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Government spending review to hit 'lowest paid and savers'

Almost 20% of Peterborough residents could be affected by the government spending review due to take place this week as it is predicted to hit low-paid workers and savers the hardest.
Money
Government spending review to hit 'lowest paid and savers' (photo: Pixabay)

Earlier this year, it was revealed by the Living Wage Foundation that the percentage of those in our city whose earnings are below the Real Living Wage was calculated to be 19.9% according to figures from 2019, equating to around 22,000 people in the city.

The Peterborough figure actually represents a drop of more than 8pc compared to comparable city figures from 2018, when there were around 32,000 workers under the Real Living Wage.

Across the UK as a whole 20.1% of workers are earning below the Real Living Wage, with figures of 22.8% for the East Midlands region and 18.8% for the East.

In light of the spending review this week, it is reported that the lowest paid and savers could lose out as Chancellor Rishi Sunak is due to address the Commons on Wednesday to set out where money will be spent and cut back as the UK deals with the economic shock of Covid-19. 

Some spending – including tens of millions on a counter-terrorism operations centre – has already been mooted, but at the weekend Mr Sunak warned there was a need to find out "what the best way of returning to sustainable public finances is".

The Times reported a 5.6% increase to the national living wage – which was due to increase to £9.21 an hour in April – will be cut back to £8.90 an hour, a rise of 2%.

The paper said it followed a report from the Low Pay Commission – who said there were around two million workers paid at or below the minimum wage in April 2019 – claiming the full rise from the current rate of £8.72 an hour was unaffordable.

Employees aged 25 and over are entitled to the National Living Wage, with lower rates – the national minimum wage – applying to those who are younger.

In March’s budget, Mr Sunak gave the commission, which recommends the wage rates, a formal target that as long as economic conditions allow, by 2024, the statutory rate will reach two thirds of median earnings.

However, lockdown brought economic activity to a halt, with tax revenues drying up, while the Treasury has paid out more than £200 billion on furlough and other schemes to try to nurse the economy through the crisis.

The latest official figures for October show public sector debt passed the £2 trillion mark for the first time in history.

Meanwhile, the Daily Telegraph said an “inflation shake-up”, where the measure will switch from the Retail Prices Index (RPI) to the generally lower Consumer Prices Index plus housing costs (CPIH), will cost investors more than £100 billion.

The Government and UK Statistics Authority has previously consulted on the plans which proposed implementing the changes between 2025 and 2030, and the paper said Mr Sunak will press ahead with the recommendations.

The RPI was 1.3% in October, compared with the CPIH – the Office of National Statistics’ preferred measure of inflation – which stood at 0.9%.

The Telegraph said the change will save the Treasury around £2 billion a year on interest payments for index-linked gilts, or bonds issued by the Government, as a higher inflation rate means higher payments to holders.

In August, the Association of British Insurers said implementing the plans by 2025 could leave those affected worse off by up to £122 billion by reducing the value of gilts tied to inflation.

It said some long-term saving products, especially defined benefit pensions, are linked to the RPI measure of inflation, and a change to CPIH would “significantly reduce the expected returns on these assets, leaving savers out of pocket”.