Nadhim Zahawi is downplaying the severity of a record fall in wages

Britain’s caretaker government appears reluctant to admit the scale of the cost of living crisis

Chancellor Nadhim Zahawi (PA) (PA Wire)

Real wages have fallen at their fastest pace on record and more pain is in store as the country heads into a long recession and average energy bills surpass £4,000 a year.

Yet the chancellor, Nadhim Zahawi, responded to this latest shocking economic news by seeking to downplay it.

Incomes are not just being squeezed they are being subjected to an all-out assault. Public sector workers in particular have been hammered by a huge pay cut in real terms.

New official figures show that on average, public sector workers – including many of the key workers for whom ministers clapped during the pandemic – were paid 1.8 per cent more between April and June than they were a year earlier.

With inflation rising to 9.4 per cent, that equates to a big drop in living standards. There is no comparison in history when a government has overseen such a sustained decline in the earnings of public sector workers including teachers, police officers, healthcare workers, legal aid lawyers and many more.

So some of those workers may have choked on their value-brand cornflakes when they heard Zahawi claiming that a slight increase in the number on employers’ payrolls means that the jobs market is in a “strong position”.

For Zahawi, the numbers showed the “resilience of the UK economy and the fantastic businesses who are creating new jobs across the country”.

DWP minister, Julie Marson, also hailed the “resilience” of Britain’s labour market.

Both ministers ignored the fact that there was a slight fall in the number of job vacancies – a sign that employers may be beginning to think twice about hiring with a recession round the corner.

The data also highlighted a continued disparity between pay growth in the public and private sectors. Total pay, which includes bonuses, grew by 5.9 per cent over the quarter to June in the private sector but only 1.8 per cent for public sector employees.

Workers in retail, hospitality and restaurants saw the sharpest pay increases, at an average of 7.7 per cent, after employers hiked wages in a bid to solve staff shortages.

Mr Zahawi did concede there were “no easy solutions to the cost of living pressures people are facing” but that the government was “providing help where we can”.

That will be of little comfort to those who have seen their living costs rocket since former chancellor Rishi Sunak announced the last round of government support a few months ago.

James Smith, economist at ING bank, put it in more realistic terms: “Hiring demand is fading, but at the same time the skill shortages and labour supply issues that have plagued the jobs market for several months now are showing only limited signs of improvement.

“Inactivity remains high, even if migration – a key source of worker shortages through the pandemic – is showing some signs of bouncing back.”