Walker welcomes new national living wage & income tax cuts

Today in Westminster, the Chancellor George Osborne delivered the first Conservative

Budget since 1996 with key measures to improve the economic security of Britain. At the

heart of this budget was a commitment to make the UK a higher wage economy.

Britain is currently growing faster than any other major advanced economy. The economy

grew by 3 per cent last year – up from the 2.6 per cent we thought in March – and faster

than any other major advanced economy. Global risks mean that forecasts for global growth

in 2015 have been revised down – but they estimate Britain will grow by 2.4 per cent this

year, and be the strongest major advanced economy for the second year in a row.

 

Robin Walker, MP for Worcester, has particularly welcomed the introduction of a new

national living wage, at £9 per hour by 2020 for people 25 and older. It will start to rise

towards this from next April with an increase from £6.70 to £7.20 an hour and will increase in

every year of this Government by well above the rate of inflation. Those currently on the

minimum wage will see their pay rise by over a third this Parliament, a cash increase for a

full time worker of over £5,000.

 

Another welcome measure for the lower paid is that the personal allowance will rise from

£10,600 to £11,000 from April next year – worth £80 to the typical taxpayer, and meaning

they are paying £905 less than in 2010. This will take a further 902 people in Worcester out

of tax in April 2016 and represent a tax cut for over 40,000 in the city. The threshold at which

the 40p rate is paid will rise from £42,385 to £43,000. This is the first major step towards the

Conservatives’ commitment to raise the personal allowance to £12,500, and the 40p

threshold to £50,000 by the end of this Parliament, reducing tax for millions of people. Robin

has previously spoken up for the Government to link the income tax threshold to the same

level as someone working full time on the minimum wage and today the Chancellor

confirmed that this will be done.

 

To help small businesses to pay the higher wages required for a national living wage, the

employment allowance will rise to £3,000 – cutting the jobs tax for all businesses but

particularly the smallest ones. From 2016 the Employment Allowance will rise 50 per cent so

a firm will be able to employ 4 people full time on the new National Living Wage and pay no

national insurance at all. As a former member of the Business, Innovation and Skills Select

Committee – Robin has always supported measures to help businesses take people on.

In addition, there will be a cut to corporation tax to 18 per cent by the end of the Parliament

and continue the downward trajectory for this key business tax which, when it is set too high

discourages investment in the UK. The rate will be reduced to 19 per cent in 2017, then 18

per cent in 2020. The change is coupled with reforms to dividend tax relief to discourage tax

avoidance and help savers. The dividend tax credit with be replaced with a new tax-free

allowance of £5,000 of dividend income for all taxpayers. Those who either pay themselves

in dividends or have large shareholdings worth typically over £140,000 will pay more tax,

85% of those who receive dividends will see no change or be better off and over a million

people will see their tax cut.

 

Robin said:

“I am delighted that this budget has set out to raise pay and productivity so that work will pay

and we can continue to create more and better paid jobs. It is great news that we have

continued to raise the burden of taxation from the low paid and reduce the subsidy from

government to businesses who pay too little. The case for a national living wage has been

building for a number of years and I have been convinced of it for some time. The challenge

has been to make sure it is delivered without the destruction of jobs and in a way that

ensures businesses, particularly small ones, are supported to keep up their investment in

people. I am delighted that this budget addresses that challenge up front and will mean that

millions of people can expect to see a pay rise in the years to come.”

“The recovery in our economy since 2010 has been remarkable and the decline of

unemployment in Worcester to record low levels creates a real opportunity for wages to

increase and for our city to see a higher standard of living. I believe that the step change

launched at this budget towards a national living wage and lower taxes linked to the

increasing minimum wage will push us forward along this path.”

 

Notes to Editors:

To read more of today’s Budget visit:

https://www.gov.uk/government/publications/summer-budget-2015