Why we need an official living wage

Whatever David Cameron and George Osborne may claim, the British economy continues to struggle.

The Tory-led coalition's promise of a private-sector-led recovery has failed to materialise and the much-vaunted deficit reduction isn't taking place.

Under the last Labour government, we were beginning a slow climb out of the recession caused by the greed of international financiers and speculators.

All of that has turned to ashes as the coalition follows the failed economic policies of the 1930s and 1980s.

Cameron, Osborne and their sidekick Nick Clegg insist on holding on to the doctrinal relics of a bygone era. They still believe in the "trickle-down effect," yet this only further concentrates wealth at the very top.

This is a know-nothing, learn-nothing government, which has no plan B because it can't admit how wrong it has managed to get everything.

The last Budget's income tax cut will make millionaires better off to the tune of £40,000 a year, but will not help a single constituent of mine in East Durham.

It cannot be just that those who benefited most during the boom years should also be shielded during the lean years.

Outrageously, the government believes that such people cannot pay their fair share. Whatever happened to "We're all in this together?"

We know that it is society's most vulnerable who are bearing the brunt of the "austerity" policies implemented by Cameron and co.

Since the coalition entered Downing Street, the jobseekers' claimant count has risen by over 700 people in my constituency of Easington, and over 13,000 in the north-east as whole.

In my area, we have yet to see the announced job losses at Caterpillar, Cumbrian Seafoods, JJB Sports and Dewhirst filter into the system, and I anticipate yet more crocodile tears from ministers as they prepare to announce another set of "disappointing" employment figures.

A new report from Sheffield Hallam University, The Real Level Of Unemployment, which includes the estimated 900,000 unemployed who have been diverted onto incapacity benefits since the government assumed office, shows the true extent of unemployment in the UK.

The real unemployment figure in my constituency may be as high as 16.3 per cent of the working population, which is more than two-and-a-half times higher than the government claims.

The report indicates that while the government uses the number of jobseeker's allowance claimants to come up with its unemployment figure of 1.5 million, the real figure is closer to 3.4 million.

I believe another economic stimulus is needed, to support jobs and growth in communities like mine. However, this time, instead of bailing out the banks or paying for a tax cut for the top 1 per cent in society or funding the government's failing work plan, I propose we introduce a living wage.

Britain's private sector is failing to grow, especially in the poorest neighbourhoods, because the government is driving demand out of the economy at every opportunity.

A living wage is just one measure that would start to create demand in our flatlining economy.

Cameron promised to "make work pay" - and he has succeeded for those earning over £150,000. But what about the other 99 per cent?

Let's look at some of Cameron's other claims. Have changes to tax credits made work pay?

His welfare reforms have lowered the household income threshold for a family to claim child tax credits from £41,300 per year to £26,000 for families with one child, and to £32,000 for a household with two children.

Eligibility for work tax credits has been changed so that a couple with at least one child will only qualify if the couple's joint work hours total at least 24 hours a week - up from the previous level of 16 hours.

Over 200,000 households, which include 470,000 children, are at risk of losing up to £3,870 per year unless they are able to find the extra eight hours per week to meet the government's new criteria.

The Institute for Fiscal Studies has suggested that families with children would lose an average of £580 per year due to tax and benefit changes.

So how is making the working poor poorer helping our economy?

The government is also dismantling employment rights through its Enterprise and Regulatory Reform Bill.

Business Secretary Vince Cable, who wants us to believe that he is the softer, social democratic conscience of the coalition, recently sneaked out a written statement stating that in addition to extending the qualifying period from one to two years before an employee can bring forward an unfair dismissal claim, he would also significantly reduce the compensation cap for claimants.

So, Cable, just how does creating new job uncertainties and making it easier for bad bosses to unfairly hire and fire their employees "make work pay?"

Perhaps it hasn't occurred to him that the best way for employers to avoid paying compensation for unfair dismissal is to stop treating their staff unfairly.

This is "Beecroft-lite," but we all know that the Conservative Party wants to go further.

Adrian Beecroft's proposals would dilute some of the most basic employment rights, allowing employers to "fire at will."

In the censored Downing Street version of the Beecroft report, he recommended:

• Dropping legislation on flexible working for parents
• Scrapping licensing regarding the employment of children
• Scrapping the gangmasters legislation that was set up following the deaths of the 23 Chinese cockle-pickers in Morecambe
• The relaxation of the national minimum wage, taking us back to the bad old days of £2 per hour.

Beecroft's "bad bosses' charter" belongs in the pages of Dickens, not 21st century Britain.

His proposals have many supporters on the Tory benches, especially among those on the Conservative right such as Philip Davies MP who has suggested that disabled people work for below the minimum wage or Damian Collins who thinks young people should busk to raise travel fares and that a lack of motivation is to blame for one million unemployed under-25s or Christopher Chope who sponsored a private member's Bill to abolish the minimum wage, supported by the likes of Peter Bone MP, once labelled "Britain's meanest boss" for defending paying a 17-year-old trainee just 87p an hour back in 1995.

When Labour introduced the national minimum wage, despite being set at just £3.60 an hour in 1999, it immediately raised the pay of 1.9m low-paid workers.

It was an important first step, but the time has come to move beyond a "minimum" to a "living wage."

As the minimum wage is not a living wage, nearly all low-paid workers are eligible to receive tax credits.

I do not oppose the additional support for the lowest-paid worker - I do oppose profitable employers failing to pay their own wage bill.

The taxpayer wouldn't tolerate the government paying a private business's energy costs or its advertising bills, so why is it acceptable that they receive a subsidy to meet their staffing costs, enhancing the profits of some of the largest multinationals which continue to rely on cheap labour and pay poverty wages?

Save the Children recently launched its first-ever domestic campaign in order to raise £500,000 to help low-paid working families.

According to its new report, It Shouldn't Happen Here, thousands of children are going without hot meals, new shoes and winter clothes, and missing out on school trips, toys and treats because their parents cannot afford the rising cost of living.

Let us not forget that all three main political parties signed up to the 2010 Child Poverty Act with the aim of ending child poverty in Britain by 2020.

Making work pay should be at the centre of lifting children out of poverty, but shockingly 61 per cent of children in poverty live in households with working parents.

All working parents should be able to earn enough to raise their family free from poverty and with enough income to provide their children with a healthy childhood.

Social mobility has ground to a halt in Britain, where only one out of every nine children from a low-income background will eventually join the top 25 per cent of earners as an adult. Poor children are still becoming poor adults.

Only the Labour Party can stop this destructive cycle and no matter what the economic position at the next election, the first line in any Labour Budget for 2015 must state that: "Work must pay and must provide a route out of poverty. We will ensure work always pays with the introduction of a living wage."

This would be the next step towards creating a future fair for all.

• Grahame Morris is Labour MP for Easington and chairman of the LabourLeft policy think tank.