MILLIONS of British workers are in line for a pay rise from today with the introduction of the UK Government’s National Living Wage.

For full-time workers on the current minimum wage, it will mean a £900 a year cash increase, says the Treasury.

Initially, 1.3m people over 25 will see their minimum wage rate rise 50p from £6.70 an hour to £7.20. Almost three million workers are expected to benefit by 2020, when ministers hope the rate will be £9 an hour, and the Office for Budget Responsibility, the Government’s independent forecaster, has predicted as many as six million could benefit from a ripple effect on wages.

The Treasury also pointed to new analysis published today, which showed the NLW would help women in particular as it was expected to eradicate the gender pay gap for the lowest paid by the end of the decade.

Chancellor George Osborne, seeking to get back on the front foot following his setback on proposed disability benefit cuts in the Budget, hailed the initiative, saying: "I said last year when I announced plans for the National Living Wage that Britain deserved a pay rise; today, I'm proud to say Britain is getting one.

"So I’m delighted that 1.3m people across Britain will benefit from the biggest wage increase in eight years thanks to the new NLW.

“It will play a central role in moving Britain to a higher wage, lower tax, lower welfare economy. It will also mark the end of the gender pay gap for some of our lowest paid and hardest working people," added Mr Osborne.

But there has been a mixed reception from his new initiative.

Trade unions welcomed the hike to £7.20 an hour for adults over 25 but said it was not fair that younger workers were missing out.

Frances O’Grady, the TUC general secretary, said: "Britain desperately needs a pay rise and this increase is good news for those aged 25 or older.

"But the Government must ensure younger workers are not left behind. Twenty one to 24-year-olds will not be seeing an increase…This is not fair. Future wage increases must narrow the pay gap between old and young,” she insisted.

The bakers’ union was more critical, branding the NLW “fool’s gold”. Ian Hodson, its national president, branded the “paltry” NLW a gimmick. “How typical of this Tory government to use spin and deception to distract people from the real agenda of savage cuts to in-work benefits, originally designed to cushion the blow of poverty pay," he said.

Labour was equally critical. Owen Smith, the shadow work and pensions secretary, said: "It's a typically cruel sleight of hand from the Tories to introduce their version of the living wage with one hand while taking five times as much in cuts to Universal Credit and tax credits with the other.

"While this higher minimum wage for the over-25s is welcome, it will feel like an act of deception for the two million families set to lose £1600 a year through cuts to in-work support," he added.

But Helen Barnard, head of analysis at the Joseph Rowntree Foundation, claimed the NLW was an important step towards a high-wage, low-welfare economy.

"Investing in the skills of low-paid workers and encouraging the creation of more productive jobs would help us to reach this goal faster.”

She added: "However, on its own it won't do a great deal for poverty. That's partly because many workers with low hourly pay live in households with quite high overall incomes.”

There was also concern expressed by the business community.

Adam Marshall for the British Chambers of Commerce, warned the NLW would “apply a ratchet effect to all companies' pay bills” and sat alongside a raft of other high employment-related costs.

"While many companies have the ability to increase pay, others will struggle to do so alongside pensions auto-enrolment, the apprenticeship levy, employer National Insurance contributions and other up-front costs.

"Some will have to divert money from training and investment to increase pay, which could hurt their productivity. Others may stop hiring altogether," he added.