In what may be seen by some as an about turn, the Chancellor George Osborne announced yesterday (January 16) that he is in favour of an above-inflation rise in the minimum wage from the current level of £6.31 for adults aged 21 and above.
Mr Osborne said in an interview that the economy “can now afford” a higher minimum wage and suggested that it would need to rise to £7 an hour by 2015 if it is to return to the relative level it was before the financial crisis began.
The wage rates are set by the Government but are based on recommendations by the Low Pay Commission, which was set up by the Labour government in 1998 and is currently overseen by the Business Secretary, Vince Cable.
However, pre-empting the Commission’s recommendation, which is due to be published at the end of next month, the Chancellor has decided that, as the economy improves, it should be reflected in the pay of those in the lowest paid jobs.
The minimum wage has fallen behind inflation since the financial crisis started in 2008, making the four per cent of the workforce that earn the least much worse off in real terms.
The Chancellor added that the Government was also planning another “big increase” in the amount of money people can earn before they start to pay income tax.