. Now the number is 98,000, an increase of 20,000 at a time when agriculture has been displacing its full-time employees. The greater number are to be found in parts of Holland and the Isle of Ely but primarily in my constituency. Thousands of men and women are employed in these gangs going out to work. They are paid according to the going rate, which is currently £1.60 an hour. The hon. Member for Birkenhead spoke of somebody in Darlington earning £60 a week. I suppose that these men and women in the gangs are lucky to get £60 a week. There are no overtime rates, no matter how many hours they work. There is no holiday pay, no sickness pay and for most of them no trade unions. If they are known to have joined a trade union they are dropped from the gang if the gang-master does not hold with trade unionism. With 14 per cent. out of work, he can pick and choose. The problem goes beyond that. The gang-master has so many men and women to choose from that when his van collects them in the morning, if there is any indiscipline, as he would describe it, anything said untoward or any conduct of which he disapproves, that man or woman who has been in the gang is summarily and arbitrarily dropped.
With every respect to the right hon. Member for Middlesbrough, I cannot see that his motion helps those in that category. There are tens of thousands of people who are being treated, in the main, ruthlessly and shabbily. It would help if there were a reversion to licensing gang-masters. They used to be licensed in days gone by. When conditions of full employment existed, the number of gang-masters diminished. Indeed, their numbers fell so low that they were no longer a problem. After all, if a person wanted to work in agriculture he could get a proper job, be paid a proper wage and be treated in a reasonable way. Only in conditions of unemployment does the gang-master come back, with all the horror stories that can be related about them.
There is a case for looking at the way in which gang-masters are allowed by law to behave, by treating their employees as self-employed, dismissing them at will and breaking not just the letter but the spirit of all the regulations of the agricultural wages council. In my consituency and in the adjoining areas, the gangs are undoubtedly there to stay. The gang-masters are likely to carry on in their present ways unless the House reconsiders their total freedom.
I urge the Minister to consider how they should be treated in future. Rather than seek a method of improving wages, which would not be feasible in the circumstances, will he reintroduce the licensing system so that gang-masters periodically have to return to the magistrates court and apply for a licence to do their work, as they used to 498 until recently? That would be an important safeguard and would ensure that they behaved themselves and did not exercise the considerable powers they have over their fellow men and women in an inhuman and totally unjust manner.
There is one overwhelming argument against the motion. Although hon. Members have touched upon it it has not been satisfactorily answered by those who support the motion. I am sure that the right hon. Member for Middlesbrough will acknowledge that a wage is the price of labour. In a free society, the price of anything is a matter for agreement between a willing seller and a willing buyer. However, the motion represents an attack on that principle. If it says anything, it says that a willing buyer of labour and a willing seller of labour should not strike a bargain together as they want to do, but that an agreement must be imposed on them by some interfering Parliament.
It is true that Parliament has interfered between a willing buyer and a willing seller tens of thousands of times. For example, it has put up tariffs and duties against cheaper food and commodities from abroad to prevent a willing buyer, in the form of a British consumer, from having the freedom to choose what he wants. However, when Parliament interferes to put right a mischief, it invariably gives rise to another mischief which is always very small at first, but which gradually becomes bigger and bigger. If this motion is accepted, the mischief would become very large indeed.
If Parliament stepped in and told hundreds and thousands of employers and employees that the bargains that they had struck according to the existing law were no longer legal and that if they persisted with them they would be punished by law, there would be an obvious and immediate consequence: more people would be out of a job. There is no point in Parliament interfering through a new law unless it makes a change in the way in which people behave. A satisfactory minimum wage would increase wages, but I suspect that the total amount of wages paid would remain broadly the same. Some of those already in low-paid jobs would have the good fortune to receive a higher wage, but that increase would be made good by others who were less fortunate and lost their jobs.
Therefore, those of us who cannot accept the motion are entitled to challenge anyone who is minded to support it. As long as the British people are in the throes of mass unemployment, should not the House bear in mind one overriding consideration when making any attempt to change the laws governing employment, whether the change that we have in mind will provide more or lead to fewer jobs? Is there any hon. Member who can say with any self-assurance that if the House acts on this motion, more jobs will be provided?
§ Mr. William Pitt (Croydon, North-West)
I should like to join other right hon. and hon. Members in congratulating the right hon. Member for Middlesbrough (Mr. Bottomley) on winning a place in the ballot. The right hon. Gentleman told the House it had taken him 21 years to obtain the prime place in the ballot. However, a little later he whispered to me that he had been in the House for 15 years before that. As I have been here a mere 17 months, I have a long way yet to go.
I congratulate the right hon. Gentleman on his choice of subject. We have had a broad and interesting debate. 499 We have had many lengthy contributions from Government supporters saying, by and large, that they did not agree with the motion and taking a long time to do it. However, there can be no doubt that the problem of low pay has not worried the Government overmuch during their term of office. They seem to regard the problem of high pay as being more important than that of low pay. Yet, during their term of office, the number of families on family income supplement has doubled; and, during their reign, the number of unemployed has also doubled, and that is the biggest wage cut of all. What is more, it still costs £5,000 a year to keep someone on the dole. We should keep that figure in mind when we discuss low wages.
The only solution to low wages, from what I hear, seems to be a clamour for the abolition of the wages councils. Many small shopkeepers in my constituency, who have been told that the wages councils prevent them from paying their employees proper wages, have asked me whether I intend to support the abolition of the councils. I have told them that it is not the fault of their employees or themselves; it is the fault of the increasing burden of taxes and rates that small business men have had to bear over the last few years.
We can be critical as much as we like, but one creative solution would be to look at the rate burden that small businesses and industries bear in our local authority areas. Non-domestic rates are an enormous burden on many businesses, and in the most deprived areas the rate burden has become so high that businesses have been driven out, creating more unemployment in the very areas where jobs are needed most.
At the very minimum, we should be looking for a 10 per cent. relief from domestic rates, which would give back to small business men about £600 million in total costs. A 10 per cent. relief from their rate burden could enable them to pay fair wages to their employees. Most of them employ only one or two people. That would be far better than clamouring for the abolition of the wages councils and making the wage the determining factor whether a person has a viable business.
I am sympathetic to the idea of a statutory minimum wage, but I am concerned that, instead of having a statutory minimum wage, we should perhaps be looking at a statutory minimum income—in other words, not the wage the employee receives, but what he has in his pocket after paying taxes.
Could we have an effective statutory minimum wage policy? One of the causes of my concern is a remark by Sidney Weighell at the Labour party conference in 1978. He said:If Alan Fisher wants to get out from under the bottom of the pile—Alan, you have got to support 38"—the conference was discussing resolution No. 38—because if you do not I will tell you what is going to happen. You say 'Let's get 40 per cent.' That is what you want ֵ Let me tell you this. If you get 40 per cent., Alan, in your world, I am going to get 40. And the difference between you and me: I have got some power to do it with.I and many others are concerned that it is not the people who really need these wage increases who will get them. It is the power of the people with the loudest voices and the biggest clout in the large trade unions. The NHS dispute showed that, in the final analysis, wages are determined by muscle.
It is important to distinguish between a minimum wage and a minimum income. A minimum wage of £5,000 a 500 year may be just the ticket in one area. It may he just right for the economic situation in that area. But it may be far too large or far too small in another area. It will not necessarily be the ideal wage all over the country. The hon. Member for Birkenhead (Mr. Field) was clear about that. He was concerned, as I am, that we should be looking at the amount of money in a person's pocket after, not necessarily before, he has paid his taxes.
That brings me to the nub of the argument that the Liberal party has pursued for years. Instead of having a national minimum wage, we should be looking to a proper national minimum income, based on a unified tax credit system. It would be in four parts—personal credits, non-earners' credits, child and juvenile credits, and low income credits. The first three would be on a flat rate and the last would be withdrawn as income rose.
I could discuss the tax credit system for hours, but we have neither the time nor the inclination, I suspect, to discuss it. However, I recommend all hon. Members to read the memorandum that was submitted to the Treasury and Civil Service Sub-Committee by Mr. Philip Vince. At the beginning of his memorandum, he said:On the structure of income support and income taxation, Government should work towards a unified scheme, comprehensible to the ordinary citizen and as free as possible of `traps' which negate the citizen's personal efforts to improve earnings from a low base.After many pages of erudite prose and well thought-out argument, Mr. Vince shows how a proper unified tax benefit system would work. It would work specifically to the advantage of the low paid. It would enable them to have a proper income in their pockets. It would not get them into the poverty trap or into the income tax trap, and it would not be necessary to tinker continually with the income tax system, as the Chancellor of the Exchequer has done. The system could be made revenue neutral. It would lower the basic rate to 3875 per cent., and it would cost about £1.7 billion to do it.
We have had a useful debate. I believe that until we attack the system fundamentally and radically, we shall not get anywhere; we shall continue to talk round the point. We have very little time in which to do it. If we have continuing low wages, we shall have continuing low performance. There is no proof that low wages give high performance in an economy. We are at the moment a low-wage, high-cost economy. It alienates large numbers of our working people, most of whom are women. In certain areas they are being treated almost as slave labour.
I congratulate the right hon. Member for Middlesbrough again, and commend all hon. Members to consider a proper unified tax credit benefit system that would give real power and income to low wage earners.
§ The Minister of State, Department of Employment (Mr. Michael Alison)
The Government fully agree with the intention that lies behind the motion of the right hon. Member for Middlesbrough (Mr. Bottomley). The wages of too many people are abysmally low and it would be a good thing if they could be raised in real terms. Even worse, because of the problem of unemployment, a large number of people have no wage at all.
I congratulate the right hon. Member not only on his success in the ballot—a historic occasion—but on his choice of subject. It is an important subject and one that 501 is central to the economic life of the country. Indeed, he placed it in the broad economic context of his speech, and I shall refer to that aspect a little later.
It is appropriate that the right hon. Gentleman has chosen Budget week, when economic affairs are very much to the fore, I am glad that the topic can form part of the general Budget debate, and I welcome this short opportunity to contribute to it.
One obstinate fact that cannot be gainsaid is that pay levels in this country, as in any other, depend in the end upon what we earn—on what we produce or sell. That is true whether we are talking about individuals, about the work force of a particular firm or industry or about the whole economy.
It is, of course, possible to transfer resources from one industry to another through subsidies, and a great deal is done to transfer resources between individuals, either directly through the tax and social security system or less directly through the provision of free or subsidised services. Before resources can be transferred they have first to be earned. Real wealth cannot be created by legislation, although technically money can be created by Government. Bitter experience has taught most of us that money created in excess of the output of real goods and services simply melts away like a snowflake in terms of its real value.
The only way that the general level of wages can be raised—and it must be real wages that are of primary concern to the low paid—is by improving output through increased efficiency, higher productivity, managerial performance and trade union responsibilities to which the hon. Member for Islington, South and Finsbury (Mr. Cunningham) fairly drew attention. Any rise in money incomes which is not backed by a real increase in output is an illusion and worse, because it creates inflation and destroys jobs.
The right hon. Member for Middlesborough alleged that the Government's great misdemeanour was their failure to maintain an adequate level of demand. I rebut that charge on purely statistical grounds. For example, from the low point—the trough—of 1981 until the third quarter of 1982, the last quarter for which we have reliable figures, total domestic United Kingdom demand rose by at least 3.5 per cent., or nearly 4 per cent., while output rose by only 1.25 per cent. This reflected the weakness of world markets, but the essential problem is that of competitive supply. That was the problem in the 1970s, when there was no shortage of demand, but when lack of competitiveness meant that demand led to inflation and higher imports.
In the view of many, demand management now has a bad name. The right hon. Gentleman will recall what happened in the 1970s when our domestic expenditure—that is, expenditure measured on current prices and in money terms—rose 300 per cent. At constant prices the level of activity rose only by 23 per cent. That means that in that decade nine tenths of the increase in monetary demand went to increases in unemployment and prices. That was in a period of massive injections of demand potential into the economy. However, unemployment doubled.
I entirely agree with the first half of the motion. Low pay exists and it has not been eradicated under this or any other Government. I hope to demonstrate that the 502 mechanism proposed today is not an appropriate remedy. A national minimum wage would not eradicate low pay. It would raise labour costs relative to other input costs of production. Either competitiveness would suffer or other factors of production would be substituted for labour. That has been going on for a long time. Either way jobs would be lost.
The most important consideration in my mind and in the minds of hon. Members in all parts of the House, is that nothing should be contemplated that would jeopardise the propects of economic recovery and, above all, put at risk the creation of jobs for those who need them. For that reason above all this Government, in common with successive Administrations, reject the call for legislation on a national minimum wage. The right hon. Member for Chesterfield (Mr. Varley) was cautious, almost ambiguous, in his endorsement and the enthusiasm with which he approached the possibility of negotiating a national minimum wage with the unions when the time comes.
§ Mr. George Cunningham
Will the Minister bear in mind when considering the longer term the fact that the French are much more clear-sighted than the level-headed British and do not take the view that the Minister has just expressed? The French have been rather more successful than we have in maintaining employment with the system that they have.
§ Mr. Alison
We shall have to see what happens to the French in the rest of this year, when the forecast rise for unemployment is sharp. There is a passage later in my speech which, if I have the time to read it, refers to practices overseas.
Not only did high wage increases price people out of work directly by reducing competitiveness in the 1970s, but a real shift took place in the distribution of income as wages took an increasing share of national income at the expense of company income. The money that should have been invested for the future in new plant and machinery went instead into personal consumption—much of it on goods imported from abroad. Between 1975 and 1980, real gross domestic product in Britain rose on average by only 1.6 per cent. a year, compared with nearly three times that level in West Germany, and nearly four times that level in Japan. That is why real incomes—it is real incomes that must concern the low paid—have increased so slowly, and so ineffectively, despite a sharp increase of about 125 per cent. in those five years in money incomes.
If increases in money incomes were the answer to low pay, the problem would have been eradicated years ago, because pay has raced ahead in money terms. As it is, many people now have no pay at all because their jobs have been destroyed.
There has been a return to economic reality, at least in the past three years. In the 1979–80 pay round—the first over which the Government presided—pay settlements averaged 15 to 20 per cent. That was the legacy of the Labour Administration's failed incomes policy and the post-dated cheques from Professor Clegg's comparability commission. In 1980–81, settlements fell to about half that, averaging 8½ per cent., and fell again, to 7 per cent., in the 1981–82 round. Settlement levels are still falling. According to the CBI, recent settlements in manufacturing are averaging just over 5½ per cent.
While we can take heart from these improvements, it would be quite wrong to pretend that progress has been 503 entirely satisfactory. While our economic performance is steadily improving, competitor nations are not standing still. While pay rises of 5 to 6 per cent. are moderate by past standards, they are still higher than in many other countries, and are not yet low enough to generate new jobs. Of course, as the dispute in the water industry proved, there are still some groups secure in their monopoly position who are prepared to use industrial muscle to get extra money at the expense of others.
Perhaps this is the right point at which to demolish the myth that those in work have made real sacrifices in recent years. It is a myth. Throughout the lifetime of this Government, average weekly earnings have risen by 62 per cent., but the retail price index by only 52 per cent. Real earnings have therefore risen by 10 per cent. during a world recession, and that trend is currently increasing. Average earnings increased in the year to January—the latest available figure—by 7.75 per cent. Over the same period the RPI rose by only 4.9 per cent. Average earnings are therefore currently running well ahead of the RPI and will probably continue to do so for the rest of this pay round. That is a real benefit to the low paid.
It is quite wrong therefore to suggest that those in work have made sacrifices. The real cuts in income have been taken by those who have lost their jobs. If those in employment took more moderate pay rises, that would undoubtedly free resources for investment, improve competitiveness, and create jobs for those who need them. The most certain way of destroying the recovery which is now under way would be a return to inflationary wage settlements.
§ Mr. Alison
Perhaps the right hon. Gentleman will forgive me, but I want to allow time for two more hon. Members to speak.
The specific proposal in this motion is for a statutory national minimum wage. If put into effect, in my judgment it would add to inflationary pressures and destroy jobs in two ways.
First, it would clearly raise the wages of those below the statutory minimum—most of whom will be young people—and the unskilled. This would raise employers' costs, reduce competitiveness and destroy jobs. In some industries, which face particularly severe international competition, and where wages are generally below average, the destruction of jobs would be simply catastrophic if the threshold were significantly above current pay levels.
Secondly, all experience in Britain during periods of incomes policies, and abroad in those countries that have minimum wage legislation, shows that differentials are quickly restored after the pay of the lowest paid has been raised. That point was well made by my hon. Friend the Member for Harborough (Mr. Farr) who spoke about the leap-frogging syndrome. Even if the labour market did not secure that result through the market's mechanisms, the trade unions can be relied upon to insist upon it. The hon. Member for Croydon, North-West (Mr. Pitt) in his quotation from a debate at the TUC conference, gave a good example of how that would happen.
In practice, every increase in the national minimum wage would be seen by other groups not as a relative ceiling below which they should stay—as a matter of conscience, as the hon. Member for Birkenhead (Mr. 504 Field) would say—to improve the relative position of the low paid, but as a minimum target that better paid groups would expect at least to match and, if possible, improve upon.
Those who advocate legislation must ask themselves not only whether they have the right to pursue policies that could destroy jobs, but whether they are justified in interfering with the freedom of those who work in low-paid jobs to choose between some work, however poorly paid, and no job at all. It must be borne firmly in mind that those who would be most severely affected are young people who earn low wages because their youth and inexperience do not qualify them for more highly paid work. Young people would not only be denied the opportunity to earn money but, more importantly, would have fewer opportunities to gain the skills and experience that bring rewards later in life.
There is, of course, no official definition of low pay, but a number of definitions have been suggested by various pressure groups and academics. Most are based on some ratio to average earnings, usually about two thirds, or by reference to social security payments—and all come out at about £90 per week. In passing, perhaps I can rebut the suggestion peddled by the Low Pay Unit and echoed by the hon. Member for Stalybridge and Hyde (Mr. Pendry), that the United Kingdom is in breach of its commitments under the social charter of the Council of Europe. There is a proposal from one of the council's advisory bodies that there should be a minimum wage of not less than 68 per cent. of the average wage. That proposal has never been accepted by the Council of Europe, nor, so far as I am aware, does it have the support of any member Government.
It is quite untrue to suggest that the United Kingdom Government, or the Government of any other member state, has an obligation to ensure a specific earnings figure. I hope, therefore, that the Low Pay Unit will stop making allegations that the Government are in breach of an obligation which simply does not exist.
To return to the figure of £90 per week, it is sufficient to draw attention to the fact that 10 per cent. of adult male workers, 50 per cent. of adult women, and 95 per cent. of young people under 18 earned less than that in April 1982. A minimum wage at that level would put a considerable number of jobs at risk.
It is for that reason that most countries with statutory national minimum wage systems set their levels very low. In the United States of America, for example, the levels tend to fluctuate between 40 per cent. to 50 per cent. of average earnings. But even at that low level—well below the two thirds relationship usually advocated for Great Britain—research shows that there is a significant job loss.
It is not possible to quantify the employment effect of a minimum wage at the higher levels suggested for Britain. What can be said is that other countries have not dared set minimum wage levels at a level that would really bite because of the fear about jobs. Also, of course, at those low overseas levels where, for example, £65 per week would be about equivalent here to the American experience, there is very little point in having legislation. Only 2 per cent. to 3 per cent. of adult men would be affected by that, and no one with dependent children who took their benefit entitlements would end up with more money because the tax and social security system already brings their total income up to that level.
505 Experience abroad also shows that there is pressure to restore differentials—the very spectre that I held out as a possible reality here. Nevertheless, there is such pressure, even when minimum wages are set at modest levels. Moreover there is no doubt that those people who are higher in the pay league would insist on restoration. I need not remind the House how many strikes, including the recent water dispute, centre around differentials.
Only if minimum wage legislation formed part of a permanent incomes policy could differentials be squeezed to improve the relative position of the low paid. I believe that that route has been sufficiently well travelled now and that the distortions that it creates in the labour market, as well as the frustrations and pressures that it creates, are too well appreciated for it to be seriously advocated as a policy for Britain. Yet without it, minimum wage legislation would be unworkable.
Few hon. Members would now disagree that statutory incomes policies do not work and that the level of wages is generally best left to the parties to determine between themselves. In some industries, negotiated levels already have statutory underpinning by the wages councils system. That is an ancient system, which was set up in 1909, and is contracting. However, some 2.75 million workers are still covered by it. They range from the big retail councils to such exotic bodies as the coffin furniture and cerement making wages council to the ostrich and fancy feather and artificial flower wages council. A range of weird bodies still exist and they set minimum rates that lie between £55 and £65, the average being close to £60.
Recently, my right hon. Friend the Secretary of State's attention has been been drawn to the behaviour of the two retail councils whose proposals for increases in minimum rates led to a chorus of protest from employers in the trade. These employers included not just the smaller businesses but the major high street companies whose names are familiar to us all. Their fear, put simply, was for jobs. Letter after letter told of the prospects of redundancies if the increases were implemented. As a response my right hon. Friend wrote to the chairmen of both councils, telling them that it was abundantly clear that increases of the level proposed—8 per cent.—could only damage employment in retailing, and urging the most serious consideration of independent representations of this point.
I believe that one of the councils has since met and made some modest change to its proposals by deferring part of the proposed increase for six months. This shows some recogniation of the strength of representations on its proposals but it is, of course, for the trade to judge whether this will be helpful to its capacity to provide jobs. The right hon. Member for Chesterfield mentioned that case and hoped that I would repudiate my right hon. Friend's approach. I make no such apology for the view that both my right hon. Friend and I hold—the reduction, so far from being undesirable, was too little because jobs would be put at risk. The right hon. Member for Chesterfield and I have a common interest in that regard—we both want there to be more jobs.
There is no doubt that positive arguments for a national miminum wage can be advanced. None of us who heard the introductory speech of the right hon. Member for Middlesbrough could fail to be struck by the cogency of his arguments. Two of the most impressive and seductive arguments which he deployed in favour of a national 506 minimum wage were justice and equity. I agree that some workers are paid very little. We do not applaud, or seek, that effect. However, state intervention in the determination of pay does not work in practice and is an important diminution of freedom. Social justice is not advanced by giving someone a pay rise one week and a redundancy notice the next. People can best judge for themselves whether a wage rate is acceptable and whether they prefer a job on low wages to no job at all.
Secondly, it is suggested that we should try to relieve poverty by a national minimum wage, but there is little connection between low pay and poverty. In 1979 only 1 per cent. of families where the head of the family was in full-time work had incomes below supplementary benefit level, and only 4 per cent. had incomes less that 140 per cent. of supplementary benefit level. The great majority of low-paid workers are young people or married women whose income supplements the earnings of other workers in the household. Very few poor people would be helped by a national minimum wage.
I hope that I have said enough to show that, beguiling and impressive though the presentation of the case by the hon. Member for Middlesborough was, it does not carry sufficient weight for me to advise the House to accept the motion.
§ Mr. Bruce George (Walsall, South)
I thank my right hon. Friend the Member for Middlesborough (Mr. Bottomley) and the Minister for allowing me to squeeze in a seven-minute speech. I had the good fortune to raise the issue of low pay in the House about seven years ago. It is unfortunate that we must still expose the extent of low wages today. The problems of those on low wages are considerable and growing.
Labour Members incessantly champion the army of the unemployed, but often the low paid are forgotten or given much lower priority then they deserve. The Minister argued that they are fortunate to have jobs, but that sentiment—if endorsed by others—will continue many evils and malpractices.
The total number of the low paid and those in receipt of benefits is tragically high. It is regrettable that the Government's policies have led to a increase in unemployment. In my area the figure has risen in four years from 5 per cent. to 20 per cent. It is a result of the ineptitude, wrong-headedness and, in some cases, malice of the Government. Hardly a week goes by without redundancy notices being handed out. Recently a large company in my area—F. H. Lloyd—was officially killed by a scheme drawn up by Lazard Freres, under which the company must destroy the melting furnaces in all its foundries. For the Government to countenance the deliberate destruction of expensive machinery, much of which was paid for by the taxpayer, is intolerable.
Walsall suffers from high unemployment and has many low-paid workers. The West Midlands county council's economic development committee published a document called "Family Income Trends", which provides a devastating indictment of the Government's economic and social policies. Its conclusions differ radically from those of the Minister. The report was highlighted in my local newspaper today. I said that I would raise the matter in Parliament, and I have the opportunity to do so more quickly than I expected. We must remember that the west midlands used to be an area of great prosperity, but the 507 poverty in the area is growing. One in three of the population now lives on or is marginally above the official poverty line. The figures are staggering. In my constituency the number of supplementary benefit claimants has increased from 18,000 to 27,000 between 1980 and December 1982. That represents an increase in Walsall of 49.37 per cent.
Supplementary benefits represent the official poverty line. Despite a dramatic increase in the number of claimants, it is estimated that 100,000 potential claimants are failing to take up their full entitlement. Statistics on rent rebates have shown that the numbers have gone up staggeringly. Some 33 per cent. of the population are in receipt of rent rebates. No Government can express any pride in one in three of the population living on the poverty line. The recession has transformed the west midlands from an area of relative affluence in 1980 to one of poverty.
The low pay areas are not only geographical but functional areas. Wages council employees suffer considerably, and I endorse the retention of the wages councils. The problem with low pay lies mainly in the public sector. Both central and local government are among the worst low pay employers. Women and ethnic minorities are suffering considerably.
Last week I went to see a job creation scheme in my constituency. I was impressed by the quality of the work and the supervision. The kids are earning less than £25 a week. If they travel to work, they are worse off working than not. If they are employed for a year, they join the dole queue shortly afterwards. I hope that the minimum wage for the young unemployed on job creation schemes will be £30 a week.
The number of families living in poverty in the west midlands—those earning and these in receipt of benefit—continues to grow at an alarming rate. There is no indication that this trend will be reversed in the foreseeable future.
I am glad to contribute to the debate. I hope that the Government will listen carefully to what is being said and will introduce policies to assist those who have so far been on the receiving end of this appalling Government.
§ Mr. Arthur Bottomley
I thank right hon. and hon. Members who have kindly referred to me. I should particularly like to thank my right hon. and hon. Friends who have given me such strong support. My hon. Friend the Member for Birkenhead (Mr. Field) forcefully presented the problem of low pay, particularly in connection with his work in the Low Pay Unit. I am glad that his successor, Chris Pond, is such a worthy person. I noted what my right hon. Friend the Member for Chesterfield (Mr. Varley) had to say, and I am pleased that he is genuinely concerned about the problem of low pay.
The Government reply was very disappointing, and, judging from their reaction, some Government supporters were not enthusiastic about the speech of the Minister of 508 State, Treasury. Even putting up two Ministers, one from the Treasury and one from the Department of Employment, has not answered my case in support of my motion. The Government have stated only that low pay is linked to low production. I have tried to explain that low pay is a major cause of inefficiency and reduced production. Raising the wages of the low paid would help Britain to become more efficient and compete more effectively.
By the way they spent most of the time avoiding the subject that we are debating, I understand why the Government do not have a very credible record on low pay. They have made matters even worse. They have no policy on low pay except to increase the size of the problem. Ministers spent most of their time talking about the reduced rate band of tax. That is important, but it is by no means central to the problem of low pay.
Ministers have always argued that it is of benefit to use the revenue raised for allowances rather than to reduce rate bands. Is the Treasury Minister aware that, although this may be true in any one year, in the long term a reduced rate band has a lasting effect which increased thresholds do not have? Is he also aware that to restore the tax burdens to the level at which they stood in 1979, taking account of the abolition of the reduced rate band and the increase in national insurance contributions, would require an increase in tax allowances of 35 per cent., not the 14 per cent. given on Tuesday? The Budget leaves 120,000 families with children in the poverty trap—twice as many as in 1979. Tinkering with tax thresholds is not enough to combat the poverty trap, which is why we need a minimum wage.
The National Union of Public Employees and the Low Pay Unit have worked hard to bring this problem to the attention of the public, the House and the Government, but they clearly have not had much success in influencing the Government. In 1979 less than one male worker in 10 was low paid. By 1982 the proportion had increased to almost one in six. In 1979, two thirds of female manual workers were on low pay compared to almost three quarters last year. The Government have put back by 10 years the earnings of the low paid. An examination of Government policies helps to explain why that is so, and Ministers have made it even more obvious by their contributions today. The Government's disappointing reply should have encouraged me to force a vote on the motion, but it is clear that, with the Government's majority, I would not stand much chance of success. I am glad to have drawn the attention of the House, and through the House the attention of the country, to low-paid workers and the poverty trap. I hope that future Governments will treat the problem much more seriously than the present Government and that we shall in the end have some standard for wages so that millions of workers do not fall into the poverty trap through low pay.
I beg to ask leave to withdraw the motion.
§ Motion, by leave, withdrawn.