The government has confirmed that the national living wage will increase by 6.6% from £8.91 to £9.50 as it officially accepted all recommendations of the Low Pay Commission (LPC).
Announcing his Autumn Budget today, the chancellor Rishi Sunak said: “For a full-time worker that’s a pay rise worth over £1,000 [and] it will benefit over 2 million of the lowest paid workers in the country. This is a major commitment to the high-wage, high-skill, high-productivity economy of the future.”
The LPC’s remit is to recommend the rate of the national living wage that will enable the UK to meet the target of two-thirds of median earnings by October 2024.
Commissioners are expected to “advise on any emerging risks and – if the economic evidence warrants it – recommend that the government reviews its target or timeframe”.
In a letter to the business secretary Kwasi Kwarteng, LPC chair Bryan Sanderson said: “The economic situation has improved substantially since last year, with GDP approaching its pre-crisis level earlier than predicted and relatively strong growth expected next year. The labour market has also recovered strongly, with payroll employment above its pre-crisis level and a record level of vacancies suggesting this will rise further.”
He added that the increase in the national living wage to £9.50 was “greater than last year’s, reflecting the significant improvement in economic conditions. It is also greater than the anticipated rise in inflation, meaning living standards should be protected and those on the national living wage should see their pay rise faster than the average”.
Publishing its findings, the LPC’s “central projections” suggested the national living wage would actually need to increase to £9.58 in 2022 and £10.70 in 2024 to reach two-thirds of median wages, but it said this approach was “front-loaded” and not the right approach in the current economic circumstances.
“While there are many positives in the current data, inter-related issues affecting global supply chains, rising input costs and staff availability present some near-term risks,” it said.
In his concluding remarks in his letter to Kwarteng, Sanderson wrote:
“The Commission has noted on multiple occasions the need for additional support for the social care sector to enable it to fulfil its ambitions to pay workers a decent wage. This need has only become more urgent.
“We heard again this year about the acute pressures on the childcare sector, and the impact on both providers and low-paid parents, and would highlight this as a further area where additional government funding is vital.
“The impact of our recommendations is dependent on strong compliance and enforcement action. Without this some employers can unfairly undercut their competitors and exploit workers. We urge the government to take this into consideration as it develops the Single Enforcement Body.”
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