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London: Firms Should Get Tax Breaks to pay Living Wage, says Ed Miliband
The Guardian
Allegra Stratton

February 28, 2011
View the Original Article

Labour leader makes suggestion as new research shows 22p in every pound of increased wages between 1979 and 2005 went to society's highest earners

The Labour party has published research showing 22p in every pound of increased wages between 1979 and 2005 had gone to society's highest earners, as Ed Miliband said companies could be offered tax incentives to pay a living wage.

Ed Miliband produced the analysis – carried out by the House of Commons library – at the launch of a cross-party commission on living standards which will investigate and propose ways to deal with the imbalance between those who have gained from recent economic growth and those who have lost out.

Set up by the Resolution Foundation, the commission will spend 14 months looking into what can be done to ameliorate factors affecting the third of the working population earning between £11,000 and £33,000 or the "squeezed middle".

Members of the commission are drawn from banking, finance and social policy and include figures from big employers such as British Gas, who will represent realistic industry opinion on policy dilemmas like paying higher wages.

All 12 members have been told they will have to have something to say on ideas such as the living wage, whether positive or negative.

Those on low to middle incomes have become of central concern to all three main political parties, jostling to demonstrate they best understand the needs of the cohort.

The deputy prime minister, Nick Clegg, who is to speak at Resolution's next event, has begun work on policies affecting this group, choosing to translate literally a phrase from the French president, Nicolas Sarkozy, and name the demographic "alarm clock Britain", reflecting that these families feel they rise for work early and return late, squeezing living standards.

All parties are aware that low earners – for whom food and fuel bills are a greater part of their household budget – are feeling current inflation levels most acutely.

Ed Miliband stumbled over Christmas when he was unable to define the precise nature of the group but today he gave a more assured answer and proposed areas he hopes the commission looks into.

Emphasising the tax and benefit system could only do so much to address the problem and effort had to be put into getting business to take some of the load, Miliband suggested:

• Tax incentives for companies to encourage them to pay a higher level of a guaranteed wage – a living wage at £7.80 which reflects the greater cost of living but is a cost currently fully borne by the employer

• Incentives to encourage companies to improve the skills of their workers in order that they qualify for better paid jobs — in Germany, he said, 80% of employees in retailing had had vocational training lasting two or three years and that allowed them to progress into managerial careers, compared to only three out of 10 of their British counterparts.

When asked whether the task was economically viable when British companies were facing competition from foreign, lower-paying multinationals Miliband said: "I don't subscribe to that fatalistic view," and pointed out his examples of better models came from Germany, a country that has kept competitive with countries such as China.

Resolution's chief executive, Clive Cowdery, supported this position, saying that the five main industries that employed half of all low-paid workers in the UK were largely insulated from truly international competition with the rising economic powers of Brazil, Russia, India and China. The concern would, however, remain a problem in another of the big five low-paying industries – manufacturing.

Miliband repeated his criticism that Labour had been wrong, when in government, not to put sufficient thought into the type of economy it was building and failed to think how to help the creation of jobs for low to middle earners.

Miliband said a Labour government led by him would not remain "neutral" about the future quality of jobs.

Asked to reflect on renewed criticism of his leadership from the former business secretary, Peter Mandelson, who has just published another draft of his memoirs, Miliband said: "He's a writer not a quitter these days."