George Osborne’s decision to back an above inflation increase in the national minimum wage is his most politically significant decision since his decision to cut the 50p rate. It also makes that decision far less harmful politically.
Reducing the top rate of tax might have been the right thing to do economically but it hurt the Tories politically. It enabled Labour to claim that this was a government for the rich and that the recovery was only benefitting the few. By contrast, this decision allows the Tories to emphasise that, in Osborne’s phrase, this is ‘a recovery for all.’
There will be those on the dry right who don’t like this policy. They’ll argue that it’ll cost jobs. But there is a strong argument that, at the moment, the government is subsidising companies that pay low wages through tax credits. Raising the minimum wage should enable the government to remove these implicit wage subsidies.
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