Chancellor surprises Vince Cable with call for above-inflation increase to minimum wage

George Osborne pre-empts Ed Miliband speech on economy, but  Lib Dems say Treasury ignored repeated calls for increase

George Osborne has attempted to ambush Labour and his Liberal Democrat Coalition partners by signalling that he wants the national minimum wage to increase to £7 an hour.

In a surprising intervention Mr Osborne claimed that a sharp fall in unemployment towards the seven per cent level was proof that he was “fixing the economy” and that a real increase in the minimum wage from the current rate of £6.31 would not harm job creation.

But Liberal Democrat sources said they had been kept in the dark about Mr Osborne’s announcement. They claimed that the Treasury had consistently blocked attempts by the Business Secretary Vince Cable to support an above-inflation rise in the minimum wage to the Low Pay Commission.

The Commission, which includes representatives of business, unions and academia, is due to make its recommendations on the level of the minimum wage and its potential impact on jobs in February. Any upgrade would be expected to take effect in the autumn.

“We were calling for this in September but the Chancellor and his office were dragging their feet,” said a senior Liberal Democrat source.

“In fact they blocked us from asking the Commission to look at restoring the fall in the minimum wage in real terms altogether. While we welcome them round to our point of view it is rather surprising given what they’ve been saying in the past on this,” said the source.

But Mr Osborne told the BBC he now believed Britain could afford an above-inflation increase in the minimum to “restore its real value for people” and “make sure that work always pays. “The exact figure has to be set by the Low Pay Commission, which talks to business, talks to other bodies in our economy,” he said.

The Chancellor continued: “But, if for example, the minimum wage had kept price with inflation, it would be £7 by 2015/16. It’s £6.31 at the moment, so, that’s an increase. I think we can see an above-inflation increase in the minimum wage and do it in a way that actually supports our economy precisely because the economy is recovering and many, many jobs are being created.”

In response to Mr Osborne’s announcement, Mr Cable said: “I’m delighted to have the Chancellor’s endorsement of the position I set out back in September. It’s a useful addition because we are, I think, now essentially saying the same thing.” 

Labour suggested Mr Osborne’s announcement was an attempt to try and overshadow a speech on the economy by Ed Miliband on Friday. Sources said it was yet more evidence that the Chancellor was running the economy on the basis of tactical political advantage rather than the national interest.

Mr Osborne’s move was subject to criticism from by industry and employer representatives, however, who warned it could damage jobs.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Marketing Executive / Marketing Research Executive

£30000 - £35000 per annum: Recruitment Genius: The Company is the UK's leading...

Recruitment Genius: Operations Manager / Section Manager - Airport Security

£40000 per annum: Recruitment Genius: This is a critical role within the secur...

Recruitment Genius: Sales Executive - OTE £45-55k

£20000 - £55000 per annum: Recruitment Genius: The company is an established, ...

Recruitment Genius: E-Commerce Manager - Fashion Accessories

£25000 - £30000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn