Toby Helm and Anushka Asthana
Ed Miliband steps up his bid for the Labour leadership today by promising substantial tax cuts for any company prepared to guarantee a "living wage" of at least £7.60 an hour. The commitment is designed to appeal to the party's core supporters who believe New Labour took insufficient measures to combat low pay, despite having introduced a legally binding minimum wage that now stands at £5.83 an hour.
A company that agreed to set the "living wage" as its minimum rate – as opposed to the legal minimum – would pay lower rates of corporation tax.
All five candidates to replace Gordon Brown are preparing to sharpen their messages before ballot papers go out to party members at the beginning of next month.
Research for the Ed Miliband campaign by the Institute for Fiscal Studies shows that companies paying below the "living wage" cost the taxpayer between £5.9bn and £6.3bn a year. This is because low-paid employees can top up their income with tax credits and benefits, and the Treasury also receives less in tax revenue.
Miliband will argue that the heavy cost to taxpayers of subsidising the low-paid could be reduced by between £3.4bn and £4.1bn a year if companies take up the idea. Firms that refused to offer at least £7.60 would not be eligible for lower levels of corporation tax announced by the coalition government in its June emergency budget.
Under George Osborne's plans, the main rate of corporation tax will be cut from 28% to 24% over the next four years. The rate for small companies will be cut from 21% to 20%.
Miliband said: "One area where I think New Labour did fall short was in leaving too many people in lowly paid jobs. We need to be willing not just to urge and cajole but to act to encourage companies to behave responsibly to achieve greater social justice."
Former MP Oona King, who is running to be the Labour candidate for the mayor of London, says in today's Observer that she backs Miliband.
Evidence from companies paying the "living wage", including accountancy firm KPMG and Barclays Bank, has shown it helps reduce staff turnover and worker productivity, reducing the companies' costs. KPMG has seen staff turnover reduced by 50%. Today the former health secretary, Andy Burnham, will release his manifesto for the leadership, promising to "break down the elites that run our country". In a highly personal document in which he links his policy ideas to experiences growing up amid financial instability, he will pledge to end the trend towards unpaid internships.
David Miliband will make a speech on Wednesday, arguing that while Labour must learn the lessons of its election defeat it should not ignore the interests of the middle classes.
The former schools secretary, Ed Balls, will release a 10-point "contract with the party" promising greater representation for women at all levels, while Diane Abbott will step up her bid for votes from the left of the party.