Hunt’s budget aims to ‘help more people back into work’
GROWTH in pay in Britain - which the Bank of England is watching closely as it weighs up whether to pause its run of interest rate hikes next week - lost pace in the three months to January, official data showed on Tuesday (14).
Basic pay, excluding bonuses, rose by 6.5 per cent compared with 6.7 per cent in the three months to December, representing the first slowdown in the that measure since late 2021.
Total pay grew by an annual 5.7 per cent in the November-to-January period, slowing from six per cent in the previous figures and the weakest increase since the three months to July last year, the Office for National Statistics said.
Britain’s unemployment rate held at 3.7 per cent in the three months to January, close to its lowest in almost five decades, the data also showed. The UK economy now has more than 1.1 million job vacancies.
The BoE is expected to raise borrowing costs on March 23 by a further quarter of a percentage point to 4.25 per cent although investors have cut their bets on such a move sharply after the collapse of US lender Silicon Valley Bank.
Interest rate futures showed investors were putting the chance of the BoE pausing its rate hikes next week at about 40 per cent on Tuesday morning, while a quarter of a percentage point increase in borrowing costs was seen as a 60 per cent possibility.
Chancellor Jeremy Hunt is expected to announce measures in his budget statement on Wednesday (15) that will seek to get more people into work, easing the inflationary pressure in the labour market.
“The jobs market remains strong, but inflation remains too high,” Hunt said after the data was published, a day ahead of his budget speech.
“Tomorrow at the budget, I will set out how we will go further to bear down on inflation, reduce debt and grow the economy, including by helping more people back into work.”
Tuesday’s data showed earnings were further diminished by an inflation rate that stood above 10 per cent in January.
The ONS said basic pay, when adjusted for inflation using the consumer prices index, fell by 3.5 per cent, one of the largest falls since records began in 2001. Total pay fell by 4.4 per cent in real terms, the biggest drop since early 2009.
There were some signs of a further easing of the tightness in the labour market with the economic inactivity rate - measuring people out of work and not looking for it - falling by 0.2 percentage points to 21.3 per cent, driven mostly by young people.
Vacancies decreased for the eighth time in a row in the three months to February, falling by 51,000 from the previous three months to 1.124 million.
Hunt flagged last weekend that he would reveal more childcare support to help parents get back into work.
And he will reportedly seek pension changes to discourage workers from taking early retirement.