Government agrees to significant increase in national minimum wage

In March 2001, the UK government announced an 11% increase in the main adult rate of the national minimum wage, to GBP 4.10 per hour. The new rate will take effect from October.

On 5 March 2001, the trade and industry secretary, Stephen Byers, announced that the government had accepted a recommendation by the independent Low Pay Commission (LPC) to increase the adult rate of the national minimum wage (NMW) from GBP 3.70 per hour to GBP 4.10 on 1 October 2001. The government has also agreed "in principle" to a further recommended increase in the NMW to GBP 4.20 in October 2002, "subject to the economic conditions prevailing at the time".

The increase to GBP 4.10 an hour represents a pay rise of almost 11% for around 1.3 million workers. Mr Byers said that this was "a significant increase which is both affordable and will make a real difference to those that receive it".

The government's move follows the early submission to ministers of the first part of the LPC's third report, which deals solely with the increase in the main adult rate of the NMW, in order to maximise the length of notice to employers to enable them to plan for the change. In drawing up its recommendations, which were agreed unanimously by its "tripartite" membership, the LPC heard evidence from, among others, the government, the Confederation of British Industry (CBI) and the Trades Union Congress (TUC) (UK0101108N and UK0102112N).

John Monks, general secretary of the TUC, welcomed the government's decision to implement the LPC's report in full. He said in a statement: "This is clearly another significant step towards a decent minimum wage. In the longer term we will continue to press for the adult rate to be extended to over 18 year olds and for the minimum wage to do even more to secure justice for the low paid."

The CBI said that it accepted the government's decision, but its director-general, Digby Jones, warned that the increase would not be easy for some small businesses to absorb: "The government has gone as far as it can without moving to a point where the damage outweighs the benefits."

The LPC will make further recommendations in May 2001. These will address the issue of the age at which younger workers should become eligible for the main adult rate of the NMW (UK0007182N).

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