Government rejects 'freeze' calls and raises national minimum wage by nearly two per cent, with a new adult rate of £6.31

(Dominic Lipinski/PA Wire)

Calls from business leaders to freeze the national minimum wage were rejected today by the Government which raised its level by nearly two per cent.

The rate will rise by 12p to £6.31 an hour in October for adults, by 5p to £5.03 for 18 to 20-year-olds and by 4p to £3.72 for 16 and 17-year-olds.

The Low Pay Commission, the independent body which fixes the rate, had been urged by officials in the Business Department not to grant any rise that could cause job losses. Business chiefs have also argued that an increase could deter employers from recruiting new staff.

An announcement on wage levels was delayed for a month, prompting speculation that ministers were considering leaving the rates unchanged.

However, Vince Cable, the Business Secretary, has approved increases close to the inflation rate and rejected a recommendation from the Commission that the wage for apprentices should be frozen. It will instead increase by 3p to £2.68 an hour.

Mr Cable said he was confident the rates struck the right balance between boosting the income of the low-paid and not putting off employers from recruitment.

But he added: "There is worrying evidence that a significant number of employers are not paying apprentices the relevant minimum wage rate.

"Apprenticeships are at the heart of our goal to support a stronger economy and so it is important to continue to make them attractive to young people."

The TUC said it was pleased the Government had turned down calls for freeze rates, although it said the increase should have been larger.

But Adam Marshall, director of policy at the British Chambers of Commerce, said it was disappointed the Government has raised rates by 1.9 per cent, which it said was more than 50 per cent higher than average pay increases.

He said: "While the pressures of inflation are affecting many people, including the lowest-paid, the scale of this rise adds significantly to business costs, most of all by contributing to broader pay inflation. It will also make some employers less inclined to hire additional members of staff."

Gavin Kelly, chief executive of the Resolution Foundation think-tank, said: "A below-inflation rise in the minimum wage will be a tough blow for all those struggling to get by on low pay. This will be the fourth straight annual fall in the minimum wage after taking account of inflation."