Brown to raise minimum wage above £5 barrier

Gordon Brown will announce that the minimum wage is to rise above the symbolic £5 mark for the first time in a Budget expected to launch Labour's election campaign.

Gordon Brown will announce that the minimum wage is to rise above the symbolic £5 mark for the first time in a Budget expected to launch Labour's election campaign.

The Chancellor has been given the all clear to raise the minimum hourly rate for adult workers from £4.85 to £5.05 in October, and to £5.30 the following year.

The increases, which will delight unions and Labour backbenchers, is recommended in a leaked draft report of the Low Pay Commission.

The commission, chaired by Adair Turner, a former chairman of the CBI, has overruled objections from industry that increased rates are hurting business. A survey of 2,000 firms, carried out for the Forum of Private Business last week, found 40 per cent said the last rate increase was bad for business.

Unions, on the other hand, have argued for a rate of over £5 an hour since the minimum wage was introduced at £3.60 in April 1999, increasing the earnings of an estimated 1.9 million workers.

However, the latest rise will be balanced by a tightening of Britain's benefits payments as ministers promote a "work pays" message.

Alan Johnson, Secretary of State for Work and Pensions, will announce this week that the incapacity benefit is to be capped at a flat rate instead of increasing for the first year as part of his department's five-year plan.