UK Business Groups Warn Ed Miliband over £8 Minimum Wage 'Political Football' Pledge

UK business groups have warned Ed Miliband over his pledge to increase the National Minimum Wage to £8 by 2020.

The rate is currently set at £6.31 ($10.32, €8.02) an hour and is due to rise by 2.9% in October to £6.50, on the recommendation of the independent Low Pay Commission.

The Labour Party leader said he wants to increase the NMW to £8 per by 2020, which amounts to 3.75% or 33p a year, if he is elected after the 2015 General Election.

"It is about values," Miliband told the Observer. "It is about saying that this country does not work for millions of working people and we are going to change it. It is not business as usual. It is a proper plan for your future."

But, once the Office for Budget Responsibility's Consumer Price Index inflation projection is taken into account, the raise would be 2.2% or 13p per year.

However, the Confederation of British Industry (CBI) said that the NMW is set at the highest rate it can be without putting job creation at risk.

"Raising wages in this way would put serious strain on businesses, particularly hard-pressed smaller firms with tight margins, which would end up employing fewer people," said Katja Hall, the deputy director-general of the CBI.

"Instead, politicians should address how people move on in their careers, through training and better skills, helping them move to higher paying roles over time."

The Federation of Small Businesses said it was worried that NMW hikes are "becoming a political football".

"Our concern is that setting rates according to political need means that the impact of rises on employment, inflation and growth will not be fully explored," said John Allan, national chairman of the FSB.

Simon Walker, director general of the Institute of Directors stressed that decisions on the NMW "must be taken" by the Low Pay Commission.

"The Low Pay Commission was established to assess objectively and independently the appropriate speed and extent of increases in the figure," Walker said.

"To date, it has been regarded as successful in balancing the rate against inflation, economic growth and the effect rises would have on small businesses and young people.

"The only sustainable drivers of wage growth are productivity gains and improvements in company performance."