U.K. Chancellor Sajid Javid Offers Boost to Lowest Paid Workers

(Bloomberg) -- U.K. Chancellor of the Exchequer Sajid Javid offered a pay rise to low earners, as Britain’s ruling Conservatives set out policies intended to win votes at the next election.

Speaking at his party’s annual conference in Manchester, England, Javid said the mandatory National Living Wage would rise to 10.50 pounds ($12.93) an hour over five years, up from 8.21 pounds now. Young workers will also qualify for the rate sooner.

“Over the next five years, we will make the U.K. one of the first major economies in the world to end low pay altogether,” he said.

The chancellor’s speech is a key element of his party’s pitch to voters ahead of a looming election. The Tories are on the back foot, after their annual gathering in the northern English city was overshadowed by scandals engulfing Prime Minister Boris Johnson.

The premier is battling allegations of sexual impropriety and plots to oust him, as he struggles to make progress delivering the U.K.’s tortured divorce from the European Union. Javid also said he would make the most of historically low interest rates to borrow to invest in infrastructure and signaled he could loosen the government’s fiscal rules.

Businesses cautiously welcomed the move, though Carolyn Fairbairn, director general of the Confederation of British Industry, said “increasing productivity is the only way to sustainable pay rises.”

The government will:

• raise the target for the wage from 60% of median earnings by 2020, to 66% of median earnings by 2024
• bring down the age threshold in phases so that the wage policy covers all workers over the age of 21, from 25 currently. From 2021, 23 year-olds will qualify, and 21 year-olds will from 2024
• Combined, the two policies will help 4 million workers, who will receive an average pay increase of 4,000 pounds, Javid’s spokesman said.

The National Living Wage was started in 2016 as a minimum rate for all employees over the age of 25. The mandatory pay floor is supposed to reflect the cost of living better than the minimum wage.

The opposition Labour Party has promised to raise the Living Wage to 10 pounds an hour in 2020 if elected and include workers under the age of 18, who are currently entitled to just 4.35 pounds.

More Local Power

Javid also promised to give more power to English regions. The aim is to facilitate greater investment in infrastructure and local services, he said.

And at the next budget he will clarify how exactly he will change the government’s so-called fiscal rule, which determines how much it can borrow. Speaking on Sky News Monday, Javid indicated he’s ready to relax the existing framework, using near record-low interest rates to increase borrowing.

The current framework, set by his predecessor Philip Hammond, limits structural borrowing to 2% of gross domestic product.

--With assistance from Andrew Atkinson.

To contact the reporter on this story: Jessica Shankleman in London at jshankleman@bloomberg.net

To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Andrew Atkinson

©2019 Bloomberg L.P.