Friday 10th July

It is truly amazing just how in recent years there has been so much poltical cross-dressing.  We had Labour vying with the Tories to present policies to control immigration; all three parties love the NHS, Labour are concerned about the squeezed middle, the LibDems signing up to Tory cuts and so on.  And during the election campaign Labour were talking up the idea of a Living Wage but with no concrete proposals to make it a law.  Now George Osborne has proposed a legal National Living Wage which should raise the incomes of those at the bottom of the working pile.  The idea is that, combined with further reductions to Benefits this will force people to take jobs they might otherwise have rejected.

Well, that should have been a Labour policy, but with maybe a touch more carrot than stick.  We have to wait and see if any of it will work.  One thing is for certain, people on benefits, including the disabled will be poorer from now on.  I suspect, and knowing employers as I do, that they will increase prices to compensate for any higher wages they will have to pay.  Either that or they will lay off staff, or push them harder to produce more; in Restaurants that will mean one more table for each waiter to cover.  Another result may well be that differentials will come into play, at the moment with the Minimum wage at £6.50, quite a lot of shift leaders and supervisors are on £7.50 or £8.00 an hour.  If you raise the minimum to £9.00 then these people will insists on being paid in excess of £10.00 an hour.  And that will mean a hike in inflation.  Not that a bit of inflation is so bad, except for those on fixed pensions or indeed on reduced benefits, or savers of course.  But everyone knows that the base rate of 0.5% is not going to remain forever, and if inflation starts to take off the Bank of England may be forced to increase it, so hitting mortgage holders.

You see, whatever policy you adopt there are unforeseen consequences which may well result in the opposite of what you wanted.  So, I give a limited round of applause to Osborne for adopting a Labour policy.  I wish him good luck, but with his policy of reducing income tax I am not sure he will achieve his twin goals of paying down the deficit and getting more people into full-time work.