Public Sector Payrises and More Tax20 Dec 2024 16:55
“Public sector pay jumped sharply in November as the Government prepares for a further surge in spending next year.
Pay rises for public sector workers drove up central government staff costs by £2.4bn on the year, to £18.3bn in November.
Meanwhile, spending on benefits climbed to £25.4bn in November, according to the Office for National Statistics (ONS), up by £1.2bn compared with the same month in 2023.
It comes amid fears of further rises in borrowing despite Rachel Reeves’s record tax raid in the October Budget.
A string of pay rises handed out to NHS workers and teachers is likely to result in higher wage costs in the coming years. Spending will rise by £239bn by 2030, according to forecasts from the Office for Budget Responsibility, topping £1.5 trillion for the first time.
The Government is also under pressure to hand out further inflation-busting pay rises in a forthcoming review.
The Bank of England said on Thursday that it did not expect the economy to grow in the last three months of 2024, meaning tax revenues will also suffer.
Ruth Gregory, at Capital Economics, said borrowing was still not fully under control – which potentially means the Chancellor will need to raise taxes again in future to meet her fiscal rules.
Ms Gregory said: “The weakening in the economy and recent rises in market interest rates suggests the government will still struggle to bring the deficit down as quickly as planned. That raises the chances that extra revenue-raising tax hikes or spending cuts will be required.”
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