3.8percent increase in minimum wage

From October, the national minimum wage for people over 21 will go up by an above inflation 3.8 per cent, from £5.52 to £5.73 an hour. The rises for younger workers will also exceed inflation. For 18- to 21-year-olds the rate will be £4.77, up from £4.60, while 16- to 17-year-olds will get £3.53, up from £3.40.

Since the minimum wage was introduced in 1999, the over-21 rate has gone up by 60 per cent. The increases recommended to the Government by the Low Pay Commission are above the Consumer Price Index (an anualised 2.2 per cent in January) and are seen as a move towards gradually improving the living standards of Britain's poorest workers.

"It makes a real difference to the lives of many of our lowest-paid workers and protects them from exploitation," said Business Secretary John Hutton.

This time round, though, the increase is no greater than the rise in average wages across the economy as a whole. As a result, the CBI said it could swallow the rise, saying it was grateful the LPC had taken account of the "considerable economic uncertainty" felt by business.

Unions, though, were critical, calling for a rise to £6.75 an hour.