Conservatives 'considering ways to raise minimum wage'

Pound coins In 2012 there were 1.4 million workers earning the national minimum wage

The Conservative party is examining ways to raise the national minimum wage, BBC Newsnight has learned.

Measures being considered include offering tax breaks to companies paying a wage level higher than the current national minimum of £6.19 an hour.

And a possible demand for companies above a certain size or profit level to pay employees more than the minimum.

However, sources say this is meeting some resistance inside government amid fears it may alienate business leaders.

The proposals are part of a Conservative effort to combat low wages and underscore the party's commitment to make work pay.

Sources told BBC Newsnight that the Conservative party intends to announce further welfare reforms this Autumn, but believes that any further tightening of Britain's benefits system must also be met with greater support for those in work.

They also want to ensure that the economic recovery is enjoyed by those on low salaries as well as those at the top in an attempt to blunt Labour's charge that the Coalition is presiding over a recovery for the few.


Policy advocates are pushing for a change in the minimum wage to be included in Prime Minister David Cameron's speech to the Tory party conference at the end of September, or failing that in the Autumn Statement in November.

But a Downing Street source told Newsnight that a policy change "remains a long way off" and that "it may be more likely as a contender for the Tories' next manifesto".

Insiders say that for any measure to be adopted it must balance increasing people's earning power, with ensuring that there is no negative impact on employment.

In 2012 there were 1.4 million workers earning the national minimum wage.

One option being looked at is offering a National Insurance cut for those companies that pay their minimum wage employees more than that level.

This would mean less revenue for the Treasury, but because people's salaries would to be topped up by a lower amount of tax credits from the Treasury the policy is supposed to be close to cost neutral for the Exchequer.

The independent think tank the Institute for Fiscal Studies has calculated that for every pound spent paying the so-called Living Wage, which is currently set at £7.45 per hour for those working outside of London, £8.55 per hour for those inside London; the Treasury saves 50p through not needing to pay tax credits and benefits.

The figures would be different for an increased minimum wage, but the same calculation could apply, though experts caution that the effect a higher minimum wage would have on tax credit savings would be far more complicated in reality.

Cost of living

Another option being considered is some kind of "profit threshold" above which a company would be compelled to pay a higher minimum wage, though sources say the policy might be optional for companies below that profit level or size.

The most extreme option is simply that the Low Pay Commission, which sets the level of the national minimum wage, would recommend that the national minimum wage should be higher and that there would be no policy to offset this for businesses.

Although the Commission technically sets the rate, government sources believe a statement by the prime minister that he would like to see an increase which reflects the suppression of wages in recent years would be taken on board by them.

But this option is thought not to be palatable within government.

The minimum wage is already scheduled to increase to £6.31 an hour in October. On current projections, experts predict that the UK is heading for a minimum wage in the region of £7.20 an hour in 2017/18. This, they say, would be equivalent to £6.12 at today's prices and lower in real terms than it was in 2004-5.

Strategists across all political parties agree that the rising cost of living will be one of the defining issues in the next general election. Tory strategists are keen that alongside more policies to drive people back to work, they are also making having a job pay.

The Labour party has floated a series of policies to increase the number of companies and councils that pay the Living Wage, but has so far not committed to any specific changes.

As part of the Labour party policy review process, the shadow Treasury team are also looking at whether living wage zones could be set up, targeted at certain sectors of industry or geographical areas where a large number of employers are prepared to pay the living wage.

Conservatives believe that the living wage is too high and so blunt an instrument that it would have a bad effect on business activity and employment levels.

Allegra Stratton Article written by Allegra Stratton Allegra Stratton Political editor, BBC Newsnight

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  • rate this

    Comment number 580.

    " may be more likely as a contender for the Tories' next manifesto".
    So whether you are for or against, don't get too excited.
    I still remember "The Tory Party will not walk on by while Pensioners and Savers are hit" (Osborn 2009)

  • rate this

    Comment number 579.

    577. Kitty

    sorry but there are plenty of jobs, trouble is, people think living on benefits is an option they can take instead of working, all down to relative ease of living on benefits instead of working. now thats a fact. caused by too generous a system that doesnt force people to work, and minimum wage subsidised by tax payers

  • rate this

    Comment number 578.

    #572 - Spot on comment! Even though the minimum wage is necessary to help protect low paid workers, the fact that companies also use it to justify low wages, or make themselves look more appealing in job ads - "pay is ABOVE minimum wage!" (even if it's only 10p above), is an issue.

    #574 - a perfectly sensible suggestion. So that'll never happen....

  • rate this

    Comment number 577.

    @576 pique

    There aren't enough jobs though. It's a fact. Go look up the amount of unemployed vs jobs available. Then subtract the 0 hour contracts from that.

    Then you have to take into account jobs per region vs jobless per region and understand people can't afford to move as it is. Nor is there enough housing to do so. You'd end up with a massive crime rate as people starve.

  • rate this

    Comment number 576.

    minimum wage should be set whereby none of my tax goes to subsidizing employers wages bills and companies pay their employees without any tax credits of any kind being needed.

    and while we're on, introduce a maximum period of jobless benefits of 6 months. dont care what anyone says about there being no jobs, there are plenty, just lots of lazy people

  • rate this

    Comment number 575.


    Imagine you had a kid a few years back, you had a good job, it was paying well. Then the recession hit. Your wages get cut in order for you to keep your job, eating away at your savings. Then you get made redundant.... and now have little to no savings because of the recession.

    You can say don't have kids, but you can't predict how life goes.

  • rate this

    Comment number 574.

    I would start by raising the personal tax allowance to well above the minimum wage for full time employment.

  • rate this

    Comment number 573.

    More tax-credit subsidies to our pampered BMW-driving SME operators! Meanwhile, we read elsewhere that a survey shows they work significantly less hours than their European counterparts for their excess differentials.
    Never mind. I'm sure they're "worth it".

  • rate this

    Comment number 572.

    The introduction of the min wage has acted as a drag on the average wage. This because businesses have used it as a bench mark where by any pay slightly above it is morally OK even if the employer knows employees need more to live on.
    Connected to this abuse of the min wage is the maintenance of a pool of unemployment under constant pressure to take any job offered.
    We live in a sick country.

  • rate this

    Comment number 571.

    Why does the taxpayer have to subsidise business by paying allowances to make up poor wages? What sort of morality is business based on when it uses people without rewarding them enough to eat and sleep in the dry?
    The Tories have demonised "scrounges" but the real scrounges are businesses that that do not pay a living wage. Remember Jesus' teaching that labourers are worthy of their hire!

  • rate this

    Comment number 570.

    Any MP joining the houses of Parliament should be paid ONLY the National minimum wage for the first 5 years of their stay, with no additional perks! Welcome to the real world!

  • rate this

    Comment number 569.

    Nice to hear Tories floating these ideas before the election,

    Do they seriously expect us to believe that they are the people to solve the problem? Their record suggests we shouldn’t

    I still cannot shake off the vision of a few months ago & the teary eyed chancellor paying homage to the queen of the low wage service economy at Mrs T’s funeral. – Suspect its a cynical Australian ploy

  • rate this

    Comment number 568.

    Stop subsidising businesses at the taxpayers expense allowing them to pay low wages. There are many companies that make enough profit to pay more per hour without this type of support.

    If the government want to reduce the burden on low wage earners increase the tax threshold to £15,000 and raise the basic rate by 1p and the higher rate by 5p.

  • rate this

    Comment number 567.

    Change to Household Tax. £12k for each property plus £4k for each of maximum 4 occupants.
    Homes with several earners share the allowance. This would help single people, who still have to pay the same bills as multi-income households.
    Homes on benefit would receive 40% of the tax allowance the home would receive if working, a REAL incentive to work.
    This would replace ALL existing benefits

  • rate this

    Comment number 566.

    @Andrew All i want to do is work and have my own independence at 28 years old. Thank the radical feminist of your decade that helped the welfare disease.opps sorry state develop. Unfortunately i am out of educational resolutions as i did not go to uni because i couldn't afford it but sure you have something to say.because your education was free. OK you keep your bus pass.all i want is oppertunity

  • rate this

    Comment number 565.

    Call me cynical but I still remember how the Tories at this stage of the electoral cycle last time were hugging huskies, Hoodies and telling us of their undying affection for the NHS – That all turned out to bovine droppings.

    Why should I believe Dave Cameron and expensive Australian Spin Doctor this time?

  • rate this

    Comment number 564.

    562 James: I paid TfL fares for decades, man and boy, part of which went to other people's free passes at sixty - and now it's my turn and I'm entitled to it.

  • rate this

    Comment number 563.

    The other day I saw a Big Issue seller with a sign saying " Big Issue self service" with a pile of magazines next to it.

    He was sitting down on his laptop.

  • rate this

    Comment number 562.

    Get rid of child benefits, if you can't afford them don't have them. Cut the pensions, because you didn't pay for your free bus pass or winter allowance.And the 1 million ex-pats still claiming pensions that just contribute hatred. Just remember 62 percent of the benefit budget is in pensions! We are not stupid, just young, we know who vote's and your cultivating all of this ideological Hypocrisy!

  • rate this

    Comment number 561.

    Recall Tian Square @481
    First time watching Newsnight? First time you've read anything from Allegra (note the spelling)?

    Where have you been hiding?

    Tax credits are top ups for people who work for less than a living wage paid for by taxes of those earning more than a living wage.

    NI breaks for companies paying over the minimum wage is also paid for by taxes.

    Corps, get tax payers cash


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