Announcing the new budget in October, Rishi Sunak said that the government was giving people on the National Living Wage a pay rise worth over £1,000.
It is true that the National Living Wage – the minimum pay for workers aged 23 and over – is set to rise to £9.50 an hour from April 2022. This does mean that, for a full time worker, gross annual earnings will go up by more than £1,000.
But Mr Sunak’s claim is missing important context, without which it’s difficult to say what this change is actually “worth”.
As Paul Johnson, head of the independent Institute for Fiscal Studies (IFS), points out, the £1,000 figure doesn’t account for tax and national insurance contributions. Once we do that, someone working full-time on the National Living Wage (who’s not on Universal Credit) can expect a rather more modest pay rise next year as a result of this policy – about £700. And it’s even smaller for full-time workers on Universal Credit, for whom the IFS calculates the change is worth about £330 a year.
Rishi Sunak, thought to be the richest man in the House of Commons with family wealth reportedly running into the hundreds of millions, was right to state that full-time workers were getting “a pay rise worth over £1,000.” This was correct in terms of gross annual earnings. But he did not add that accounting for tax and national insurance, the change was worth £700, according to the IFS. Nor did he say that for workers on Universal Credit, that reduces to £330 a year. While it is perhaps unfair to say he misled parliament (and less well-paid workers) he can be accused of leaving out meaningful context. We gave the Chancellor the opportunity to challenge this judgement, but he did not respond.