Planned rise in living wage could be shelved as UK firms face slump

Planned rise in living wage could be shelved as UK firms face slump after coronavirus lockdown

  • Minimum pay rate had been expected to rise by 5.6% to £9.21 per hour next April
  • The Low Pay Commission is considering recommending a smaller increase
  • It is because of concerns that it could be ‘unaffordable’ at a time of recession
  • The final decision on whether to apply the brake will be Chancellor Rishi Sunak’s 

Planned increases in the national living wage could be shelved despite warnings the issue is vital to cementing Tory support in Labour’s former ‘Red Wall’ seats.

The minimum pay rate had been expected to rise by 5.6 per cent from £8.72 per hour to £9.21 next April as part of plans to raise it to two-thirds of average pay by 2024.

But the Low Pay Commission, which advises the Government on the wage, is considering recommending a smaller increase because of concerns that it could prove ‘unaffordable’ for employers at a time of recession and even spark job losses. Officials are now discussing with ministers whether to apply an ‘emergency brake’ to the increase at this autumn’s Budget.

The move comes amid fresh warnings about the need for the Government to consolidate its support in Red Wall seats in the North and Midlands which it took in last year’s General Election.

The final decision on whether to apply the brake to the increases in the national living wage will be Chancellor Rishi Sunak’s (pictured)

A report by the Tory think-tank Onward today urges ministers to focus on boosting wages and cutting unemployment in these areas.

The study is backed by 40 Conservative MPs who have formed a ‘Levelling Up Taskforce’.

It reveals that the election has radically altered the composition of the Tory Party at Westminster.

Average wages in newly won Conservative seats are around 5 per cent lower than in Labour constituencies. Property prices in Labour seats are a third higher than in new Tory constituencies.

The report urges ministers to publish an annual report on progress on Boris Johnson’s ‘levelling up agenda’, focusing on whether disparities in wages and employment levels are falling.

And it urges the Treasury to carry out a ‘geographical analysis’ of all Budget policies to measure their impact in the regions, warning that the UK has become one of ‘the most geographically unbalanced developed economies’ in the world.

Onward founder Tory MP Neil O’Brien said: ‘The coronavirus crisis has only made the case for levelling up stronger so we can get the economy moving in areas that are less well-off.’

The report urges the Treasury to carry out a ‘geographical analysis’ of all Budget policies to measure their impact in the regions

Bryan Sanderson, of the Low Pay Commission, yesterday confirmed it is concerned about the ‘profound impact’ of the proposed 5.6 per cent increase in the living wage at a time when many firms are reeling from the pandemic. The increase would also have a significant impact on the public sector wage bill.

Mr Sanderson said the effects of the pandemic ‘will require us to review whether the emergency brake is required.’ The commission will report to ministers at the end of next month. But the final decision on whether to apply the brake will be Chancellor Rishi Sunak’s.

Any move to shelve the pay increase would risk a backlash from Tory MPs, particularly those representing low-wage areas.

It would also jeopardise a Tory manifesto commitment to raise the living wage to two-thirds of average incomes by 2024. One senior Tory said: ‘It’s the Low Pay Commission’s job to worry about these things, but the Chancellor has to look at the wider picture.

‘Are businesses in trouble because of small differences in the living wage or because of the impact of the pandemic? If so, what is the right response? And what message would it send about the PM’s levelling up agenda if the Government is seen to be squeezing the wages of the lowest paid?’

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