................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE: 18.6.95 ................................................................................ JOHN HUMPHRYS: Harriet Harman, why have you backed away from setting a level? HARRIET HARMAN: Well, what we're saying is we think the better way to do it is to have a low pay commission which involves unions and employers, and that you fix the level of the minimum wage, not according to a formula just related to average earnings, but that you have a low pay commission which takes account of the employment situation, the distribution of income in the workforce, and you then achieve a consensus about it, because you see in all other countries where they've got minimum wages they actually involve employers and unions together in fixing it and that's very helpful also when it comes to making sure that it's put into effect. HUMPHRYS: So you want some sort of consensus, you want some sort of overall agreement, across the board agreement, and you accept that there are going to be economic effects from whatever the minimum wage turns out to be? HARMAN: Well, we think it's absolutely essential that there has to be a minimum wage, and there are two reasons. Firstly because of the exploitation that there is because of low pay, and I think that there's an increasing feeling in this country that people don't like the huge divisions in society, the divided Britain, the unfairness of the Tories, that actually you've got some people on the one hand awarding themselves huge pay increases, whilst others are driving down pay, down to one pound an hour, and of course the Tories have not just stood by whilst this has happened, they've actually been driving it with the abolition of the Wages Councils, and by asking all unemployed people before they get benefit now, "What's the lowest wage you're willing to work for". So people know that there is this division emerging, and I think people think it's fair that there should be a floor under wages, and of course the cost of low pay is not just paid by the low paid themselves, some of them working longer and longer hours, it's also paid by the taxpayer, and that is an issue that has to be addressed. HUMPHRYS: So - but it's because you accept that there are going to be economic effects, there is going to be some sort of economic fallout of setting a minimum wage, that you're reluctant to rush into setting the figure at this stage? HARMAN: It's not about rushing into it, it's about how we're going to do it, and if you look at the experience of how we had low pay protection in this country through the Wages Councils which we had up to two years ago, what those Wages Councils did, and they involved an equal balance of employers and unions getting together, saying what's happening in pay, what is the best level that we can move pay up to, where should the floor now be? So what we're doing - there's nothing about sort of keeping our cards close to our chest on this, it's looking at our tradition of wage fixing in this country, it's looking at international experience, and saying: what's the best way to do it - is there a formula which relates to a single index, is that the best way to do it, or should we actually have a much more flexible situation where we pull employers and unions together, take account of employment, take account of economic circumstances and fix it like that. So this is about strengthening our policy and making it a more practical policy for government, it's not at all about backing off. HUMPHRYS: Why do you have to wait until after the election? Why can't you get employers and unions together and reach some of those decisions now? HARMAN: Well, I think you can't in practice have a shadow low pay commission. I mean you can't do that - that's something - HUMPHRYS: Why? HARMAN: Well, it's not just something you can do from opposition, you have to do it - you have do it in govermment. HUMPHRYS: You talk to employers at all sorts of levels, you talk to unions on all sorts of levels, there's no reason why you can't get them altogether now is there? HARMAN: No. The way to do it is when we're in government, then to say, now employers and unions can come together, look at the economic circumstances then, and participate in fixing the level of a minimum wage which we will then implement. HUMPHRYS: Yeah, but I mean it's not as if ... HARMAN: And the Tories - you see the Tories are in government, so any shadow low pay commission couldn't actually then go on to implement it, because the Tories are in government. HUMPHRYS: Of course you've got to wait until you get into power before you can do it, but there's nothing .... HARMAN: That's the point John, if I might say so. HUMPHYRS; But there's absolutely nothing stopping just as you have with all sorts of other commissions, getting together and formulating your policy at this stage. You don't have to wait until after the election to formulate a policy. HARMAN: Ah, but we are formulating a policy, we have formulated a policy, and the policy we've formulated is to tell people, this is how we're going to do it, and if you look at how Winston Churchill set up the Wages Councils that's actually exactly the same approach he took. He said, "We will set up the Wages Councils, we will get employers and unions together, they will look at the economic and employment circumstances and they will fix a figure in the light of those circumstances with the twin objectives of actually ending the exploitation of low pay", and he too had the objective of worrying about those industries which were expecting the taxpayer to pick up their pay bill and therefore were having the effect of driving pay down. HUMPHRYS The reality is that what you're most worried about at this stage is the political fallout that there would be from setting any sort of minimum wage isn't it, that's the truth of the matter? HARMAN: No, the reality is we're very concerned about the exploitation of low pay, we're very concerned, HUMPHRYS: And you've said that. HARMAN: Yes, but we're very concerned indeed about the effect on the taxpayer, and one thing that didn't come out from what Andrew Dilnot of the Institute for Fiscal Study was saying, is that the benefit bill for people who are in work but are seeing their pay fall has actually doubled in the last four years, so it's not the case of a particular level, and I think that what we're concerned to do is to set out what our approach is and to set out how we'll do it, because as I've said I think the British people want to see protection against low pay, they don't think it's right, but they want to see us implement it practically, they want to know that we're a serious government who when taking important economic steps will actually take into account the views of employers as well as unions, and the economic circumstances. HUMPHRYS: But what all of that is not going to lead to is a minimum wage of four pounds fifteen an hour is it? HARMAN: Well, I don't think there's any point in us saying that the way we're going to fix it is by consultation and by involvement, and then me sitting here now and saying what it's going to be, that would undermine the integrity of the process, and just as Winston Churchill didn't say, "I'm going to set up the Wages Councils, but by the way here's what the figure's going to be", I mean that's to ignore the fact that when you pull people together you pull in a lot of experience and a lot of information in addition to the information you've got through published sources. HUMPHRYS: But you.... HARMAN: It's a real - you see the difference that I think it is important for people to understand is that this is not a device, this change in policy. This is about a practical improvement in our policy, so that when we get into government we can deal with the issue of low pay, which is an enormous problem, but in the most sensible pragmatic way. HUMPHRYS: But you don't have to go to the employers to find out what their view is on four pounds fifteen an hour; they'd tell you, you would be off your heads to set a minimum wage of four pounds fifteen an hour. You know that now. HARMAN: But we certainly have to involve employers in the process. Firstly we have to draw on their experience that's over and above the figures, secondly, and this is.... HUMPHRYS: So involving the employers in the process means that it's not going to end up as four pounds fifteen an hour is it? HARMAN: But if you have a consensus you actually have to take into account the views of people you're involved with. HUMPHRYS: Quite. Exactly. HARMAN: I'm not going to answer your question John. HUMPHRYS: Well, you've already answered it I think, haven't you? You've said you will take into account the views of the employers. They are manifestly, obviously opposed to the four pounds fifteen an hour floor, that's that! HARMAN: What I'm saying is that it's not for me to sit here and say in advance what the figure that's going to be agreed through this procedure's going to be, because that would be to make the procedure a sham, and I think that it's important that procedure works, because in all other countries where they have a low pay floor, where they have a floor under wages - and you see we're the odd people out here. Up until two years ago we had low pay protection, we are now alone in having no low pay protection, and in other countries what they do, and this is America, Canada, Japan, as well as Europe - what they do is they actually achieve a consensus on it, and the reason why they achieve a consensus is because they get the right figure in that way, they have the broadest possible agreement, and you can make sre that it's actually put into effect, if you've got everybody behind it. HUMPHRYS: Indeed, and quite clearly you are not going to get a consensus on four pounds fifteen so let's leave it there for the moment on that figure, I mean, I take your point, you're not going to give me a figure, I accept that, but it's manifestly obvious to anybody listening to this that if you were prepared to accept four pounds fifteen, you'd say so because then you'd get the unions off your backs wouldn't you, but you can't say so because you know the effect on the employers. HARMAN: No, I think what is manifestly obvious, at least I hope what's manifestly obvious to people watching is that we've gota very strong commitment to the ending..the exploitation of low pay. We are against the tax payer being ripped off and low paying employers off-loading the costs of their employers onto the benefit bill and we are going to do it in a sensible way. Now, in the past we have have a formula which actually related to only one indices, only one indicator, and what we are suggesting is that this is a better way to do it and that's what is manifestly obvious, it's as plain and simple as that. HUMPHRYS: Right, so you would be much more flexible is what you're saying than you have been in the past, you set an across the board national minimum wage in the past, you're going to be more flexible than that now. Does that mean that you would take into account regional variations because of the effect they would have on employment, unemployment? HARMAN: Well I think that the case for regional variations is not actually made; one of the problems is that low pay and these new figures that we have produced show that low pay is a problem in all regions, there are more people earning less than two pounds fifty an hour actually in the South-East than there are in Yorkshire. I mean, obviously, in the economies, in the regions where the economies are weak, we've got an economic strategy which will equalise up regions and therefore if you have a minimum wage, which entrenches that regional inequality that we don't think that's the best direction to go in.. HUMPHRYS: But if the employers in those regions, the sorts of regions of which you speak came along to to you when you are getting them altogether and trying to arrive at a consensus, and said we feel strongly that there has to be some regional variation because dozens of us would go bust in this area if you set this sort of level, what would your reaction be to them? HARMAN: Well if you look at the experience of other countries where they do have regional inequality between the economies of different regions, what they do is they draw in employers representing work in different regions and take that into account, but I think that the importance of having a national figure is that we are talking about a floor under wages, we are not talking about average wages, we're talking about setting a floor under wages. HUMPHRYS: A level below which nothing could possibly drop. HARMAN: Exactly, exactly. HUMPHRYS: But it's hugely important from the employers' point of view therefore isn't it, that that be flexible so that you won't get great ...after all, it costs much less to live in, I don't know, Liverpool, than it does in Bournemouth let's say, for instance. Therefore, it would be unrealistic would it not, they will say to you when you have your commission, to make us all pay exactly the same, notwithstanding the cost of living for instance? HARMAN: Well I think what employers are saying to us now, and obviously we are talking extensively to employers as well as unions about this, is that they want to be sure that the voices will be heard from different industries and the voices will be heard from employers in different regions. HUMPHRYS: So your mind's open on that, you're not.... HARMAN: No, no..... HUMPHRYS: Oh, so you're talking to them but you're closed.... HARMAN: Just let me finish my sentence. What I am saying is that you have to take into account that at the moment there are regional inequalities. Part of our economic strategy is directly designed to reducing those regional inequalities. In other countries where they have a national minimum wage they involve employers from all regions so they can look at what the effect is going to be. But the end objective is to fix a floor under wages and I think it's quite important that you don't have to ask yourself what region do I live in or what region is my business in, or what region..what industry do I work in or what industry is my business in, you can actually say for nobody can know what is the floor under wages and I think that's why one of the reasons why many countries have chosen a national figure is that it's much clearer, much more simple, much morre straight forward and everybody can know what it is. HUMPHRYS: So you are going to talk to the employers, you've used the word consensus a number of times in the course of this interview, you are going to talk to the employers, you are going to ask them what they want, but if they say one of the things we want is regional variation, if they say one of the things we want is variation according to what industries we're talking about...textile people for instance might say we're competing against very low wages in other parts of the world therefore we have to pay something (sic), you will say not interested in those arguments, sorry, our mind's made up, I mean, that is what you're telling me. HARMAN: Well you have to take into account the effect on their industry and you can either take into account... HUMPHRYS: Oh, so your mind isn't made up, I am sorry I am really puzzled by this, I'd like to be clear about this. HARMAN: You can either take into account the effect on their industry by having many different figures for different industries which is what the Wages Councils did, or you can look across...you can take into account the effect on different industries and fix one figure, and that model works in different countries and certainly there are many employers now who are recognising that they can benefit from a minimum wage because they see that our vision of the economy is that we can't compete on a spiralling down of wages, of lower and lower pay, that that is not the way to economic prosperity and that our low pay policy is part of our economic strategy for moving Britain from the low road to the high road. HUMPHRYS: It's beginning to sound as though this is going to have to be a pretty low ceiling, isn't it, if you are not prepared to acknowledge regional differences, if you are not prepared to acknowledge industry differences. You can't set it too high can you? HARMAN: Well I don't think it's helpful to talk about too high or too low. HUMPHRYS: It's very helpful to the employers because their companies are at stake. HARMAN: What's important is that we know what the objectives are, which we do, is to protect the low paid from exploitation and to prevent employers off-loading the cost of their employees onto the state. It's important that those objectives are clear and indeed they are and shared by the unions and by many employers as well as ourselves. And it's also important that people understand how we're going to do it and that's what people want to know and you see that's the way the Wages Councils were introduced in this country by Winston Churchill, that's the way all other countries have introduced their low pay protection and what's why..how when it comes to uprating their minimum wages, that's what they do. And I think the trouble is that people have kind of forgotten that we are out of step here and that we are also heading down a very dangerous path because we cannot compete successfully as an economy simply by cutting and cutting pay and also the taxpayers are not going to put up with a growing bill where they have to pay the wages of low paid employees. HUMPHRYS: And I'm not suggesting that your policy is to encourage cutting and cutting pay, what I'm saying to you... HARMAN: But you see this is the dividing line because the Tories' policy is to do just that. HUMPHRYS: Well we'll talk to them about that at another occasion. HARMAN: No, but this is the choice, John, the choice is whether or not you compete on the high road with high investment, high skill, high productivity and high quality and our minimum wage is part of that - or whether you do as the Tories' do and abolish the Wages Councils, drive down the pay by using unemployed and say compete on the lowest possible cost. HUMPHRYS: But if you are talking about setting a national minimum wage across the board, across all the regions, across all the industries, what I'm saying to you is that that cannot be set at even a moderately high level because of the devastating effect it would have on industries and on regions, that's common sense isn't it. You don't need a commission, you don't need hundreds of people talking to each other for months and months and months until the election and after, to establish that, that's just common sense. HARMAN: What you know you have to do is to look at the figures from the Labour Force survey, to see what the distribution of pay is. You have to obviously take account of the strength of the economy, you also have to talk to employers across different regions.... HUMPHRYS: Yes, and you want their agreement... HARMAN: ....and form a consenus and it's all part of moving from the low road and make no mistake we are on the low road now and that's where we're starting from...moving to the high road. HUMPHRYS: You're going to seek the consensus that you're talking about, in other words you have to take the employers along with you, you cannot set even a moderately high base level, across the board, nationally across regions of industries without causing them turmoil, and they've told you that already, you don't need to ask them again they've already made that prefectly clear to you. HARMAN: I think what you can do is look at how the Wages Councils worked and they did afford protection to people who otherwise might see their pay fall, as it has down now, sometimes to one pound fifty or even one pound an hour. So that you can look at the circumstances in which you are going to fix the minimum wage at a sensible level and I think quite frankly John, talk about moderately high, high...you know all those things are missing the point. HUMPHRYS: Not according to the unions and the employers they are not, that is the absolutely key factor. You can talk about a national minimum wage until the cows come home, but if you give them no idea at all of what sort of figure you have in mind, it is absolutely meaningless and unless you set it at a particular level, unless you set it at a reasonably high level and reasonably high isn't a description that the unions would use of course, but unless you set it at a reasonably high level then apart from anything else you are not going to save the two point four billion pounds in Social Security payments that you were talking about. HARMAN: Well there are two points there. You are saying that the way we are doing it is meaningless, you are therefore saying that the way that Winston Churchill introduced the Wages Councils were meaningless, in fact there was a lot of protection from those Wages Councils, it wasn't meaningless to the people on low pay at all. What you are saying is that the way all other countries do it is meaningless, it's not meaningless... HUMPHRYS: ...we have figures from them, we can see it in action, we can't see yours in action because you are not going to do anything until after the election. HARMAN: Yes but what they didn't do, is they didn't while in opposition fix a figure and then impose it in government, what they did is say how they would set about doing it and when in government they set about doing it and that's exactly what we will do. HUMPHRYS: But it's clear from what you've said, as far as I can make out anyway, that you are talking about a relatively low rate, has to be because..and that's going to upset the unions, it's going to be national, across the board and across industries, that's going to upset the employers - you're not going to get a lot of consensus are you, maybe that's why you're delaying it until after the election because you know the problems you've got. HARMAN: Not at all. I think there's an enormous amount of consensus. There's a consensus between us and the unions about the scandal of low pay and the importance of Labour attacking the problem of low pay and there's a consensus between us and the British people who loathe the unfairness of the Tory Government and who also recognise that it's to send the economy and the British people down a blind alley to make them compete on low wages with countries who pay ninety per cent lower than us. You made a benefit point which I'm afraid I didn't deal with, you're saying and Andrew Dilnot said.. HUMPHRYS: The two point four billion. HARMAN: That unless the minimum wage was eight pounds we'd still be paying benefits to people in work, but I think there's an important point here, because if you extend in-work benefits and the Tories are suggesting that they will extend Family Credit to people without children, what you are doing - and you have no floor under wages - what you are doing is you are sending a green light to employers, unscrupulous employers - cut wages, we will pay the bill. So that the whole point is that if you have in-work benefits you must have a floor under wages otherwise you end up with employers ripping off the taxpayers. So that it's certainly the case that we are in favour of in-work benefits as a welfare to work strategy but we want the benefit to go to the low paid, not to the unscrupulous employer. HUMPHRYS: Harriet Harman, thanks very much indeed. ...oooOOOooo...