26 Nov 2020
The Chancellor’s Spending Review would normally be looking three or four years ahead. However, given the current uncertain circumstances, the Chancellor has addressed only the next year.
Following the review, the new rates for the National Minimum Wage (NMW) and the National Living Wage (NLW) have been announced.
So what did he have to say?
Spending review & national wage rates
To begin with Mr Sunak made clear the interconnection between the “health emergency”, which is not yet over, and the “economic emergency” which has only just begun.
Opening with a flurry of mind-boggling figures, the Chancellor highlighted that total spending on coronavirus so far has been £280 billion. The economy will contract this year by 11.3% (the largest fall in output since 1709). Finally, underlying debt is due to hit 97.5% of GDP in 2025-26.
Describing totals not seen since the two world wars, he said that the Government will spend a further £55 billion to support public services next year.
“Even with growth returning,” he went on, “our economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022.”
Quoting the independent Office for Budget Responsibility (OBR) the Chancellor said that unemployment is expected to rise to a peak of 7.5% (2.6 million people) in the second quarter of 2021.
It will then gradually fall back to 4.4% by the end of 2024.
Given that private sector wages have fallen by nearly 1% compared to last year, while public sector wages have risen by nearly 4%, there is no justification, Mr Sunak made clear, for a “significant, across-the-board pay increase” for all public sector workers.
There will, however, be a pay rise for over one million nurses, doctors and others working in the NHS while the Government will also act to “protect those on lower incomes”.
The 2.1 million public sector workers who earn less than the median wage of £24,000 will be guaranteed a pay rise of at least £250.
In addition, the Government will accept a recommendation from the Low Pay Commission (LPC) to increase the National Living Wage (NLW) next year by 2.2%, to £8.91 an hour - extended to those aged 23 and over (for full details, see https://www.gov.uk/government/news/national-living-wage-increase-to-protect-workers-living-standards).
What will the new rates for National Minimum Wage be?
From April 2021, the new rates for the NMW will be as follows:
- Apprentice - £4.30
- Over CSA – 17 - £4.62
- 18-20 - £6.56
- 21-22 - £8.36
- 23+ (NLW) - £8.91
Comparatively, the current rates are:
- Apprentice - £4.15
- Over CSA – 17 - £4.55
- 18-20 - £6.45
- 21-22 - £8.20
- 25+ (NLW) - £8.72
Statutory pay rates increasing
The government has announced its proposed rates for statutory maternity, paternity, adoption, parental bereavement and shared parental payments from April 2021. These are collectively known as "Family-friendly payments". These will increase from £151.20 to £151.97 per week.
However, statutory sick pay (SSP) is set to increase. From April, this will be £96.35 per week.
The average earning an employee has to earn to receive these payments is likely to increase too. However, we don't yet know what these will be.
These increases are lower than we've seen in recent years. This is undoubtedly a result of the coronavirus pandemic. The family-friendly payment usually increase from the 4th April, SSP usually increases on the 6th April. These dates may still change, so keep an eye out for an announcement of this change.
Paying these higher rates may be difficult given the current climate. If you need pay advice you can speak to one of our expert advisers today by calling 01455 858 132.
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