Upping the base wage ‘would bring in billions’ says TUV secretary

Britain is losing out on billions of pounds in revenues by keeping the minimum wage low, TUC secretary general Frances O’Grady said yesterday ahead of the opening of the union body’s annual congress.

Ms O’Grady unveiled TUC-commissioned research, by Howard Reed of Landman Economics, showing that if the £6.31-an-hour minimum wage were increased to the level of the voluntary “living wage” – £7.45 an hour outside London – the total benefit to the exchequer could reach nearly £3.3bn.

Even an increase of 4 per cent to just £6.56 would generate benefits in terms of income tax, National Insurance contributions and lower benefit costs equivalent to £273m while a “halfway house” figure of £6.88 would reap £884m.

The figures come amid renewed debate over the minimum wage with reports last week suggesting that the Conservatives were looking at raising it as part of their desire to “make work pay” and because it could prove electorally popular.

A number of high-profile British or British-based businesses, including Barclays, have adopted the living wage. It is calculated annually by the Centre for Research in Social Policy at Loughborough University, with a higher London figure set by the Greater London Authority, and is designed to afford those who receive it a basic standard of living.

They argue that there is a strong business case for doing so, with workers paid the living wage performing their roles better, staying in post longer, and taking less time off sick. Despite this, KPMG, another “living wage” employer, calculated that one in five workers in the UK – some 4.82m people – are now paid less than the living wage.

The impact of the current bruising economic climate of rising prices and increasing costs of living at a time when wages are not keeping pace falls hardest on these low paid workers.

Mr Reed, a former chief economist at the Institute for Public Policy Research, used a model created by Landman Economics and the IPPR to calculate changes in income tax National Insurance, and amounts received through tax credits and means-tested benefits which would arise if everybody paid below the specified rates had wages boosted.