Wednesday, 22 October 2014

Wage ambitions

Last week’s spat over what government minister Lord Freud thinks about minimum pay rates for people with disabilities has rather over-shadowed debate about the National Minimum Wage itself.

This year marks the fifteenth anniversary of National Minimum Wage (NMW).  It boosted pay at the bottom without leading to a loss of jobs, and has had wide support from business as a result.

Before it was introduced, some people were paid as little as £1 an hour.  For example, the Low Pay Unit found someone working in a chip shop in Birmingham earning just 80p an hour. It also found a factory worker earning £1.22 an hour and a residential home worker earning £1.66 an hour.

The Conservatives and many Liberal Democrat MPs bitterly opposed the introduction of the minimum wage legislation. Critics of the NMW said before its introduction that it would lead to job losses. However, now, the widely accepted consensus is that those predictions have proved false.

Today the extremes of exploitation have been eliminated but the problem of low pay – people working hard and struggling to make ends meet – has actually grown. Low pay has got worse in the last 4 years and the value of the NMW has been eroded in real terms since 2010.  

Families are on average £1,600 a year worse off since David Cameron and Nick Clegg took office. The UK now has the one of the highest rates of low pay in the developed world, with more than five million workers paid less than the Living Wage in the UK. Low pay also represents a considerable cost to the Exchequer in the form of in-work benefits and foregone tax receipts.

That’s why I believe we need to see a more ambitious target for the NMW.  It won’t be quick and it won’t be easy, but that’s why we need to be determined.

There’s no reason why a goal of halving the number of people on low pay in our country by 2025 cannot be achieved if we have the commitment. A clear long term target will give businesses time to plan and adapt their business models to boost productivity to support higher wages.  

Tuesday, 21 October 2014


Regulators were originally established in law to secure the interests of consumers in markets where people depend on essential goods and services – food, money, energy, water, post and communication, transport – to go about their daily lives.

This government’s Better Regulation Agenda changed the overall brief for regulators. It says it is “committed to reducing regulatory burdens and supporting compliant business growth through the development of an open and constructive relationship between regulators and those they regulate” and wants regulation which “supports and enables regulators to design their service and enforcement policies in a manner that best suits the needs of businesses and other regulated entities.”

Perhaps the real agenda can be taken from the fact that it measures progress by calculating savings to business that have resulted from reducing the costs of regulation, rather than whether consumers are being properly protected. It appears that the regulators have taken this new Code to mean that the interests of the companies are to take priority over the interests of customers.

Well, how else are we to interpret their approaches to some of the issues that are really important to protecting consumers?

It has now been revealed that the energy regulator, OFGEM, has given its approval to price comparison sites which actually hide the best energy deals from the customer. And, why would they do this? Because they don’t get paid commission on the best deals. It’s astonishing. How could anyone acting in consumers’ interests ever believe that that is reasonable? Clearly it isn’t.

And, what about the position of those customers who enter into – often very expensive - phone contracts only to discover that, in practice, they simply can’t get decent reception for all or most of the time, even in their own homes, but find that they are locked in to payments for a service they can’t get? You would have thought that any half-decent regulator would say “if you can’t get the service you are paying for, the contract is void”. Does OFCOM do that? No. It allows the phone-providers to have all sorts of get-outs.

We urgently need a new over-arching brief which puts protection for customers, rather than the interests of the companies, right at the heart of the regulatory regimes.