Public sector pay rises driving fiscal ‘black hole’
SUGGESTED
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“Rachel Reeves’ statement on the state of the public finances was good in parts. The estimates for the size of the ‘black hole’ may be suspect, but the increased scrutiny of in-year spending is welcome. The new Chancellor also appears willing to take tough decisions to save taxpayers’ money, such as ending winter fuel payments for better-off pensioners.
“However, taking the figures at face value, the immediate savings identified will only reduce this year’s shortfall from £21.9 billion to £16.4 billion. This suggests that substantial tax rises in the Autumn Budget will still be needed to close the gap.
“Moreover, the biggest single item is the bill for above-inflation pay rises in the public sector, only partially funded by efficiency savings. The Chancellor has also decided to double down on the existing fiscal rules, which are arbitrary and hold back the economy.
“The result is likely to be further cuts in infrastructure spending and large increases in the taxes on investment, which is not a good look for a Government that says it is prioritising growth.”
ENDS
Notes to Editors
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