Low-paid Workers: Wage Growth

Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 28th November 2017.

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Photo of Stuart McDonald Stuart McDonald Shadow SNP Spokesperson (Immigration, Asylum and Border Control)

What steps his Department is taking to support wage growth for low-paid workers.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

The national living wage will rise to £7.83 from April 2018. In total, that represents a pay rise of over £2,000 for a full-time minimum wage worker since the introduction of the national living wage in 2016, which has helped to reduce the proportion of full-time jobs that are low paid to the lowest level in at least 20 years. At the same time, in-work benefits support the incomes of poorer households and universal credit will mean that it always pays to progress in work. Sustainable long-term pay growth relies on improving productivity, which is why we are increasing the national productivity investment fund to more than £31 billion.

Photo of Tommy Sheppard Tommy Sheppard Shadow SNP Spokesperson (Cabinet Office), Shadow SNP Spokesperson (Scotland), Shadow SNP Spokesperson (House of Lords)

The Chancellor’s predecessor, George Osborne, boasted that the minimum wage would be more than £9 an hour by 2020. That forecast has now been downgraded. Now that we are in the middle of the longest fall in living standards in history, why should the very poorest people pay for the crisis? They will lose £500 a year compared with the promise that they were made just this spring.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

As I have just pointed out, those on the national living wage have actually gained £2,000 a year. The commitment on the national living wage was, and remains, that it will reach 60% of median earnings, and it will continue to do so. On the hon. Gentleman’s other point, he will note that real household disposable income per head, a much more appropriate measure of living standards, is almost 5% higher in 2016 than it was in 2010.

Photo of Stuart McDonald Stuart McDonald Shadow SNP Spokesperson (Immigration, Asylum and Border Control)

A hard Brexit is predicted to lose workers up to £2,000 a year in real wages. Is not the best policy for wages to stay in the single market?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

The best policy for Britain, including for the wages of British workers, is to get a good deal with the European Union that secures high levels of access to European markets after we leave the EU, and that is what we intend to do.

Photo of Amanda Milling Amanda Milling Conservative, Cannock Chase

In my constituency, one key thing that is important to wage growth is to ensure that we attract businesses that create high-skilled and high-paid jobs. Will my right hon. Friend join me in encouraging all of those involved in future developments, including the redevelopment of the Rugeley B power station, to ensure that we attract high-tech and innovative businesses?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

Yes. Indeed, that was the central theme of the Budget. If we are to ensure prosperity for all our people in the future, we must embrace the technologies and businesses of the future and create the jobs of the future. We must be prepared to invest in the infrastructure that is needed to support them and in giving our people the skills that they will need to take advantage of those high-paid jobs.

Photo of Wes Streeting Wes Streeting Labour, Ilford North

The fact is that, according to the Office for Budget Responsibility, disposable incomes are set to fall this year. On top of that, the cost of living is rising faster than pay. The area that the Chancellor has direct responsibility for is public sector pay. Is it not time to remove the pay restraints on the lowest-paid public sector workers to make sure that, as their bills go up, their wages keep pace?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

I am sure the hon. Gentleman knows that the blanket pay cap across the public sector has indeed been removed—that was announced in July by the Chief Secretary to the Treasury, my right hon. Friend Elizabeth Truss. That will mean that individual Secretaries of State can look at the particular circumstances of the workforces for which they are responsible—recruitment and retention challenges and opportunities for improving workforce efficiency—and make proposals to the pay review bodies accordingly.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Will the Chancellor confirm that Conservatives want people to keep more of the wages that they earn and that, when we came to power in April 2010, disgracefully, people earning as little as £6,500 a year had to pay income tax? Now they can earn more than £11,500 before incurring an income tax liability.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

Yes, £11,850—my hon. Friend is exactly right. It is by keeping to our commitment that we made in our manifesto of increasing the personal allowance to £12,500 by 2020 that we will ensure that people keep more of their income. Going back to the original question, people on the national living wage are now £3,600 a year better off after tax than they would have been in 2010.

Photo of Martyn Day Martyn Day Scottish National Party, Linlithgow and East Falkirk

With households facing stagnating wages, high inflation and soaring household debt and austerity, why have this Government not followed the Scottish example and ended the public sector pay cap?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

I am not sure whether the hon. Gentleman was listening to the answer that I gave to Wes Streeting a few moments ago. We have ended the blanket pay cap across the public sector and are allowing Secretaries of State to make recommendations to the pay review bodies that reflect the circumstances of their individual workforces.

Photo of Huw Merriman Huw Merriman Conservative, Bexhill and Battle

My constituency is in the top 10 constituencies for the highest proportion of people on the minimum wage, so the rise to £7.83 will be most welcome. Does the Chancellor agree that moves such as that and increasing the personal allowance will help us to further reduce income inequality in my constituency and the country at large?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

My hon. Friend is exactly right. The uncomfortable fact for the Opposition Front Benchers is that income inequality in this country is now the lowest it has been since the mid-1980s—lower than it was at any point during the 13 years of the Labour Government.

Photo of Robert Courts Robert Courts Conservative, Witney

Will the Chancellor confirm that, according to last month’s Office for National Statistics figures, median disposable income is £600 higher than in the previous year and £1,000 higher than before the 2008 crash? Does he agree that it is the policies of this Government, with their jobs miracle, that have made that possible?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

Yes, and it is one of this Government’s proudest achievements that we have created 3 million new jobs in this country since 2010. John McDonnell might reflect on his prediction in 2011 that the Government’s policies would cost the economy 1 million jobs. That turned out to be slightly wide of the mark.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

The gender pay gap has fallen by only 0.4% in the past five years. If that trend continues, it will take 113 years for women to be on an equal footing. Why is the Chancellor not doing more for women who are paid less than men?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

It is a priority of the Government to continue to close the gender pay gap, which is now at its lowest level ever.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

Sorry, Mr Speaker; I had intended to ask my second question during topical questions.

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

Ah—I had been advised that the hon. Lady wished to proffer a second inquiry now. We will wait in eager anticipation for her second contribution at a later stage of our proceedings. Lacking her, let us hear Mr Cryer.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

Thank you, Mr Speaker.

In reference to the Chancellor’s first answer, what is the connection between low wage growth and the slump in productivity?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

As the hon. Gentleman will know, in the end wages can only be paid for by the productive output of workers. Increasing the productivity of workers in the British economy, so that they can produce more and earn more in a way that allows their firms to remain competitive while paying them more, is the way forward, and that is what the Government will pursue.