UK pay rising in real terms, says coalition

 

David Cameron: "I want to see people paid more"

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Most British workers have seen their take-home pay rise in real terms in the past year, the government claims.

It has produced figures showing all except the richest 10% saw their take-home wages rise by at least 2.5% once tax cuts were taken into account.

That is more than the Consumer Prices Index (CPI) inflation rate of 2.4% in the year to April 2013.

Labour leader Ed Miliband said the figures were "dodgy" and ministers were out of touch with people's lives.

Analysis

So did we all feel a little better off this morning?

The government is suggesting that the vast majority of us should.

There is a debate how the figures on rising wages add up. But this isn't simply a matter the statisticians - it's a battle for territory amongst the politicians.

Labour have made great play of a "cost of living crisis" - citing a fall, on average, in gross wages since 2010 of £1,600.

For a while, the government didn't have a dog in this fight - instead pinning its hopes of a political recovery on the economic recovery.

But now, teeth gnashing, they are getting on to Labour's ground in a sign that they won't concede any arguments before the general election.

The trouble is trading statistics doesn't in itself make people feel better off - and the IFS says, across the piece, average incomes are still likely to be lower in 2015 than 2010.

The coalition are hoping, though, that today's foray might just plant the suggestion that - to coin a phrase - things can only get better.

The government said the figures showed only the top 10% of earners fell behind the CPI rate - which excludes the costs of buying and owning a home such as mortgage interest repayments - with an average increase of 2%.

It said it made its claims by taking into account cuts to income tax and national insurance.

Conservative skills and enterprise minister Matthew Hancock said: "Of course, as a consequence of the great recession, people who work hard have been made poorer and times are tough for families as a result.

"That's why, as part of our long-term economic plan, we are cutting taxes for hardworking people so they have more money in their pockets and are more financially secure."

Speaking on Thursday, Prime Minister David Cameron said there were "some positive signs" on take-home pay but a sustained and broad-based recovery in people's finances would take time.

The Lib Dems said they had been the driving force behind tax cuts for the lowest-paid, which will see no-one pay tax on the first £10,000 of their income by 2015.

But Labour said the government's figures were based on weekly, not annual earnings and did not take account of benefits cuts.

Chart showing government figures on take-home pay

"This is a complete insult to millions of people who can see with own eyes and feel with own pay packets that they are getting worse off," Mr Miliband said.

"I think this is a government in a hole that has no answers to cost of living crisis."

Analysis

Is real-terms pay now rising?

As ever, the answer to this depends on which statistics you choose to look at.

Official ONS figures on pay show that annual pre-tax pay rose 2.1% in the year to April 2013.

Over the same period, inflation was 2.4%, so in that period pay was falling in real terms.

However, now we know that CPI inflation has fallen to 2%, it might be reasonable to assume we have reached the point at which pay is again growing in real terms.

But other statistics tell a different story.

According to the ONS, average weekly wages rose by just 0.9% between the autumn of 2012 and 2013. That is well below inflation.

Put another way, the average weekly wage, pre-tax, rose from £472 to £475 over the last year.

On figures like that, not many people will be feeling richer.

And in any case, inflation out-stripped pay in each of the last five years. So we have quite a bit of catching up to do.

"All they're producing is a set of dodgy statistics, data that doesn't add up, to try and tell people what they can see with their own experiences, with their own lives just isn't true."

Paul Johnson, director of the Institute for Fiscal Studies, told BBC Radio 4's Today programme the government had used "a perfectly sensible set of numbers" to calculate take-home pay for the 2012-2013 period.

But he pointed out that more up-to-date Office for National Statistics data - the average weekly earnings index - showed wages rose "quite a lot less quickly than inflation in the most recent months".

He added that the IFS's own analysis suggested that "if the recovery takes off and continues as expected, people will start to see their incomes rising by 2015... but they will be well below where they were six or seven years ago".

Labour's assertion that real annual wages have fallen by £1,600, on average, since 2010 also only gave a "partial picture", the IFS added.

TUC General Secretary Frances O'Grady said the government's figures should be taken "with several tons of salt" as they did not include the effects of tax credits and benefits, particularly the freeze in child benefits.

Earlier this week, the International Monetary Fund upgraded its forecast for the UK economy, the latest in a series of positive economic indicators.

It now expects the economy to grow 2.4% this year - faster than any other major European economy - against its previous forecast of 1.9%.

Chart comparing earnings and inflation
 

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  • rate this
    -58

    Comment number 928.

    Too many people think that their economic circumstances are the result of a deliberate cruel government trick.

    The government actually has very little power to influence the economic realities that prevail. They don't control interest rates, global energy prices, currency valuations, labour costs here or abroad, they are hemmed in by treaties.

    They can't look after you all the time...grow-up!

  • rate this
    +67

    Comment number 858.

    No chance, im in public sector and my wife in private, she has not had a pay rise for years and I have had regular pay decreases. ie we will give 1 % and then take off 3 % for pension we are facing another pension payment increase this year and no real pay rise so pay more my foot.
    with bills increasing a threat of interest rise the middle has never been squeezed so much......

  • rate this
    +60

    Comment number 825.

    As anyone who knows statistics can tell you, the data can be manipulated using poor or skewed samples and poorly applied arguments to show false results. I feel that all stats produced by official bodies such as political parties and the police, should be vetted by a neutral expert panel before being touted to the unknowing public. Stas correctly used are amazing but incorrectly are misleading.

  • rate this
    -43

    Comment number 714.

    My pay has risen year on year apart from 2008/9. In fact my pay has increased 51% since 2005. Like everyone my company had to make huge savings, but I showed them how to do it without cutting the work force or pay. As a result I have saved my company £67,000 a year on electricity alone, saving my job as well as others. Get involved and stop saying "not my job"

  • rate this
    +73

    Comment number 701.

    I haven't had a pay rise for over 8 years, but everything else has gone up so I can't see how I am better off. I have tried getting another job with better pay but am too old so have to stick where I am. My husband lost his job a couple of years ago, did manage to get another one but it is 30 miles each way and costs a fortune in fuel - roll on retirement, or maybe not. We are surviving just!

 

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