Biggest finance squeeze on families since the1920s
‘Bank of England can’t wave a magic wand’.
Since 2007, household bills have soared but average salaries have risen by only 7.6%.
The Bank of England’s governor, Mervyn King has said the wage squeeze is likely to continue this year, with inflation currently at 3.7 per cent but an average predicted pay rise of only 2.1 per cent.
Figures from the Office for National Statistics show the average salary has increased by only 7.6 per cent since 2007, from £24,043 to £25,879. King added that inflation has ballooned by about 12 per cent but wages have failed to keep up.
Pay cuts, petrol price rises and higher utility bills will reduce the spending power of millions of consumers.
King said that the cost of living is ‘likely’ to rise by ‘somewhere between 4 per cent and 5 per cent’ over the next few months, although it will drop back next year, he said.
This is much higher than the target set by the Government for inflation, measured by the consumer prices index, of 2 per cent.
Mr King said the Bank of England could not wave a magic wand to make things better, saying that ‘Monetary policy’ cannot alter the fact that, one way or another, the squeeze in living standards is the inevitable price to pay for the financial crisis and subsequent rebalancing of the world and UK economies.’
