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Vince Cable Should Fix £6.99 National Minimum Wage

Tuesday, February 24, 2015

GMB Call On Vince Cable To Revise Low Pay Commission Proposal Of £6.70 National Minimum Wage From October 2015 To Make Up Ground Lost In Recession

The rate should be at least £6.99 per hour from October 2015 to make up the ground lost since rate was fixed at £5.65 from 1st October 2006 before the recession says GMB.

GMB commented on the Low Pay Commission recommendations to government that the adult national minimum wage should be £6.70 an hour from October 2015. See notes to editors for copy of statement by Department for Business, Innovation and Skills (BIS) dated 23 February 2015.

Paul Kenny, GMB General Secretary, said “This is a missed opportunity by the Low Pay Commission to uprate the national minimum wage to the real term rate that it was before the recession hit in 2007. Vince Cable should revise the proposal.

With the economic recovery under way there is no justification for the national minimum wage not going back to where it was in real terms before the recession.

The Low Pay Commission should have recommended a rate of at least £6.99 per hour from October 2015 to make up the ground lost since the rate was fixed at £5.65 from 1st October 2006 before the recession. See notes to editors 2 below for calculation.

The Low Pay Commission to do what it says on the tin – “fight for the low paid”.

There has to be a concerted effort to make work pay. If this was done, staff would not need their meagre wages to be topped up by taxpayers with family tax credits and housing benefits so as to make ends meet.

GMB members tell us that in their experience at least £10 an hour and a full working week is needed to have a decent life free from benefits and tax credits. Less than £10 an hour means just existing not living. It means a life of isolation, unable to socialise. It means a life of constant anxiety over paying bills and of borrowing from friends, family and pay day loan sharks just to make ends meet."

End

Contact: Kamaljeet Jandu 07956 237178 or Martin Smith 07974 251722 or GMB Press Office 07921 2898880

Notes to editors                                                                                  

1 Press statement from BIS dated 23rd February on the Low Pay Commission’s recommendations to government for the 2015 rates:

Business Secretary Vince Cable has today announced that the Low Pay Commission’s recommendations to government for the 2015 rates are £6.70 (adult rate) £5.30 (18-20 rate); £3.87 (16-17 rate) and £2.80 (apprenticeship rate). See below for full details.

Business Secretary Vince Cable said:

“Today the Low Pay Commission have made their recommendations to government that the adult national minimum wage should rise by just over 3% to £6.70 an hour from October 2015. This would represent an annual pay rise of £416 for a full time worker on the minimum wage. If this recommendation were accepted, the value of the minimum wage would be higher than when we came to office in 2010 and we are now making good progress towards restoring the value it lost during the financial crisis.

‘I will now study these recommendations and consult my Cabinet colleagues with a view to announcing the final rates in the next few weeks.

‘The Low Pay Commission strike a delicate balance between what is fair for workers and what is affordable for employers, without costing jobs. It does so impartially and without political interference. No government has ever rejected the main rates since it was established fifteen years ago. It is important that it is able to continue to do its work ten weeks before a general election”

Further information:

The Low Pay Commission (LPC) is an independent body that advises the government about the National Minimum Wage. It is made up of 9 commissioners and a chair, drawn from a range of employee, employer and academic backgrounds. We specifically ask the LPC to makes recommendations based on maximising the wages of the low paid without damaging employment opportunities.

2015 recommendations

· The adult rate (21+) has increased to £6.70 by 20p (+3%) from £6.50.

o fastest nominal increase since October 2008 (which was 3.8%) – it was also 3% in 2014

o fastest real increase since 2007 (CPI)

o compared with around £6.81 at its real CPI peak (assuming HM Treasury Panel inflation in 2015 – 1%) or £6.77 (assuming Bank of England inflation in 2015 – 0.5%). Still 1.0-1.6% below its peak in 2007.

o Last year the adult rate increased to £6.50 by 19p (+3.0%) from £6.31.

· The Development Rate (18-20) has increased to £5.30 by 17p (+3.3%) from £5.13

o fastest nominal increase since October 2008 (3.7%)

o compared with around £5.67 at its real CPI peak (assuming HM Treasury Panel inflation in 2015 – 1%) or £5.64 (assuming Bank of England inflation in 2015 – 0.5%) – still 6.0-6.5% below its peak in 2007.

o Last year the development rate increased to £5.13 by 10p (+2.0%) from £5.03.

· The youth rate (16-17) has increased to £3.87 by 8p (2.2%) from £3.79.

o fastest nominal increase since October 2008 (3.8%)

o compared with around £4.19 at its real CPI peak (assuming HM Treasury Panel inflation in 2015 – 1%) or £4.17 (assuming Bank of England inflation in 2015 – 0.5%) – still 7.2-7.6% below its peak in 2007.

o Last year the youth rate increased to £3.79 by 7p (+1.9%) from £3.72.

· The apprentice rate has increased to £2.80 by 7p (2.6%) from £2.73.

o fastest nominal increase since October 2011 (4.0%)

o compared with around £2.82 at its real CPI peak (assuming HM Treasury Panel inflation in 2015 – 1%) or £2.80 (assuming Bank of England inflation in 2015 – 0.5%) – 0-0.7% below its peak.

o Last year the apprentice rate increased to £2.73 by 5p (+1.9%) from £2.68.

Next steps

The Government will now consider the LPC’s recommendations and respond in March. The regulations to change the rates will be debated in Parliament before the new rates are introduced on 1 October 2015.

Previous LPC recommendations

In 2013, for the first time, the Government rejected the LPC’s rate recommendation to freeze the apprentice rate. Ministers decided that it was important to maintain the relative position of the apprentice rate (compared to benefits and the youth rates) to preserve the attractiveness of apprenticeships for young people. The apprentice rate was therefore increased by 1% - the same increase as the minimum wage rates for young people and out of work benefits. However, the main adult rate has never been overruled in fifteen years since the establishment of the LPC in 1999.

2 Uprating the National Minimum Wage from 1st October 2006 of £5.35 per hour before the recession:

The movement in the RPI from September 2006 to September 2014 has been 28.73%. The estimated RPI inflation rate from September 2014 to September 2015 is likely to be at least 2%. That means the movement in inflation between September 2006 and September 2015 is likely to be at least 30.73%.

To uprate the 1st October 2006 rate of £5.35 by 30.73% requires a total increase of £1.65

So to keep pace with inflation national minimum wage October 2015 should be £6.99.

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