A new ‘national living wage’ which will go up to £9 an hour was announced in yesterday’s budget - but has been described as “gimmickery of the highest order” by academics.
The measure, which will start next April at £7.20 an hour, was one of several measures announced in chancellor George Osborne’s first Conservative only budget.
Mr Osborne said that “Britain deserves a pay rise” when he announced the policy to loud cheers.
Dr Craig Berry, deputy director of the Political Economy Research Institute at the University of Sheffield, said: “The rebranding of the national minimum wage as the national living wage is gimmickry of the highest order, designed only to soften criticism of the continuing downward pressure on wages rather than bring about real pay rises, and it seems likely that any gains for employees will be offset by losses arising from significant tax credit cuts.”
Restricting tax credits and universal credit to those families with two children was also confirmed in the budget.
Mr Osborne said: “Tax credits subsidise wages in a way never intended.”
On benefits, he said welfare should “not support the lifestyles not achievable to taxpayers who fund it.”
Some of the other key budget announcements were:
-No fuel duty rise
-Personal tax allowance to rise to £11,000
-£37 billion of further spending cuts by 2020 including £12bn of welfare and £5bn from tax avoidance
-Working age benefits to be frozen for four years
-Housing benefit will not be able to be claimed automatically by 18-21 year olds
-Major reform to vehicle excise duties to pay for new road building fund in England with new VED bands for new cars from 2017
-Public sector pay rise to continue at 1 per cent for the next four years
-Deficit to be cut at same rate as in last Parliament -securing a budget surplus a year later than planned in 2019-20
-Inheritance tax threshold will be increased to £1m from 2017
-The point at which people start paying income tax at 40p to rise from £42,385 to £43,000 next year
-Rents in social housing sector will be reduced by 1 per cent a year for the next four years
-Higher-income households in social housing made to pay rents at the market rate
-State pension ‘triple lock’ to be protected
-Annual tax relief on pension contributions to be limited to £10,000 a year