The answer to Britain’s low pay crisis is not more years of austerity and uncertainty, but a pay rise for those struggling to make ends meet, writes Kate Green MP
A report from the Child Poverty Action Group last month showed that working parents are finding it harder to meet basic living costs. Meanwhile, the Trades Union Congress revealed that one in eight workers is skipping meals in order to make ends meet. How can it be right that going out to do a fair day’s work means you cannot afford to pay the bills?
I am genuinely puzzled by ministers’ indifference – indeed complacency – in the face of the scandal of in-work poverty. Why wouldn’t a Conservative government want to make work pay? Yet every time we question ministers about it, we are brushed aside with excuses and platitudes. Of course it is good that more people are in work, but only if the work itself is good enough. Work should be a route out of poverty, but all too often it is not. Low pay, inadequate hours, and the freeze on working age benefits, while the cost of the basics continues to rise, are putting families under pressure. This is where the chancellor needs to concentrate his attention as he prepares his autumn budget.
Let’s start with low pay. The TUC are absolutely right to say, after years of pay stagnation, that Britain needs a pay rise. Increasing the national living wage, while welcome, will not do enough for those on the lowest incomes. Those who benefit are not necessarily the poorest, but often second earners in less poor households. Increases in the personal tax allowance, meanwhile, are of no use to those on the lowest pay who already earn less than the threshold – while better-off earners continue to benefit. Surely there are better ways for the government to help low and modest earners – like lifting the public sector pay cap.
But there is no point in giving with one hand while taking most of it back again with the other. Universal credit should have helped to make work pay. But the rate at which it is clawed back as your wages increase leaves low paid workers little better off. If the chancellor is serious about making work pay, he needs to increase work allowances (the amount you keep before your benefit begins to reduce), and reduce the clawback rate.
Next, the freeze on working age benefits needs to end. Just one year in to a four-year freeze, price inflation (especially for essentials like food and energy) has already begun to bite into family budgets. By 2019, CPAG say, prices are projected to rise by 12 per cent. I shudder to think what that will mean for struggling families after three more years of a freeze in their benefits. To help tackle what will otherwise create a dramatic rise in child poverty, and support working parents, the chancellor should start by unfreezing benefits paid for children.
The promise of 30 hours free childcare for working parents has proved a fiasco, as my colleague Tracy Brabin has so powerfully pointed out. And it too fails to help some of the lowest earners: those with low or insecure hours are least likely to benefit. As my colleague Lucy Powell and the Social Market Foundation have shown, the design of the policy means it is actually regressive in effect, benefiting better off parents most. Meanwhile, some nurseries are charging parents for ‘extras’ to make the sums stack up. Others are simply shutting up shop.
The chancellor needs to get a grip on this. Childcare costs are a significant burden for working parents. Availability of reliable, affordable childcare’s a prerequisite for parental employment. But the bottom line is that there is not enough money to fulfil the manifesto commitment the Tories made. The chancellor must make good on those pre-election promises, and come up with the extra cash.
Some will say we cannot afford all this, and I recognise the difficult circumstances the chancellor faces. Of course, the Tories have only themselves to blame. Seven years of austerity, exacerbated by Brexit uncertainty, have left the public finances in a poor state of repair. More austerity looks set to follow.
But asking working people to pay the price is neither sensible nor right. Nor is wasting money by giving more to those who need it least. If the chancellor wants a strong economy, he has to invest in what will deliver it – the workers who are essential to its success. Progressive policies to make work pay for the lowest earners should be his priority as he prepares his budget.
Kate Green MP is member of parliament for Streford and Urmston. She tweets @KateGreenSU
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