Healey’s cost of living battle just got harder as workers face ‘real terms pay cut’
Andy Burnham and John Healey have spoken at length about efforts to provide “breathing space” to both households and businesses. This task at next week’s Budget has now become more difficult. Over the summer the jobs market continued to weaken. Workers are at risk of being worse off while job seekers are finding it harder [...]
Andy Burnham and John Healey have discussed measures to provide "breathing space" for households and businesses in their upcoming Budget. However, the task has become more challenging as the jobs market weakened over the summer, putting workers at risk of a real terms pay cut. Despite this, wage growth continued to slow, falling to 3.7 percent, including bonuses and 0.6 percent excluding them.
This pay growth is far below the Bank of England's target to reach two percent inflation in the medium term. Thomas Pugh, chief economist at RSM UK, warned that private sector workers are likely to face a real terms pay cut as inflation rises above three percent. Healey faces limited fiscal headroom, projected to have been reduced to around £12 billion.
He has excluded revenue-raising measures like a capital gains tax hike, with a banking tax expected to be the main new income source. Despite the challenges, Healey can celebrate a drop in unemployment to 4.7 percent between June and August, a slight improvement from 4.9 percent previously. This unemployment reduction, alongside a modest rise in wage growth, might provide some relief to the Chancellor, who could have more room for maneuver in the upcoming Budget than initially thought.
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