George Osborne’s new ‘national living wage’ is not actually a living wage, the group responsible for promoting the living wage has said.
The Chancellor said it would become compulsory to pay over-25s £9 an hour by 2020 and £7.20 from next April.
However, the living wage is currently £7.85 an hour and £9.15 an hour in London. It is likely to rise next year as living costs continue to increase.
“The Living Wage is calculated according to the cost of living whereas the Low Pay Commission calculates a rate according to what the market can bear,” the Living Wage Foundation said in its response to the Budget.
“Without a change of remit for the Low Pay Commission this is effectively a higher National Minimum Wage and not a Living Wage.”
The Foundation however nevertheless welcomed the pay rise.
“We are delighted that the announcement made in the Budget this lunchtime will see over 2.5 million workers receive a much needed pay rise,” said Rhys Moore, the Foundation’s director.
“This is a massive victory for Citizens UK and those communities, workers and business leaders who have campaigned for a Living Wage since 2001.”
Mr Osborne made the surprise announcement in his Budget statement to Parliament on Wednesday.
“It’s because we’ve taken these difficult decisions, and overcome the opposition to them, that Britain is able to afford a pay rise,” the Chancellor said.
“Because let me be clear: Britain deserves a pay rise and Britain is getting a pay rise. I am today introducing a new National Living Wage.”
What does five more years of the Tories mean for Britain?
What does five more years of the Tories mean for Britain?
1/8 Welfare payments will be slashed
One of the most controversial parts of the Conservative manifesto was to cut benefits for the working age poor by £12 bn over the next three years. But during the campaign they only said where £2 bn of these savings would come from. That leaves £10 bn still to find. Some experts think the only way they can close that gap is by means testing child benefit – with millions of families losing out
2/8 There will be tax cuts for those in work and those who die
The Tories will increase the threshold at which the 40p rate of tax becomes payable to £50,000 by 2020. They haven’t said so but it is also likely that at some point in the next five years they will abolish that 45p rate of tax altogether for the highest earners. They also want to increase the effective inheritance tax threshold for married couples and civil partners to £1m
3/8 There will be an in/out EU referendum in 2017
The next two years are going to be dominated by the prospect of a referendum on Britain’s membership of the EU. First off David Cameron has the daunting task of negotiating a deal with other EU leaders an acceptable deal that he can sell to his party so he can go into the referendum campaigning for a ‘yes’ vote. This may be unachievable and it is possible that the Tories may end up arguing to leave. Opinion polls show Britain is divided on EU membership, one poll this year showed 51% said they would opt to leave compared to 49% who would vote to stay in
4/8 There will be more privatisation of the NHS
Having won the election the Tories now have a mandate to go further and faster reforming the NHS. In order to make cost savings there is likely to be greater private involvement in running services, while some smaller hospitals may lose services they currently provide like A&E and maternity units
5/8 There will be many more free schools – and traditional state schools will become a thing of the past
The Tories plans to create 500 new free schools and make 3,000 state schools become academies. They will also carry on reforming the Department of Education and remove more powers from local authorities over how schools are run
6/8 On shore wind farms will be a thing of the past and fracking will be the future
Government spending on renewable energy is under real threat now the Lib Dems are no longer in power with the Tories. Subsidies are likely to be slashed for off-shore wind farm and other green energy supplies. Meanwhile there will be generous tax break for fracking as ministers try and incentivise the industry to drill for onshore oil and gas
7/8 There maybe more free childcare – but not necessarily
In the campaign the Tories pledged to double the amount of free early education for three- and four-year-olds from 15 hours a week to 30. The extra hours would only be offered to working families where parents are employed for at least eight hours a week. However they have not said where the money will come from to fund the pledge
8/8 Workers' rights could be reduced
The Tories want to slash business regulation, merge regulator and cut costs. The Lib Dems stopped them from reducing the employment rights of workers in power – but these are now under threat
One colleague of Mr Osborne who appeared not to be in the loop about the announcement was Mayor of London Boris Johnson.
Despite attending David Cameron’s political cabinet, Mr Johnson this morning told LBC Radio that the living wage should not be compulsory because it would hurt business.
“I don’t want the living wage to be made absolutely compulsory,” he said. “If you talk to a lot of people who’ve really led on this, London Citizens, the people who many years ago got this movement going, they don’t want it made compulsory.
“They don’t want every single small business to be obliged by law to pay something that might really damage their ability to survive.”
An investigation conducted in March found that not a single high street chain had signed up to provide the voluntary rate, despite posting huge profits.
In October last year the Coalition Government’s social mobility tsar, former Labour minister Alan Milburn, said the wage should be made compulsory.
The major parties have shied away from raising the minimum wage to the rate, however. Before it lost the election, Labour said it would only raise the minimum wage to £8 an hour by 2017.
The living wage is an hourly pay rate set independently and updated annually, calculated according to meeting basic living costs in Britain.
The rate is currently £7.85 an hour in the UK and £9.15 in London, where living costs are higher.Reuse content