In a welcome U-turn, Britain’s Chancellor has said that he would support an increase in the National Minimum Wage to £7.00 an hour, the level it peaked at in real terms before a series of sub-inflationary increases during the double-dip recession. It is understood that George Osborne had last year forbidden his Liberal Democrat colleague, Business Secretary Vince Cable, from directing the Low Pay Commission (which sets recommended levels for the NMW which Parliament always follows) to look at such an increase. Furthermore, Osborne fronted the Coalition initiative to defeat Labour’s legislative amendment that would have done exactly as Osborne wants: restore the NMW to pre-recession levels. Nevertheless, that was then and I’m interested in what will happen now.
The Coalition is aware that the ‘One Nation’ Labour theme of falling incomes and rising living costs poses a political challenge to it: people are angry that the wealthy are enjoying lavish tax cuts (the Conservatives are happy to slash the top Income Tax band to 40%) whilst most of us are having a distinctly hard time. Whatever one thinks of Messrs Cameron, Clegg, Osborne and Alexander, they are not political novices. Together with freezes on fuel duty, a lightening of social and environment levies on energy bills and now a possible hike in the NMW, the Government cannot now be accused of ignoring what Ed Miliband has termed the ‘cost of living crisis’.
I believe that Labour can and must go further than the Coalition on low pay. I think that there are three options the Labour leadership have with regard to NMW policy:
- Match the Coalition’s proposed 11% increase in the National Minimum Wage. Offer tax incentives to employers to pay Living Wage, and examine phasing in a full Living Wage by inflation-busting rises in the Minimum Wage. This is existing Labour policy.
- Promise to increase the National Minimum Wage by 22%, bringing it to the national Living Wage level of £7.65 an hour . The Coalition’s increase would bring the NMW to within striking distance of providing a liveable income. It would be difficult to argue that an extra £27 pay a week on top of planned rises would bankrupt employers.
- Increase the NMW to £7.65 an hour but encourage/pressurise employers in London to pay the London Living Wage of £8.80 an hour. Gradually introduce a London rate of the Minimum Wage.
I see no political or economic difficulty with the second option: yes, it is radical in that it makes Britain the first country in the world to guarantee full time workers a liveable income independent of the state (with the possible exception of Housing Benefit- but housing costs are something that a Labour government should be tackling). But it is a modest rise in what is proposed already. Not modest to the employees. A 9% increase to somebody on such a low income is life changing. But it is modest for one of the world’s largest and most successful economies.
I’ve spent some time talking about Labour, but it would be fantastic to enlist rival political movements in the race to a Living Wage. If I woke up to hear David Cameron on the Today programme announcing legislation hiking the NMW to £9 an hour, I would be pleased, even if was inconvenient for my party. Granted, in such a universe, I would be riding a flying pig to my job as a telegraph proccessor, but you get my point. Osborne’s ‘£7 an hour’ comments should be viewed as a good sign as well as a challenge.