The minimum wage is to increase by 17p an hour to #5.52, the Government has confirmed.

The new rate for adults will come into force in October and will lead to pay rises for more than one million workers, two-thirds of them low-paid women.

The statutory rates for 18 to 21-year-olds will rise by 15p to #4.60 an hour while 16 and 17-year-olds will have their rate increased by 10p to #3.40.

Trade and Industry Secretary Alistair Darling said he had accepted recommendations from the Low Pay Commission for the new rates. But he rejected a recommendation that 21-year-olds should receive the adult rate.

Mr Darling said the minimum wage had now gone up by almost 30 per cent more than inflation since 1999.

"Just ten years ago home workers could be paid as little as 35p an hour, cleaners #1.30 an hour and security guards #2.25 an hour, which was bad for families and just plain wrong. I am proud of the minimum wage, proud of how it is helping families and proud of the role it plays in the modern economy we are delivering."

The Government also announced that industries which employ a large group of migrant workers will be targeted to make sure they are being paid the proper rate.

Since 1999 more than #22 million in unpaid wages has been recovered on behalf of tens of thousands of workers paid below the minimum wage.

The Government has already targeted hairdressing and childcare sectors for enforcement and said it will turn its attention to hotels and hospitality.

Paul Myners, chairman of the Low Paid Commission, said he was "delighted" that the Government had accepted the increased rates, adding: "While preparing this report our analysis of the evidence showed that recent upratings of the minimum wage have continued to benefit many low paid workers and helped to narrow the gender pay gap.

"The bite of the minimum wage has clearly increased and this year the economic indicators and labour market data presented a rather more mixed picture than in previous years.

"There has been a small fall in the number of jobs in the low paying sectors for the first time since the introduction of the minimum wage. Given these and other factors we concluded that a cautious approach to our recommended minimum wage upratings was advisable."

Mr Darling will also seriously consider a recommendation that employers who refuse to pay the minimum wage should face a fresh crackdown with an automatic penalty.

The Commission told the Government that employers who evaded paying the minimum wage were becoming more "adept".

Mr Myners said in effect rogue employers were taking advantage of a free loan from their employees until they were found out.

Fresh legislation would be needed before any automatic penalties were introduced but the Minister said it was important to crack down on employers deliberately underpaying workers.

The Government's announcement was welcomed by the British Retail Consortium, which had called for this year’s increase to be no more than inflation.

The BRC's director-general, Kevin Hawkins, said: "Hard-pressed retailers have had to cope with a #2.7 billion hike in wage bills caused by the previous two above-inflation increases.

"The BRC’s survey of retailers shows that between 2005 and 2006 78,000 retail jobs were lost. That’s not scaremongering about what might happen in the future, they are real jobs that are no longer out there for real people.

"With energy prices, rents, rates, and service charges also on the increase, cutting staffing costs by employing fewer people would have been one of the few ways retailers could have accommodated another inflation-busting increase.

"What retailers want now is an end to this annual uncertainty. There should be no real-terms increase next year either while the Commission reviews the future direction of the minimum wage." and produces, what we hope will be, a more predictable formula for future changes."

Birmingham Chamber of Commerce also said the latest rise should signal the end of above inflation increases.

Kasia Kurowska, BCI policy adviser, said: "We understand the importance of ensuring a minimum wage to protect the rights of workers but economic sustainability and specific sector impacts of it must be acknowledged in the Government’s calculations."