The decision, reached at a Downing Street meeting on Friday, is a victory for Tony Blair and Chancellor Gordon Brown who are concerned at the inflationary impact of the proposals.
Mr Brown has been urging a watering down of the minimum wage plans suggested in a Low Pay Commission report.
Union bosses hoped the commission would recommend annual increases in the minimum wage to keep pace with earnings. They also want an early increase in the proposed full rate of pounds 3.60 to pounds 3.70.
Mr Blair is unwilling to be tied to a regular system of uprating. He wants to see how the minimum wage "beds down" before further discussions on increases.
The decision will be welcomed by many business leaders who have argued that the new provisions will destroy jobs. However, it will cause dismay among the unions and represents a defeat for Margaret Beckett, President of the Board of Trade.
Other key decisions on the proposals, including Mr Brown's desire to cut protection for young people, have yet to be resolved.
The Chancellor wants the rate for young people to be reduced from pounds 3.20 to pounds 3, and the age limit of those on the reduced level to be increased from 21 to 24. Ministers expect a compromise, possibly with Mr Brown winning over the first issue but not the second.
The Conservatives yesterday stepped up their attack on the project. Peter Lilley, the deputy leader argued that the "pretence that a minimum wage will not destroy jobs will lead the unions to believe that pay increases, unmatched by productivity gains throughout the rest of the economy, will also not harm jobs".Reuse content