Business groups urge caution over chancellor’s minimum wage rise plan
British business groups have urged caution over chancellor Sajid Javid’s pledge to markedly increase the minimum wage while welcoming his confirmation that he will boost spending on infrastructure.
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In his speech to the Conservative conference in Manchester, Javid announced an increase of the minimum wage to £10.50 by 2024 and a lowering of the age limit at which it is received to 21.
He also promised an “infrastructure revolution” while confirming £25bn would be spent upgrading Britain’s roads.
British Chambers of Commerce director general Adam Marshall said businesses needed “ample time” to “adjust to any changes” in the minimum wage, which the Conservatives increased and called the “national living wage” in 2016.
“The government’s ambition to raise and simplify the national living wage is laudable but the path to doing so must be on the basis of clear economic evidence,” Marshall said.
The CBI’s director general Carolyn Fairbairn also urged caution, saying: “Increasing productivity is the only way to sustainable pay rises.”
Federation of Small Businesses (FSB) chairman Mike Cherry said the “increase will leave many small employers struggling and, without help, could make some small firms unviable”.
However, Nye Cominetti, economic analyst at the Resolution Foundation think tank, said the minimum wage is one of Britain’s “big policy success stories”.
“The chancellor’s announcement today to eliminate low pay by the middle of the decade is hugely ambitious, and hugely welcome.”
Labour shadow chancellor John McDonnell branded the plans a “pathetic attempt at catch-up”. He said: “Labour will introduce £10 as a minimum as soon as we take office,” which would apply to everyone over 16.
Business groups were more receptive of the plans to ramp up spending on infrastructure. The FSB’s Cherry said: “Investing in the road network is vital in keeping the country competitive.” He urged that “upgrades are delivered quickly and effectively”.
Tej Parikh, chief economist at the Institute of Directors, said: “Funding for transport infrastructure upgrades was top of the domestic wish list for business leaders coming into the year.”
Yet the Institute for Economic Affairs think tank was less keen. Its director general Mark Littlewood said that as long as the expensive High Speed Two railway “remains on the Treasury’s books, it is near-impossible justify any hike in transport spending”.
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“Devolved, local infrastructure projects should be prioritised over the government’s grandstanding pet-project”.
(Image credit: Getty)