National Minimum Wage (Amendment) Regulations 2026

Motion to Approve

That the draft Regulations laid before the House on 2 February be approved.

My Lords, I note the regret amendment tabled by the noble Lord, Lord Sharpe.

The context of this instrument is that the regulations were laid before Parliament on 2 February and approved by the other place on 2 March. Their purpose is to increase the national living wage and national minimum wage rates. Subject to the approval of this House, the regulations will come into effect on Wednesday 1 April.

The creation of the minimum wage is one of the proudest legacies of the previous Labour Government. We will always defend working people, and the minimum wage remains a key plank of this Government’s plan to make work pay. The Opposition are wrong to suggest that we are not sufficiently taking into account employment opportunities for young people.

These increases are based on the recommendations of the Low Pay Commission, which the Government have accepted in full. We are grateful to the commission and extend our thanks to its chair, the noble Baroness, Lady Stroud, and her fellow commissioners and supporting officials. The LPC is an independent and expert body. It reaches its decisions through consensus between its employer, worker and independent commissioners, following extensive stakeholder consultation and research. The Government recognise and value the commission’s established track record of balancing a multitude of factors when making wage rate recommendations that deliver for workers and businesses alike.

The remit for the 2026 rates was to ask the LPC to recommend rates that minimised impacts on employment prospects for workers and considered the risks for younger workers. In addition, the Government are committed to helping young people get and retain good jobs—including the recent announcement of reducing the cost of hiring younger workers. The Government are also delivering a long-overdue reform to rebalance the business rates system and deliver growth-boosting support with the business growth service to unlock business potential.

Noble Lords will have seen the publication yesterday of the 2026 remit of the Low Pay Commission. The remit continues to benchmark the national living wage to two-thirds of median hourly earnings, while also considering the condition of the labour market, the cost of living, the impact on business and competitiveness and wider macroeconomic conditions. The new remit maintains the commitment to removing the discriminatory age bands for adults. We recognise that the national minimum wage and national living wage alignment must be achieved while protecting jobs and supporting labour market stability. The remit gives the LPC full flexibility to use its significant expertise and social partnership model, including employer and worker representatives, to recommend the appropriate pace and timing of aligning the 18 to 20 national minimum wage with the national living wage. We have asked the LPC to provide its recommendations to government by October. The Government will then confirm the new national living wage and national minimum wage rates to apply from April 2027.

Moved by

At end to insert “but this House regrets that the draft Regulations will make it harder for small businesses to take on staff, especially for first jobs and apprenticeships; risk worsening already elevated youth unemployment by further increasing the cost of hiring younger workers; and fail to reflect sufficiently the fragility of the youth labour market, at a time when the number of young people not in education, employment or training is approaching one million”.

My Lords, I am extremely grateful to the Minister for explaining and introducing this SI, to which I have tabled a regret amendment. But I am afraid I take a slightly different view from the one he has just explained.

Once again, we start with an ill-thought-out, anti-business measure by this Government. It is very interesting to note that the Minister, when he was explaining and introducing the instrument, referenced a number of government agencies that will be enforcing all sorts of fines and whatnot, but he did not really talk about its impact on business, which is regrettable. Quite frankly, this will end up being an anti-worker measure too, and it will price people out of the labour market.

No one on this side of the House opposes higher pay in principle. Of course we want people to earn more but, for that to be the case, there must be work to be had. A wage floor that is set without proper regard to hiring conditions, business confidence and the fragility of entry-level employment does not help the low paid if it helps price them out of a job altogether. That is why this SI is so troubling. From 1 April, the adult rate will rise to £12.71, while the rate for 18 to 20 year-olds will rise to £10.85 and the under-18 and apprentice rates will rise to £8.

The Government may pretend that there is no trade-off here, but everyone outside government understands that there is. If one sharply compresses the wage differentials—the Minister called them “discriminatory”—between inexperienced younger workers and older workers, one makes it less attractive to hire those with the least experience, the least confidence and the least established work history. The key word is not “discrimination”; it is “experience”. That is not only true for those aged 21 to 25 who are entering the workforce but especially true for 18 to 20 year-olds, many of whom rely on part-time, flexible and entry-level work to get that crucial first foothold in the labour market. Retailers themselves are warning that these local, flexible jobs are often the first step into work for young people, including Saturday jobs and short-hours roles around study or caring responsibilities.

This is not happening in a healthy labour market. The latest ONS figures show that the overall UK unemployment rate was 5.2% in October to December 2025. As we heard in the debate on the previous subject, the OBR is forecasting that to rise to 7%. For 16 to 24 year-olds, the unemployment rate was 16.1%, according to the latest ONS series. That is now higher than the EU average. The latest ONS NEET release shows that 957,000 young people aged 16 to 24 are not in education, employment or training, including 411,000 who are unemployed and 547,000 who are economically inactive.

Business groups have been warning the Government about exactly this. The British Chambers of Commerce said that

“every above-inflation wage increase leads to higher business costs, lower investment and fewer opportunities”.

It warns that:

“Making employment more expensive risks deepening the jobs crisis among young people”.

The BCC also found that

“labour costs remain the biggest cost pressure for SMEs, cited by 72% of businesses”.

Its January recruitment survey found that only 23% of firms expected to increase their workforce in the next three months and 14% expected to reduce it.

The chief economist at the CBI warned that, when government piles more costs on to employment, those costs

“feed back into hiring decisions, investment plans and … the opportunities … available to individuals”.