Matthew Hancock is the Member of Parliament for West Suffolk and Minister for Skills in the Departments of Business and of Education. Follow Matt on Twitter.
I used to be an
economist. Worse, for a while I was an economic forecaster. My only defense was
that I was young and naïve. But while forecasters may have been invented to
make astrologers look good, there’s another aspect of the economists’ trade
which makes me cringe: the idea that low pay is a necessary evil of globalised
There are some on the right who argue, rightly, that Britain needs to be more
competitive but then argue, wrongly, that lower labour unit costs are the way
to get there. This argument makes the fundamental mistake of treating labour unit
costs as a means to an end rather than an end in itself. After all, one
person’s labour unit costs are another’s wages, so low labour costs are just a
euphemism for low pay. But pay means prosperity – which is the whole point of
becoming more competitive in the first place. Higher pay does not make a
country less competitive, it makes it more prosperous.
Then there are those on the left who make the opposite mistake, they accept the
importance of higher pay, but they reject competitiveness as the route to get
to it. They argue that higher taxes or more borrowing are the route to higher
pay. But this ignores the crucial question of where the pay – the prosperity
comes from. We have no God-given right to pay and prosperity higher than most
of the rest of the world. We have to earn it, not borrow it from our children.
For me, tackling the root causes of low pay are what being a modern
Conservative is all about. Of course a modern Conservative Party also needs to
be comfortable with modern Britain. We must constantly reassert our strong and
heartfelt commitment to public services: we must be passionate about an NHS
free at the point of delivery, and about raising standards in education for
all. And we must recognise Britain’s social and cultural changes.
Today, the Tories are the energetic, forward-looking party, excited by new
technology, optimistic about the future. Where once we’d campaigned against
phone masts, now we’re rolling out superfast broadband across the country, for
example. But being comfortable with modern Britain isn’t enough. A modern
Conservative Party is, must be, and must be seen to be, on the side of the low
This means being fair in the way we share the responsibilities of deficit
reduction: that we are all in this together. The biggest burden rightly falls
on those most able to bear it, with the top ten per cent bearing the greatest
burden, so that in 2010/11 inequality actually fell sharply to a level last
seen under the last Conservative Government. It’s also why raising the tax
threshold is such an important policy: so if you’re on the minimum wage your
income tax bill has been cut in half.
Where we directly control pay, in Government, the public sector pay freeze has
excluded those earning less than £21,000. Our public sector pension reforms
benefitted the lowest paid, and the highest paid took the greatest hit.
But we also need to tackle low pay across the economy, outside areas directly
under Government control. And here the policies of the centre right are best
placed to deliver.
Being a modern Conservative Party means ruthlessly supporting each and every
person to reach their personal best, which where the modern, inclusive, social
policies, and the economic policies, become intertwined.
Because we cannot compete unless every person reaches their potential. And the
best way to do that is by radical education reform. Nor can we deal with
our deficit without tackling the social injustice of youth unemployment. And
that means radical welfare reform, supporting those who work hard and want to
get on in life. It’s why we are bringing in measures like Traineeships
announced today, and high quality Apprenticeships to give all young people the
skills they need to get a job, and then a better paid job.
The only way to compete in the global race is to tackle low pay by tackling low
productivity, to ensure globalisation is a race to the top, not a race to the
bottom. That’s not just an economic challenge but a vitally important social
Supporting the low paid in this way means tackling immigration. While
challenging for some businesses, it is right for the low paid whose wages were
undercut. It means building housing by reforming planning, so people can afford
to buy a home. It means passionately supporting the minimum wage, and indeed
strengthening it, as we did when we introduced the Apprenticeship minimum wage.
Capitalism is always stronger when the link between effort and reward is
stronger, at every level of the income scale. That’s why, in the past, I’ve
railed against rewards for failure for the highest paid. Now we must
deliver rewards for success for the lowest paid. Supporting those who want to
work hard and get on in life: that is modern Conservatism in action.