Millions of workers will receive a £1,400-a-year boost to their pay from next week, Rachel Reeves confirmed today.
The Government revealed during her Budget in October that it would be increasing the National Living Wage by 6.7 per cent from next Tuesday (April 1).
The Chancellor confirmed the move today during her spring statement – adding that three million people would see their pay rise from £11.44 to £12.21 an hour.
Meanwhile, the National Minimum Wage – for 18 to 20-year-olds – is said to rise from £8.60 to £10 an hour from April in a 16.3 per cent increase.
The rises are far higher than inflation, which the Office for Budget Responsibility forecasts will average 3.2 per cent this year, before falling to 2.1 per cent in 2026.
Ms Reeves told the Commons that the government is investing £1 billion to help people back into work.
Meanwhile, she is announcing further cuts to welfare after the budget watchdog said the Government’s plans will not save as much as ministers hoped.
Ms Reeves namechecked the rise to the National Living Wage in her opening speech this afternoon.
She told MPs: ‘This Labour government was elected to bring change to our country. To provide security for working people and to deliver a decade of national renewal.
‘That work of change began in July – and I am proud of what we have delivered in just nine months.
‘Restoring stability to our public finance, giving the Bank of England the foundation to cut interest rate three times since the general election.
‘Rebuilding our public services with record investment in our NHS bringing waiting lists down for five months in a row and increasing the National Living Wage to give three million people a pay rise from next week.
‘Now our task is to secure Britain’s future in a world that is changing before our eyes.’
In Budget documents, the government also said it plans to create a single adult wage rate for workers across the UK ‘over time’.
Next month’s minimum wage changes follow Labour’s instruction to the Low Pay Commission, which recommends minimum wage rates, to include the cost of living in its calculations.
The move has been criticised by business groups, who insist it will drive some small firms to the wall at a time they are also grappling with rises to National Insurance.
Tina McKenzie, policy chairwoman at the Federation of Small Businesses (FSB), called for extra tax help for owners, saying: ‘Raising employer NICs at the same time as employers adjust to a higher National Living Wage is why the Government should step up and significantly increase the Employment Allowance.
‘Reducing tax employers pay on wages is how you get sustainable rises staff actually feel in their pockets.’
At the same time, the Resolution Foundation think tank pointed out that it amounted to the smallest increase in the minimum wage in three years. Last year it went up 10 per cent.
Nye Cominetti, its principal economist, said: ‘The smaller rise in the minimum wage next Spring – expected to be 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. The Government may want to take a more ambitious approach in future years.’