Pay rise for 4m with a hike in minimum wage
CHANCELLOR Sajid Javid yesterday announced a pay rise for four million lower paid workers with a hike in the national living wage to £10.50 within five years.
Young workers will be given the full rate after years of trailing behind older colleagues doing the same job.
Industry experts said the plans could mean an extra £333 a year being saved by workers into their retirement pots.
In his first party conference speech as Chancellor, Mr Javid heralded the start of a “decade of renewal” for the country.
“Over the next five years, we will make the UK one of the first major economies in the world to end low pay altogether,” he said.
Under the plans, the national living wage will be pegged against average earnings, matching it by two-thirds.
It would mean wages increase to £10.50 an hour by 2024 on current forecasts, £1.05 more than expected if the reforms were not introduced.
Pressure
This year the rate is £8.21 for the over-25s.
The age threshold for earning the full rate will drop to 23 in two years and to 21 within five years.
It will mean a pay rise of £4,000 a year by 2024 for the average fulltime worker on the living wage.
Pensions experts said the increase in the living wage will mean workers pay more into their retirement pots through the auto-enrolment system.
Jon Greer, head of retirement policy at wealth management firm Quilter, said: “They may not realise this pay rise will also bring with it benefits for their retirement, as thanks to auto-enrolment these workers will also see their pensions contributions rise.
“Not only will they be putting more money away for retirement, but it also means their employers and the government, in the shape of tax relief, will top these contributions up by more too.
“This could result in an extra £333 each year being saved for retirement by someone on the national living wage at its new rate.”
But business leaders raised concerns about the impact of a higher wage bill on smaller firms.
Mike Cherry, chairman of the Federation of Small Businesses, warned some companies could go bust from the extra pressure.
He said: “While it is welcome that the Chancellor is giving businesses five years to adapt, this increase will leave many small employers struggling and, without help, could mean some small firms would not be viable.
“Those in sectors with tight margins and which are heavily labourdependent, such as the care sector, retail or hospitality, will be particularly badly hit without support.
“Four in 10 small employers say operating costs are rising due to employment costs.
“The Chancellor must now find ways to help those smaller businesses to meet his ambition, without deterring them from expanding and hiring more employees.”
Mr Javid said the Government wanted to bring down the age threshold to cover all workers over the age of 21.
In his speech he an “infrastructure revolution” with investment in roads, buses and broadband.
“Our roads are the arteries of our country. We will soon launch the new roads investment strategy with £29billion committed to strategic and local roads over the next five years,” he said.
“And today we are getting the shovels out early on several important road projects.”
The projects include the M60 Simister Island in Manchester and dualling the A66 Trans-Pennine route. He also allocated £500million to create a new Youth Investment Fund to roll out youth centres and services to help young people “get on the conveyor belt to a better life and career”.
And Mr Javid announced plans to bring forward a White Paper on further devolution in England, saying the Government wanted to give more powers to local people.
A spokesman for the Chancellor said the proposed rise in the minimum wage would only have a “minor impact” on departments, adding: “We are not particularly worried about it costing jobs.
“I would not necessarily describe this as a massive increase in wages.
It’s the right balance, it makes a significant difference to four million workers in a certain category, but I wouldn’t necessarily call it a massive increase,” the spokesman insisted.
“It’s the right balance between addressing people’s cost of living and maintaining a pro-business environment.”
Speaking on Brexit, Mr Javid said leaving without a deal would not be without “significant challenges”.
He said: “I know that some businesses and households are concerned about what a no-deal outcome might mean for them. I recognise that.
“And I understand that the uncertainty around Brexit is challenging. But our step-change in preparations has made a deal outcome more likely and a no-deal outcome more manageable.
“Every department now has the resources available to prepare for no-deal.”
Boris Johnson said he remained “cautiously optimistic” about the prospect of a Brexit deal despite the limited time available ahead of the scheduled October 31 withdrawal date.
The Prime Minister said Britain side had made some “pretty big moves” towards a deal, but it was up to Brussels to respond to find the right “landing zone”.