Record wage rises as Rishi Sunak insists there is light at the end of the tunnel

Data from the Office for National Statistics (ONS) yesterday showed that the growth of pay reached 7.8 per cent compared to last year.

The ONS said that this was the highest since comparable records began in 2001.

However, once inflation is taken into account, real wages were down by 0.6%.

The Prime Minister on Tuesday said that the figures, in addition to an anticipated fall in inflation, showed the Government was correct to stick to its tight spending rules.

“The plan is working. I think there is light at the end of the tunnel,” he said.

“If we get through this, people will really start to see the benefit in their bank accounts, in their pockets, as inflation starts to fall.”

However, the increase in wages is expected to push the Bank of England to raise interest rates for the fifteenth consecutive time, with the cost of mortgage payments set to wipe out any wage increases seen across the workforce.

The Bank’s current base rate sits at a 15-year-high of 5.25 per cent.

“When it comes to tomorrow’s CPI figures, we think there’s some scope for a positive surprise on services inflation, but ultimately a September rate hike still looks nailed on,” said James Smith, developed markets economist at ING.

Yesterday’s figures were accompanied by less positive news for plans to get more people into work, with unemployment rising and record numbers shown to be inactive due to long-term sickness.

The ONS said that the unemployment rate rose 0.3 percentage points up to 4.2 per cent, bringing the measure above pre-pandemic levels.

However, unemployment in Yorkshire decreased by 1.1 percentage points, the largest decrease of any region.

At the same time the number of vacancies have fallen for the 13th time in a row to 1.02 million, a drop of 66,000.

The number of people who are economically inactive because of long-term sickness is now at a record 2.5 million, up 400,000 since the start of the Covid-19 pandemic.

Chancellor Jeremy Hunt said: “Thanks to the action we’ve taken in the jobs market, it’s great to see a record number of employees.

“Our ambitious reforms will make work pay and help even more people into work – including by expanding free childcare next year – helping to deliver on our priority to grow the economy.”

Labour today said that the Conservatives have left households significantly worse off even if this week’s inflation figures show improvement.

The Office for National Statistics (ONS) is expected to reveal Consumer Prices Index (CPI) inflation of 6.7 per cent for July, down from 7.9 per cent in the previous month.

Ahead of the release of the July data, the opposition said that even if inflation does drop families will be paying £82 more a week on the cost of living than in 2021/22.

The party said weekly spending on items such as food, transport and fuel bills is forecast to have risen from £529 in 2021/22 to £611 today.

Labour said that even if Mr Sunak meets his target to halve inflation, families will still be hundreds of pounds worse off a month than two years ago.

Shadow economic secretary Tulip Siddiq said: “Families in Britain are worse off because of 13 years of economic chaos and incompetence under the Conservatives.

“We’ve had a decade of low growth, low pay and high taxes. Now families are paying the price of the Conservatives’ cost-of-living crisis with higher bills and prices in the shops.”

“If Labour were in power today, we would introduce a proper windfall tax on the huge profits the oil and gas giants are making to help families with the cost of living.

“Labour’s plan to build a strong economy will boost growth, increase wages and bring down bills so working people are better off.”