George Osborne will tell voters in his Autumn Statement on Thursday that workers' pay has remained steady in the wake of the recession, despite official evidence from the independent statistics watchdog showing they have fallen by over £5,000.
The Chancellor will try to blame the slowdown in real incomes on Gordon Brown for allowing other costs to rise like employers' national insurance payments. To back up his point, Osborne will reveal new figures put together by the Treasury showing workers' pay packets have kept up with inflation, after taking account of employers' national insurance and pension contributions.
However, figures from the Office for National Statistics showed annual wages of median households had plummeted 6.4% from £37,900 to £32,600 from 2007-2008 to 2011-2012. Figures from the House of Commons library show that the value of British workers' pay packets has suffered one of the largest falls in the whole of the European Union.
James Meadway, senior economist at the New Economics Foundation (NEF), told the Huffington Post UK: "Rising GDP is not turning into rising real earnings, though, so he’s trying a bit of statistical smoke-and-mirrors to cover up the problem.
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Meadway added: "All credible sources, including the Government’s genuinely independent statistics body, the Office for National Statistics, show a very clear drop in real earnings over the last few years. It’s the biggest decline in the standard of living for most people since Queen Victoria was on the throne."
TUC chief economist Duncan Weldon suggested Osborne's new analysis looked "more like the Treasury trying to score a political point (the living standards squeeze is all Labour’s fault) rather than a serious attempt to explain what is happening to pay."
According to research by the influential Institute for Fiscal Studies, wages have fallen by more in real terms during the current economic downturn than ever previously recorded.
The Chancellor's attempt to present a rosier view of the state of workers' pay packets comes after ministers were accused of trying to reduce fuel poverty by changing the definition in official statistics.
Amendments to the Energy Bill would change definitions so that 2.4 million are classed as fuel poor rather than 3.2 million.
Joan Walley, the Labour MP chairing the Commons Environmental Audit Committee, said: "The government is shifting the goalposts on fuel poverty so that official statistics record far fewer households as fuel-poor.
"The changes to the fuel poverty definition and target, in part being made through amendments to the Energy Bill, should be stopped unless the Government is prepared to make a public commitment to end fuel poverty altogether."