Cut or freeze minimum wage if it hurts economy, suggests government


The minimum wage could be frozen or cut if it is found to be damaging the economy, the government has suggested.

In an unprecedented move amid a government review of the Commission’s remit, the government will write into its new terms of reference a requirement to formally consider the minimum wage’s impact on “employment and the economy” before agreeing to future increases.

Ministers have hinted that the national minimum wage could be held back from rising due to difficult economic circumstances, with business minister Matthew Hancock warning last October that there was “evidence that in these tough economic times the minimum wage level may have an impact on the employment opportunities” of young people.

The Prime Minister’s spokesman said the government was “looking at” these measures as part of a wider plan to restimulate the economy.

“It’s something we are looking at. We need to make sure that it’s working,” the spokesman said this morning.

A BIS spokesperson said: “The government is committed to the minimum wage because of the protection it provides to low-paid workers and the incentives to work it provides.

“It is important that we have a minimum wage that helps as many low-paid workers as possible, while at the same time making sure that we do not damage their employment prospects by setting it too high.”

Labour have attacked the move, with shadow Treasury minister Chris Leslie saying it undermined Chancellor George Osborne’s economic credentials ahead of a speech he is expected to deliver this evening.

“How can George Osborne claim he wants to make work pay when the government is considering cutting or freezing the minimum wage? His speech will be exposed as totally empty rhetoric if he fails to rule out such a move.

“Working people are already worse off under this government because prices are rising faster than wages. And on top of that figures from the independent IFS show that the average family will be £891 worse off this year because of tax and benefit changes since 2010.

“While millionaires get a huge tax cut from George Osborne this week, he is making millions of people on middle and low incomes pay the price for his economic failure.”