Minimum wage set to rise but 18-20 year-olds will not get bigger increases

The minimum wage is set to rise but 18-to-20 year-olds are expected to see lower increases than in previous years, the BBC understands.

Pay for younger workers will rise in line with the increase in minimum pay for employees aged 21 years and over.

However, the increase for younger workers is lower than that seen in the previous two years, when Labour raised the rate to meet a manifesto promise that it would remove "discriminatory age bands" with all adults entitled to the same minimum wage".

Chancellor John Healey will reveal the new pay rates in the Budget on Wednesday, while also announcing measures to give families what he is calling "breathing space" with the cost of living.

"The manifesto pledge on equalisation still applies but we were always clear it could happen over time," 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 put in place 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, which is currently £12.71 an hour. It is set to rise by 3.9% to £13.20, the Times said.

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 that the ongoing wars in Iran and Ukraine had "hit families here 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 extending a freeze on fuel duty.

The government is also planning 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 per year - or 40p a week - when combined with existing tariff suspensions that were 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 the government announced on Tuesday included:

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 per mile to 35p above that

Allowing carers to earn more than an existing earnings limit without losing their entire allowance, replacing it with a taper mechanism instead

Giving two weeks of paternity pay to self-employed fathers, who have previously missed out on payments of up to £194 a week for the period

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. The 5p duty discount is also set to continue. That discount was first introduced in 2022, and was due to last 12 months, but has been extended ever since.