Fresh data from the Institute for Fiscal Studies has delivered a grim verdict on the household finances of millions: real wages are falling again, and the cost of essentials like bread, milk and energy continues to climb. The report, released this morning, shows that median household income after housing costs dropped by 2.3% in the final quarter of last year, wiping out gains made during the summer.
Sarah Jenkins, a mother of two from Barnsley, told me her weekly shop now costs nearly £20 more than it did a year ago. ‘I’ve stopped buying fresh fruit, I’m using cheaper cuts of meat, and I still can’t keep up,’ she said. ‘The heating goes on for two hours in the morning and two in the evening. I’m worried about my kids going without.’
Trade unions are pointing the finger at stagnant wage growth and the Government’s refusal to uprate benefits in line with inflation. The TUC’s general secretary, Paul Nowak, said: ‘Working people are being squeezed from every angle. The minimum wage must rise, and Universal Credit must be increased. The Chancellor is out of touch if he thinks this is sustainable.’
The picture is particularly stark in the North of England and the Midlands, where wages are already lower and the cost of living crisis bites deeper. In Manchester, food bank usage has surged by 40% year on year. In Hull, a survey by the local Citizens Advice found that one in three residents has skipped meals to pay bills.
Ministers argue that the labour market remains tight, with unemployment at historic lows, and that targeted support like the Household Support Fund is reaching those in need. But the IFS data counters that the real value of wages has shrunk for the past five months, as inflation in food and energy outstrips pay rises even in the better-paying sectors.
The Bank of England is caught in a bind. Raising interest rates to curb inflation risks pushing the economy into recession. Holding steady leaves prices rising and wages lagging. For households, the immediate concern is the coming winter. Energy bills are projected to rise again in January, and the removal of the blanket energy price guarantee will leave many paying more than they did last year.
For the Government, the political calculus is fraught. The Prime Minister has staked his reputation on ‘levelling up’ the regions, but the IFS report suggests the gap between London and the rest is widening. A spokesperson for the Treasury said: ‘We understand families are struggling, which is why we have provided over £1,500 of direct support per household. We are committed to delivering sustainable growth that benefits everyone.’
But for Sarah Jenkins and millions like her, that promise feels hollow. ‘They talk about growth, but I don’t see any of it. I just see my bills going up and my wages staying the same. I’m not sure how much longer we can go on like this.’
The unions are preparing for a winter of discontent. Strike ballots are already underway in the rail, health and education sectors. The RMT, Unite and the NEU have all indicated they will co-ordinate action if pay demands are not met.
One thing is clear: the cost of living crisis is no longer a headline. It is a daily reality that is breaking bodies, budgets and, increasingly, the social contract that ties work to reward.
