HL Deb 23 March 1995 vol 562 cc1318-20

3.25 p.m.

Baroness Turner of Camden asked Her Majesty's Government:

What steps, if any, they intend to take following the recent report that over 1 million people are earning less than £2.50 per hour; and whether they will reconsider their policies towards the wages councils and a national minimum wage.

Lord Inglewood

My Lords, workers at all levels have enjoyed an increase in real earnings since 1979. This has resulted from the Government's continuing policy of sound economic management. The country's improved competitiveness and productivity have brought about this welcome increase in earnings.

Baroness Turner of Camden

My Lords, I am sure the Minister will not be surprised to learn that I find that Answer very unsatisfactory. I drew the figures in my Question from the labour force survey which indicates a widening gap in the period to which the Minister refers in the wages of the lowest paid and the highest paid. Is he aware that we as taxpayers are now having to pay £2.44 billion in benefit to top up low pay and that this is really a subsidy to low paying employers? Would it not be better if there were an obligation upon employers to pay a living wage and so relieve the rest of us from having to pay this subsidy?

Lord Inglewood

My Lords, wages can only amount to what it is possible for an employer to pay in any particular circumstance. As the work that the Government have done on the earlier Trades Union Congress proposal for introducing a minimum wage has shown, if that were introduced it would be likely to lead to about ¾ of a million extra people unemployed. It would also lead to a substantial increase in public expenditure. That does not seem to me a sensible way to proceed.

Lord Clark of Kempston

My Lords, does my noble friend agree that if wages councils were re-introduced and we had a minimum wage, unemployment would increase, as it would if the social chapter were accepted by the Government? Does my noble friend also agree that, as regards the minimum wage, there is a certain reluctance on the part of the official Opposition to fix a rate?

Lord Inglewood

My Lords, my noble friend is absolutely right. It is interesting to reflect on what Mr. Tony Blair said in 1991 in a letter to the Independent. He wrote: I have not accepted that minimum wages will cost jobs. I have simply accepted that the econometric models indicate a potential jobs impact".

That seems to sum up the muddled thinking.

Lord Mackie of Benshie

My Lords, is not the Minister a little naive to say that employers will only pay what they can for labour? Is he not aware that a great many employers will only pay what they have to?

Lord Inglewood

My Lords, the noble Lord, Lord Mackie of Benshie, is right. You can only pay what you can afford, which is determined by what you have.

Lord Campbell of Alloway

My Lords, is my noble friend the Minister aware what sort of wages are referred to in the report? Are they casual wages by the hour? Are they wages by the day? Are they weekly wages? What wages are they?

Lord Inglewood

My Lords, the report to which I understand the Question refers was produced by the Labour Party. Therefore, it is a matter for the Benches opposite to elaborate. However, I understand that they are hourly wages.

Lord Eatwell

My Lords, as my noble friend made clear, the figures mentioned in her Question were produced by Her Majesty's Government, not by the Labour Party. Would the Minister like to withdraw his statement in answer to my noble friend that wages have increased at all levels? Is he not aware that the Rowntree Report on Income and Wealth demonstrated that for people in employment incomes have fallen for the lowest 10 per cent. and have remained stagnant for the next 10 per cent. of the labour force? Will he withdraw that false statement?

Lord Inglewood

My Lords, that is not my understanding.

Lord Molloy

My Lords, I served for many years on a wages council. Is the Minister aware that when this Government took the foolish step of abolishing wages councils they irritated many organisations on the employers' side? Here was a system whereby trade unions and employers came together and worked out some of their difficulties. Was it because they worked so admirably that the Tories got rid of them?

Lord Inglewood

No, my Lords, I do not accept that there is widespread support for wages councils. We abolished the wages councils in order to introduce flexibility into the labour market and thereby increase the potential for creating jobs and wealth for the country.

Lord Stoddart of Swindon

My Lords, in his reply to my noble friend on the Front Bench regarding the Rowntree Report the Minister said that that was not his understanding of the report. Can he say what is his understanding of the report?

Lord Inglewood

My Lords, the Rowntree Report is an interesting document which contributes to the debate in the country in general as well as in this House. It tries to focus on the problems of poverty in the country as it perceives them. However, in our view the report does not properly take into account many aspects such as the provision of education and healthcare which have meant that people's standard of living has increased.

Baroness Farrington of Ribbleton

My Lords, will the Minister confirm that the Government accept that wage levels of the order we are discussing are below the poverty level and that the Government themselves, through income support and family credit, subsidise those excessively low wages? Can he explain why, when a company is making enormous profits, the Government are prepared to use taxpayers' money to subsidise that employer who is paying wages below subsistence level?

Lord Inglewood

My Lords, in this context it is important to differentiate clearly between what people earn for doing a job and what may be provided by the welfare system so that the households of which they are part can have an adequate standard of living. Wages are determined by the marketplace. The level of income which is appropriate for households varies according to a variety of different criteria such as the number of people in the household. Therefore the two are calculated in a different manner.