Labour ensures minimum wage takes account of cost of living for first time

The Labour government has overhauled the way the minimum wage is set to ensure for the first time that the cost of living is taken into account, delivering on one of the party’s manifesto commitments.

The Department for Business and Trade announced today that the government has changed the remit of the Low Pay Commission (LPC) – the independent body that advises on the national living wage and the national minimum wage – to ensure the cost of living is factored into future recommendations.

Jonathan Reynolds and Angela Rayner have also instructed the LPC to “narrow the gap” between the minimum wage rate for 18- to 20-year-olds and the national living wage, which the government said “will be the first step towards achieving a single adult rate” – another manifesto pledge.

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In a letter to the LPC’s chair Conservative peer Baroness Stroud, the Business and Trade Secretary and the deputy Prime Minister said the government is “committed to ensuring that the minimum wage is a genuine living wage which delivers improved living standards for working people right across the United Kingdom”.

The LPC’s updated remit requests that the body recommend a national living wage to apply from April 2025 that “take[s] into account the impact on business, competitiveness, the labour market, the wider economy and the cost of living, including the expected annual trends in inflation between now and March 2026”.

Commenting on the announcement, Reynolds said: “For too long working people have faced the worst of the cost-of-living crisis, but this government is taking bold action to address it and make work pay.

“The new remit to the LPC is the first of many vital steps we will take to support more people to stay in work and improve living standards. Our focus remains on putting more money in working people’s pockets and boosting economic growth.”

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Chancellor Rachel Reeves said: “Economic growth is our first mission, and we will do everything we can to ensure good jobs for working people. But for too long, too many people are out of work or not earning enough.

“The new LPC remit is an important first step in getting people into work and keeping people in work, essential for growing our economy, rebuilding Britain and making everyone better off.”

Also commenting, TUC general secretary Paul Nowak said: “Hard work should pay for everyone. These are significant first steps towards making the minimum wage a real living wage and will make a difference to millions.

“We welcome the government’s decision to ask the Low Pay Commission to be more ambitious next year and into the future.

“We also support the government’s commitment to ending discriminatory age bands for minimum wage workers. Young people face the same cost-of-living pressures as other adult workers and will welcome their pay being brought into line.”

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