It has been barely a few weeks since the Liz Truss government took charge in the UK but looks like the wheels are already coming off. Currently, in a major economic crisis, the UK will need to cut as many as 200,000 government jobs in the next two years to avoid saddling the exchequer with billions in debt, per a report by Institute for Fiscal Studies (IFS).
The think tank said that the government will have to find a way to pay nearly $5.6 billion of savings to the workforce this year, accounting for the public sector wages that are set to increase by five per cent.
It added that over 100,00 job cuts will ensure that the wage bill remains unchanged, at least for this year. However, it added the caveat that if inflation continues to increase at the current pace, the UK government might have to go on another spree and slash the workforce by another 100,000.
Notably, during the pandemic, the public sector workforce of the UK grew by a quarter of a million to 5.5 million. Thus, the government is already looking to tone down the bureaucracy and cut nearly a fifth of the headcount which could essentially save $3.8 billion.
The IFS report comes in the backdrop of the UK government having been forced to abandon its plan to abolish the 45 per cent top rate of income tax. The humiliating u-turn was necessitated days after announcing the policy change and on the back of a turbulent reaction from the markets as well as the conservative party.
Such has been the economic downturn in the UK that according to the Bank of England, the pension funds which are managing vast sums on behalf of retired people in the country came close to a collapse after an “unprecedented” meltdown in the government bond market.
The Bank of England stepped in late September to temporarily buy bonds after the British pound collapsed and reached its lowest ever in history against the dollar.
(With inputs from agencies)
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