Minimum wage to increase to £6.31

Business secretary Vince Cable has announced that the  national minimum wage is to rise by 12p an hour to £6.31 for adults and by 5p to £5.03 for 18-to-20-year-olds.

The increases, which take place from October, are below current inflation levels, but Cable said that the government was working with recommendations made by the Low Pay Commission.

He said: "The independent Low Pay Commission plays a crucial role in advising the government when setting the national minimum wage every year. It balances wages of low paid workers against employment prospects if the rate was set too high.

"We are accepting its recommendations for the adult and youth rate increases, which I am confident strikes this balance."

Despite a recommendation that pay for apprentices be frozen, rates will actually rise by 3p to £2.68 an hour.

Cable added: "Apprenticeships are at the heart of our goal to support a stronger economy, and so it is important to continue to make them attractive to young people. Therefore, I am not taking forward the LPC's recommendation to freeze the apprenticeship rate due to non-compliance, but instead am raising it in line with the youth rates."

Katja Hall, chief policy director of the CBI, said: "Pay restraint has been crucial in creating jobs in this tough economic climate. The LPC has struck a careful balance in setting the rates given sluggish growth, particularly in recommending a cautious approach to youth pay. Given average earnings this year are already lower than expected, we must make sure the minimum wage doesn’t limit jobs in key sectors, by outstripping pay across the rest of the workforce."

Ben Willmott, head of public policy at the Chartered Institute of Personnel and Development (CIPD), said: “The announcement to increase the minimum wage for adults by 1.9% and to increase the youth and apprenticeship rate by 1% is a welcome one. We also welcome the announcement that there will be a stronger set of measures put in place to enforce the minimum wage. "Many employers already pay more than the minimum wage, particularly for apprenticeships, but it is good to see that more will be done to ensure that the small minority of rogue businesses, who are exploiting their workers by not acting within the law, will be brought to justice.”