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New 'living wage' only for over 25s

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The government has announced a new version of the minimum wage for people aged 25 and over in today’s Budget.

The new national living wage, which will be introduced in April 2016, will be £7.20 an hour.

The rate will be 50p higher than the increased national minimum wage rate, which comes into effect in October 2015 and will apply to the under 25s.

The government wants the national living wage to reach 60 per cent of median earnings by 2020 which would put it at over £9 per hour based on forecasts by the Office for Budgetary Responsibility.

The national living wage rate is slightly below the living wage, which is set by campaign group the Living Wage Foundation and paid voluntarily by some employers. It is currently £7.85 an hour and £9.15 an hour in London.

The move comes alongside a reduction in corporation tax and a rise in the national insurance contributions employment allowance for small businesses in a bid to cut costs for employers. The Budget also announced cuts in tax credits which the chancellor George Osborne described as a subsidy to low paying businesses. He referred to low pay as a source of the country’s low productivity.

The Budget document said the Office for Budgetary Responsibility estimated that employment would rise by 1.1 million in 2021, which is 60,000 lower than it would have risen without the national living wage

The document said 2.7 million workers would see their wages rise as a direct effect of the national living wage and a further 3.25 million people also see an increase in wages as an indirect result of its introduction.

The chancellor also announced a new levy on large UK employers to fund new post-16 apprenticeships in England. The Budget document said the funding will be controlled by employers through a digital voucher and “firms that are committed to training will be able to get back more than they put in”. Further details of the plan will be set out in the spending review and the government pledged to work with businesses on the levy.

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