Policy Reunion: National Minimum Wage

As part of our Better policy-making project, along with the Political Studies Association (PSA), we are running a series of 'policy reunion' seminars with the Political Studies Association on policies its members ranked as successes of the last 30 years in an Institute survey.

Part of the fabric: report of the National Minimum Wage policy reunion

The national minimum wage emerged as the top pick for the most successful policy of the last 30 years in our survey of members of the Political Studies Association.

But how exactly did this policy change from being highly controversial to almost universally accepted? That was the subject of our most recent Policy Reunion which brought together the key players in the setting of the UK's first national minimum wage.

The story of the national minimum wage emerged as a play in three acts:

• first - getting internal agreement within the Labour party and the wider labour movement to the principle of the national minimum wage
• second - once the principle was agreed the detailed preparation in Opposition to both settle the details and the politics to be ready for implementation in the event of a Labour victory
• third - the establishment of the Low Pay Commission to determine the level of the national minimum wage.

The Panel

• Sir George Bain, First Chair of the Low Pay Commission (1997-2002)
• Rt Hon Sir Ian McCartney, Shadow Employment Minister (1994-1997), Minister at Department for Trade and Industry (1997-1999)
• Rt Hon Margaret Beckett, President of the Board of Trade (1997-1998)
• Sir Bill Callaghan, Chief Economist and Head of the Economic and Social Affairs Department at the Trade Union Congress, Commissioner, Low Pay Commissioner (1997-2000)
• Rodney Bickerstaff, President of TUC (1992), General Secretary of UNISON (1995-2000)
• Geoffrey Norris, Special Adviser (Business), Number 10 Policy Unit (1997-2008)
• Dan Corry, Senior Economist IPPR (1992-1997), Special Adviser DTI and DTLR (1997-2002)
• John Rhodes, First Secretary of the Low Pay Commission (1997)
• Chris Pond, Director of the Low Pay Unit (1980-1997), Chair, Low Pay Unit (1997-1999)
• Academic Discussant: Dr Martin Lodge, Department of Government, LSE

Act one: the battle for the labour movement

The national minimum wage was not adopted as formal Labour party policy until 1985. The idea had been around since the beginning of the 20th century, but was opposed by many in the labour movement throughout the 1960s and 1970s.

Trade unions were concerned that it would undermine collective bargaining, erode their members differentials and also potentially cost jobs. 

Rodney Bickerstaffe and Chris Pond recalled their campaign to get acceptance of the principle of a minimum wage - with poorly attended meetings and a lot of scepticism.

The tide began to turn in the mid 1980s. A minimum wage of 2/3 male median earnings became Labour policy in its 1985 party conference. It was endorsed by the TUC (though with the TGWU voting against) a year later.

The next battle was to get it into the Labour manifesto. In the early 1990s, shadow chancellor John Smith and employment spokesman Tony Blair were persuaded to put the minimum wage into the 1992 Labour manifesto. But that was the election Labour did not win.

Act two: preparations for office

From 1994-6, Sir Ian McCartney led the efforts to prepare the way for the introduction of a national minimum wage:

• technically - by resolving a range of detailed issues
• politically - by repositioning the issue as part of a wider attack on poverty, and as a measure to improve economic performance and social justice

A 'fat cats' campaign contrasted excessive boardroom pay with abuse at the lower end of the system.

The aim of the preparatory work was twofold:

• to ensure the Labour leadership were not caught out by questions in the 1997 election campaign (as Neil Kinnock had been earlier)
• to have a blueprint available to hand to the civil service, and ensure the legislation could get into the Queen's speech 10 days after the new government took office.

Act three: the establishment of the Low Pay Commission

In opposition, Tony Blair decided to move away from the formula approach and instead allow a new Low Pay Commission to set  the national minimum wage. Representatives of labour and the employers would work with independents to make the decisions.

The appointment of the Chair was critical. After much debate within government, Canadian academic, Professor George Bain was appointed.

Also critical was CBI's decision to support the Low Pay Commission. All members agreed that unanimity within the Commission was vital if its decisions were to stick.

President of the Board of Trade, Rt Hon Margaret Beckett MP, led in ensuring government acceptance of the proposals. She was determined to ensure that the government did not try to 'pick and mix' from the Low Pay Commission proposals but back them as a package - and was almost entirely successful.

She also won the battle against the Treasury to put the Commission on a standing basis. This proved an important success factor. It meant that the rate for the minimum wage could come in relatively low and then be ratcheted up over time - once it was shown not to have negative effects on employment and that the Low Pay Commission was there to tackle detailed implementation issues.

The establishment of the national minimum wage was an important blank into the government's overall strategy of boosting the returns to work. It allowed the government to introduce tax credits without simply subsidising bad employers.

Although David Cameron has said that he accepts the minimum wage, seminar participants had some doubts about how likely the policy was to be sustained over coming years. They saw risks in regionalisation, in exemption of small businesses or simply letting the rate drift downwards.

More information

• Read a report of this seminar (PDF, 170KB)
• Read a speech by Sir George Bain: The Bullock Committee and the Low Pay Commission:  some reflections (PDF, 31KB)
• Read about our Better Policy-making project
• Event podcast