Chancellor Rishi Sunak revealed in the Spending Report 2020 (SR2020) that basic rate workers will get a 2.2 per cent increase in minimum wage, backtracking the 49p an hour increase which was promised earlier this year.
Sunak said: “We are accepting in full the recommendations of the Low Pay Commission to increase the National Living Wage by 2.2 per cent to £8.91 an hour; to extend this rate to those aged 23 and over; and to increase the National Minimum Wage rates as well.”
It was explained that around two million people would benefit from these minimum wage increases, and that a full time worker on the National Living Wage will see their annual earnings increase by £345 next year.
“Compared to 2016 when the policy was first introduced, that’s a pay rise of over £4,000,” Sunak said.
Wage increase based on age
This is how much the minimum wage is set to rise from April 2021 based on age groups:
16 to 17 years old: a 1.5 per cent increase from £4.55 to £4.62 per hour18 to 20 years old: a 1.7 per cent increase from £6.45 to £6.56 per hour21 to 22 years old: a 2 per cent increase from £8.20 to £8.36 per hourFor apprentices: a 3.6 per cent increase from £4.15 to £4.30 per hour
The daily accommodation offset rate will also be increased by 2 per cent from £8.20 to £8.36.
“Further, the government will increase the 2021-22 Income Tax Personal Allowance and Higher Rate Threshold in line with the September CPI figure,” the SR2020 states.
The government will also use the September CPI figure as the basis for selling all National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions, for 2021-22.
‘Letting down workers’
Trades Union Congress (TUC) secretary Frances O’Grady said that workers had been let down by the government’s choice to “row back” on the full pay rise.
Responding to the SR2020 on the TUC blog, the organisation said: “The TUC believes the minimum wage should be at least £10 an hour, so people can earn enough to live on.”
The shopworkers’ union Usdaw also said that it was disappointed that low paid workers would not be getting the full minimum wage increase that they had been promised.
General secretary Paddy Lillis said: “The increase of 19p to £8.91 an hour doesn’t meet the union’s call for £10 per hour, the real living wage rate of £9.50 or even the government’s previously projected rate of £9.21.
“We provided the Low Pay Commission with evidence of why we need a new deal for workers, which includes at least £10 per hour and an end to unjust rip off youth rates.
“Today the Chancellor missed the opportunity to fully recognise the huge efforts low paid key workers have made through the pandemic. There needs to be lasting and fundamental changes to the way society views our lowest paid workers.
“We need a new deal for the workers, and a minimum wage of at least £10 per hour.”