The national living wage could rise by as much as 65p an hour next year, an advisory body has estimated, as the terms of its annual review of wage rates were published.
Ministers are determined to deliver “a genuine living wage”, according to the Low Pay Commission’s (LPC) latest remit for increasing the so-called national living wage – the UK minimum wage for workers aged 21 and older.
At the moment, the national living wage is £12.21 an hour.
The LPC estimates that this will need to increase to £12.71 in 2026 to not fall below two-thirds of median earnings: the threshold which the Government expects it to stay above.
But the LPC acknowledged the national living wage could rise to as much as £12.86 an hour, or as little as £12.55 an hour, depending on changing economic conditions.
Founded in 1997, the advisory body provides recommendations to ministers each autumn regarding how it believes the minimum wage should be changed.
The Government ultimately sets minimum wage rates for the following April after this advice.
A letter from Deputy Prime Minister Angela Rayner and Business Secretary Jonathan Reynolds said the committee must take into account the cost of living as it reviews the national living wage.
The two senior ministers insisted the Government was “committed to ensuring that the minimum wage is a genuine living wage”.
They added: “We continue to recognise that our ambition should be backed by evidence, and that the minimum wage rate should be consistent with delivering inclusive growth for working people and businesses alike.
“We are therefore asking the LPC to recommend a national living wage rate that is at least two-thirds of UK median earnings for workers aged 21 and over, to apply from next April, which takes into account the cost of living, effects on employment and developments in the wider economy.”
Elsewhere, the Government is pushing forward with plans to end “discriminatory” age banding for the minimum wage, and has extended the LPC’s remit to examine this.
It said the LPC will consult with employers, trade unions and workers on narrowing the gap between the national living wage and the minimum wage rate for 18 to 20-year-olds, which is currently £10.
There is also a minimum wage for those aged under 18, and apprentices, of £7.55.
The LPC will report back in October with advice to the Government on how much the minimum wage should rise by in 2026.
The Resolution Foundation, a think tank which works to improve living standards, suggested the Government was using “ambitious language” on increasing the minimum wage, but in reality was adopting a cautious approach.
Nye Cominetti, principal economist at the think tank, said: “Despite the Government’s ambitious language around ‘delivering a genuine living wage’, the new remit for the Low Pay Commission represents a steady-as-she-goes approach to the adult rate, after faster increases in the years preceding 2024.
“This caution is warranted given worrying labour market data, which is thanks in part to the Government’s increase in employer national insurance contributions in April.”
