Pay cuts are a start but capital projects are next
This is an old-style financial crisis but not all the old answers will work. Freezing the pay of doctors and judges may have worked for the Wilson and Heath governments but it has little impact when inflation is negligible or negative.
In the days of double-digit inflation a freeze or pay limit made a real difference but today public-sector spending totals almost £700bn a year and a quarter of that is wages. Avoiding a 2 per cent pay rise makes little dent on that figure. Either individual workers’ pay has to be cut or the number of state-sector workers has to be slashed.
That said, an old-fashioned freeze at least brings home to people that this is a real crisis not a phoney one. And the government does not seem scared of hurting the pockets of a significant part of the population, even though they are voters too.
But as public-sector employees would have been lucky to receive much more than 1 per cent now that inflation is so low, receiving nothing is more a psychological blow than a financial one. Remove exemptions like army personnel and continue honouring three-year deals with nurses, teachers and the police, and many people escape the freeze anyway.
Many in the private sector have already seen wages frozen or cut. And more important, many on the private sector have lost their jobs completely. It is fair that the pain is extended to the public sector but it puts even more pressure on the government to control bankers’ bonuses to avoid a picture of the City celebrating while civil servants suffer.
But the big spending cuts must involve job losses in the public sector. Including front-line jobs. The new mantra must be not how can town halls and government departments find the finance to supply services but to ask which services to axe.
And if politicians are resorting to old-style answers, then the next cuts will be on capital projects. An aircraft carrier here and a transport scheme there will go, together with big budget projects such as ID card systems. Whoever is in power in a year’s time will find such decisions inevitable.
October 7th, 2009 at 9:05 am
Regarding public sector I submit that the more fundamental issue is not the service necessarily but the vast array of middle managers, back- office administrators and non-jobs that mostly prevent the service being carried out effectively. I totally agree that staff reductions are needed. In my opinion there is a need for drains-up restructuring. Employees should then be asked to reapply for a job. Front-line normally quailfied workers would not be the ones most at risk.