UK pay rising in real terms, says coalition

 

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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
    +1

    Comment number 835.

    Civil Service. Pay increase stuck at 1% for several years now, except for those at the very top. 'Nuff said.

  • rate this
    +2

    Comment number 834.

    If, as people claim on this forum the Tories are lying, why aren't opposition parties actually hawling them up on it?

    So either they aren't lying, or Labour is full of idiots who can't work out the truth, or they know that they would have told the same lies in the sample place, so regardless of what colour you support we are all screwed.

    Given the options, I hope they aren't lying.

  • rate this
    +4

    Comment number 833.

    Not only are we going back to the 19 century we are becoming more, and more the 51st State of America. forget the poor,disabled,old, and unemployed..As Camerooon says we are the party for the HARD WORKING MILLIONAIRES...So they make even more profits, and pay less taxes.!

  • rate this
    +7

    Comment number 832.

    The Toris must live on the moon if they talk about pay rise...

    Workers lost 20% in the last 10years and useless executives gained 300%....

  • rate this
    +3

    Comment number 831.

    544. Walton Simons
    I think you meant..

    Statistics are like bikini’s, they reveal a lot but hide all the important parts.

    - Brian Moore (Talk sport)

  • rate this
    -2

    Comment number 830.

    758.Lightmare
    "more needs to be done, especially around child "benefit".."

    ==

    What's to be done about the "4X4s" then? (those women who have 4 children by 4 different fathers to get the statutory 15% of each's disposable income?

    They're often perfectly comfortable, benefit or not, and not disproportionately inclined to be Labour voters.

  • rate this
    +2

    Comment number 829.

    What a load of complete nonsense. My pay has not changed in the last 3 years, yet diesel has gone up, gas/electric has gone up, my council tax has gone up, supermarket bills are higher... I could go on. And I've had no tax cuts. The pound in my pocket is definitely shrinking...

  • rate this
    +7

    Comment number 828.

    These statistics remind me of the grain reports in Animal Farm, where the other animals are being worked harder and harder and there rations reduced, but the pigs announce that the feed supplies are better than ever to try to convince the animals that what they actually feel and experience must surely be false as the statistics PROVE otherwise, life is now better!

    We're all in it together you see

  • rate this
    +7

    Comment number 827.

    The Government has also produced figures that shows we are all younger than this time last year too. Come off it, David. Who are you trying to kid?

  • rate this
    +6

    Comment number 826.

    770. mushroomfarmer
    "OMG! they're starting to believe their own lies!"

    This is where it gets dangerous; see, they all start thinking the same & then proceed to dehumanise groups.

    Perhaps the poor or unemployed. Comparing them to rats etc.

    Its called the five steps to tyranny. And it usually culminates in the murder of millions of innocent people.

    http://www.youtube.com/watch?v=PeBisBQblFM

  • 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
    +10

    Comment number 824.

    You have to remember, anyone earning less than £100,000 a year don't exist to Tories.

    So yeah, from their perspective, wages have probably doubled.

  • rate this
    +5

    Comment number 823.

    Excuse me "Nightmare" er sorry Lightmare 636. I am far from mawkish. Unlike you and the Coalition, I DO live in the harshness of the real world.The world "doesn't need" to owe me a living. I hold down 2 jobs and have worked since 1968. Yes maybe I should have used the word "despicable" rather than "criminal"(figue of speech etc) when talking of the immorality of this Govt. It would have sufficed.

  • rate this
    -4

    Comment number 822.

    800.U14758196
    Quickest way to a payrise is to move employer!! After 2 years without a raise I moved on and got a 35% payrise. Luckily there are plenty of IT jobs if you have the skills

    Yes, but the problem is that people without any skills think they are entitled to the same raise, just by showing up and doing their job. And they're not.

  • rate this
    0

    Comment number 821.

    The stats are all very well, lets see the formula for arriving at these figures.

    We need to control our political parties so when a party proposes a study, the opposition parties either subscribe to their formula to do so or propose their own which would run alongside. The findings can then be presented to the public along with the rationale, so the public can make an informed decision.

  • rate this
    +4

    Comment number 820.

    Pull the other one. These fantasy figures are getting ridiculous now.

    Truth is, fiddling the figures is all they have and I actually think that if they hypnotise people into believing things are better then people will go out and spend money they haven't got, or something, and the economy will magically get better.

    They're sounding like the Iraqi Information Ministry now.

  • rate this
    +2

    Comment number 819.

    Pleese excus my ignarance, I am not very good wiv polotics and stuff.

    Pleese excus my speling 2.

    But is ther a elecshon soon???

  • rate this
    +8

    Comment number 818.

    I know David Cameron is lying because his lips moved

  • rate this
    +3

    Comment number 817.

    755.
    mike

    Not so much a draw bridge, but a couple of massive iron gates.
    And yes, they, and the wall, do keep the riff-raff out.

  • rate this
    +1

    Comment number 816.

    Two words spring to mind!!

 

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