The UK Government has announced a significant expansion of the Low Pay Commission’s (LPC) remit, marking a shift in how the minimum wage will be determined.

For the first time, the LPC will now be required to consider the cost of living when making recommendations to the government on future minimum wage rates.

Addressing the Cost of Living Crisis

Business and Trade Secretary Jonathan Reynolds emphasised that this new directive is part of a broader effort to address the ongoing cost of living crisis. Reynolds stated, “For too long working people have faced the worst of the cost of living crisis, but this Government is taking bold action to address it and make work pay.”

He further highlighted the government’s commitment to improving living standards and keeping more people in work, noting that this change to the LPC’s remit is just the first of many initiatives aimed at putting more money into the pockets of working people and boosting economic growth.

Narrowing the Wage Gap

In addition to considering the cost of living, the LPC has also been tasked with narrowing the gap between the minimum wage rate for 18-20-year-olds and the National Living Wage. This is seen as the initial step towards establishing a single adult rate for the minimum wage, addressing long-standing concerns over age-based discrepancies in pay.

Chancellor of the Exchequer Rachel Reeves reiterated the government’s focus on economic growth and job creation, stating, “Economic growth is our first mission, and we will do everything we can to ensure good jobs for working people. But for too long, too many people are out of work or not earning enough.”

Reeves described the new LPC remit as a crucial first step in getting people into work, keeping them there, and ultimately helping to grow the economy and improve living standards across the country.

Strengthening the Minimum Wage

The introduction of the minimum wage over 25 years ago has been one of the most successful policy interventions in recent history. The government’s latest move to incorporate the cost of living into the LPC’s remit is viewed as the next step towards realising the promise of a genuine living wage for working people.

The new remit will ensure that, in addition to the cost of living, the LPC will continue to consider the impact on businesses, competitiveness, the labour market, and the wider economy when making its recommendations.

Supporting Fair Pay for All

The Trades Union Congress (TUC) has welcomed the government’s decision. TUC General Secretary Paul Nowak said, “Hard work should pay for everyone. These are significant first steps towards making the minimum wage a real living wage and will make a difference to millions.”

Nowak also expressed support for the government’s commitment to ending age-based discrimination in minimum wage rates. “Young people face the same cost of living pressures as other adult workers and will welcome their pay being brought into line,” he added.

A Broader Agenda for Economic Growth

This expansion of the LPC’s remit is part of the government’s broader “Plan to Make Work Pay,” which sets out an ambitious agenda aimed at ensuring workplace rights are fit for a modern economy, empowering working people, and delivering sustainable economic growth.

The changes announced are seen as the first steps towards fulfilling the government’s mission to grow the economy and raise living standards across the country. The Secretary of State and Deputy Prime Minister have communicated these changes to the Chair of the Low Pay Commission, with the full remit available for public review.