Living wage 'would boost Treasury'

Public finances would receive a £3.2 billion boost if low-paid workers received the living wage, which is well above the rate of the statutory minimum, a new report has claimed.

The TUC said giving 4.8 million workers a pay rise up to the living wage rates - which increased this week to £7.65 an hour and £8.80 in London - would boost tax and national insurance contributions.

The Treasury would also pay out less in means-tested benefits and tax credits, said the union organisation.

TUC general secretary Frances O'Grady said: "Almost five million workers across the UK are being paid less than the living wage, and with in-work poverty growing, it's not hard to see why so many families are struggling to make household budgets stretch to cover the cost of everyday essentials.

"Of course not every employer can afford to pay their staff the living wage, but many more can. Increasing the number of people across the UK who are paid at least the living wage would mean huge savings for the public purse in extra taxes paid and fewer benefits claimed."

More than 400 employers are now paying the living wage, which compared to the national minimum wage of £6.31 for adults.

Simon Walker, director general of the Institute of Directors, said: "There doesn't appear to be any serious analysis in the TUC report of the massive cost to businesses of paying a living wage - or how many people currently unemployed will be denied jobs because companies can't afford to pay higher wages.

"If companies choose to pay the living wage because they can afford it, that's a welcome part of a flexible labour market. But it's simplistic in the extreme to say if all employers were to pay this rate, it would result in a net gain for the Chancellor."