Harman and CBI clash on wage

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Indy Politics

Economics Editor

The general election may still be nearly two years away, but opening salvoes were fired yesterday on what seems sure to be one of the main fronts, Labour's commitment to introduce a national minimum wage.

Speaking on BBC Radio 4's Today programme, the Deputy Prime Minister, Michael Heseltine, described any rate set above the market level as a surefire recipe for destroying jobs. But, addressing a CBI conference in London, Harriet Harman, Labour's spokesperson on employment, denied this claim, saying that "a minimum wage introduced sensibly does not cost jobs and that abolition of minimum wage protection does not create jobs".

The exchange of fire was prompted by a CBI paper for the conference which said that "even a low minimum wage would reduce job opportunities and create major problems for wage structures in a wide range of companies". If set at pounds 4.10, the objective of many in the trades union movement, "job losses would be significant". It would add pounds 4.5bn or 1.5 per cent to the national pay bill.

Howard Davies, director- general of the CBI, said that a national minimum wage would erect a "higher hurdle" to those trying to get back into the labour market. With low household incomes mainly linked to joblessness, he said the CBI "did not find it a persuasive prescription" to tackle poverty.

The CBI suggested that the best way to deal with poverty was to extend the family credit system, under which top-up payments are made to working couples or single parents on low pay. It supports the extension of in-work benefit to childless couples, a measure the Government is to pilot next year.

Ms Harman maintained that a national minimum wage was essential to protect the taxpayer. In-work benefits now cost pounds 2.4bn and had doubled since 1990. In-work benefits and no floor under wages created "a blank cheque for unscrupulous employers." The result was that the taxpayer had "to top up a bottomless pit", she said.