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Labour heads for clash over pay: Union leaders want party to fix pledged national minimum wage at pounds 4.05 an hour

LABOUR and trade unionists are set to clash over a demand by some union leaders to fix its pledged national minimum wage at pounds 4.05 an hour, higher than the pounds 3.40 it supported at the 1992 general election.

While 'modernisers' on the National Executive Committee will resist moves to attach any figure, Labour yesterday defended the principle, saying it remained a policy goal and denying it was beyond the country's ability to pay.

John Prescott, the party's employment spokesman, highlighted the large sums being paid out in family credit to low-paid workers. Taxpayers were paying to make up for poverty pay levels, he said.

A statutory hourly minimum of pounds 4.05 - half the current rate of male average earnings - would produce a 40- hour week wage of pounds 162 and take more than 300,000 families off means-tested benefits.

Labour's commitment to some form of minimum wage protection is expected to survive an NEC meeting later this month to become a key plank of the party's local, European and by-election campaigning over job-related issues.

But the naming of a sum, or a pledge to pay half male average earnings which could rise in line with wage inflation, is anathema to the modernisers following Labour's hammering over the issue during the 1992 election campaign. Amid reminders of the support for John Smith, the Labour leader, during last year's 'one member, one vote' crisis, some union leaders have mooted the pounds 4.05 figure as an appropriate quid pro quo. Pressure to adopt it would spark a row.

The party was forced to water down the commitment during the election propaganda war over the effect on jobs. The new legislation would stick to a figure of pounds 3.40 rather than provide for increases in line with earnings as originally intended, it was finally decided.

Mr Prescott said yesterday that a national minimum could not possibly cost the pounds 50bn a year that had been claimed by the Confederation of British Industry to bring an estimated 4 million people up to a minimum level.

He added: 'The Government said it would cost 2 million jobs. I see the CBI can't bring themselves to endorse that. They suggest 100,000. I'd like to see the evidence that it would cost jobs.'

In the past he has accepted that the minimum wage would cause some shake-out of jobs, but yesterday he said on the Walden programme on ITV that he believed some employers would opt for a small increase in prices rather than put people out of work.