Millions of low-paid workers in the UK are to get a pay rise of 4.1% next year, as Rachel Reeves confirmed that minimum wage rates will go up as part of the government’s ambition to improve living standards.

The national living wage will rise from £12.21 to £12.71 an hour from April for over-21s, which the government said would increase the annual earnings of about 2.4 million workers by £900.

The minimum wage for 18- to 20-year-olds will increase by 8.5% to £10.85 an hour, narrowing the gap with older workers as part of the government’s commitment to “raise the floor” on wages for all workers.

The Treasury had been concerned about the increase in youth rates with some ministers and officials fearing that they could be “priced out” of entry-level jobs.

But the government has accepted

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