Miliband Sets Out Plan For £8 Minimum Wage

Britain 'Can Afford' To Increase Minimum Wage

Updated: 9:25am UK, Friday 17 January 2014

Britain can afford to increase the amount its lowest-paid workers earn, the Chancellor has announced.

George Osborne said an above-inflation rise in the national minimum wage - currently set at £6.31 an hour - would "secure a recovery for all".

He has not revealed how much the wage could increase by, although he said it would need to rise by more than 10% to £7 an hour to match improvements to the economy.

"I believe Britain can afford an above-inflation increase in the minimum wage, so we restore its real value for people and make sure we have a recovery for all and that work always pays," he told the BBC.

Prime Minister David Cameron has also said the Conservatives have taken "difficult decisions" to "fix the economy" and could now afford to put "more money in people's pockets".

However, Labour accused Mr Osborne of "flailing around under pressure", while a Liberal Democrat source said the Chancellor had "dragged his feet" on making an announcement.

Chris Leslie, the Labour Treasury spokesman, said: "The Tories cannot hide from the fact that working people are on average £1,600 a year worse off since they came to office.

"We need action now to earn our way to higher living standards and tackle the cost-of-living crisis."

Any increase to the minimum wage would be recommended by the Low Pay Commission (LPC), which talks to businesses and looks at economic data before suggesting a rate.

The LPC, which is independent and overseen by Business Secretary Vince Cable, reviews rates each year and reports to the Government in February.

 It has been handed the Government's latest analysis on jobs and the economy ahead of its report next month.

The Government sets the rate based on the LPC's recommendation, with HM Revenue & Customs handling enforcement. 

An increase to the minimum wage would likely take effect in the autumn.

The Federation of Small Businesses backed an increase to the minimum wage but said it should rise by no more than the rate of inflation - currently 2%.

Its national chairman John Allan said: "The Low Pay Commission will recognise that in some industries, such as retail and social care, small businesses operate very fine margins and are still struggling with rising costs in areas such as utilities and business rates.

"At the same time, the recovery remains on a fragile footing in certain regions of the UK."

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