George Osborne looks on as David Cameron delivers a speech to business leaders in Manchester. Photograph: Getty Images.
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Osborne falls far short of £7 minimum wage target

The proposed figure of £6.70 fails to meet the Chancellor's aim of restoring the minimum wage to its pre-recession value. 

In a characteristically calculated intervention last year, George Osborne sought to compensate for the Tories' past opposition to the minimum wage by declaring that he hoped the main rate would rise to £7 by 2015-16. "If, for example, the minimum wage had kept pace with inflation it would be £7 by 2015-16, £6.31 at the moment, so that is an increase," he said, with an eye to his party's blue collar wing. "I think we can see an above inflation increase in the minimum wage and do it in a way that actually supports our economy precisely because the economy is recovering and many, many jobs are being created." The Treasury published an accompanying analysis modelling the impact of an increase to £7, lending further weight to the figure (which at the time would have restored the minimum wage to its pre-recession value). 

But it is now clear that Osborne was raising false hopes. The Low Pay Commission, the body that advises the government on the minimum wage, has today published its recommendations for 2015-16 - and they do not include an increase to £7. Instead, the LPC has called for a smaller rise to £6.70 (up from £6.50). The government is not obliged to accept its proposals but Vince Cable, who is formally responsible for this area as Business Secretary, has signalled that ministers will almost certainly not oppose the figure. He said: "I will now study these recommendations and consult my Cabinet colleagues with a view to announcing the final rates in the next few weeks. The Low Pay Commission strike a delicate balance between what is fair for workers and what is affordable for employers, without costing jobs. It does so impartially and without political interference. No government has ever rejected the main rates since it was established fifteen years ago. It is important that it is able to continue to do its work ten weeks before a general election."

Cable is known to have been angered when Osborne floated the figure of £7, believing that the LPC would never approve such a large rise. Indeed, Osborne pre-emptively retreated when the government failed to propose this rate in its final submission to the body. The Chancellor can point out that he maintained at the time that 'the exact figure has to be set by the Low Pay Commission'. But that does not alter the fact that he sought (and won) headlines on his support for a £7 rate. Through this careless act, he has handed Labour political ammunition with which to attack him and ensured that a 20p rise (3 per cent above inflation) will now disappoint expectations. 

Although inflation has fallen significantly, a rate of £6.77 would still fail to restore the minimum wage to its peak value. As the Resolution Foundation noted: "The minimum wage is set to rise by 3 per cent in October 2015, roughly the same percentage by which it rose in October 2014. Last year, the Low Pay Commission described its decision to recommend a 3 per cent increase last year – rising from £6.31 to £6.50 – as reflecting “a new phase” for the minimum wage, following a period in which it had suffered repeated falls relative to inflation. But that lost ground has yet to be fully made up. The Resolution Foundation estimates that an increase of 4.2 per cent to £6.77 would have been necessary to take the minimum wage back to its highest ever value in real-terms, which it held in 2008-09."

To be on track to meet Labour's promise of an £8 minimum wage by the end of the next parliament, the rate would need to rise to £6.78. That means the opposition faces some tough questions of its own: would it have become the first government to overrule the LPC? 

George Eaton is political editor of the New Statesman.

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The UK is dangerously close to breaking apart - there's one way to fix it

We must rethink our whole constitutional settlement. 

When the then-Labour leader John Smith set up a report on social justice for what would be the incoming government in 1997, he said we must stop wasting our most precious resource – "the extraordinary skills and talents of ordinary people".

It is one of our party’s greatest tragedies that he never had the chance to see that vision put into practice. 

At the time, it was clear that while our values of equality, solidarity and tolerance endured, the solutions we needed were not the same as those when Labour was last in power in the 1970s, and neither were they to be found in the policies of opposition from the 1980s. 

The Commission on Social Justice described a UK transformed by three revolutions:

  • an economic revolution brought about by increasing globalisation, innovation and a changing labour market
  • a social revolution that had seen the role of women in society transformed, the traditional family model change, inequality ingrained and relationships between people in our communities strained
  • a political revolution that challenged the centralisation of power, demanded more individual control and accepted a different role for government in society.

Two decades on, these three revolutions could equally be applied to the UK, and Scotland, today. 

Our economy, society and our politics have been transformed even further, but there is absolutely no consensus – no agreement – about the direction our country should take. 

What that has led to, in my view, is a society more dangerously divided than at any point in our recent history. 

The public reject the status quo but there is no settled will about the direction we should take. 

And instead of grappling with the complex messages that people are sending us, and trying to find the solutions in the shades of grey, politicians of all parties are attached to solutions that are black or white, dividing us further. 

Anyone in Labour, or any party, who claims that we can sit on the margins and wait for politics to “settle down” will rightly be consigned to history. 

The future shape of the UK, how we govern ourselves and how our economy and society should develop, is now the single biggest political question we face. 

Politics driven by nationalism and identity, which were for so long mostly confined to Scotland, have now taken their place firmly in the mainstream of all UK politics. 

Continuing to pull our country in these directions risks breaking the United Kingdom once and for all. 

I believe we need to reaffirm our belief in the UK for the 21st century. 

Over time, political power has become concentrated in too few hands. Power and wealth hoarded in one corner of our United Kingdom has not worked for the vast majority of people. 

That is why the time has come for the rest of the UK to follow where Scotland led in the 1980s and 1990s and establish a People’s Constitutional Convention to re-establish the UK for a new age. 

The convention should bring together groups to deliberate on the future of our country and propose a way forward that strengthens the UK and establishes a new political settlement for the whole of our country. 

After more than 300 years, it is time for a new Act of Union to safeguard our family of nations for generations to come.

This would mean a radical reshaping of our country along federal lines where every component part of the United Kingdom – Scotland, Wales, Northern Ireland and the English regions – take more responsibility for what happens in their own communities, but where we still maintain the protection of being part of a greater whole as the UK. 

The United Kingdom provides the redistribution of wealth that defines our entire Labour movement, and it provides the protection for public finance in Scotland that comes from being part of something larger, something good, and something worth fighting for. 

Kezia Dugdale is the leader of the Scottish Labour party.