The Budget: Living Wage 'Could Cost 60,000 Jobs'

The Chancellor's Budget and the impact of his living wage pledge will come under scrutiny from independent experts and MPs today.

George Osborne said the £7.20-an-hour wage, unveiled yesterday as part of a "plan for working people" , would take effect in April for workers over 25.

It will increase to £9-an-hour by 2020.

"Britain deserves a pay rise," Mr Osborne told MPs during Wednesday's big speech in the Commons.

But Labour has accused the Chancellor of trying to "con" the public, saying millions will be worse off overall because of significant welfare cuts.

Mr Osborne said the living wage amounted to a direct pay rise for two and a half million people and that those currently on the minimum wage would see a £5,000 wage increase by the end of the decade.

The "pay rise" - as well as the Chancellor's plans to cut £12bn from the welfare budget through measures such as changes to tax credits - will be picked apart later.

Budget: The Key Points You Need To Know

The Institute for Fiscal Studies think-tank is set to unveil its own Budget analysis.

Its director, Paul Johnson, has already said Mr Osborne is "taking a bet" with the wage.

He told Sky News: "The question is where does that money come from?

"It has to come either from reduced profits for the companies employing them, or from lower wages from other people who are being employed, or from higher prices.

"In the end the money has to come from somewhere."

The independent Office for Budget Responsibility (OBR) has also sounded a significant note of caution.

It believes 60,000 jobs will be lost because of the new wage and that four million working hours could be lost each week.

Despite the concerns, Mr Osborne said the OBR still maintained one million jobs would be created by 2020 if growth carries on at 2.4% a year.

The national minimum wage for under-25s, currently £6.50 an hour, will continue to be set by The Low Pay Commission.

The Chancellor told Sky News yesterday's Budget offers a "new contract with the country".

"It says to businesses we're going to cut your taxes but you have to pay higher salaries.

"It says to people we'll make sure you’re going to get a proper wage, a national living wage, but there are going to be less benefits.

"And it says to the country we’re going to spend less but we’re going to live within our means and have economic security.

"I think that new contract, that new centre of British politics, is going to be a settlement that the country are happy with."

Labour said the Chancellor is "trying to pull the wool over people's eyes" and using the headline-grabbing announcement to gloss over its programme of welfare cuts.

Interim leader Harriet Harman said the Budget was "more about political tactics designed by the Chancellor to help him move in next door".

Among the cuts announced were: reducing the benefits cap to £23,000 in London and £20,000 elsewhere; freezing working age benefits for four years; scrapping student grants; and slashing the income threshold at which families can receive tax credits by almost half - from £6,420 to £3,850.

The first all-Tory Budget in 20 years also saw an increase in the level at which working people pay income tax to £11,000; scrapping inheritance tax for estates under £1m; and raising slightly the threshold for the 40p tax band.