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Raise minimum wage to £6.50, says Low Pay Commission

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Vince Cable says recommendation is first real increase above inflation since 2008

The independent Low Pay Commission (LPC) has recommended an increase of 3 per cent in the national minimum wage, Vince Cable revealed to a legislative committee today (Wednesday).

If the government decides to accept the recommendation the NMW will rise to £6.50 in October “which will be the first real increase ahead of inflation since 2008, the biggest cash increase increase since 2008”, the business secretary told MPs.

Inflation measured using the consumer price index (CPI) is currently much lower at 1.9 per cent.

However, the recommended rise to £6.50 is still lower than the £7 hourly figure Chancellor George Osborne called for in January this year. At the time he said the “economy can now afford” to raise the NMW to as much as £7 an hour from the current rate of £6.31.

Cable said the government would now consider the commission’s recommendations, however, ministers usually accept the recommendation.

Responding to the recommendation, Dr Adam Marshall, executive director of policy at the British Chambers of Commerce, said: “The Low Pay Commission has to tread a careful balance, recommending changes to the minimum wage that help low-paid employees without undermining employers’ ability to generate jobs and growth.

“As the economy continues to improve, businesses agree that the minimum wage must rise. In recent polling, 60 per cent of chamber members supported an increase in line with current inflation, and fourteen percent favoured an above-inflation increase. After years of pay restraint, companies now feel somewhat more confident when it comes to the question of pay.

“So while the Low Pay Commission’s recommendation appears to be slightly higher than many employers had hoped, it represents a reasonable compromise.  

He urged ministers to work hand-in-hand with business to raise productivity and skills in the workplace, which he highlighted as "the keys to higher wages for all in the future”.

The CBI’s chief policy director Katja Hall commented: “A 3 per cent rise recognises the improvements we’re currently seeing in the economy.

“The LPC has made a sensible judgement on the increase, and not recommended an unaffordable rise that would put jobs at risk.”

 


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