Minimum Wage Change And 'Pasty Tax' VAT Changes Take Effect

Minimum Wage Rises As Unions Warn That Workers Will Actually Be Worse Off

A rise in the minimum wage has come into effect, leading to a bigger pay packet for some workers, but the low-paid will actually be worse off, according to union leaders.

The adult rate increases by 11p an hour to £6.19, but there will be no change to the £4.98 an hour for 18 to 20-year-olds and £3.68 an hour for workers above school leaving age but under 18.

The rate for apprentices will increase by 5p to £2.65 an hour.

The minimum wage rise is not in line with inflation, which is running at 2.9% and according to the TUC, the 1.8% rise in the statutory hourly rate will lead to a "squeeze" on the living standards of almost a million workers.

TUC general secretary Brendan Barber said: "While we are pleased that government has rejected the siren calls of some employers to freeze the minimum wage for adult workers and apprentices, these increases are still far below inflation and will leave the lowest-paid facing a real terms cut.

"These new rates are a particular blow to younger people who will face the biggest hit on their living standards. There is no evidence that the minimum wage has had an adverse impact on young people's employment so it is hard to see the logic behind their pay freeze.

"Today's rate increases do not do enough to help hard-pressed families. We need a bolder increase next year otherwise the real incomes of minimum wage workers will continue to fall, along with consumer demand."

The changes to minimum wage are introduced as the so-called "pasty tax" comes into force, amid warnings that it could tip struggling businesses "over the brink".

Chancellor George Osborne originally announced plans to raise £110 million by levying 20% VAT on hot baked goods at the Budget.

The move prompted a huge outcry, with critics accusing ministers of waging class warfare against pasty eaters.

Mr Osborne later staged a partial climbdown by exempting products that are left to return to "ambient temperatures" on shelves in bakeries and supermarkets.

The concession is estimated to have cost the Treasury around £40 million.

However, there is still anger that food kept warm for customers - in hot cabinets at bakeries, burger vans, or chestnut stalls - will attract the full tax.

Greg Mayne of accountancy firm Reeves said: "The VAT rise will impact on revenue for already struggling businesses and may tip some over the brink at a time when many people are cutting back on their discretionary spending, particularly eating out.

"This is going to hurt hot food sellers and may prove too much for some to survive.

"The message to traders, whether they are selling pasties from a shop or hot chestnuts from a stall, is, 'Don't bury your head in the sand' and ignore the VAT.

"Many places are suddenly going to find they should be charging VAT from next week and could face significant fines if they fail to do so."


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