Whilst Coalition ministers claim that they want to ‘make work pay’, someone in government is considering how to freeze or even cut the National Minimum Wage. Yes, really.
Last week, before he was in the news for making comments that seemed to suggest a link between the Mick Philpott case and welfare reform, George Osborne made headlines with a speech to workers at a Morrisons distribution centre in Kent. The Chancellor’s speech was mostly about the welfare and tax reforms that came into force that day, but one of his key messages was ‘this month we will make work pay’.
In fact, as my Citizens Advice colleague Sue Royston noted astutely, many of the Morrisons workers in the audience on 1 April are likely to be on wages only slightly above the National Minimum Wage (NMW) and will now be worse off in real terms, with their small gain from the tax threshold change being wiped out by inflation and the 1% cap on benefit uprating.
But there’s a further irony: whilst the Chancellor was talking of ‘supporting hard working people’ and ‘making work pay’, some in his government – and I don’t think they’re Liberal Democrats – were thinking about how to freeze or even cut the NMW. Just hours before the Chancellor got to his feet in Morrisons, the Daily Telegraph reported that changes in the Low Pay Commission’s terms of reference ‘raise the prospect of the first ever across-the-board freeze or cut in the minimum wage’, and Downing Street confirmed ‘it is something we are looking at’.
Are they really? Are they mad?
As Sonia Sodha – a former adviser to Labour leader Ed Miliband – argues in a must-read column in yesterday’s Observer, ‘the real scandal of welfare is the rising numbers of people reliant on in-work benefits because minimum wage jobs don’t pay enough to make ends meet; the majority of people living in poverty are in work.’ And, turning to the Labour leadership’s response, Ms Sodha concludes that ‘they need policies that address the fact that work [simply] doesn’t pay for the millions of people on low wages – but in a way that’s got nothing to do with our benefits system.’
In particular, ‘Labour should make a bold commitment to raise the NMW. There is an increasingly convincing economic case that can be made for it as well as one based on fairness.’ Indeed, the deputy editor of the Daily Telegraph has argued that, for economic as well as moral reasons, the NMW should be substantially raised, not cut.
Amen to that. But any move to raise the NMW in real terms – perhaps towards Living Wage levels – will need to be supported by stronger enforcement of the law. As the recent case of 197 call centre telesales workers for whom HMRC have won NMW arrears of almost £100,000 illustrates all too well, there are still far too many employers who think they can get away with paying below the NMW.
That too has to change. Which is a subject I will return to on this blog when I start to set out some ideas for Labour’s policy review on protecting workers.
Richard Dunstan is a policy wonk who has worked for Citizens Advice, the National Audit Office, the Law Society, and Amnesty International UK.