The Government has unveiled plans to introduce a compulsory national living wage for workers over the age of 25 as part of the 2015 Budget.
The national living wage will be introduced in April 2016 at a rate of £7.20 an hour, Chancellor George Osborne said this afternoon.That will rise to £9 per hour by 2020, Osborne said.
Unveiling the plan as part of a budget to move from “a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country”, Osborne said: “Britain deserves a pay rise.”
The Chancellor quoted research from the Office for Budget Responsibility (OBR), which suggested the switch to a national living wage would have a “small impact” on jobs, with around 60,000 set to be lost.
Osborne said that cutting corporation tax from 20% to 19% in 2017 and 18% by 2020 would help employers pay the extra wages and claimed 2.5m people would get a direct pay rise as a result.
Currently the national minimum wage for workers aged 21 and over stands at £6.50 an hour. That is set to rise to £6.70 in October.
It means workers currently earning the minimum wage will receive an extra 50p per hour under the new compulsory living wage.
The official Budget statement said that the living wage will be a “new premium” on top of the national minimum wage.
“The government will ask the Low Pay Commission to set out how the national living wage will reach 60% of median earnings by 2020,” the Budget said.
The Association of Convenience Stores has labelled the decision “reckless” and said it will have a “devastating impact” on the sector.
ACS chief executive James Lowman said: “The introduction of a compulsory ‘Living Wage’ will have a devastating impact on thousands of convenience stores. This will lead to retailers having to reduce staff hours, work more hours in their business and ultimately cancel their investment plans.
“To introduce this measure with no consultation undermines the independent Low Pay Commission and is a reckless way to impose a massive burden on small businesses.”