HC Deb 06 July 1998 vol 315 cc729-31
10. Mr. Tim Loughton (East Worthing and Shoreham)

What is her estimate of the net effect on benefit levels of the introduction of the minimum wage. [47477]

The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley)

The national minimum wage is one element of the Government's strategy to make work pay. People receiving in-work benefits may see a reduction in the amount of benefit paid, as they would with any increase in income. However, the current benefit system is structured so that increases in income are not deducted pound for pound from benefit entitlement.

The introduction of the working families tax credit and the child care tax credit will increase the return from work for low and middle-income families with children and ensure that recipients keep more of any increase in income. In addition, major changes in the national insurance system from April 1999 will reduce contributions for low-paid workers.

Mr. Loughton

Will the Minister confirm that, if a single mother of two who is working full time and currently earning £3 an hour is lucky enough still to have a job when the minimum wage of £3.60 is introduced, her family income will rise by just £3 per week, with £21 clawed back by the Exchequer in lost benefit? Only 7.5p per hour will go to that employee. Does the hon. Gentleman agree that, for all the soundbites about attacking poverty pay, the minimum wage is just a tax on business, designed as a revenue-raising exercise for the Treasury?

Mr. Bradley

The national minimum wage is an essential part of our strategy to put a floor under in-work benefits and ensure, by combining the minimum wage with the working families tax credit and the child care tax credit, that people in work are significantly better off than they are currently. We shall ensure that, as the national minimum wage and the changes that we are making to in-work benefits through the tax system unfold, people see the benefit that the Government are bringing about by that combination of measures.

Mr. Peter L. Pike (Burnley)

Is it not a fact that those on low pay throughout the country know that, as a result of what the Government are doing on the national minimum wage, national insurance, tax and benefits, they will get a much fairer deal than they ever would have done under a Tory Government? Is it not also a fact that employers paying a fair wage to their employees are fed up with paying in taxation to subsidise those who are paying poverty pay?

Mr. Bradley

My hon. Friend is absolutely right on every point.

Miss Julie Kirkbride (Bromsgrove)

With several reports this morning showing that Britain sadly appears to be on the edge of a recession, I wonder what work the Department of Social Security has done to estimate what the impact of a minimum wage will be if the economy is to dip into recession, bearing in mind the fact that the minimum wage will not only increase the wage bill nationally for those on low pay, but have a knock-on effect on differentials.

Mr. Bradley

I refer the hon. Lady to the appropriate Departments: the Department of Trade and Industry for the national minimum wage and the Treasury for the state of the economy. However, on the changes that we are making in the social security system, the working families tax credit and the child care disregard have been warmly welcomed throughout the country by those who recognise that work should pay, and that employers should pay a decent wage.

Mr. David Winnick (Walsall, North)

Whenever a Conservative Member gets up to attack the minimum wage, would it not be useful to find out how many jobs that Tory Member has and the likely total income received? Is it not the height of hypocrisy for such people to criticise a scheme which would give the lowest-paid workers something of a lift-up?

Mr. Bradley

Once again, my hon. Friend makes a valid point. The previous Government were not prepared to put a floor under benefit levels. They allowed family credit and other in-work benefits to take the strain of low wages, ensuring that very poor employers did not take their responsibilities seriously and provide a decent wage for their employees.