Two decades with no real growth in pay

BRITAIN faces almost two decades without earnings growth – while the national debt will not be under control for another 50 years, according to a bleak assessment yesterday.

The Institute for Fiscal Studies said it was ‘truly astonishing’ that average earnings would still be below their 2008 level, in real terms, in 2022. And it said the net national debt may not fall to its pre-crisis levels of 40 per cent of national income until ‘well past the 2060s’. It currently stands at 86 per cent.

The IFS based its projections on figures in Wednesday’s Budget. The forecaster’s director Paul Johnson said they made ‘grim reading’, adding: ‘Despite all the gloom we may hope for better – though we may still fear for worse.’

The think-tank also said Philip Hammond’s Budget suggested the end of austerity was still a long way off. It said public services outside the NHS were facing further spending cuts of 7 per cent in the next five years.

Official forecasts from the Office for Budget Responsibility suggest GDP per head will be 3.5 per cent lower in 2021 than was forecast two years ago. This will equate to a £65billion hit to the economy, Mr Johnson said. And average earnings in 2021 look set to be nearly £1,400 lower than forecast in March 2016 – lower in real terms than in 2008. He added: ‘We are in danger of losing not just one but getting on for two decades of earnings growth.’

The UK’s growth is predicted to be ‘well behind’ the other G7 advanced economies; the OBR said it may not top 1.6 per cent in the next five years. The IFS said this means Mr Hammond’s chances of hitting his target to balance the nation’s books in the 2020s look ‘remote’.

Mr Johnson said that meeting the target would require another £20billion of cuts.

Responding to the IFS, a Government spokesman said: ‘The Budget set out the next steps in our plan to build an economy that is fit for the future, deliver the homes our country needs and support families and businesses.’