New UK PM faces US$442 billion fiscal problem, think tank says
A new fiscal strategy is needed
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[LONDON] Britain’s public finances are losing around £330 billion (US$442 billion) a year due to weak economic growth, population ageing and ill health, according to estimates from a think tank that show the scale of the challenge facing the next prime minister.
The left-leaning Resolution Foundation said former Manchester mayor Andy Burnham, who is due to replace Keir Starmer in Downing Street on Monday, needs a new fiscal strategy to stop borrowing, public spending cuts and tax increases from becoming more painful.
About two-thirds of the £330 billion hole comes from a slowdown in economic growth per person since 2007, it said.
In a report into what it called Britain’s two-decade fiscal funk, the Resolution Foundation also said the triple lock system for increasing the value of state pensions should be replaced with a less expensive link to average earnings alone.
Reforms are needed to replace fuel duty receipts which are being lost as drivers switch to electric cars.
Increased investment in public services would counter a drop-off in productivity.
The impact of the Iran war has probably reduced the government’s headroom against the current fiscal rules from £23.6 billion in March to £10 billion now. REUTERS
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