Labour Leader Ed Miliband has set out plans for a statutory minimum wage linked to average earnings, an idea soundly rejected by business groups.

The plans are part of Labour’s vision to tackle low pay and help people earn a ‘living wage’. It would mean “the biggest changes to [the wage] since its creation 15 years ago”, said Labour HQ.

Conservatives and Liberal Democrats have also suggested an increase in the minimum wage is on the cards. None of the parties have quoted a figure yet.

Business groups said any major increase in the minimum wage would lump pressure on small businesses and damage the UK’s competitiveness on the world stage.

Katja Hall, CBI deputy director-general, said: "The national minimum wage has been a success in raising wages for the lowest paid because it's been left to the Low Pay Commission, not politicians, to set the rate. A government proposed target would undermine the Commission’s independence.

"The simplicity of the national minimum wage is one of its strengths, but ultimately pay must reflect productivity. Every business should pay the national minimum wage, so we support better enforcement.

She added: "The living wage takes no account of a businesses' ability to pay, particularly smaller firms. That's why it should remain voluntary, and reporting on it therefore isn't appropriate.”