Question to the HM Treasury:

To ask His Majesty's Government what steps they are considering to mitigate the potential inflationary effects of the increase in the National Living Wage and the National Minimum Wage.

In March 2020 the Office for Budget Responsibility estimated that meeting the National Living Wage target of 2/3rds of median earnings by 2024 would increase the level of consumer price inflation by less than 0.1 per cent across that period. Evidence shows employers respond to minimum wage increases in a variety of ways, most commonly by absorbing the additional cost and accepting lower profits.

Inflation reduces real incomes, creates uncertainty, and slows economic growth. It’s essential that the government continues with its efforts to keep inflation down. Inflation has more than halved, falling from its peak of 11.1% in October 2022 to 3.4% in February. The OBR forecasts that inflation will return to the 2% target in the second quarter of this year, a year earlier than forecast in November.