The adult national minimum wage will increase from £5.52 to £5.73 an hour in October.

The rate for 18 to 21-year-olds will rise from £4.60 to £4.77 an hour, while 16 to 17-year-olds will get £3.53 an hour, up from £3.40.

One million people would benefit from the increase, two-third of which are women, the government said.

Small business associations welcomed the “moderate” rise, although unions said the rise would not cover increased food and energy costs.

"At a time when inequality is rising up the political agenda and business leaders are awarding themselves record pay rises, the lowest paid workers continue to slip back,” said Unite joint general secretary Tony Woodley.

"Unite asked for a significant rise above the increase in average earnings that brings the adult rate above at least £6.00 an hour.”