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Labour pledges living wage tax breaks for employers

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Employers that pay staff the living wage will receive tax rebates of up to £1,000 per employee if the Labour party is re-elected, leader Ed Miliband has said.

If the party wins the next election in 2015, organisations will be offered a 12-month tax break in 2016 if they agree to pay the living wage as a minimum.

This would equate to an average rebate of £445 per employee, although it could reach £1,000 in some cases.

The living wage, which today rose by 20p to £7.65 outside London, is the hourly rate of pay an individual needs to earn to cover the basic costs of living. It is calculated by the Centre for Research in Social Policy at Loughborough University and is more than £2 higher than the legal minimum wage.

In an interview with the Independent on Sunday, Miliband said: "There is no route to tackling the cost of living crisis that doesn't go through tackling the issue of low pay. This will be the central mission of the next Labour Government: to spread the living wage across the country. Millions of people could benefit and I think it's a pro-business agenda as well as a pro-worker agenda."

The CBI welcomed the news, but warned the proposed incentive will not benefit all organisations and employees.

Katja Hall, CBI chief policy director, said: "We are pleased that Labour is taking a voluntary approach to the living wage.

"The minimum wage acts as a floor on pay, protecting workers. This scheme may help some firms pay more, but many companies simply can't afford it. The best way to boost wage growth in the longer term is to build a sustainable recovery and invest in the productivity growth that will boost wages."

So far, 432 companies have signed up to a campaign to pay the living wage instead of the minimum, which is up from 78 companies this time last year.