In our series of articles considering how election pledges, if realised, could impact employers, we look at how the main political parties view minimum and living wage rates.
Workers currently on the minimum wage, or thereabouts, must feel like something of a political football in the run-up to the election. They are the subject of promises from all political angles, with most of the key leaders making some sort of pledge around low pay and how they will tackle it.
National minimum wage resources
Hours before presenting its final pre-election budget, the Government confirmed that the minimum wage would rise to £6.70 in October, following the recommendations by independent advisory body the Low Pay Commission.
The Prime Minister’s office was quick to boast that this was the largest “real terms” rise since 2008, but opposition parties and unions argued that this is still way off the mark.
Shadow business secretary Chuka Umunna blasted the coalition for failing to deliver on its promise to put the minimum wage up to £7 per hour by the end of this Parliament. Indeed, Labour claims that there has been a reduction in value of the minimum wage of 5% since the coalition came into power.
Whichever party achieves power in May’s election, it will be under scrutiny to deliver on its wage promises as soon as realistically possible. So, what can we expect?
Tax thresholds matter
While it is not strictly evidence of a commitment to a rise in minimum wages, the Conservative Party has pledged that if it gets into power, it will increase the tax-free personal allowance to £12,500 from the £10,800 proposed in the Budget.
According to Tom Kerr Williams, partner at law firm DLA Piper, there is a preference from both the Conservative and Conservative and UK Independence Party (UKIP) camps to move lower-paid workers outside the personal tax threshold, rather than force up wages. UKIP has pledged to exempt minimum wage earners from tax altogether.
“There is a sense [from politicians] of the minimum wage threshold and the tax threshold tying together more, so if you earn the floor amount there should be some level of tax relief,” he says.
Apprentices promised more money
Apprenticeship wages have also made the headlines, with an announcement in March that the national minimum wage for apprentices would go up by 57p an hour, to £3.30 – plus there are plans to consult with businesses on the future of the apprenticeship wage rate.
Before now, both coalition parties have pledged to simplify how the minimum wage works, particularly for apprentices, as part of a drive to tackle youth unemployment.
Labour and the living wage
The Labour Party has pledged to increase the minimum wage to £8 by 2020, and has said it will demand that government contractors pay their employees at least the relevant living wage. The living wage is an hourly rate calculated according to the basic cost of living in the UK, currently £9.15 per hour in London and £7.85 an hour elsewhere.
Ed Miliband has also promised employers tax breaks if they sign up to pay the living wage, and has said that a Labour government would increase fines to £50,000 for employers that fail to pay it from the current £20,000 per worker level.
However, these fines are dependent on employers being investigated by HM Revenue & Customs (which has, in the past, named and shamed non-minimum wage payers, but there have been few criminal prosecutions). The TUC has called for the next parliament to hire 100 more revenue and customs enforcement officers to hold non-payers to account.
The most generous minimum wage pledge comes from the Green Party, which would like to see the national minimum rate go up to £10 per hour by 2020. The party claims that by increasing the national minimum wage to a level at which it becomes a “genuine living wage”, this would benefit an estimated 5.2 million people, or 17% of the working population.
The party says this is in line with the current projected trajectory of the living wage as calculated by the Living Wage Foundation, and would reduce the need for employees on lower wage bands to be “topped up” by working tax credits and other state benefits.
TUC general secretary Frances O’Grady has called for greater co-operation between political parties, saying: “There should be broad consensus between political parties, good employers and trade unions that the minimum wage should always be enforced effectively.”
That said, the most likely outcome of this year’s election is some form of coalition. So, while making changes to the national minimum wage should be a straightforward legislative move if one party achieves overall power, it’s unlikely that we’ll see any of these wage pledges realised without some debate and compromise first.
In terms of seeing any of these wage pledges realised, this could prolong the process. “Changing the minimum wage rate could be done swiftly and it’s an easy win,” says Albert Bargery, a solicitor at Parrot and Coales. “But at the moment it’s all hypothetical, a lot of posturing, and if there’s a coalition in power not a lot will happen immediately.”