The chancellor has hit out at claims yesterday's Budget will hit small businesses, saying it offered the UK a "new contract".
Read more: At a glance - July Budget 2015
In an interview on Radio 4 this morning, George Osborne said the new Living Wage was a "fair deal" for taxpayers.
Labour has slammed the Living Wage, which will be hiked to £7.20 an hour for the over-25s, rising to £9 an hour by 2020, as being a "con".
However, Osborne said this morning that some companies had "frankly taken a free ride" by failing to help their workforce move up the ranks.
Yesterday the Confederation of British Industry (CBI) said small shops, hospitality firms and care provides would all be hit by the new wage.
"Delivering higher wages can only be done sustainably by boosting productivity. Bringing politics into the Low Pay commission is a bad idea," said John Cridland, the CBI's director-general.
Meanwhile, he welcomed changes to corporation tax which will lower it to 18 per cent.
"Combined with a welcome commitment to publish a business tax roadmap in April 2016... this must provide businesses of all sizes with the certainty they need to invest," he said.