George Osborne’s “Living Wage”

9 July 2015

Osborne has pledged to introduce a “national living wage” for over-25s, which will start at £7.20 an hour next April, and rise to about £9 an hour by 2020.

But despite Osborne’s appropriating the language of the Living Wage Campaign – what he has proposed is not the living wage, but simply a higher minimum wage.

The living wage – calculated as the minimum income necessary for a worker to meet their needs that are considered to be basic – currently stands at £7.85 an hour, £9.15 an hour for London. In Osborne’s plans, the minimum wage will not meet this for five years.

And while the move is ostensibly an offering to the low paid, Osborne also announced that working age benefits will be frozen for four years – including tax credits and local housing allowance.

By slashing tax credits, the Conservatives have essentially undone any advantage a higher minimum wage would otherwise provide. They are pretending they are on the side of the working class, while introducing parallel policies which will make the cost of living much higher, and the standard of living much lower.

The Institute for Fiscal Studies said that Osbourne was “plain wrong” in saying that a higher minimum wage will compensate for benefit cuts. Director Paul Johnson said; “The cuts will be bigger for people in work than they will be for people out of work and in the new universal credit system it will reduce the incentive for people to move in to work. The tax and welfare changes between them mean that poorer households have lost quite significantly and as a result of yesterday’s Budget, much more significantly than anything that has happened to richer households”.

The Social Market Foundation, calculated that even once the national living wage is taken into account, a single-earner family with two children, where the breadwinner is on the minimum wage, will be more than £1,200 a year worse off next year due to the budget changes.

As the TUC says, “The Chancellor is giving with one hand and taking away with the other. Massive cuts in support for working people will hit families with children hardest.

“The Chancellor has finally woken up to the fact that Britain needs a pay rise. The TUC has long campaigned for the minimum wage to rise faster and the Chancellor has listened to us at last.

“For young people, it was all bad news as they will not get the minimum wage boost and will suffer from cuts to higher education grants and housing benefit. And it was not a one-nation budget for public sector workers who will face years more of cuts to real wages.

”Massive tax cuts for the wealthiest show the Conservatives are still the party of the inheritors, rather than the workers.”