Inflation Nation: UK Sees Largest Decline in Wages Since 2014

LONDON, ENGLAND - MARCH 13: A shopper walks past row of shops on Kilburn High Road on Marc
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Kurt Zindulka

Wages in Britain have seen the sharpest decline in real terms since 2014 as the impact of inflation grips the nation, the Office for National Statistics (ONS) revealed on Tuesday.

According to the UK government’s official statistician, wages — excluding bonuses — rose by 3.8 per cent in the three months leading up to January, yet the gains were entirely wiped out by rising inflation.

While the previous reporting period saw inflation wipe out wage gains to zero, the latest figures show that in real terms the average Briton saw their wages actually decline by one per cent when counting the impacts of inflation, the sharpest such decline since 2014.

Commenting on the figures, the general secretary of the Trade Unions Congress (TUC), Frances O’Grady said that the government should introduce support measures for workers in next week’s spring statement from Chancellor of the Exchequer Rishi Sunak.

“Working people deserve financial security and a wage they can live on. But instead, they are facing the steepest decline in real pay for eight years, and a cost of living crisis that will get worse if the government doesn’t act now,” O’Grady said

“Energy bills will rise at least 14 times faster than wages this year. Household budgets are already stretched to the brink and can’t take any more,” she added.

While the government has been facing widespread calls to increase spending to alleviate the energy and household spending crunches, others have questioned why the Conservative government is steadfastly refusing to reduce the tax burden, which has climbed to a seventy-year high under Prime Minister Boris Johnson’s government.

The government has argued that it is necessary to increase taxes, including the hike on national insurance payments — a tax on income — is necessary in order to prop up the country’s socialised healthcare system in light of massive backlogs incurred during the Chinese coronavirus crisis.

Despite the soaring cost of energy, the government has also refused to cut taxes on electricity, even though some thirty per cent of average household electricity bills are devoted towards either subsidies for so-called green energy firms or direct taxes to the government. Boris Johnson had once even claimed cutting taxes on energy could be a benefit of Britain leaving the European Union, but now he’s in government he has changed his tune.

The latest inflation figures come from before the war in Ukraine, meaning that the inflation hit on wages will only increase. Indeed, a report released this week from the Resolution Foundation think tank warned that there could be a “second peak” of as much as 8 per cent inflation in Britain by the Autumn.

The think tank went on to warn that the poorest citizens will likely face real level inflation rates of 10 per cent, due to the outsized spending on food and fuel in their household budgets.

The figures also come ahead just two days before the Bank of England is set to announce its latest interest rate decision, which is expected to be raised from 0.5 per cent to 0.75 per cent in the hopes of curbing inflation.

There were some signs of optimism within the UK economy in the latest ONS release, however, which noted that unemployment falling slightly more than expectations, from 4.1 per cent to 3.9 per cent, with the number of people out of work at 1.34 million, which is the first time the figure fell below pre-pandemic levels.

Responding to the release, Chancellor Rishi Sunak said: “Thanks to the unprecedented economic support we’ve provided, we’ve now seen a year of falling unemployment and a stronger jobs market bounce back than so many predicted.

“I am confident that our labour market is in a good position to deal with the current global challenges, with payrolled employee numbers above pre-pandemic levels in every nation and region and redundancies at record lows.”

Follow Kurt Zindulka on Twitter here @KurtZindulka

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