The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
I beg to move,
That the draft National Minimum Wage (Amendment) Regulations 2025, which were laid before this House on 4 February, be approved.
The purpose of the regulations is to increase the national living wage rate and the national minimum wage rates on 1 April 2025. The regulations were laid in draft before Parliament on 4 February and approved by the other place on 17 March.
The Government are committed to making work pay. The plan to make work pay will tackle the low pay, poor working conditions and poor job security that have been holding our economy back for far too long. Earlier this month, the House approved passage of the landmark Employment Rights Bill, which will benefit more than 10 million workers in every corner of the country and deliver the biggest upgrade to workers’ rights in a generation. Some aspects of the Bill and accompanying legislation and guidance will not come into effect for some time as the Government continue to engage with stakeholders, businesses and trade unions on its implementation. When we took office last year, however, we committed to taking immediate action where we could, and on the minimum wage we have done so.
One of the proudest achievements of the last Labour Government was the creation of the national minimum wage, which eliminated the extreme low pay that was blighting our country. We are proud to say that one of the first actions taken by this Labour Government within a month of last year’s general election was to overhaul the remit to the Low Pay Commission. For the first time, the remit now explicitly includes the cost of living as one of the key factors to be considered when making national living wage recommendations. We have begun the journey towards creating a genuine living wage, as well as extending that to all workers aged over 18 by moving towards a single adult rate.
Before turning to the precise details of the regulations, I want to extend my thanks to the Low Pay Commission. The commissioners and their officials have worked diligently and efficiently, particularly after the updates to the remit were made, and we were pleased to accept all their recommendations. That is testament to their social partnership model and expert analysis and engagement, which ensure that the Government can deliver on their ambitious agenda, but without adversely impacting on businesses, the labour market or the wider economy.
Turning to the detail of the regulations, which, after parliamentary approval, will take effect on 1 April, the national living wage rate, which currently applies to workers aged 21 and over, will increase from £11.44 to £12.21. That represents a rise of 77p or 6.7%, which is well above all measures and projections of inflation, therefore delivering real terms pay increases to an estimated 3 million workers.
We will also be delivering large increases to the other national minimum wage rates. The 18 to 20-year-old rate will increase by £1.40 from £8.60 an hour to £10 an hour. That is a record 16.3% increase for that age group. It means that a full-time worker on the 18-to-20 minimum wage rate will see their gross annual earnings increased by around £2,500 a year—a well-earned pay rise and a significant step towards parity with the headline rate. The national minimum wage rate for 18 to 20-year-olds will be equal to 82% of the national living wage in 2025, compared with 75% in 2024.
The minimum wage rate for workers above school leaving age but under 18 years old will increase from £6.40 to £7.55 an hour—a large rise of £1.15 or 18%. The same rise will apply to the apprenticeship minimum wage rate, which applies to apprentices aged under 19 or in the first year of their apprenticeship. Finally, the accommodation offset rate, which is the maximum daily amount that an employer can charge a worker for accommodation without it affecting their pay for minimum wage purposes, will increase by 6.7%, or 67p, to £10.66.
I draw Members’ attention to the comprehensive impact assessment, which the Department published alongside this legislation. As they may have noted, the impact assessment, which includes an equalities assessment, has received a green fit-for-purpose rating from the independent Regulatory Policy Committee. As I have touched on, we estimate that the increases to the minimum wage rates will deliver a direct pay increase for over 3 million workers, while an additional 4 million could benefit from the positive spill-over effects. The minimum wage has greatly reduced pay inequality in the UK, with the share of low-paid jobs in hourly terms estimated at 3.4% in 2024. That is a record low, and down from 21.9% in 1999.
But the work does not stop there, as we continue to build towards a genuine living wage and the extension of eligibility to workers aged between 18 and 20 by ending the discriminatory age bands. To that end, we will publish in due course a fresh remit to the Low Pay Commission, asking it to recommend minimum wage rates to apply from next April. As part of this, the Low Pay Commission will consult about the appropriate trajectory towards the single adult rate as we ensure that this is delivered without adverse impacts on youth employment as well as participation in training and education. Like the previous Labour Government, with their creation of the minimum wage over a quarter of a century ago, this Labour Government will be proud to leave a profound legacy for workers’ rights, because we are making work pay and we are proud to make more progress on this by supporting this instrument today. I commend the regulations to the House.
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
With the leave of the House, Madam Deputy Speaker, I will begin by addressing the many contributions that were made to what I think was, overall, a very positive debate. I welcome the support of the Liberal Democrats, and also welcome the hon. Member for Chippenham (Sarah Gibson) to the Chamber: it is good to see her back in her place. She made some important points about the social care sector. We know that the abuse of travel time reimbursement is a huge issue. The Low Pay Commission is keen to look into it, and I am sure that once the fair work agency is up and running, it will focus on it as well.
The hon. Lady’s colleague, the hon. Member for Honiton and Sidmouth (Richard Foord), also talked about the importance of that sector. Our impact assessment has established that about one in five social care workers will receive a direct pay rise as a result of the increases announced today. As would be expected, before making its recommendations the Low Commission has consulted widely with, among others, representatives of social care workers. We believe that they have been undervalued for far too long, which is why we are introducing the first ever fair pay agreement in the adult social care sector so that care professionals are recognised and rewarded for the important work that they do. While I appreciate the hon. Member’s wish for a separate rate for care workers, we think we are taking the right measures to recognise and value them. The operation of different rates brings a range of challenges relating to enforcement and to clarity for employers, which we think is important.
There were, I have to say, a number of excellent speeches from the Labour Benches. My hon. Friend the Member for Earley and Woodley (Yuan Yang) made the positive economic case and referred to the wealth of evidence in support of increases in the minimum wage. On the Labour Benches, we passionately believe that increased protections at work and increases in the minimum wage are good not just for individuals but for the wider economy. She mentioned the many young people in her constituency who will benefit from the moves to parity for the 18 to 20 age band with the adult rate.
My hon. Friend the Member for Ealing Southall (Deirdre Costigan) has great knowledge and experience in this area. She said that this is the beginning of the journey. That is right. We recognise that it will take time to achieve our ambitions for the Low Pay Commission for the people in this country, but it is a journey we are determined to finish.
My hon. Friend the Member for Blaydon and Consett (Liz Twist) took us back into the depths of history. I must declare that I am one of those who can remember what it was like before the minimum wage. When I tell my children how much I used to earn in my first jobs, they cannot believe it. But it was true: that is what the world was like before the minimum wage. She also reminded us of the doom-laden warnings we got from the Conservative Opposition at the time. We heard a small echo of that tonight, but I think history has proved that those warnings were wrong.
My hon. Friend the Member for Doncaster Central (Sally Jameson) spoke passionately about the issues with in-work poverty, which is one of the key things that we must change in this country. For too long, people have not had work pay for them. Earnings have not kept up with the cost of living and that is one of the reasons why the Low Pay Commission’s remit has changed.
Mark Sewards (Leeds South West and Morley) (Lab)
I am very grateful to the Minister for giving way. The Low Pay Commission previously said that about 300,000 people are not being paid the minimum wage despite being on it—they are being underpaid. Will he update the House on the Government’s progress to ensure that all people on the minimum wage are paid the minimum wage?
Justin Madders
My hon. Friend makes a very important point that those rights are only as good as the ability of the Government to enforce them. As we know, His Majesty’s Revenue and Customs has a very effective system to deliver on the minimum wage and we will shortly be releasing our latest round of naming and shaming of those employers who have not done the right thing. We hope that the fair work agency, when it is established, will be even more effective at delivering fairness across the country and ensuring that everyone gets the minimum wage they deserve. We know there are particular sectors where there are acute challenges.
I turn to the points made by the Scottish National party spokesperson, the hon. Member for Dundee Central (Chris Law), about the bills and costs of an 18-year-old being the same as those for an adult. That is something I absolutely understand. It is why we changed the Low Pay Commission’s remit to ensure that we eventually get parity for that age group on the full adult rate. It is also why we have changed the remit of the Low Pay Commission to move towards a real living wage for all adults. We understand that that is such an important thing for us to deliver on. He may feel that we are not quite there yet, and we must ensure we take evidence as we go along from businesses on how it impacts on particular sectors and particular parts of society, but 18 to 20-year-olds are getting a £2,500 pay rise this year as a result of the regulations. That is something I am sure he will welcome.
My hon. Friend the Member for Newton Aycliffe and Spennymoor (Alan Strickland) raised very well the regional impacts of the wage increase in his part of the world. It is the case that the regulations will mean 140,000 workers in the north-east, or 14.5% of the total workforce in that region, will benefit from the increase. We should all be absolutely delighted about that.
My hon. Friend the Member for Kettering (Rosie Wrighting) also raised in-work poverty. That is why the remit is being changed. We want to ensure that in-work poverty is consigned to the history books.
My hon. Friend the Member for Hendon (David Pinto-Duschinsky) set out in stark terms the figures associated with the regulations. I may mention them again at some point before I finish. They are the bold numbers that will go directly into people’s pockets and that we can show as tangible proof of a Labour Government delivering for working people.
My hon. Friend also raised the matter of the empty Opposition Benches. I do not want to equate that with meaning that the Conservatives do not support these increases, as I think the shadow Minister, the hon. Member for West Worcestershire (Dame Harriett Baldwin), said that they did. I do put her on notice, though, that her party leader has been less than full in her support for the minimum wage, so I hope that the shadow Minister’s support for today’s measures has not damaged her career prospects. It may well be that there is another leader in a few months anyway, and that things will be looking up. We do hope that the Conservatives continue to support the minimum wage as we move forward and that they do not change tack now that they have entered opposition.
However, the shadow Minister did raise a number of important questions, which I will now try to address. She raised the impact on public sector workers. Of course, pay for most frontline workers is set through pay review body processes, which do take account of national living wage increases as part of their processes. We do not believe that many public sector workers will be directly affected by this change, but it is something the Departments will take into account when they set their budgets.
The shadow Minister also asked about the cumulative impact of the changes. The impact assessment does show that this year’s upratings will represent a 0.14% increase in the UK-wide wage bill, which I think is incredibly good value for what we are delivering into people’s pockets. Of course, the total impact of the Employment Rights Bill is, at most, 0.4% of the total wage bill.
The hon. Lady raised questions about burdens on SMEs. The Low Pay Commission does take into account the impact on business as part of its operations. It looks at the competitiveness of individual businesses, the labour market and the wider economy, drawing on extensive labour market pay analysis and stakeholder evidence when recommending rates, and we would expect the commission to do exactly the same next year. Small businesses have, of course, had support from this Government. We have increased the employment allowance from £5,000 to £10,500, meaning that 865,000 employers will pay no national insurance contributions at all, and more than half of employers will gain or see no change from this measure. We have also extended business rates relief for the retail, hospitality and leisure sectors.
The hon. Lady raised concerns about the impact of the measures on young people. The youth guarantee will ensure that every young person has access to education or training to help them to find a job, and we are transforming the apprenticeship levy to ensure that young people get the opportunities they deserve.
The shadow Minister raised concerns about the overall labour market. I would just make the point that payroll employment is actually higher now than it was this time last year, and the latest labour force survey last week showed record numbers of people in work. Perhaps the negative headlines that we have been seeing are not actually the reality of the situation. I like to deal with facts, Madam Deputy Speaker, and the facts are that these regulations will put more money into the pockets of workers around the country—around 200,000 workers in Scotland, 160,000 workers in Northern Ireland and 150,000 workers in Wales. This will make a real difference to people: £1,400 for a full-time worker and £2,500 for someone on the 18-to-20 rate.
This is truly a worthwhile exercise, and we thank the Low Pay Commission for its work, as well as HMRC, which enforces on behalf of the Department, and ACAS, which offers impartial advice and expertise to ensure that workplace disputes can be resolved and workers’ rights can be upheld. This is a meaningful change being delivered by this Government that delivers a powerful message: this Government, and indeed this Parliament, are committed to making work pay. These real-terms increases to the minimum wage will end insecurity at work. I commend these regulations to the House.
Question put and agreed to.
Resolved,
That the draft National Minimum Wage (Amendment) Regulations 2025, which were laid before the House on 4 February, be approved.