Bloated public sector growth leaves tax rises all but inevitable

"The UK public sector has swelled to its largest size in over a decade, even as the wider economy struggles with a hiring slowdown. Figures from the Office for National Statistics (ONS) show almost 6.2 million people now work in the public sector - the highest since 2011 and up 75,000 in the past year. The total includes a record two million NHS staff and the biggest civil service headcount since 2006. By contrast, private employers have pulled back on recruitment following increases in employment taxes and the National Living Wage earlier this year."

"The expansion in the state workforce comes at a difficult moment for Chancellor Rachel Reeves, who is preparing her autumn Budget on 26 November. She is expected to raise as much as £30bn in new taxes to close fiscal gaps created by weaker growth forecasts and pressure from the Office for Budget Responsibility (OBR). Economists warn that the combination of a growing public payroll and persistently low productivity leaves Reeves with little choice but to tighten the tax burden, already heading towards a post-war high."

Public-sector employment reached almost 6.2 million, the highest level since 2011, including a record two million NHS staff and the largest civil service headcount since 2006. Private employers have pulled back on recruitment following increases in employment taxes and the National Living Wage. The government faces pressure to raise up to £30bn in new taxes to close fiscal gaps amid weaker growth forecasts. Public payroll growth combined with persistently low productivity—estimated 4.2% below pre-Covid levels despite nearly 600,000 more public employees—reduces efficiency and increases fiscal strain. National debt nears the size of the £2.8 trillion economy and long-term gilt yields have risen.

Read at Business Matters