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The UK national minimum wage is to rise to £5.73 from £5.52 in October, the government has announced.

The rate for 18-21 year olds will also increase from £4.60 to £4.77, while the 16-17 year old rate will rise from £3.40 to £3.53.

There will also be more funding to enforce the minimum wage and tougher penalties for employers who underpay staff as part of the Employment Bill, now before parliament.

Chairman of the Low Pay Commission, Paul Myners said: "This increase means the minimum wage will have risen by 59 per cent since it was introduced in April 1999 - almost double the expected growth in prices over the same period.

"Despite many predictions to the contrary, job numbers in the industries most affected by the minimum wage have grown and grown significantly over the same period."

The government said nearly one million employees, two thirds of them women, will benefit from the increase.

Last year, the Trade Union Congress (TUC) urged the government to crack down on employers who underpay staff.

The TUC said 95 per cent of employers currently caught underpaying the minimum wage simply pay back what they owe, meaning there is no incentive to pay the minimum wage.