Average real earnings are set to fall by £1,200 as a result of rising inflation and lower wage growth analysis conducted by the Labour Party revealed.
Labour analysis, in partnership with the House of Common’s Library, revealed that changes announced by the government in the last Budget would reduce real term earnings over the coming years.
At the Budget last month inflation was forecast up for this financial year and average earnings forecasts lowered next year, and for the next two years. The combination of higher prices and lower wages will result in living standards becoming further squeezed.
This time last year, at the Budget 2016, the OBR was forecasting real average earnings growth of 9 per cent between 2015 and 2020 (average earnings adjusted for CPI inflation). However, at this year’s Budget, this was revised down to growth of 5 per cent between 2015 and 2020.
Converting this to income values, Budget 2016 was forecasting that real average earnings would be almost £2,500 higher in 2020 than in 2015. However, at Budget 2017 this was revised down to £1,300. This is a difference of £1,200.
This analysis comes on the back of research by the Institute for Fiscal Studies (IFS) which reported that, “outlook for living standards has deteriorated rather sharply”, and the Resolution Foundation which said that the “outlook for living standards in 21st century Britain does not look promising.”
Andrew Gwynne said:
“The analysis conducted by Labour and the House of Commons library shows definitively that the Tories economic failures are now clearly damaging wage growth.
“Living standards are being squeezed and working people are being hit hard, this is despite the Tories promising at the last General Election that they would raise living standards.
“The truth is that Theresa May has failed working families – Only Labour will take the action needed to end the Tories’ economic failure by introducing a Real Living Wage of £10 an hour by 2020 and by investing in our regions and our local communities.”