In the July 2015 budget statement, George Osborne announced a new higher minimum wage of £7.20 per hour from April 2016 rising to £9 per hour by year 2020.
While this is a significant boost to millions of workers the Institute of Fiscal Studies has pointed out that the £4 billion added income is outweighed by the £12 billion cuts to welfare. They estimate that 13 million families losing an average of £260 a year. Around 3 million people will lose around £1,000 a year because of less generous tax credits .
A further point of concern is the chancellor’s deliberate political sleight of hand in badging the proposed higher minimum wage as a ‘Living wage’. A Living wage is quite different: the Living Wage is set meticulously every year and is based on the actual cost of living, not what the market will bear. It reflects public perceptions of the income needed for a range of family types to reach a minimum acceptable standard of living. This calculation is completely unencumbered by concerns over the state of the economy or its impact on jobs. At present, it is £9.15 in London, £7.85 everywhere else – significantly higher than George Osborne’s proposed higher minimum wage. Crucially the actual Living Wage based on the cost of living takes account of existing in-work support such as tax credits: without this, for instance, the London rate would soar to £11.65 .