Minimum wage set to rise but 18-20 year-olds will not get bigger increase
Minimum wage changes are expected in the Budget
Ninoda.com – Workers aged 18 to 20 are expected to receive a minimum wage increase in the forthcoming Budget, but the rise is likely to be more modest than the substantial boosts delivered over the previous two years. The new rates are due to be announced by Chancellor John Healey on Wednesday alongside a wider package aimed at easing pressure on household budgets.
The expected approach would see younger employees’ pay rise at the same percentage rate as the National Living Wage for people aged 21 and over. However, it would leave a gap between the two age groups, despite Labour’s manifesto commitment to phase out what it described as discriminatory age bands in minimum pay.
For 18-to-20-year-olds, the National Minimum Wage is expected to move from £10.85 an hour to roughly £11.27, an increase of 3.9%. That would follow a much sharper rise since Labour returned to government in 2024, with the rate for younger workers having increased by 26% over that period.
The anticipated £11.27 rate would still be lower than the current £12.71 National Living Wage for workers aged 21 and above. That higher rate is also expected to increase by 3.9%, taking it to £13.20 an hour.
Equal pay debate continues
The government says its commitment to bringing adult minimum wage rates together remains in place, while stressing that the change is intended to happen over time. Business Secretary Jonathan Reynolds said ministers had to weigh wage improvements against conditions in the labour market.
“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.”
Trade union Unison has criticised the prospect of retaining different rates for employees doing the same work. Its general secretary, Andrea Egan, argued that lower pay for younger adults cannot be justified by differences in everyday living costs.
“Twenty year-old care workers, teaching assistants and security guards do the same work as their older colleagues. They don't pay less in the supermarket or at the petrol pump. They must be paid equally.”
The issue is particularly significant for people entering full-time work, including employees in care, retail, hospitality, education support and security roles. A rise in hourly pay can affect weekly income immediately, especially for workers with regular shifts, but the continued age-based difference means two adults may still receive different statutory minimum rates for identical hours and duties.
Food, fuel and family measures
The Budget is also expected to include measures presented as practical support with the cost of living. Ministers have announced plans to remove import tariffs on 100 food products, building on tariff suspensions introduced in June for products including pasta, fruit juice and tuna.
The government estimates that the combined changes could save households up to £21 a year, equivalent to about 40p a week. While that is a limited individual saving, Reynolds said the wider package of tariff changes could be worth around £500m annually.
Items named among the products affected include baked beans, garlic, gherkins, chocolate-coated wafers and waffles, boiled sweets, toffees, caramels, citrus jams, marmalades, throat pastilles and cough drops. Plant-based drinks made from soya, nuts, cereals or seeds are also included.
Tariff changes will extend beyond food. The list includes kerosene and fertilisers, with ministers saying the fertiliser measure is intended to support farmers. Reducing import levies on kerosene is aimed at households that depend on heating oil. A full product list is expected from the Treasury on Wednesday.
Tariffs are import duties paid by domestic businesses when they purchase goods from overseas. Removing them may reduce costs faced by importers, although the impact on shop prices can vary depending on supply chains, competition and other business expenses.
Carers, parents and drivers
Other announced measures include a change to carer’s allowance rules. At present, earning above the relevant limit can result in a person losing their full allowance. The planned replacement is a taper system, allowing carers to earn more without immediately losing all support. The change is not due to begin until 2030.
Self-employed fathers are also set to gain access to two weeks of paternity pay. Previously, they had missed out on payments worth up to £194 per week during that period.
For people driving for work, the government plans to make a 55p-per-mile tax-free mileage rate permanent for the first 10,000 miles. Above that threshold, the rate would rise from 25p to 35p per mile. Hundreds of additional Post Office drop boxes are also due to be introduced to make parcel sending more convenient.
Healey described the policies as incremental rather than transformational.
“None of this is going to change the world. But if it helps around the margins and its action the government can take, then I want try and fix it.”
Fuel duty is also expected to be frozen again. The existing 5p duty reduction, first introduced in 2022 for an intended 12-month period, is set to remain in place after being extended repeatedly.
Together, the measures combine higher statutory pay, targeted tax and tariff changes, support for carers and self-employed parents, and the continuation of fuel-duty relief. For households, the practical effect will depend on employment status, earnings, travel needs and the goods they buy, while the unresolved question remains how quickly the government will complete its promised equalisation of adult minimum wage rates.
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