My Lords, from April 2016, we will be introducing the national living wage for workers aged 25 and over. At £7.20 per hour, it will mean that a full-time worker working a 35 hour week will earn £910 per year more than at the current national minimum wage. The Government encourage all employers to pay above the national minimum wage, where they can afford to do so.
My Lords, KPMG in its survey was talking about the real living wage, which is £9.40 per hour in London and which enables employees to live with dignity and receive fewer tax credits. Why does the Minister think that 1.3 million more women than men are paid less than the living wage? Why is it that a young woman in her 20s is going to be 50% more likely to earn less than the living wage next year than the workforce in general? It is great that more than 700 employers now pay the London living wage, but the retail industry is notably recalcitrant. In September—
My Lords, the noble Baroness is quite right as far as the living wage and wages for women are concerned, and the sooner that we have more parity in that, the better. She also mentioned the retail industry. I should point out that from next April, when the national living wage will be paid, Lidl, Starbucks, Costa, Morrisons, Amazon and Mitie have all committed to pay the national living wage.
My Lords, does the Minister agree that the self-employed have a particular responsibility for, and indeed control over, their own earnings? One of the reasons why Britain is the best country in Europe to become self-employed in is the very high threshold for registration for VAT, which is £82,000, which is about 10 times that of the other countries in the EU. This means that someone starting a small business does not have to charge VAT until they reach a turnover of £82,000, which of course gives them a huge competitive advantage if they are selling their services to people who cannot reclaim VAT.
My Lords, my noble friend is right on that. It is so important that these small businesses have as much help as possible, and the fact that we have this high threshold for value-added tax helps them. I add that the Government are increasing the employment allowance from £2,000 to £3,000 from April 2016. This will benefit up to 590,000 employers, and as a result those businesses could employ four people full-time on the national living wage and pay no national insurance contributions.
My Lords, the justification given by the Chancellor of the Exchequer for reducing the payment of tax credits was that recipients would be compensated by increases in the minimum wage, incorporating the living wage. Even on the Chancellor’s own figures, this will not happen until 2019-20, and now the Institute for Fiscal Studies has confirmed that the increase will not provide adequate compensation for the loss of income by many recipients. Does the Minister now agree that the justification given by the Chancellor of the Exchequer was deeply flawed?
My Lords, my noble friend Lord Ashton of Hyde answered a Question on this subject yesterday. With the leave of the House, I shall repeat part of what he said:
“As the Chancellor has made clear, the Government will set out in the Autumn Statement how we plan to achieve the same goal of reforming tax credits and saving the money we need to save to secure our economy”.—[Hansard, 4/11/15; col. 1631.]
My Lords, the KPMG report shows that 72% of 18 to 21 year-olds are earning less than the living wage compared with 17% of those in their 30s, yet the Government have chosen to exclude under-25s from getting what they call the new living wage—in fact, a new minimum rate for over-25s. I would like the Minister to tell the House why. The Paymaster-General, Matthew Hancock, said the reason was that young people were not productive enough to merit a living wage. Is that the reason? If not, what is?
My Lords, as the noble Baroness is aware, the national minimum wage, which covers young people under 25, has had the biggest increase in its rate—3%—since 2006. This means that the national minimum wage is closer to the average wage than ever before. She asked a number of other questions that I do not—
My Lords, the report by the Living Wage Foundation demonstrates that in London the wage to be paid as a minimum should now be £9.40 an hour, instead of waiting until 2020 for it to reach £9 an hour under the Government’s formulation. What is the Minister’s view of the fact that, for another four years and more, millions of people who serve this country, serve this capital and serve every industry and activity outside it are going to be grossly underpaid?
My Lords, the noble Lord makes a point relating to the UK living wage of £9.40 in the capital of this country. Employers choose to pay the UK living wage on a voluntary basis. It is not actually affordable for all employers. The rates for the national minimum wage and the trajectory for the national living wage toward its target of 60% of median earnings by 2020 are recommended by the independent Low Pay Commission in order to set the pay floor as high as possible without having a material impact on employment.