Chancellor John Healey is set to announce a nearly 4 percent increase in the National Living Wage as part of the upcoming Budget, raising it above £13 an hour for the first time. The rise, expected to take the wage from £12.71 to around £13.20, will outpace current inflation, which is at 3.5 percent and projected to average about 3 percent in 2027. This increase applies to workers aged 21 and over.

At the same time, the government plans to slow the growth of minimum wage rates for younger workers aged 18 to 20. The rate for this group is expected to rise from approximately £10.85 to £11.27, an increase broadly in line with the adult rate but significantly less steep than in previous budgets. This move effectively delays Labour’s manifesto pledge to equalize the youth minimum wage with the National Living Wage during the current parliamentary term.

The decision comes amid concerns about youth employment in the UK, where nearly one million young people are currently not in education, employment, or training (often referred to as "Neets"). Various business groups and economists have warned that rapid increases in the youth minimum wage have made it more difficult for young people to access entry-level positions. Louise Hellem, chief economist at the Confederation of British Industry, highlighted that rising employment costs have led many firms to be more cautious about hiring, particularly for entry-level roles that help young workers start their careers.

Similarly, the chair of UKHospitality, Kate Nicholls, supported the slowdown for youth wage increases, warning that accelerating equalization could harm job opportunities for young people. She noted that the sector continues to face substantial challenges from combined pressures of rising wages and higher employer National Insurance contributions. Craig Beaumont, executive director of the Federation of Small Businesses, emphasized the need for tax relief to small businesses as a means to promote wage growth and job creation.

Opposition voices have criticized the wage hike, with Shadow Chancellor Andrew Griffith claiming that pushing the minimum wage above inflation could lead to job losses and increased costs for families. Conversely, Healey and government officials have framed the increase as a balanced approach, taking into account advice from the independent Low Pay Commission, which recommends setting wage levels that support both workers and employment rates.

In addition to wage measures, the Budget is expected to include various cost-of-living relief initiatives. These are likely to feature the removal of tariffs on more than 100 imported goods—including everyday items like baked beans and chocolate—to save consumers up to £185 million annually. Planned reforms also include making a tax break for self-employed drivers permanent, extending parental pay rights to self-employed fathers, and adjusting Carer’s Allowance rules so unpaid carers retain benefits when exceeding earnings limits.

The upcoming Budget, described as a more restrained fiscal event compared to previous large-scale spending measures, will also maintain the current freeze on fuel duty and impose a tax increase on banks to help fund support for lower-income households facing ongoing economic pressures.