Rachel Reeves is set to reveal a rise in the minimum wage in a further blow to businesses, reports claim. The Chancellor will reportedly announce a “significant” rise in a “new living wage” at the Budget on Wednesday.
Government sources have suggested the level of the living wage will be higher than previously projected, according to MailOnline.
This is because the Low Pay Commission now takes more account of the cost-of-living and expectations around inflation after the Chancellor granted the body a new remit in the summer.
The Low Pay Commission’s main estimate for the national living wage from April 2025 is £12.10, an increase of 5.8%, with a lower-range projection of £11.82 and an upper range of £12.39.
This is up on the Commission’s previous estimate of £11.89 in March this year. These figures may have risen further still as growth in earnings this year has been stronger than previously forecast.
As of September, inflation was 1.7%, down from 2.2% in August and well below the peak of 11.1% in October 2022.
In a further possible blow to businesses, the Labour Government’s first economic statement for 15 years is expected to include a cut to the earnings threshold at which employers pay National Insurance.
Labour pledged not to raise taxes on “working people” in the General Election, ruling out hikes to VAT, National Insurance and income tax.
But Ms Reeves is expected to raise employers’ – rather than employee’s – National Insurance contributions by at least one percentage point in the Budget, which could hit small businesses particularly hard.
Education Secretary Bridget Phillipson on Sunday told broadcasters working people will not see higher taxes “on their payslip”.
Ministers have also refused to rule out keeping the freeze on income tax thresholds brought in by the previous government, which sees people pulled into paying higher rates through a phenomenon known as “fiscal drag”.
Ms Reeves described such freezes last year as “picking the pockets of working people” when the Conservatives continued the policy, leading to Tory accusations of hypocrisy over Labour’s own expected extension of it.
Challenged on her assertion that working people will not face a greater burden “on their payslip” in light of the prospect of the thresholds remaining frozen, Ms Phillipson told Times Radio: “I’m just not prepared to speculate on hypotheticals.”
Despite ministers remaining tight-lipped, there are several measures expected in Wednesday’s statement, including a cut to the earnings threshold at which employers pay their National Insurance contributions.
Combined with a hike in the rate of employer contributions, this is expected to raise around £20billion as Ms Reeves seeks to revive public services and put the economy on a firmer footing.
Meanwhile, Prime Minister Sir Keir Starmer on Monday (October 28) will say in a speech ahead of the Budget that the economic statement will embrace the “harsh light of fiscal reality” but “better days are ahead”.
