Living wage – coming to a city near you

The challenges are real, but the living wage chimes with the public mood.

The last time a letter left on a desk caused such a stir it involved an exchange between two senior politicians about the future of the country’s finances. This time the note was from a group of Whitehall cleaners to Iain Duncan Smith asking him to make good on his commitment to make work pay and make his department, DWP, a living wage employer. The fact that it so caught the public mood says something about how the question of low pay has risen in salience.  

This is in no small part due to the success of the living wage campaign, a grass-roots movement formed just over a decade ago, to push for a decent wage – above the minimum wage - for workers. It has helped shine a light on the rising problem of in-work poverty. In an era when there are many structural forces bearing down on low pay – from shifts in technology and trade to the continued demise of collective bargaining and the real terms falls in the minimum wage - the momentum behind the campaign for a living wage is a rare example of at least some countervailing pressure.

Yet for all the verve and campaigning success it is still the case that only a relatively small number of people are getting paid a higher wage as a result of working for a living wage employer. For example, in London it is estimated that around 650,000 employees are paid less than the London living wage (£8.30 per hour) yet only around 10,000 have gained an accredited living wage since 2005. Look at the national picture, where a total of six million employees are being paid less than a living wage, and the scale of the low pay challenge becomes clear.

None of which is to say that progress has not been made - thousands of low-paid workers will attest to the difference a living wage has made to their lives – just that the living wage faces a difficult set of challenges as it comes of age.

First, there is the need for the living wage to reach out beyond the public sector and the select parts of the private sector (relatively small numbers of high-profile financial and legal firms) where it currently resides into more mainstream employers. So it is timely that a new report  from the Resolution Foundation and IPPR estimates the impact on the wage bill of large firms across different sectors and challenges some prevailing assumptions. In key sectors like banking, construction, food production and communications - where roughly a million people in total work below the living wage – the typical impact of paying a living wage on the wage bill of large employers is pretty modest at around 1% (and that assumes a knock-on effect on wage differentials for those earning above the living wage).

Average firm-level wage bill increase in different sectors

Source: Resolution Foundation

Of course, the precise cost of a living wage will vary from employer to employer but figures of this size should be absorbable.

Second, is the need to make real progress beyond London where the campaign has traditionally been anchored. The US experience shows how campaigns can move quickly from one city to another, as was the case when the living wage movement first succeeded in securing a higher wage floor in Baltimore in the early 1990s and then quickly spread elsewhere. In the UK we’ve seen the emergence of many new city initiatives over the last year or so - Sheffield, York, and Newcastle have all set up Fairness Commissions following on from the experience in Islington - with the aim of promoting fairer pay across local public and private sectors. It remains to be seen what these processes will achieve but so far it appears that a healthy degree of civic competition is proving a useful spur – and the newly expanded base of Labour-led authorities is only likely to generate more interest.

Third, is the need to ensure that being ambitious about the potential of the living wage doesn’t mean being unrealistic about tax credits. Contrary to what many think (though not the main campaign groups) the living wage is nowhere near high enough to ensure a typical household with children can live independently of state support: indeed the level of the living wage has always been premised on full take-up of in-work tax credits. If it didn’t then the London living wage, for example, would rise from £8.30 an hour to an eye-popping £10.40.  

Finally, there is an unresolved conundrum, both for campaigners and sympathetic politicians, as to the role government should play in expanding coverage of the living wage. This is about philosophy as much as policy. Pure voluntarism, which has been the essence of the campaign to date, may well mean relatively slow progress. Too much statism, for instance through calls for legislation – effectively replacing the minimum wage with a living wage – or expensive tax incentives for employers, would, however, contravene the character of the living wage campaign which has been rooted in a civic process to get employers to take responsibility themselves for paying a decent wage on ethical grounds.  The chasm that exists between relying on moral suasion on the one hand, and top down legislation on the other, needs to be better explored.

While these challenges are real, they all arise from rare success. The living wage is an idea that chimes with the times, allied to a label that works, rooted in a progressive argument that doesn’t rely primarily on more state spending. And that puts it in a very small category indeed.

Many working in key sectors like construction are working below the living wage. Photograph: Getty Images

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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David Davis interview: The next Conservative leader will be someone nobody expects

The man David Cameron beat on why we should bet on a surprise candidate and what the PM needs to do after the referendum. 

“I’m tired,” says David Davis when I greet him. The former Conservative leadership candidate is running on three hours’ sleep after a Question Time appearance the night before. He is cheered, however, by the coverage of his exchange with Ed Miliband. “Which country would it be be like?” the former Labour leader asked of a post-EU UK. “The country we’re going to be like is Great Britain,” the pro-Brexit Davis retorted

The 67-year-old Haltemprice and Howden MP is at Hull University to debate constituency neighbour Alan Johnson, the head of the Labour In campaign. “As far as you can tell, it’s near to a dead heat,” Davis said of the referendum. “I think the run of events will favour Brexit but if I had to bet your salary, I wouldn’t bet mine, I’d place it on a very narrow victory for Brexit.”

Most economists differ only on how much harm a Leave vote would do. Does Davis believe withdrawal is justified even if it reduces growth? “Well, I think that’s a hypothetical question based on something that’s not going to happen ... One of the arguments for Brexit is that it will actually improve our longer-run economic position. In the short-run, I think Stuart Rose, the head of Remain, had a point when he said there would be very small challenges. In a few years probably nothing.

“The most immediate thing would likely be wage increases at the bottom end, which is very important. The people in my view who suffer from the immigration issue are those at the bottom of society, the working poor, which is why I bridle when people ‘oh, it’s a racist issue’. It’s not, it’s about people’s lives.”

More than a decade has passed since David Cameron defeated Davis by 68-32 in the 2005 Conservative leadership contest. The referendum has pitted the two men against each other once more. I asked Davis whether he agreed with the prime minister’s former strategist, Steve Hilton, that Cameron would be a Brexiter were he not in No.10.

“I think it might be true, I think it might be. When you are in that position you’re surrounded by lot of people: there’s the political establishment, the Whitehall establishment, the business establishment, most of who, in economic parlance, have a ‘sunk cost’ in the current set-up. If changes they stand to lose things rather than gain things, or that’s how they see it.

“Take big business. Big business typically gets markets on the continent, maybe distribution networks, supply networks. They’re going to think they’re all at risk and they’re not going to see the big opportunities that exist in terms of new markets in Brazil, new markets in China and so on, they’re naturally very small-C Conservative. Whitehall the same but for different reasons. If you’re a fast-track civil servant probably part of your career will be through the Commission or maybe the end of your career. Certainly in the Foreign Office. When I ran the European Union department in the Foreign Office, everybody wanted a job on the continent somewhere. They were all slanted that way. If all your advice comes from people like that, that’s what happens.”

Davis told me that he did not believe a vote to Leave would force Cameron’s resignation. “If it’s Brexit and he is sensible and appoints somebody who is clearly not in his little group but who is well-equipped to run the Brexit negotiations and has basically got a free hand, there’s an argument to say stability at home is an important part of making it work.”

He added: “I think in some senses the narrow Remain is more difficult for him than the narrow Brexit. You may get resentment. It’s hard to make a call about people’s emotional judgements under those circumstances.”

As a former leadership frontrunner, Davis avoids easy predictions about the coming contest. Indeed, he believes the victor will be a candidate few expect. “If it’s in a couple of years that’s quite a long time. The half life of people’s memories in this business ... The truth of the matter is, we almost certainly don’t know who the next Tory leader is. The old story I tell is nobody saw Thatcher coming a year in advance, nobody saw Major coming a year in advance, nobody saw Hague coming a year in advance, nobody saw Cameron coming a year in advance.

“Why should we know two years in advance who it’s going to be? The odds are that it’ll be a Brexiter but it’s not impossible the other way.”

Does Davis, like many of his colleagues, believe that Boris Johnson is having a bad war? “The polls say no, the polls say his standing has gone up. That being said, he’s had few scrapes but then Boris always has scrapes. One of the natures of Boris is that he’s a little bit teflon.”

He added: “One thing about Boris is that he attracts the cameras and he attracts the crowds ... What he says when the crowd gets there almost doesn’t matter.”

Of Johnson’s comparison of the EU to Hitler, he said: “Well, if you read it it’s not quite as stern as the headline. It’s always a hazardous thing to do in politics. I think the point he was trying to make is that there’s a long-running set of serial attempts to try and unify Europe not always by what you might term civilised methods. It would be perfectly possible for a German audience to turn that argument on its head and say isn’t it better whether we do it this way.”

Davis rejected the view that George Osborne’s leadership hopes were over (“it’s never all over”) but added: “Under modern turbulent conditions, with pressure for austerity and so on, the simple truth is being a chancellor is quite a chancy business ... The kindest thing for Dave to do to George would be to move him on and give him a bit of time away from the dangerous front.”

He suggested that it was wrong to assume the leadership contest would be viewed through the prism of the EU. “In two years’ time this may all be wholly irrelevant - and probably will be. We’ll be on to some other big subject. It’’ll be terrorism or foreign wars or a world financial crash, which I think is on the cards.”

One of those spoken of as a dark horse candidate is Dominic Raab, the pro-Brexit justice minister and Davis’s former chief of staff. “You know what, if I want to kill somebody’s chances the thing I would do is talk them up right now, so forgive me if I pass on that question,” Davis diplomatically replied. “The reason people come out at the last minute in these battles is that if you come out early you acquire enemies and rivals. Talking someone up today is not a friendly thing to do.” But Davis went on to note: “They’re a few out there: you’ve got Priti [Patel], you’ve got Andrea [Leadsom]”.

Since resigning as shadow home secretary in 2008 in order to fight a by-election over the issue of 42-day detention, Davis has earned renown as one of parliament’s most redoubtable defenders of civil liberties. He was also, as he proudly reminded me, one of just two Tory MPs to originally vote against tax credit cuts (a record of rebellion that also includes tuition fees, capital gains tax, child benefit cuts, House of Lords reform, boundary changes and Syria).

Davis warned that that any attempt to withdraw the UK from the European Convention on Human Rights would be defeated by himself and “a dozen” other Conservatives (a group known as the “Runnymede Tories” after the meadow where Magna Carta was sealed).

“They’ve promised to consult on it [a British Bill of Rights], rather than bring it back. The reason they did that is because it’s incredibly difficult. They’ve got a conundrum: if they make it non-compliant with the ECHR, it won’t last and some of us will vote against it.

“If they make it compliant with the ECHR it is in essence a rebranding exercise, it’s not really a change. I’d go along with that ... But the idea of a significant change is very difficult to pull off. Dominic Raab, who is working on this, is a very clever man. I would say that, wouldn’t I? But I think even his brain will be tested by finding the eye of the needle to go through.”

Davis is hopeful of winning a case before the European Court of Justice challenging the legality of the bulk retention of communications data. “It’s a court case, court cases have a random element to them. But I think we’ve got a very strong case. It was quite funny theatre when the ECJ met in Luxembourg, an individual vs. 15 governments, very symbolic. But I didn’t think any of the governments made good arguments. I’m lucky I had a very good QC. Our argument was pretty simple: if you have bulk data collected universally you’ve absolutely got to have an incredibly independent and tough authority confirming this. I would be surprised if the ECJ doesn’t find in my favour and that will have big implications for the IP [Investigatory Powers] bill.”

Davis launched the legal challenge in collaboration with Labour’s deputy leader Tom Watson. He has also campaigned alongside Jeremy Corbyn, last year travelling to Washington D.C. with him to campaign successfully for the release of Shaker Aamer, the final Briton to be held in Guantanamo Bay.

“I like Jeremy,” Davis told me, “but the long and the short of it is that not having been on the frontbench at all shows. I’m not even sure that Jeremy wanted to win the thing. He’s never been at the Despatch Box. He’s up against a PM who’s pretty good at it and who’s been there for quite a long time. He’s playing out of his division at the moment. Now, he may get better. But he’s also got an incredibly schismatic party behind him, nearly all of his own MPs didn’t vote for him. We had a situation a bit like that with Iain Duncan Smith. Because we’re a party given to regicide he didn’t survive it. Because the Labour Party’s not so given to regicide and because he’d be re-elected under the system he can survive it.”

At the close of our conversation, I returned to the subject of the EU, asking Davis what Cameron needed to do to pacify his opponents in the event of a narrow Remain vote.

“He probably needs to open the government up a bit, bring in more people. He can’t take a vengeful attitude, it’s got to be a heal and mend process and that may involve bringing in some of the Brexiters into the system and perhaps recognising that, if it’s a very narrow outcome, half of the population are worried about our status. If I was his policy adviser I’d say it’s time to go back and have another go at reform.”

Davis believes that the UK should demand a “permanent opt-out” from EU laws “both because occasionally we’ll use it but also because it will make the [European] Commission more sensitive to the interests of individual member states. That’s the fundamental constitutional issue that I would go for.”

He ended with some rare praise for the man who denied him the crown.

“The thing about David Cameron, one of the great virtues of his premiership, is that he faces up to problems and deals with them. Sometimes he gets teased for doing too many U-turns - but that does at least indicate that he’s listening.”

George Eaton is political editor of the New Statesman.