Low Wages and Income-related Benefits (Publication of Information) (Hansard, 26 March 1996)

§ Mr. Denis MacShane (Rotherham)

I beg to move, That leave be given to bring in a Bill to require employers to publish, in the form of an annual statement, information showing the number and percentage of their employees in receipt of income-related benefits and the proportion of their disposable income accounted for by wages and income-related benefits, respectively. Were this Bill to move to Committee, it might need some changes to ensure that it neither breaches the confidentiality of employees receiving benefit nor places a new red tape burden on employers—especially the responsible small businesses that pay fair wages, for which, of course, the Labour party is now the chief spokesman and hope.

In 1944, during the war, Sir Winston Churchill, who used to insist on one-page summaries of important measures, received a one-page summary of the famous 1944 White Paper on full employment. That document can be seen at the Public Record Office in Kew. Paragraph 8(a) calls for better statistics and other information from private enterprise about the nature of the labour market. That animates the spirit of my Bill, just as Sir Winston Churchill's spirited defence of putting a floor under low-wage exploitation when he set up wages councils in 1909 remains the core reason for introducing a job-creating, national minimum wage system today.

If Sir Winston were alive today, as a one-nation Conservative, he would be appalled at the mean-spirited public policy of reducing so many of our employed people to the humiliation of means-tested dependency on welfare benefits. Indeed, as a classical Conservative economist, Sir Winston would have been appalled at the huge taxpayers' subsidy going to low-pay firms. Last week, I received answers to some parliamentary questions revealing that welfare benefits amounting to about £2.9 billion—£120 for every taxpayer in the country—are being paid to people in employment.

That figure has nearly trebled in the past four years. If that upward progression continues, whether geometrically or exponentially—that is, if it doubles every two or three years, as it is doing under the current Secretary of State for Social Security—by the beginning of the next century we shall be paying more in subsidies to low-pay firms that we spend on our national education budget.

Obviously, all efforts to get people off welfare and into work should be applauded. Professor Richard Layard and Professor Dennis Snower and others have suggested schemes, as has my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor. In other countries, such as the United States, policymakers have pioneered in-work benefit schemes, but have combined them with a minimum wage to provide a floor below which employees cannot be exploited.

However, in Britain, the cold-blooded deliberate creation of a two-nation society requires the opening of a vast new world of low-paid work that the taxpayer has to subsidise. As the thousands of millions of pounds paid in benefits to people in work increase, the wages of people in work go steadily down.

836 In my constituency, jobs paying as little as £1.44 an hour are being advertised in the jobcentre. A quarter of all the full-time jobs advertised in Rotherham jobcentre offer pay of less than £3 an hour. In Yorkshire as a whole, there are more full-time jobs advertised at under £3 an hour than there are part-time jobs paid at that rate. Thus a Gresham's law of wages can now be said to exist: bad wages are driving out good or fair wages. We shall soon see jobs paying £1 or 50p an hour, because the employers offering them will know that under present policies the Government will subsidise them—a subsidy that will increase over the next three to five years to at least £10 billion.

All categories are covered. I am grateful to my hon. Friend the, Member for Leeds, East (Mr. Mudie) for showing me a parliamentary reply that he received today, which reveals that 70,000 professional, managerial and education jobs have such low pay that employees in them are eligible for family credit.

That trend is now being built into the wage-setting mechanism. I first became aware of that fact a year and a half ago at a meeting of bus companies here in the House. Bus managers from London said that, under the rules of competition and deregulation, they were forced to offer employment only or principally to people eligible for welfare benefits. Jobcentres collude with benefit agencies, one phoning the other to approve so-called fast family credit, so that the employer offering low wages will know that his employees will get the subsidies. In other words. Government officials are acting as the agents of low-paying employers to create a new state-subsidised employment sector.

The new clients of that new culture of welfare dependency are exploitative low-pay firms that undercut their business rivals thanks to massive state subsidies. Which are those firms? I can name two. Growthbeat Ltd., of Barrowden, near Oakham in Leicestershire, paid a woman £150 to be on duty for 112 hours a week—Monday to Sunday, 5 pm to 9 am. Starlite Garments, in Blackburn, Lancashire, paid two women £25 for a 42.5-hour week-59p an hour.

Little wonder that many citizens look at the madhouse economics of that system, decide that they want no part of a labour market based on a war of all against all, and drop out into the black economy, the drugs economy, or the do-nothing economy. Those who suffer most are the honest and responsible firms that seek to pay a living wage and do not use the benefit system as an excuse to pay low or ever-decreasing wages—this certainly angers my friends in the small business community in Rotherham.

This issue is part of a larger debate about our labour market—about which we need to know far more information. We need a responsibly set minimum wage that is not job destructive; we need effective negotiating rights for workers; and we must have, as Sir Winston Churchill agreed in 1944, the information to carry out the correct analysis to arrive at the best policies to stop this destructive spiral into low pay and this ever-increasing taxpayers' bill to subsidise low pay firms. My Bill would ensure the provision of that information, and I commend it to the House.