Andy McDonald – 2015 Parliamentary Question to the HM Treasury

The below Parliamentary question was asked by Andy McDonald on 2015-11-17.

To ask Mr Chancellor of the Exchequer, if he will estimate the annual change in tax revenue from extending the national living wage to those aged between 18 and 25.

Mr David Gauke

Younger workers tend to have less experience than older workers in the labour market, and so there is a risk that too high a wage rate may make them relatively less attractive to employers. So, to minimise any negative impact on employment of younger workers, the National Living Wage is limited to those 25 and over. The Government has not therefore made an estimate of what the fiscal impact of this policy change would be.

The Office for Budgetary Responsibility estimate that, by 2020-21, the National Living Wage will increase income tax and NICs receipts by around £0.1bn, as set out in Table B.3 in of their July 2015 Economic and Fiscal Outlook. They assume that, by 2020-21, the overall impact of the policy on the public finances is to reduce public sector net borrowing by £0.2bn.