Supply-side to the fore:

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March 17, 2015 12:04 am

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UK apprentices awarded 20% pay increase

Elizabeth Rigby, Kadhim Shubber and Sarah O’Connor

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Meaty rise: An apprentice with deputy prime minister Nick Clegg

 

Pay for apprentices will jump by a fifth from October after the government decided to do ignore advice from the Low Pay Commission.

 

David Cameron and Nick Clegg on Tuesday announced a 20 per cent rise, 57p, in the pay for apprentices to £3.30 an hour, well above the 2.6 per cent increase to £2.80 suggested by the commission.

They also confirmed a 3 per cent increase in the national minimum wage to £6.70 an hour, the biggest real terms rise since 2007.

The increases come on the eve of George Osborne’s pre-election Budget, when the chancellor is expected to introduce measures intended to convince voters that the recovery is benefiting them.

Economists say the public finances look healthier than at the time of the Autumn Statement in December, giving Mr Osborne more opportunity to introduce some voter-friendly sweeteners.
One Liberal Democrat adviser said on Monday that the Vince Cable, the business secretary had pushed hard for the apprentices’ wage rise. “We were very keen on this, we believe apprenticeships have been a success story of our government and we believe it will continue to be so: this increase will make a huge difference to young people.”

But the CBI employers’ group said the rejection of the commission’s recommendation on apprentice pay was disappointing.

“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,” the CBI said.

 

The commission warned in its report last month that “large increases in the level of the apprentice rate could pose risks to provision,” and opted instead for the “more cautious step” of recommending a 2.6 per cent increase.

It is the second time that the government has rejected the commission’s views on apprentice pay. In 2013, the government increased the apprentice rate 1 per cent, ignoring a recommendation to freeze it.

Mr Osborne is also expected to use Wednesday’s Budget to delay any decision on a new profit levy on tobacco companies, amid concerns that duties on cigarettes might be a more effective way of raising money from the sector.

 

The chancellor announced a consultation on a levy in the Autumn Statement but is understood to have decided not to press ahead with the idea, seen as a rival to a similar plan by Labour, on the grounds that the case for a new tax has not been made.

Other measures expected on Wednesday include a review of business rates, an extension of a £500,000 tax-free allowance to encourage capital investment until the end of 2016 and a plan to build 45,000 new homes on brownfield sites.

The chancellor is expected to use whatever savings he can generate to fund an increase in the personal tax allowance from a planned £10,600 to £11,000. Mr Osborne confirmed at the weekend that pensioners would be given the right to sell their annuities, continuing the coalition government’s plan to give people more say over their retirement income.

Related Topics

• UK employment