THE BLOG

Spin or Substance? The Chancellor and the Living Wage

21/07/2015 15:32 | Updated 20 July 2016

The real impact of a Budget isn't clear until a little later, when the dust begins to settle. Announcements that seem very clever in the Commons chamber can lose their lustre under more extended scrutiny.

George Osborne and Gordon Brown are very different in their character and politics. As Chancellors, however, both have a weakness for over-complicated budgets. Both seem to love measures that are a little bit too clever, when it may be smarter in the long run to be straightforward. Osborne's announcement of a "national living wage" is a classic example.

The measure itself - a significant increase in the statutory minimum wage for over-25s - has been almost universally welcomed. It rewards hard work, and it reduces the welfare bill by putting more responsibility on employers to pay a decent wage.

So what's not to like?

The problem is simple: Osborne hasn't raised the minimum wage to the level of the Living Wage, but he has sought to appropriate the brand. The Living Wage is something calculated independently, and based on the actual costs of living. (It's currently set at £9.15 in London, and £7.85 across the rest of the UK). It's probably sensible for Osborne to keep the minimum wage a bit lower than this: the global economic climate is unstable, and a larger rise in the minimum wage could cost many more jobs. We can only move step by step to the kind of "high pay, low welfare" economy that both Labour and the Tories rightly want. (Incidentally, Ed Miliband's much-mocked speeches on "predistribution" were arguing for precisely this direction of travel.) For the time being, the level to which the government can safely raise the minimum wage is still too low to live on without a significant top-up from the welfare system.

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That's why David Cameron and Boris Johnson have been so supportive of Citizens UK's Living Wage Campaign - which asks employers to something higher than the legal minimum. Our campaign has always focused on the institutions that can afford to pay an actual Living Wage, such as banks, Premier League football clubs and high street retailers. Our campaign is not intended to drive the struggling corner shop out of business, but is designed to hold richer, larger companies to their lofty rhetoric of "corporate social responsibility."

The Living Wage Campaign has also targeted the public sector. If politicians really want to tackle poverty, there are three good reasons why the government should take a lead on paying it: because of its sheer scale as an employer, because of the power of its example, and because a large proportion of the cost goes back to the Treasury in welfare savings.

Citizens UK has been careful and measured in its response to the Budget. Because we are rooted in the neighbourhoods which are worst hit by poverty, we are more interested in winning change than having a big row. Raising the minimum wage is welcome - but as Boris Johnson argued last week, calling it a "living wage" may cause confusion. He is worried that Osborne's rhetoric may "take the wind out of the sails" of the real Living Wage.

So what's to be done?

Today, Citizens UK is out in force in Whitehall, urging more government departments to pay the real Living Wage. The Department for Work and Pensions has been one of the departments making progress. The much-maligned Iain Duncan Smith has been a key ally in the fight to both increase the minimum wage and get government departments paying the Living Wage.

One way the government can make sure the Budget doesn't undermine the real Living Wage is to get more and more of its departments to pay it. Following the example of the Tory Mayor of London and the SNP at Holyrood, the whole UK Government could become a Living Wage employer. That simple policy change, even if phased in over two or three years, would show it is serious about a two-pronged fight for better wages - both raising the floor and modelling good practice.

If Mayor Boris Johnson can do it in London, and First Minister Nicola Sturgeon can do it in Scotland, surely the Chancellor can do it across the UK? It would prove the Budget changes weren't just a stunt, but were part of a serious strategy to tackle in-work poverty. Over to you, Mr Osborne...