Stats warfare: Numbers fly in cost-of-living battle

Labour's general election strategy of focusing on cost-of-living issues is coming under fire from the government, which is insisting wages are now rising faster than inflation.

The row is politically critical because it threatens Labour's strategy of targeting how well-off voters are feeling in the run-up to the 2015 vote.

Downing Street has released government analysis of the annual survey of hours and earnings survey, which showed that take-home pay had increased by above the 2.4% inflation rate for all but the top ten per cent of earners.

"Of course, as a consequence of the great recession, people who work hard have been made poorer and times are tough for families as a result," minister Matthew Hancock said.

"That's why, as part of our long-term economic plan, we are cutting taxes for hardworking people so they have more money in their pockets and are more financially secure."

Labour angrily dismissed No 10's arguments, pointing to analysis from the Institute for Fiscal Studies (IFS) think-tank which showed people are on average £891 worse off as a result of the government's tax and benefit changes.

"The reality is the Tories are pretty desperate to get off this agenda because they know our message is getting through," Labour's Cathy Jamieson told the Today programme.

She added: "The truth is under this government real wages have fallen by over £1,600 a year."

The IFS said the government's figures were not as revealing as those from the Office for National Statistics' average weekly earnings index, which showed wage increases had slipped below inflation in recent months.

But Downing Street responded by arguing: "Changes to the personal allowance are not captured in ONS earnings data, which therefore gives no indication of the proportion of earnings that are kept after income tax and employee national insurance contributions are deducted."

The struggle follows prime minister's questions on Wednesday, when Cameron insisted that the situation was "recovering" after conceding "it would be astonishing if household incomes had not fallen and earnings had not fallen".

Miliband replied: "All he shows is that he has absolutely no understanding of the lives of people up and down this country.

"That is the reality: ordinary families are working harder for longer for less; he is cutting taxes for millionaires and not helping those families; and the minimum wage is falling in value.

"He cannot be the solution to the cost-of-living crisis, because he just does not understand the problem."