The chancellor is set to increase the national living wage to £9.50 in Wednesday’s budget, Sky News has been told.
It will rise from the current living wage of £8.91 per hour for those aged 23 and over, which the government says will give full-time workers an extra £1,000 a year.
The national living wage is what the government has called the national minimum wage for anybody above 22-years-old since 2016.
Those below that age are eligible for what is called the “national minimum wage”, which will also see a rise.
People aged 21-22 will see an increase to £9.18 an hour from £8.36 and apprentices, those aged 16 or over not in full-time education, will get a rise to £4.81 from £4.30.
However, the chancellor has made no announcement on other age groups, with under 18s currently getting £4.62 and 18 to 20-year-olds getting £6.56 an hour.
Despite its name, the national living wage has previously not been based on the true cost of living, however, by increasing it to £9.50 it brings it up to the actual living wage of those outside London, according to the Living Wage Foundation.
The independent campaign organisation says the living wage inside London is £10.85 an hour.
Chancellor Rishi Sunak said: “This is a government that is on the side of working people. This wage boost ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this parliament.”
However, Labour’s shadow chief secretary to the Treasury Bridget Phillipson called the rise “underwhelming”.
“This underwhelming offer works out at £1,000 a year less than Labour’s existing plans for a minimum wage of at least £10 per hour for people working full-time,” she said.
“Much of it will be swallowed up by the Government’s tax rises, universal credit cuts and failure to get a grip on energy bills.”
The Treasury said the changes mean the government is accepting all recommendations made by the Low Pay Commission independent advisory board.
Mr Sunak has announced a series of other spending pledges ahead of the autumn budget as he promised to do “whatever it takes” to support families with the cost of living.
Among the promises he has already revealed are:
• £1.4bn to encourage foreign investment into UK businesses and attract overseas talent
• £700m to be spent mainly on the new post-Brexit borders and immigration system, as well as a new maritime patrol fleet
• £435m for victims services, crime prevention and the Crown Prosecution Service
• £560m for adult maths coaching to help increase numeracy
• a six-month extension to the COVID recovery loan scheme to June 2022.
There are calls from Labour for the chancellor to remove VAT from domestic energy bills from 5% to zero for six months in order to help families this winter.
The party said the cut could be funded by higher than expected VAT receipts this year.
And the Liberal Democrats want Mr Sunak to make funding to end the cladding crisis a major focus.