Tory failure on living standards sees real earnings fall by £1,200

Labour
analysis, using House of Common’s Library endorsed modelling, shows that:

Average real earnings are set to
fall by £1,200 as a result of rising inflation and lower wage growth

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 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.

Today’s
analysis comes on the back of IFS analysis last year which showed that the
“outlook for living standards has deteriorated rather sharply”, describing the
prospects for real earnings growth as “dreadful”.

The
Resolution Foundation has also said that the “outlook for living
standards in 21^st century Britain does not look promising” and that
“weak and regressive nature of income growth in the years ahead should concern
us all”. 

This analysis looks at the effect on living standards
resulting from changes to OBR forecasts at this year’s Budget.

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.

John
McDonnell MP, Labour’s Shadow Chancellor, commenting, said:

“Today’s analysis shows the impact of seven years of
Tory economic failure.

“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
people and the Tories are taking the country backwards. Labour would make
different choices and stand up for ordinary
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.”