Cost of living: Workers hit by record pay slump as wages lag behind inflation, new ONS figures show

With wages lagging further than ever behind inflation amid the cost-of-living crisis, households have less to spend on essentials. ITV News Political Correspondent Libby Wiener reports.

Workers have been hit by a record pay slump as wages lag behind inflation amid a deepening cost of living squeeze, the latest official figures have revealed.

Regular pay, excluding bonuses, grew by 4.7% over the three months to June, the Office for National Statistics (ONS) said.

But Consumer Price Index (CPI) inflation, which hit a 40-year-record of 9.4% in June and is expected to peak at around 11% later this year, meant workers saw a 3% drop in regular pay terms when inflation was taken into account.

This represented the biggest pay slump since records began in 2001, and comes as millions of UK households brace for energy bills to soar within months as the price cap lifts.

The economy has suffered a series of shocks following a succession of Covid lockdowns and Russia’s invasion of Ukraine.

The latest real-terms pay figures are likely to result in more pressure on the government to ramp up support for those hit by skyrocketing energy bills.

The government has pledged a package of support - including a £400 energy bills discount beginning from October - but is under pressure to offer households more help.

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Official figures also showed that the number of UK workers on payrolls rose by 73,000 between June and July to 29.7 million.

ONS director of economic statistics Darren Morgan said: “The number of people in work grew in the second quarter of 2022, whilst the headline rates of unemployment and of people neither working nor looking for a job were little changed.

“Meanwhile, the total number of hours worked each week appears to have stabilised very slightly below pre-pandemic levels.

“Redundancies are still at very low levels.

“However, although the number of job vacancies remains historically very high, it fell for the first time since the summer of 2020.”

Shrinking spending power will pile pressure on government - analysis by ITV News Consumer Editor Chris ChoiRising prices are leaving earnings lagging far behind - as Tuesday's figures show pay falling in comparison to living costs at the fastest rate in around two decades.

New research from retail analysts Kantar today shows a typical shopper is now paying an extra £10.25 every week on groceries - that’s a rise of £533 a year ... more than 11%, and average wages are not even nearly keeping pace.The figures show wages growing at the fastest rate in 15 years as firms struggle to attract staff., with around 1.2 million unfilled vacancies remaining unfilled, according to the figures.This new evidence that spending power is shrinking fast will add to the pressure piling on the government to do more to tackle the cost of living crisis.

What measures are Rishi Sunak and Liz Truss proposing to help struggling households?

Former Chancellor Rishi Sunak, who is considered the underdog in the race for No. 10, has committed to removing the 5% VAT charge on energy bills for 12 months from October.

The Institute for Fiscal Studies estimated this would provide an average saving of around £154 annually on all domestic energy bills, and cost the exchequer about £4.3bn initially.

Mr Sunak's team have valued the cost of the VAT cut at about £5bn a year.

He has also pledged to give households emergency support payments, expanding the schemes that are currently in place, such as the £400 rebate which he introduced as Chancellor in May.

(From left) Rishi Sunak, Keir Starmer and Liz Truss. Credit: PA

Ms Truss has refused to offer "handouts" as part of her proposals to tackle the cost of living crunch, instead focusing on lowering taxes.

The foreign secretary told the Financial Times she would of course “look at what more can be done” when it came to spiralling fuel bills but said she would do things in a “Conservative way."

The foreign secretary has also pledged to halt “green levies” on energy bills, reverse the national insurance hike and cancel the planned corporation tax rise.

What is Labour proposing?

Sir Keir Starmer unveiled what he said was a "fully-funded" plan to make sure consumers would not pay "a penny more" for their gas and electricity over the winter, as energy bills soar.

He claimed the measures, which would include freezing the energy price cap at its current level of £1,971 for the average household, would save households £1,000 on average.

To pay for these measures, Labour said it would close a "loophole" in the windfall tax levied on the profits of the energy companies announced by Mr Sunak in May, and backdate the start to January, which the party said would bring in £8bn, together with rising prices.

Labour said £14bn would come from other measures such as dropping Mr Sunak's £400 energy rebate, and abandoning pledges made by the Tory leadership contenders – such as halting the “green levy” on fuel bills, which Ms Truss is proposing, or scrapping VAT on domestic fuel bills which Mr Sunak has promised.