A plan to make work pay

This weekend, Lincoln Labour teams — including councillors, volunteers and me — spoke to hundreds of Lincoln residents about current issues and concerns and what we can do to help. Plenty said they’re really struggling despite being in work and being careful with their weekly and monthly budgets. Sadly, this doesn’t surpise me – Britain is facing the greatest cost of living crisis in a generation.

The link between the much sought after “growth” and living standards has been broken. A small bit of the former does not, as it used to, mean a better standard of living for ordinary people. Wages have gone up slower than prices for 39 out of 40 of the months David Cameron has been Prime Minister, and many people are finding it not just difficult but impossible to make ends meet.

Average wages are over £1,500 lower than they were when the Tories came into power in 2010, and year after year people are working harder, for longer, for less. It can’t be right that we’ve now reached the point where more of the people bringing up families in poverty are in work than out of work.

Work should pay. At the moment, for millions of people, it just doesn’t. We need to restore the link between wider economic growth and the standard of living for most British families and we need to ensure that any recovery isn’t just a ‘race to the bottom’. Change isn’t unobtainable or somehow beyond the grasp of government – it’s perfectly possible, but the government have to want it to happen.

Cameron and Osborne would have us believe a government should be non-interventionist on wages and in fact on virtually everything relating to the free market — they even voted against the Minimum Wage, which they now admit was a mistake. The truth however is that the Tories are willing to interevene and indeed they do, but they do it on behalf of a very elite few at the top. Take their tax cut for millionaires for example, or their defending of bankers’ bonuses.

Government is not helpless and change is possible. This week, Labour announced plans to introduce Make Work Pay contracts that will help businesses raise wages for millions of low-paid workers, and help the next Labour government to cut the taxpayer’s welfare bill. Firms that sign up to paying their employees the Living Wage, currently £7.65, in the first year of the next Parliament will be offered a 12 month tax rebate of up to £1,000 for each individual worker that receives a pay rise. The money would be fully funded from the increased tax take and National Insurance revenues. The additional savings in lower tax credits and benefit payments, as well as increased tax revenues in future years, will cut social security bills and help pay down the deficit.

Make Work Pay contracts would be good for employees, for businesses and for the British taxpayer. Low-paid workers would see their wages increase, pushing families out of poverty and easing the cost of living crisis. Firms would receive a tax rebate and benefit from the higher staff morale, increased productivity and lower turnover of staff; all of evidence proves paying the Living Wage produces. The British taxpayer would see a reduced social security bill from lower spending on tax credits and benefits for people in low-paid work.

The benefits of making work pay with this kind of scheme are manifold and, along with measures such as freezing energy prices and dramatically increasing the number of apprenticeships, it would be another positive way of both addressing the current cost of living crisis and building a dynamic and fair economy, where we aim for high-skill and better-paying jobs in a British race to the top.