BUDGET: National Living Wage will increase from £8.91 to £9.50 an hour

Wage rise for low-paid workers

  • The UK’s lowest-paid workers will receive a pay rise next year as the National Living Wage increases from £8.91 to £9.50 an hour – an extra £1000 a year for a full-time worker.
  • From 1 April, young people and apprentices will also see their wages increased as the National Minimum Wage for people aged 21-22 goes up to £9.18 an hour and Apprentice Rate increases to £4.81 an hour.
  • According to the Tory government this builds on the government’s action to support people with the cost of living including through the £500 million Household Support Fund, Energy Price Cap, Seasonal Cold Weather Payments and Warm Homes Discount.

By Bill Heaney

The UK’s lowest paid workers – and there are thousands in West Dunbartonshire and Argyll – will benefit from a pay rise next year, as the government takes further action to help the country’s poorest households, according to a pre-budget media release from Tory Chancellor Richi Sunak.

The Chancellor is expected to confirm at Wednesday’s Budget and Spending Review that the National Living Wage will increase from £8.91 to £9.50 an hour – a 59p an hour boost which means a full-time worker on the National Living Wage will see a pay rise of more than £1,000 a year.

The National Living Wage was introduced in 2016 and sets the minimum hourly pay a person over the age of 23 can earn when working.

Rishi Sunak is also set to announce a wage rise for young people under the age of 23. For those aged 21-22 the National Minimum Wage rate increases to £9.18 an hour, up from £8.36 – a 82p increase.

With apprenticeships a key part of our Plan for Jobs, the minimum hourly wage for an apprentice will also see a boost next year, with an 18 year old apprentice in an industry like construction seeing their minimum hourly pay increase by nearly 12%, going from £4.30 to £4.81 an hour.

Chancellor of the Exchequer Rishi Sunak said:

“This is a government that is on the side of working people. This wage boost ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this Parliament.” 

By introducing these changes, which are broadly consistent with previous increases, the government accepts all recommendations made by the Low Pay Commission – an independent advisory board which brings together economists, employer and employee representatives.

Mr Sunak says the government remains committed to meeting its ambitious target of a National Living Wage of two-thirds of median earnings and expanding it to include workers over the age of 21 by 2024, provided economic conditions allow.

And claims that since 2010, this government has continuously supported working people on the lowest wages – doubling personal tax thresholds, doubling free childcare for eligible working parents – worth up to £5,000 per child per year. It has also expanded Free School Meals to all five to seven-year-olds – saving families £400 a year.

This builds, he maintains, on recent action to support the lowest earners in the winter months, through measures like the £500 million Household Support Fund to help families with their food and utility costs, the Energy Price Cap, Seasonal Cold Weather Payments, and the Warm Homes Discount to ensure low-income households can keep their homes warm over the winter period.

As we enter the next stage of the Plan for Jobs, an extra £500 million will also be invested to give people the skills and support they need to find good work as we build back better from the pandemic, he added.

Research by the Liberal Democrats has revealed that a full-time worker paid the National Living Wage will see nearly half (44%) of the proposed increase wiped out before it even reaches their bank account due to tax and the increase in National Insurance.

  • Currently, an employee working 40 hours a week and paid today’s National Living Wage of £8.91 an hour, takes home £16,264.50 – after income tax and the current rate of National Insurance (12%).

  • Once the Government raises the National Living Wage to £9.50, and National Insurance to 13.25%, that worker will see their take home pay rise by £707 a year. However, if the Government hadn’t raised National Insurance, they would have seen their after-tax income increase by £835 instead.

  • This means that they would have been able to keep over two thirds (68%) of their pay rise, whereas now they will only take home just over half (58%).

  • Once combined with the cut to Universal Credit, the same worker could be left poorer by £780 a year.

Liberal Democrat Treasury Spokesperson Christine Jardine MP said:  “Ahead of the budget people will be looking to the Chancellor’s announcement of a pay rise to help them, instead they will be bitterly disappointed to see almost half of any rise snatched away by the Treasury before it even reaches their bank accounts.”

Meanwhile, small and medium-sized businesses, from tech startups to hairdressers and cafes, will pay an extra £2.4bn a year due to the rise in national insurance, research commissioned by the Liberal Democrats has found.

As one Tory hand giveth, however, another taketh away by breaking promises.

Boris Johnson broke his 2019 manifesto promise by raising employer National Insurance Contributions by 1.25%, impacting thousands of small businesses. House of Commons Library research has detailed the impact of this tax rise on small businesses across the country. It is estimated that the average micro-business employing up to nine people will pay more than £1,000 extra a year as a result of the tax hike.

The most impacted areas of the country include Glasgow (8th) and Edinburgh (13th). They are all expected to pay tens of millions extra in tax following the broken promise.

Ahead of the budget, the Liberal Democrats are calling for small businesses to be offered a lifeline by slashing their employer’s national insurance contributions instead of raising them. 

Under the party’s proposals, the Employment Allowance would be quadrupled from £4,000 to £16,000 for at least two years, meaning taxes on small businesses would be slashed by £5.5 billion next year.

Former Clydebank-based journalist Christine Jardine, pictured above,  commented on the findings:  “The Tories’ broken manifesto promise will create a tax bombshell for the small Scottish businesses that are the backbone of our communities. It’s little wonder that voters no longer see the Conservative party as the party of low tax.

“We have already lost far too many treasured shops from our high streets, and too many businesses are drowning in tax rises and red tape.

“Rishi Sunak must give small businesses the chance to grow again instead of clobbering them with a crippling tax rise.  The Chancellor is out of touch with small businesses and if he truly cared about their survival, he would cancel this tax hike immediately.

“The Liberal Democrats want to unleash the power of small businesses to create jobs and drive our economic recovery, by giving them the tax cut they need and deserve.”

The latest news on this from the Conservatives is that the Chancellor is expected to announce a new, £150 million fund to help thousands of small and medium sized enterprises in Scotland at this week’s budget – building on the Government’s commitment to level up opportunities across the UK.

The fund will be delivered through the British Business Bank, working closely with local partners, and will help Scottish SMEs to invest and grow. It will build on the success of existing funds in other parts of the UK, which have been shown to support the creation of high-paying high productivity jobs and the upskilling of existing workforces.

Similar existing funds in England and Northern Ireland typically provide loans or invest in local companies – this can be recent start-ups looking to borrow smaller amounts to kick-start activity or established SMEs looking for larger investments to grow their business.

Details on how businesses in Scotland can access the fund will be outlined in due course.

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