National Living Wage

Budget Announcement about the National Living Wage sparks debate

Chancellor George Osborne’s Summer budget brought mixed news for employers and employees in Norfolk. The headline for many was the new “National Living Wage” set at £7.20 per hour, which is due to rise to £9 by 2020. Applying only to people over the age of 25, the new National Living Wage will be compulsory for employers. According to the Office for Budget Responsibility, the living wage will give a pay rise to six million workers.

“The concept of the living wage is laudable, but the real test will come when we see if businesses are tempted to reduce their staff numbers to balance the books,” said Sam Holt of Norwich-based accountancy recruitment specialists, Big Sky Additions. Daniel Childerhouse, a trustee for the charity Living Wage Norwich, highlighted the positive benefits higher wages bring, including lower staff turnover and sickness.

Industry leaders responded with mixed reviews. John Cridland, CBI director-general, said the measure was a “big gamble”. “The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay,” he said. “This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6%.”

Mr Osborne also committed to an apprenticeship levy for larger firms with the money collected from the levy directly controlled by employers. Commenting on the levy, Chris Kirk, education partner at professional services firm PwC, said: “Most large employers already contribute significant time and investment to these programmes. In return for supporting an additional levy, employers will want to see investment focused on the skills they actually need, such as technology and engineering, and they will want to know that training providers are of a high standard. They will also expect that government can simplify what is at present a very complex system.”
In another measure, Mr Osborne promised to introduce a new youth obligation for those aged 18-21 that says they must either earn or learn by finding a job or remaining in education.

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