Abandoning austerity is no solution

Abandoning austerity is no solution

  • In 2011, public sector pay was 18% higher than private sector pay. At that time the UK had the highest structural budget deficit in the OECD. Public sector pay restraint was essential.
  • Tories plan to balance the books by 2025-26, which would mean the UK is due to be in deficit for 25 years. Softening this programme would be dangerous.
  • A big increase in taxes should not be the way forward either. The UK’s tax burden is the highest in nearly four decades.
  • For OECD countries with high budget deficits in 2010, a larger fall in government spending has been associated with larger deficit reductions, higher economic growth, higher wage growth and lower unemployment.
  • Ireland’s fiscal consolidation has been 2½ times as large as the UK’s, yet Ireland has seen unemployment fall by twice as much proportionally.
  • If public sector pay is to be eased, this should involve re-gearing government priorities or examining ways of regionalising pay.

Daniel Mahoney, Tim Knox - Thursday, 13th July, 2017