The Chancellor, Jeremy Hunt, is set to announce an increase in the national living wage to at least £11 per hour starting from next April. In his speech at the Conservative Party conference,
Hunt is expected to highlight that this move will benefit approximately two million of the lowest-paid workers. Additionally, he plans to toughen sanctions for individuals receiving benefits who do not actively seek employment. These announcements come as some Conservative members urge the government to reduce taxes.
The national living wage, which currently stands at £10.42 per hour, sets the minimum hourly wage for workers aged 23 and over, as mandated by law. Younger workers are subject to lower rates. The rates are reviewed annually by the government based on recommendations from the Low Pay Commission, an independent advisory group. Typically, the government accepts the commission's suggestions.
The government had previously set a target for the national living wage to reach two-thirds of the median hourly pay by October of the following year. While the Low Pay Commission has not yet confirmed its recommendations for the upcoming year, it estimates that the rate needed to meet the government's target should fall between £10.90 and £11.43.
In his speech on Monday, Jeremy Hunt is expected to affirm that regardless of the commission's recommendation, the rate will increase to at least £11 an hour. According to the Conservatives, this change will result in a £1,000 increase in the annual earnings of full-time workers on the national living wage.
Hunt is expected to state, "Since we introduced the national living wage, nearly two million people have been lifted from absolute poverty. That's the Conservative way of improving the lives of working people: boosting pay and cutting tax."
The Chancellor is also set to announce that the government will review the benefits sanctions system to promote a return to the workforce. He will emphasize the importance of addressing the issue of people leaving the labor force for a life dependent on benefits, particularly given the current labor shortage.
Details about these benefit plans are not expected to be revealed until the Autumn Statement in November when the Chancellor presents his economic plans.
At a fringe event on Sunday, Work and Pensions Secretary Mel Stride indicated that the government is already evaluating the Work Capability Assessment to better align it with modern work practices, including increased opportunities for remote work. This assessment determines the extent to which an individual's illness or disability affects their ability to work. Benefits may be withdrawn if someone is deemed fit for work.
Reintroducing individuals into the workforce is a central component of the government's economic growth strategy, as highlighted in the Chancellor's Budget speech in March. Recent figures have indicated an increase in the number of individuals unable to work due to long-term sickness, with approximately 2.5 million individuals absent from the labor market due to medical conditions.
Meanwhile, some Conservative MPs continue to advocate for tax reductions. On Monday, former Prime Minister Liz Truss is expected to call for a reduction in corporation tax for businesses to stimulate economic growth. She will also suggest measures to promote housebuilding and the revival of shale gas fracking to lower energy costs.
Regarding tax cuts, Jeremy Hunt mentioned to the BBC, "I would love to cut taxes before an election - that is very consistent with Conservative ideology - but to do so now would be inflationary. If we want faster growth and an end to continually rising taxes, it is possible, but there are no shortcuts."
Prime Minister Rishi Sunak stated on Sunday that he wants to reduce taxes but did not provide a timeline for doing so. His primary focus remains on addressing rising prices and controlling inflation, which he views as the most effective form of tax relief. The Chancellor has previously stated that tax cuts are "virtually impossible" at present until the economic conditions improve.