The nation will be "getting a pay rise" according to Chancellor George Osborne as he unveiled plans to increase the minimum wage.
It was one of many announcements revealed during his summer Budget which also included a package of welfare reforms and a cut in corporation tax.
Mr Osborne said a new compulsory 'national living wage' for working people aged 25 and over would commence in April at £7.20 an hour and rise to £9 an hour by 2020.
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The measure will replace the existing minimum wage of £6.50.
The Chancellor also announced an expected £12 billion of cuts to the welfare budget which will hit some working people on lower incomes as well as some of the unemployed.
Other key announcements included:
- Forecast for paying down the national deficit and running a surplus knocked back by a year from 2017/18 to 2018/19
- New Fiscal Charter committing the country to running an overall budget surplus in normal economic times when real GDP growth is lower than one per cent a year
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- Corporation tax to be cut from 20 per cent to 19 per cent in 2017 and 18 per cent by 2020
- Tax-free personal allowance at which 20p income tax rate is payable raised from £10,600 to £11,000 next year. Rates of income tax remain unchanged
- Higher rate 40p income tax threshold to rise from £42,385 to £43,000 from next year
- Rises in public sector pay restricted to one per cent per year for the next four years
- Package of welfare reforms includes four-year freeze for working-age benefits
- Reduction from £6,420 to £3,850 in income level at which tax credits begin to be cut, with increase in taper rate at which the benefit is removed
- Support for children through tax credits and universal credits to be limited to two children, affecting children born after April 2017
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- Benefits cap to be reduced from £26,000 per household to £23,000 in London and £20,000 in the rest of the country
- Social housing tenants earning more than £40,000 in London and £30,000 elsewhere to pay rent at market rates
- Abolition of automatic entitlement to housing benefit for 18 to 21 year olds
- Rate of Employment and Support Allowance aligned with Jobseekers' Allowance for new claimants deemed able to work
- Rents in the social housing sector to be reduced by one per cent a year for the next four years
- Permanent non-dom tax status to be abolished
- Inheritance tax reform to allow estates worth up to £1 million to be tax-free if they include a home
- Britain committed to meeting Nato target of spending two per cent of GDP on defence for rest of this decade while the Ministry of Defence is guaranteed real-terms increases in its annual budget
- New bands for vehicle excise duty for brand new cars from 2017 - with most cars paying £140 standard charge. No change to VED for existing cars. All income from VED to go into new Roads Fund to pay for investment in the network
- Climate Change Levy exemption for renewable electricity to be removed