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No 10 to proceed with ‘national living wage’ despite pressure

15 August 2016

At the end of July, NCF along with other trade associations representing the interests of over 388,000 businesses employing around 4.5 million people, wrote a letter to the new Secretary of State for Business, Energy and Industrial Strategy Greg Clark, urging caution over planned increases in the National Living Wage in the next four years. 

Unfortunately Downing Street has dismissed pressure to slow the implementation of the ”national living wage” in the face of lobbying from businesses concerned about rising salary bills.

The policy, which is expected to raise the minimum wage for the over-25s to approximately £9 an hour by 2020, was the centrepiece of George Osborne’s 2015 budget.

But Theresa May’s official spokeswoman pointed to her pledge, immediately after she became prime minister last month, to govern in the interests of families struggling to make ends meet.

“The prime minister has been clear that we want to build an economy that works for everyone, where people up and down the country have a share in the benefits of the economy, and making sure that people earn a decent wage for a day’s work is an important part of that,” she said.

Sacking Osborne was one of May’s first acts as prime minister, and she has struck a markedly different tone on some areas of economic policy by condemning excessive corporate pay and suggesting she could boost the power of shareholders to check lavish boardroom rewards.

The beefed-up business department has had industrial strategy added to its title and Clark is expected to be more interventionist than his Thatcherite predecessor Sajid Javid, another early casualty of May’s arrival in Downing Street.

The national living wage fits with May’s rhetoric about boosting the prospects for the poorest. Speaking directly to what she called the ordinary working-class family in her first Downing Street address May promised: “The government I lead will be driven not by the interests of the privileged few, but by yours.”

The Treasury is braced for a wave of lobbying in the run-up to new chancellor Phillip Hammond’s first autumn statement, as trade bodies and other interest groups seize the opportunity of a new minister in charge to try to win concessions.

Hammond used a recent trip to China to promise a reset on economic policy. The independent Office for Budget Responsibility (OBR) is also expected to make sharp downgrades to its forecasts for growth when it publishes its latest projections alongside the autumn statement.

The national living wage policy already makes some allowance for a downturn in economic growth because it is set in relation to median wages, and is targeting 60% of media UK pay by 2020. The minimum wage for over-25s rose by 50p an hour in April to £7.20 as a result.

Conor D’Arcy, policy analyst at the Resolution Foundation thinktank, said: “By sensibly pegging the national living wage to typical earnings, the government has already built in flexibility to help steer it through choppy economic times.”

A Treasury spokesman said: “Since April the new national living wage has been boosting the wages of the lowest paid. The independent Low Pay Commission will advise on the path future increases should take, taking into account the state of the economy.”
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