Rachel Reeves ready to sign off on above-inflation minimum wage hike

The Chancellor will have to decide whether to accept officials’ recommendations for increases to the National Minimum Wage and welfare benefits.

The minimum wage increases are calculated by the Low Pay Commission, a quasi-organisation which previously predicted it would propose a 3.9% rise. That would take the rate to £11.89 an hour, up from the current £11.44, with the change due to come into effect from next April.

The body noted in its report published in March that “these projections are subject to uncertainty because they are based on forecasts.”

While this increase will be lower than in recent years, it will still be higher than the forecast inflation rates and average wage growth in 2025.

The Office for Budget Responsibility (OBR), the independent financial watchdog, is forecasting inflation of 1.5 per cent next year and profit growth of two per cent.

As a result, businesses with lower-income workers, especially smaller businesses, are likely to face further challenges as wage costs rise.

Ms Reeves will also have to use the Budget to set out her intentions on benefit and state pension increases.