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.


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 855.

    On the matter of MP pay. I believe we should pay every one of them £110,000 per annum with £50,000 per annum fixed expenses, no more and no less. That MP's should not be allowed to have any other job or income, while their assets and savings, other than their main residence, should be taken into trust with guaranteed growth of 1% above RPI, anything above this being taken by the state.

  • rate this

    Comment number 854.

    When will people realise that Gordon Brown ran this country into the ground???

    Ed Balls-Up and David Millibland were also part of his cabinet of incomptence!

    The country is slowly healing and Cameron, Clegg & Osbourne have had to make some very harsh decisions and they are turning the UK around and we are growing into a very strong economic power within Europe.

  • rate this

    Comment number 853.

    Just Check my back Account. Seems that even after cutting back on all "pleasure Spending " i am still not flush. My pay have gone down over then past 5 years and i am in the private self employed sector. seems all my bills and taxes have gone up. When will the politicians stop lying. We are not stupid. Roll on 2015

  • rate this

    Comment number 852.

    It's amazing that one of the comments of good news #95 @betsyboo is the lowest rating. Just goes to show how those who are the most angry are the most jealous. He's stating a fact and they hate it

  • rate this

    Comment number 851.

    Recently we found my husbands pay slip from 8 years ago - his take home pay (ie. after tax, which is PAYE) is the same as it is now despite earning supposedly £7000 more per year. We are certainly not better off - in fact our family is a whole lot worse off.

  • rate this

    Comment number 850.

    I like many 1000's of others have had 1 payrise in the last 4 years, that was a paltry 1% coupled to this is a 3 year rise in my pension cost (public sector) has seen my take home pay fall. Cost of living in the past year has risen somewhat.. lies must mean theres an Election coming.
    Oh and the 11% pay increase for MP's /:

  • rate this

    Comment number 849.

    UK pay not rising for me, says employed middle class guy.

    No pay rise for 6 years, I work in a team of two that was a team of 17 ten years ago.

    In real terms, I have less coming in, and more going out.

    Hope those MP's are all OK though. That's the important thing.

  • rate this

    Comment number 848.

    Once again the BBC should be thoroughly ashamed for trumpeting this Tory propaganda!

    Do some journalism, report the REAL news and stop pandering to the rich and the diownright deceitful. Anyone with an ounce of common sense knows this absolute nonsense!

    People are relying on FOOD BANKS just to survive!

    Be ashamed BBC, be very very ashamed!

  • rate this

    Comment number 847.

    768. zzgrark

    Cutting spending could have been done in many different ways. Labour had a plan for massive spending cuts, with a short delay built in. Labour's plans' however, were being applied intelligently with a view to maintaining spending where it could most help the economy, e.g. large building projects. The coalition cut across the board indiscriminately knowing they could blame Labour.

  • rate this

    Comment number 846.

    As an employer we always aim to offer above inflation wages rises every year as our prices increase year on year, and so do most of our costs. The real cost of living crises has been caused by the lack of credit as the financial institutes re-organise balance sheets and the last Labour government increasing benefits for all and promoted debt as a way of life.

  • rate this

    Comment number 845.

    While polititions continue delude themselves about improving take home pay. Having received first payrise since economic downturn my salary has dropped by 15% over the period had it kept pace with the Gov's target inflaion rate of 2%. Maybe the Westminster numties should get out of its ivory towers and see how their 1.5 decades of financial screwups have effected the rest of us in the real world

  • rate this

    Comment number 844.

    752 "You mean Tory wives in divorce proceedings? Yes I'm sure their incomes have gone up in real terms too" - ah yes, you couldn't answer the question as to why Socialism believes £26,000 per annum completely free is not enough and not "something for nothing", because there is no defence, so you made a silly comment. Well done. :)

  • rate this

    Comment number 843.

    Really ???? On what planet is this happening ??? Not on planet earth .
    Pay rise is wiped out by rise in gas and electric. Petrol costs is making driving to work a massive percentage of my take home pay. As public transport has been cut I have no choice but to drive.
    Am I getting better off ??? NO WAY. !!!!! Comment sums up just how out of touch these people really are . Makes me sick to the core

  • rate this

    Comment number 842.

    TRUTH, above all is what we want, what we deserve isn't it. We can handle the truth. We don't want trumped up figures we know to be false by experience and propaganda that's peddled, as if we're all stupid.
    We are constantly insulted by this.

    (The first commandment of any decent society and governing body should be the TRUTH. (Now who's being unrealistic ay.!!))

  • rate this

    Comment number 841.

    Torries must be really desperate if they bring out made up statistics already now. Besides even if it is the case it is no thanks to the Torries but more to LibDems

  • rate this

    Comment number 840.

    725. Mark_from_Manchester

  • rate this

    Comment number 839.

    Public sector worker here not had a pay rise at our work for the last 8 years anybody getting only 1% each year arrhhhh poor you, the real world says want more money you have to move jobs

  • rate this

    Comment number 838.

    My wife and I earn a "medium" income. We keep detailed household accounts (we are sad like that). Compared to 2007 we are thousands better off, not entirely 100% due to the mortgage rate. Our income has risen more than our expenditure. That isn't a party political comment, just a fact.

  • rate this

    Comment number 837.

    If you only look at the editor's picks you would think everyone on this thread agreed with Cameron. Bias at the BBC? Surely not!

  • rate this

    Comment number 836.

    As a Single earning family in 20% tax bracket I can't say we have noticed.. Despite having one kid still at home... I have had to sub my two kids in higher education an extra 2k as they had their loans reduced this on top of the £800 or so I was emotionally blackmailed by HM Gov to give them...


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