A new National Living Wage of £7.20 an hour, an apprenticeship levy for large employers and a youth obligation to ‘earn or learn’, were among the measures affecting the world of jobs and employment, announced by Chancellor George Osborne in today’s summer Budget.

Addressing Parliament earlier this afternoon, Osborne revealed the government is to introduce a National Living Wage of £7.20 an hour from next April, which will rise to £9 an hour by 2020.

The new National Living Wage will be compulsory and apply only to people aged 25 and over.

To offset the impact on business of the measure, Osborne will cut Corporation Tax to 18% by 2020, while the amount smaller firms pay in National Insurance Contributions (NICs) will also be cut from next year, with the employment allowance increased by 50% to £3k.

Currently the employment allowance ensures employers can reduce the amount of NICs they pay for their employees by up to £2k. 

But Helen Reynolds, chief executive of RIDA, an investment house specialising in the recruitment industry, warned such a wage increase could lead to employers cutting jobs.

“Employers who pay minimum wage do so because they cannot afford higher wages, with many small businesses struggling to keep their heads above water,” she said. 

“Any wages rises will invariably mean cutting staff, which could have a domino effect on local economies – fewer jobs, higher unemployment and less disposable income to spend on goods and services.”

Echoing Reynolds’ sentiments, John Cridland, CBI director-general, said the measure was a “big gamble”.

“The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay,” he said. “This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6%.”

In his speech, Osborne also committed to an apprenticeship levy for larger firms with the money collected from the levy directly controlled by employers. He added government is to work with business on how to do this.

Commenting on the levy, Chris Kirk, education partner at professional services firm PwC, said: "Most large employers already contribute significant time and investment to these programmes.

“In return for supporting an additional levy, employers will want to see investment focused on the skills they actually need, such as technology and engineering, and they will want to know that training providers are of a high standard.  

“They will also expect that government can simplify what is at present a very complex system." 

In another measure, for those aged 18 to 21, Osborne committed to introducing a new youth obligation that says they must either earn or learn by finding a job or remaining in education.

In a bid to tackle tax avoidance, the Chancellor announced the government will consult on the technical details of introducing tougher measures for those who persistently enter into tax avoidance schemes that fail, including a surcharge on those whose latest tax return is inaccurate due to using a failed scheme and publishing the names of these avoiders. 

Meanwhile, though not expressly mentioned by the Chancellor in his Budget speech, a document released after the speech confirmed the government will consult on devolving powers on Sunday trading, including larger retailer opening times, to city mayors and local authorities.

For more on how the Sunday trading reforms will affect the world of recruitment, see recruiter.co.uk tomorrow morning.

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