“Rishi Sunak congratulating himself over today’s [15 November] figures will be cold comfort for all the hard-working people still bearing the brunt of this Conservative chaos. 

“For months on end, people across the country have been watching as their pay cheque gets squeezed from all sides, draining every spare penny. From the ever-increasing cost of the weekly shop to skyrocketing mortgage payments. 

“Enough is enough. With next week’s Autumn Statement the Government must properly help families and pensioners struggling with the cost-of-living crisis and give our NHS the funding it desperately needs.” Liberal Democrat Treasury spokesperson Sarah Olney MP 

Lib Dem analysis as reported in the Times:

Oliver Wright www.thetimes.co.uk 

Higher prices have cost workers the equivalent of a 3p rise in income tax over the past two years, new research suggests, as Rishi Sunak looks set to finally hit his 5 per cent inflation target.

An analysis by the House of Commons library found that for 22 months of the last two years, average salaries increased by less than the rising cost of living.

Researchers calculated that a worker earning £28,400 in October 2021 was now £697 worse off than they would have been if pay had kept pace with inflation. For someone earning £55,000 a year the loss was even greater with average salaries now £1,348 less than might have been expected without steeply rising prices.

They added that the losses were greater than if the government had increased income tax by 3p in the pound and average earnings had kept pace with inflation.

The analysis comes ahead of new data from the Office of National Statistics due to be published on Wednesday which is likely to show that the prime minister has met his pledge to bring down inflation to below five per cent two months earlier than he promised.

Inflation stood at 6.7 per cent in September but economists expect it to fall sharply when October’s figures are released because last year’s Ofgem energy price cap increase will have dropped out of the data.

The consensus forecast is that inflation will have fallen to 4.8 per cent — 0.2 percentage points below Sunak’s target, which he pledged to meet by the end of the year.

In other good news for the government, separate figures showed that despite the hit on living standards over the last two years wage growth is now finally outstripping inflation.

The ONS said average regular earnings, excluding bonuses, increased by 7.7 per cent in the three months to September, down from an upwardly revised and record high of 7.9 cer cent in the previous three months.

At the same time, the unemployment rate was unchanged at 4.2 per cent, although job vacancies fell to the lowest level for more than two years, down 58,000 quarter-on-quarter at 957,000.

Jeremy Hunt said it was “heartening” to see inflation falling and real wages growing which meant “keeping more money in people’s pockets”. Speaking in the House of Commons, the chancellor said the government was starting to “win the battle” against inflation which would allow the government to “focus on the next stage” at his autumn statement next week.

“As we start to win the battle against inflation, we can focus on the next stage which is growth,” he said.

But the Liberal Democrats, which commissioned the Commons research on lost earnings, said the words would “ring hollow for families who have seen their wages decimated by years of Conservative chaos”.

“The squeezed middle has been hardest hit by this toxic mix of stagnant wages and high inflation,” Sarah Olney, the party’s Treasury spokeswoman, said.

‘The Conservative Party has completely run out of steam and is holding our economy back.”

Economists said the latest wage growth figures, together with last week’s official data showing a stalling economy with zero growth in the third quarter, were likely to persuade the Bank of England to hold off from further interest rate rises.

Policymakers at the Bank are watching wage growth closely, with the recent record highs having been a cause for concern in its battle to bring inflation back down to the 2 per cent target.

Rates are now widely seen as having peaked at 5.25 per cent and with the threat of recession looming large, some economists believe the Bank will move to begin cutting borrowing costs in 2024.

Samuel Tombs at Pantheon Macroeconomics said: “Wage growth is slowing sufficiently quickly for the Monetary Policy Committee to conclude that bank rate already is high enough at 5.25 per cent”.

Hunt suggested that the autumn statement was likely to extend — or even make permanent — tax breaks for companies who invest in new technology or equipment.

In his budget in March announced a three-year policy of “full expensing” under which companies could set off investments from higher levels of corporation tax.

There have been calls to make the tax break permanent at a cost to the Treasury of around £10 billion a year. Hunt said: “I will focus on increasing business investment because, despite the fact that our growth has been faster than many of our European neighbours, our productivity is still lower.”