Conservative conference: National living wage to rise and be available to more people, Sajid Javid announces

Four million low-paid workers are to gain an average £4,000 a year from a hike in the National Living Wage announced by chancellor Sajid Javid, the Treasury has said.

The increase will bring the national minimum up over the next five years from 60 per cent to 66 per cent of the median wage, and the age threshold will be cut from 25 to 21, the chancellor said.

At current trends this would boost the hourly minimum rate from £8.21 to £10.50 by 2024, compared to the £9.55 it could be expected to reach over the same period under current rates.

Mr Javid claimed the rise would allow a Conservative government to “end low pay altogether”.

But Institute of Directors chief economist Tej Parikh said that setting the rate too high “risks forcing firms to reduce staff numbers amid elevated costs, particularly with Brexit disruption on the cards”.

And CBI director-general Carolyn Fairbairn cautioned that it would be best if the Low Pay Commission – which advises government on minimum pay rates – could reatain its freedom to “judge the pace and affordability of any future wage rises”.

The Treasury declined to confirm that the change would cost UK businesses around £16 billion.

And spokesmen rejected suggestions that the £10.50 figure had been chosen to steal a march in the expected general election on Labour, which has promised a £10-an-hour minimum rate for workers of all ages.

In a clear attempt to steal Labour’s mantle, Mr Javid told delegates: “It’s the Conservatives who are the real party of labour. We are the workers’ party.” 

Shadow chancellor John McDonnell said the Labour offer was worth more to workers, as it would come into effect as soon as the party took power.

“This pathetic attempt at catch-up by the Conservatives will fool nobody,” said Mr McDonnell.

“Labour will introduce £10 as a minimum as soon as we take office and, rising with living costs, it will mean everybody over 16 years of age will be earning comfortably more than £10.50 an hour by 2024.”

Treasury sources said the rise in National Living Wage would be phased in over the next five years, and the final rate would depend on increases in median wages over that period.

The current over-25s rate could be expected to reach £9.55 by 2024 under existing trends, meaning the increase announced by Mr Javid will be worth about £1 an hour in real terms.

Downplaying the likely impact on employers, a Treasury source told reporters: “I wouldn’t describe it as a massive increase in wages. It makes a big difference to 4 million workers.

“It is the right balance between addressing people’s cost of living and maintaining a good business environment.”

TUC general secretary Frances O’Grady said: ”The Chancellor’s pre-election promise should be taken with a huge bucket of salt. This pledge would be overwhelmed by a no-deal Brexit. If we leave the EU without a deal, jobs will be lost, wages will fall, and our public services will suffer.”

The general secretary of the Unison union, Dave Prentis, said: “Many people will be wary of the Chancellor’s promises to splash the cash knowing an election is just around the corner. 

“If it’s so easy to conjure up this money now, it’s hard to understand why the government has been running public spending into the ground for a decade. It seems the Tories have been nurturing magic money trees all along.”