Rishi Sunak to end public sector wage freeze for millions of workers and raise the national minimum wage in the budget on Wednesday, although economists warned the measures would not offset increases in inflation and cuts in credit universal.
Chancellor expected to confirm year-long ‘pause’ on public sector wages, which affected 2.6 million teachers, police and civil servants during the pandemic, will be lifted as the economy recovers of the pandemic.
On Monday, he also confirmed that the UK’s national living wage would rise from £ 8.91 to £ 9.50 an hour for workers aged 23 and over from April, an increase of 6 , 6%, which means a pay rise for millions of low-paid workers after ministers accepted the recommendation of the low-wage committee.
The announcements mean that around 7.5 million people could see their wages increase – around 5.7 million working in the public sector and 2 million at minimum wage, although there is some crossover. Just under half of public sector workers were affected by last year’s freeze, with exemptions for NHS workers and those earning less than £ 24,000.
Sunak imposed the controversial public sector wage freeze in November 2020 and it went into effect in April. At the time, he said, it was unfair for millions of workers to get a raise when many of their private sector counterparts were on leave or lost their jobs.
But with rising wages in many sectors, and the prime minister using his party conference speech to emphasize the prospects of a “high-wage economy,” that argument no longer applies.
“The economic impact and the uncertainty of the virus have meant that we have had to make the difficult decision to suspend public sector wages,” Sunak said, announcing the end of the freeze. “Along with our Jobs Plan, this action has helped us protect livelihoods at the height of the pandemic. And now, with the economy firmly on track, it is only fair that nurses, teachers and all other public sector workers who played their part during the pandemic are seeing their wages increase. “
The Treasury said the increase in the minimum wage represents an increase of around £ 1,000 per year for a full-time worker. But Labor calculations have revealed that those affected by the £ 1,000 a year cut in universal credit, the rise in national insurance and the freeze on the personal income tax allowance will always be in worse shape. loties of £ 807 from April.
They should also feel the effects of higher gas and electricity prices when the energy price cap is revised the same month.
The Institute for Fiscal Studies (IFS) think tank agreed that the increase in the minimum wage would not offset the cuts in benefits. Tom Waters, Senior Research Economist, said: ‘While this increases the incomes of full-time minimum wage workers by more than £ 1,000 a year, those on universal credit will see their disposable income increase by only £ 250 because their taxes go up and they get benefits. decreases as their income increases.
“Minimum wage workers are most heavily concentrated in the middle of the household income distribution – not the bottom – often because they live with a higher income partner. This means that the minimum wage is a very imperfect tool to compensate for cuts in benefits, which target poorer households much more.
“Rising inflation will also blunt the real value of this minimum wage increase – and of course, as prices go up now, the minimum wage increase won’t start until April.”
Both government announcements are seen by Treasury and No. 10 as placing the emphasis on higher wages rather than government support. Sunak is also likely to confirm that the government is aiming to raise the national living wage to over £ 10 by the next election, a pledge that would match that of Labor.
Bridget Phillipson, Labor shadow chief secretary at the Treasury, said the offer was ‘disappointing’ and would cost £ 1,000 a year less than Labor plans for a minimum wage of at least £ 10 an hour for people working full time. “Much will be swallowed up by government tax hikes, cuts in universal credit and the failure to get energy bills under control,” she said.