The government has announced that the National Minimum Wage will increase by 3% to a new rate of £6.70 per hour, effective from October – the largest real-terms increase in the National Minimum Wage since 2008. Over 1.4 million of Britain’s lowest-paid workers are set to benefit but critics say the increase doesn’t go far enough.
The Prime Minister and the Deputy Prime Minister have also announced that the National Minimum Wage for apprentices will increase by 57p an hour to £3.30. This is the largest ever increase in the National Minimum Wage for apprentices and will halve the gap with the National Minimum Wage rate for 16 to 17 year olds, which will be £3.87 an hour from October 2015. The government will also launch a consultation with businesses on the future of the National Minimum Wage rate for apprentices.
The government is also putting employers in control of the funding for apprenticeships by introducing a new digital apprenticeship voucher.
Apprenticeship vouchers will further simplify things for employers and give them the purchasing power over the government contribution to apprenticeship funding. The employer would register their details on a system being developed by the Skills Funding Agency including their type of business, the details of the apprentice and the apprenticeship standard being signed up to.
The discounted rate, which could be up to 100% for 16 to 18 year olds, at which employers can purchase training would be calculated and the employer would be able to pass on the voucher code to the provider that is delivering the training for their apprentice. The provider would then reclaim the value of the voucher from the Skills Funding Agency.
Prime Minister David Cameron said: “At the heart of our long-term economic plan for Britain is a simple idea – that those who put in, should get out; that hard work is really rewarded; that the benefits of recovery are truly national.
“That’s what today’s announcement is all about – saying to hardworking taxpayers: this is a government that is on your side. It will mean more financial security for Britain’s families; and a better future for our country.”
Deputy Prime Minister Nick Clegg said: This is just one of the many ways in which we’ve created a fairer society whilst building a stronger economy. If you work hard, this government is behind you all the way. Whether you’re on low pay or starting your dream career through an apprenticeship, you will get more support to help you go further and faster.”
However some feel the help to Britain’s lowest paid doesn’t go far enough.
TUC General Secretary Frances O’Grady said minimum wage workers will be hit by the Chancellor’s cuts. “For the low paid to get a fair share of the recovery, this was a year in which we could have had a much bolder increase in the minimum wage,” he said.
“With one in five workers getting less than a living wage, this is nowhere near enough to end in-work poverty. Britain’s minimum wage workers should be very fearful of the billions of pounds of cuts to government help for the low paid that the Chancellor is planning if re-elected.
“Apprentices will welcome the increase to their minimum wage, which will reduce the shortfall in their minimum pay relative to 16 and 17 year-old employees. But there really shouldn’t be a gap at all. The TUC will continue to call on the Low Pay Commission to recommend a future increase that will match the apprentice rate to that for 16 and 17 year-olds.”
Labour’s shadow business secretary Chuka Umunna said: “This 20p rise falls far short of the £7 minimum wage which George Osborne promised over a year ago. Ministers have misled working families who have been left worse off. Under David Cameron we’ve seen the value of the minimum wage eroded – we need a recovery for working people.”
Labour has promised the minimum wage would rise rise to £8 an hour over the course of the next parliament if it wins in May.
This latest announcement – coming on the back of positive news about pension annuities yesterday and before a likely rise in personal tax allowances is announced tomorrow – makes one thing pretty clear: the economy will be the government’s chosen battleground in May’s general election.
The Chancellor’s statement this week may not quite be a giveaway budget – but it certainly won’t be a takeaway one either. And if the economy really is the number one priority when voters go to the polls in May, the government is giving itself a fighting chance of re-election. ‘Not a political budget?’ – we’ll see!
The National Minimum Wage rates from 1 October 2015, as recommended by the Low Pay Commission. (LPC) will be:
- a 20p (3%) increase in the adult rate (from £6.50 to £6.70 per hour)
- a 17p (3%) increase in the rate for 18 to 20 year olds (from £5.13 to £5.30 per hour)
- an 8p (2%) increase in the rate for 16 to 17 year olds (from £3.79 to £3.87 per hour)
- The National Minimum Wage rate for apprentices will increase by 57p (20%) from £2.73 to £3.30 per hour. The LPC recommended an increase of 2.6% to £2.80 in the apprentice rate.
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