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'Real living wage' to be central to Labour 'bargain in the workplace'

Published 26/09/2016

Shadow chancellor John McDonnell visits Make Liverpool, an open access business unit that allows small start up companies to rent space and use equipment to help their businesses grow
Shadow chancellor John McDonnell visits Make Liverpool, an open access business unit that allows small start up companies to rent space and use equipment to help their businesses grow

A Labour government would enshrine in law a "real living wage" expected to be more than £10 an hour, shadow chancellor John McDonnell has announced.

Mr McDonnell said Labour would create a living wage review body with a remit to ensure that the minimum income is set at the level needed for a decent life, which he said was likely to be higher in 2020 than the £10 level he proposed last year.

The announcement came in a keynote speech to Labour's annual conference in Liverpool, in which he promised an "interventionist government" which would use a £250 billion national investment bank to support British industry and create a "manufacturing renaissance" following withdrawal from the EU.

He won applause by promising a shake up of company law to prevent abuses of the kind which former BHS boss Sir Philip Green has been accused of, telling the conference: "U nder Labour there will be no more Philip Greens at all."

He won a standing ovation as he concluded his speech by saying that Labour had a "vision to rebuild and transform Britain", adding: "I n this party you no longer have to whisper its name, it's called Socialism."

After the bruising leadership contest over the summer, Mr McDonnell held out an olive branch to defeated candidate Owen Smith, praising his efforts to block government benefit changes. And he also name-checked prominent moderate Caroline Flint.

Announcing his plans to improve on the current £7.20 rate of the National Living Wage, Mr McDonnell said: "When we win the next election we will write a real living wage into law.

"We'll charge a new living wage review body with the task of setting it at the level needed for a decent life. Independent forecasts suggest that this will be over £10 per hour.

"This will be a fundamental part of our new bargain in the workplace...

"Backed up by our commitment to investment, we will end the scourge of poverty pay.

"Decent pay is not just fundamentally right, it's good for business, it's good for employees, and it's good for Britain."

Mr McDonnell said Labour would be putting forward proposals to help businesses - particularly small and medium-sized companies - implement the higher living wage.

And he indicated that this could involve state support via an extension of National Insurance breaks for employers under the Employment Allowance.

"We will be examining a number of ideas, including the expansion and reform of Employment Allowance, to make sure that this historic step forward in improving the living standards of the poorest paid does not impact on hours or employment," he said.

The shadow chancellor also said Labour would reintroduce sectoral collective bargaining across the economy to end a "race to the bottom" on wages. And he restated his commitment to repeal the Trade Union Act which restricts striking rights.

More resources for HM Revenue and Customs and the Gangmasters and Labour Abuse Authority would ensure there were "no more national scandals like Mike Ashley of Sports Direct", he said.

The living wage proposal was warmly welcomed by trade unionists, including Unite general secretary Len McCluskey, who described it as " music to the ears of the millions of low-paid workers who are getting poorer under this Government".

Dismissing the Government's National Living Wage as "a con", Mr McCluskey said: "We have to get back to a situation where a fair day's work is respected with a fair day's pay.

"The people who keep our economy moving, care for our elderly, sick and our children, clean our streets, serve in our shops - the millions of people who are the backbone of our nation - are paid enough to enjoy the decent life they deserve."

Brian Rye, acting general secretary of the building workers' union Ucatt, said: "This is a genuinely radical policy which will end the low-pay misery experienced by thousands of workers including many in construction when, despite working long hours, they still don't earn enough in order to properly live."

And Manuel Cortes, general secretary of the TSSA transport union, hailed it as " a bold and grown-up approach to lift workers out of in-work poverty".

"For too long British workers have had their wages and standards of living kept artificially low by Tory governments who have been subsidising bosses by paying out tax credits to those in who are in work rather than make work pay properly," said Mr Cortes.

"This policy delivers more than long overdue wage justice; it delivers for the whole economy as more workers will be taken into the tax system rather than out of it and, with more money in their pockets so people will be able to spend more."

Mr McDonnell confirmed his ambition to shake up the tax system to shift the burden "away from those who earn wages and salaries and on to those who hold wealth". And he said he was "interested in the potential of a universal basic income".

Setting out his plans for more state intervention in industry, he said: "We need a new deal across our whole economy, because whatever we do in Britain, the old rules of the global economy are being rewritten for us.

"The winds of globalisation are blowing in a different direction.They are blowing against the belief in the free market and in favour of intervention.

"Good business doesn't need no government. Good business needs good government. And the best governments today, right across the world, recognise that they need to support their economies because the way the world works is changing."

He accused the Conservatives of being "too blinkered by ideology" to act promptly to protect industries like steel against global market pressures.

Employers gave a wary response to the shadow chancellor's proposals.

Terry Scuoler, chief executive of the manufacturers' organisation EEF, said: "At last both Government and Opposition are talking in depth about the importance of industrial strategy and how manufacturing must be at the heart of driving growth and infrastructure investment at regional and national level.

"Business will need to be convinced, however, that some of the proposed policies are relevant for a modern economy. In particular, a return to collective bargaining is a backward step."

And Adam Marshall, acting director-general of the British Chambers of Commerce, said: " John McDonnell talks of an 'interventionist' future Labour government, but needs to remember that there's both good intervention and bad intervention. Good intervention creates the conditions for all businesses to thrive, but bad intervention ensnares them in red tape and makes them less inclined to employ, train or invest.

"As the Labour Party develops its alternative economic proposals, it must remember that the state cannot control every aspect of economic or business life and stay competitive in a global economy."

Mike Cherry, national chairman at the Federation of Small Businesses, welcomed the proposal to expand the Employment Allowance, adding: " Our members will also be pleased by moves to create new small business workspaces in local communities, strengthen small business access to finance to enable them to grow, shake up the energy market to allow small local suppliers to compete and innovate, and bring greater parity between how the welfare system treats the self-employed and the employed."

Meanwhile, Rebecca Long-Bailey, shadow chief secretary to the Treasury, said Labour would fight to make the UK economy work for everyone.

She said: "My mum has a little saying: 'Back us into a corner at your peril'. We will always come out fighting and we are fighting - fighting to make our economy great, to make our economy fair and to make our industry the envy of the world.

"At the heart of this is making sure that the prosperity we generate reaches every corner of this country so that no community is ever left behind again."

CBI director-general Carolyn Fairbairn said businesses would be "wary" of Mr McDonnell's "combative tone ... and a focus on extensive intervention".

" The best way to increase pay and living standards across the UK is to support firms to improve productivity," she said. "We already have an expert independent Low Pay Commission, which should have responsibility for setting statutory wages levels."

Mark Littlewood, director-general of the free-market Institute of Economic Affairs think-tank, dismissed Mr McDonnell's interventionist plans as "fantasy economics".

"The shadow chancellor wants a return to the industrial strategy of the 1970s, ignoring the past failures of a raft of initiatives, from subsidising the nuclear industry to Concorde," he said.

"It's time for the shadow chancellor to get real. The long-term economic prosperity of the UK will not be secured by shifting taxation to wealth, by higher spending or by more regulation. Labour's strategy amounts to huge private sector 'austerity' in order to protect and expand the public sector. This would be disastrous for the health of the UK economy."

Chairman of the GMB union's young members' section David Hamblin said Mr McDonnell's real living wage should be extended to under-25s, who are currently excluded from the National Living Wage and entitled only to minimum wage levels varying from £3.30 to £6.70 an hour.

"Equal work for equal pay is an absolute must and so the inequality of the current living wage for under-25s cannot be ignored," he said. "For a young person, the food in their mouth and the roof over their head is no cheaper due to their age."

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