Labour pledges minimum wage rise to £5 an hour

Patrick Wintour and Nicholas Watt
Thursday March 11, 2004
The Guardian

Labour is planning to go into the next general election with a commitment to raise the minimum wage to at least £5 an hour - a key demand of leading trade unions.

In a move which will delight the Labour grassroots on the eve of the party's spring conference this weekend, Tony Blair confirmed yesterday the minimum wage would rise by 8% to £4.85 an hour in October.

Government sources indicated this would clear the way for an increase to at least £5 on the eve of the general election, which is expected in the early summer of next year.

The prime minister, whose relations with the unions have become strained over reforms to public services, was praised yesterday when he indicated a youth minimum wage will also be set for 16- and 17-year-olds.

"I hope next week we will be able to say more about the national minimum wage and its impact on young people, which will no doubt find support at least on this side of the house," Mr Blair said. This means that 1.6 million people would benefit.

In a swipe at the Tories, who initially opposed the minimum wage, he added: "Some people said unemployment would go up as a result of the minimum wage. Actually we have one-and-three-quarter million more jobs in the British economy as well."

The announcements will be made on Monday by Patricia Hewitt, the trade and industry secretary, when she tells MPs she has accepted key recommendations from the Low Pay Commission.

In February last year the commission recommended the minimum wage for over-21s should rise this October by 35p an hour to £4.85.

This marks the second year in a row the minimum wage has seen a percentage rise above the average for British workers. The adult rate was first set at £3.60 an hour in 1998.

The commission's other recommendations were to:

· Increase the minimum wage for 18- to 21-year-olds by 30p to £4.10.

· Set a youth minimum wage for 16- and 17-year-olds, expected to be about £3 an hour.

The Department of Trade and Industry dropped its opposition to the rise when it told the commission: "The government introduced the national minimum wage to end exploitation through low wages and as part of its policies to make work pay. It would be wrong to allow 16- and 17-year-olds in employment, the youngest workers, to be exploited through low wages."

Brendan Barber, the TUC general secretary, warmly welcomed the announcements. "This year's rise is welcome particularly for workers at the bottom of the salary scale, who will be feeling the benefits in their purses and wallets," he said.

"Unions will be delighted that their campaigning has paid off and that young people are to benefit from a minimum wage at last."

Mr Blair was given a taste of how important Labour MPs regard the minimum wage by Liz Blackman, the MP for Erewash, who told him in the Commons yesterday: "Many young people in Erewash have no earnings potential and are open to exploitation by some unscrupulous bosses who pay them a pitiful wage for often quite responsible jobs."

Raising the minimum wage - and extending the measure to 16- and 17-year-olds - will risk a row with business chiefs.

The British Chamber of Commerce warned this year businesses were worried about "having their hands further tied by red tape" when it was disclosed the government had dropped its opposition to the youth minimum wage.

The Low Pay Commission, which includes business leaders, qualified its call for a rise by calling for a consideration of "whether the recommendation remains appropriate in the light of economic circumstances".

Since its recommendation in February last year - at a time of global uncertainty about the economy ahead of the Iraq war - key measures have picked up. Employment has continued to rise, with industries crying out for workers from the EU accession countries, which has made it difficult to argue that the minimum wage is a crippling burden to employers.