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Did George Osborne just kill the living wage?

Did George Osborne just kill the living wage?

Ok, maybe that’s overstating it. Let me explain.

The Living Wage is an independently set wage which campaigners suggest is the minimum sufficient to make ends meet in the real world after taking rent, prices and benefits into account. The campaign for a modern living wage was born out of the work of London Citizens, an alliance of civil society institutions including churches, mosques, schools and unions. In listening to their members and leaders, they realised that families were struggling to meet basic needs and keep time aside for family and community life, particularly in London, even when working full time.

The Living Wage has never carried the force of the law. Rather, companies have been encouraged/nagged/cajoled/embarrassed into adopting the Living Wage – the objective is to make employers think about their moral obligations to their employees, rather than just their legal duties, often by confronting well paid executives with their struggling colleagues. Some of the firms that pay the living wage can be found here.

In his budget speech on Wednesday George Osborne announced that he would legislate for a ‘National Living Wage’. This will reach £9 per hour in 2020, compared to a London living wage of £9.15 in 2015, and £7.85 outside London. George Osborne has been told by the Office of Budget Responsibility that the policy may cost some jobs over the next 5 years, but that a much larger number will be created over that period. Why did the Chancellor do this most un-Conservative thing, which had Work and Pensions Secretary Iain Duncan Smith wildly cheering in the House of Commons?

Whatever you make of his policies, George Osborne is an extremely astute politician. His budgets in the past, and this one all the more, have all been a mix artful political framing, substantive policy change and clever statecraft.

First, the framing. Osborne has the ability to manage the mood around budgets, bringing the collage of spending decisions into a persuasive narrative. This time, following a speech by the Prime Minister a couple of weeks ago, the narrative is one about moving from a high-tax, high-welfare economy to a low-tax, low-welfare economy. There are shades too of centre-right populism – aka blue-collar conservativism – in, for instance, reforming Vehicle Excise Duty and hypothecating it for a road building fund (Osborne obviously not a great reader of Papal encyclicals), along with conscious land grabs for ‘progressive’ territory. Supporters are buoyed, and prepared to accept measures which they’re unsure of, while opponents are left disorientated.

Second, the substantive policy change. The ‘Northern Powerhouse’ agenda, though incorporating more than a little rhetorical fluff, has seen a genuine redistribution of decision making and budgets to northern cities. That process looks set to continue. This is only one strand of a series of policies which would encourage some north/south economic rebalancing, but no one can deny that the economic development of northern conurbations has been pushed up the political agenda in a way they had not been before 2010.

Then, the state-craft. The decision, for instance, to give mayors and local authorities the power to determine locally whether shops should open on Sundays will get Osborne what he wants without having to negotiate the complicated Parliamentary politics (Thatcher lost such a vote even with a large Parliamentary majority), as will devolving the Disability Living Allowance to local authorities.

The 'National Living Wage' bears all three marks of Osborne’s political genius. First, it is a brilliant act of political framing. Britain deserves a pay-rise! Of course, it is effectively a raise in the minimum wage, but the phrase “national minimum wage” still carries an air of state bossiness, while the “national living wage” is more clearly connected to what people need. Labour may have had bragging rights on the minimum wage, but now the Conservatives - the putative workers party - went a step further! Nevertheless, it is substantive change, a move ironically toward the pre-distribution agenda that Ed Miliband and co. briefly toyed with, and £1 more than Labour’s 2015 manifesto commitment to an increased minimum wage on £8 by 2020. Two cheers - at least - for that. But it’s also an act of state-craft – the government can mandate a higher minimum wage, and will have to pay their own employees that wage, but its main role will be to ensure businesses take the responsibility of offsetting reduced levels of in-work benefits. 

It’s a compelling narrative, and a great piece of ‘politics’ – taking that busted-flush ‘the state’ out of the way of the relationship between employer and employee, and bearing down on the welfare spending that crowds out more productive forms of government spending. Of course, it’s more complicated than that. Welcome as it is - and it is welcome - the ‘National Living Wage’ will not do the same thing as means tested benefits like tax credits which, expensive as they are, are targeted at the poorest and can take account of family size. And I suspect that campaigners for the “real Living Wage”, as it must surely now be re-badged, will tell you that the first line of defence from companies is that in paying the minimum wage they fulfil their legal obligations. Now that they have the cover of a ‘National Living Wage’ (which, it seems, will exclude the under-25s), it will be harder to get firms to respond to obligations to workers that, in the end, are not legal but moral.


Paul Bickley is the Director of Political Programme for Theos


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