“Britain deserves a pay rise and Britain is getting a pay rise,” Osborne said. “We need to move Britain from a low wages, high tax, high welfare economy to a high wages, low tax, low welfare economy.”
Osborne promised to introduce a “national living wage” of £9 an hour by 2020 for people aged 25 and older. It will start at £7.20 an hour from next April. The national minimum wage is currently set at £6.50 an hour.
The chancellor cited statistics from the Office for Budget Responsibility (OBR) that said hiking the minimum wage up to the suggested living wage would impact on about 60,000 jobs. However, the OBR also says more than one million jobs are due to be created overall as the economy picks up.
Raising the minimum wage to the living wage will lead to increased pay for six million people, said Osborne. “The Conservatives are the party of the working people,” he said.
Osborne also announced that the government would be cutting corporation tax to 19% in 2017 and 18% by 2020, to encourage businesses to “grow, invest and hire with confidence”.
He said that while paying the living wage will cost businesses 1% of corporate profits, lower rates of corporation tax will offset this.
Osborne said the UK’s smallest companies paying the living wage will not have to pay national insurance taxes. He said this would provide a pay rise for 2.5 million people.
Osborne also announced an increase in the national insurance threshold for lower paid workers, to £11,000. It is currently set at £10,600. In the Conservative manifesto, the party promised to raise it to £12,500 by 2020.
The higher rate tax rate has also been raised, to £43,000 per year.
