Spending review: Chancellor announces National Living Wage increase

Chancellor Rishi Sunak has announced the National Living Wage will increase in his spending review today.

The National Living Wage will increase by 2.2% to £8.91 for those aged 23 and over from April 2021.

The chancellor committed £2.9b towards the government’s three-year restart programme to help more than one million people who have been unemployed for over a year find new work. Unemployment in the second quarter of 2022 is expected to hit 2.6 million people.

He also announced a new levelling-up fund worth £4b for regional infrastructure, for which local authorities will be able to bid directly for up to £20m to fund local projects, for example, upgrading transport, new museums and galleries, and improving high streets and town centres.

Economic output is not expected to return to pre-Covid levels until the fourth quarter of 2022.

In light of the struggles of sectors such as hospitality, Sunak said he could not justify a significant blanket pay increase for the public sector and will pause pay increases next year apart from for NHS workers and those earning less than £24,000. The latter will get a pay increase of at least £250.

Sunak said the review delivered on “the priorities of the British people” with the immediate priority of protecting “lives and livelihoods”, however no further support for the hospitality sector was forthcoming.

He added that it was a “clear statement of our priorities” and acknowledged: “We cannot protect every job.”

Commenting on the announcement, UKHospitality chief executive Kate Nicholls said: “Hospitality jobs are at the core of the grave unemployment forecasts the chancellor announced today, yet the sector has shown repeatedly, most recently in August, how those jobs can help deliver economic growth for the economy. But it can only do so if it survives the winter, and that means getting the necessary support now. The increase to the National Minimum Wage will be a great benefit to many workers in our sector only if the businesses that employ them are still around.

“The hospitality sector is key in preventing unemployment getting out of control. The sector is being hit hardest by this crisis, but it is also the sector which could lead the recovery of the economy if given the chance. As demonstrated after the financial crisis in 2008, we can provide jobs, investment and opportunities in every region of the UK and the economy back up to full speed. Once the crisis has passed, people will want to go out for a drink or a meal, take a holiday or enjoy their newly gained freedom with their family and friends. Hospitality is central to all of this.

“We can only deliver the growth that the Treasury desperately needs if we survive the winter. If hospitality does not get the support it needs right now, businesses will fold and jobs will be lost. That is not just a disaster in the short term, it undermines the efforts to recover next year and into 2022. We have already lost 600,000 jobs. Support must be comprehensive and swift if we want to stop that figure from rising and avoid the nightmare of unemployment the chancellor spoke of.

“A swift announcement to fill the gap in hospitality previously filled by the Job Retention Bonus, coupled with a solution on rents, is critical for immediate survival. Subsequent revival will be hugely benefited by then extending the VAT cut and the business rates holiday. Every venue that we can save now means jobs safe and secure as we look to rebuild.”