Summer Budget

MQT on 2015-07-15
Session date: 
July 15, 2015
Question By: 
Len Duvall OBE
Labour Group
Asked Of: 
The Mayor



Answer for Summer Budget

Answer for Summer Budget

Answered By: 
The Mayor

Boris Johnson MP (Mayor of London):  Thanks, Len.  This is an excellent Budget and I welcome very much that it has several important changes that will help Londoners, such as supporting working people with lower taxes.  You will be able from next year to earn £11,000 before paying any income tax at all.  The figure before the Coalition Government came in was about £7,000 or perhaps even lower, which was a measure of the inequity of the taxation system in this country.  They have also raised the threshold so that you do not pay the 40p tax rate until you are earning £43,000 and about 13,000 people will be lifted out of the higher tax rate.

It is good news for London that the corporation tax is being cut to a spectacularly low level of 18%, which is a real incentive to business to grow and to invest.  Measures to take family homes out of inheritance tax will be particularly important in boroughs in this city where many people have seen the value of their home inflate through no fault of their own and face the real threat of being forced to sell the family home in order to pay death duties.  That is a reasonable change that will help people on low and middle incomes in London who simply happen to be living in a very expensive property that just reflects what is happening in the London economy.

The changes to the Living Wage we welcome and the idea of a National Living Wage is one, clearly, whose time has come.  It is very important and it will be good news for people on low incomes and low pay in the sense that over this Parliament somebody currently on the Minimum Wage will see their income rise by about £5,000.  There is a further incentive for businesses to pay the Living Wage in the sense that the Employment Allowance has been increased by 50% and you can employ four people fulltime without paying any National Insurance at all if you are paying the Living Wage.

I think everybody around this horseshoe would agree that this may be progress, but we must in no sense abandon the goal of getting London businesses to sign up to the London Living Wage, which is a campaign that everybody has supported and it remains extremely important.  It is a rate of pay that Londoners deserve.  So far, 630 employers have signed up: we must not take the foot off the gas because of this progress in low pay across the board.

There are various other improvements in the standing of London and devolution of powers of one kind or another that Members will have seen in recent days over planning and over Sunday trading.  We are getting £10 billion for transport investment, as the Chancellor announced in the long-term economic plan for London.  Crossrail 2, the Bakerloo line extension, the east river crossings and all of that agenda will progress.  I do think that it is a good budget for this city and I look forward very much to taking questions on it.

Len Duvall AM:  Thank you, Mr Mayor.  You have been a great champion for the real London Living Wage issue and, yes, the rise in the Minimum Wage nationally is to be welcomed.  Mr Mayor, in terms of the Chancellor recognising in the benefit caps that there is a differential in terms of London, is there not a case, then, for you to lobby for a higher rate of the National Living Wage here in London differentially as well?

Boris Johnson MP (Mayor of London):  Thank you, Len.  What I have done is, as you would expect, I have already weighed in on this subject at the levels you would expect with the Chancellor and the Prime Minister.  I do think that there is absolutely nothing to be lost from the point of view of any party - Conservative, Labour, whoever -in campaigning for the London Living Wage across the board.  I really believe in it.

Whether the right way forward is, as you propose, a special London weighting for the new National Living Wage is open to argument because it might involve a further dilution of our focus on the London Living Wage.  It is very important.  The London Living Wage is something that, as everybody knows, is set by a team of impartial economists here in City Hall.  They look at the costs of living in London.  They calculate it now to be £9.15 per hour.  We think that is fair.  There are businesses across the city that are paying it.  They are not all big banks, accountancy firms, lawyers or whatever: we have contractors paying it now; we have pubs;  we have cafés; we have all sorts of businesses now starting to pay it.  It is interesting that we were actually on the brink of a breakthrough with a major retailer to get it to pay the London Living Wage.

What I must say in all honesty to the Assembly is that I do worry now that that impetus will be diminished by businesses’ ability to say, “It is OK now because we are paying this National Living Wage”.  Do you see what I am on about?

Len Duvall AM:  Mr Mayor, you do accept that in terms of reductions in the welfare bill and making work pay, increasing the National Minimum Wage or the voluntary real London Living Wage, which I think is what you are saying, is the way forward?  In that sense, will you not lobby for that and accept that there is a higher cost of living issue here in London in terms of normal workers?  You can go away and think about that and your role in the final year of this mayoralty.

Can you also give an undertaking that as part of your renewed commitment to the real London Living Wage, you will undertake a study through the Greater London Authority (GLA) Living Wage Unit of what the National Living Wage in London will need to be set at to compensate for the cuts in in-work benefits announced by the Chancellor in 2015 ‑‑

Boris Johnson MP (Mayor of London):  Yes.  I understand, Len, yes.

Len Duvall AM:  ‑‑ because that must have a say in terms of where you are coming from about the real London Living Wage?

Boris Johnson MP (Mayor of London):  Len, you are right that we should be looking into whether there should be a National London Living Wage weighting.  The trouble is that this conversation is now going to get so complicated that people will cease to follow which living wage we are talking about.  We could get to a new National London Living Wage weighting, just as there is under the existing Minimum Wage.  There is a London weighting and I think that is what you are driving at.  That is one conversation.

The second conversation is to tell not just businesses but also Whitehall departments.  Some Whitehall departments pay the voluntary London Living Wage; some do not.  They all should.  All councils should.  I would be very unhappy to see our effort being dissipated in that area.

On tax credits and the trade-off between bearing down on in-work benefits and tax credits and lifting wages, given all the cliffs and poverty traps that there are in the tax credit system - and everybody will talk to constituents who have been made absolutely miserable by being overpaid and then being forced to pay back - and all the difficulties that arise in the tax credit system, clearly, it is better to lift the wages of the low-paid and indeed to reduce the tax burden.  That has to be the right way forward.  That is a much more equitable system, in my view.

There has to be some compromise here and there has to be a way forward and I appreciate that there is now, to put it mildly, a conversation going on within the Labour Party itself about how to do that.  Some representatives of the Labour Party, notably Harriet Harman [Rt Hon Harriet Harman QC MP,Leader of the Opposition], seem to be more willing to recognise the difficulties and the reality than others.

Len Duvall AM:  Mr Mayor, I am under pressure on time.  I take it that somewhere in that answer was a yes to the study that you will do with the GLA unit to help us with the lobbying.

Boris Johnson MP (Mayor of London):  Yes.

Len Duvall AM:  Then there is one further group that I would ask you to consider lobbying for.  In London’s demographics, we have approximately 50% more 20-to-24-year-olds than the national average.  Will you also lobby for a full or partial exemption for London from the rule that only people aged over 25 will receive the National Living Wage?  There does seem to be a big problem here for London and for that section of our community and it makes no sense at all.

Boris Johnson MP (Mayor of London):  I understand that.

Len Duvall AM:  Is that a simple yes or no?

Boris Johnson MP (Mayor of London):  Yes.

Len Duvall AM:  Will you look into it?  Maybe there might well be some further support from the Assembly for these particular areas because they will have a major impact on our young people.

Boris Johnson MP (Mayor of London):  What I certainly will undertake, Len, is to look at the particular impacts of the Budget on under-25s.  That is reasonable.  People should bear in mind that on the whole in London, in spite of the costs of living here, people do better.  They are paid more.  There are more opportunities here in London.  To put it mildly, there are considerable advantages of living in London, which we should not neglect as well.  However, given the threshold that was established in the Budget for the National Living Wage of only over-25s, it is reasonable that we should look at the impacts for under-25s as well.

Len Duvall AM:  Thank you.