Planned rise in minimum wage to £9.21 per hour is set to be scrapped because UK ‘can’t afford it’ after coronavirus pandemic
- The living wage was expected to rise from £8.72 to to £9.21 per hour in April
- However, Chancellor Rishi Sunak could be forced to pull back on the plan
- Low Pay Commission has warned companies may not be able to afford a rise
- Increasing the rate could lead to a rise in unemployment, the commission fears
Britain may not be able to afford a planned rise to the national living wage due to the Covid-19 pandemic.
The living wage was expected to rise from £8.72 to to £9.21 per hour in April, but ministers and government officials are reportedly discussing applying an ’emergency break’ to the plan, according to The Telegraph.
The decision not to go ahead with the increase would be announced by Chancellor Rishi Sunak in the up-coming autumn budget.
A target had been set by the Chancellor that would see the rate increased to the equivalent of two-thirds of the country’s median earnings by 2024.
However, members of the Low Pay Commission are said to believe that companies would not be able to afford an increase to £9.21 in April.
It could, they have warned, result in increased levels of unemployment among Britain’s lowest paid workers.
The commission has warned that the pandemic ‘clearly represents a very challenging set of circumstances for workers and employers alike, and will require us to review whether an emergency brake is required.’
The decision not to go ahead with the increase to the national living wage from £8.72 to to £9.21 per hour in April would be announced by Chancellor Rishi Sunak (pictured) in the up-coming autumn budget if recommended by the Low Pay Commission
If evidence suggests the planned increase would be ‘damaging for the lowest-paid workers,’ the commission could trigger the emergency break, The Telegraph claims.
Ahead of the Autumn budget, the commission will meet to discuss what living wage recommendation to give to Mr Sunak.
One option that is reportedly being discussed with trade groups is a small increase to the rate in line with inflation. Another is to push back the 2024 target by a year to 2025 or later.
‘The Low Pay Commission always advises Government based on a thorough review of the evidence and detailed discussions with workers and businesses alike,’ Bryan Sanderson, the chairman of the Low Pay Commission, told the Telegraph, adding: ‘This is more important than ever, given the profound impact of Covid-19.
‘There are not many winners in today’s uncertain world. Our contribution to help steer a path through the complexity will be to provide a recommendation founded on rigorous research and competent analysis which has the support of academics and both sides of industry.’
Currently, the national living wage applies to those who are 25 and over, while younger workers receive the lower national minimum wage, but from April, the wage was due to be extended to 23 and 24-year-olds.
As of April 2020, minimum wage sits at £4.15 for apprentices, £4.55 for under 18s, £6.45 for 18 to 20s and £8.20 for 21 to 24-year-olds.
From April 2019 to March 2020, it was £3.90 for apprentices, £4.35 for under 18s, £6.15 for 18 to 20s and £7.70 for 21 to 24-year-olds. The living wage was £8.21.
The Chancellor’s target to continue increasing the living wage to two-thirds of median earnings by 2024 was conditional on ‘sustained economic growth’ in the UK.
The commission defined this as GDP growth of over 1 per cent.
Increasing the national living wage to £8.72 from £8.21 was announced on December 30, 2019, and came as part of the Prime Minister’s pledge to ‘level up’ the country and improve living standards for new Tory voters in the North and the Midlands.
The announcement was in line with plans to hike the minimum wage for all employees aged 21 or over to £10.50 an hour by 2024 which were unveiled earlier in the year.