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
    +3

    Comment number 875.

    SUPERMARKET POLITICS - A SPECIAL OFFER EVERY WEEK BUT THE PRICE ALWAYS INCREASES.

  • rate this
    0

    Comment number 874.

    Lets cal, it the 30% campaign !

    What ever job offer you get ask for min. 30% more than offered - everyone should do it to get back the money the industry "stole" from us...

  • rate this
    +5

    Comment number 873.

    So David Cameron thinks a pay increase of 0.1% above the rate of inflation is enough for "hard working" people while the EU limit of 100% on bankers bonuses (200% with explicit shareholder approval) is too low. Of course bankers had nothing to do with the recession and they deserve to be well paid while the rest of us suffer because they fund the Conservative Party.

  • rate this
    +3

    Comment number 872.

    what a load of rubbish, sorry the stand of living for most in the country has got worse,

  • rate this
    +7

    Comment number 871.

    I work for a limited company, but majority owned by UK Govt. so I'm public sector. They said they had to follow Osborne's guidelines so we got 1% (ie yet another real terms cut). And that 1% was wiped out by taking extra pension contributions from us.
    They also gave the top boss 17% shortly before he retired (final salary pension of course)
    It's just LIES, all the way down.
    ALL LIES LIES LIES

  • rate this
    +1

    Comment number 870.

    @846.Aly
    'the last Labour government increasing benefits for all and promoted debt as a way of life.'
    Funny thought the whole debt driven economy started in the 80's under the Tories.

  • rate this
    +6

    Comment number 869.

    As a public sector worker, I've not had a pay rise for years.
    And the increase to my pension contribution has been greater than the gain from the increased personal tax allowance, so my take home pay has gone down slightly.

    Millions in the same position I'm sure.

  • rate this
    +3

    Comment number 868.

    Why do they bother even bringing out these 'facts'?
    People who haven't seen an increase in wages or are on benefits won't think "oh that's great the economy is really picking up I think I'll vote Tory".
    People who have had increase know whether it is due to their own efforts - will vote the way they always do.
    MP's trying to claim credit for your efforts. No change there then.

  • rate this
    +2

    Comment number 867.

    So presumably, this is the Tory fire engine tackling those Labour arsonists? Pity it lacks substantial water in the tank. As with Osborne sucking up to Carney, these frequent displays of premature pre-election desperation are rapidly becoming embarrassing & undignified, if not blatantly obvious.

  • rate this
    +4

    Comment number 866.

    Thank you for this crapy survey, shows where our tax money is been stupidly spent on some un inaccurate survey. I am glad that i been saving since a very young age and this does not effect me but many of friends are not in the same position. Our pay in the private sector may increase by 7-14p but everything else increases and it is 3.7% more going out of our pockets

  • rate this
    +6

    Comment number 865.

    One word. Starts with b, ends in s, rhymes with clocks. Another Tory trip to planet self deluding.

  • Comment number 864.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +5

    Comment number 863.

    They would say this.

    After all, they also say we're happier than we have been in years - despite the poverty rate increasing under them.

    Its pretty simple really; When this so called "coalition" speaks, what ever they say, reverse it and only then you know what they really mean, and more importantly whats really happening.

    So in this case, wages are stagnant, if not decreasing in real terms.

  • rate this
    +4

    Comment number 862.

    They came to this conclusion by taking in to account cuts to NI. My wages are higher than they were years ago but im paying out way more in basics which bring my disposable income to an all time low.
    Plus I had part time work that was self employed so I have to pay a flat rate NI on top of NI I paid for paye jobs. Even on weeks I never worked self employed.
    This soundbite for GE is laughable

  • rate this
    -1

    Comment number 861.

    826. The Alf Garnett Experience

    "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."

    Sounds like the Left talking about bankers

  • rate this
    +4

    Comment number 860.

    BBC, using titles such as "UK pay rising in real terms" really does not give an accurate picture. Playing with words when people are really suffering is in my opinion totally unprofessional and perhaps adds to the many claims that the BBC is not really impartial as it claims.

  • rate this
    +4

    Comment number 859.

    Tory propaganda. And the BBC go along with it. Shame.Bet this dont get the Editors Pick

  • 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
    +6

    Comment number 857.

    757.AuntieLeft
    Scaremongering, misinformation, spin = Labour
    ---
    I have no love for Labour but I think the Condemns are engaging in misinformation and spin with their claims of good news this week.

    You are engaging in scaremongering with your views of Labour.

    Politicians = pots and kettles

  • rate this
    +6

    Comment number 856.

    The Ministry of Truth is working overtime this week... almost makes we want to get the Bunting out for our Glorious Leader

 

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