Budget Resolutions and Economic Situation — House of Commons, 2015-07-14
Topic: Labor
Shabana Mahmood (Labour, Centre-left): That was hardly worth the wait. I have to say that the hon. Gentleman should have been paying attention to what my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman) actually said. She came out very strongly against the whole package of working tax credit changes. If he had listened to my remarks, rather than try to intervene with a Whip’s question, he would have realised that that is exactly what I am doing myself The Government will say that they have moved on pay. Again, however, there is a big difference between rhetoric and reality. The Government’s cuts to tax credits overwhelmingly outweigh their measures on pay. I welcome the proposed rises in the national minimum wage, which is still what it is. [Interruption.] I am pleased to see that the Chancellor has joined us. He has failed to explain why raising the minimum wage was so wrong only a few short weeks ago during the general election campaign, in view of our manifesto commitment, or how he came to agree with us so soon after the general election. Nevertheless, imitation is indeed the sincerest form of flattery. We are pleased to observe that the party that forced the last all-night sitting in the House in an attempt to block the introduction of the national minimum wage by the last Labour Government now agrees with us not only that it is important and necessary, but that it should go up. However, we should be clear about the fact that it is not a living wage There has always been a difference between the minimum wage and the living wage. Re-badging the new national minimum wage as a living wage will not help the Chancellor, because ordinary working people can see a political con for what it is. The Living Wage Foundation was quick off the mark on Budget day in making that very point. The inconvenient fact for the Chancellor is that the living wage—the real living wage—is calculated on the assumption of a full take-up of tax credits, the very tax credits that the Chancellor has just cut. To make up for the loss of those tax credits, a real living wage would have to be considerably higher than what the Chancellor is now promising working people in Britain The new national minimum wage rate of £7.20, when it is introduced next year, will be lower than the current living wage of £7.85. In effect, the Chancellor, who says that he stands with working people, will offer working people in 2016 the 2011 living wage, and we will not let him pretend otherwise. In the end, the simple truth is that the wage increases that are on their way are not enough to make up for the loss of tax credits Twenty-four hours after the Chancellor delivered his Budget, the Institute for Fiscal Studies dismissed his claim that increasing the minimum wage would compensate working people. The IFS said: "the key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of losses that will be experienced by tax credit recipients. That is just arithmetically impossible." The IFS also said that the biggest change, which sounded very technical, was the reduction in the work allowance. It explained: "The work allowance is the amount that a claimant can earn before benefit starts to be withdrawn. Significant allowances were an integral part of the design of UC" —universal credit— "intended to give claimants an incentive to move into work. This reform will cost about 3 million families an average of £1,000 a year each. It will reduce the incentive for the first earner in a family to enter work." A regressive Budget with a work penalty of £1,000 a year: that is what the Government have delivered to ordinary working people in our country—and while they hit those ordinary working people, they also fail to address a central economic challenge—productivity. That is the puzzle that it is crucial for us to crack and solve, because getting it right is vital if we are to achieve higher living standards, sustained GDP growth, and effective deficit reduction, but this Budget failed the productivity test.