The government is set to announce a rise in the minimum wage in the upcoming Budget, but 18-to-20-year-olds will receive a smaller increase compared to previous years, according to sources familiar with the plans.
Pay for younger workers will rise in line with the National Living Wage for those aged 21 and over, however the increase falls short of the significant jumps seen in the past two years when Labour moved to eliminate discriminatory age bands by aligning all adult rates.
Chancellor’s Budget to Address Cost of Living Pressures
Chancellor John Healey is expected to unveil a package of measures aimed at providing “breathing space” for families grappling with persistent cost of living challenges. The National Minimum Wage for 18-to-20 year-olds is projected to increase by 3.9% from £10.85 to approximately £11.27 an hour, according to reports.
This represents a marked slowdown from the 26% increase implemented for younger workers since Labour returned to power in 2024. Even with the proposed rise, the rate for under-21s remains below the National Living Wage, which currently stands at £12.71 and is set to increase to £13.20.
Business Secretary Jonathan Reynolds defended the approach, telling the BBC: “The manifesto pledge on equalisation still applies but we were always clear it could happen over time. Of course, you want not just good wages but good work. It is a balance of making sure the pressures on the labour market are taken into account.”
Union Condemns “Deeply Unfair” Pay Gap
Andrea Egan, general secretary of Unison, criticised the decision to maintain separate pay scales for identical work. “Twenty year-old care workers, teaching assistants and security guards do the same work as their older colleagues,” she said. “They don’t pay less in the supermarket or at the petrol pump. They must be paid equally.”
The disparity has drawn criticism from labour rights advocates who argue that age-based wage discrimination undermines efforts to support young people entering the workforce during a period of economic uncertainty.
Budget Measures Target Household Savings and Family Support
Beyond wage policy, the government is announcing several measures designed to ease financial pressures on households. These include removing import duties on 100 food items, which could save families up to £21 annually when combined with existing tariff suspensions introduced in June.
Reynolds acknowledged that the measures represent incremental rather than transformative change: “We’re not going to say it is everything… but taken alongside the changes implemented in the summer on goods such as pasta, fruit juice and tuna, it would save around £500 million a year.”
Additional announcements include making permanent a 55p per mile tax-free mileage rate for work-related travel, extending paternity pay to self-employed fathers, and expanding Post Office drop box infrastructure to support small businesses and remote communities.
Fuel Duty Freeze and Carer’s Allowance Reforms Also Expected
The Treasury is also expected to confirm another freeze on fuel duty, maintaining the 5p per litre discount first introduced in 2022. While initially intended as a temporary measure, the relief has been repeatedly extended amid ongoing fuel price volatility.
For carers, the government plans to replace the current cliff-edge earnings threshold with a taper system, allowing recipients to retain more of their allowance as income rises. However, this reform will not take effect until 2030, drawing mixed reactions from advocacy groups.
Political Opposition Criticizes “Gherkins Over Priorities” Approach
The Conservative Party responded sharply to the government’s agenda, with Shadow Chancellor Andrew Griffith dismissing the measures as inadequate responses to broader economic challenges. “Shoppers face rising costs at the till and families are struggling to make ends meet, but Burnham’s plan is cheaper gherkins. This is an insult to families hammered by Labour’s tax rises,” he said.
Critics argue that while individual measures may offer modest relief, they fail to address underlying structural issues affecting household budgets, including energy costs, housing expenses, and wage stagnation.
Why it Matters
The Budget’s approach to minimum wage policy reflects a delicate balancing act between supporting younger workers and managing labour market dynamics. While the 3.9% increase offers some relief, the slower pace of reform for 18-to-20-year-olds risks perpetuating a two-tier system that disadvantages entry-level workers at a time when many are struggling with rising living costs. For unions and labour advocates, the decision underscores ongoing tensions around fair pay and workplace equity, particularly as the government faces pressure to deliver tangible improvements without triggering unintended consequences in an evolving economy. The broader package of targeted savings and family support measures, while welcome to some extent, highlights the limitations of piecemeal interventions in addressing systemic affordability challenges facing British households.