Trade unions and business leaders in the North have come together to welcome plans to increase the national minimum wage.
Chancellor George Osborne has indicated that he is ready to contemplate an increase of almost 11% in the present £6.31-an-hour rate to £7, which would see the rate restored in real terms to pre-recession levels.
Such a rise, Mr Osborne said, would “make sure we have a recovery for all and that work always pays” while Prime Minister David Cameron said that “because of the difficult decisions we’ve taken to fix the economy, we believe we can now afford to increase the minimum wage - putting more money in people’s pockets and helping them provide for their families.”
The TUC welcomed the move but said the Chancellor needed to be “more even-handed” about increasing wages more widely and getting more people on to the higher “living wage”.
Northern TUC regional secretary Beth Farhat said: “The TUC welcomes George Osborne’s acceptance of the TUC’s case for an above inflation rise in the minimum wage. Currently the North East average gross weekly earnings for full-time employees stands at £484, significantly below the UK average of £563.
“It doesn’t take an economist to see that we need a more even-handed and proactive approach and that we need not only more jobs, but better paid ones, as well as better pay rises for those already in work to ensure the whole of the country’s workforce benefits from any recovery.
“We want the Government to work more with unions and employers to increase the spread of the living wage, lift the cap on public sector pay, and recognise that the wages of millions of workers across the economy have been falling in real terms and now need a decent increase.”
Business leaders say employers have been struggling to close the gap between basic salaries and the cost of living for several years.
North East Chamber of Commerce (NECC) director of policy, Ross Smith, said: “We need to make sure that we’ve got a national minimum wage which is applicable across the country. Any rise has to be balanced and the impact on some businesses and crucially on jobs has got to be kept in some check.
“Yes, there’s an immediate debate about what the minimum wage level should be, but we’ve got to encourage people away from that and introduce higly skilled, better paid jobs which would lead to a more productive economy.”
The independent Low Pay Commission is due to make its recommendations on the level of the minimum wage and its potential impact on jobs in February.
Some business groups have warned against an above-inflation rise, saying it would be unaffordable for many businesses in sectors like care homes, retail, hospitality and wholesale.
“It’s going to cost jobs,” said Mike Cherry, policy chairman of the Federation of Small Businesses. “There’s no two ways about it. At the bottom end of the marketplace, where businesses are really struggling, it is going to set confidence back, it’s going to set investment back and they are just not going to be able to recover these sorts of massive increases.”
Government Ministers have also been criticised by business groups for interfering in the work of the Low Pay Commission, which recommends the rate of the minimum wage.
Both the Conservatives and the Lib Dems are known to be keen on increasing the rate to counter repeated attacks from Labour over the cost of living for working people.