Chancellor to offer firms a tax cut to seal his inflation-busting minimum wage increase

• Osborne angered employers by indicating he is ready to contemplate an increase of almost 11 per cent
  
• Would bring present £6.31-an-hour rate to £7 to restore it to pre-recession levels
• If rise is approved, sources say he may ease pain for businesses – probably with more cuts in employers’ National Insurance contributions

By JAMES CHAPMAN FOR THE DAILY MAIL

Published: 19:22 EST, 17 January 2014 | Updated: 20:35 EST, 17 January 2014

George Osborne is prepared to offer more tax breaks for businesses to help compensate them for an inflation-busting rise in the minimum wage, Government sources say

George Osborne is prepared to offer more tax breaks for businesses to help compensate them for an inflation-busting rise in the minimum wage, Government sources say.

The Chancellor angered employers by indicating he is ready to contemplate an increase of almost 11 per cent in the present £6.31-an-hour rate to £7 to restore it to pre-recession levels.

But if the rise is approved by the independent Low Pay Commission, Government sources say he is likely to ease the pain for businesses – probably with more cuts in employers’ National Insurance contributions.

The Chancellor’s announcement of a possible minimum wage increase delighted most Tory MPs, who believe it will neutralise Labour claims that only the better-off are enjoying the fruits of economic recovery.

Many business leaders also support raising the minimum wage, the real terms value of which has been undermined by the financial crisis.

But critics including the Confederation of British Industry, the British Chambers of Commerce and the Institute of Directors warned that it could lead to lay-offs if it is too steep, particularly in sectors such as social care and retail.

Prime Minister David Cameron said: ‘Because of the difficult decisions we’ve taken to fix the economy, we believe we can now afford to increase the minimum wage – putting more money in people’s pockets and helping them provide for their families.’

Business minister Matthew Hancock, the first minister to call publicly for a significant minimum wage hike, said: ‘Modern Conservatives are passionate backers of the minimum wage, as part of a plan to make work pay and ensure everyone can benefit from the recovery.’

But Mike Cherry of the Federation of Small Businesses said: ‘This is going to cause real, real problems, particularly for those firms who have got fixed-term contracts and have no means at all of being able to factor in this sort of increase in costs. 

‘So it’s going to cost jobs, there’s no two ways about it.’

Lib Dem Business Secretary Vince Cable claimed that the Chancellor had followed his lead with the announcement, saying: ‘I was a little surprised but I was not taken aback by it.

'Imitation is the best form of flattery.’

Nick Pearce, director of the Institute for Public Policy Research, said: ‘We should prefer an economy where people earn their way to a decent standard of living, rather than relying on the state.

'However, it is also true that some of the gain of a higher minimum wage will accrue to the state,  in higher taxes and reduced  benefit payments.’

No more coalitions, say two out of three voters

Almost two thirds of voters think a hung parliament at the next election would be bad for the country – but half believe it will happen anyway.

In a sign that the country is turning against the idea of coalition, the Ipsos Mori survey found 60 per cent now say the 2010 inconclusive result was bad for Britain – almost double the 32 per cent who believe it was good.

Almost two thirds of voters think a hung parliament at the next election would be bad for the country - but half believe it will happen anyway

This compares to the 52 per cent who thought it was bad in May 2010 and 40 per cent who said it was  good. But 51 per cent said they did not believe any party would win outright  at next year’s general election.

Spokesman Gideon Skinner said: ‘The last few years haven’t changed Britons’ longstanding dislike of coalition governments.’

The poll also put Labour support at 39 per cent, up two points on last month, with the Conservatives on 30, Lib Dems on 13 and UKIP on 11.