Summer Budget 2015: Chancellor brings in national 'living wage'

The Chancellor also re-stated that working parents of three- and four-year-olds will receive 30 hours of free childcare from September 2017.

All parents of children aged three and older, including lone parents, will have to look for work if they want to claim universal credit.

‘Those who can work will be expected to look for work and take it where it is offered,’ he said.

Families with more than two children will not receive tax credits or universal credit for any subsequent children from April 2017, and people who make a new claim will only get support for two children.

There would be exceptions for multiple births.

Welfare benefits will be frozen for four years, to save £12 billion by 2019/20, excluding maternity pay and disability benefits. Disability benefits will not be taxed or means-tested. Child benefit will be maintained. The cap on benefits will be reduced from £26,000 to £23,000 in London and £20,000 outside London. The measures will be set out in the welfare reform bill to be published tomorrow.

For 18- to 21-year-olds there will be a youth obligation, requiring young people to ‘earn or learn’.

Introducing the new national living wage Mr Osborne said, ‘Britain deserves a pay rise.’

From next year a new national living wage will be brought in at £7.20 an hour for over-25s, rising to £9 an hour by 2020.

For smaller businesses, the Government will subsidise this by ensuring that a company could employ up to four people full-time on the national living wage and pay no National Insurance at all.

Public sector pay will rise by just 1 per cent over the next four years.

Corporation tax will be cut to 19 per cent in 2017 and 18 per cent in 2020.

The Government will raise the tax-free personal allowance to £11,000 from next year and the higher threshold from £42,380 to £43,000.

Apprenticeships and students

There will be 3 million more apprenticeships.

There will be a ‘radical approach’ by bringing an apprenticeship levy on large firms and incentives for taking on more apprentices.

Mr Osborne said that £3 billion in maintenance grants for students was now ‘unaffordable’.

Maintenance grants for students will be axed and replaced with loans for new students from 2016-17.

Students will be eligible to apply for loans of £8,200 a year and would need to earn £21,000 a year before repaying it.

There will be a consultation on freezing this loan repayment threshold for five years.

Living wage reaction

The National Day Nurseries Association welcomed the principle of the living wage but warned that there would be a huge impact for nursery businesses that could lead to rises in nursery fees for parents.

Purnima Tanuku, chief executive of the NDNA, said, 'We want a well-paid, well-rewarded workforce, that better reflects the importance of the early years and childcare professions and raises their status in our society, so the principle of a National Living Wage is welcome.
 
'However, the National Living Wage will have a huge effect on the payrolls of nurseries. As in any organisation, if lowest-paid members of staff receive more money, more senior staff will need uplifts, too. The National Living Wage can only be supported in our sector if the right funding is in place, via the Government and paying parents, to make the sums add up while avoiding a steep rise in the cost to families.
 
'It’s therefore absolutely vital that the current Government funding review of nurseries takes these longer-term, ongoing costs into account and results in not just a quick fix but long-term, sustainable rates of funding for the forthcoming 30 free hours per week for three- and four-year-olds.'
 
She added that parents who paid for their childcare provision, and whose childcare tax credits would be frozen for the next four years, would question how they could afford nursery fees 'if the National Living Wage causes them to rise further.'