No recession in the public sector
Why should business expect government to halt the recession when the recession does not apply to the state? It is an insult to expect a shrinking private sector to finance an expanding public sector.
The chancellor’s pre-budget report was all about getting the economy growing again but while the income-earning part of the country is forecast to get smaller, public spending is scheduled to keep growing.
Alistair Darling is looking for a real increase in public expenditure in 2010/11 of 1.2 per cent, rising to 1.3 per cent the following year then reverting to a 1.1 per cent rise above inflation. That’s not as great growth as the 2 per cent previously predicted but it is an increase nonetheless.
The whole economy, meanwhile, is forecast to shrink by between 0.75 and 1.25 per cent next year. Given that the expanding public sector is almost half the economy, that means the private sector is shrinking much faster than the fall in gross domestic product – probably by 3 to 4 per cent.
Darling should have properly tackled public spending by slashing the size of that sector, starting with town halls and government departments. He hopes to have £5bn of efficiency savings kicking-in eventually, but just as the private sector is having to shed jobs, so must the public sector – despite adding to unemployment.
The only cuts on the public side of the economy are on capital budgets, which will be frozen from 2011. But capital spending is largely placed with private companies so again, spending on public-sector wages survives while what is left of the private sector is doubly squeezed.
The chancellor should have announced a freeze on council taxes for 2009/10 with an instruction to councils to provide the same services more efficiently or cut back on inessential activities. And for 2010 onwards there should be an absolute cut in council taxes. After that the voters can decide whether they want to pay more.
Cutting council taxes would not only share the pain and put right many current injustices, it would put cash directly into the pockets of consumers to spend on reviving the economy.
