The Chancellor is taking a risk on raising the 'National Living Wage'

George Osborne speaks in Parliament Credit: PA Wire

Holdsworth Packaging in Sheffield employs 15 people. Today eight of them learned they are in line for a pay-rise - thanks not to the boss but the Chancellor

The company is being forced to increase the wage bill. They weren't expecting this and haven't worked out if they can afford it.

The Chancellor's "Living Wage" is considerably lower than the rate the Living Wage Foundation campaigns for but this is still a bold move.

In February the Low Pay Commission decided that £6.70-an-hour was the maximum companies could afford to pay without negatively impacting on jobs. George Osborne has now decided they can afford £7.20 an hour from April.

Explainer: What is the National Living Wage?

The OBR calculates the changes will push up the earnings of six million people in the next five years.

Individuals will be affected differently, remember, while in-work tax credits are also being hacked back and five million people in the public sector face another four years of pay-rises capped at just one per cent.

The Chancellor is taking a risk. He's betting that businesses will take his National Living Wage on the chin. He's offering them small cuts to corporation tax and national insurance (for small companies) and hoping they will accept lower profits.

He may be right, but George Osborne may find companies start raising prices, cutting hours and jobs in a way the OBR hasn't modeled.

Hiking the minimum wage was a bold move. The CBI fears the worst but gloom may have been overdone; KPMG believes it more likely to increase staff loyalty and productivity rather than redundancies.

But there are those who passionately believe companies should set pay not politicians. What's interesting is the until today the Chancellor appeared to be one of them.