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National Living Wage

Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 1st March 2016.

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Photo of Royston Smith Royston Smith Conservative, Southampton, Itchen 12:00 am, 1st March 2016

What assessment he has made of the potential effect of the national living wage on wage growth.

Photo of George Osborne George Osborne Chancellor of the Exchequer and First Secretary of State

The national living wage will mean that a full-time minimum-wage worker benefiting from the policy will earn over £4,000 more by 2020 in cash terms, a rise of more than 35%. Due to the ripple effects on those on higher incomes, up to 6 million workers will benefit. The national living wage will drive up productivity; it will make sure that work pays; it is progressive and fair; and I am proud it is being introduced by a Conservative Government.

Photo of Royston Smith Royston Smith Conservative, Southampton, Itchen

I thank the Chancellor for his response. I am delighted that the national living wage will come into force from 1 April because Southampton has a high number of low-paid workers, which this policy addresses. What assurances can my right hon. Friend give my constituents that their jobs will be protected as a consequence of this wage rise and a strong local economy?

Photo of George Osborne George Osborne Chancellor of the Exchequer and First Secretary of State

The assurance I can give is that, alongside the national living wage, we have cut taxes for businesses so that they have more money to invest in their workforce. We have introduced and increased the employment allowance, which helps small businesses in particular. I introduced that increase at the same time as announcing the national living wage. We are of course making big investments in the Southampton economy so that it is a great place to grow a business and employ people. All those things will help the hard-working people my hon. Friend represents so well.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

Wage growth matters, but surely it is the bottom line of your payslip that really counts. That is why the Chancellor is wrong to say that this is progressive. The Resolution Foundation has found that, over the next Parliament, those in the top half of our income distribution will benefit more than those at the bottom. How can the Chancellor say that what he has done will help those with the least?

Photo of George Osborne George Osborne Chancellor of the Exchequer and First Secretary of State

The hon. Lady seems to be opposing the national living wage. I think it is a progressive policy. Indeed, it was based on work by the Resolution Foundation. If you want a regressive policy, I will give you one. How about increasing the basic rate of income tax? That is what the Labour party is proposing in Scotland—the first sign of what an economic policy would look like under this new Labour leadership. How can an increase in the basic rate of income tax, which would hit people earning over £11,000, be remotely progressive or fair?

Photo of Nigel Huddleston Nigel Huddleston Conservative, Mid Worcestershire

Most businesses, as well as workers, in my constituency warmly welcome the introduction of the national living wage and the increased spending power it will deliver. Will the Chancellor and his team carefully monitor the implementation of the national living wage to see whether there are any unintended consequences, particularly in sectors where margins are already small, such as farming, social care and hospitality?

Photo of George Osborne George Osborne Chancellor of the Exchequer and First Secretary of State

We will of course monitor the impact of all our policies on the economy and on particular sectors. That is one of the reasons why, alongside introducing the national living wage, we have introduced the new council tax supplement for the social care sector. The Office for Budget Responsibility analysis when we announced the national living wage was that, while in theory 60,000 jobs could be lost in the future that might otherwise have been created, the other policies we were pursuing would see over 1 million new jobs created, so the overall effect is an increase in employment of over 1 million.

Photo of Margaret Ritchie Margaret Ritchie Social Democratic and Labour Party, South Down

How can the Treasury ensure that employers do not reduce the hours of work of their employees, many of whom are in receipt of low incomes?

Photo of George Osborne George Osborne Chancellor of the Exchequer and First Secretary of State

Many employer organisations and businesses have welcomed the national living wage, and many studies suggest that having a higher floor for wages drives up productivity, which, as the hon. Lady will know, is one of Britain’s great economic challenges.