Fears have been raised that millions of workers could lose out on a planned rise in the national minimum wage – because of damage done to the economy by Covid-19.
Reports began circulating on Sunday that Chancellor Rishi Sunak might not introduce the rise from £8.72 to £9.21 per hour in April, as a result of damage done by the pandemic.
A target had been set by the Chancellor that would see the National Living Wage – the minimum wage for over-25s – increased to the equivalent of two-thirds of the country’s median earnings by 2024.
The pledge to increase the rate also featured heavily in the Tory manifesto at the last election.
But confronted about the report today, Downing Street refused to guarantee the next rise will definitely happen as planned.
No10 said the government still planned to introduce the change – but added a really important caveat, saying it was originally planned if “economic conditions allow.”
The official spokesman for Boris Johnson, asked about reports the Treasury was considering pulling an emergency brake on the policy, said: “I’m not aware of any change to that position.”
But he added: “At the Spring Budget, the Government reinforced its commitment to an ambitious target for the national living wage to reach two thirds of median earnings by 2024 – provided that economic conditions allow.
“In terms of the latest set of recommendations from the Low Pay Commission for 2021, we haven’t seen those yet and I don’t think we are due to receive them until the autumn.”
Britain’s economic conditions have changed dramatically in the last few months, as a result of the coronavirus pandemic.
The UK’s headline unemployment rate has remained at 3.9% since the lockdown was introduced thanks to the furlough scheme.
But the Bank of England expects the rate to double to 7.5% by the end of the year as government-funded support schemes come to an end.
It isn’t exactly clear if the time of downturn we’ve seen since march would constiute a big enough change in “economic conditions” to suspend the increase.
According to the report in the Sunday Telegraph, members of the Low Pay Commission are said to believe that companies would not be able to afford an increase to £9.21 in April.
The commission has warned that the pandemic “clearly represents a very challenging set of circumstances for workers and employers alike, and will require us to review whether an emergency brake is required.”
But any delay or broken promise on pay could hit the Conservatives hard – especially in the so-called ‘red wall’ seats they won from Labour.
A report by the Levelling Up Taskforce, a new group of 40 Conservative MPs, concluded that people living in seats won by the UK Conservative party in last year’s general election earn on average 5% less than those in areas held by the Labour opposition.
Mr Johnson and chancellor Rishi Sunak have been warned by MPs representing the red wall seats that their voters may not be able to shoulder the extra burden.
One told the Financial Times: “This isn’t leafy Surrey. Whacking up fuel duty will really hurt our voters.”