Last week saw the publication of the latest annual data on earnings. After a brief recovery starting in 2014, once again they are rising more slowly than prices. That’s not because the rate of increase in cash wages has slowed down; it simply hasn’t sped up enough to match the recent acceleration in prices inflation.
The key backdrop to all fiscal events in the UK since the financial crisis has been the weak performance of the economy. At the time of the March 2017 Budget, national income per adult was around 15% lower than it would have been had output per adult instead grown by 2% a year (close to the post-war average) since the start of 2008. Despite this historically poor performance, weak growth was forecast to continue. The March forecast implied that, by 2022, national income per capita would be 18% lower than it would have been if it had grown at 2% per year since 2008. That is astonishing.
