Minimum wage to rise from £8.91 an hour to £9.50

But increase could be eaten up by national insurance hike and universal credit cut

Jon Stone
Policy Correspondent
Monday 25 October 2021 13:10
'Our recovery comes with a cost', Chancellor Rishi Sunak tells Tory Party conference

The national minimum wage for adults is to go up to £9.50 an hour in this week’s budget, the Treasury has confirmed.

The rate, also known as the national living wage, is currently at £8.91 – meaning the rise represents a 6.6 per cent increase.

The national living wage applies to workers aged 23 and over, with a lower rate in place for younger workers. Those aged 21 to 22 will see an 83p increase, up to £9.18.

But the increase for 16 and 17-year-olds will be just 19p, while the rate for 18 to 20-year-olds will be 27p more. The minimum wage for apprentices will go up 51p to £4.81.

The government said the increases were “broadly consistent” with previous rises, which it said had impacted between 1.5 and 2.5 million workers.

But the wage floor rise will come at the same time as the government increases national insurance contributions for low earners and cuts universal credit payments, meaning many workers will see little of the increase.

Announcing the increase, chancellor Rishi Sunak said: “This is a government that is on the side of working people. This wage boost ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this parliament.”

The government has pledged to raise the adult rate to two-thirds of median earnings by the end of the parliament – around £10.40 on current estimates.

Labour says it wants a minimum wage of at least £10. Keir Starmer’s leadership has resisted calls from his own members and unions to commit to gradually raising the rate to £15 an hour.

Liberal Democrat Treasury spokesperson Christine Jardine said the wage rise would be offset by the national insurance rise and universal credit cut.

“Ahead of the budget, people will be looking to the chancellor's announcement of a pay rise to help them. Instead they will be bitterly disappointed to see almost half of any rise snatched away by the Treasury before it even reaches their bank accounts,” she said.

“The Conservatives carelessly breaking their promise not to increase national insurance is hitting working people hard on their paychecks, snatching back money from people who have worked hard for their salary.

“The chancellor seems to be taking working families for granted. Instead of a fair deal, families across the country are facing a budget nightmare with a soaring rise to the cost of living paired with tax hikes left, right and centre.”

Bridget Phillipson, Labour’s shadow chief secretary to the treasury, said: “This underwhelming offer works out at £1,000 a year less than Labour’s existing plans for a minimum wage of at least £10 per hour for people working full-time. Much of it will be swallowed up by the government’s tax rises, universal credit cuts and failure to get a grip on energy bills.

“It’s clear that Labour is the only party serious about improving the prospects of working people.”

TUC general secretary Frances O’Grady said the government needed to "set its sights higher" than the announced policy.

"We need a £10 minimum wage now, and we need ministers to cancel the cut to universal credit," she said.

"This increase won’t come into effect until next spring by which time many household budgets will have been hammered by rising bills and the universal credit cut.”

Mr Sunak will deliver his autumn spending statement on Wednesday, where he will chart the economy’s course over the next six months and beyond.

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