The Local Economy Forum is asking government to rethink its approach to minimum wage.
LEF believes government could meet the original Island Plan proposal of living wage in an a ordable and sustainable way.
It says this can be done by the application of a more realistic increase in minimum wage level combined with government suppressing the rate of tax hikes by introducing tax credits for the lower paid.
Overwhelming Advantages
The LEF proposal offers a suite of advantages so substantial that they demand serious consideration:
- The low paid would receive a higher increase than currently proposed.
- The cost to business would be reduced and result in less job losses and services cuts.
- The increase would not fuel inflation, which will erode the benefits of the increase.
- More money would circulate locally, so government would benefit from more VAT.
- New investors would have the certainty of a link between IOM and UK statutory rates.
- Existing businesses wouldn’t have the annual unpredictability of local rate setting.
- Despite comments to the contrary, it is a relatively simple change to the tax system.
- Government is free to pursue a laudable social policy without damaging the economy.
- Government would meet its long-held desire to achieve a living wage to reduce poverty.
Makes Sense at Every Level
Forum Chairman, Chris Robertshaw, said: “Our proposal makes sense at every level.
“The Minister for the Treasury is on public record as saying that the increase in minimum wage is not about tax-raising, so why not stop collecting 40% of the increase and work with businesses to make the living wage a reality from April 2026?
“To date, the only objection voiced by the minister is the added complexity of administration, which is a point of detail, not principle. In fact, it’s not a substantial change, and tweaks to payroll IT and paperwork shouldn’t be considered a valid reason not to do the right thing.
“We have invited government to meet us to discuss the proposal, but the original date of 19 December has been pushed back by them to January. That’s disappointing as delay in addressing the issue only increases the risk of unnecessary job losses in the new year.”
The Economic Data
Forum Secretary, Brett Martin, addressed the economic imperative of a change of heart from government: “If you look at the economic data reported between 2020 and 2025 (2020 being pre-pandemic data from 2019 or earlier, you’ll see an 8% drop in GDP, a 7% fall in freight imports and a 5% decline in energy usage, all clear indicators of economic slowdown.
“How does government expect local businesses to shoulder the burden of yet another double-digit rate increase against the backdrop of an economy that’s clearly struggling?
“Whilst the wider economy has been shrinking, government payroll has grown at an average rate of over £100,000 per day, every day, from 2021 to 2025, sustained in part by the tax from minimum wage increases that the minister says weren’t looked for!
“It really is time for government to step up to the plate and take some responsibility for its own social policy rather than using it to help fund never-ending public-sector growth. If it doesn’t act, and act soon, it will cause irreparable damage to the local economy, and the very people it claims to be helping.”
