Good news on pay and inflation may be coming, but we are not out of the cost-of-living woods yet

It is almost a year to the day since, during the long hot summer of the 2022 Tory leadership contest, Rishi Sunak pledged to cut income tax from 20p to 16p by the end of the next parliament.

Faced with heavy defeat from Liz Truss – a result which, of course, came to pass a month later – Mr Sunak temporarily broke out of his fiscal responsibility straitjacket with a pitch to the Conservative right.

By the time Mr Sunak did get into No 10 in October there was no question of radical tax cuts: in the last 12 months, the cost of living crisis has deepened, and while inflation is now past the peak, prices have remained high and rising interest rates have continued to squeeze household budgets.

But if predictions are right, figures released next week will show, for the first time in 14 months, that average earnings are rising faster than inflation.

This will be hailed as an important turning point in the cost of living crisis, even if many householders will not feel immediately better off.

Will this moment be enough to change the Prime Minister and Chancellor’s minds over tax cuts? It is unlikely, at least not in the medium term.

One month of positive news on earnings is not enough to change the cost of living crisis or the political weather on tax cuts.

Both Mr Sunak and Jeremy Hunt are wedded to the strategy of bringing inflation down before any fiscal pledges can be made, regardless of how much pressure Tory MPs put them under.

The rise in wages could also be artificially high due to the one-off payment given to striking nurses and ambulance drivers earlier this year.

What’s more, the Bank of England, following its 14th consecutive rise in interest rates last week, may view a jump in earnings as a sign that monetary tightening should continue.

While the economic outlook is not as bleak as it was when Mr Sunak came to power, we are not out of the cost-of-living woods yet.