Economists Warn of Inflation Risks with Pay Hikes

Economists are warning that planned inflation-busting pay hikes for public sector workers, such as teachers and NHS staff, could fuel inflation and trigger higher pay demands in the private sector, potentially resulting in a wage-price spiral. The Labour government, led by Chancellor Rachel Reeves, is considering these recommendations, which could cost up to £10 billion across the public sector. Concurrently, Reeves has launched a landmark review of the pensions landscape aimed at driving investment and boosting pension pots by over £11,000. This review includes plans to consolidate pension funds and invest in infrastructure and small businesses, potentially unlocking billions for the UK economy. The government aims to address high fees and improve governance within the Local Government Pension Scheme, with further measures to be discussed with industry leaders to ensure economic growth and better retirement outcomes.