Should workers outside London and the South East be paid less? How inflation hits different parts of the country | UK News
Liz Truss’s proposal was that local boards should set salaries for government employees which reflected where they lived, which would result in lower pay for civil servants outside of affluent areas like London and the South East.
But poorer cities and towns in the North, West Midlands and Wales are experiencing the largest cuts to real wages, according to research from policy institute Centre for Cities.
The cost of living is increasing faster in Burnley than any other urban area in England and Wales. Inflation in the Lancashire town is estimated to be 11.5% – the highest rate out of the 58 urban areas looked at by the researchers.
This is notably higher than London and Cambridge, which have the lowest rate of 8.8%, and the UK average of 9.1%.
Many of the poorest cities and towns are being squeezed the most.
This means that people least able to cope – those on the lowest wages and with the highest debt – are seeing their living standards eroded the most.
The findings would suggest that workers in these parts of the country need higher wage increases to keep up with rising prices, rather than falling behind further as they would have done in the plans announced by Ms Truss.
Experts warned that to reach the £8.8bn of savings the policy was meant to make, the plan would have to branch out further than government departments, with the likes of teachers, nurses and police officers also facing lower wages than workers in the South.
Team Truss claimed there had been a “wilful misrepresentation” of the policy, but former Tory whip Mark Harper, who is supporting Ms Truss’s opponent Rishi Sunak, said they should “stop blaming journalists” for reporting on the details in her own press release.
Other supporters of Mr Sunak said the policy would “kill levelling up”, was “a totally bad initiative” and “a sure-fire way to lose the next general election”.
Inflation highest for poorest households
Jack Leslie, senior economist at the Resolution Foundation, says that the Centre for Cities research chimes with their own findings, that inflation is 1.6 percentage points higher for the poorest tenth of households than the richest.
“The scale of rising cost pressures depends to some extent on families’ spending habits and where they live,” he says.
“With inflation currently being driven by rising energy bills and petrol prices, rural areas with less well-insulated housing stock and fewer public transport links are experiencing particularly acute cost pressures.”
Many urban areas in the North of England also have poorly insulated houses.
In Burnley, 80% of houses are energy inefficient and 15% of spending is on vehicles. Whereas, in London, these numbers are only 58% and 10%.
High energy bills are one of the main drivers of high inflation in poorer urban areas. This is eroding spending power as wage increases are not keeping up with price rises.
Is housing pushing up inflation?
Aside from energy costs, you might think that high house prices and rents are a key driver of inflation in places like London.
Housing costs did not factor into the calculations done by the Centre for Cities researchers due to a lack of data.
Sky News analysis of rental data from SpareRoom has found that the amount of income spent on rent does vary a lot. But despite high prices in the capital, rent absorbs about the same amount of income in Burnley.
Households in Burnley spend 21% of their pay on rent, compared with 22% in London and just 17% in Cambridge.
This doesn’t tell the whole picture as many people own their home or live in social housing.
But Valentine Quinio, senior analyst at the Centre for Cities, says that this does not shift the picture much as housing is not the main driver of inflation at the moment.
“Our estimates still paint an accurate picture of the geography of inflation [as] the main driver is energy (and food prices), so it’s looking at how these vary between cities that give the clearest idea of which places are the most impacted,” she says.
Government handouts are helping but not enough
The government recently announced £15bn to help households with rising energy costs.
Centre for Cities research has found that households in the North and Midlands are likely to receive more than other parts of the country, but despite this, most people still face higher energy costs.
Only 19% of the 58 urban areas studied are better off after the handout. The average household in Burnley still has to shoulder a £109 increase in annual energy costs.
A spokesperson from the Department for Levelling Up, Housing and Communities said: “We recognise the challenges households are facing with the cost of living, which is why we’re providing a £37bn package of support that is helping millions of people deal with rising living costs.
“We’re investing £6.6bn on in total this parliament to improve energy efficiency across the country, benefiting tens of thousands of homes and delivering savings of £300 a year on average on their energy bills.
“The changes we’ve made to Universal Credit mean that 1.7 million households will on average keep around an extra £1,000 on an annual basis.”
The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.