Capital Economy, Business and Finance
Within ten days of the UK’s recent election, the new leader of the House of Commons was telling reporters the public finances were even worse than Labour had expected. That hasn’t prevented the chancellor, Rachel Reeves, dropping heavy hints that she’ll give nurses and teachers above-inflation pay rises of 5.5 per cent, in line with pay review bodies’ recommendations, even though the Institute for Fiscal Studies says that will mean extra borrowing, more taxes or cuts elsewhere. It could also mean demands for similar raises from other parts of the workforce, and an uptick in inflation. But Reeves tells the BBC there’s a cost to not acting in terms of recruitment, retention and industrial action. UK public debt is already at 99.5 per cent of GDP and the IFS’s Paul Johnson says there’s “no fourth option” for raising the government’s fiscal headroom. There is, of course. It could rejoin the EU single market. But Keir Starmer has said he won’t even think about it.
