Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will make an assessment of the impact of below inflation pay rises on household disposable income.

Since mid-2021, UK inflation has been pushed higher by global pressures, such as supply chain disruptions from Covid-19, and pressures following Russia’s war against Ukraine. More recently, tightening in the labour market, rising wages and other input prices for firms mean that domestic factors are playing a bigger role. As a result, consumer price inflation was 10.5% in December 2022.

Wages have also grown but remain lower than current levels of inflation.

Total annual pay growth increased to 6.4% in the three months to November 2022, significantly above pre-pandemic average growth of 3.4% (2019 average).

Below inflation wage growth has led to a fall in real household disposable income. Latest data from the Office for National Statistics (ONS) show real household disposable income decreased by 2.6% on the year in Q3 2022. The OBR, in its November 2022 forecast, expected real household disposable income to fall in 2022 and 2023, and start increasing from Q4 2023.