Chancellor George Osborne has outlined a new National Living Wage, which while higher than the current minimum wage is not all it's cracked up to be.
Here are the key points:
- The new compulsory National Living Wage will be set at £7.20/hour next April, rising to £9/hour by 2020, but it only for over-25s.
- This is higher than the compulsory minimum wage, which will be £6.70 an hour from October for over-21s.
- However, it is less than the voluntary living wage that many companies employ, which currently stands at £7.85/hour (£9.15/hour in London). The fear is that as the new compulsory minimum is less, yet uses virtually the same name, that employers will adopt the lower, compulsory version.
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'Pulling a rabbit out of the hat and sleight-of-hand at the same time'
Martin Lewis, founder and editor of MoneySavingExpert.com says: "The Chancellor has managed a clever double whammy of pulling a rabbit out of the hat and sleight-of-hand at the same time.
"This is not a living wage. He has naughtily nicked the name from the Living Wage Foundation which sets the living wage at £7.85/hour (£9.15/hour in London) this year. His living wage is £7.20 next year. By using the valued brand of 'the living wage', even though he's not paying that amount, he hopes to get extra credibility.
"While a rise is welcomed, if he wants a living wage, he should've been willing to push it further."
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Current minimum wage
In March, the Government announced the following minimum wage hourly rate rises from 1 October 2015:
- The hourly rate for adults aged 21 and above will rise to £6.70, from £6.50 a 3% increase.
- The hourly rate for 18-20-year-olds will rise to £5.30, from £5.13 a 3% increase.
- The hourly rate for 16 and 17-year-olds will go up to £3.87 from £3.79 a 2% increase.
- The hourly rate for apprentices will rise to £3.30 from £2.73 a 21% increase.
The rates were recommended by the Low Pay Commission and are based on the inflation forecast of 0.5%, although the Government went further than the suggested figure of £2.80 for apprentices. See MoneySavingExpert.com's Budget Planner for help managing your cash.