As yesterday’s emergency budget was being delivered, it was pretty much as I expected. Tax cuts to benefit the better off, and further cuts to welfare that will hit the poorest sections of society. Osborne was even trumpeting it as a low tax low, low welfare budget. Then he ended with his announcement of a living wage, suddenly grabbing my attention.
Had I heard him correctly? Was a Tory government really giving us a statutory living wage?
Apparently I wasn’t hearing things. Osborne was taunting the Labour benches, Tory MPs were baying loudly, and I was left thinking there must be a catch.
A little while later and I realised that there was quite a big catch. For Osborne’s living wage is nothing like what it’s cracked up to be. Indeed, it isn’t even a living wage.
With the current, albeit voluntary, living wage set at £9.15 an hour in London and £7.85 elsewhere, Osborne’s’ wage of £7.20 across the board falls well short of this. But whereas the current living wage is based on a minimum income standard that takes account of the tax and benefits system. In contrast, Osborne’s budget means cuts to welfare. So for a low paid worker, any increase in wages will be offset by cuts to tax credits and other benefits.
Another very significant problem is that Osborne’s wage will not apply to anyone under 25 years old. This disregard of the contribution some 2 million young people make to society is frankly shameful; and I fear it is only going to trap more families in poverty and lead to further disengagement from the political process.
In addition, Osborne is expecting his wage to be raised according to what the Low Pay Commission considers affordable, rather than the actual cost of living. So unless there is some change to the Commission’s terms of reference, this will surely result in Osborne’s wage failing to rise to the levels needed, particularly when the benefits cuts are factored into the equation.
Finally, what about the 1600 employers who are recognised by the Living Wage Foundation as current living wage employers? With rates already above that of Osborne’s wage, will we now see these employers freezing their living wage rates or worse, cutting them back to Osborne levels?
Clearly when making his announcement, overlooking the small print was deliberate. Sure, at face value Osborne’s wage is a step in the right direction; and it is only right that employers pay more and the state pays less. But as it currently stands, today’s living wage is calculated alongside today’s benefit system. So we still have a very long way to go before employers are paying the sort of wage rates that someone can live on without the need to claim any state benefits. Whats more, there is a real danger that today’s announcement will do very little to raise families above the poverty line; and that, I’m sure you’ll agree, is unacceptable.