Boost for George Osborne as pay overtakes inflation

Britain's living standards squeeze appeared to be coming to an end today, as average pay rises outstripped inflation for the first time in four years.

In a day of good news for Chancellor George Osborne, unemployment fell 77,000 in the three months to February, to 2.24 million — a jobless rate of 6.9 per cent, the lowest for five years.

But economists predicted an interest rate rise could now take place in less than a year as the recovery gains steam. At its meeting next month, the Bank of England’s monetary policy committee will discuss a possible rise from the historic low of 0.5 per cent, with unemployment having fallen below seven per cent. MPC members are set to vote against a hike, but the Pound rose sharply on expectation that a rise will now happen sooner than expected.

Official figures showed that pay, in-cluding bonuses, was 1.7 per cent higher in the year to February. The latest Consumer Prices Index rate of inflation was 1.6 per cent for March. It is the first time since spring 2010 that inflation has not exceeded the increase in pay, said the Office for National Statistics (ONS) — although wage rises excluding bonuses were up 1.4 per cent. Pay increased by an average two per cent in private firms, and 0.9 per cent in the public sector.

A record 30.3 million people are now in work, according to the ONS, with the claimant count falling to 1.14 million. Unemployment in London was down 12,000 and employment has risen by 691,000.

Mr Osborne said: “These strong jobs numbers are good news. Coming alongside yesterday’s lower inflation, they are evidence that our economic plan is working. These remain difficult times. But today’s news supports the argument we have made all along, that the only way to see rising living standards is to grow the economy.”

David Cameron tweeted: “Employment rises to record 30.39m - an extra 239,000 people with the security of a job and hope of a brighter future.” Employment minister Esther McVey claimed the figures showed a “seismic shift” since the financial crash.

The news threatens to undermine Labour’s argument over a cost-of-living crisis. But Ed Balls stressed: “At the next election, the answer to Ronald Reagan’s famous question: “Are you better off than you were four years ago?” – looks likely to be a resounding no.”

Shadow work and pensions secretary Rachel Reeves said: “It’s complacent and out of touch for the Tories to try to claim this deep-seated cost-of-living crisis has suddenly been solved.”

Len McCluskey general secretary of the Unite union, said: “The squeeze continues, leaving ordinary people bewildered at the self-congratulatory tone of the Government that has presided over the growing shame of food-bank Britain.”