New Finance Minister Rachel Reeves is primed to present the new government’s spending plans. These plans are under heavy attack after a red wave of policy U-turns. These changes, not least in welfare, will all need many billions of pounds in additional spending. This new revenue is key both to address the country’s fiscal needs. As the Chancellor gears up for a critical announcement on November 26, the implications of these changes are becoming increasingly apparent.
In addition to the uncertainty created by these policy flip-flops, the federal government now faces a daunting fiscal picture. The Chancellor made big commitments worth billions in last year’s Autumn Budget, but the collapse of the status quo calls for a complete rethink. According to official figures, public sector productivity has recorded its largest fall ever under Labour. This troubling decline begs the question of whether we are using public spending any better.
Public services have continued to struggle under this trend, and healthcare—a highly politicized and important public service—has been no exception. Productivity in the health sector has been negative over the same stretch. These changes further point out that the performance of public agencies is determined, more than by large infusions of money, by other factors. Productivity and efficiency improvements must be part of the paradigm to make certain that every dollar is spent wisely.
It’d force the Government to raise tens of billions of pounds in new taxes. This is a critical step to become compliant with spending guidelines. The exact nature of these tax increases is not known. Officials do pledge that a great deal more information will be revealed in the next public announcement. The Chancellor’s plans rely almost entirely on these tax changes. This is a real-case example of the tightrope the federal government needs to walk between infrastructure investment and fiscal restraint.
As the Chancellor comes under pressure to make an early address, she has a tough few months in store. Meeting the government’s commitment to welfare improvement, at the same time as making sure public sector efficiency and productivity improves will be a tricky line to walk. It is clear that without substantial reform in how services are delivered, simply increasing funding may not yield the desired outcomes.