Why I am supporting @TonyRobinsonOBE’s petition for a #LivingWage and fair payment terms

Two simple ways for national and local government to boost the UK economy.

If you were at the East Anglia SME Business Forum (#EASMEBF) in Dunston Hall on Thursday 7 Nov (or at similar events earlier this year), you might well have heard me sounding off (to those who would listen) about how the UK government should boost the economy with two simple (and ultimately self-funding) measures: prompt payment of invoices and a Living Wage. Thankfully I am not the only one making these suggestions – and the calls are coming from across the political spectrum, including from many supporters of the free market (like me).

Pay up on time

The first was to ensure that all government departments and government supported organisations (Quangos and such), whether local or national, paid all their suppliers’ invoices within 72 hours.  There are two reasons for this – one moral and the other economic.

The moral case is that these suppliers have provided the goods and services as agreed and should not be left waiting for payment. Government (unlike private enterprise) does not have to worry about cash flow – it can always fund its payments out of borrowing or revenue. Society (all of us) should not be riding on the backs of people who supply it with goods and services (many of us).

The economic case is that cash flow is the big killer of businesses – particularly micro-businesses and Small and Medium Sized Enterprises (SMEs). So by paying all suppliers faster, the government makes it less likely that those companies (or their suppliers) will have cash flow problems. This would mean fewer companies going into administration, which leaves creditors out of pocket and employees out of work. A more reliable cash flow might also make it easier for some companies to borrow to fund expansion – so boosting growth.

Fair pay for a fair days work

My second point was that all levels of government should ensure that everyone working for the state (whether directly or on contract) is paid a Living Wage (currently put at £7.65 an hour by the Living Wage Foundation) rather than just a subsistence minimum wage (of just £6.31 an hour). Again, there are good moral and economic grounds for this.

The moral justification is that we all benefit from the work of these people and they are often among the most vulnerable in society (many a product of shortcomings in our state education system). We should at least treat them with the decency and respect we’d want for ourselves. We (society) should not be riding on the backs of the weakest, simply because they lack the means to negotiate more equitable rates of pay for themselves.

It also makes good economic sense to pay the lowest paid a Living Wage (which, let’s face it, is still pitifully low). For a start, it would reduce the amount they have to claim in working tax credits and other complex benefits that are costly to administer. People would also be able to plan their lives more effectively, including spending more time with their children, which would mean fewer chaotic and failing families (with all their associated social costs).

According to KPMG, which supports the Living Wage, some 21% of Britain’s 25m workers are paid less than the Living Wage. Of these, some 891,000 would are on the minimum wage. Increasing their pay to £7.65 an hour would make them some £2,500 a year better off.

KPMG UK (which has paid the Living Wage, as a minimum, to all directly employed staff and those employed by its sub-contractors and suppliers since 2006) reports that employee turnover among its contracted cleaning staff has “more than halved since paying the Living Wage.” There is also good evidence to show that paying the Living Wage increases productivity by boosting morale and reducing levels of employee sickness caused by the stress of working multiple jobs just to make ends meet. “Paying the Living Wage is not only morally right,” says Boris Johnson (Mayor of London), “but makes good business sense too.”

Currently, QE is supporting the economy but, in the words of a leading hedge fund manager, it is the “biggest redistribution of wealth from the middle class and the poor to the rich ever.” Paying the poorest workers a Living Wage would help (in a very small way) to redress this. It would also enable them both to save and to spend more, both of which would help boost the economy (since saving is used to fund investment elsewhere) and increase tax revenues.

The government (local and national) should require these things of its suppliers – as part of those suppliers Corporate Social Responsibility (#CSR) commitments – something that many companies seem to go on about, without really understanding what social responsibility means. Apparently the European Commission has clearly stated that applying such socially responsible conditions to public sector contracts, particularly relating to paying the Living Wage, is fine provided they are not discriminatory – so there is nothing stopping this, except a lack of political will.

Now there’s a petition

So I was delighted on Saturday 9 November to see, on twitter, that @TonyRobinsonOBE has started a petition urging the UK government to pay its bills on time and pay the Living Wage as a minimum. But he went further, he urged the government to use its powers of negotiation (rather than legislation) to persuade all government suppliers to commit to paying all invoices within 30 days and all employees the Living Wage as a minimum, if they want to win government contracts in future. In other words, make those bidding for such lucrative contracts “an offer they cannot refuse.”

This approach appeals to me because it is using government as a force for good – setting the agenda/leading by example whatever you like to call it – without going down the complex (and anti-free market) route of legislation. It also doesn’t force an increase in costs on the very smallest companies, which sometimes struggle to employ people on the minimum wage as they start to expand. And it doesn’t deter companies from doing business in the UK (since they don’t have to apply for government contracts if they don’t want to or can’t make them pay on these terms).

Socially Responsible Investment (#SRI)

I am also pleased to see that Socially Responsible Investors, such as CCLA, are now considering a Living Wage as an important factor for their ethical investments.  The more private investors who can put pressure on their SRI fund managers to do this the better. In time, we might hope to see paying a Living Wage as an integral part of all Corporate Social Responsibility (#CSR) policies. So please sign Tony’s petition today and help improve the lives of millions of people.

@HuwSayer

@Business_Write

Thoughts on the EU and the use of the veto

People are criticising Cameron for using the veto, saying “this fails to protect our interests.” They fail to understand that if there had been no threat to the single market and our financial services industry (from either existing EU legislation introduced by the Lisbon Treaty or a new EU fiscal treaty) then the 26 could have easily given the safeguards he asked for and Merkel would have got the ‘stability pact’ she wanted (rather than the weaker one Sarkozy engineered: note, either way it falls a long way short of the full fiscal union needed to save the euro).

The fact that the 26 could not – and would not give those safeguards is a clear indication that the safeguards were (and still are) really needed but were not going to come unless we demanded them. It is also worth noting that what DC asked for was not that radical and could have been accommodated if Sarkozy had allowed. However, Sarkozy quite clearly wanted a) not to have full EU jurisdiction over French budgets (so needed to spike Merkel’s plan – that’s why he was smiling and she was not), b) wanted the UK out of the way and the City at his mercy.

If Cameron had not asked for safeguards he would have been accused of being weak (by left and right) – and by agreeing to a new EU treaty, he might have been forced into a ratification referendum (which the EU would have hated even more). Having asked for such safeguards, he could not back down for the same reason. Miliband says he should have built alliances (a debatable point since the coalition seems to have been very active in Europe since taking office) – but it might have been more helpful if Labour hadn’t signed up to some of the new financial regulation (with the Lisbon Treaty) in the first place.

Nor could DC have waited for a more opportune moment. This was probably the last time we would have had any real leverage on the issue of financial regulation, because the formation of the euro17 block effectively scuppers our ability to block most legislation even if it harms our national interests. Those who say DC should not have asked, implicitly accept the financial consequences of such inaction – and need to explain how they would deal with the subsequent loss of tax revenues from a shrinking City.

If Cameron had backed the 26 in a new fiscal treaty the threat of new legislation and taxes would have stood – and Sarkozy would have made good on it. The EU would also have used the new treaty for more mission creep – that is inevitable (as we have seen over the last 50 years – and as enshrined in the ratcheting clauses of the Lisbon Treaty) – and in time we would have been subject to the same German austerity (with, note, a greatly reduced stream of tax revenues from a by then depleted City), which would make Osborne look like Santa.

Finally, it is worth noting (particularly for those fans of the euro and those who think we should have backed this enhanced stability pact) that these new fiscal rules impose the same balanced budget constraints on the euro17 as the Republican Tea-Party want to impose on the US – now I wonder how the ‘progressives’ feel about that?