Labour Party does U-turn on low pay promise November 2015

Labour tries to placate business over minimum wage

Shadow business secretary Chuka Umunna has pledged that a Labour government would not dictate a rise in the minimum wage to £8, part of an effort to reassure companies that Ed Miliband is not hostile to wealth creation.

Business leaders have been particularly critical of Labour’s minimum wage policy, but Mr Umunna told the Financial Times he was working closely with them to find a “new framework that they’re happy with”.
The Low Pay Commission, which sets the minimum wage and has won praise from across the political spectrum for its professionalism, would be revamped to become a “proper big low pay watchdog”, he said.
Under this plan the commission’s remit would become more like the Bank of England’s inflation target. It could introduce smaller increases in the minimum wage if necessary, depending on broader economic conditions.
“The Bank of England has a target for inflation but it doesn’t mean they don’t have operational independence,” the shadow business secretary said. “The governor writes a letter to the chancellor if you miss that target.”
In September Ed Miliband put the low-paid at the heart of his general election campaign, pledging to raise the minimum wage from £6.50 now to £8 by 2020. The CBI warned that such a move to a “politicised US-style system” would put a serious strain on businesses – and employment levels.
At the same time the Joseph Rowntree Foundation, a poverty charity, warned Labour not to let the minimum wage become “subject to political whim”. Jon Cruddas, the party’s own policy chief, has also questioned the policy.
Mr Umunna, speaking in a joint Financial Times interview with Rachel Reeves, shadow work and pensions secretary, said he wanted to deal with some of the concerns about the proposals raised by business. Ms Reeves said the £8 figure was a “target” of where Labour wanted the minimum wage to be.
The pair will next week host a conference in London for small business where they will set out several policies aimed at convincing entrepreneurs that Labour is behind them.
Ms Reeves said that self-employed people had seen a 14 per cent drop in earnings compared with a 9 per cent fall for employees’ pay since 2010. They were also less likely to have a pension and found it harder to get a mortgage.
Labour is putting down amendments to the current Small Business Bill to force companies to pay interest if they do not pay their supplier on time. Companies would have to report on the backlog of late payments when they put in their quarterly VAT returns.
The party is exploring ways to extend automatic enrolment of pensions to the self-employed: at present the system is limited to company employees.
Ms Reeves said if Labour won the election, it would pause for three months the Tories’ flagship welfare policy of combining benefits and tax credits into a single payment, termed Universal Credit: “We will review how UC works for the self-employed, because there are clearly big problems at the moment both in terms of red tape and in terms of the way that self-employed people are viewed.”