News

Chancellor George Osborne has said he wants to see an above-inflation increase in the minimum wage. 

The minimum wage is paid to an estimated 1.35 million people. However its value has fallen in real terms since the financial crisis of 2008.

According to Mr Osborne, National Minimum Wage would have to increase to £7 per hour by 2015 for its value to return to where it was before the economic downturn.

Labour claims that the economic upturn has not translated into improved living standards and that we are currently in a ‘cost-of-living crisis’ as inflation, currently at 2%, outstrips wage rises.

Mr Osborne has said that the "economy can now afford" to raise the National Minimum Wage rates.

He has also said that the government was planning another "big increase" in the personal allowance, which is the amount of money people can earn before paying income tax.

TUC general secretary Frances O'Grady has welcomed the news, saying that the chancellor should be “more ambitious about achieving decent pay rises across the whole of the UK workforce”.

Nevertheless, George Osborne has also recently warned against a steep rise in the national minimum wage, describing such a move as “self-defeating” and that a significant increase could “cost jobs”.

Smaller businesses in particular could suffer, with many already struggling to meet rising costs.

"An unaffordable rise would end up costing jobs and hit smaller businesses in particular. Any increase in wages must reflect improved productivity."

The rate of National Minimum Wage is recommended by the Low Pay Commission, which is due to report back next month with its recommendations for October’s annual minimum wage change.

The current hourly rates for National Minimum Wage are £6.31 for Over-21s, £5.03 for 18 to 20s and £3.72 for Under-18s.

Questions about National Minimum Wage?

Foremans can help. Contact us for free initial advice on 01244 625 500 or send your question to our expert Tax Advisors here.