Younger workers face smaller pay increase as Healey prepares first Budget

The minimum wage is set to rise, but 18-to-20-year-olds are expected to receive smaller increases than in previous years, the BBC understands. Pay for younger workers will rise in line with the increase for employees aged 21 and over. The increase for younger workers is nevertheless lower than in the previous two years, when Labour raised the rate to meet a manifesto promise to remove discriminatory age bands and entitle all adults to the same minimum wage.

John Healey, the Chancellor, will reveal the new pay rates in the Budget on Wednesday, alongside measures intended to give families what he calls breathing space with the cost of living. "The manifesto pledge on equalisation still applies but we were always clear it could happen over time," the Business Secretary, Jonathan Reynolds, told the BBC. "Of course, you want not just good wages but good work," he added. "It is a balance of making sure the pressures on the labour market are taken into account."

The Times reported that the National Minimum Wage for 18-to-20-year-olds is likely to rise by 3.9%, from £10.85 an hour to around £11.27. That is a smaller rise than the 26% increase the Labour government has introduced for younger workers since returning to power in 2024. Even after the reported rise, the rate remains below the National Living Wage for older workers, currently £12.71 an hour, which is set to rise by 3.9% to £13.20, according to the newspaper.

Andrea Egan, general secretary of the union Unison, said it was deeply unfair to keep paying different rates for the same job. "Twenty year-old care workers, teaching assistants and security guards do the same work as their older colleagues," she said. "They don't pay less in the supermarket or at the petrol pump. They must be paid equally."

Speaking ahead of his first Budget, Healey said the ongoing wars in Iran and Ukraine had hit families at home through higher everyday costs. "We can't control global events, but we can act where we can make a difference," he added. The Chancellor plans to make higher tax-free mileage rates permanent, remove import taxes on some food and extend a freeze on fuel duty. The government also intends to end the so-called cliff-edge for those receiving carer's allowance payments. It says removing tariffs from 100 food items could save households up to £21 a year, or 40p a week, when combined with existing tariff suspensions introduced in June. "We're not going to say it is everything," Reynolds told the BBC, but taken alongside the changes implemented in the summer on goods such as pasta, fruit juice and tuna, he said it would save around £500m a year.

Other measures announced on Tuesday include making permanent a 55p per mile tax-free mileage rate for those driving up to 10,000 miles for work, with the rate rising from 25p to 35p above that; allowing carers to earn more than an existing limit without losing their entire allowance, replacing it with a taper; giving two weeks of paternity pay to self-employed fathers, who have previously missed out on payments of up to £194 a week; and rolling out hundreds of additional Post Office drop boxes to make sending parcels easier. The government will also freeze fuel duty again in the Budget, the BBC understands, and the 5p duty discount is set to continue. That discount was first introduced in 2022 and was due to last 12 months, but has been extended ever since.

The products on which tariffs will be removed include baked beans, garlic, gherkins, chocolate-coated wafers and waffles, boiled sweets, toffees and caramels, citrus jams and marmalades, throat pastilles and cough drops, plant-based drinks including soya, nut, cereal or seed, kerosene and fertilisers. The government said removing tariffs on fertiliser was aimed at helping farmers, while changes to import levies on kerosene were targeted at households relying on heating oil. The Treasury said it would publish a full list on Wednesday. A tariff is an import duty paid by domestic businesses buying products from overseas. Asked why the government was making it cheaper to buy goods from abroad rather than cutting business costs for UK firms, Reynolds said: "Where you can make a reduction in the cost of importing goods into the UK, when you think you can balance that with your domestic economic interests, that's a decision we will take."

Balwinder Dhoot, director of sustainability and growth at the Food and Drink Federation, said: "It's more expensive to make food and drink here in the UK than in many of our close neighbours, as businesses face such high energy costs." The Conservatives said the government's everyday fixes had already been wiped out by higher borrowing costs, taxes and inflation. Andrew Griffith, the shadow chancellor, said: "Shoppers face rising costs at the till and families are struggling to make ends meet, but Burnham's plan is cheaper gherkins. This is an insult to families hammered by Labour's tax rises."