Thursday, 23 January 2014


As each month goes by, there is growing evidence that the economy has turned a corner. Growth is predicted at 2.4 percent. There have been 400,000 new businesses created since 2010 and over 1 million new jobs. Unemployment is falling and now stands at its lowest rate since 2009. In Camborne and Redruth, unemployment is at 3.3%, lower than the national average.

One of the main priorities for the government has been to make work pay again. I have met too many people who say that if they work more than, say 16 hours a week, they lose more in benefits than they would gain in wages. We have to reform the benefits system so that it always pays to work longer hours. The new Universal Credit will have a tapered system so that you avoid sudden drops in benefit entitlements and by placing a cap on the maximum amount any one household can claim in benefits and reducing benefits like Housing Benefit, you increase the incentive to work.

However, the other side of the equation is trying to raise the income on those who are low paid and on the minimum wage. At the moment almost one and a half million people receive the minimum wage which is set at £6.31 per hour. Those who are at the lowest end of the pay spectrum have also had to grapple with the spiralling inflation left behind by the last Labour government. Inflation is now decreasing but the previously high rate has meant that even though there has been a strengthening of our national economy in real terms this hasn’t been allowed to really hit home and find its way into people’s pockets.

At the end of last week George Osborne said that it was time to consider increasing the national minimum wage because the returning strength to our economy means an increase can now be afforded. It's a difficult to get the balance right in a place like Cornwall. On the one hand, we know if we want to make work pay and help those on the minimum wage, we should be trying to increase the pay of those at the bottom. On the other hand we have a larger number of small businesses who are themselves struggling and we don't want to make it harder for them to take people on and create new jobs.

Both George Osborne and the Low Pay Commission, who advise the government on the minimum wage, have signalled that the rate should stand at £7 an hour which would be slightly above the rate of inflation and would see the wage return to its proper value before the recession hit. This will be a welcome boost in income for those on the minimum wage and should also increase the incentive to get off benefits and get into work.