Northern Ireland workers will be £600 worse off this year
hy the money in your wage packet just can’t keep up with the rising cost of everyday living
Northern Ireland’s average wage earners are facing further financial misery over the next year as the cost of living continues to rise.
Anyone earning the median wage of £24,000 will find themselves around £600 worse off when the hikes in fuel, food, energy and transport are taken into account, according to figures obtained by the Belfast Telegraph.
Despite Chancellor George Osborne (below) promising a “Budget for the people”, it’s the ordinary man and woman in the street who are going to be clobbered over the coming months.
Figures show that some 200,000 people in Northern Ireland will find themselves worse off in real terms as the price increases start to bite.
Economist John Simpson said: “Full-time workers in Northern Ireland who are earning the typical average wage of £24,000 are going to be £600 poorer this year compared to last as a result of a combination of the Budget and inflationary pressures.
“Given the change in income tax, people should be £200-a-year better off. But that is not the case when you take the rising cost of living into account.”
Mr Simpson added: “The Budget will have helped people earning the average wage a bit — but not enough to offset inflation.”
Fuel, which is already at its highest level ever, is guaranteed to rise by another 3p-a-litre in August when the Government’s fuel duty increase takes effect.
The cost of filling a large family car — such as a Ford Mondeo — with petrol has risen to almost £100, while a diesel family car now costs around £103 to fill.
Motoring groups said the rise in the cost of fuel — now 5.1% higher in Northern Ireland this year compared to 2011 — was hurting drivers.
AA head of public affairs Paul Watters said the organisation had “long suspected” that successive Governments underestimated the impact that rising fuel costs had on families and businesses.
He said the current high prices, inflated by concerns surrounding Iran and Syria, will only continue to rise.
Mr Watters said that the fuel duty hike in August will add a further £3.80 to filling a tank.
He said the recent rise meant the average motorist is paying £8.44 a month more than at the start of the year to fill a car — the equivalent of £100 more a year.
The increased cost wipes out almost half the £220 average rise in personal tax allowances that the Chancellor announced in the Budget.
Weekly food shopping bills are 5.8% higher this year — with the average cost of a basket of goods rising from £40.33 to £42.58.
Data from mysupermarket. co.uk also shows that some items, such as bread, are slightly cheaper than last year (down 1.48%), while others have risen substantially, namely mince beef (up 38%).
Home heating oil is up 10% this year compared to the same time last year, averaging at 61p-a-litre since the start of January.
Last year it was £542 for 900 litres and £310 for 500 litres, whereas today it is £570 for 900 litres and £325 for 500 litres, according to the comparison website cheapestoil.co.uk.
Savage rises in utility bills have also been taking their toll on consumers’ battered budgets.
Phoenix said an average natural gas bill this month was £603 compared to £437 in March 2012 (although the tariff will fall by 8.5% from April 1).
Meanwhile, electricity bills have gone up by 18.5% over the last 12 months, with the average yearly bill sitting at £588 this month compared to £496 the previous year.
And there was no sympathy for any people with vices in the Budget. Smokers were hit with a 37p rise on a packet of 20 cigarettes, while an automatic rise of 2% above inflation will add 10p to a pint of beer, and push the average cost of a bottle of wine to £5.
With no substantial reductions in basic commodities expected over the next 12 months, debt and poverty are expected to hit alarming levels.
All this against a backdrop of higher unemployment and falling property prices paints a very gloomy economic picture for people in Northern Ireland.
We’re left treading water as spending power is cut
The typical worker, living on the average wage, paying taxes and also coping with rising prices, knows only too well that changes in the last year have left them with a smaller pay packet in terms of real purchasing power, writes John Simpson.
Chancellor George Osborne has made life a little easier.
For the normal taxpayer, the proposed increase in the amount of income earned before tax becomes payable was the welcome piece of news from the Budget.
The personal allowance is to go up by £1,100, or the equivalent of a tax reduction of £220 in a full year.
In contrast to a reduced tax bill, the cost of living has been rising.
In the year to the end of 2011, living costs increased by an uncomfortable and unusually high 5.1%.
Spending all the earnings of a full-time employee, on a typical pay packet, would mean that to stay at the same living standard would cost just over £1,220.
Set against the lower tax take, the income earner would be about £1,000 worse off over a full year.
There is another key factor in assessing the impact of inflation
and tax changes: would a person’s pay packet have increased?
In the most recent Hours and Earnings survey for Northern Ireland, for full-time employees an increase of nearly 3.2% in gross earnings was recorded.
If a similar increase takes place this year (which is, of course, not guaranteed) gross earnings might increase but that would be partially offset by some extra taxable income.
Possibly, take home pay might increase by £650.
However, in 2011-12, many salary and wage rates are subject to tighter restraint.
Some pay rates are frozen.
Even, as an average, a net pay increase of £400 may be ambitious.
These figures take no special account of unusual costs outside the cost of living index or other behaviour affecting the level of household savings.
Consequently, taking only the tax allowance, a small pay increase and deducting the unexpectedly high cost of living increase, a typical employee on a median salary is facing into the rest of 2012-13 with the prospect that spending power could be down by £600 in the year, or about £11.50 per week, representing a 2.5% fall in real income.
Of course, these figures are a selected sample.
Nevertheless, most employees would recognise that, whatever the arithmetic, the realities are uncomfortable.