As inflation in February 2022 soars to 6.2%, the chancellor is coming under pressure to announce a plan to ‘get wages rising’ in today’s Spring Statement.
The consumer prices index (CPI) measure of inflation reached a 30-year high in the 12 months to February 2022, according to the Office for National Statistics (ONS), up from 5.5% in January.
On a monthly basis, CPI rose by 0.8% in February 2022, compared with a rise of 0.1% in February 2021. This was the largest monthly CPI increase between January and February since 2009.
The retail prices index (RPI) measure – which unions usually base their pay negotiations on – was 6.8%, unchanged from January 2022.
Pay settlements are severely lagging behind inflation, with data from XpertHR showing that the median basic pay increase in the three months to the end of February was 3%, unchanged from the previous three-month period.
Its analysis was based on 230 pay settlements, covering more than 268,000 employees.
Cost of living
“The recent increase in XpertHR’s headline pay award reflects employers trying to keep pace with rising inflation and contending with labour market shortages. But what would have been a reasonably high pay increase a year ago, global pandemic aside, now feels inadequate,” said Sheila Attwood, XpertHR pay and benefits editor.
“With the latest predictions from the Bank of England suggesting that consumer prices index inflation could reach around 7% in spring 2022, a 3% pay rise equates to a notable real terms pay cut, as the gap between wages and the cost of living continues to widen.”
The TUC has urged chancellor Rishi Sunak to use his spring statement today (23 March) to announce more help for working people who are struggling to keep up with the rising cost of living.
This should include a “comprehensive plan to get wages rising, including new pay bargaining rights for workers and their unions”, said general secretary Frances O’Grady.
“The chancellor must respond to high inflation today with much greater help for families with soaring bills and a plan to get wages rising,” she said.
“Families need grants, not loans to help with soaring energy bills. These should be funded by a windfall tax on excess profits from gas and oil. Universal credit should get a boost to help families keep up with the rising cost of living.”
Jack Leslie, senior economist at the Resolution Foundation, said the chancellor “will need to set out a bold response to the cost of living crisis”,
“Another sharp rise in inflation last month offers a foretaste of the huge income squeeze coming this year, with inflation likely to hit at least 8 per cent this spring – which could be the highest it’s been in 40 years – along with a second spike this autumn.
“This prolonged period of high inflation – which millions of people have simply never experienced before – is a complete disaster for living standards. It will mean pay packets continuing to shrink, along with vital income support such as Universal Credit and the state pension.”
XpertHR also surveyed 303 organisations about their 2022 pay forecasts and identified an expected median pay award of 3%., but 40% are expected to be worth 4% or more.