Speaking at the Conservative Party conference in Birmingham on Wednesday, David Cameron promised he would raise the tax-free personal allowance on income tax to £12,500 if the Conservatives win the General Election.
Cameron said this would mean that one million people on minimum wage would pay no income tax, with a further 30m workers enjoying a reduction in tax.
“With us, if you work 30 hours a week on minimum wage, you will pay no income tax at all. Nothing. Zero. Zilch," he said.
The ALMR, which represents Britain’s licensed trade, said the proposal would benefit both workers and employers in the hospitality industry.
“Reducing the tax paid by low-income workers is an extremely welcome measure that will soon feed back into the economy through increased spending,” said ALMR chief executive Kate Nicholls.
“Not only would this tax cut allow our staff to keep more of their earnings, it will also increase our customers’ disposable income and this will hopefully feed back as higher sales, allowing us to keep investing in our businesses and delivering the vibrant, modern hospitality of which Britain is so rightly proud.”
The coalition government introduced an Employment Allowance earlier this year, and has scrapped Employers’ National insurance Contributions for under 21-year old’s. Nicholls said she would like to see any future government go further and extend this to under-25s.
“Our latest employment survey shows that almost 77 per cent of workers in pubs and bars are over 21, underlining the limited potential for measures targeted at under-21s to support growth in our sector,” she said.
“We could do a lot more to get people into work and reward our existing staff if the burden of Employers’ NICs were relaxed, and we look forward to constructive conversations with politicians of all parties to ensure that employment-friendly measures like this have wide support ahead of the 2015 election.”
Cameron’s promises come after Labour leader Ed Milliband vowed to raise the minimum wage to £8 by 2020 if his party won the General Election.
His proposals was met with criticism by business leaders, who warned that setting a five-year target for minimum wage, instead of basing it on what the economy could afford at the time, could be disastrous for employers.
Speaking to BigHospitality, British Hospitality Association (BHA) deputy chief executive Martin Couchman stressed that the benefits of a higher minimum wage for workers would depend on income tax brackets.