Young adults could be in for a pay rise, after the government ordered a major shake-up of how minimum pay rates are set.

Angela Rayner, deputy prime minister, and Jonathan Reynolds, business secretary, have written to the Low Pay Commission (LPC) instructing it to close the gap between the minimum wage rate for 18 to 20-year-olds and the national living wage, as reported by The i.

The government says it intends to remove the "discriminatory age bands" for adults.

Currently, the minimum wage for 18 to 20-year-olds age is £8.60. The national living wage, paid to over 21s, is £11.44.

The government has asked the LPC to recommend a national minimum wage rate for 18 to 20-year-olds to apply from April 2025.

Rachel Reeves, chancellor of the exchequer, visited Gloucester before the election and talked to Mark Owen, Punchline-Gloucester.com editor, about the plans.

She said: "We do want to turn the minimum wage into a real living wage because the truth is too many people on the minimum wage are reliant on the state topping up their incomes and the majority of children who are growing up in poverty today are in a family where at least one person works.

"So we need to make sure that work pays and that will also incentivise more people to take work, but we will keep the independent Low Pay Commission to pay the rate of the minimum wage, but to take into account the cost of living."

While the move has been welcomed by some businesses and trade unions, which have long said the disparity in pay was unfair, it will hit some smaller businesses hard, particularly in the hospitality sector.

Sam Holliday, FSB development manager for Gloucestershire, said: "Small business owners often operate at very tight margins, but they always do the very best they can to look after and support their staff. Our latest FSB South West survey showed that nearly 70% of small business owners gave pay increases in the last 12 months above the current rate of inflation. That in itself is remarkable, considering the huge pressures they have been under.

"However, in that same survey, the cost of labour was cited as the second biggest barrier to growth for small business owners in this region. It has become increasingly hard to recruit and retain staff and, as small businesses can't always offer the career paths of bigger organisations, they have to battle to try to offer competitive wages while dealing with other increasing costs.

"It is also important to note that, while we fully support the objectives of the national living wage, people often think that it is the government that funds increases to it but of course it isn't. It is the businesses themselves, and so they must be part of discussions on any changes.

"We all want to see increased salaries for young workers, but we feel that all future changes to minimum wage rates should be made by the Low Pay Commission without reference to targets set by government."

Ian Mean, Business West Gloucestershire director, said: "On the face of it, the move by deputy prime minister Angela Rayner and the business secretary, Jonathan Reynolds, to give young earners a wage boost seems fair and sensible.

"To narrow the gap between the minimum wage rate for 18 to 20-year-olds and the national living wage will be a good boost for young people setting out on their world of work journey. However, the effect on the profitability of some businesses - particularly on those smaller retailers - may harm their sustainability.

"I firmly believe in rewarding good work with properly graduated wages rises. When I started work as a young trainee reporter at 17, I had to pass my proficiency certificate before I got an appreciable wage rise.

"So, I believe that the government needs to be very careful before insisting that the minimum wage rate should apply to 18-20-year-olds from next April. Growth is going to come by encouraging young skilled people - they need to have clear personal development plans from their employers."