Living wage

Meeting: 
MQT on 2014-11-19
Session date: 
November 19, 2014
Reference: 
2014/4954
Question By: 
Tony Arbour
Organisation: 
GLA Conservatives
Asked Of: 
The Mayor
Category: 

Question

Research by my office has found that making the London Living Wage compulsory, as some have suggested, would cost the London economy £612m per annum and thousands of jobs. Some councils are assessing business rate relief as a means of incentivising take-up, does the Mayor support this and would he consider introducing a similar scheme for the GLA?

Supplementary Questions: 

Answer

Answer for Living wage

Answer for Living wage

Answered By: 
The Mayor

Boris Johnson (Mayor of London):  Tony, thank you very much.  This is actually an extremely good question and a thoughtful idea.  I have asked Kit [Kit Malthouse AM, Deputy Mayor for Business and Enterprise] to take it away and see if this is something that we could develop.  Obviously, there is an anxiety I have about using taxpayers’ money, as it were, to subsidise the Living Wage because you would be cutting business rates in order to encourage businesses to pay it, but it might be a price worth paying because one of the advantages of the Living Wage is that it helps us to reduce the number of people who are receiving in-work benefits at the same time.  It is definitely worth looking at.

 

Tony Arbour AM:  I am pleased to hear that and I look forward to the results of Kit’s investigation.  As you know, there are no greater supporters for the London Living Wage than those of us who are sitting here.  We very much applaud your efforts in seeing that London businesses sign up to the Living Wage.  You have been infinitely more successful than your predecessor was, and you have been doing something substantial for it. 

 

I wonder, Mr Mayor, if you are familiar with the situation of workers and owners of small businesses in parts of London.  I wonder if I can give you a couple of quotations here.  This is a man who owns an off-licence in Tower Hamlets.  When we were doing our research he said, “I have one person working here and he is on £6.79 an hour.  It is tough owning an off-licence.  I spend over £2,000 a quarter just on value-added tax (VAT), £420 a month on business rates alone, plus rent and rates on top.  I would pay the London Living Wage tomorrow if I had some relief on my massive tax burdens, but if it becomes compulsory I know about 20 people in my position who will go under in a flash”.

 

Similarly, someone in a business which is a little larger said, “I employ eight people and pay them between £6.50 and £8.00 an hour.  I value them immensely and want to hold on to them, but in order to do that I need to pay them the best I can.  I feel terrible that I cannot yet pay them the London Living Wage, but frankly if it is made compulsory it will put me out of business.  I would have to cut staff in order to meet the increased wage bill, which is unthinkable as the customer demands great service and we need people in order to fulfil this.  I have to increase sales anyway to make a fair living wage for myself.  We have been going for three years and we are still constantly on the line.  I pay myself £10,000 a year even though I do six days a week.  What would help people like me is a VAT cut for the hospitality sector.  I pay £7,000 a quarter just in VAT.  It is a killer”.

 

Under these circumstances, do you not think it incredibly mistaken of the people sitting on the opposite side who believe that the London Living Wage should be compulsory and that the way to deal with the matter is to encourage people to pay the Living Wage by giving them carrots rather than using the stick?

 

Boris Johnson (Mayor of London):  I agree.  It is a very interesting proposal, the business rate relief.  Maybe there is something you could do on VAT.  I have to say that I agree with your basic point, which is that it should not be compulsory.  There is a minimum wage which is compulsory, but the point about the London Living Wage is that it is specifically to reflect the extra cost of living in London.  It is spreading.  The number of firms paying it has multiplied 15 times or more since I have been Mayor and 429, maybe more, companies now are paying it.  It was only about 27 when I started.  Huge progress is being made. 

 

The difficulty with making it compulsory is that you lose the moral aspect of it.  This is something that is about companies making a commitment to their staff that is supererogatory, that genuinely shows that they value those people and that shows that they are committed to their employees and they want to help them meet the costs of living.  Companies should do it.  They should do it.  They will find that it engenders loyalty; it produces higher productivity and all the rest of it.  However, if you make it compulsory you nullify that aspect of the thing, and you also probably have some of the bad impacts you describe in terms of making it very difficult for some smaller businesses.

 

Tony Arbour AM:  The spin-offs are obvious because every employer wants workers who are going to be loyal to them, and the employer wants to be loyal to his workers.  In the two examples I have given you that is exactly what happens.

 

Did you know that there are some quite wealthy people who work in London who are not paying the London Living Wage, and indeed use zero-hour contracts, and indeed I refer to 62 Labour Members of Parliament who ‑‑

 

Boris Johnson (Mayor of London):  You are joking.

 

Tony Arbour AM:  I am not joking, Mr Mayor.

 

Boris Johnson (Mayor of London):  Are these the people that Ed Miliband [Leader of the Labour Party] was attacking?

 

Tony Arbour AM:  Indeed. 

 

Boris Johnson (Mayor of London):  The predators.  Predatory Labour MPs.

 

Tony Arbour AM:  Absolutely right, and yet they come here and they posture and they say how terrible the administration is here in London..

 

Boris Johnson (Mayor of London):  Velociraptor Labour MPs.

 

Tony Arbour AM:  ‑‑ when no one has done more to ensure that the London Living Wage is paid than you.  In relation to the point about business rates, of course, as you know, Mr Mayor, there has always been a provision whereby local authorities can give a rebate on business rates in relation to charity shops and indeed other premises which local authorities consider to be adding to the quality of life in London.  Since manifestly the London Living Wage will add to the quality of life in London, do you not think that because you are a preceptor, you may be able to have some particular influence in ensuring that the kind of discretion that I am asking for is given?  No doubt you could give Kit [Kit Malthouse AM, Deputy Mayor for Business and Enterprise] a steer on that one.

 

Boris Johnson (Mayor of London):  As I think Murad [Murad Qureshi AM] said, Brent is looking at this.  They have not actually done it as far as I understand it.  They are looking at a business rate discount of £5,000 for 2015/16 if they become accredited London Living Wage employers.  There is going to be a discussion at cabinet level in Brent in January 2015.  It is an interesting idea.  A one-off payment to 200 firms they will be making. 

 

The question for the state is, “Will you ultimately save money by taking people off in work benefits, by helping their firms to pay them more?”  That is the interesting--

 

Tony Arbour AM:  Classical economist Adam Smith would certainly say that by giving people more disposable income, which they can choose to spend themselves, that in itself will generate far more than we are laying out.  It is a sprat to catch a mackerel.

 

Boris Johnson (Mayor of London):  Yes.

 

Tony Arbour AM:  Thank you, Mr Mayor.

 

Boris Johnson (Mayor of London):  Thank you.