Minimum Wage

Oral Answers to Questions — Treasury – in the House of Commons at 11:30 am on 10th March 2005.

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Photo of Jim Cunningham Jim Cunningham Labour, Coventry South 11:30 am, 10th March 2005

What assessment he has made of the impact of the increase in the level of the minimum wage on women and ethnic minorities in the work force.

Photo of Mike Hall Mike Hall PPS (Rt Hon John Reid, Secretary of State), Department of Health

What assessment he has made of the effect of the national minimum wage on low-paid workers.

Photo of John Healey John Healey The Economic Secretary to the Treasury

Around 1 million workers have benefited from the minimum wage each year since it was introduced, around two-thirds of those beneficiaries being women. This year, the increase in the national minimum wage takes the rate above £5 for the first time ever, which will guarantee a pay rise to 1.3 million workers in October.

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South

Can my hon. Friend clarify whether a 21-year-old will be paid the adult minimum wage, and if there is no intention to do that, can he tell us why not?

Photo of John Healey John Healey The Economic Secretary to the Treasury

We have indeed considered that; it was recommended to us by the Low Pay Commission. The economic evidence is mixed, so we have decided to make no change this year, but we will look at it carefully again in future.

When we bear in mind the 140,000 people who are destined to benefit from the national minimum wage rise in my hon. Friend's region, the real question is whether there will be a minimum wage in the future, and the real concern should be the comments of the shadow Minister for deregulation, Mr. Redwood, who said:

"there are several ways of dealing with the damage to jobs done by the minimum wage. It could be repealed, or it could be frozen"—[Hansard, 29 April 1999, vol. 330, col. 541.]

Photo of Mike Hall Mike Hall PPS (Rt Hon John Reid, Secretary of State), Department of Health

I really do welcome the recent announcements and the increase in the national minimum wage. Through the new deal, a large number of people in my constituency have found work, but there is still one thing that I am concerned about, which is allowing people to become more prosperous when most people at the lower-wage end need more help from the Government. What can my hon. Friend say to me that would give reassurance to my constituents?

Photo of John Healey John Healey The Economic Secretary to the Treasury

My hon. Friend is right, of course, that the national minimum wage is just part of the set of measures that we need and have put in place to support the wages and take-home pay of poorer families. The national minimum wage should be seen alongside, and working with, tax credits. It is there as an essential guarantee of fair minimum pay for workers, but it cannot reflect family circumstances, so the tax credit, set alongside it, means that we can target help better on tackling poverty for those families. With the two put together, in October, families with one full-time worker and one child will be looking at take-home pay of £7 an hour.

Photo of John Bercow John Bercow Conservative, Buckingham

Naturally, the logic of the existence of the minimum wage is that it should be periodically and affordably increased, and the reasonable increases recently announced are therefore heartily welcomed by sensible people. However, given that the poorest fifth of households in this country pay a higher proportion of their income in taxation than any other group, does the hon. Gentleman agree that the prime candidates for tax reduction, those for whom we should do most, are those who have least—the poorest people in our country?

Photo of John Healey John Healey The Economic Secretary to the Treasury

That is precisely the role of the tax credits.

On the national minimum wage, I served on the Standing Committee, as the hon. Gentleman did, when we passed the historic National Minimum Wage Act 1998. I remember that he and his colleagues were arguing that it would cost 2 million jobs. They had argued that before 1997, but now there are 2 million more jobs in the British economy, under Labour, with the national minimum wage.

I refer the hon. Gentleman to the Low Pay Commission, which has looked very carefully at concerns such as his. It has been able to prove that around 1 million workers each year benefit from the national minimum wage, and that the economy has continued to generate new jobs since it was implemented, including in those sectors with a tradition of low pay. This policy is successful. I hope that the shadow Chancellor will give it his full backing.