Pay rises for 8 MILLION as Rishi Sunak increases minimum wage to £9.50 an hour

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Chancellor Rishi Sunak wants to make work pay by increasing the minimum wage to £9.50 and scrapping his public sector salary freeze. An estimated eight million workers, including more than five million nurses, teachers and police officers can look forward to receiving a salary hike next year. He also receiving a salary hike next year.

He also signalled an inflation-busting hike in the National Living Wage. The minimum hourly pay rate for employees aged over 23 will increase from £8.91 to £9.50.

Mr Sunak said: “The economic impact and uncertainty of the virus meant we had to take the ­difficult decision to pause public sector pay.

“Along with our Plan for Jobs, this action helped us ­protect livelihoods at the height of the pandemic.

“And now, with the economy firmly back on track, it’s right that nurses, teachers and all the other public sector workers who played their part during the pandemic see their wages rise.”

Mr Sunak’s one-year pay pause put tight restrictions on salary increases for millions on the state payroll following the huge ­pressure on Government coffers caused by the pandemic.

In his Budget and Spending Review tomorrow, the Chancellor will say that the pace of the economic recovery and encouraging signs in the jobs market will allow an end to the pay restraint.

How much of a pay rise public sector workers receive depends on the recommendations from the independent Pay Review Bodies, who set the pay for most frontline work forces.

Treasury officials yesterday claimed the increase in the National Minimum Wage will raise annual pay for the lowest-paid workers in full-time employment by around £1,000.

Mr Sunak said: “This is a Government that is on the side of working people.

“This wage boost ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this Parliament.”

Introduced in 2016, the National Living Wage sets the legal minimum hourly pay an employee over the age of 23 can earn. Mr Sunak also confirmed pay hikes for younger workers below the age for the National Living Wage.

For those aged 21-22, the National Minimum Wage rate increases to £9.18 an hour, up from £8.36.

And apprentices aged 18 working in construction and other industries will see their minimum hourly pay increase by nearly 12 percent from £4.30 to £4.81 an hour.

Treasury chiefs said Mr Sunak had accepted all this year’s recommendations made by the Low Pay Commission, an independent advisory board which brings together economists, employer and employee representatives.

But some economists last night disputed the Treasury claim that the rise was equivalent to £1,000 a year.

Torsten Bell, the chief executive of the Resolution Foundation living standards think tank, described the figure as “nonsense”.

Tom Waters, senior research economist at the Institute for Fiscal Studies, said rising inflation will “blunt” the increase in real terms.

He also said Universal Credit claimants will “see their disposable income go up by just £250 because their taxes rise and ­benefit receipt falls as their earnings increase”.

Business leaders warned the hike would concern small firms already struggling following the pandemic. 

Jane Gratton, head of people policy at the British Chambers of Commerce, said: “With rising energy costs, higher raw material prices, high levels of debt as a result of the pandemic and tax increases due, many firms are facing a cashflow squeeze.

“So while businesses support the minimum wage, the size of this increase ‑ with less than six months’ notice ‑ will cause significant concern, especially with so many smaller firms struggling.

“There is a limit to how much more firms can continue to absorb rising costs before they have to raise their own prices, adding to inflationary pressures. It is therefore vital that companies are not faced with any further up-front costs for the remainder of this Parliament.

“The best way to sustainably increase wages is to help firms boost skills and productivity.”

Mike Cherry, chairman of the Federation of Small Businesses, said: “The Treasury must play its part to secure wage increases ‑ the taxman will gain almost £500 for every worker whose pay increases to £9.50 an hour.

“Across the board, costs for small businesses are on rise, from energy bills, input and recruitment costs as well as taxes and shipping.

“Small firms are under the cosh. The Government pledged to cut the burden of business rates and we need to hear this loud and clear in the Budget.”

Union leaders claimed the increase does not go far enough to help the low paid. 

Frances O’Grady, the general secretary of the Trades Union Congress, urged the Government to “set its sights higher” by instead increasing it to £10. 

She said: “This increase won’t come into effect until next spring, by which time many household budgets will have been hammered by ­rising bills and the Universal Credit cut.”

Paddy Lillis, of shopworkers’ union Usdaw, said: “Workers in retail and low-paid industries have shown how vital they are to keeping the economy going during a time of extreme pressure.

“The best way to thank key workers is to give them a wage they can live on.”

Comment by Graham Griffiths

The rise in the National Living Wage is a positive step for workers ‑ it will go some way to easing the pressure on households feeling the squeeze.

However, there is still a substantial gap between the Government’s 2022 rate and the rising cost of living.

The past 18 months has been a perfect storm for us all, with fuel and energy costs rising and cuts to household incomes meaning many workers and their families are trapped in low pay.

On November 15, as part of Living Wage Week, the new real living wage rate will be announced to reflect the steep rise in living costs. 

It remains the only rate that’s based on what workers and their families need to get by: the weekly shop; energy bills; school uniforms; even a trip to the dentist.

The rates are calculated every year based on the best available evidence on living standards in the UK and London (where there is a different rate to reflect the higher cost of living). It applies to all workers over 18 in recognition that young people face the same living cost as everyone else.

Our annual rate announcement will see more than 300,000 people get a vital pay boost, providing them with the security and stability they need.

Almost 9,000 businesses have voluntarily chosen to go above and beyond the Government minimum and do right by workers and their families by paying the real living wage. Accredited employers include Aviva, Everton FC and Google, plus thousands of small-to-medium-sized firms.

When living costs have been rising so sharply, it’s never been more important to pay a wage that provides a decent standard of living. 

If we’re to recover, we’ll need to see more employers do the right thing now, and commit to pay a real living wage.

Graham Griffiths is director at the Living Wage Foundation

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