UK workers ‘will miss out on pay rises worth ?15,000 over next five years’

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Jeremy Hunt’s autumn statement will mean Britain’s workers will miss out on pay rises worth ?15,000 over the next five years as the chancellor’s tax-heavy budget pressures the nation’s “squeezed middle”.

Figures published alongside Jeremy Hunt’s autumn statement on Thursday by the Office for Budget Responsibility said the UK was in a recession that would wipe out eight years of growth, with British households set to face the biggest fall in living standards since records began.

The Resolution Foundation thinktank said on Friday that the dire economic outlook means that real wages are now not expected to return to 2008 levels until 2027.

If pay had continued to grow at the pre-crisis peak, workers would be ?292 a week, or ?15,000 annually, better off over the next five years.

The thinktank said that Hunt had put further pressure on the “squeezed middle”, with the budget set to bring about a permanent 3.7% income hit to typical households.

The Resolution Foundation said that the move to maintain a boost benefits in line with inflation next year represents the biggest rise since 1991, making a huge difference to those on low-to-middle incomes. Households on universal credit will receive a boost of ?244 on average next year.

However, the scaling back of support for soaring energy bills next April will mean that the government will help households offset only 30% of the rises expected over the next two years.

About one in eight families – 3.3m homes in total – will be paying more than ?2,000 more for energy than they did last year.

However, the poorest fifth of UK households will be covered for 48% of the expected rises because of the government’s targeted lump sum payments plan.

“As an energy importer during an energy price shock, Britain is getting poorer,” said James Smith, a research director at the Resolution Foundation. “Deciding how we do so was, to a significant extent, the choice facing the chancellor. He has decided that households will do so with higher energy bills, higher taxes and worse public services than previously expected. Whether or not making the choices was tough, the reality of living through the next few years will be.”

Speaking on Friday morning, Hunt said: “People will feel like even despite the hardship they can do things like go to the pub. We want people to feel the government is helping them through the recession. There is a plan, we’ll get through it, bring inflation down and growth the economy healthily when we get to the other side.”