Britain: public sector income growth lags private sector after pay freezes

By Edward Harrison On Jul 7, 2011

Below are the findings of the recently released VocaLink Public Sector Take Home Pay Index. The VocaLink Take Home Pay Indices measure after-tax income as opposed to pre-tax gross income. So they are designed to reflect what Americans call disposable personal income.

The VocaLink Public Sector Index continues to fall this month, showing annual growth of 1.3% for the three months to June

Annual growth of the VocaLink FTSE 350 Take Home Pay Index rises to 3.3% for the three months to June – up from 1.8% for the three months to May

The VocaLink Manufacturing Index rises again, with three month annual growth rising from 1.1% in May to 2.4% in June

Three month annual growth on the VocaLink Services Index rises from 1.9% in May to 3.4% in June

Growth on the VocaLink Public Sector Take Home Pay Index in June has continued to fall with annual growth of 1.3%, down from 1.5 % for the three months to May. This is largely due to April’s two year pay freeze on workers earning above £21,000 and means public sector take home pay growth is now 2% lower than the FTSE 350.

The VocaLink FTSE 350 Take Home Pay Index has seen a sharp increase in the three months to June reaching 3.3% growth, up from 1.8% in May and its highest level since February 2009.

The upward swing in take home pay across the private sector (FTSE 350) largely reflects the continued impact of the tax changes which came into effect in April 2011.

The majority of UK workers have also benefited from the £1,000 increase in Income Tax free personal allowances which is now being entirely reflected in the VocaLink three month moving average take home pay data. While public sector workers have also gained from Income Tax reform, the two year pay freeze which came into effect in April this year has offset any growth.

This month’s VocaLink data shows significant rises in take home pay for both the manufacturing and services sector. The services sub-index rose 1.9% in May to 3.4% in June, while manufacturing take home pay growth rose from 1.1% to 2.4% in June.

Although it is now showing stronger growth, the VocaLink FTSE 350 Take Home Pay Index continues to lag behind elevated inflation which remains at 4.5% in May. In addition, according to the latest ONS data, the volume of retail sales has decreased from 1.0% to 0.8% over the three months to May, with several big high street shops closing in June, displaying clear signs that the squeeze on real incomes is now impacting the retail sector.

This chart puts the index results in graphical form:

Visit the new forum: www.takehomepay.co.uk , and have your say on how UK take home pay growth is affecting peoples’ pockets and the impact on the wider economy. Or visit https://www.linkedin.com/groups/Take-Home-Pay-3988366?trk=myg_ugrp_ovr and join the debate.

3 Comments

David Lazarus says 13 years ago

You also need to consider that we have had inflation above target as well during the last two years to also squeeze incomes still further.
1. Neil Wilson says 13 years ago
  
  Most of which is indirect tax increases.
  1. David Lazarus says 13 years ago
    
    There is a factor from the VAT increase but that will drop out in a few months anyway. The increases have been primarily because of the commodity bubbles feeding through to food prices. Oil had an impact going up and will have the same impact coming down.

Comments are closed.