Real wages in Britain are set to fall below 2008 levels by 2021 and the poorest third of households are going to get poorer.
These are the stark conclusions from two think tanks, the Institute for Fiscal Studies (IFS) and the Resolution Foundation (RF), following last week’s Autumn Statement.
The IFS said this was the “worst decade for living standards since the last war and probably since the 1920s”.
It expected average earnings to rise by less than 5 percent by 2021 in real terms—to a level that’s 3.7 percent lower than predicted in March. This amounts to more than a decade without growth in real wages.
It also means Tories will not follow through on chancellor George Osborne’s promise of a £9 minimum wage by 2020. That’s because the minimum wage is calculated based on median earnings.
The RF showed that chancellor Philip Hammond’s changes to Universal Credit (see box, right) won’t stop poverty rising.
It set out how much different households will lose every year up to 2020 because of the benefit freeze. At the time of this year’s budget, a single unemployed household was set to lose £170. Now it’s £220.
A single unemployed parent with one child was set to lose £300. Now it’s £390. Those in work are now set to lose £470, compared to £365 at the time of the budget in spring.
A couple with one worker and two children lose most—£640 now, compared to £495 after the budget.
The RF said the poorest 10 percent would see their incomes drop by over 3 percent by 2020 due to tax and welfare policies. And “the entire bottom third” of households would suffer falling incomes.
This matches government data showing that the poorest 30 percent of households will be poorer by 2019-20.
Hammond defended his budget by saying he was preparing for a “rainy day”. He used lower expectations of economic growth—blamed on the vote to leave the European Union and workers’ “low productivity”—to justify yet more austerity.
Shadow chancellor John McDonnell rightly said Hammond’s speech gave no hope.
Unfortunately he appeared to call for more money for businesses as well as for workers. “The figures speak for themselves,” he said.
“Growth down, wage growth down, business investment down.”
McDonnell said the Tories’ economic plan had “failed”. But the plan is to make ordinary people pay for the crisis—and so far it is working.
The Tories know that austerity, privatisation and cuts are unpopular. So they try to present these things as inevitable or for the good of ordinary people.
Theresa May hoped to “move on” from what she sees as a toxic legacy left by former chancellor George Osborne and David Cameron. In reality she is continuing their project.
Tories’ toughness means little when it comes to rich
Tory proposals to “crack down” on top bosses’ pay and protect workers’ pensions are a hypocritical lie.
Prime minister Theresa May said on Tuesday that she wanted to “create an economy that works for everyone, not just the privileged few”.
This apparently meant targeting an “irresponsible minority of privately held companies acting carelessly—leaving employees, customers and pension fund beneficiaries to suffer when things go wrong.”
But the proposals, published in a government consultation document on Tuesday, amount to almost nothing.They include making firms publish the difference between chief executives’ pay and average workers’ wages—but not making bosses pay workers more or themselves less.
They also suggest introducing a “code of practice” for the biggest companies, which bosses can ignore so long as they can “justify” it.
Plans to put workers on company boards now just mean giving workers a “voice”.
The Tories’ actual plans in last week’s Autumn Statement (see page 17) show whose side they are on—holding down wages while cutting tax for bosses.