Unions call for minimum wage rise

BUSINESS leaders have challenged Prime Minister Tony Blair to reject calls for a dramatic hike in the minimum wage. The TUC wants a 25% increase to bring it up to £5.30 an hour. Now employers warn such a move would cost jobs at a time of growing economic uncertainty.

The demand by the unions has renewed fears that they are using their financial clout to tighten their stranglehold on Labour, which is around £8m in the red. Last week party officials were forced to go cap in hand to union leaders for an emergency £100,000 bailout to pay for wages, as well as heating and lighting bills.

TUC general secretary John Monks asked Ministers to impose a 'bold' increase in the minimum wage, which is currently £4.10 an hour rising to £4.20 in October.

'The introduction of the national minimum wage is one of the Labour Government's major successes,' said Monks. 'It has made a real difference to more than a million workers and helped make Britain a fairer place. But it's now time to be bolder and to grasp the opportunity to make it an even more effective weapon against poverty.'

But three leading employers' organisations threw down the gauntlet to Blair on Monday by signalling their opposition to such a rise.

The Institute of Director's head of policy, Ruth Lea, said: 'The minimum wage has not had an impact on employment so far because it was set at a modest level and was introduced at a time when the economy was strong. This sort of increase will hit people on low incomes hardest - it will cost jobs.'

The CBI also called for a sensible approach to increases in the minimum wage. CBI deputy director John Cridland said any rises should be based on recommendations from the Low Pay Commission, which takes evidence from both employers and the unions. 'The CBI is concerned with making sure that low pay is tackled in a way that protects jobs and businesses,' he added.

The British Chamber of Commerce said that increases well above inflation would be impossible to cope with for many small firms. A spokesman also dismissed the TUC's claims that productivity would increase if the minimum wage rose.

'Most employers already pay £5 an hour or above but in those sectors most affected by low pay, such as cleaning, catering and in hotels, how can a cleaner or waiter produce more?' he asked.