Why the new Real Living Wage rate could boost Scottish Government coffers

There will be wider economic benefits to increasing the rate of the Real Living Wage

Almost 70,000 Scottish workers are set for a pay increase - and that could in turn help boost funds for vital public services.

From April 1 2025, the Real Living Wage will be increased by five per cent to £12.60 an hour, or £2,200 for those on an annual salary.

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The Real Living Wage is a voluntary rate employers can pay their staff, and is independently updated annually so it is truly in line with the cost-of-living.

The Real Living Wage is set to increase to £12.60 an hour.The Real Living Wage is set to increase to £12.60 an hour.
The Real Living Wage is set to increase to £12.60 an hour. | Dominic Lipinski/Press Association

This new increase will apply to over 68,000 people working for over 3,750 Real Living Wage accredited employers.

While this is good news for these individual workers, it will also bring about benefits for the Scottish Government.

If more workers are paid better, more of them will be able to pay income tax - which in turn will boost the funds the government has to spend on public services.

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Lynn Anderson, Living Wage Scotland manager at the Poverty Alliance, said: “The Real Living Wage is about recognising that paying workers a wage that reflects real living costs means there is less pressure on social security and increased tax receipts coming into the government as a result.

“Increased wages means less pressure on public finances.

“There are fundamental economic benefits as high wages leads to increased spending, and that is likely to be locally.”

She added: “There are estimates on what economic benefits can be enjoyed when more workers are moved onto the Real Living Wage.

“At a UK level, if a quarter of the lowest paid employees were moved onto the Real Living Wage, that would be £1.7 billion being paid back into the economy. Love politics? Then sign up for The Steamie daily newsletter

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“In Scotland, the estimated economic boost is £140 million, and that is a mix of increased tax receipts and increased consumer spend.

“There are benefits not just for workers and their families, but the organisations where they work and the wider economy.”

This was echoed by Deputy First Minister Kate Forbes, who told BBC Good Morning Scotland: “That’s always been my argument about increasing the tax base - that’s just a codeword for increasing the number of people who are paid sufficiently well to pay revenue.

Deputy First Minister Kate ForbesDeputy First Minister Kate Forbes
Deputy First Minister Kate Forbes | Jeff J Mitchell/Getty Images

“More well paid, secure jobs means the economy can grow.”

Earlier this week First Minister John Swinney refused to rule out increasing income tax band thresholds in the Scottish budget for 2025/26, which will be announced on December 4.

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There are already warnings this will be a difficult budget for the Scottish Governments, particularly as Finance Secretary Shona Robison cut £500m from public services over the summer and halted all but essential government spending.

Peter Kelly, chief executive of the Poverty Alliance, said: “We all need an income that is enough to cover our needs and protect us from poverty, but too many workers in Scotland are struggling to stay afloat.

“A just Scotland would see every worker’s wage meet their everyday needs, and employers can play their part by paying the real Living Wage, which is the only wage rate in the UK based solely on living costs.

“We commend the leadership of more than 3,750 accredited Living Wage employers in Scotland that have taken a stand to ensure workers can earn a wage that covers their needs, even when times are tough for many businesses.

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“We call on many more employers to pay the Real Living Wage and become accredited.”

A spokesman for the Scottish Government said: “Growing wages plays an important role in strengthening Scotland’s tax base and delivering income tax revenues that can be reinvested to support the economy.

“The Real Living Wage has an important role to play in this process.

“Companies across Scotland are finding it also helps improve staff recruitment and retention, innovation and productivity.”

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