Pay rises for the top 10% of UK earners, including City bosses, have clearly outstripped those for the rest of the workforce and been prime drivers of recent inflation and soaring interest rates, according to new analysis of official figures.
After a week that saw interest rates rise for the 13th consecutive time, by 0.5 percentage points, to their highest level level since 2008, the Bank of England’s governor, Andrew Bailey, angered union leaders by appearing to blame low and middle earners for wage demands that had fuelled the crisis.
But figures from the Office for National Statistics (ONS) show that since January, annual wage increases are only becoming more generous among the top 10% of earners, while the rest of the working population is suffering a decline in wage growth.
Analysis by the TUC of official figures also shows that workers among the top 1% of earners, with an annual income of at least £180,000, were paid 7.9% more than last year, up from 3.7% in January.
By contrast, those who are paid £59,000 a year saw the rate of their wage rises fall from 7.2% to 5.5% a year, while workers receiving £26,300 a year saw an even bigger fall in annual wage rises, from 9.5% in January to 4.7% in April.
Last year, the increasing cost of gas and electricity and the higher price of food were blamed for rising inflation.
But the ONS said May’s 8.7% inflation rate, unchanged from April, was mainly due to a surge in demand for discretionary services, including restaurants, hotels, entertainment and flights abroad.
More than 1.2 million people work in financial services and several million more in business services, many of them with high levels of disposable income to spend on non-essential items.
The TUC’s head of economics, Nicola Smith, said the ONS figures showed the wrong people were being blamed.
“Scapegoating people in work for high inflation is wrong. There is no evidence of high or accelerating wage increases across 90% of the workforce. If anything, the data shows wage rises are slowing and most workers are suffering real-terms wage cuts,” she said.
After the rate increase decision, Bailey said: “The UK cannot continue to have the current level of wage increases.”
On Saturday, as anger over pay unfairness and the rising cost of living grew, union leaders rounded on ministers over suggestions they were now ready to overrule the official pay review bodies (PRBs) if they recommended “unsustainable” increases, after the Bank governor’s comments.
Unison’s assistant general secretary, Jon Richards, said: “In the last pay round, the government spent months hiding behind the NHS pay review body. Ridiculous claims ministers couldn’t intervene with the PRB led to strikes and much needless disruption to patients and services.
“For the prime minister to be pondering blocking the other pay review bodies is utterly farcical.”
Responding to reports that ministers could even block pay rises recommended by the School Teachers’ Review Body, Patrick Roach, general secretary of teachers’ union NASUWT, said if that was the case, they would have misled parliament.
“In recent weeks [education secretary] Gillian Keegan has been insistent that the pay review body process will determine teachers’ pay. Our members will be asking whether she has deliberately misled parliament and the country. She must now show some integrity.”
Referring to the threat of more strike action in schools, he added: “We have been calling on the education secretary to return to the negotiating table to find a resolution that will command the support of teachers and headteachers. She must do so immediately.
“If the government chooses to ignore the recommendations of the pay review body, this will have profound consequences for future industrial relations, with industrial action likely in the autumn.”
On Saturday, shadow chancellor Rachel Reeves wrote to the chancellor, Jeremy Hunt, urging him to work with the Financial Conduct Authority to ensure savers are rewarded fairly as interest rates rise.
“With interest rates going up across the board for mortgage holders, it’s only right that savers should get the bang for their buck they deserve. The government should be working with the regulator and the banks now to make sure competition for savings is working.”
Data from financial information service Moneyfacts shows the spread between mortgage rates and saving rates for two-year products grew from 1.08 percentage points in November 2019 to 1.65 percentage points now – an increase of more than half a point.
Rishi Sunak has staked his credibility on halving inflation by the end of this year, a promise that most economists now believe he may struggle to keep.
