This time last year, David Cameron was mocking Ed Miliband for advocating ‘predistribution’. Ed argued for a move away from an approach to low pay based purely on top-ups through the tax and welfare systems towards one in which welfare becomes less necessary as employees are paid a decent wage in the first place. At conference this year, Ed should drop the unfortunate word but stick to his guns on the idea, which is an absolute winner.
Poll after poll shows that the public support welfare payments to those who cannot change their situation – children, the elderly, the disabled. However, support for benefits for the poor has plummeted and remains low. Many assume that being poor means being out of work, and that the poor are unemployed through their own fault. This is mostly not true – two-thirds of children growing up in poverty live in households that are in work. The issue for them is not unemployment, but low pay.
In 2011-12, HMRC spent nearly £30bn on tax credits – over six times more than was spent on jobseeker’s allowance. Ed’s plan would reduce that bill and push up wages for the lowest paid. A policy that helps those who help themselves, recognises that work should always be the best route out of poverty, reduces welfare and pushes up wages is bound to be popular. No wonder that Cameron sought to belittle it.
Brighton is being billed as the ‘cost of living’ conference and it is time for Ed to put some flesh on the predistribution bone. He has two tools: the statutory minimum wage (surely Labour’s proudest achievement) and the non-statutory living wage. He should start with the minimum wage – not just increasing its value, but also suggesting how it will be better enforced, ensuring that it doesn’t just sit on the statute book, but also hits the pocket book. The current system of HMRC enforcing on behalf of the Business Department is broken and Ed would send a strong signal by showing how he will fix it.
Last year, just 708 employers received penalty charges of up to £5,000 from HMRC for breaching minimum wage rules. Over 26,000 employees were awarded back pay, but in that year over 960,000 employees over 21 were paid at the minimum wage. To date, only eight employers have been convicted of offences under the National Minimum Wage Act and just one business has been ‘named and shamed’ under a new scheme which came into effect in 2011.
This is not good enough. Businesses which do not pay the minimum wage unfairly undercut decent businesses which do. Employees lose out either way – by missing out on their legal right or when decent employers lose business. When employees lose out, so do consumers: we should all care about this. It is also not good enough to expect employees to refer their own employers to HMRC, yet only 40 per cent of minimum wage cases are initiated by HMRC.
Ed should give the power to enforce the minimum wage to local authorities or, in the case of London, to the Greater London Authority. Councils are closer to their communities than a national agency and could be given funding incentives to proactively investigate cases. Employers which deliberately underpay should not be given the opportunity to settle with a civil enforcement notice – they should be prosecuted, with all the attendant bad publicity that a prosecution brings. As TUC general secretary Frances O’Grady has said, rogue employers should be named and shamed. Paying less than the minimum wage should be as socially unacceptable as drink-driving and this would be a start along that path.
Properly enforcing the minimum wage would be a strong signal that action on living standards is for life, not just for conference. But Ed should also promote the work of many Labour councils which are now living wage employers. A full-time worker earning the minimum wage will get paid £13,125 a year; the London living wage would pay them £17,784. It goes without saying that this is not a large sum for a 40-hour week, but the difference between minimum and living wage could be the difference between eating well and badly, kids going on school trips or having to miss out, or heating bedrooms in winter. This matters.
Ed should legislate to ensure that all public bodies take into account whether an organisation is a living wage employer when they make public procurement decisions. In Waltham Forest, we are looking into ways of doing this and other Labour councils are doing the same. We know that we want to do business with companies which take their obligations to their employees seriously – they are more likely to be secure, sustainable businesses which provide a better service to us and our residents. The first obligation is to pay employees a proper wage for proper work and we want to reward employers which do that. Such legislation would be a good example of the public and private sectors working together to improve conditions for all of us – exactly what Labour should be about.
Living standards are the right focus for this conference. GDP may grow, but it means nothing to the employee whose income drops at the same time as prices go up. We need a growth in disposable income, not just GDP; the pound in the pocket is sovereign. Taking on energy prices and transport fares is important, but so is improving the income that people take home to spend on themselves and their families. Predistribution might be better policy than PR; perhaps that explains why Cameron dismissed it. But when he does that, he is actually arguing for lower wages and higher welfare. In Brighton, Ed must not let him forget it.
Mark Rusling is a Labour and Cooperative councillor in the London borough of Waltham Forest and writes the Changing to Survive column
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