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Critics say new rates 'still too low'

Above inflation minimum wage rise ‘affordable’ for small firms

PayThe national minimum wage is to be lifted by an above-inflation rate in a move that is likely to be regarded as “affordable” by smaller companies.

A rise in the apprenticeship rate is expected to help remove some of the stigma surrounding them as second rate jobs.

Prime Minister David Cameron said the new £6.70 rate for adults would benefit more than 1.4 million workers. The rate for apprentices will rise by 57p an hour, to £3.30. This closes the gap between apprenticeship wages and the wage for 16 and 17-year-olds, which will go up to £3.87 in October, while the minimum wage rate for 18- to 20-year olds will also rise, from £5.13 to £5.30.

The increases follow a recommendation on the rises last month from the Low Pay Commission, the body that advises the UK Government on the national minimum wage rate.

With inflation for 2015 likely to remain around 0.5%, the new rates for the minimum wage makes the rise the largest in real terms for eight years.

TUC general secretary Frances O’Grady, claimed the government could have been “much bolder” in increasing the minimum wage.

“With one in five workers getting less than a living wage, this is nowhere near enough to end in-work poverty,” she said.

“Apprentices will welcome the increase to their minimum wage, which will reduce the shortfall in their minimum pay relative to 16 and 17 year-old employees. But there really shouldn’t be a gap at all. The TUC will continue to call on the Low Pay Commission to recommend a future increase that will match the apprentice rate to that for 16 and 17-year-olds.”

Scottish Secretary for Fair Work, Skills and Training Roseanna Cunningham said: “Any increase to the National Minimum Wage is a welcome step and in particular I am pleased that the UK Government have listened our calls for an increase to the rate of pay for apprentices.

“However, while £3.30 is a step in the right direction, it is still too low and discriminates against a valuable part of the workforce. I have previously called for a substantive increase and just yesterday I wrote to Dr Vince Cable calling for the apprenticeship rate to be brought into line with the rest of the workforce and this remains our position.

“I will continue to press the UK Government to scrap the apprenticeship rate and to address the inequality and unfairness in young people’s pay. Although the Scottish Government is not able to set pay levels in the third and private sectors, or indeed the wider public sector in Scotland where employees are not covered by our pay policy, we are encouraging every organisation, to ensure that all of their staff receive a fair level of pay and, where possible, the Living Wage.”

Sharon Spice, director of student recruitment at accountancy body, ICAEW, said: “The increase in the national minimum wage will help reduce inequality. It is reassuring that it hasn’t increased by such an amount that companies, particularly SMEs, would be unable to pay it.

“The minimum wage for apprentices has always been disappointingly low, so this increase will help remove some of the stigma around them being a second rate career option, making them more attractive to young people. However, this needs to go alongside a push to demonstrate the value of apprenticeships to a business and increased funding for them, otherwise we risk putting off SMEs who struggle with the costs involved in training and mentoring.”

But John Cridland, CBI Director-General, was less welcoming of the change. He said: “It’s positive that the Government has accepted the independent Low Pay Commission’s (LPC) recommendations on the adult and youth rates. The Commission struck a careful balance, helping many low-paid workers without damaging their job prospects.

“Therefore it’s disappointing that the Government has rejected the LPC’s recommendation on the apprentice rate.

“The National Minimum Wage has been one of the most successful policies of recent years thanks to the independence of the Commission – its politicisation is worrying.

“Employers must be in the driving seat when it comes to apprenticeship funding, so we welcome the announcement of the voucher system but await further details.”

Mr Cameron said the government aimed to reward those who work hard. “At the heart of our long-term economic plan for Britain is a simple idea – that those who put in, should get out, that hard work is really rewarded, that the benefits of recovery are truly national,” he said.

“That’s what today’s announcement is all about, saying to hardworking taxpayers, this is a government that is on your side. It will mean more financial security for Britain’s families and a better future for our country.”

The Government is also introducing digital apprenticeship vouchers which will help improve the way employers access government apprenticeship funding. They will buy and organise training through a provider who will reclaim the value of the voucher from the Skills Funding Agency.

Shadow business secretary Chuka Umunna claimed the Government was failing to deliver on pledges.

“This 20p rise falls far short of the £7 minimum wage which George Osborne [the Chancellor] promised over a year ago. Ministers have misled working families who have been left worse off,” he said.

The Labour party said it will increase the national minimum wage to £8 an hour by 2020, if it wins the general election.

 

 

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