Two weeks ago, when launching the Spending Review, George Osborne called for a
once-in-a-lifetime debate about the shape of government in the UK. He implied that there is a right and a wrong way to cut the deficit. It would be right to cut spending by addressing
the structural causes of the deficit – i.e. public sector inefficiency and the UK’s unwillingness to cut its pensions and health entitlements. It would be wrong to leave the shape of public
services and welfare unchanged, but limit their costs temporarily – “salami slice” – with public sector pay freezes for instance.
Today George Osborne opted for the slice: a two year freeze in public sector pay (rather than linking pay with performance), a three year freeze in child benefit (rather than withdrawing it from
middle and high earners), a slightly lower rate of increase of benefits and a slightly lower rate of increase of tax thresholds.
Andrew Haldenby
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