The UK economy may be back on track, but ordinary people are still being left behind

Living standards are not rising in line with growth


The economic week ended with a bang for HM Treasury. The Coalition’s own spin doctors could hardly have dreamed up a better scenario.

First the IMF, the world’s lender of last resort, upgraded its forecasts for UK economic growth to 3.2 per cent. Official figures showed the UK economy growing at a very respectable 0.8 per cent between April and June. We already enjoyed a comfortable lead in the 2014 Global Advanced Economy Growth Stakes. Now it looks like we’re going to canter home like Frankel on steroids.

Hot on its heels came shocking news from Royal Bank of Scotland, an institution which has had far too many dealings with lenders of last resort in its recent history.

Just days before the release of its full year results, the bank said its profits would be better than even the sort of optimist that thinks England can win the World Cup within the next decade could have predicted.

At this rate they’ll be tempted to swap the Christmas Cava for something fizzy from the French region of Champagne at Conservative Central Office.

They might be advised to keep it on ice. Their MPs would dearly love to be able to talk about “booming Britain” but the problem is that their constituents still aren’t feeling it it where it counts; in their pockets.

Economic growth is important, and certainly preferable to the alternative. It’s also handy that banks like RBS are making money again. Strong and profitable banks lend themselves to strong economies, although we should all pay due heed to chief executive Ross McEwan’s warning of “bumps in the road”. While his RBS is in profit, it’s nothing like a strong bank yet.

But when it comes to the standard of living for most of the citizens of this country 3 per cent growth is but a distant dream. Their incomes are still falling in real terms.

The latest official figures showed that pay, including bonuses, rose by a pitiful 0.3 per cent between March and May (0.7 per cent when bonuses are taken out of the equation). By contrast, inflation jumped to 1.9 per cent in June from 1.5 per cent in May.

The economy might be back to where it was before the financial crisis but we have an awfully long way to go before living standards have caught up.

Unfortunately, while we have growth we don’t have the sort of growth that is filtering through to ordinary people.

The Government argues that at least some of them have benefited from tax cuts, and that’s true. Millionaires, for example, enjoyed a 5p cut in the rate of tax applied to earnings above £150,000. The tax free allowance has been raised. But so has VAT. And benefits have been cut.

What the Chancellor has given with one hand, he’s taken away with another. They always do.

Falling unemployment should eventually push wages up. But even then there is a sting in the tail. The IMF’s forecasts, perhaps the RBS numbers too, will strengthen the case of the hawks on the Bank of England’s Monetary Policy Committee who have been calling for an interest rate rise.


If rising wages start to put extra pounds in people’s pockets, higher credit costs will take them right back out again. And with the recent figures showing the budget deficit remaining stubbornly high, there won’t be any fiscal relief anytime soon.

Yes we should be pleased that the UK is in recovery. There is no doubt we are in a much better place now than we were in the wake of the crisis. But the Chancellor or the Prime Minister should be careful not to sound too smug when they start reeling off lists of gaudy figures to show how well we’re doing. Because the average voter may very well ask why they aren’t getting a piece of the action.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Cover Supervisor

£75 - £90 per day + negotiable: Randstad Education Group: Are you a cover supe...

Marketing Manager - Leicestershire - £35,000

£30000 - £35000 per annum: Ashdown Group: Marketing Manager (CIM, B2B, MS Offi...

Marketing Executive (B2B and B2C) - Rugby, Warwickshire

£22000 - £25000 per annum: Ashdown Group: A highly successful organisation wit...

SEN Coordinator + Teacher (SENCO)

£1 per day: Randstad Education Leeds: Job Purpose To work closely with the he...

Day In a Page

Read Next
Piper Ryan Randall leads a pro-Scottish independence rally in the suburbs of Edinburgh  

i Editor's Letter: Britain survives, but change is afoot

Oliver Duff Oliver Duff
Some believe that David Cameron is to blame for allowing Alex Salmond a referendum  

Scottish referendum: So how about the English now being given a chance to split from England?

Mark Steel
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam