Reducing UK government deficit will require spending reductions but austerity isn’t politically acceptable

The government’s response to the pandemic and the reduction in tax take driven by the economic impact of the pandemic have increased the UK government debt and deficit to unsuitable levels. While economic growth and tax rises in the medium term are likely to reduce the deficit somewhat, they are unlikely to do all the heavy lifting and significant reductions in spending will probably be necessary in the next decade. However, spending reductions instituted by the coalition government to stabilise and recover government finances after the financial crises impacted service quality and availability to such an extent (what is often termed ‘austerity’) that this strategy is unlikely to gain sufficient public support. However, protecting services while achieving significant spending reductions requires transformation and innovation. The public sector does not have the critical skills and capabilities at the required scale in-house to achieve this transformation and innovation but bringing these skills and capabilities in from the private sector isn’t cost effective and often fails to deliver for taxpayers. The challenge: how will the government deliver significant spending reductions without impacting service quality and availability (‘austerity’) and without the capabilities required to drive the scale of innovation and transformation required?




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