From the TUC

Fair pay will save people from pay day lenders

25 Mar 2014, by Guest in Society & Welfare

Last week George Osborne told the House of Commons ‘This is a Budget for building a resilient economy’. What he didn’t say is that his vision of a resilient economy is one built on low pay jobs and on squeezed, frozen and declining wages (or ‘pay restraint’ in Osborne-speak).

Yes, some growth and jobs are returning but there’s precious little to celebrate when the average person is £1600 worse off a year under this Government; when increasing numbers of people are only able to find work in low paid, insecure zero hours employment; nor when one of the areas of fastest growth is payday lending.

I believe Labour has been right to focus on the cost of living crisis. And rising prices are an important part of the argument. But the real problem is the falling value of wages. The roots of our cost of living crisis lies in a massive structural shift in our economy, based on the neo-liberal economics introduced by Margaret Thatcher. And it’ll come as no surprise that declining wages have gone hand-in-hand with the deliberate weakening of trade unions.

In 1975 the proportion of national income going on wages was 65%, by 2011 this had fallen to 53.7%. Meanwhile the share of GDP going to shareholders at the top has soared.  In a recent article Will Hutton powerfully argued that over this period between 5-7% of GDP has ‘moved permanently from the workforce to shareholders’. As profits have soared and shareholders have taken home a bigger share of the rewards workers have lost out.

As wages have declined, and particularly sharply since 2010, millions of people have turned to credit like payday loans and racked up personal debt as the only way of maintain their living standards. I’ve been campaigning to stop the payday loan rip-off and last week took part in a TV debate about debt and payday loans. The usual suspects argued that the ‘feckless poor’ were getting loans for Xboxes and TV’s, ignoring the truth. The vast majority of people who are forced to take out a payday loans need them for food, for fuel bills, and for rent. This is Britain 2014 where low pay forces people into the open door of The Money Shop.

As a result of pressure from MPs, consumer groups and debt advisers, new payday loan regulations are now coming in and if properly enforced should stop some of the worst rip-off practices. But until wages rise to cover the cost of everyday essentials the high-cost credit will always be there with easy-access loans for people who can’t make ends meet.

Big steps have to be taken to tackle low pay and I hope the Fair Pay Fortnight will shine the spotlight on them. The National Minimum Wage used to be a safety net, but it’s become the norm. It needs a significant increase and we need a shift to the Living Wage. We need to strengthen collective pay bargaining so that trade unions can play a bigger role in all areas of employment, public and private, in securing wage increases. And we need workers sitting on remuneration boards in all workplaces so the voices and demands of staff are heard, alongside those of shareholders and executives.

Until Britain gets a pay rise, our cost of living crisis and personal debt crisis will only deepen. George Osborne can go on trumpeting his economic success story, but for the millions of people in low pay jobs and struggling to make ends meet this will remain a hollow ‘Alice in Wongaland’ recovery.

EVENT: Paul Blomfield MP will be speaking at a Fair Pay Fortnight lunch event in Sheffield on Friday 4th April with USDAW and the TUC on the links between low pay and pay day loans. You can find out more and reserve your place online here. For more information contact Neil Foster at [email protected]

A banner promoting Fair Pay Fortnight: Two weeks of events highlighting Britain's cost of living crisis, from 24 March to 6 April 2014. Find out more at