Small businesses' anger over rise in national minimum wage

Chancellor Alistair Darling made no mention of the rise in his hour-long speech to the Commons but, in a 228-page Treasury document published afterwards, it was revealed that the adult minimum wage will rise from the current 5.80 an hour in October.

"This increase strikes a balance between helping low-paid workers and families, and ensuring that the rise does not damage their employment chances," said the document.

"When increased in October 2010, the NMW will have risen by over 22 per cent in real terms since the Government introduced it in 1999."

The British Retail Consortium complained that, in a year of continued economic uncertainty, the increase was "irresponsible".

The BRC said it was "excessive", and at odds with Government promises of prudence and with what was happening to pay generally, with many employers forced to freeze wages to safeguard jobs.

Director-general Stephen Robertson said: "A measure of this magnitude should have been in the Budget speech. This increase is downright irresponsible.

"It's at odds with Government promises of prudence and public sector freezes and will damage retailers' ability to maintain and create jobs."

Ben Burgher, of the Federation of Small Businesses (FSB), said: "Small businesses have been doing all they can to take on and retain staff during these tough times, but raising the minimum wage alongside the proposed one per cent National Insurance increase will add to the wage bills of employers.

"For the worker after tax, this increase in the NMW will mean an extra 1.54 a week, but for an employer the impact of the increase could add thousands on to their wage bill."

But TUC general secretary Brendan Barber welcomed the move. He said: "In a rich country like the UK it is important that those who do low-paid jobs are not left behind.

"It would be particularly unfair if low-paid workers had to bear a disproportionate part of the cost of the economic mess created by super-rich City bankers, who are still claiming their bonuses."

Details of increases to the youth rates of the minimum wage are expected to be announced today.

A Department for Business spokesman said: "We believe that the increase in the minimum wage strikes the right balance and ensures that low-paid workers are treated fairly."

Meanwhile, business leaders welcomed other budget measures aimed at boosting smaller firms, including a cut in rates and more Government contracts, but voiced dismay that an increase in National Insurance Contributions (NICs) will not be reversed.

John Walker, chairman of the FSB, said: "This Budget has provided welcome news on helping to improve small businesses' cashflow but the increase in the NICs will be bad for job creation."

The Chancellor announced that an extra 15 per cent of central Government contracts will go to smaller firms, which could mean up to 15bn of new business across the whole of the public sector.

He added that business rates will be cut for one year from October, meaning a tax reduction for over 500,000 small businesses in England, and said there will be no increase in the minimum rate of capital gains tax.

A new body, UK Finance for Growth, will oversee the development of the Government's 4bn-plus stock of finance schemes for smaller firms.

Ministers said it will help streamline the Government's existing schemes and oversee a new Growth Capital Fund outlined yesterday.

The fund will provide finance for smaller firms looking for between 2m and 10m in growth capital.

Margaret Wood, the Institute of Directors' Yorkshire regional chairman, said: "While we certainly welcome the specific measures to support small and medium-sized businesses, we need to hear a lot more from the Government on debt reduction."