Rises in average real earnings have been revised down by £1,200 due to rising inflation, a new analysis claims.
It comes after the Resolution Foundation warned that the current decade is also on course for the worst pay growth since the Napoleonic wars – more than 200 years ago.
The think tank warned that real earnings are only projected to return to their pre-crisis peak in late 2022, 15 years after the pay squeeze began.
The new analysis by Labour, endorsed by the House of Commons Library, claims that the combination of higher prices and lower wages will result in living standards being squeezed further.
The research says that in the 2016 Budget the Office for Budget Responsibility (OBR) was forecasting real average earnings growth of 9 per cent between 2015 and the end of the decade. But this was revised down to 5 per cent at the Chancellor’s Budget last month.
Converting this to income values, Labour adds, the Government was originally forecasting real average earnings to increase by £2,500. This, however, had now been revised down to £1,300 – a £1,200 fall.
John McDonnell, the shadow Chancellor, told The Independent the analysis showed the impact of “seven years of Tory economic failure”.
He added: “Living standards are being squeezed and working people are being hit hard. This is despite the Tories promising at the last general election they would raise living standards.
“The truth is that Theresa May has failed working people and the Tories are taking the country backwards. Labour would make different choices and stand up for ordinary working families.”
A Treasury spokesperson, however, told The Independent: “More people are in work than ever before and real wages are forecast to rise in each year of this Parliament. By 2021, living standards will be 2 per cent higher than they were in 2016.
“What’s more, people will be able to keep more of what they earn as the Government increases the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament.”