Widespread use of a so-called living wage could save the government £2bn a year, according to two think tanks.

The saving has been calculated by the Resolution Foundation and the Institute for Public Policy Research (IPPR).

They say paying staff at least £7.45 per hour outside London, and £8.55 within the capital, would boost the nationwide income by £6.5bn a year.

But the government would collect more income tax and pay out less in benefits and tax credits.

Matthew Pennycook, of the Resolution Foundation, said: "There are significant overall public savings to be made from paying a living wage, on top of the beneficial effects it would have on reducing working poverty."

"Public-sector employers are well-placed to expand the living wage and to set an example which the private sector can follow."

The idea of a living wage is separate from that of the legally-enforced minimum wage.

More here http://www.bbc.co.uk/news/business-20853767

Thoughts please, it's certainly an interesting concept at this point!

It would allow cuts in the working benefits to be less painful for those facing such cuts. It would hopefully increase wages from minimum wage jobs to those approaching a living wage. If all government outsourcing had to be paid a living wage it would reduce the incentive to outsource and might provide better pay and conditions for those whose jobs are outsourced. So if a company got a government cleaning contract but had to pay living wage for those staff how quickly would they find that they could only recruit for government jobs and have to pay more to keep other cleaners. Start off with big employers and any company that has a government contract no matter how small. Then over the next decade or so bring the size of the employer down that has to comply.

I don't understand, where would the money come from? Wouldn't this hurt company profit?

Yep, and for a lot of small companies there isn't much of that left. I'd expect inflation to rise as companies pass on the increased costs to customers.

Which would of course mean the 'living wage' would be no longer valid, since the cost of goods an services would have increased.

Of course the real truth of our economy is that the SOHO sector that would be vulnerable to this is always vulnerable anyway - small companies by definition are more vulnerable to changes in conditions. If we were actually that worried about small companies going under, we'd never actually change anything. We can make the changes and (effectively) sacrifice a number of small companies if market conditions are such as to encourage more small companies to appear i.e. we have turnover of companies and jobs not an overall loss. The problem is in a very fragile, unstable economy as we currently now have you can't guarantee that small companies that go under will be replaced.

Yes but the plans to introduce it would start with big companies like the supermarkets, who have tens of thousands on in work benefits.