RACHEL REEVES TO WATER DOWN MINIMUM WAGE INCREASE FOR YOUNG WORKERS
Rachel Reeves is poised to backtrack on another manifesto pledge to raise young people’s pay as her economic watchdog warns of rising joblessness and a sluggish economy.
The Chancellor is expected to water down a promise to abolish what the Government has previously described as “discriminatory age bands” by scrapping the youth rate of the minimum wage, which has existed since the system was introduced in 1999.
Peter Kyle, the Business Secretary, is expected to write to the independent body that helps to set the wage floor in the coming weeks with a new mandate that paves the way for slower increases in pay rates for under-21s.
It comes as Ms Reeves prepares to unveil a pared-back spring forecast where her independent tax-and-spending watchdog will warn of rising joblessness.
The Office for Budget Responsibility (OBR) is expected to say on Tuesday that the number of people out of work will hit its highest rate in a decade this year as it raises its forecasts for unemployment above 5pc.
The watchdog, which was embroiled in controversy last autumn when its forecasts were inadvertently leaked, is also expected to warn that near-term growth will also be weaker, although the economy is expected to catch up in later years.
Soaring youth joblessness has sparked a series of warnings from Left-wing think tanks and even an intervention by former deputy prime minister Angela Rayner about the damage inflicted by raising the minimum wage for young people.
Ms Rayner was the architect of Labour’s pledge to raise the minimum wage for young people, instructing the Low Pay Commission (LPC) last year that all workers deserved a “genuine living wage”.
The Financial Times said ministers were planning to tell the LPC that Labour’s ambition to equalise the minimum wage does not need to be met until the next parliament, following a series of inflation-busting increases.
However, it would represent another humiliating about-turn for Labour, which has already broken promises not to raise taxes on working people and has watered down a pledge to hand workers a day one right to sue for unfair dismissal.
Andrew Griffith, the shadow business secretary, said: “Another day, another U-turn. The Government are now doing precisely what Conservatives have been calling for on behalf of businesses and young people. But this chaos is no way to run an economy.”
Ms Reeves raised the minimum wage rate for 18 to 20-year-olds by 16.3pc in April 2025, from £8.60 per hour to £10. For workers aged 21 and over it climbed 6.7pc from £11.44 to £12.21.
In April, the youth rate is set to rise again by 8.5pc to £10.85 per hour. For those aged over 21 it will climb 4.1pc to £12.71 per hour.
The move to slow down youth pay rises also risks sparking a clash with the unions, who are demanding that Labour press ahead with plans to equalise rates.
The LPC’s annual remit is usually published alongside the Spring Statement, but this has varied in recent years, with one source indicating it may appear in the coming weeks.
A government spokesman said: “We’re determined to help young people into work and deliver on our manifesto commitments to make work pay.
“We remain committed to closing the gap between the adult and youth national minimum wage. That’s why we are raising the national living and minimum wage so that low‑paid workers are properly rewarded – worth a £1,500 boost to the lowest‑paid workers.”
2026-03-02T20:15:42Z