To ask the Chancellor of the Exchequer if he will estimate the savings to the tax credits and welfare benefits system of an increase in the national minimum wage to (a) £6, (b) £6.25 and (c) £6.50 an hour. (117541)

The estimated savings to the exchequer from tax credits and income related benefits from an increase in the adult rate of the National Minimum Wage (£5.35 per hour) in 2007-08 are:

Estimates are based on Family Resource Survey data for 2004-05, uprated to 2007-08.

These figures do not take any account of likely behavioural change caused by a rise, such as changed levels of employment or hours worked. They also do not include the effect of the £25,000 disregard in tax credits, which allows income to rise between one year and the next by up to £25,000 before tax credits begin to be withdrawn. This means that the savings from tax credits would in practice be significantly smaller, at least in the first year.