POLITICS
09/12/2013 13:16 GMT | Updated 09/12/2013 13:20 GMT

UK Wage Rises Will Not Recover For Years, Warns OBR

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Annual wage rises will not return to their historic norm of around 2% for a couple of years, the head of the UK's official fiscal watchdog has told MPs.

Office for Budget Responsibility chairman Robert Chote told the Treasury Committee that "we have a relatively weak process of incomes recovering", adding: "We are still waiting for productivity growth to pick up. The expectation would be that that would lead to earnings growth.

"In terms of real earnings, we don't get the sort of 2%-a-year real growth in wages and salaries that people would have been used to on past historical experience for a couple of years still."

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Meanwhile, MPs are in line for an 11% pay rise in 2015 which would bring their salaries up to £74,000.

Last week's Autumn Statement saw the OBR increase its forecast of GDP growth for this year from 0.6% to 1.4% and for 2014 from 1.8% to 2.4%, but lowered forecasts for the following three years.

Chote said that the improved growth in 2013 and 2014 appeared to be driven by consumption and housing factors, instead of than business investment.

He told MPs: "In past recoveries you would expect to see robust investment rising as a share of GDP at this stage. One reason that hasn't happened is that firms' expectations of profitability hasn't been high. That can be linked to the fact that there is weak productivity.

"In the absence of productivity growth, you don't get the growth in real incomes and living standards that most people would think of in this context."