Osborne slashes welfare, hikes minimum wage

The Guardian reports:

George Osborne sought to outflank Labour and soften the blow from a £12bn cut to Britain’s welfare bill when he made a big rise in the minimum wage the centrepiece of the first Conservative budget in almost two decades.

In a move that went further than Labour was planning at the general election, the chancellor said employers would be forced to pay staff a minimum of £7.20 an hour from next April and raise wages by 6% a year on average to around £9 an hour by the end of the parliament.

Relishing the freedom to deliver his latest budget unfettered by coalition, the chancellor eased up on the pace of deficit reduction and reduced the size of the cuts that Whitehall departments will face in the coming years.

On the assumption that the economy grows steadily at around 2.5% a year, the Treasury is now expecting a £10bn surplus in the final year of the parliament – a sizeable war chest for the 2020 election.

So looks like it will take them five years longer than NZ to make surplus.

Declaring “Britain needs a pay rise” – once the campaign slogan of the TUC – Osborne said he was directly boosting the national minimum wage of 2.7 million workers aged over 25. The increase, accompanied by substantial welfare cuts over three years, was designed to engineer a rebalancing between the individual and the state – a political intervention to shift responsibility for low incomes from the state to employers.

“Let me be clear: Britain deserves a pay rise and Britain is getting a pay rise,” Osborne said, adding that 6 million people would see their pay increase as a result of what he dubbed the creation of a national living wage.

A fair few will lose their jobs also.

Osborne had considered a rise in the minimum wage in 2013 but could not win the support of the Liberal Democrats for the welfare cuts, or a further cut in corporation tax, an essential part of Wednesday’s package designed to ease employers’ resistance to the reforms.

But despite being given the sweetener of a cut in corporation tax from 20% to 18% by 2020, the CBI said the increases would prove “challenging” for its members working in the hospitality and retail sector.

If you’re going to have a big hike in the minimum wage, then a cut in company tax to compensate is sensible.

The big cuts to welfare come from:

• freezing working age benefits and tax credits for four years as opposed to the two set out ahead of the election.

• limiting the child element of tax credits to the first two children for new claimants. At present nearly 850,000 tax credit recipients have more than two children.

• reducing the income thresholds in tax credits from £6,420 to £3,850 and work allowances in Universal Credit

In NZ, we increased benefit levels!

I like the limit of tax credits to the first two children for new claimants. If you want more than two kids,you should be able to fund them yourselves.