Labour unveils living wage tax break plan for businesses

04 Nov 2013

Businesses that agree to pay their staff the living wage  will be eligible for a tax break worth up to £1,000 per worker, under plans  unveiled by the Labour leader Ed Miliband.

If Labour wins the next general election, Mr Miliband has  promised to give private firms a tax rebate worth around a third of the cost of  raising a worker’s pay to the living wage.

For the majority of businesses the tax break would equate to  around £445 per worker, although it has the potential to be worth up to £1,000  in some cases.

The living wage is an informal benchmark based on the amount  an individual needs to earn to cover the basic costs of living.

Living wage rates were recently uprated and are now set at  an hourly rate of £8.55 in London and £7.65 in the rest of the UK. However, the  current national minimum wage for adults aged 21 and over is £6.31 an hour.

While business leaders have largely welcomed the proposals,  some experts have warned that many firms will still be unable to afford the  increase in wages.

Commenting, Katja Hall, CBI chief policy director, said: ‘This  scheme may help some firms pay more, but many companies simply can’t afford it.  The best way to boost wage growth in the longer term is to build a sustainable  recovery and invest in the productivity growth that will boost wages.’

The Federation of Small Businesses described the plan as an ‘interesting  proposition’, but it added that the new national employment allowance, which is  set to come into force next year, would help companies to increase pay much  earlier.

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