Millions are in line for pay rises as Rachel Reeves gears up to announce an inflation-busting rise in the minimum wage to at least £12.12-an-hour.
Government sources say the Chancellor will use tomorrows Budget to unveil a significant rise in what will be rebranded the new living wage.
While this will boost many workers pay packets, it could also deal a blow to firms bottom lines and raise fears they could delay or even cancel decisions to hire new staff.
Sir Keir Starmer is now facing a growing backlash from business over planned hikes to employers National Insurance, which firms say will hit jobs and growth.
The Low Pay Commission, which advises the Government on the level of the National Living Wage, has previously projected that the minimum could rise by 3.9 per cent next April – double the rate of inflation – which would take it from £11.44 an hour to £11.89.
Government sources said the Chancellor would use tomorrows Budget to unveil a significant rise in what will be rebranded the new living wage
While this will boost many workers pay packets, it will also deal a blow to many firms bottom lines and raise fears they could delay or even cancel decisions to hire new staff
But government sources indicated the final figure will be higher as the quango will now be using a new mandate handed to it by Ms Reeves in the summer, which will require it to take greater account of the cost of living.
The Times reported that the hourly wage of the lowest paid workers would rise from £11.44 to between £12.12 and £12.20 from next year.
The move comes on top of plans to raise employers NI by between one and two per cent in a £20 billion raid on business.
Ms Reeves has insisted she will produce a Budget for strivers. But Education Secretary Bridget Phillipson caused further anger over the weekend when she declined to say whether small business owners on modest incomes qualified as working people, a phrase that has had Labour figures, including the PM, in a muddle for a week.
She told the BBC that she would meet the Governments definition, despite a salary of more than £160,000, saying: My income derives from my job, and Ill pay whatever taxes are required of me.
But she refused to say whether a small business owner making an average net profit of £13,000 a year would be covered by the protection from tax rises.
The Federation of Small Businesses said the rise in NI alone would increase the cost of hiring the average worker by £600.
Executive director Craig Beaumont, said the rise would be a tax on pay, hours and jobs which would lead to recruitment freezes – or worse. He added: Small business owners are among the hardest working people imaginable.
Keir Starmer (pictured in Apia, Samoa) has insisted tomorrows fiscal package will rebuild services and the economy
They are strivers, working long hours to run their business and in many cases create jobs and opportunities.
Labours election promise that it would not raise taxes on working people was yesterday replaced by a payroll pledge that workers will not see immediate rises in deductions from their pay cheques after the Budget.
But the more limited pledge leaves open huge scope for stealth taxes and levies on business as Ms Reeves seeks to raise an extra £35 billion in tax.
Ms Reeves is set to tear up her fiscal rules to allow her to borrow up to £50 billion to invest in infrastructure and growth sectors.
NICs is charged at different rates for employers, employees and the self-employed
The tax burden is already running near a post-war record high
Jittery financial markets have already pushed up the cost of government borrowing amid fears about the scale of the governments plans.
Former Bank of England governor Mervyn King warned the move could push up mortgage rates if Ms Reeves fails to convince financial markets that the scale of borrowing is justified.
New research from the CBI has predicted that a tax raid on British family businesses could see the UK lose out on £29billion and around 400,000 jobs.