Millions of lowest paid set for big pay rise to £12.71 an hour national living wage

An advisory body has projected that the national living wage could increase by up to 65p an hour next year, as the terms of its annual review of wage rates were revealed. The Low Pay Commission's (LPC) latest remit for increasing the so-called national living wage – the UK minimum wage for workers aged 21 and older – indicates that ministers are committed to delivering "a genuine living wage".

Currently, the national living wage stands at £12.21 an hour. The LPC estimates that this will need to rise to £12.71 in 2026 to avoid falling below two-thirds of median earnings: the threshold which the Government expects it to stay above.

However, the LPCacknowledged that the national living wagecould increase to as much as £12.86 an hour, or drop to as little as £12.55 an hour, depending on fluctuating economic conditions. Established in 1997, the advisory body offers recommendations to ministers each autumn regarding how it believes the minimum wage should be adjusted.

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The Government ultimately determines minimum wage rates for the following April after receiving this advice. A letter from Deputy Prime Minister Angela Rayner and Business Secretary Jonathan Reynolds stated that the committee must consider the cost of living as it reviews the national living wage.

The two senior ministers asserted that the Government was "committed to ensuring that the minimum wage is a genuine living wage".

They stated: "We continue to recognise that our ambition should be backed by evidence, and that the minimum wage rate should be consistent with delivering inclusive growth for working people and businesses alike.

"We are therefore asking the LPC to recommend a national living wage rate that is at least two-thirds of UK median earnings for workers aged 21 and over, to apply from next April, which takes into account the cost of living, effects on employment and developments in the wider economy."

In a move towards fairer pay, the Government is advancing its agenda to abolish "discriminatory" age banding for the minimum wage and has broadened the Low Pay Commission's (LPC) scope to review this issue.

The Government has announced that the LPC will engage with employers, trade unions, and workers to consider reducing the disparity between the national living wage and the current £10 minimum wage rate for those aged 18 to 20.

Additionally, there's a separate minimum wage for under-18s and apprentices, set at £7.55. Come October, the LPC is expected to deliver its recommendations to the Government regarding the 2026 increase in the minimum wage.

The Resolution Foundation, a think tank focused on enhancing living standards, has hinted that despite the Government's "ambitious language" concerning the minimum wage hike, their actual approach seems more on the side of caution.

Nye Cominetti, principal economist at the think tank, commented: "Despite the Government's ambitious language around 'delivering a genuine living wage', the new remit for the Low Pay Commission represents a steady-as-she-goes approach to the adult rate, after faster increases in the years preceding 2024.

"This caution is warranted given worrying labour market data, which is thanks in part to the Government's increase in employer national insurance contributions in April."