The Chancellor is in retro mode with our coins, sadly, he is in similar retro mode with wages and the economy. When what Scotland and the UK really needs is a pay rise.
When we last had a thrupenny piece, in the 1960s, up to 61 per cent of the economy went on wages. Since the 1980s, it has never gone above 56 per cent. These small percentages make a big difference to our living standards. George Osborne could equally go into retro mode with our stamps – perhaps reintroducing the Penny Red, or for Tories, probably Penny Lilacs. This would reflect that fact UK workers have experienced the longest real wage pay squeeze since 1870.
Measures in the budget were clearly targeted on the comfortably off, rather than those who have been hit the hardest by austerity economics. Changes in tax thresholds may take some out of tax, but they are actually pretty regressive. As this slide from the IFS post-budget presentation shows.
The much vaunted hard working families would gain more if this cash was used for increased tax credits. Help for savers in the form of tax cuts and bigger ISA allowances are again targeted at the upper middle income groups. How many low paid workers can afford to save anything, let alone £15,000 a year. One in three Scots has saved nothing in the past three months.
There was nothing in the budget for hard pressed public sector workers who are promised more real pay cuts and further increases in pension contributions from 2015. Also, no recognition of the damage low wages generally is doing to the economy. Real wages have been cut for 44 months, a record unmatched since records began and a loss of £1600 per year for the average worker. This is why the recovery from recession has been so slow.
One measure that would boost pay for those who most need it is the Scottish Living Wage. Let’s be clear, Scotland’s public sector has been doing well at backing the living wage, far better than any other part of the UK, and politicians of all parties deserve credit for this. They have recognised that paying the Scottish Living Wage, currently £7.65 an hour, is good for staff, employers and the economy.
It is good for workers who benefit from higher pay, improved health and job motivation. At our Ethical Care Charter event in Renfrewshire last week a councillor told me how a constituent had come to his surgery and told him just how much paying the Scottish Living Wage had meant to her family. She said it literally meant she didn’t have to choose between shoes and food on the table.
The Scottish Living Wage is also good for employers, because it reduces turnover, improves productivity and attracts better staff through reputational gain. And the wider community gains through cash into the local economy, lower benefit costs and less stress on the NHS.
Many can see how a pay rise for Britain’s low paid could benefit us all. Small businesses will benefit from the 90 pence in every pound they spend in their local community. Why do we pay a cleaner less to pay her more in tax credits? A rise of £1.50 to the minimum wage would help the nation pay off its debt by cutting the welfare bill by £5 billion. Something the Chancellor might want to consider as the deficit is double what he said it would be in 2010 - with the consequence that austerity grinds on causing even more damage.
Despite these advantages one in five Scots still earn below living wage levels. And many public services are outsourced to the private and voluntary sectors, including in vital areas such as social care. It is time to roll out the Scottish Living Wage to all those employed on public contracts. The Procurement (Scotland) Bill is a real opportunity for the Scottish Government to show leadership on this issue.
Lawyers will always find legal reasons to urge caution on ministers, but if Boris Johnson can do it, then surely the ‘progressive beacon’ that Scotland aspires to be, can do the same. If its money that worries ministers, then as we suggested last week, let’s use some of the budget’s Barnett consequentials. We could also clamp down on the tax dodging companies by banning them from public contracts.