8th July 2015
The Chancellor George Osborne has introduced a compulsory national living wage to be introduced next year. The new upgraded minimum wage will be introduced from next April at a rate of £7.20 an hour for people over the age of 25. It will reach £9 an hour by 2020.
The move comes as working-age benefits are frozen for four years – including tax credits and local housing allowance, but excluding maternity pay and disability benefits. Most housing benefit for those under the age of 21 is to be abolished.
In addition, maintenance grants for students – paid to students with family incomes below £42,000 – to be scrapped and converted into loans from 2016/17
Osborne said: “[This is] a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create”.
Colin Morton, lead manager of the Franklin UK Equity Income Fund says: “The new living wage, whilst a triumph for workers, will also pose problems for the retail and leisure industries which have traditionally paid their employees minimum wage as a matter of course. It will be interesting to see how the bigger brands adapt and amend their practices under this increased pressure and scrutiny. On the flip side, we could see a recycling of cash back into their pockets as consumers now look set to have more money in their pockets and thus more money to spend.”