The national minimum wage will rise from £4.20 to £4.80 an hour by 2005, the Government will announce tomorrow, on recommendation of the Low Pay Commission.
Tony Blair is expected to make a statement during Prime Minister's Question Time. But it is likely to bring accusations that ministers are trying to buy off criticism over its Iraq strategy with an announcement that will please union leaders and left-wing MPs.
The move was agreed in a meeting between the Prime Minister, Chancellor Gordon Brown and Patricia Hewitt, the Secretary of State for Trade and Industry.
Their decision to authorise a 14.3 per cent increase in two moves – bringing the wage within 20p of the TUC's demand for an hourly rate of £5 – follows the commission's conclusion that the wage had not affected the jobs market. But the big increase will alarm the Confederation of British Industry which is already warning the Government that business is suffering from a double blow of bureaucracy and tax rises.
A Whitehall source said the Government had initially pitched the wage at a very low level in order to ensure it did not cost jobs. "Now that those fears have not materialised we can afford to raise it substantially," he said last night.
A survey into the impact of the minimum wage by the London School of Economics concluded that its introduction had only a "minimal" impact on the long-term employment growth. The wage – a key Labour manifesto commitment in 1997 – was introduced four years ago at an hourly rate of £3.60, a level that supporters attacked as too low. It was slowly raised in 10p and 20p increments, taking it to its present level of £4.20.
Before its introduction, it was strongly attacked by business and industry and the Conservatives, who insisted it would create red tape and cost at least a million jobs. But the Tories, under the then shadow Chancellor Michael Portillo, ditched its pledge to repeal the measure three years ago.
The move will be complemented by a pledge by Mr Brown to make the drive for full employment a centrepiece of his Budget on 9 April. The Chancellor foreshadowed the Government's minimum wage plans when confronted by uneasy Labour delegates at the party's spring conference in Glasgow last month.
He also insisted the party should also be proud of its achievements on equal pay on giving new rights to women and part-time workers.
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