The national minimum wage will increase by 19p an hour to £6.50 in October, the government has announced, in a move that will benefit half a million workers.

Business Secretary Vince Cable said he had accepted a recommendation from the Low Pay Commission that the minimum wage should increase by 3%, the first time in six years that it has risen higher than inflation.

However, Sir George Bain, who set up the minimum wage 15 years ago as part of his role heading up the Low Pay Commission, has warned that it has since become outdated and needs reform to reflect modern wages.