To tackle the scourge of low pay, politicians can learn lessons from Brent council

During Living Wage Week we will hear much of why paying the Living Wage is the ‘right thing to do’ – with politicians from across the political spectrum vowing to ‘do more’ to encourage businesses to pay the Living Wage and to tackle in-work poverty.

Becoming an accredited Living Wage employer is a good place to start for public sector bodies wishing to promote the Living Wage and the news this week that 31 local authorities have become accredited is to be welcomed. But with the overwhelming majority of low paid jobs existing in the private sector, local and national government must look outwards if we are to impact change in some of the lowest paid sectors such as retail and hospitality.

Today I was proud to announce that Brent Council will be the first Local Authority in the country to propose business rate discounts to Living Wage accredited employers. The business rate discount could see local employers receive a one-off discount of up to £5,000 which will sit alongside a package of measures designed to incentivise businesses to make the transition to becoming a Living Wage employer. In addition to the discretionary rate discount, businesses can expect special recognition upon accreditation including being publicly listed on the Council’s website and to receive press and publicity support with a visit from the Mayor or Leader of the Council. The proposal has been welcomed by the Living Wage Foundation who we have been working closely with in developing the idea.

One of the key challenges in promoting the Living Wage is to see its implementation from the perspective of struggling – particularly small – businesses. The ultimate choice must of course come down to the individual business themselves and the Living Wage movement has always been clear that it does not want to push to legislate for the Living Wage. The fact that the Living Wage is voluntary however, does not mean that local and national governments do not have an active role to play when it comes to helping to widen its implementation.

If we are serious about tackling chronic low pay in the private sector where it is most prevalent then we need some serious policy discussion around this issue. The Resolution Foundation in their report ‘Beyond the Bottom Line’ states that there is ‘almost no debate about how public policy might be used to extend coverage of living wage agreements’. Given the potential savings to the exchequer from increasing living wage coverage  (the Resolution Foundation estimates savings in the region of £3.6bn if the Living Wage was universally applied) there are sound reasons for a future government to get behind this agenda in a serious way.

Section 8 of the Citizens UK manifesto is explicit in its practical recommendations to government in relation to the Living Wage which include suggestions such as including changing governance codes to require publicly listed companies to disclose how many they employ on less than the Living Wage and offering organisations that pay the Living Wage training and staff development subsidies.

Local and national government alike must review how they can best utilise existing levers of power to help promote the Living Wage by creating incentives for businesses.

The area of business rates is just one of many ways in which local government interacts with the business community, with others such as planning, inward investment and procurement potentially having a role to play in promoting the Living Wage in the wider private sector. All of these areas need to be examined to review their potential to encourage and assist businesses to become Living Wage accredited. John Allen, Chair of the Federation of Small Businesses has called for ‘government to reduce other business costs which would enable small firms to pass on the savings to their staff in the form of higher wages’, a sensible suggestion that the Labour Party could explore further by setting up a task force in partnership with business representatives and local authorities to comprehensively examine the potential for such action.

The ‘Make Work Pay’ contracts announced by Ed Miliband last year are a positive step towards giving businesses across the country incentives to pay the Living Wage. The contracts will give firms which sign up to paying a Living Wage a 12-month tax rebate of up to £1,000. It is innovative approaches like this that we need to continue to explore and promote in partnership with businesses if we are to find solutions to the problem of low pay in the private sector.

There is broad cross party consensus that government both local and national cannot and should not do all the heavy lifting when it comes to tackling poverty. What is less clear is what other agencies need to do in order to step up and take responsibility and how government can best work with them to support a reduction in poverty. Director- General of the CBI John Cridland has been an advocate of the principle that businesses are very much part of their local communities and that there is a role for them to engage in the wider social context in which they operate.

The promotion of the Living Wage must never be a stick to beat businesses with. What is required is a genuine dialogue with businesses to understand where the barriers lie to becoming Living Wage Accredited and for government to respond to these challenges by reviewing how we can best utilise the tools at our disposal to support businesses to pay the Living Wage. In between legislating and cheering from the sidelines there is a whole grey area of policy waiting to be explored.