Labour dismisses pledge to raise pay to £10.50 an hour as ‘pathetic’ attempt to catch up

This article is more than 11 months old

This article is more than 11 months old

Sajid Javid has signalled the government’s intention to woo low-paid workers in the forthcoming general election by announcing plans to increase the “national living wage” to £10.50 an hour.

The chancellor said his new five-year target to raise the national living wage and reduce the age at which people could receive it from 25 to 21 meant the Conservatives were now the “workers’ party”. The changes would benefit 4 million people.

John McDonnell, the shadow chancellor, dismissed the moves as a “pathetic attempt at catchup” and said Labour would immediately raise the national minimum wage for all workers over 16 on taking office.

Sajid Javid says Tories aim to raise national living wage to £10.50 an hour – live news Read more

But Javid’s surprise announcement at the Conservative party conference in Manchester provided fresh evidence that Boris Johnson intends to target voters on modest incomes in Conservative-Labour marginals.

The target to increase the national living wage from £8.21 to £10.50 would increase an individual’s net earnings by £1,900 over the five years. The Treasury said the proposal would raise the low-pay floor from 60% to two-thirds of median earnings.

Sources said that were the pay floor to continue to be pegged to 60% of median earnings, the national living wage would be £9.45 an hour rather than £10.50 by 2024.

The chancellor said the number of low-paid workers was already at its lowest level in four decades, but he was prepared to go further.

“Over the next five years, we will make the UK the first major economy in the world to end low pay altogether,” Javid said.

The chancellor also sought to increase the Tories’ low level of support among young people with a plan to reduce the age threshold in two stages – to 23 by 2021 and to 21 by 2024.

“The hard work of the British people is paying off. It’s clear it’s the Conservatives who are the real party of labour. We are the workers’ party,” he said.

McDonnell said: “This pathetic attempt at catchup by the Conservatives will fool nobody.

“Labour will introduce £10 as a minimum as soon as we take office and, rising with living costs, it will mean everybody over 16 years of age will be earning comfortably more than £10.50 an hour by 2024.”

Frances O’Grady, the general secretary of the TUC, said: “The TUC has long campaigned for a minimum wage of over £10 and an end to the discrimination young workers suffer from lower rates.

”But the chancellor’s pre-election promise should be taken with a huge bucket of salt. This pledge would be overwhelmed by a no-deal Brexit. If we leave the EU without a deal, jobs will be lost, wages will fall and our public services will suffer.”

The Resolution Foundation, a thinktank that specialises in research into low- and middle-income households, said achieving Javid’s goal would mark a dramatic turnaround for Britain’s low pay landscape.

Before the introduction of the national living wage in 2016, 5.5 million workers – 20.7% of the working population – were in low-paid work, a figure that has since fallen to 4.7 million workers, or 17.1% of the total.

Nye Cominetti, an economic analyst at the Resolution Foundation, said: “The introduction and ramping up of a minimum wage in the UK over the past two decades is one of our big policy success stories.

“But more than 4 million workers remain low paid – one of the highest shares in Europe. So the chancellor’s announcement today to eliminate low pay by the middle of the decade is hugely ambitious and hugely welcome.”

Tej Parikh, the chief economist at the Institute of Directors, said: “All sides must be wary of playing a bidding war with minimum and living wages.

“Raising the thresholds is a delicate balancing act, as too high a bar risks forcing firms to reduce staff numbers amid elevated costs, particularly with Brexit disruption on the cards. It’s crucial that the approach is evidence based, which is why the Low Pay Commission was set up in the first place.”

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Adam Marshall, the director general of the British Chambers of Commerce, said: “The government’s ambition to raise and simplify the national living wage is laudable, but the path to doing so must be on the basis of clear economic evidence, with ample time for businesses to adjust to any changes.

“Companies already face significant cumulative employment costs, including pensions auto-enrolment, immigration skills charge and the apprenticeship levy, so government must take action to alleviate the heavy cost burden facing firms or risk denting productivity and competitiveness.”

Treasury sources said they were relaxed about the impact on the labour market and, with unemployment at its lowest level since the mid-1970s, it was a good time to move towards a more ambitious target.