Nearly 3 million low-paid workers will receive a pay increase of almost 10% next spring after the chancellor announced an increase in the national living wage to £11.44 an hour.
Jeremy Hunt said the earnings of full-time workers would rise by £1,800 a year as a result of a move that the Low Pay Commission (LPC) said met the 2019 Conservative pledge to end poverty pay in the UK.
The chancellor accepted in full the recommendation of the LPC – the body set up to advise ministers on the level of the national legal minimum wage – by announcing the largest ever cash increase in the low pay floor.
The increase from £10.42 to £11.44 comes against a backdrop of a cost of living crisis in which inflation peaked at 11.1% – the highest in 40 years.
Eligibility for the national living wage (NLW) will also be extended by reducing the age threshold from 23 to 21.
According to the Treasury, a 21-year-old will get a 12.4% increase, from £10.18 this year to £11.44 next year, worth almost £2,300 a year for a full-time worker.
National minimum wage rates for younger workers will also increase, with those aged between 18 and 20 getting a wage boost to £8.60 an hour – a £1.11 hourly pay rise.
The chancellor said: “Next April all full-time workers on the national living wwage will get a pay rise of over £1,800 a year. That will end low pay in this country, delivering on our manifesto promise.
“The national living wage has helped halve the number of people on low pay since 2010, making sure work always pays.”
The NLW was introduced in 2016 and currently sets the minimum hourly pay for those over 23.
The Treasury said the new rate will now apply to 21- and 22-year-olds, and meant the government had met its target of lifting the NLW to two-thirds of median earnings by 2024. The Department for Business and Trade estimates 2.7 million workers will directly benefit from the increase.
Bryan Sanderson, the chair of the Low Pay Commission, said: “The national living wage has delivered an improved standard of living to thousands of people who care for our children and elderly, work in farms and shops and at many other essential jobs.
“These efforts over the lifetime of the NLW mean over £9,000 per annum more to a full-time worker without any increase in unemployment.
“This hasn’t been easy for employers, with the economy facing a range of unprecedented challenges in recent years.
“The high degree of political and economic uncertainty has made assessing and forecasting the performance of the economy, and therefore our task, very difficult. It is a tribute to my fellow commissioners that we have continued to achieve consensus.”
TUC general secretary Paul Nowak welcomed the increase, saying: “Today’s much-needed rise to the minimum wage shows the enduring impact of having representatives of business and unions on the Low Pay Commission, which recommends the rate.
“This ensures that worker and employer interests as well as the wider economy and labour market are considered. It is a template for better policymaking.”
However, Nowak called for an uplift to £15 “as soon as possible”, saying most pay packets had fallen in real terms over the last decade by failing to keep up with inflation.