Labour says it would introduce £10 living wage and tackle tax avoidance

Labour would increase the national living wage, which is likely to be above £10 an hour, shadow Chancellor John McDonnell announced as he said he would also bolster HM Revenue and Customs to tackle tax avoidance.

Speaking at the Labour party conference in Liverpool on Monday, McDonnell said one of Labour's "greatest achievements" was the introduction of a national minimum wage as it lifted "millions out of poverty".

"The Tories opposed it, claiming it would cost millions of jobs, but - united in purpose - we won the argument," he said.

"Under the next Labour government, everyone will earn enough to live on. When we win the next election we will write a real Living Wage into law.

"We'll charge a new Living Wage Review Body with the task of setting it at the level needed for a decent life. Independent forecasts suggest that this will be over £10 per hour."

He added: "This will be a fundamental part of our new bargain in the workplace."

At the 2015 budget, former Chancellor George Osbornes announced a new compulsory national living wage.

The current living wage, which came into force in April is £7.20 for workers over 25 years old and is to rise to £9 by 2020.

However Tim Thomas, head of employment and skills policy at EEF, the manufacturers’ organisation, said he was supportive of the national living wage but Labour’s proposed increase would be “extremely damaging”.

Thomas said: “Entry level jobs would be wiped out at a stroke and, the impact on costs for employers through maintaining pay at all levels would be so dramatic that it’s doubtful to see how companies would take on new workers. The impact on job creation and unemployment would be substantial.”

EEF estimated that £10 an hour would take the minimum wage to an average of £19,250 per year and with add on costs this would rise to about £23,000 to take on a new employee.

Beefed up HMRC

The shadow chancellor said that the party would set up a tax enforcement unit at HMRC by “doubling the number of staff investigating wealthy tax avoidance”.

The party would also stop multinational companies, which avoid paying tax in the UK, from gaining public sector contracts.

Government intervention

McDonnell said that the party would be more interventionist and not leave industries such as steel to flounder.

"Be certain the next Labour government will be an interventionist government. We will not stand by like this one has and see our key industries flounder and our future prosperity put at risk."

He added: “The winds of globalisation are blowing in a different direction. They are blowing against the belief in the free market and in favour of intervention.

“Good business doesn’t need no government. Good business needs good government. And the best governments today, right across the world, recognise that they need to support their economies because the way the world works is changing.”

McDonnell told Sky News before his speech that a national investment bank would borrow £100bn, which would lever in £150bn more in private finance to invest in infrastructure and employment skills.

However, Dr Adam Marshall, the acting director general of the British Chambers of Commerce, said that McDonnell needed to remember that there was both good intervention and bad intervention.

Marshall said: "As the Labour party develops its alternative economic proposals, it must remember that the state cannot control every aspect of economic or business life and stay competitive in a global economy. We need to be making the UK the most attractive place to hire, invest and do business for the future, particularly given the historic transition we now face.

"Achieving the shared goal of a prosperous Britain requires meaningful partnership between business and political parties. Neither should be dictating to the other."

Brexit and the single market

He also said that the Labour party must respect the result of the EU referendum, but it “doesn’t mean we have to accept what the Tories serve up for our future relationship with Europe”.

“So we will seek to preserve access to the single market for goods and services. Today, access to the single market requires freedom of movement of labour. But we will address the concerns that people have raised in the undercutting of wages and conditions, and the pressure on local public services.”