Chancellor George Osborne has today presented the Summer Budget, announcing the replacement of the National Minimum Wage with a compulsory National Living Wage and the introduction of three million new apprenticeships by 2020.

A surprising announcement, the new living wage of £7.20 an hour for employees over the age of 25 will be introduced from April 2016, rising to £9 an hour by 2020.

In his speech the chancellor said:

“This will be a Budget for working people. A Budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower tax, lower welfare country we intend to create.”

The announcement of increased vocational development through the introduction of three million more apprenticeships funded by large employers came alongside the announcement that maintenance grants for students will be cut from the 2016-17 academic year and replaced by loans.

George Osborne added:

“Britain still spends too much, borrows too much, and our weak productivity shows we don’t train enough or build enough or invest enough.”

To promote investment and boost UK competitiveness, the chancellor has also announced that corporation tax will be cut from 20 percent to 19 percent in 2017 and 18 percent in 2020.

Osborne continued:

“Jobs are not created by accident. They are created when businesses have confidence – the confidence to invest, to grow and to hire.”

Businesses will have their employer National Insurance bill cut by another £1,000 from April 2016, as the Employment Allowance rises from £2,000 to £3,000.

The Employment Allowance gives businesses and charities a cut in the employer National Insurance they pay, meaning that from next year, businesses could employ four members of staff full time on the new National Living Wage and pay no National Insurance.

Finally, the amount people with an income of more than £150,000 can pay tax-free into a pension will be reduced from April 2016.

Osborne said:

“Our goal is clear: we want to move from an economy built on debt to an economy built on the more secure and productive foundations of saving and long term investment.”

John Cridland, CBI Director-General, commented:

“This is a double edged Budget for business. Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.

“Firms have been unwavering in their support for the Chancellor’s deficit reduction plans and will welcome the clarity that the new fiscal rules provide. Other standout measures include making the Annual Investment Allowance permanent at £200,000, which the CBI called for, as well much-needed investment in our roads network.

“The further reduction in corporation tax is a welcome surprise but tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the National Minimum Wage next April – a 7 percent increase.

“The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6 percent.

“Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool. A volunteer army is always better than conscription but the CBI will work with the Government to make the best effect of this measure.”