RBS sets example for public-sector cuts
The public-sector job cuts have started.
It just happens that they have started in the publicly-owned banking sector with RBS (LON:RBS), which has now culled 15 per cent of its staff. Now we need to apply a similar axe to the public side of the public sector.
The 2,600 job losses announced by RBS after the general election bring its tally to 22,600 since the start of the financial crisis and there will be more to come. A quarter of the losses have been compulsory.
It is brutal for those affected but it is essential for an efficient economy. People doing non-jobs are doing no-one a favour. But if a bank can cut so many positions and still operate in a commercially competitive market, how much more scope is there for labour efficiencies in town halls, ministries and the other arms of state?
Cutting public sector costs is essential to reduce Britain’s budget deficit when we are spending £113 for every £100 earned. But cutting public services to do so gains little. The state sector must cut its costs without major effect on its output and, given its labour-intensive structure, the best way to do that is to make the workforce more productive.
Despite being 84 per cent state owned, RBS has had little trouble in defining its duty: it has had to make the bank more efficient, not least to improve its value for the taxpayers who own it. Even though it answers to the Treasury, it does not have to worry about the wider economy.
Ministers have a conflict of interest: they want to keep unemployment low but they need to cut public spending. They must not try to reconcile that conflict by minimising job losses, however. Local authorities and government departments are not job-creation schemes. Employing people in unnecessary positions is not a way to run an economy. An efficient private sector must not be expected to finance make-work schemes in the public sector.
So state-owned RBS has set an example of what can be done. A strong government must now show that it is not scared to demand similar cuts in the rest of the public sector even, if it will temporarily deflate the economy and add to benefit costs. Getting people from the public sector into productive private-sector jobs has to be the political objective – not protecting inefficient positions.
