New graphs produced by a leading think tank show a “dire” picture for the Chancellor after her first Budget with projections real wages are expected to have grown by a paltry £13 in two decades by the middle of this Parliament.
The grim data from the Resolution Foundation highlighted a “combination of higher inflation and weaker growth stemming from increased taxes on employment”.
Sharing the information on X, the Foundation said: “…The wider pay outlook is dire. Higher inflation, weaker growth from increased taxes on employment plus challenging outlook equals real pay stagnating again in the middle of this Parliament.
“By 2028 real wages are expected to have grown by just £13 a week over the past two decades.”
However, the think tank also pointed to some good news for 18 to 20-year-olds whose pay packets will get a big boost from the Chancellors increase of the minimum wage.
The Foundation added the Budget has not yet delivered a decisive shift away from Britain’s record as a “stagnation nation”, with a weak outlook for growth and living standards.
It said in a statement: “Real household disposable income per person is projected to grow by 0.5 per cent a year on average across the Parliament.
“While stronger than growth during the last Parliament (0.3 per cent), it would still be the worst term for living standards under a Labour government, lower even than the 0.8 per cent annual growth recorded in the 2005-2010 Parliament.”
“…the poorest half of households face a 0.8 per cent reduction in their annual income on average, while the richest half face a 0.6 per cent decrease.
“However, increases to Capital Gains and Inheritance taxes (not included in this modelling) are more progressive, so wealthy households will face the largest cash impact overall.”
Mike Brewer, interim chief executive of the Resolution Foundation, said Ms Reeve’s first Budget was never going to be a “crowd pleaser”.
He said: “By prioritising extra spending on public services and investment, the Chancellor is borrowing an extra £32 billion a year by the end of the Parliament, with another £41 billion coming from tax rises too.
“The short-term effect of these changes will be better funded public services – not just across schools and the NHS – but, critically, also in our justice system. But families are also set for a further squeeze on living standards as the rise in employer National Insurance dampens wage growth.
“With Britain finally turning the page on its longstanding failure to invest thanks to a £100 billion boost to public capital spending, the hope is that this short-term pain will eventually turn into a long-term living standards gain. But if it doesn’t, future Budgets won’t be any easier to deliver, especially if further tax rises are needed.”
