Laura Suter, head of personal finance at AJ Bell, comments on plans to increase the Minimum Wage:
“The Tories will mark 25 years of the minimum wage next April by increasing it to at least £11 an hour for the first time. A move to increase the minimum wage to £11 an hour would mean a pay rise of £1,055.60 a year for someone earning the minimum wage and working full-time*. It represents a near 6% pay rise compared to this tax year, and would take the full time annual salary for those on minimum wage over the £20,000 a year threshold*. The increase comes on top of the near 10% increase to minimum wage last year, and means the hourly rate will have risen by £1.50 an hour in the space of two years.
“But there are no giveaways without a flipside, and the government has also said it will crack down on those not actively seeking work, increasing sanctions for people it thinks should be in work rather than on benefits. We’ll need to see the detail of this to see how far the government goes on this clampdown.
“After being branded as the ‘biggest tax-increasing parliament’ on record by the IFS last week, it’s understandable that many Tory MPs are calling for tax cuts in order to curry favour with the public ahead of the next election. Despite claiming multiple times in interviews that tax cuts are not on the horizon, Chancellor Jeremy Hunt appeared to be thawing on that stance, using his speech to state that the level of tax in the UK is too high.
“However, the government has to tread a thin tightrope: hand out too many tax cuts and they risk a surprise resurgence in inflation, which in turn would lead to more interest rate hikes. But offer no giveaways ahead of a general election and you face losing both your voters and the backbench MPs.”
*Based on a 35-hour week
