Workers now facing 13 years of lost earnings after Chancellor’s grim message on pay in the Autumn Statement
WAGES will still be lower in 2021 than they were before the financial crash - after Philip Hammond blew billions on building projects instead of help for struggling workers.
The dire finding of more than a decade of lost earnings came as economists pored over the Chancellor’s Autumn Statement mini budget on Wednesday.
In it, the Treasury boss revealed grim forecasts of storms ahead for the economy, which will spark a fresh living standards squeeze.
Though wages will still continue to creep up slightly ahead of inflation in the next five years, they will be 3.7% lower in real terms than had been predicted in March.
The Institute for Fiscal Studies said that tiny increase will not now be enough to offset a jumbo drop after 2008.
Another think tank – the Resolution Foundation – said average earnings will grow by a paltry 1.6% from 2010 to 2020.
That compares with a 12.7% hike in the 2000s, and rises of more than 20% in every other decade since the 1920s.
The triple hit on wages over the next four years comes from lost growth – in part from Brexit wobbles – the return of inflation after the pound’s post referendum devaluation, and the government’s on-going freeze of in-work benefits.
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The lowest earning 30% of society will be hit the hardest, the IFS found.
The respected think tank’s boss Paul Johnson said: “One cannot stress enough how dreadful that is — more than a decade without real earnings growth.
“We have certainly not seen a period remotely like it in the last 70 years.”
The hit comes after Mr Hammond made a “clear prioritisation” to pour cash into roads, housing and science instead of direct cash support for the Just About Managing.
Mr Johnson added: “Given the choice between jam today in the form of more money in people’s pockets and jam tomorrow in the form of potential economic returns from greater investment, he went for jam tomorrow”.
Reversing all £3.4bn of earlier cuts to Universal Credit – rather than just £700m of it – would be the best way to help the lowest paid immediately, he added.
But the respected economists’ verdict sparked a furious response from the Government.
Theresa May was forced to defending her Chancellor’s decision making.
The PM said: “We are helping people in a variety of ways.
“That includes raising the national minimum wage, raising personal tax allowance, and of course we’re building more affordable homes.”
But she also insisted: “What matters underneath all of this is making sure we have a strong economy.
“That’s what the Autumn Statement was about yesterday.”
Downing Street also attacked the IFS for using the wrong measure for living standards.
Instead of measuring wages, a more accurate guide to living standards is real household disposable income – which includes the effects of big income tax cuts – which will go up by 2.8% by 2021, No10 insisted.
Uncertainties over how Brexit with play out are the biggest reason behind the growth slump, with the Treasury’s forecasters predicting the wobble over the referendum verdict will slash 2.4% from the nation’s wealth over five years.
But there also several others, including Britain’s long term productivity problems, China’s slowdown and new US president Donald Trump’s trade war threat.
Hammond: I'm in control of debts
PHILIP Hammond has been forced to insist he is in control of state coffers as Britain’s debt mountain balloons to almost £2trillion.
The Chancellor came under fire after revealing on Wednesday that he would be borrowing an extra £122billion over the next five years.
It also emerged that Britain’s debt burden in relation to GDP has been higher only three times in history — in 1968, during World War Two and the Napoleonic Wars.
And a war of words continued over whether the Office of Budget Responsibility’s prediction of a £58billion Brexit were too gloomy. Mr Hammond said of the nation’s debt: “It’s larger than we would like it to be, but it’s not out of control.”
Referring to the OBR, he added: “Forecasting is not a precise science, there’s a lot of uncertainty.”
But the OBR — which admits a 50 per cent chance of it being wrong — won backing from the Institute of Fiscal Studies, which branded its forecast “modestly upbeat” compared to others.
The storm clouds mean national income in 2020-21 will be £30 billion lower in total than was thought during the Office of Budget Responsibility’s last projection in March – the equivalent to £1,000 per household;
It also emerged yesterday that the growth slump will see a slower rise in the National Living Wage.
Mr Hammond boosted it from £7.20 an hour to £7.50 next April.
But it will now climb by only 20% rather than by 25% by 2020.
