Conservative grandee Lord Heseltine called on George Osborne to raise the minimum wage, arguing that the move would save the Treasury "billions" in in-work benefits.

The former Deputy Prime Minister, who spoke at Management Today's "Britain's Most Admired Companies" event, also claimed that the policy would solve the country's productivity puzzle – where productivity has remained flat, while the economy has grown.

"The great thing about being a government adviser, rather than a minister, is that I can say mad things," Heseltine said.

The peer's comments come ahead of Osborne's Autumn Statement.

The minimum wage recently increased from £6.31 to £6.50 an hour for employees that are 21 and over.

The government launched a crackdown on employers who failed to pay their workers the rate earlier in the year.

"Paying less than the minimum wage is illegal and, as HMRC's record shows, if employers break the law they will face tough consequences," said business minister Jenny Willott.

"We want to issue a clear warning to employers who fail to pay the minimum wage: under the government's new rules you will be named and shamed and face a stiff financial penalty."