Chancellor plans £10.50 national living wage

The Chancellor has announced plans to increase the national living wage to £10.50 within five years and will reduce the age eligibility for the higher rate

Speaking at the Conservative party conference in Manchester, Chancellor Sajid Javid said that the national living wage will be increased to £10.50 from the current £8.21 for over 25s by 2024. This would be equivalent to two-thirds of median earnings within five years, with the caveat, ‘provided economic conditions allow’. The national living wage is the equivalent of the national minimum wage for workers over the age of 25.

He also said the age limit for eligibility for the national living wage would go down so that younger workers will be able to benefit by bringing anyone aged 23 and over into the scheme from 2021, and 21-year-olds within five years. Currently it is only available for people over the age of 25.

The government will set out more details on the future policy framework, including the role of the independent Low Pay Commission, at the Budget, which is due to be held this November although a date has not been set as yet.

Phil Hall, AAT head of public affairs & public policy, said: ‘The announcement is not quite as much as our members have indicated they would like to see but it’s not far off and is certainly a big step in the right direction. We appreciate that many businesses are facing pressures and that employees are too – finding a balance is key to ensuring everyone gets a fair day’s pay for a fair day’s work.’

National minimum wage legislation affects many of AAT’s 140,000 members, whether they are students, apprentices, small business owners, licensed accountants or where they are employed by national and multinational companies.

However, the increase will impact smaller businesses as wage costs rise. Peninsula associate director of advisory Kate Palmer said: ‘Although the increase is to be phased in over the next five years, the Chancellor’s plans are likely to hit employers heavily in the pocket. The biggest news to take from the announcement is that the National Living Wage – the highest band of minimum wage available – will be extended to include anyone who is aged 21 and over.

‘This will effectively revert the minimum wage structure to how it was before the introduction of the national living wage [NLW] by re-applying the highest minimum wage to those aged 21 and over.’

This means that there will be fewer age bands, unlike the current system where there are five categories of worker.

‘Fewer age bands will make the system a little easier for employers to understand, but it means a significant increase in hourly pay for some workers which some small businesses may struggle to achieve,’ added Palmer.

Although structured differently, Labour leader Jeremy Corbyn has also confirmed that a pay increase for the country’s lower paid workers is one of his highest priorities.

Infrastructure funding

The Chancellor also announced an increase in funding for infrastructure and youth services, and said up to £4.3bn for UK organisations – such as charities, businesses and universities – would be set aside if certain types of EU funding end after Brexit, such as the European Regional Development Fund and Horizon 2020.

In a bid to improve the quality of broadband delivery, he also confirmed £5bn to support the rollout of gigabit-capable broadband in the hardest to reach 20% of the country, although some of this funding had already been announced at the Budget in autumn 2018.

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