MSE News

Spending Review 2020: National living wage to increase by 2.2% this April

Spending Review 2020: National living wage to increase by 2.2% this April

The national living wage will rise from £8.72 to £8.91 an hour and will be extended to workers aged 23 and over from April 2021, the Chancellor has announced.

Rishi Sunak confirmed the increase in his Spending Review 2020, which was set out in Parliament today. The review is a wider macro-economic statement with very little focus on individual consumers - we've rounded-up the key announcements below.  

When it comes to the national living wage, the 19p increase represents a rise of 2.2%, and the scheme will also be expanded to cover those aged 23 and over - up from those aged 25 and over at present. This expansion is part of a wider Government plan, which aims to extend the national living wage to cover workers aged 21 and over by 2024.

The Treasury estimates this will likely benefit around two million of the lowest paid workers. But the Chancellor hasn't gone as far as increasing the standard rate to £9.21 - something the Government consulted on earlier this year. 

Workers aged under 23 will also see an increase to their national minimum wage rates of between 1.5% and 3.6% depending on their age - we explain the difference between the national living and minimum wages below, and set out the upcoming changes to wages in the table.  

See our Money Makeover guide for help overhauling your finances.

Compulsory living and minimum wages

TABLE_CELL_STYLE National living wage (hourly) National minimum wage (hourly) (1)
  Age 25+ (age 23+ from April 2021) Age 21-24 (age 21-22 from April 2021)  Age 18-20 Age under 18 Apprentice
Current level £8.72 £8.20 £6.45 £4.55 £4.15
Level from April 2021 £8.91 £8.36 £6.56 £4.62 £4.30

(1) Applies from school leaving age, which varies around the UK

What is the national living wage and how does it differ from the minimum wage? 

Introduced in July 2015 by the then Chancellor George Osborne, the compulsory national living wage is the lowest wage that can legally be paid to employees of a certain age - and today's announcement confirms it will now apply to those aged 23 and over from April 2021. 

It's higher than the compulsory national minimum wage, which applies at varying rates to employees under this age and is also rising from next April.

But both the national living wage and national minimum wage are different from the real living wage, which is the amount calculated by campaign group the Living Wage Foundation as the minimum pay workers and their families need to live on. The real living wage, which covers everyone aged 18 and over, is currently £9.50 across the UK and £10.85 in London.

When the national living wage was first announced, MoneySavingExpert.com founder Martin Lewis blasted it as being "naughtily nicked" from the Living Wage Foundation to give "extra credibility" to the scheme despite not paying that amount. 

What else was announced in the Spending Review 2020?

Other points of note that were announced in today's Spending Review include: 

  • A pay boost for NHS staff and low income workers but freezes elsewhere. Doctors, nurses and other NHS workers are set to get a pay boost in the next tax year, though the exact level of the rise hasn't yet been set.

    Around 2.1million public sector employees earning less than £24,000 a year will also get a boost worth at least £250 at the same time but other public sector workers will see their pay frozen. 

  • A new scheme to help unemployed. A £3.6 billion cash injection has been provided to the Department of Work and Pensions for next year to help get people back into work. 

    This includes a new three-year "Restart" scheme aimed to help more than one million unemployed people find jobs, by offering "intensive and tailored support" to those who have been out of work for more than 12 months - though full details are still to be announced.

Tip Email

FREE Weekly MoneySaving email

For all the latest deals, guides and loopholes simply sign up today - it’s spam free!