Ed Miliband clashes with Vince Cable over minimum wage

“Basic principle”: Ed Miliband,left, wants to set a five-year target for the national minimum wage. Vince Cable isn't so sure

Joe Murphy @JoeMurphyLondon|Political Editor

19 May 2014

Ed Miliband clashed with business leaders today as he unveiled plans for a national minimum wage rise that could be worth more than 60p an hour for 5.2 million people.

Industry warned that small firms could shed jobs as a result, and claimed the plan risked destroying a national consensus by turning pay into a political auction. Ministers said the formula proposed by Mr Miliband could backfire and mean lower increases.

Labour’s leader said Britain had one of the worst records of any developed country for low pay. “It’s a basic principle for the next Labour government that people who are going out to work and putting in the hours should be able to get a decent return,” he said.

Mr Miliband’s announcement did not contain figures, which will be held back until closer to the election, pending consultations with business groups.

A five-year target would be set in 2015 by the new government, with the independent Low Pay Commission left to decide how best to implement it.

The minimum wage is £6.31 for adults, but less for younger people and apprentices, and is due to rise to £6.50 this year. One suggestion is that Labour would raise it to 60 per cent of median earnings, which would be about £7.14.

“Every country around the world is seeking to address this question, whether it’s President Obama in the United States, or other countries,” said the Labour leader.

But Business Secretary Vince Cable said the minimum wage had increased faster than median earnings under the Coalition. “Had we rigidly fixed it to earnings the way Mr Miliband suggests, the minimum wage would have fallen during the recession, making thousands of people worse off,” he said.

Katja Hall, chief policy director of the CBI, said it was wrong for politicians to set wages. “I think we need to recognise that the system we have at the moment has been really successful and that system involves the setting of the minimum wage by an independent Low Pay Commission,” she said.

Dr Adam Marshall, at the British Chambers of Commerce, said most businesses would support a higher minimum wage “but only on the basis of careful evidence”. He added: “There is a clear risk that ahead of next year’s general election, politicking around the minimum wage by all three major parties could lead to unaffordable promises that cost jobs and growth.”

The Institute of Directors said there was an emerging “consensus” that the minimum pay level should rise, providing it was “sensitive to the effect this could have on small employers”.

But Labour was backed by Sir George Bain, the original Low Pay Commission chairman. He said: “The problem today is the millions of people paid just above the minimum wage, but still too little to maintain a decent standard of living.”

Ed Miliband clashes with Vince Cable over minimum wage

Read More