Friday, November 22, 2024

How Britain became addicted to spending

Must read

However, it is not only the public sector wage bill putting pressure on public finances, as spending on benefits also hit a record high in the latest quarter, and in the quarter before that.

Benefits spending boom

So far this financial year, the Government has spent £154.2bn on benefits, up from £146.4bn in the same period a year ago, an increase of more than 5pc.

Much of this is because some benefits are tied to the previous year’s inflation, which locks in increases the following year.

The most notable example is the state pension, which rises not only in line with inflation, but by average wages or 2.5pc under the triple lock.

Combined with the rising number of people above the state pension age, as well as growing fears over long-term sickness, it raises the prospect of an ever-growing benefits bill that the Government will struggle to control.

The only relief, from the point of view of the public finances, is Reeves’s move to limit £300 winter fuel payments to millions of households. 

That policy decision, along with the absence of one-off cost of living payments, contributed to a drop in benefit spending in September compared to the same month of last year, the ONS said.

However, the intense political backlash over the winter fuel decision shows how hard it will be for Reeves to pursue other options to reduce government spending. 

This means it is unlikely the Government will be able to radically reduce its £2.8 trillion debt pile any time soon, which already serves as a huge burden in terms of finance costs. 

Latest article