Businesses are looking to Rachel Reeves for something in return for the hike in wages to the low paid that will add further to their costs.
The Chancellor has announced increases in the national living wage and national minimum wage as part of a commitment to help people cope with the cost of living.
From April, rises in the National Minimum Wage and the National Living Wage will boost the pay packets of around 2.7 million workers.
However, hard-pressed businesses already struggling with last year’s cost increases, have warned that without any help they will be forced to cut jobs, halt recruitment, or force existing staff to do more. Some will pass the cost on to customers, thereby negating the Chancellor’s attempt to ease household costs.
Kate Allen, who owns lettings agency Finest Stays, said: “This is yet another slap in the face for SMEs. We’re still reeling from the National Insurance hike, and now the government expects small businesses to absorb another costly, ill-judged policy. It’s completely detached from the reality on the ground, where finances are stretched to breaking point and hiring is already frozen.
“What makes it even more insulting is the timing. Dropping this at 6pm the night before the Budget feels strategic; a last-minute attempt to soften the blow of what’s likely to be yet another disappointing set of announcements. It reads like political damage control, not policymaking.”
Riz Malik, director at R3 Wealth, said: “The economy is flatlining, and the labour market is fragile, so let’s make it more expensive to employ people? That makes no sense to me, and I am sure it doesn’t to other business owners.”
Kate Nicholls, chair of UKHospitality – a trade body representing more than 700 companies and 123,000 venues – said: “Increases to minimum wage rates are yet another cost for hospitality businesses to balance, at a time when they are already being taxed out.”
“These additional costs make action at the Budget to reduce hospitality’s tax burden even more important.”
Jane Gratton, deputy director of public policy at the British Chambers of Commerce, said: “Employers want to ensure their workforce is happy, engaged and well paid.
“However, every above-inflation wage increase leads to higher business costs, lower investment and fewer opportunities for individuals. Making employment more expensive risks deepening the jobs crisis among young people.
“Our research shows that labour costs remain the biggest cost pressure for SMEs, cited by 72% of businesses in Q3. There’s a limit to how much additional cost employers can bear without something having to give.
“With unemployment rising, the government needs to use tomorrow’s Budget to ease cost pressures for business. Crucially, there must be no new tax increases for businesses.”
The Chancellor said: “I know that the cost of living is still the number one issue for working people and that the economy isn’t working well enough for those on the lowest incomes.
“Too many people are still struggling to make ends meet. And that has to change.”
The changes were based on the recommendations of the Low Pay Commission, which is an independent body created to advise the government on changes to the Minimum and Living wage.
Paul Nowak, who is the general secretary of the Trades Union Congress (TUC) said “the government is delivering on its promise to make work pay”.
The changes in detail
The National Living Wage is the minimum amount a worker is entitled to be paid if they are 21 or over.
It is currently set at £12.21 an hour and is set to rise by 4.1% to £12.71 an hour from next April.
For a full-time worker on the National Living Wage, it means an increase in pay of £900 a year.
The National Minimum Wage is the wage floor for workers aged between school-leaving age (turning 16) and 20.
For those aged 18 to 20 the hourly rate is £10. This will rise by 8.5% to £10.85 an hour.
And for those under 18 it’s £7.55, and will rise by 6% to £8 an hour
An apprentice under 19 or in the first year of your apprenticeship, receives a rate of at least £7.55 an hour. As above, it will increase by 6% to £8 an hour.
For someone on the National Minimum Wage, working full-time, it will mean a £1,500 annual increase.
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