THE minimum wage will rise to £12.21 an hour next year after the Chancellor confirmed a 6.7% increase ahead of Wednesday’s Budget.
Rachel Reeves described the move as a “significant step” towards delivering on Labour’s manifesto promise to introduce a “genuine living wage for working people”.
The increase, recommended by the Low Pay Commission, will mean an extra £1400 a year for a full-time worker earning the main minimum wage rate, known as the national living wage, from April 2025.
But it still falls short of the £12.60 per hour UK living wage calculated by the Living Wage Foundation.
The Chancellor also announced that the minimum wage for people aged 18-20 would rise to £10 an hour, an increase of £1.40.
That rise is the highest such rise on record as the Government looks to extend the main adult rate to 18-year-olds in future.
The minimum wage has risen by almost 10% in each of the past two years, against the background of high inflation.
Wednesday’s Budget is also expected to bring an increase in employers’ National Insurance contributions, adding extra costs for businesses in what the Conservatives have described as a “tax on jobs”.
Deputy Prime Minister Angela Rayner, one of the key supporters of Labour’s Employment Rights Bill, said: “A proper day’s work deserves a proper day’s pay.
“Our changes will see a pay boost that will help millions of lower earners to cover the essentials as well as providing the biggest increase for 18-20-year-olds on record.”
The minimum wage for apprentices and those aged 16-17 will also increase by 18%, reaching £7.55 an hour, meaning a total of 3.5 million workers are expected to receive pay rises in April as a result.
Nye Cominetti, principal economist at the Resolution Foundation think tank, said: “This smaller rise in the minimum wage – the first time in almost a decade when it has risen no faster than typical wage growth – is sensible in the context of an expected rise in employer National Insurance contributions at the same time.”
Suggesting the Government may wish to be “more ambitious” in future, he urged the Low Pay Commission to monitor the impact of higher minimum wage rates on employment, “including whether firms are switching to self-employed labour to minimise their tax bills and employment rights obligations”.
Meanwhile, the Federation of Small Businesses (FSB) called for additional support to help smaller employers meet extra costs, including by extending tax reliefs for small firms.
Tina McKenzie, policy chairwoman at the FSB, said: “Other business costs also remain high at a time when many small businesses have still not rebuilt the reserves they had to use to get them through the worst periods of the pandemic.
“Decisive action from the Chancellor to support small firms when it comes to business rates would be welcome, releasing money for jobs and investment rather than takin git away in what is essentially an analogue tax in the digital age.”
