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Chancellor hints at above-inflation minimum wage rise

The national minimum wage (NMW) could rise above the rate of inflation by 2015, the chancellor has suggested.

George Osborne said the current rate of £6.31 an hour for workers older than 21 could increase to £7.00 during a BBC interview.

The chancellor made the comment on the same day as the Government submitted its final analysis on employment and the economy to the independent Low Pay Commission, which makes recommendations on NMW.

Osborne said signs of economic recovery meant employers could begin to “enjoy the fruits of all that hard work”.

“Because we’re fixing the economy, because we’re working through our plan, I believe that Britain can afford an above-inflation increase in the minimum wage, so we restore its real value for people, and we make sure we have a recovery for all and that work always pays,” he said.

“Of course we’ve got to make the exact calculation of what the rate should be – that’s for the Low Pay Commission, created by a Labour Government, supported by this Government, to make the independent decision on the number itself. But when I look at the British economy, I see the British economy expanding, I see jobs being created, I see the prospect of future jobs being created as well, and I think Britain can afford a higher minimum wage.

“I think we’ve worked hard to get to this point, and we can start to enjoy the fruits of all that hard work."

Industry feedback

Confederation of British Industry (CBI) director general John Cridland warned that such an increase in the NMW could impact on job creation and disadvantage smaller businesses.

“Recommending the rate of the national minimum wage must be a matter for the Low Pay Commission, as the chancellor recognises,” said Cridland.

“An unaffordable rise would end up costing jobs and hit smaller businesses in particular. Any increase in wages must reflect improved productivity.”

But TUC general secretary Frances O’Grady said the move would help many people.

“We welcome George Osborne’s acceptance of the TUC’s case for an above inflation rise in the minimum wage,” she said.

“But while this would help many, the Chancellor should be more ambitious about achieving decent pay rises across the whole of the UK workforce.

“The Government should work with unions and employers to increase the spread of the living wage, lift the cap on public sector pay, and recognise that the wages of millions of workers across the economy have been falling in real terms and now need a decent increase.”

The Low Pay Commission is due to report back with NMW rate recommendations for 2014 and its additional assessment in the spring.