To promote the living wage, we need to reform the tax system

We must end the absurdity of companies being financially penalised for becoming living wage employers.

The living wage is one of the few policies that garners consensus across the political spectrum. Which politician would be crazy enough to speak against the idea of companies paying their low-paid employees enough to live on? Cue Ed Miliband and Boris Johnson giving speeches today to mark the start of Living Wage Week – with David Cameron not letting the fact that he’s in the Middle East prevent him from pitching into the debate.

Yet when it comes to what supporting a living wage actually means, the differences begin to show. The to-ing and fro-ing between the Labour Party and No 10 today highlight the slippery nature of an idea that is – since no politicians are advocating a statutory living wage – in essence about businesses doing the right thing.

Cameron and Johnson – if their contributions today are anything to go by – stand for business voluntarism in its purest sense. Politicians should stand alongside campaigning organisations like London Citizens in imploring businesses to pay a living wage, but there the buck stops. This ignores the fact that early living wage adopters have tended to be City corporations with a very low proportion of low-paid staff – for whom the costs of becoming a living wage employer are relatively low – and values-driven public sector organisations (of which Boris Johnson’s Greater London Authority is not yet one). The idea that a moral campaign led by civil society and government can by itself shift working conditions for millions in the low-paid, low-skill service sector remains a distant prospect.

Ed Miliband recognised this today by floating the idea that the tax system should reward those companies that become living wage employers. This is an idea that merits serious consideration. The idea that we would financially penalise companies for doing the right thing – for using green energy, for investing in R&D, or for supporting local communities, seems ridiculously self-defeating.

Yet when it comes to the living wage, that is exactly what we do. The IFS estimated back in 2010 that the annual cost to the taxpayer of employers paying below the living wage – in terms of tax credits, benefits and foregone tax – is approximately £6bn. Yet we financially penalise companies taking the decision to become living wage employers. An employer would face an extra bill of £570 a year in employer national insurance contributions (NICs) as a result of moving a full-time employee from the minimum to the living wage. This is despite the fact that the cost to the Treasury of employers paying below living wage is around £1,000 per employee. The tax system effectively charges employers to do something that not only is the right thing to do, but which saves the Treasury a substantial amount of money.

A good way to address this anomaly would be to take the disincentive to pay the living wage out of the system – by introducing a new, flat-rate employer national insurance contribution for employees earning below living wage. This would be set at the same level for a full-time employee actually on the living wage, paid pro-rata for part-time employees. The Treasury could recycle the extra revenue this generates through targeted NICs holidays for small businesses taking on new employees.

Of course, the tax bill is only one of a number of factors companies take into account when making decisions about how much to pay their employees. But if the energy invested by business lobby groups into making the case for lower national insurance is anything to go by, it is something that weighs heavily on the minds of employers, particularly in these straitened times.

Politicians are wary of legislating for the living wage, and they are right to be so: the effects of a big increase in the statutory minimum wage for unemployment are untested. But the Tory approach of just asking nicely won’t bring about the change we need. The Labour party is right that we need government to be much more creative in terms of how it encourages employers to pay the living wage. A reform of employer national insurance contributions for low-paid employees would be one pragmatic way of doing so.

Sonia Sodha is a former senior policy adviser to Ed Miliband. She writes in a personal capacity. She tweets @soniasodha.

Labour Party leader Ed Miliband addresses workers at Islington Town Hall. Photograph: Getty Images.

Sonia Sodha is head of policy and strategy at the Social Research Unit and a former senior policy adviser to Ed Miliband. She tweets @soniasodha.

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No, Jeremy Corbyn did not refuse to condemn the IRA. Please stop saying he did

Guys, seriously.

Okay, I’ll bite. Someone’s gotta say it, so really might as well be me:

No, Jeremy Corbyn did not, this weekend, refuse to condemn the IRA. And no, his choice of words was not just “and all other forms of racism” all over again.

Can’t wait to read my mentions after this one.

Let’s take the two contentions there in order. The claim that Corbyn refused to condem the IRA relates to his appearance on Sky’s Sophy Ridge on Sunday programme yesterday. (For those who haven’t had the pleasure, it’s a weekly political programme, hosted by Sophy Ridge and broadcast on a Sunday. Don’t say I never teach you anything.)

Here’s how Sky’s website reported that interview:

 

The first paragraph of that story reads:

Labour leader Jeremy Corbyn has been criticised after he refused five times to directly condemn the IRA in an interview with Sky News.

The funny thing is, though, that the third paragraph of that story is this:

He said: “I condemn all the bombing by both the loyalists and the IRA.”

Apparently Jeremy Corbyn has been so widely criticised for refusing to condemn the IRA that people didn’t notice the bit where he specifically said that he condemned the IRA.

Hasn’t he done this before, though? Corbyn’s inability to say he that opposed anti-semitism without appending “and all other forms of racism” was widely – and, to my mind, rightly – criticised. These were weasel words, people argued: an attempt to deflect from a narrow subject where the hard left has often been in the wrong, to a broader one where it wasn’t.

Well, that pissed me off too: an inability to say simply “I oppose anti-semitism” made it look like he did not really think anti-semitism was that big a problem, an impression not relieved by, well, take your pick.

But no, to my mind, this....

“I condemn all the bombing by both the loyalists and the IRA.”

...is, despite its obvious structural similarities, not the same thing.

That’s because the “all other forms of racism thing” is an attempt to distract by bringing in something un-related. It implies that you can’t possibly be soft on anti-semitism if you were tough on Islamophobia or apartheid, and experience shows that simply isn’t true.

But loyalist bombing were not unrelated to IRA ones: they’re very related indeed. There really were atrocities committed on both sides of the Troubles, and while the fatalities were not numerically balanced, neither were they orders of magnitude apart.

As a result, specifically condemning both sides as Corbyn did seems like an entirely reasonable position to take. Far creepier, indeed, is to minimise one set of atrocities to score political points about something else entirely.

The point I’m making here isn’t really about Corbyn at all. Historically, his position on Northern Ireland has been pro-Republican, rather than pro-peace, and I’d be lying if I said I was entirely comfortable with that.

No, the point I’m making is about the media, and its bias against Labour. Whatever he may have said in the past, whatever may be written on his heart, yesterday morning Jeremy Corbyn condemned IRA bombings. This was the correct thing to do. His words were nonetheless reported as “Jeremy Corbyn refuses to condemn IRA”.

I mean, I don’t generally hold with blaming the mainstream media for politicians’ failures, but it’s a bit rum isn’t it?

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

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