Pay rises ‘will have to wait’

Britons suffering as their pay packets fail to keep pace with inflation will have to suffer the problem throughput this year, an economist has warned.

Senior economic advisor to the Ernst & Young ITEM Club Andrew Goodwin suggested the circumstances in which people can expect larger increases in their wages and salaries to counterbalance rising prices are not on the cards as the economy continues to struggle.

He said: “Looking forwards, we expect to see little respite this year. Large parts of the public sector are about to begin a two-year pay freeze, while it is unlikely that private sector employees will be able to force through significant pay rises while unemployment is so high.”

Such a situation could leave those who are struggling with debt getting into deeper difficulty, with some possibly even finding keeping up repayments so difficult an individual voluntary arrangement (IVA) may be their best option to tackle the situation.

An IVA offers the debtor a chance to clear their debts, with creditors accepting a smaller amount back and a new schedule of repayments being set over a period of up to five years, with any remaining debt written off at the end of this.

However, Mr Goodwin predicted, next year will be better as the economic recovery gains “traction” and “real terms” wage increases start to emerge again.

The Trades Union Congress has launched a campaign in favour of higher wage settlements now, which it argues will stop workers suffering from the effects of real-term reductions in their pay and could help stimulate economic growth.

By Amy White