Government will refuse business demands to freeze minimum wage

Ministers will reject calls from business leaders for a freeze in the national minimum wage. However, only a modest rise in the hourly rate – currently £5.73 – is expected in 2009, reflecting falling inflation and the risk that a big increase might add to the toll of job cuts. The call for a freeze came from the British Chambers of Commerce, which said it would help to limit the number of jobs being lost in the recession. David Frost, its director general, warned: "A rise in the minimum wage would not help firms hold on to staff and would simply add to unemployment."

He added: "We're not opposed to the minimum wage going up when employment is high and the economy is doing well, but when jobs are being lost daily and a recession is in full swing, it makes no sense to increase it. Most businesses are prioritising survival at the moment."

In contrast, the Trades Union Congress is calling for the minimum wage to be raised by 6.4 per cent to £6.10 an hour next October and to £6.50 an hour a year later. Brendan Barber, the TUC general secretary, argued: "A low minimum wage would not only leave low paid workers – predominantly women – in poverty unnecessarily but would also leave them with less money to spend. This would leave consumer spending around £250m below where it should be."

Ministers said they did not want to second-guess the Low Pay Commission, the independent body which makes a recommendation each year on the level of the minimum wage.

Pat McFadden, the minister for Employment Relations, told The Independent: "The system whereby the Low Pay Commission recommends the rate has worked well for the last 10 years. The commission takes account of all the economic evidence and I am sure it will do so this year too."

Yesterday the Tories seized on an opinion poll showing that 44 per cent of mortgage holders are worried about being able to meet their mortgage payments over the next year. The YouGov survey also found that 47 per cent of local authority and housing association tenants and 41 per cent of private tenants are worried about being able to afford their rent.

Grant Shapps, the Tory spokesman on housing, said: "Householders up and down the country and in every kind of housing are now concerned, as never before, about their ability to maintain a roof over their heads over the next 12 months."

Labour hit back by challenging Tory frontbenchers to say whether they supported the Government's plans to combat the recession by speeding up projects such as housebuilding, improving schools and GPs' surgeries and flood defences. Ministers warned they would be abandoned under David Cameron's policy to spend less than Labour.

In his New Year message published today, the Liberal Democrat leader Nick Clegg said his party would offer practical help to families who are struggling in the recession through big, permanent and fair tax cuts and a huge "green investment programme".

Accusing Labour and the Tories of being "parties of the past, prisoners of their own special interests", Mr Clegg said: "I know we can fix this economic mess Britain's in if only we do things differently for once, instead of making the same old mistakes the same old parties have made for generations. Both Labour and the Conservatives keep doing the same thing over and over again and expect something different to happen."