Leading finance expert’s alert over living figures
A leading finance expert has warned that Government claims household wages are increasing above rates of inflation have failed to account for key factors.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), who is originally from Shoreham, has spoken out in the wake of a major row that has erupted between Conservatives and Labour over a perceived cost of living crisis.
Chancellor George Osborne cited figures from a Government real household disposable income measure to state that earnings were growing rapidly at rate of a third faster than 2.4 per cent inflation levels up to April 2014.
But according to a number of independent analysts, including the IFS, the Government failed to consider a number of scenarios, including the impact of ongoing cuts to benefits.
Speaking on the issue, IFS director Mr Johnson said: “There are some concerning figures being quoted surrounding earnings. Living standards have undoubtedly fallen since 2010.
“People are in fact about six or seven percent worse off economically than before the recession and will not see an obvious rise in living standards for years.
“The data set that the Government has used for its figures on earnings does in fact seem to show that pay rose between 2012 and 2013, so we are starting to move in the right direction.
“Best estimates show that earnings will increase over the next five years, but we are still behind levels of pay for 2008 at the start of the recession.”
In response to the report, Labour has produced its own figures, with shadow chancellor Ed Balls claiming that households will in fact be around £1600 worse off than under his party by the time of next year’s general election.
The issue has deeply divided to the two political parties, with Conservatives pointing to studies released this month from the Office for National Statistics that have shown five modest successive quarters of economic growth.
However, a number of observers have highlighted the fact that economic output still remains lower than at the start of the recession in 2008.
Mr Johnson added that one of the key factors that remained an issue for many families had remained the high cost of energy, which continued to place a strain on many household outgoings.
But on a note of optimism, he added that historic low mortgage rates had offered some sense of relief to many households whose wages have been hit in recent years.
He also said there were encouraging signs of confidence within the manufacturing sector in particular, which pointed to wider sustained recovery within the economy.