Media playback is unsupported on your device Media caption Chancellor George Osborne: "We have worked hard to get to this point and we can start to enjoy the fruits of all that hard work"

Chancellor George Osborne has said he wants to see an above-inflation increase in the minimum wage.

He told the BBC the "economy can now afford" to raise the rate, currently set at £6.31 an hour for people over the age of 21.

The call comes after Labour claims that the economic upturn has not translated into improved living standards.

But Mr Osborne said it was Labour's fault that they had fallen and he was aiming to make people better-off.

The value of the minimum wage, paid to an estimated 1.35 million people, has fallen in real terms since the financial crisis of 2008. The current rate of inflation is 2%.

HOURLY MINIMUM WAGE Over-21s - £6.31

18 to 20s - £5.03

Under-18s - £3.72

Conservative Mr Osborne told BBC political editor Nick Robinson it would have to increase to £7 an hour by 2015 for its value to return to where it was before the economic downturn struck.

The rate is recommended by the Low Pay Commission, which is overseen by Liberal Democrat Business Secretary Vince Cable.

He said the coalition, since coming to power in 2010, had "rescued the country from the brink of disaster and got us into a position where we can now see the minimum wage going up for people and, more broadly. I want living standards to go up for the whole country as we fix the economy."

'In touch'

Attacking Labour's record in power, he said: "Britain is poorer because of what happened to it in the great recession. People in the country are poorer because of what happened in the great recession."

I put it to George Osborne that many would think he was simply trying to claim credit for a policy his party had long fought and that his insistence that "we were all in it together" was undermined by the targeting of the next round of spending cuts on benefits often paid to the same people who are on the minimum wage.

Mr Osborne added: "I want to make sure we are all in it together, as part of the recovery, which is why I want to see above-inflation increases in the minimum wage, precisely because the British economy can now afford that."

The minimum wage rate for workers aged 18 to 20 is £5.03 an hour, while it is £3.72 for under-18s.

Some Conservatives have urged the chancellor to call for a minimum wage increase to demonstrate the party's concern over living standards, particularly those of the working poor.

Nick Robinson said the announcement was likely to trigger an argument within the coalition with Liberal Democrats accusing the Conservatives of stealing their policy ideas.

The Conservatives opposed the creation of the national minimum wage in 1999.

Mr Osborne said: "The Conservative Party in the 1990s was on the wrong side of the argument. The Conservative Party has changed. It's a modern Conservative Party in touch with the country."

He added that the government was planning another "big increase" in the amount of money people can earn before paying income tax and defended his plans to remove a further £12bn from the welfare budget.

Mr Osborne said: "This government, and I as chancellor, are on the side of hardworking people. I want a welfare system that supports work, that's fair to those who use it and those who pay for it."

Labour leader Ed Miliband has repeatedly accused the coalition of presiding over a "cost-of-living crisis", with inflation for fuel, food and other essentials outstripping wage rises.

Shadow Treasury minister Chris Leslie said: "George Osborne is flailing around under pressure but he has made no concrete announcement about the level of the minimum wage."

He added: "The Tories cannot hide from the fact that working people on average £1,600 a year worse off since they came to office. We need action now to earn our way to higher living standards and tackle the cost-of-living crisis."

TUC general secretary Frances O'Grady said: "We welcome George Osborne's acceptance of the TUC's case for an above-inflation rise in the minimum wage.

"But while this would help many, the chancellor should be more ambitious about achieving decent pay rises across the whole of the UK workforce.

"The government should work with unions and employers to increase the spread of the living wage, lift the cap on public sector pay, and recognise that the wages of the millions of workers across the economy have been falling in real terms and now need a decent increase."

John Cridland, director-general of the CBI business group, said: "Recommending the rate of the national minimum wage must be a matter for the Low Pay Commission, as the chancellor recognises.

"An unaffordable rise would end up costing jobs and hit smaller businesses in particular. Any increase in wages must reflect improved productivity."

John Allan, chairman of the Federation of Small Businesses, said the minimum wage increase should not be above the rate of inflation as many firms operated within "very fine margins" and were "struggling with rising costs in areas such as utilities and business rates".