Struggling Brits were offered some hope today as official figures showed wages are outstripping prices for the first time in nearly two years.

Regular pay increased 7.8 per cent over the three months to August, a 0.7 per cent rise taking the headline CPI inflation rate into account.

The level for the quarter to July was also revised up to 0.1 per cent, meaning living standards edged up for Brits for the first time since October 2021 – when the economy was recovering from Covid

The ONS data was also slightly lower than economists expected, potentially reducing pressure on the Bank of England to hike interest rates again. 

However, the latest inflation numbers due tomorrow will be critical.

And there are increasing signs that UK plc is grinding to a halt amid the battle to rein in prices. Although still at historic highs, vacancies were down slightly and labour market statistics next week are expected to show rising levels of unemployment.    

Chancellor Jeremy Hunt reiterated there is no prospect of early tax cuts, despite a clamour from Tory MPs and a report underlining the eye-watering increase in the burden. A third of workers are set to be paying the higher rate by 2027 as the government tries to stabilise the public finances.

Mr Hunt said: ‘It’s good news that inflation is falling and real wages are growing, so people have more money in their pockets. To keep this progress, we must stick to our plan to halve inflation.’

Regular pay lifted 0.7 per cent in the three month to August after taking CPI inflation into account. The figure for the three months to July was also revised up, meaning pay is now increasing faster than prices

Regular pay lifted 0.7 per cent in the three month to August after taking CPI inflation into account. The figure for the three months to July was also revised up, meaning pay is now increasing faster than prices

Chancellor Jeremy Hunt reiterated there is no prospect of early tax cuts, despite a clamour from Tory MPs and a report underlining the eye-watering increase in the burden

Chancellor Jeremy Hunt reiterated there is no prospect of early tax cuts, despite a clamour from Tory MPs and a report underlining the eye-watering increase in the burden 

The higher rate of income tax applied to less than 2 million people in 1990/91, but the Institute of Fiscal Studies forecast that 8.9million will fall within that category by 2027/28

The higher rate of income tax applied to less than 2 million people in 1990/91, but the Institute of Fiscal Studies forecast that 8.9million will fall within that category by 2027/28

Analysis today warned that the number of people paying higher-rate income taxes is set to double to nearly nine million thanks to the Government’s £52billion stealth raid.

The respected Institute for Fiscal Studies (IFS) found that 8.9million will be subject to higher-rate taxes by the 2027/28 financial year – or one in six of the adult population.

It said the ‘huge tax rise’ was equivalent to adding 6p per pound to both the basic and higher rates of income tax, or increasing the main rate of VAT from 20 per cent to 26 per cent.

The number affected is up from 4.4million at the time when the freeze was introduced in 2021 and nearly three times the 3.2million who paid higher-rate taxes at the end of the last Labour government in 2010.

In previous generations, the higher rate of income tax applied to a much smaller section of the population, covering only 1.7million in 1990-91.

But the IFS cautioned that there is no room for tax cuts or spending increases ahead of the general election next year, saying the UK is in a ‘horrible fiscal bind’.

The think-tank said that in fact there was ‘an argument for a net tax rise’ over the medium term to satisfy the ‘appetite for public spending’.

As the Chancellor prepares for his Autumn Statement next month, the report said debt levels have soared as borrowing costs have gone up, while the inflation rate remains above target. 

The IFS laid out a grim picture of the state of the public finances in its Green Budget report

The IFS laid out a grim picture of the state of the public finances in its Green Budget report

The think-tank highlighted the staggering sums set to be raised by failing to raise income tax and NI thresholds

The think-tank highlighted the staggering sums set to be raised by failing to raise income tax and NI thresholds

Yesterday the Bank of England’s chief economist Huw Pill said it is still concerned that wages are rising too fast to keep inflation under control.

He said: ‘It is important that we do not declare victory prematurely, just because movements which are relatively mechanical in headline inflation are working their way through.’ 

Mr Pill added the Bank still had ‘some work to do’ to make sure inflation fell back to the central bank’s 2 per cent target. 

Meanwhile experts have warned that the current war in Gaza between Israel and Hamas could cause trouble for inflation figures, with oil prices being pushed above $100 a barrel. 

That would have a knock-on effect for fuel consumers.

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