Keir Starmer writes a blog post about George Osborne's Summer Budget:
At first glance, the announcement by the Chancellor in the budget that a living wage of £7.20 per hour will be introduced next April seems like a step in the right direction. But look a little closer and it becomes clear that for many people on low incomes in Holborn and St Pancras things will get worse, not better.
The living wage – currently £7.85 per hour out of London and £9.15 per hour in London – is calculated according to the cost of living. The idea behind a living wage is very simple: that a person should be paid enough to live decently and to provide for their family. The new measure announced by the Chancellor – coming in at £7.20 per hour - therefore falls short of this. It is, in reality, a higher minimum wage and not a living wage.
For those currently receiving tax credits, the story gets worse. In the same budget, the Chancellor announced significant cuts to tax credits. About 8,600 families in Holborn and St Pancras rely on tax credits and the impact on them will be significant.As the Resolution Foundation has observed, the brunt of these cuts will be borne by the poorest 30% of households. For working parents in Camden, the cuts in tax credits outstrip the increase in the minimum wage. The Chancellor is thus giving with one hand and taking (more) with the other.
The government argues that by cutting tax credits, wages will rise to compensate those affected. But that is simply not going to happen. At the moment, the living wage is calculated on the assumption that families are entitled to, and do, receive tax credits, housing benefit etc. If that support is cut, as it now will be, the living wage would have to be recalculated to keep pace. In London it would probably have to be raised from £9.15 per hour to about £11.65 per hour to compensate for the loss of in-work benefits; about 80% higher than the current minimum wage. The Chancellors proposals may even drive people out of work, rather than helping them in work.
Then, of course, there are all those in our constituency who are under 25. They are excluded altogether from the living wage proposals announced by the Chancellor but included – in fact, targeted - in the welfare cuts. For those under 18, the minimum wage of £3.79 per hour will continue to apply; for 18-20 year olds, £5.13 per hour; and for 21-24 year olds, £6.50. And from April 2017, those out of work aged 18-21 making new claims for universal credit will not be entitled to housing benefit.
This is not a one-nation budget. It is a recipe for more inequality not less inequality in our communities. Instead of tackling low pay, it will hit the low paid.
Keir Starmer QC MP