Labour leadership: Firms could face pay penalties, says Burnham

Firms who failed to pay a proposed new higher living wage of £11 per hour could face penalties including higher national insurance payments, Labour leadership hopeful Andy Burnham says.

He said he would use a "carrot and stick" approach to force up pay if he leads the Labour Party to power.

Those who embrace the £11 rate would be rewarded with lower NI contributions under Mr Burnham's plan.

He faces Yvette Cooper, Jeremy Corbyn and Liz Kendall in the leadership vote.

At the start of the final 10 days of campaigning, Mr Burnham will set out the proposals at an event in Pudsey - a seat Labour failed to win at the election.

He is expected to say Chancellor George Osborne's National Living Wage plan - announced in the Budget - is a "complete con" because it only applies to over-25s and fails to compensate for cuts in tax credits.

'For everyone'

Mr Burnham's proposed rate, which would rise to over £12 in London, would apply to all age groups.

It would also be adjusted for the loss of tax credits and linked to the cost of housing, food and household items.

Firms that failed to pay the rate would face penalties devised in consultation "with independent experts and with business, ensuring a credible, deliverable and fair plan", Mr Burnham is set to say.

"The Labour Party I lead will stand for a true living wage for everyone," Mr Burnham is expected to say.

"It will be based on the simple principle that the same hour's work deserves the same hour's pay, regardless of your age. So I will abolish the youth rate minimum wage, apply the higher rate to everyone and give incentives for companies to go even further."

The shadow health secretary, who is trailing Mr Corbyn according to recent polls, is expected to add: "Businesses will be helped to pay a true living wage, but as more firms pay this fair wage it would be wrong for the unscrupulous few to hold out. So over the next Parliament I will phase in National Insurance penalties for those not paying the rate.

"By 2025, we will end the scourge of low pay in the UK for ever."

Labour leadership contest

Labour leadership candidates (l-r): Liz Kendall, Andy Burnham, Yvette Cooper, Jeremy Corbyn

• Who are the candidates? Andy Burnham, Yvette Cooper, Jeremy Corbyn, Liz Kendall

• Dates: Ballot papers will be sent out on Friday; voting can take place by post or online. They must be returned by 10 September. The result is announced on 12 September

• Who can vote? All party members, registered supporters and affiliated supporters - including those joining via a union

• What is the voting system? The Alternative Vote system is being used so voters are asked to rank candidates in order of preference

• How does it work? If no candidate gets 50% of all votes cast, the candidate in fourth place is eliminated. Their second preference votes are then redistributed among the remaining three. If there is still no winner, the third place candidate is eliminated with their second preferences (or third in the case of votes transferred from the fourth place candidates) redistributed. It is then a head-to-head between the last two candidates

At-a-glance profiles of the four contenders