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.


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."


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

    Comment number 735.

    With few exceptions, we've 'enjoyed' near 4 years of personal & family loss or frank 'economic' suffering, needless worry still for self & others, not 'in it together' but at constant risk of job-loss, benefit-loss, pension down-grade; all the while at the mercy not just of 'world prices' but of tainted banks & grotesquely privatised utilities. Cover for next 'master-strokes'? NHS privatisation?

  • rate this

    Comment number 734.

    @ 700. CHALKIE: "Who are they asking or is it just based on people down south."

    'The South' - a magical, mythical land where the streets are paved with gold.....

    In reality there are people below Watford having a rough time as well, just as there are people in 'The North' with a better standard of living.

  • rate this

    Comment number 733.

    Absolute rubbish.The company i work for (once a public utility but privatised in the 90's) brought in an across the board 5% pay cut 5 years ran for 2 years, followed by a further 3 years with no payrise whatsoever.Last year we had a 1% pay rise.I know many people in the same postion.Never having recovered form the crisis 5 years ago.Typical Tory lies.

  • rate this

    Comment number 732.

    641 - a 3% drop may or may not be justifiable in whatever industry/business you may be working in, however I think many employers use the gloomy financial picture to increase their margins and drive down salaries and the large number of unemployed add to that downward pressure on salaries.

    In doing so these employers may be contributing to a vicious cycle downwards.

  • rate this

    Comment number 731.

    You could increase your pay if you work hard and work your way up the ladder sadly most want to be up the ladder to the top from the start.

  • rate this

    Comment number 730.

    After the earlier unemployment claims and counterclaims yet another pointless statistical debate that entertains nobody except the politicians.

    The govt shows poor judgement in pursuing these dry arguments. There is more than enough fodder in focussing on the last labour govt's mismanagement on the economy and Ed + Ed's policy black hole.

  • rate this

    Comment number 729.

    If ever there was proof of their being

    "lies, damned lies and statistics"

    These figures for a small fixed date range, excluding certain groups and only counting a specific income.

    even then its a tiny 0.1% (after years of drops)

    It demonstrates this governments contempt for people and the belief they are stupid.

    Those lauding these figures must be, as they fly in the face of reality

  • rate this

    Comment number 728.

    To say that Pay rise has taken place is a full blown cover which ONLY covers only 5% of the entire Uk population. Youth are back bone of the country. About 100% of the young people are unable to get their own home and having to rely on ongoing beheading benefits. They are unable to afford to feed their famililies. WHO ASKS THIS? To get the correct stats need to ask right contributing people.

  • rate this

    Comment number 727.

    695 tekdz. A very constructive comment

  • rate this

    Comment number 726.

    I don't believe it doesn't apply at the top. Our chief executive has certainly seen his pay go up over the last few years. The rest or the directors have done ok.

  • rate this

    Comment number 725.

    My aunts friend hasn't had a pay rise in 2 years and I've not had a pay rise for 6 months now.

    Therefore, these stats must be wrong. Oh and taking more in tax from people doesn't mean they have less to spend either.

    Well, that's about the sum of Labour's claims.

    You can now smell the fear coming from their supporters as they realise the game is up for the hopelessly clueless 2 Ed's.

  • rate this

    Comment number 724.

    You really have to question how the basket of goods calculating inflation is calculated. As part of my job, I wrote to the ONS to ask if they were taking into account product downsizing in their calculations e.g. a metric equivalent pound bag of sugar (568g) was now a 500g bag at the same price. I never got a reply.

  • rate this

    Comment number 723.

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

    Yes, a small handlful of the super rich.
    I wonder what he wants for the rest of us.

  • rate this

    Comment number 722.

    Was this included in the public sectors pay freeze and the police, and army who have no pay when they are out of work.

    This is another case of Tories trying to pull the wool over our eyes.
    They show the figures they want you to see.

  • rate this

    Comment number 721.

    670. Madbrit

    Might want to change the BR to SH, cos that's all you talk...

  • rate this

    Comment number 720.

    This is propaganda. Government are lying about unemployment and salaries. Banks are manipulating house prices, share prices, gold prices, silver prices and interest rates. They do this to take power and money from us. It will end this year. Interest rates will increase within 3 months. Clear your debts ASAP.

  • rate this

    Comment number 719.

    What a load of tosh! Myself and my colleagues haven't had a pay rise for at least 12 years. Everyone in our small company has had to take pro rata 20% pay cut in return for working a 4 day week instead of 5. We've been here for 25 years and are clinging on by a thread. Cretins!

  • rate this

    Comment number 718.

    This isn't what it looks like from my family's perspective.

    I am on the same salary as I was in 2009 with higher deductions. The Mrs' pension isn't keeping pace with real prices in the shops and my son with a family is getting below-CPI increases.

    The only one who is better off left the public sector to work for a bank at twice the salary. Good people are leaving the NHS in droves!

  • rate this

    Comment number 717.

    I couldn't give a ****. I'm absolutely loaded!

  • rate this

    Comment number 716.

    Since the coalition choked off the modest recovery in 2010 most folk have taken further falls in the standard of living. The recovery we are seeing now is gaining ground that the coalition lost for us. To get to this point they have begun to use Plan B with policies they refused to have in Plan A. Now they have started to use some of Labour's investment policies we are seeing some progress.


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