Forgive us for not sharing Iain Duncan Smith’s level of enthusiasm around the announcement of a compulsory National Living Wage during yesterday’s Budget.
While the idea of a National Living Wage is fantastic news for employees on lower pay who are paid by the hour, in practice it may not be quite as brilliant as it sounds.
The Living Wage will be paid to those who are aged 25 years old and above, starting at £7.20 an hour from April 2016. The Government plans to increase this to £9 an hour by 2020, but that’s an increase of just 45p per hour each year.
The current minimum wage is £6.50 an hour and that’s for anyone aged 21 and over, so of course the Living Wage is an improvement on that, but for younger workers it’s simply redundant.
The British Retail Consortium (BRC) also made the point that retail staff are already paid higher than the Living Wage on average, so it may not affect them at all.
BRC Director General Helen Dickinson said: "The retail industry is not a minimum wage employer. Median wages for hourly paid workers currently stand at £7.30 per hour – this is already above the rate of the new National Living Wage announced yesterday. Retailers will look closely at the new proposals and assess the impact alongside the positive tax change announced by the Chancellor.
"We welcome the fact that the task of outlining a route map to bringing the National Living Wage to 60 per cent of median income has been given to the Low Pay Commission (LPC). The LPC has always worked well with both employers and employees in making its recommendations and we look forward to working with them in plotting the course to higher basic wages.
“We continue to believe that the real key to raising more people out of low pay will rest in increasing productivity. This will be more effective than playing pass the parcel around the economy with the financial burden of increasing people’s incomes. It is crucial that Friday’s productivity plan addresses the issues faced by retail businesses and creates a sustainable route to higher incomes.”
The other thing to consider is how some businesses, especially smaller ones like independent PC retailers, are going to be able to afford to pay this new Living Wage to all their staff.
But George Osborne made the point that although wages are going up, corporation tax is being lowered, implying businesses will be able to afford to pay their staff more as they will be paying less tax. And staff will receive fewer benefits.
"The country can afford [higher wages], British business can afford that," he said.
Read more about yesterday’s Summer Budget in our roundup piece, with information on corporation tax changes and new apprenticeships being created.
The BRC was not as welcoming with lowering corporation tax, saying the Government should be doing more.
Dickinson added: “For every £1 retailers pay in corporation tax, they pay £2.30 in business rates. The high burden of business rates combined with other challenges retailers experience means that the cut to corporation tax in 2017 to 19 per cent and then 18 per cent by 2020 is welcome but not enough.
"We now need to see a move to more fairly distribute the burden of business rates across the economy if we want to avoid further shop closures."
On the Sunday trading announcement, Dickinson commented: "Clearly, devolving decisions on Sunday trading times to major towns and cities is a very significant step. A key issue will be how local authorities reach decisions around altering trading hours. Effective consultation with business and the community, clarity and certainty are essential."
Labour of course attacked the Tories plans for a Living Wage, with them highlighting the fact that those aged below 25 would be excluded from the National Living Wage.
Liz Kendall also tweeted the below:
— Liz Kendall (@LizforLeader) July 8, 2015
Regardless, the Secretary of State for Work and Pensions, Iain Duncan Smith, was pleased with the news. You can check out the announcement and his excitable reaction below:
During the March Budget earlier this year, the Government announced plans to invest in the Internet of Things