Minimum pay hike slammed as pre-election 'sweetener'

Trade leaders last week accused the government of going back on its promise not to increase the minimum wage annually.

News that the minimum wage is going to rise from £3.70 to £4.10 in October and then again by 10p to £4.20 next year has prompted strong criticism from the trade and warnings that many pubs will lay off staff or cut hours in order to cover the extra cost.

During government consultation with small businesses including pubs before the minimum wage was brought in, trade leaders said they were given assurances that the rate would not be raised annually as taxes are.

But trade leaders claim the latest rise is being used by ministers as a pre-election "sweetener" to win popularity with lower paid workers in the run up to the forthcoming General Election.

Nick Bish, chief executive of the Association of Licensed Multiple Retailers, said: "Even if licensees can manage to cover the extra cost, the problem is that the government is doing exactly what it said it wouldn't do.

"The timing of this is very interesting. It is clearly a pre-election sweetener - the Low Pay Commission was not even due to report back until June.

"This is really all our worst fears come true, seeing the minimum wage ratcheted up on an annual basis."

Tony Payne, chief executive of the Federation of Licensed Victuallers Associations, warned that the rise could lead many licensees to cut staff hours and may even force some struggling pubs to close.

"We are talking about a rise of 10.8 per cent. Licensees simply cannot absorb that kind of a rise themselves and many will be forced to put up prices or cut down on staff hours," he said.

"Putting up prices in such a competitive market, with the JD Wetherspoons of the world charging 99p a pint, is not going to work, so it will be the staff costs that have to be cut.

"A lot of licensees are already working 12-hour days and don't even get the minimum wage themselves."

The announcement was made last week by Trade and Industry Secretary Stephen Byers who said it was "bold enough to make a difference but prudent enough not to have any adverse impact on employment or the economy" and denied it had been timed to coincide with the run-up to the election.

Bob Cartwright, communications director for Bass Leisure Retail, said: "We have been supporters of the minimum wage. Obviously this is a very significant rise above the rate of inflation and it is different from what we were led to believe would happen but we are still studying the implications for us in terms of our costs at the moment."

The rise will still leave the UK behind France and Belgium, where the minimum wage is £4.57 and £4.79 respectively (taking into account the differing cost of living). Germany and Italy have yet to introduce a minimum.