On Friday the government announced that the deficit was up to the highest monthly level since 2009 – £8.6bn in October alone. This is in part because the UK economy is not particularly growing (inflation was negative last month). Unlike countries, such as the US, who have not engaged in harsh austerity, the UK economic recovery is on a go slow. Countries who have been willing to spend on capital projects have seen their GDP grow far faster than the UK. That means that we don’t have increasing taxes coming in to help balance the books.
Another reason for the increased deficit is pensions. While inflation was negative and wages are stalled, pensioners are taking an ever increasing proportion of the UK’s benefits bill. In order to secure the grey vote, the Tories promised to give pensions a “triple lock” whereby the state pension is guaranteed to go up by price inflation, wage inflation or 2.5% – whichever is greater. Pensions income is racing away from other income and other benefits. From April 2016, the state pension will be worth £119.30 a week (compared to £57.90 jobseekers allowance for a 24 year old for example). Pensions make up £95bn of the state budget thanks to the triple lock, and with people living longer and longer, that super inflationary increase is not going to help the chancellor balance the books.
But don’t worry – there’s a budget this week, and instead of keeping pension inflation in line with everyone else, or injecting work in to the economy, we can cut back some more essential services or screw the poor some more. Mwhahaha.