Rishi Sunak, the former Chancellor and Prime Minister, has publicly admitted that his decisions to aggressively increase the national minimum wage may have been a mistake, particularly regarding their impact on young workers. In a detailed opinion piece published in The Sunday Times, Sunak called for the Low Pay Commission (LPC), the independent quango responsible for recommending wage levels, to be abolished entirely. He argued that ministers should take full ownership and accountability for setting the national living wage, rather than delegating the politically sensitive task to an unelected body.
Sunak's intervention comes against a backdrop of worsening youth unemployment figures. Data for the period from January to March 2026 showed that the unemployment rate for 16 to 24-year-olds in the UK reached 16.2 per cent, up from 14.2 per cent in the same quarter of the previous year. This translates to 729,000 young people out of work. Furthermore, nearly a million individuals—957,000 precisely—were classified as NEET (not in education, employment or training) in the final quarter of 2025. These statistics have reignited a fierce debate about the unintended consequences of rapid minimum wage growth.
During Sunak’s tenure as Chancellor from 2020 to 2022, and later as Prime Minister up to 2024, the national living wage underwent a dramatic increase. It rose from £8.91 per hour in 2021 to £11.44 by April 2024, a near-10 per cent increase in a single year in 2022. Sunak noted that these increases were largely in line with recommendations from the LPC. However, he now says he wishes he had been “braver” and overruled the commission. “I decided that for a multimillionaire chancellor to overrule the LPC without any covering fire wasn’t politically sensible — and so let that pay carry on rising,” he wrote. “I now wish I’d been braver and acted anyway.”
The current government, under Chancellor Rachel Reeves, has continued the trend of substantial increases. The national living wage is set to rise to £12.71 per hour from April 2026, fully accepting the LPC’s recommendation. Business groups have warned that this jump, combined with higher employer National Insurance contributions introduced last year, has created a “perfect storm” of cost pressures for employers. Many small businesses, particularly in retail, hospitality, and social care, have reported cutting back on hiring younger, less experienced workers to offset the rising labour costs.
Historical Context of the Low Pay Commission
The Low Pay Commission was established in 1997 by the Labour government to provide independent advice on the national minimum wage, which was introduced in April 1999. Its purpose was to depoliticize the process and ensure that wage increases were based on economic evidence rather than political expediency. The commission includes representatives from employer groups, trade unions, and independent experts. Over its 25-year history, the LPC has generally enjoyed broad support from both sides of the political spectrum, as it helped the minimum wage rise steadily without causing significant job losses.
However, critics argue that in recent years, the pace of increases has outstripped productivity growth. Sunak himself highlighted this, stating that wage increases had “outstripped productivity gains.” When wages rise faster than the value of goods and services produced per worker, employers face margin pressure. In response, they may reduce hiring, cut hours, or invest in automation—all of which can disproportionately affect young and low-skilled workers.
The debate is not new. Economists have long studied the relationship between minimum wage hikes and employment. While some studies show modest or no negative effects—especially for small, targeted increases—others indicate that large, rapid jumps can price low-productivity workers out of jobs. The current situation in the UK may be a case in point, with youth unemployment climbing sharply after consecutive above-inflation increases.
Sunak’s Proposals for Reform
In his article, Sunak not only called for the LPC to be abolished but also urged Chancellor Reeves to freeze the rates of statutory wages until 2030. He argued that wages should be linked to productivity rather than political ambitions. “We need a system where pay rises are sustainable and backed by improvements in what workers can produce,” he wrote. He also suggested that ministers should set the wage rate directly, after consulting with businesses and unions but without delegating the final decision to an independent body.
Sunak’s proposals have generated mixed reactions. Some business leaders have expressed cautious support, especially those in sectors hit hard by rising labour costs. However, trade unions have condemned the suggestions, warning that freezing wages would harm low-income workers at a time when the cost of living remains high. The current government has not responded directly to Sunak’s calls, but officials have previously defended the LPC’s role and the gradual approach to narrowing the gap between youth and adult rates.
Broader Economic Implications
The minimum wage debate is part of a larger conversation about productivity in the UK economy. Since the financial crisis of 2008, UK productivity growth has been sluggish, trailing behind many other developed economies. Rapid wage increases without corresponding productivity gains can exacerbate this problem by making the economy less competitive internationally. On the other hand, proponents of higher minimum wages argue that they can boost worker morale, reduce turnover, and encourage firms to invest in training and technology—all of which could lift productivity in the longer term.
However, the immediate evidence from the labour market is concerning. The rise in NEET numbers and youth unemployment suggests that many young people are finding it harder to enter the workforce. This is particularly worrying because early employment experience is crucial for building skills, networks, and career trajectories. A prolonged period out of work can have lasting negative effects on lifetime earnings and employability.
Sunak’s mea culpa represents a significant shift from his previous stance. As Chancellor, he championed the increases as part of a plan to make work pay and support low-income households during a period of high inflation. Now, he seems to acknowledge that the policy may have gone too far, too fast. Whether his call for abolition gains traction remains to be seen, but it has certainly reopened a vital policy debate at a time when the UK faces stubbornly high economic inactivity among the young.
Source:MSN News