Draft National Minimum Wage (Amendment) Regulations 2026
(1 day, 7 hours ago)
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The Parliamentary Under-Secretary of State for Business and Trade (Kate Dearden)
I beg to move,
That the Committee has considered the draft National Minimum Wage (Amendment) Regulations 2026.
It is a pleasure to serve under your chairship, Mr Stringer. The purpose of the regulations is to increase the national living wage and national minimum wage rates on 1 April. The Government laid the regulations before the House on 2 February.
We are committed to making work pay. The passage into law of the Employment Rights Act 2025 in December was a proud day for this Government and, indeed, this Parliament. We are raising the minimum floor of employment rights, raising living standards throughout the country, and levelling the playing field for those businesses that are already engaged in good practice. Our landmark employment rights are set to benefit over 18 million workers in every corner of the UK, and we are pleased and proud to work alongside businesses, trade unions and groups across civil society. We are currently carrying out, and will continue to do so over the coming months, comprehensive consultation with those groups as we deliver the changes together.
The creation of the minimum wage remains one of our proudest achievements. We introduced it and are continuing to back it with real-terms above-inflation increases. Before I provide the precise details of this year’s increases, I would like to pay tribute to the work of the Low Pay Commission. Its diligence, expertise and social partnership model ensure that the Government can continue to deliver on their ambitious agenda for working people without causing adverse impacts for businesses, the labour market or the wider economy.
This year’s national minimum wage regulations will take effect on 1 April, as I said—subject, of course, to the approval of the Committee. Let me provide the detail of the changes we are enacting. The national living wage will rise from £12.21 to £12.71, an increase of 50p an hour, adding over £900 to the gross annual earnings of a full-time worker. This 4.1% rise is above measures and projections of inflation, ensuring another real-terms pay increase for working people as we continue to build towards a genuine living wage.
The regulations will also implement increases to the other national minimum wage rates. The rate for those aged between 18 and 20 will increase from £10 an hour to £10.85, which is an 8.5% increase worth over £1,500 per year. Meanwhile, the rates for those above school-leaving age but under 18 will rise by 45p, or 6%, to £8 an hour.
Charlie Dewhirst (Bridlington and The Wolds) (Con)
I represent a seaside town, Bridlington, to which five million visitors come every year. It has a fantastic, successful seasonal economy that creates a large number of jobs for young people in the town every summer. Is there not a danger that the significant increases in the minimum wage for 16 to 18-year-olds and 18 to 20-year-olds will disincentivise local employers from giving young people opportunities to get on that first rung on the jobs ladder?
Kate Dearden
I pay tribute to the businesses in the hon. Gentleman’s constituency that provide those opportunities for young people. Of course, the Government sets the remit and the Low Pay Commission, as an independent body, provides guidance on the rates to ensure that we can provide a real-terms increase for people no matter what their age. We recognise that people of different ages should not be paid a different rate for the same time, while ensuring that the rates take into account the implications for young people getting the opportunity to get on the job ladder. We made that clear in the remit.
I mentioned that the rate for those above school-leaving age will increase to £8 an hour, and the same applies to the apprentice national minimum wage, which applies to apprentices who are under the age of 19 or in the first year of their apprenticeship. Finally, the accommodation offset rate, which is the maximum daily amount that an employer can charge a worker for accommodation without it affecting their pay for minimum wage purposes, will increase from £10.66 to £11.10.
The Department for Business and Trade published an impact assessment alongside the regulations. It includes a full equality assessment and received a green “fit for purpose” rating from the independent Regulatory Policy Committee. The Government estimate that this year’s national living wage and national minimum wage increases will provide a direct pay increase for approximately 2.7 million workers, with a further 5.1 million workers potentially benefiting from positive spillover effects as employers maintain pay differentials. We are really proud to protect working people in every corner of the United Kingdom. We estimate that 180,000 workers in Scotland, 140,000 workers in Wales and 140,000 workers in Northern Ireland will directly benefit from the changes.
It was a Labour Government that fought against opposition to bringing in the minimum wage when it was introduced in 1999. The headline rate—at the time, for workers aged 22 and over—was £3.60 an hour. As well as more than trebling in cash terms, based on current forecasts this year’s national living wage is expected to be 80% higher in real terms than the top rate in 1999. In hourly terms, the share of low-paid jobs has dropped from 21.9% in 1999 to just 2.5% last year. It is a testament to the success and effectiveness of the policy, over more than a quarter of a century, that all this has been achieved without the damage to the economy and the labour market that some people predicted at the time. The work continues, of course, and we will keep making progress on our manifesto commitments in this space to deliver a genuine living wage that works for employers and workers alike.
The Government will publish a new remit for the Low Pay Commission in due course. We will ask for recommendations on the national living wage and national minimum wage rates, thereby ensuring that our decisions our backed by evidence and consistent with delivering inclusive growth for working people and competitive businesses across the UK. As usual, we will ask the LPC to make its recommendations by October. The Government will subsequently confirm the new national living wage and national minimum wage rates for April 2027, ensuring there is sufficient notice for employers and workers.
We are grateful to all the employers, worker representatives and other stakeholders who engage thoughtfully with the LPC’s consultation each year, ensuring that the Government can balance the various concerns appropriately. We are proud to be driving reforms to the employment rights landscape and delivering for workers, employers and the wider economy. I commend the regulations to the Committee.
Andrew Griffith (Arundel and South Downs) (Con)
It is a pleasure to serve under your chairmanship, Mr Stringer.
I wish the Minister all the very best; she has already demonstrated that she is an effective performer on behalf of her constituents. In your time, Mr Stringer, you will have seen many Ministers pushed out to defend the indefensible, but very rarely are they caught in the action of passing a statutory instrument while, in real time, the Treasury is peddling and briefing stories of a U-turn—before the ink is even dry, before the vote has been taken and before the regulations have been agreed to.
Why is that? I think colleagues across the House, who want the best for our country and for young people, recognise that there is a growing crisis of young people being unable to access the work market. The latest figures show that 957,000 young people are not in education, employment or training. Although the Government inherited that number, they are actually making it worse—and that is before the impact of the regulations and the unemployment Bill, with which the Minister is deeply acquainted.
If we look at the overall level of young people who wish to find work—those who are formally looking for work—we see that the figure for youth unemployment is 16.1% for young people between the ages of 16 and 24, the very young people in respect of whom the above-inflation rate changes make up the largest part of the regulations before us. Why would any of us in this Committee be passive or neutral about passing measures that every economist and business group that has looked at them believes are likely to discourage firms from taking a chance on those young people?
I often find myself in common cause with the Federation of Small Businesses. It does wonderful work and represents the smallest and most fragile businesses across all our constituencies, which we all want to see succeed on our high streets and grow. They are where growth comes from. The same is true of the British Chambers of Commerce, which also has concerns about the approach the Government are taking to the wage rates for 16 to 20-year-olds—people getting their very first chance at work.
It is far less often that I find myself in common cause with the Tony Blair Institute or the Resolution Foundation, which have both, in the last 48 hours alone, reiterated their concern about the changes that the Minister advocates we vote for and pass today. This is not some Tufton Street think-tank expressing concern but the Resolution Foundation: the finishing school for aspirant young Labour Ministers—sadly, some of the talent that sits elsewhere on the Labour Benches is overlooked—and the ideological heart of the modern Labour party. The Resolution Foundation has said that this change is the wrong direction to go in and called for a moratorium.
I am sure that right hon. and hon. Members would not dream of taking out their phones under your chairmanship, Mr Stringer, but if they did so right now and looked at the Financial Times, they would see that Treasury sources are briefing that the Department will be scaling this measure back. That would be part of what I think is U-turn No. 16, although it is very hard to tell—being a bear of little brain, I cannot always keep up with the number of U-turns the Government have made.
My final words come from the author of this strategy herself: the right hon. Member for Ashton-under-Lyne (Angela Rayner), who was my interlocutor throughout the passage of the 300-page, 1970s, red tape, job-destroying unemployment Bill. Recently, albeit after she had left Government and perhaps moved beyond the influence of those on the Treasury Bench, she spoke about the overall challenge of employment for our wider economy—the coastal, seasonal and hospitality businesses on the frontline, where so many young people, whom we are all here to represent in a non-partisan fashion, had their very first shot at a job, as I did myself. The right hon. Lady said:
“I think we’ve got to recognise, it’s not even a double whammy, it’s not even a triple whammy. I talk about the challenges on business rates, the challenges on VAT, the challenges of the minimum wage going up and the living wage going up”.
Will the Minister update us on the Chancellor’s latest thinking on this measure? What does she think about the difficult challenge for young people having their first shot at life and opportunity?
Sir Alec Shelbrooke (Wetherby and Easingwold) (Con)
I am genuinely delighted to see the hon. Member for Halifax in her place as the Minister; I congratulate her on her achievement. She has been sent here to speak to a straightforward piece of delegated legislation that raises the minimum wage levels but, as my hon. Friend the Member for Arundel and South Downs outlined, the situation is becoming more complex.
It is worth saying a few words about what we see in the real world. My constituency is Wetherby and Easingwold, and it does what it says on the tin: I represent the two market towns of Wetherby and Easingwold, as well as other towns such as Tadcaster and Boroughbridge, surrounded by lots of villages. There are lots of small businesses in those towns, and although it would be wrong to say that they are not hiring young people, they have stopped hiring as many young people as they used to.
It is all well and good to compliment the changes and say that wages are rising for the poorest paid, but that does not take into account the other tax changes that have taken place, such as the changes to rates and employers’ national insurance contributions. All these things, when added together, have resulted in businesses cutting back on the number of young people who work for them.
I remember my very first job at WHSmith, when I was still at school. I went for a Saturday job, but I ended up getting a job doing the newspapers and magazines before the shop opened every day of the week. I would get up at half-past 5, and leave WHSmith at half-past 8 to go to school. It was a real experience for me as a 17 to 18-year-old to have to have that discipline and to go to work in the real world. As I have often said, I have never had as much disposable income as I had then—the clubs and pubs of Gravesend were very welcome to it.
The experiences that a young person can gain from short-term or Saturday employment, or part-time employment during school holidays, are vital. I fear that looking just at the rises in the minimum wage, and talking about how much people can earn a year, does not take into account the other pressures on business. For all the importance of raising people’s wages, it does not achieve anything if the jobs are not there.
Michelle Scrogham (Barrow and Furness) (Lab)
Having run a business on the high street for the last 21 years, I can safely say that we have not had Saturday jobs around for at least the last 10 of them. That is not to do with the national minimum wage; it is due to a lack of support from Government over the last 14 years. Hundreds of ideas came forward, and numerous consultations were never acted on, so does the right hon. Gentleman agree that it is a bit of a leap to say that it is the minimum wage that is creating the issue?
Sir Alec Shelbrooke
I am grateful to the hon. Lady, because she illustrates the point I am making. It is not about the minimum wage; it is about the other taxes that have gone alongside the minimum wage and put huge pressure on businesses. Lots of people say that raising the minimum wage is great, because it puts more money in people’s pockets, but it is the other pressures at the same time that are the issue. I could name five businesses in just one town in my constituency that did hire young people to work on a Saturday but have reduced the number of people they hire because of the other costs.
I will move on, because I am sure we were not expecting to be here in the Committee Room for too long. My hon. Friend the Member for Arundel and South Downs mentioned the right hon. Member for Ashton-under-Lyne. I raised this issue on Second Reading of the Employment Rights Act. I do not know how many Members on the Government Benches stood for election before 2024, but Labour party manifestos before 2024—it was not in the 2024 one—said the party would ban unpaid internships. I have fought to ban unpaid internships in every single term I have been in this place, and I have never got anywhere. Every Prime Minister came to the Dispatch Box and said, “I don’t see why we are not doing it,” and then it did not happen.
I brought forward an amendment to the Minimum Wage Act 1998 so that it would include unpaid internships. One would have thought that a Government who keep talking about paying young people, getting them on the ladder and doing things for them would have included a simple minimum wage—whether the apprenticeship wage or the minimum wage for the youngest, a minimum wage—in that Act for people who are exploited. Anybody who works for a company for four weeks is adding value to the company, no matter what anybody says. Being asked to go and work, perhaps in London, for a year—having to sort out accommodation and bear all the costs—and not getting paid is exploitation.
I am afraid that, again, I push back on the Government. They parrot that what they are doing for people is great, because they are raising the minimum wage, but that does not take into account the other tax rises that have put pressure on business, and it does not do anything to move things forward for young people who are missing out on opportunity because they do not have the ways and means to work for free. The Government should take a close look at themselves. They have talked about their Employment Rights Act and have come here today to boast about rises in the minimum wage, but they have not ensured that a whole section of young people actually get paid for a day’s work. My party has always believed that work should pay.
Kate Dearden
I thank the shadow Minister, the hon. Member for Arundel and South Downs, for his contribution and for his kind words at the start of his speech. However, I am not sure that I am defending the indefensible. I am defending the decision to uplift our national living and minimum wages. On 1 April, when the regulations come into effect, we will be delivering a direct uplift of around £900 for a full-time worker on the national living wage and £1,500 for someone on the minimum wage for 18 to 20-year-olds. That is not insignificant.
On the national minimum wage rate for 18 to 20-year-olds, we are absolutely committed and determined to raise living standards for working people and ensure a genuine living wage, and our manifesto made our direction clear. When recommending the 2026 youth rates, we asked the LPC to consider the risk of employment impacts, while balancing those risks with the ambition to remove the discriminatory age bands for adults. The LPC carries out extensive consultations, commissions new research and considers a range of economic, labour market and business data to assess the impact of the national minimum wage on young workers, and it concluded that there is no clear evidence that the recent increases to the national minimum wage
“have affected young people’s employment overall.”
It assesses that a range of factors are driving recent trends among young people, including the sectors they are more likely to work in.
On what the Government are doing about the situation and the figures that the shadow Minister alluded to, we announced at the Budget more than £1.5 billion of investment over the spending review period for employment and skills support, to deliver the youth guarantee and to reform the growth and skills levy for young people. I agree about the significance of jobs at a young age, and I thank the right hon. Member for Wetherby and Easingwold for sharing his experience; it is one that I can sympathise with from my own journey and career. The skills learned in those first jobs are invaluable.
That is why the youth guarantee is so important. It will provide 16 to 24-year-olds across Great Britain with enhanced support to move into work or training, including by improving employment support through expanded youth hubs and increased support in jobcentres. I have seen the impact of that in my constituency, where the youth hub has transformed the lives of over 70 young people in the year that it has been running. The hubs are clearly of significant benefit across the country, creating nearly 300,000 additional work experience and training opportunities.
Sir Alec Shelbrooke
Does the Minister agree that unpaid internships should be banned?
Kate Dearden
I know that the right hon. Gentleman has campaigned on that for a number of years. I am going to come to unpaid internships shortly, so I will respond to him then with an update on our work in the Department.
To finish on 18 to 20-year-olds, we have committed over £500 million to youth programmes and support from 2026-27 to 2029. I want to touch on the wider package, and how we are looking at opportunities for young people and their employment prospects, because it is really important. It includes over £60 million for a new richer young lives fund to improve activities and youth work; £15 million for youth workers; £70 million to rebuild and improve local youth services; £350 million to refurbish or build up to 250 youth facilities; and £22.5 million over three years to create a tailored enrichment offer in up to 400 schools, as well as the work that we are doing on apprenticeships training, which will be completely free for small and medium-sized enterprises that hire eligible young people aged 16 to 24. I wanted to spend some time responding to that point, because this is a clear Government priority and we are working at pace on it.
I thank the right hon. Member for Wetherby and Easingwold for raising unpaid internships. I know that he has been campaigning on that for a number of years, and I pay tribute to all his work on it. He will know that we ran a call for evidence from 17 July to 9 October 2025. We had hundreds of responses, which was brilliant to see, and we published our response on Friday. We committed to three key actions to tackle non-compliance: reviewing and expanding national minimum wage guidance; strengthening enforcement through the new fair work agency; and bolstering communications so that young people are aware of and understand their rights. That is a significant bit of work, and something that we are committed to reviewing and keeping an eye on. I know that the right hon. Gentleman will hold to account on that, and I thank him for that.
The regulations represent clear, discernible progress towards our manifesto commitments of delivering a genuine living wage and expanding eligibility for the national living wage to all adult workers. It is not entirely clear whether the Opposition will vote against them today and try to prevent these 2.7 million workers from getting a pay rise—we will see.
I extend my thanks to ACAS, which offers impartial and expert assistance on employment issues, and to His Majesty’s Revenue and Customs, which enforces the minimum wage on behalf of the Department for Business and Trade. We are confident that the creation of the fair work agency, which will be set up from April this year, will ensure a more effective, less fragmented enforcement system.
In closing, I again thank the Low Pay Commission; we are grateful for its expertise and its collaborative social partnership model, which brings together the perspectives of workers and businesses. The minimum wage is one of the most successful Government policies in recent decades and remains one of the cornerstones of our plan to make work pay. I commend the regulations to the House.
Question put and agreed to.