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Businesses and unions split on minimum wage

Businesses and unions were divided over the national minimum wage after the Government announced that the adult rate will increase by 15p an hour, benefiting almost a million workers.

Ministers said they had accepted recommendations from the Low Pay Commission, taking the adult rate to £6.08 an hour from October, while the statutory minimum for 18 to 20-year-olds will increase by 6p to £4.98 an hour.

For 16 to 17-year-olds it will rise by 4p to £3.68, while for apprentices it will go up by 10p to £2.60.

The adult increase is worth 2.5%, below the rate of inflation, while the new figure of £6.08 compares with the first ever national minimum wage of £3.60 an hour for adults when measure was introduced in 1999.

Business Secretary Vince Cable said: "More than 890,000 of Britain's lowest-paid workers will gain from these changes. They are appropriate, reflecting the current economic uncertainty while at the same time protecting the UK's lowest-paid workers."

The announcement was made just after Mr Cable addressed the annual British Chambers of Commerce (BCC) conference, when he made no mention of the increase.

David Frost, director general of the BCC, said it was the "wrong increase, at the wrong time", adding: "With over a million unemployed, the priority has to be getting people back into the job market. Youth unemployment is at a record high and we can't afford to price young people out of work.

"It's clear from speaking to businesses that a significant number are having to freeze wages. These changes will be a barrier to job creation, and economic recovery."

But TUC general secretary Brendan Barber said the increase was "modest", adding: "With research suggesting workers on the minimum wage spend 100% of their pay rises where they live or work, these increases should provide a modest stimulus to local economies.

"There will be room for more generous increases in future, once the economy begins to recover."