Labour rethink on minimum wage

Labour will go into the next general election with neither a set figure nor a calculation formula for a national minimum wage, Tony Blair, the party leader, and senior colleagues have decided.

Their opposition to setting a level or fixing a formula - including the half male median earnings computation that is favoured by left-wing unions - does not diminish Labour commitment to a national minimum, a party source emphasised yesterday.

But Mr Blair and Harriet Harman, the party's employment spokeswoman, want a switch of emphasis away from a specific figure that could be exploited by the Tories, and towards a public campaign for the principle of the minimum and a "sensible" policy by a party preparing for government.

The rethink, which is to be confirmed officially in the next few weeks, is likely to see the Labour Party embracing the idea of the minimum wage being fixed by consultation between employers and trade unions, a feature of the now-defunct Wages Councils, and for it to reflect prices rather than earnings. A system that used changes in the price index instead of average earnings to determine increases in the minimum could solve the problem of union negotiated differentials, which critics have claimed would lead to across-the-board wage rises and risk rising inflation.

Signalling the new approach with the release of a dossier of other countries' minimum wage systems yesterday, Ms Harman said common factors were that all countries consulted unions and employers, most took account of the price index rather than the level of average earnings, and all took account of the effects on employment of any change in the minimum wage.

Some senior Shadow Cabinet members have privately expressed concerns that bringing in the wage at too high a level could affect jobs.

The Labour leader has consistently affirmed his continuing commitment to a national minimum, but the scrapping of the pledge at the 1992 election to bring it in at a specific rate will anger the leaders of the biggest unions.

Bill Morris, the leader of the Transport and General Workers' Union, insisted last month that a £4-an-hour figure should be struck.

Last year's suggestion by the Labour-sponsored Social Justice Commission that the figure should be set at £3.50 provoked criticism from some trade unionists as effectively freezing the level promised by Labour at the last election. The half median male earnings formula would produce a figure of about £4.15 per hour.

Labour Party chiefs are aware of the risk of confrontation with the unions, but will make the point that most very low-paid workers are not unionised anyway.

If the "consensus" approach produced a figure only as high as £2.50 an hour, 1.3 million people currently earning less than that would benefit.

There are a further 342,000 people who are earning less than £1.50 an hour. "We are saying that even at £2.50 an hour more than a million people would be helped," said a party source.

Labour to target Tories, page 8