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Tuesday, 15 February, 2000, 11:01 GMT
Troubles ahead over minimum wage

The minimum wage is rising by 10p an hour

By BBC News Online's political correspondent Nick Assinder

Tony Blair's ambitious pre-election pledge to a national minimum wage was always going to cause him problems.

And his attempt to head off a backbench revolt by abandoning plans to freeze it this year will only delay the inevitable.

Minimum wage
Labour MPs led by Pendle's Gordon Prentice have welcomed the 10p an hour rise, but are committed to fighting for an automatic annual increase.

Chancellor Gordon Brown has insisted there will be no such formula and that increases will be made only when the economy can stand them.

That will inevitably mean that, in some years, there will be no increase at all.

Gordon Brown will only sanction increase if the economy allows
And it ensures that the row over the level of the minimum wage will become an annual event.

The policy was hit by internal feuding from the very start.

Before it was introduced there was a major dispute within the Labour and trades union movement over the level it should be set at.

In classic New Labour style, Tony Blair created the "independent" low pay commision to come up with a level.

Right direction

Many MPs and unions were furious that it was set at only 3.60 an hour - and were even more dismayed when a second, lower rate was introduced for those under 21.

For many, this was the start of the process of disillusion with the Labour government.

Gordon Prentice wants to see an automatic annual increase in the wage
More widely, however, the move was welcomed as a step in the right direction, and most welcomed the fact that the principle of a national minimum wage had been established.

They believed that, once in place, it would gradually increase closer to the unions desired 5 an hour. Gordon Brown's suggestion that it would be frozen this year caused widespread anger and fears that the wage could wither on the vine.

In what is being seen as a significant climb down, the chancellor has now agreed a small uprating which, over an 18 month period, will be just below the level of inflation.

Proved right

Ministers have constantly argued that the government pitched the original wage at just the right level to avert large job losses and not damage industry or the economy.

And on this they have been proved right. The Tories have even been forced to abandon their opposition to the wage because it has not had the expected negative effects and they do not want to enter an election arguing against it.

They are now caught on a hook, however. Shadow chancellor Michael Portillo has accepted the new rise, claiming it is minimal and will have no undesirable effects.

But he has not made it clear at what level he would reintroduce the Tories' opposition to the policy.

Meanwhile, Labour backbenchers will continue demanding a mechanism for annual uprating and Mr Blair may not have completely bought off his critics.

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See also:
15 Feb 00 |  Business
Minimum wage set to rise
07 Feb 00 |  Business
Minimal impact of minimum wage
07 Feb 00 |  Business
Should the government raise the minimum wage?
30 Oct 99 |  Business Basics
Minimum wage in the UK

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