Labour members present the party's "cost-of-living contract" during a campaign rally on May 21, 2014 in London. Photograph: Getty Images.
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Labour should pledge to make the government a living wage employer

Even at a time of austerity, it is a small price for a big gain. 

The government claims to be a proponent of the living wage. David Cameron says he supported it at the last election and believes it is an idea "whose time has come". Earlier this year he told the World Economic Forum in Davos that "where companies can pay the living wage, they should". Yet for all the warm words, government departments continue to drag their feet over becoming accredited living wage employers.

Rather than leading the way, ministers still insist that a living wage is a cost we perhaps can’t afford. As Lord Deighton, the Commercial Secretary to the Treasury, told Parliament in 2013: "requiring employers to pay a living wage could be burdensome to business and damage the employment prospects of low-paid workers". When confronted with the argument that it may be a price worth paying, Downing Street retorts that, anyway, living wage clauses in public procurement breach EU law (a view strong disputed by the European Commission, as well as by Boris Johnson).

If the GLA and a long list of local authorities, universities and charities can pay the living wage, why not Whitehall? Indeed, our study on "setting a fair pay standard: the government as a living wage employer" (here) shows that the cost of paying all low-paid Whitehall workers the living wage would be only £18m – equivalent to 0.002 per cent of total public spending. This would include all in-house employees as well as cleaners, security, catering staff etc who are contracted in. The cost would still be only around £23m even if contractors didn’t absorb any of the costs involved in taking pay rates up to the London living wage level (£8.80).  

Alan Buckle’s recently published report on low pay for the Labour Party recommends that central government departments should become accredited living wage employers and use the power of procurement to encourage organisations bidding for contracts to pay their staff a living wage. This would ensure that all sub-contractors pay the living wage to any staff working on government contracts. Our analysis suggests that this would cover nearly 200,000 people, and approximately 30,000 people would see their pay increase as a result. Many of those low-paid workers who would benefit are currently working for the DWP, which is committed on paper at least to paying the living wage.

There’s a lot of complex number crunching involved in evaluating the cost to government of paying the living wage. Some workers are paid close to the living wage which means the uplift costs are low, others are on the National Minimum Wage and could see their wages rising significantly; there are issues around how much different contractors in different services can afford to contribute, and how phasing might operate; how best to factor in know-on employment effects and productivity gains; and what impact will pay rises at the bottom have on wage differentials? All are important considerations, but not impossible for government to work out. What is most striking is that the overall costs to the taxpayer are low because government gets a dividend back from tax receipts and reduced benefit payments. According to our analysis, the tax and benefit savings of moving 30,000 workers onto the living wage would be some £20m. That’s roughly half the total cost of becoming a living wage employer.

Ed Miliband has flirted with several ideas over how to support the living wage, including council-backed living wage zones and tax breaks to private firms. Each have their merits and demerits. But surely it is best to start with the public sector. Government, after all, is a major employer of low-paid workers and has huge buying power. Ministers can set the pace on the living wage and force and cajole the business community to follow.

In Scotland, Holyrood recently voted down an amendment to the Procurement Reform Bill by Labour to introduce a "Scottish Living Wage duty" - which would make it compulsory for companies who wanted to win work from the public sector to pay the living wage. This was something of an embarrassment for the SNP, which boasts that the Scottish government is an accredited living wage employer.

Labour should be bolder on the living wage than Salmond or Cameron and give a clear and unequivocal commitment over the term of a parliament to making not just Whitehall, but all public bodies living wage employers. The opportunity is there to outflank the Tories, whose credibility on tackling low pay and endorsement of the living wage needs to be challenged. There is a cost and the big contractors will fight against paying their share, but as our report shows, even at a time of fiscal austerity, it is a small price for a big gain. 

Paul Hackett is the director of The Smith Institute.

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Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.