Osborne minimum wage spoiler for Ed Miliband speech
Last week, the Chancellor lifted a hemline and let be known he wanted substantial increases in the minimum wage. Then some Treasury sources signalled they were pulling back from that position and tried to dampen expectations.
Now, funily enough on the eve of Ed Miliband’s latest speech on the cost of living crisis and re-thinking the economy, the chancellor has blasted an open and specific fanfare for a 70p hike in the minimum wage. He’s let it be known in an interview given exclusively to the BBC that he wants the minimum wage to rise in two instalments from its current rate of £6.31 to reach £7 an hour by the autumn of 2015.
Treasury sources say the timing is all coincidence. They just happen to have submitted their recommendation to the Low Pay Commission yesterday and thought that would be a good moment to share it with a wider public. Well, governments have not shared specific cash targets for the minimum wage in public before, let alone two-year targets. As the government well knows, the Low Pay Commission jealously guards its independence – you might call it the poor man’s Bank of Engfand monetary policy committee in that respect.
The government knows exactly how upset the LPC gets about interference or public pressure because it heard it directly from the chairman, David Norgrove, in the run-up to the autumn statement in December. Back then, the Treasury was looking to make a promise about increases along the lines of the one George Osborne talked about today.
But the LPC got “very prickly” about that, one close to the process says, and the government pulled back. Now the government thinks it has the licence to talk about its own submission because it is allowed to talk about its own policies. It is not known whether the LPC takes the same position. Its members have a big, extended off-site meeting to look forward to when they jointly crunch the numbers and argue the right course.
The Treasury’s evidence to the LPC says it believes these rises will not have a negative impact on employment, one of the key criteria the LPC considers. The LPC will, though, have to look at other analysis. The Treasury is saying that it is not doing this to make some money on the side through a bigger tax take – it’s letting it be known that its own fiscal analysis of the higher minimum wage hike suggests it would not make an extra penny from a higher minimum wage.
Trade unionists on the LPC (its other members are business people, officials and economists) will find themselves in the unfamiliar position of cheering on George Osborne. Business people and officials on the LPC may take a different view. You get a flavour of it from this chilly response just issued by the CBI:
“Recommending the rate of the national minimum wage must be a matter for the Low Pay Commission, as the chancellor recognises.
“An unaffordable rise would end up costing jobs and hit smaller businesses in particular.
“Any increase in wages must reflect improved productivity.”
It may seem a petty point to make, but some devout admirers of the LPC and the minimum wage worry that the government is risking the independence and credibility of the LPC for a “political moment”. We find out at the end of February whether they are all ready to sign up to the £7 by 2015 number that the chancellor put out there today.
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