Average real earnings are set to fall by £1,200 as a result of rising inflation and lower wage growth new analysis of the House of Common’s Library has shown.
At the Budget last month we saw inflation forecast up this year and average earnings forecasts lowered next year and for the next two years.
The combination of higher prices and lower wages is that living standards are set to be squeezed.
This time last year, at the Budget 2016, the Office for Budget Responsibility (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 latest analysis comes on the back of IFS research last year which showed that the “outlook for living standards has deteriorated rather sharply”, describing the prospects for real earnings growth as “dreadful”.
Tax and benefit changes, as well as previous OBR forecasts will impact on living standards; however, this analysis focuses just on inflation and earnings outlook.
Cllr Stephen Morgan, Portsmouth’s Labour Leader, said:
“Too often in this great city of ours I meet families who are struggling to make ends meet. 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 the current government has failed working people.
We need a real living wage. We need a better deal for our city from government to support our region’s growth and our support local communities.”