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Will all business leaders applaud cuts?

Robert Peston | 12:03 UK time, Monday, 24 May 2010

Business leaders have been arguing passionately that the public sector needs to become more efficient. You'll recall that the equivalent of a plane-load of them publicly backed the Tories' general election campaign to make additional savings in public expenditure this year - in order to avoid that national-insurance rise they hate.

George Osborne and David Law hold a press conference in the garden of HM TreasuryWell, it'll be interesting to see how they respond, now that their dreams have been made a reality.

Because a good proportion of the savings announced today will hit them directly.

So, for example, the Treasury has announced £1.15bn of cuts in discretionary spending by Whitehall on items like consultancy and travel.

Who receives the bulk of such largesse? Well, it's private-sector consultants and travel companies.

There'll also be £95m of IT savings - again a squeeze on monies handed over to private-sector contractors.

A further £1.7bn will be saved from delays and cancellations to contracts and projects - which is probably £1.7bn of revenue that won't be received by companies.

On top of all that, there are the reductions in funding for regional development agencies, which could have an effect on financial support received by many thousands of businesses.

In other words, the harsh reality of making government more efficient may not be quite so appealing as the theory to the many business leaders who sell goods and services to the public sector.

As for those business leaders who recognise that there's no gain without pain, they'll only be half-impressed by today's one-off cuts.

They'll see most of today's savings as so-called low-hanging fruit, blindingly obvious examples of eliminating unnecessary expense: what they'll want to see is a cultural revolution, to improve productivity for years to come and create a waste-averse climate in every allegedly cushioned nook and supposedly feather-bedded cranny of the public sector.

Meanwhile, there's another paradox about the effect on jobs of today's cuts.

George Osborne said - and passionately believes - that the cuts in public spending that he announced this morning, and the further and deeper cuts that will be chosen in the autumn, will over time create jobs rather than contribute to intractable long-term rises in unemployment.

The chancellor bases this optimistic view on the assumption that shrinking the public sector, and narrowing the gap between what the government spends and what it receives in taxes, will liberate the private sector - which, he hopes, will create the jobs that are shed by the public sector.

How compelling is this argument?

Well, most would concede that interest rates paid by households and businesses will be lower, in the absence of a collapse in confidence in the government's ability to pay its debts - and that therefore the interest burden on the private sector is irretrievably linked to the perceived financial health of the public sector.

Which means that the private-sector benefits if banks and investors are impressed by the coalition government's determination to shrink the public-sector deficit earlier and faster than the previous Labour government would have done.

But there is an internal contradiction in one of the underlying arguments deployed by the Tories when saying that the state must be shrunk from the 50%-or-so share of GDP that it currently represents: to wit, that the public sector is intrinsically more wasteful, less efficient and less productive than the private sector.

Most research proves that the productivity of public sector is indeed lower than the private sector. But the lower productivity of the public sector means - by definition - that each extra pound of reduced public-sector spending will tend to lead to relatively more jobs lost than are created by each extra pound of income received by the private sector.

To put it another way, the lesser efficiency of the public sector means that it creates more employment than the private sector when expanding, and sheds more when contracting.

Of course, that's not an argument for increasing the size of the public sector relative to the private sector. If that went on indefinitely, we'd all be in the workhouse.

But it does mean that shrinking the public sector can in the short term bring a huge human cost, in jobs lost, and hopes of fulfilling employment dashed.

Which is presumably why the chancellor has not used all his public-sector savings to pay down the national debt. He has also authorised £150m of new spending, to create 50,000 adult apprenticeships, and he is allowing £50m to be spent on the modernisation of further-education colleges.

Shrinking the state may well boost the creation of sustainable jobs in the longer term. But the immediate effect must be to increase unemployment.

Comments

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  • Comment number 1.

    Yep

    I agree with that

    Unless we start to correct the imbalance, though, we will get nowhere ever

  • Comment number 2.

    Will all business leaders applaud cuts?

    Only if they don't suffer the loss of a Government contract. Or currently supply services to the soon the be axed civil servants.

    IT suppliers will hate it.

    I am in all honestly less concerned by business leaders who are generally an arrogant selfish bunch - I am far more concerned with the businesses. Business leaders, like politicians are two-a-penny and can easily be replaced, but it takes far longer to develop the organisation of a successful business.

    Ask not what the government can do for you, ask what the impact of government actions will be on your business.

    PS anyone going to give me a peerage?

  • Comment number 3.

    "Most research proves that the productivity of public sector is indeed lower than the private sector. But the lower productivity of the public sector means - by definition - that each extra pound of reduced public-sector spending will tend to lead to relatively more jobs lost than are created by each extra pound of income received by the private sector."

    I'm not sure this is the correct conclusion to draw.

    If the private sector is more efficient, then I'd agree fewer jobs would be needed to create the same results.

    But surely the money "saved" through efficiency could then be focused on other aims, creating more jobs, and more results, and leading to a more productive economy.

    Which would, in turn, create more jobs?

  • Comment number 4.

    'Shrinking the state may well boost the creation of sustainable jobs in the longer term. But the immediate effect must be to increase unemployment'.

    This is the reality that the last Government was just too scared to face up to. They would rather carry on bashing the UK's credit card and ignore the fact that in the end the final cost would be much higher.

    For the past decade the UK has increased public spending to a level that could not be afforded even during the height of the debt-fuelled boom. Eventually, that had to come to an end - well now it has and real jobs will be lost as a result of the Labour Government's excessive spending.

  • Comment number 5.

    "Shrinking the state may well boost the creation of sustainable jobs in the longer term. But the immediate effect must be to increase unemployment."

    Very likely.

    And much worse to come next year.

    Not convinced that shrinking the state will create more sustainable jobs in the private sector - that remains to be seen - it may just leave a lot of people poor and out of work for a very long time.

  • Comment number 6.

    Business should pay to educate its own workers. It used to train engineers, years ago with apprenticeships. Now it expects us taxpayers to pick up the bill.

    It's time to give the bill back to business - they've been freeloading for years.


  • Comment number 7.

    "Of course, that's not an argument for increasing the size of the public sector relative to the private sector. If that went on indefinitely, we'd all be in the workhouse."

    Really, as opposed to increasing the private sector indefinitely which would lead to .......mmmmm. The public sector can survive without the private sector whereas the private sector cannot. It is also not constrained by "pursuit of profit" resulting in the endless quest of paying staff less and less, to ensure profit nargins are maintained. which of course results in staff being unable to buy the stuff they need to survive, so they borrow until they cant borrow any more which in turn leads ultimately to the recession as we have now. Nope, I favour a little bit of waste in the public sector, which is quite probably a fraction of the "profit" that the private sector pursues. Why should I pay a private firm to run my public services, eg emptying my bin, when I know the firm would be paying it staff peanuts to make a profit so its owner can have a mansion and drive a Ferrari to his office every day. No thanks.

  • Comment number 8.

    Yep, I think I suggested this the other week....

    Lets say lord snooty & co. cut (eg.) the £12bn NHS computerisation project (fine by me). How many of the job losses will be the evil public sector workers and how many in so the called private sector?

    I think some of lord snooty's mates will be laughing on the other side of their face as this comes home to roost.

  • Comment number 9.

    The key is to Privatise or Out-source the Management not to privatise or out-source the workers.

    Bad management is endemic in the Public sector while the front line staff have unpleasant jobs on low pay. Put the management roles up for change every three years with bonuses based on achieving targets audited by an independent body.

    For too long the workers have had to suffer and I am sure again that they will in these cuts as self serving management protects itself like a parasitic worm.

  • Comment number 10.

    Can't disagree with your analysis robert. There WILL be pain but the important thing to point out is that there are good arguments for keeping services within the public sector - particularly education and health. Private provision of these would probably lead to falling standards and also probably higher costs (see US healh system for prime example of this).

    Unfortunately there will be some people who never get into work again but at least the provision of adult apprenticeships is a welcome change.

    I am still a bit mystified where our growth is going to come from - we need to invest in a new generation of technologies that will drive our economy in the future.

  • Comment number 11.

    I think much of this goes without saying. The key word mentioned there that is seldom used is 'productive'. Thanks to Labour, for every productive worker out there, there are handfuls of unproductive people hired for the sole purpose of pushing pencils and box ticking.

    The irrational socialist concept of public sector job creation for the sake of lowering unemployment figures, without any thought put into productivity of the country as a whole is an unmitigated disaster.

    This coalition will need to much as much effort and thought into private sector investment as they currently are with the cuts, otherwise we certainly will end up as the 'workhouse' of the western world.

  • Comment number 12.

    Something of a blindingly obvious statement I'd have thought; it doesn't take an economic genius to work out the the cuts won't be without pain.

    The reality is that there is a level of affordability that is sustainable, and (unsurprisingly) the last 13 years have take UK to a point way beyond that. A very substantial top-slice of state spending is discretionary, and labour lost any vestige of discretion a long while ago. They have in effect been paying unemployment benefit as state salaries.

    It's been the economic equivalent of slapping on a coat of paint to a damp wall - makes it look pretty for a while but doesn't address the underlying problem, which sooner or later bursts through and has to be faced.


  • Comment number 13.

    What is a business leader? Discuss.

    It is well understood that once the state begins to cut that private sector elements which also suck at the taxpayers teat will suffer as well. It has always puzzled me why the government cannot develop and source its own expertise in consultancy and IT. Maybe it is a management thing or politicians thinking that tendering from external providers is more efficient; which it isn't.

    No rational business person will have put all their eggs into one basket and so whilst the state as a customer dies off there will be more reason for seeking out other opportunities. These other opportunities might even become value-adding rather than value destroying.

    I will look forward to seeing the first consultant. They will become like buses: none for ages then ten come along at once!

  • Comment number 14.

    Perhaps our government would like to clamp down on the Insolvency Practioners who like to wind up good businesses in temporary financial trouble which could easily survive except for the IPs. These IPs then going onto make a nice profit from winding up the business being irrelevant to their advice naturally. These businesses will drive the recovery. Slap the IPs now.

  • Comment number 15.

    "To put it another way, the lesser efficiency of the public sector means that it creates more employment than the private sector when expanding, and sheds more when contracting"

    The lesser efficiency means that my tax needs to be higher to support all of these, which means I have less to spend. If I have less to spend in the shops, then the government get less tax revenue.

    The public sector do not pay tax as they are paid from tax in the first place.

    So that is why I think most businesses will be happy.

  • Comment number 16.

    Hopefully business leaders are intelligent enough to spot that it is in fact their own taxes (corporation, capital gains and income) that provide the money for the government to channel back to them through public spending. Or else the government runs up a huge deficit and so our taxes have to stay high to pay off the debt and interest.

  • Comment number 17.

    The road is fully of potholes, tarmac melting into the gullies, all four wheels down to the rims, suspension broken, pistons broke. No oil. No petrol.
    Hold tight! shouts Osborne.
    I have an idea.
    Is there water in washer bottle?

  • Comment number 18.

    Just wait....for those who struggle daily on mediocre incomes no fault of their own, previously been ripped off by NuLabour on the rampant hikes of council tax, Osborne has mentioned nothing on this. Unless he does something, any cuts mean nothing to the ordinary. This penal tax has got to be reformed.

  • Comment number 19.

    Heh. I'm an IT contractor, but I completely welcome these cuts, actually. Why?

    1) Govt IT projects, particularly the ones getting canned, are pretty terrifying prospects really (ID database, NHS, ContactPoint) - all massively bureaucratic monoliths that go against any decent efficient design principle.

    2) Innovative and create IT startups, that concentrate more on "How can we make this small, cost-effective, and easy to use" than on "How many whistles can I fit in this" design principles should have opportunities here, as these companies are all about saving money in IT long-term.

  • Comment number 20.

    "Business leaders have been arguing passionately that the public sector needs to become more efficient. You'll recall that the equivalent of a plane-load of them publicly backed the Tories' general election campaign to make additional savings in public expenditure this year - in order to avoid that national-insurance rise they hate."

    ...yeah and what about the 'efficiency of the private sector' - I mean half the country is engaged in private sector employment which is solely dedicated to the management and movement of money.

    As this money has no real worth - is this really an efficient system of resource allocation?

    I wonder if these same 'business leaders' are the same 'business leaders' who avoid paying tax towards the management of our country, but are quite happy to see all the public services destroyed knowing that they didn't build them and that they can live without them.

    Look at your wage packet - and then look at the wage packet of a 'business leader' - and tell me if you think your views are 'aligned'?

  • Comment number 21.

    'Shrinking the state may well boost the creation of sustainable jobs in the longer term. But the immediate effect must be to increase unemployment.'

    Thats why rather than sacking staff government should think about going for a 4 day week or 9 day fortnight. Alternatively the Civil service could have August off unpaid (when parliament is in recess) which would provide an 8% saving.

    Otherwise the majority of the people made unemployed will claim other benefits and there will also be other costs linked to unemployment (eg higher crime, worse health)

    Cutting loads of public sector jobs in a recession is a false economy.

    With whats happening in the eurozone and the problems that still exist with banks I don't think confidence will return to the private sector for quite a while.



    As one public sector banker (RBS) recently said - prepare for the "Great Depression II" (see link below)

    http://ftalphaville.ft.com/blog/2010/05/20/238051/the-great-depression-ii/

  • Comment number 22.

    Can anyone really believe that Mr Darling has the audicity to criticise! Has he already forgotten that he Brown, Blair etc got us into this mess by spending all the money! The answer of course is yes.

  • Comment number 23.

    "Most research proves that the productivity of public sector is indeed lower than the private sector."

    Research by who? by private sector research companies perhaps?

    I have workd all my life in the private sector - and I can assure you it is the most unproductive system possible.

    Generally workers are more dissatisfied, more likely to leave in the private sector. This wasn't too much of a problem until the 'replacement workers' went into decline - I mean have you managed to achieve anything with a call centre call recently?

    The private sector likes to 'forget' it's 'management' in it's summary of efficiency - I mean how much does it cost the UK to run the FSA, BoE, all the ombudsmen, all the commissions etc - simply to stop the private sector strangling itself with it's greedy desires to make profits? - oh no, this is all accounted under a 'public sector cost'

    What about the fact that a large part of our 'employed' in the private sector are dedicated to the managment (or mis-management) of money? - is that efficient?

    The idea that the private sector is more efficient died when people got working rights and their bosses were no onger allowed to work people to death. Since then the private sector has become the height of inefficiency and it's only protection was in the fact that as long as people kept consuming above their needs then nobody would notice.

    Now that has ended and the credit lines have dried up - it's obvious what a complete waste of resources our 'bigger and better' private sector has produced.

  • Comment number 24.

    'Shrinking the state may well boost the creation of sustainable jobs in the longer term. But the immediate effect must be to increase unemployment'.

    Good point - perhaps we should just carry on spending, and forget about all this nasty cutting.

  • Comment number 25.

    And another thing - why is it all about cuts not about tax rises

    I propose a 60% income tax on any pay over £60k for any worker in an organisation which has an explicit or implicit tax payer guarantee - ie all public sector and all UK clearing banks!!!

  • Comment number 26.

    Had GO invested the savings in stimulating demand, reducing unemployment and assisting private sector investment they would have some merit. This is Micawber moneynomics at its worst and more short sighted thinking to come.

  • Comment number 27.

    2 John_from_Hendon

    If you wanted a peerage you should have purchased one when there were some going spare from that tennis playing chap. The tube to Burnt Oak and a 251 bus would have taken you close to his house.

  • Comment number 28.

    Correct - it's a simple philosophy. More pain now and the gain kicks in sooner. Spread and the pain and it takes longer to heal. However, maybe it's not that simple.

    However - hit hard now and lots of people lose their jobs and it costs more to hire them back later through recruitment and retraining. Also cancelling contracts just throws the money already spent right in the bin.

    Then there are the hidden costs - crime goes up, education goes down (the impact of which isn't seen for 10-15 years). Then there's the social aspect and overall quality of life. If that is hit, and doesn't recover then who cares about .5% interest rates?

    It's a difference indeed - but is so-called new politics actually taking us right back to the old days of Conservative economic policy?

  • Comment number 29.

    #7 AverageJoe:

    "The public sector can survive without the private sector whereas the private sector cannot"

    I hope you have that the wrong way round, for how can the public sector exist without the taxes raised in the private sector, remembering that all public sector are paid from tax in the first place?

  • Comment number 30.

    I would be grateful if the BBC news would stop referring to the UK deficit as "£160 billion". This figure is the annual INCREASE in the UK deficit. The actual deficit is much higher and I have seen figures quoted between £1.5 trillion and £4.5 trillion depending upon which of the many items are included. £1 trillion equates to around £40,000 per taxpayer.

  • Comment number 31.

    If we want a sustainable, viable economy then we have to shift demand away from the public to the private sector. How each service company deals with that change will inevitably give rise to winners and losers. But t'was ever thus.

    But there is also a need for greater fairness in society as the exposure that lawyers, bankers, accountants etc are due to make a mint out of Prudential's takeover in Asia demonstrates.

    It's early days for this government - Nick Clegg is right - let's judge results in 5 years time - not 10 days.

  • Comment number 32.

    Cuts to private sector consultants and travel are cuts but how much still remains in those budgets?
    Look at the prices on contracts to the private sector and see if the costs are near what the public would pay when contracting for a similar services?
    After budget are passed monies are moved around in accounts and all of sudden cuts are replaced with funds from somewhere else or what was once categorized as one type of purchase are now classified as something else.
    Need a substantial bank tax so they can pay for their sins.

  • Comment number 33.

    Ah, this this optimistic view.

    This chap I know, goodness, he is an optimistic fellow, always thinking that something will turn up.

    He currently earns £54,100 pa but his outgoings are £69,700 pa yet he goes to the bank and asks to borrow another £15,600 this year to cover the difference between his income and expenditure.

    The bank manager coughs and says this will be difficult because you currently have a mammoth overdraft of £890,000 which needs servicing at around 4% pa.

    That is, you are already paying interest of £35,600 pa on your overdraft and you want to borrow even more?

    Mr. Optimistic says Ok, look, to demonstrate my good intentions, I will cut my spending by oooh ... £620 this year.

    If you were the bank manager, would you lend any money to this chap?

    No - I would'nt either.

    Unfortunately his name is Mr. UK plc and his real debt is the above numbers with several noughts tacked on i.e. hundreds of billions of pounds.

    PS. This is a reworking of an earlier post of mine, using revised numbers(May 2010), but I think you get the picture, which is definately not our friend Rosy Scenario.

  • Comment number 34.

    Of course "the public sector is intrinsically more wasteful, less efficient and less productive than the private sector" because they are doing different sorts of things in differing contexts. The trouble is with the definition of wasteful, efficient and productive. Is accidentally writing off a £100m Typhoon on excercise inefficient? How about policing? Efficiency of police cover of an area is increased by car patrols, however these have the disadvantage of reducing contact between individual police officers and individual citizens and they have also been shown not to reduce crime. What they do though, is reduce citizens' fear of crime and improve attitudes toward the police. So what is your goal, and how easy is it to get it onto the bottom line? In the private sector usually easy (and making the wrong soap powder choices doesn't do a lot of permanent damage); not so in the public sector, and mistakes cost lives and well-being.

  • Comment number 35.

    It's quite clear. We need to print money. The shrinking public sector and unemployment are bigger risks to our economy than inflation. Printing money will also rebalance the effect of artificial property price inflation over the last 30 years (which allowed property developers to print their own money) and the subsequent devaluation of the pound will help exports. As for cutting IT spending, we need to know what IT services will be cut. I hope they are not looking to cut IT security given the current status of cyber-terrorism threats. If printing money could be coordinated with other major currencies then many of the risks would be mitigated. I imagine that the US and Euro would need little convincing. As for China with their $2trillion reserves I doubt that they would be too happy but part of our problem is China keeping their currency artificially low. As for pensioners in the UK, yes there would need to be some adjustment for their savings but it's not rocket science. Quickly hacking the public sector apart will destroy our economy and will lead to disproportionate problems further down the line.

  • Comment number 36.

    Well, who is surprised?

    In about 9 months I expect to hear 'Unemployment is a price worth paying'. Doubt those unemployed people will get an OBE for services to the economy though.

    No. You'll not be able to pay for your heating, you'll struggle to pay the TV license, you won't have bus fares out to the cheap supermarket that sells the only food you can afford, you won't be able to make the mandatory contribution towards your housing costs and you certainly won't be able to have that much needed haircut if you are to be presentable at the odd interview you just might be lucky enough to secure.

  • Comment number 37.

    6. At 1:00pm on 24 May 2010, Jacques Cartier

    Agreed 100%

    I was shocked to see our council giving massive subsidies to a company I once worked to train people in understanding why a website was good for their business. The welfare we give to the private sector is outrageous.

  • Comment number 38.

    I fear that what this means is that, sooner or later, we will have to pay a private company if we want our bins emptied more than once a month. We may need a street to "club together" if the people on the street want street lights or street cleaning.

    We may need to pay individually for policing.

    More children is less (and less well funded) schools.

  • Comment number 39.

    7. At 1:01pm on 24 May 2010, Averagejoe

    Yes.

    Anyone who has spent time in the States will see how ridiculous it is to rely on the private sector. While the population on the States are struggling to have an NHS and other services like we have, we are looking like we may just throw it all out. Stupidity in plain view!

  • Comment number 40.

    Which business or business leader will not agree with that - Can anyone actually find someone who would disagree?
    A very safe altruistic approach to business sentiment, Mr Peston.

  • Comment number 41.

    It used to be that business was in two main groups, large companies and the small/medium sized companies. NuLabour introduced a new group, i.e. companies, or divisions of large companies, who get all (or almost all) their business from the government and are simply a disguised extension to the public sector. It is this sector that Osbourne has cut.
    These people never called for cuts and they are not highly thought of by the rest of the business community. When the recession hit they were initially alarmed but soon found that they got *more* money from government. As they were the only part of business outside the banks that government ever actually talked to they prompted some of the more idiotic government pronouncement (e.g. seeing "the green shoots of recover" in Jan 2009 from Baroness Vadera).
    Most of business will welcome what he has done.

  • Comment number 42.

    What is a sustainable job?

    Does that mean the state is signalling they are no longer willing to train us for different private sector jobs every 5 to 10 years throughout our working lives? A return to the days when one career was all you needed?
    Or do they simply mean a job that can be sustained for a few years before that industry moves off to the East?

    Or is it just a fashionable work in sme new top-selling management paperback they've picked up at the airport because they've read all the magazines in the first class private lounge?

  • Comment number 43.

    19. At 1:52pm on 24 May 2010, Steve wrote:

    Heh. I'm an IT contractor, but I completely welcome these cuts, actually. Why?

    1) Govt IT projects, particularly the ones getting canned, are pretty terrifying prospects really (ID database, NHS, ContactPoint) - all massively bureaucratic monoliths that go against any decent efficient design principle.

    2) Innovative and create IT startups, that concentrate more on "How can we make this small, cost-effective, and easy to use" than on "How many whistles can I fit in this" design principles should have opportunities here, as these companies are all about saving money in IT long-term."

    I agree totally - in principle - however I don't think anyone in the civil service understands IT enough to realise where they went wrong with the NHS database system.

    Lots of small IT companies could tell you exactly what went wrong, but they don't have any say. Lots of small IT companies could have produced something more useful to the NHS in a few months and at a budget with 4 or 5 less zeros on the end.

  • Comment number 44.

    All publice service employees are paid from tax revenues. This pay is itself also subject to taxation. In short, 5.8 million public employees cost on average £22k pa, less tax and NI giving them a take home of £17k pa. Total tax burden by average uk joe is near to 40%, so in effect £13k is tax salary for each public employee. The average benefit bill for each uk claiment is £2800.00. So by making, lets say 1,000,000 redundant from the public service the uk saves on balance £10.2 trillion pa. The £6 billion we are talking about is peanuts. Lets keep the public services as its cheaper and the employed will still get value for money. In short my message is this - Its not the services that cost, its the employees. Sack 20% and dont worry.

  • Comment number 45.

    Public IT projects are, of course, infamous for overshooting budget and under-delivering. However, Boy George has effectively announced a return to the sliderule by cancelling all upcoming projects. Are we to understand that, of the £1.7bn IT capital budget in the public sector, not one of those projects had a justifiable business case?

    By throwing out the baby with the bathwater, Osborne has guaranteed one of two results:

    1) The public sector soldiers on with its sliderules, and becomes even more inefficient.
    2) Some of these projects are forced through anyway, owing to the overwhelming case for them to be carried out, making a mockery of the claimed figure for savings.

    A moratorium on large-scale IT projects was eminently sensible while past fiascos are examined and lessons learnt. However, Osborne is (wilfully?) misleading the public by including this £1.7bn in his permanent reduction in public spending.

  • Comment number 46.

    I do not think it matters who applauds or who cries foul- we cannot spend as much of GDP on Government and that is it cos we have to borrow it and the day of reckoning comes. We will need to raise taxes as well and we will need to get the balance between tax cuts and cost cuts right but for now a start has been made and I think that is the right thing. Some folk like Ed Balls seem to think we do not have to cut yet - and indeed think the price being asked of the Greeks is unreasonable by their Euro country colleagues- if it means we create unemployment- sadly we have debts to pay back and fresh borrowing to raise and so the only way to avoid cuts would be to put up the basic rate of tax to 30%- which of course would hammer the recovery even more. Labour has made us dependent on foreign investors again and so sadly we will have to do what they want us to just like in the 70's.

  • Comment number 47.

    Why the furtive picture of Osborne and Laws (at the top of Robert's blog)...taken with a telescopic camera lens through some foliage?

    Is it 'cos they are holding hands just below the sight-line?

    ...or is this just another necessary cut?

  • Comment number 48.

    Averagejoe wrote:
    "The public sector can survive without the private sector whereas the private sector cannot."

    Am I the only one laughing at your ridiculously disingenuous comment?

    may I ask how you pay for the public sector with no private taxpayer income?

  • Comment number 49.

    Robert, most of this is blindingly obvious, especially the resultant & inevitable job losses in the Public Sector.

    Would you suggest we carry on as we are & the new Government do nothing?

    The reality is this country needs to wean itself off the Public Sector and generate Private Sector manufacturing & service industries that can successfully export to the rest of the world.....it will be tough though

  • Comment number 50.

    Richard temple wrote: "I would be grateful if the BBC news would stop referring to the UK deficit as "£160 billion". This figure is the annual INCREASE in the UK deficit. The actual deficit is much higher and I have seen figures quoted between £1.5 trillion and £4.5 trillion depending upon which of the many items are included. £1 trillion equates to around £40,000 per taxpayer."

    Richard, you have it wrong my friend

    The annual deficit is indeed £160 Billion, deficit meaning the difference between income and expenditure.

    the national Debt however is as of April 2010 tallied at just shy of £900 Billion (according to [Unsuitable/Broken URL removed by Moderator]) This does however exclude the cost of our shares in LBG and RBS as well as PFI and Public Sector Pension Liabilities, which if added to the National Debt would indeed get pretty close to £3 Trillion

  • Comment number 51.

    Why are all those who don't work in the public sector always so derogatory of those that work in the public sector. For goodness sake life would be pretty intolerable if there was no the public sector and the public sector hugely supports the private sector whether they like it or not.
    If we had to pay as individuals for everything we now get from our public sector, we would be paying a much higher price than we do now. How much does it cost to have your vehicle serviced or call out for a plumber/electrician etc etc. £40-£60+ per hour. Who would be prepared to pay that rate for their refuse to be collected or a consultation with your GP?
    We are all happy to complain, until it effects us directly. What if you suddenly needed cancer treatment, or simply having a baby. The first here in the UK £40-60,000+, the 2nd in Switzerland £10,000.
    In some EU countries, including Spain & Sweden you pay 12 Euros each & every time you visit your GP. Could easily come here, as they have to become more efficient. One of the NHS's greatest inefficiencies is created by the general public, who just fail to keep appointments, so an easy arguement would be to make you pay, to ensure you turn up.
    At the moment, we get an amazingly good deal from our public services compared to many other Countries. The problem is, the press don't give a balanced picture of what others have to pay for in other Countries, so we just all feel we are so hard done by.

    How many companies supply goods and services to the public sector whether it is the purchase of vehicles, fuel, food, stationary, buildings, equipment, IT, utilities, other services etc etc. Public services don't live in a bubble, they use the private sector through every sector of their work, which means people in the private sector have jobs.
    For years and years Local Authorities have been told to cut and cut. They cannot actually cut anymore without there being serious risks to health. Then who will complain? All those who want more and more cuts in public services but who always come down hard on the public sector workers who fail to deliver. They are caught between a rock and a hard place.
    Why is everyone so hard on the public sector and yet those who caused this crisis in the first place, namely the Banks, sit quietly grinning from ear to ear, as they carry on as if nothing happened. Why are they not pilloried, why has no one been brought to book for gross negligence, fraud, corruption etc?
    Why does a social worker on a pitiful wage run the gauntlet of the press when something goes wrong and yet the bankers who earned millions got bailed out.

    Be oh so careful what you wish for, if you rely on the public sector paying for your goods and services.

    We should be looking at ways of working together for the good of everyone, not constantly snipping at those who are perseeved as something else. The vast majority of people are hard working trying to do a difficult job in difficult circumstances, whether in the public or the private sector.
    Maybe we need to call it a Coalition of Private & Pulic Sector? Seems to be the current buzz word.

  • Comment number 52.

    #44 MONSTRA MIHI PECUNIAM

    I see you went to the Gordon Brown School of Economics, £10.2 trillion??? I think you need to check your arithmetic.

  • Comment number 53.

    Robert,

    When assessing the relative efficiency of private vs public sector; are we factoring the billions of pounds squandered by private sector banks at the heart of this crisis into the equation or not?

    Only asking....

  • Comment number 54.

    MONSTRA MIHI PECUNIAM wrote:
    "All publice service employees are paid from tax revenues. This pay is itself also subject to taxation. In short, 5.8 million public employees cost on average £22k pa, less tax and NI giving them a take home of £17k pa. Total tax burden by average uk joe is near to 40%, so in effect £13k is tax salary for each public employee. The average benefit bill for each uk claiment is £2800.00. So by making, lets say 1,000,000 redundant from the public service the uk saves on balance £10.2 trillion pa."

    your maths is way off mate!

    if £17000 per annum of your average public sector employee is paid for from private taxation, minus the £2800 they would receive in benefits = £14200 taxpayer footprint per employee, multiplied by 1,000,000 = 14.2 billion.

    yes its a lot more than 6 Billion, but its a hell of a lot LESS than your trillions. You also forgot to factor in the £14200 net that would actually get spent on VAT bearing items and other goods and services which contribute to private company revenue and therefore profits and by extension get paid in corporation taxes.

    The net difference is even less.

  • Comment number 55.

    29. At 2:21pm on 24 May 2010, yam yzf wrote:

    #7 AverageJoe:

    "The public sector can survive without the private sector whereas the private sector cannot"

    I hope you have that the wrong way round, for how can the public sector exist without the taxes raised in the private sector, remembering that all public sector are paid from tax in the first place?"

    It can work that everything is 'public sector' - the public sector just needs to produce everything, and sell everything as well. That way, all the money that the public sector workers earn is spent back into the public sector organisations.

    It's called Communism - and you just need to look at Soviet Russia for an example of how brilliantly it works.

  • Comment number 56.

    39. At 2:48pm on 24 May 2010, copperDolomite wrote:

    "Anyone who has spent time in the States will see how ridiculous it is to rely on the private sector. While the population on the States are struggling to have an NHS and other services like we have, we are looking like we may just throw it all out. Stupidity in plain view!"

    Ah yes - the good old US of A - it's quite fitting that the first thing the great Capitalist nation did when Capitalism shwoed it's contradictory nature was to bolt for Keynesism as their saviour.

    Then the population realised why private health care and tiny unemployment benefits weren't such a great idea "nobody said we would all be unemployed and unable to get a job".

    If it weren't for Obama there would be dying unemployed US citizens in the street of that 'free country' - discarded by Capitalist overproduction as so many other resources.

    ...and what's our solution to the great Capitalist plague enveloping our nation? - throw it more resources, keep the beast happy, chuck in the few remaining pieces of collectivised nation we have in an effort to subdue the beast.

    It seems we're more idiots than inspiration to the world.

  • Comment number 57.

    43. At 2:57pm on 24 May 2010, Paul

    I've worked with small IT companies in the past. I'm exceptionally wary of software projects provided by small companies as a result.

    The NHS system is truly horrifying. One of the best examples of sheer incompetence I can think of if you exclude the world of finance. I'm against the NHS IT system for one additional reason.

    My health records are between me and and my doctors. No one else. No little research companies mining data, statistics or anything else. I had an interesting appointment with my GP a few years ago. He fixed me up with a diagnosis and some really good advice. I gave him a quick demonstration of how poor the system he had on his desk really was - left him in a bit of a state...

  • Comment number 58.

    15. At 1:30pm on 24 May 2010, yam yzf wrote:

    "The public sector do not pay tax as they are paid from tax in the first place."

    ..and the private sector cannot afford to provide it's on security, transport or health system. The public sector is born out of the private sectors failures to address and therefore it must pay for them.

    If the whole world was private, then we would see old workers thrown out by the production owners as 'obsolete' and 'not economically viable' - scant reward for years of service.

    We might also find that the short termism of the private sector would lead to damage to ourselves and the economy as the private sector continued unabated in it's thirst for profit. Then nothing would be sacred - children, the elderly, the infirm - would all have to work or die.

    Nice world the private sector.

  • Comment number 59.

    'Shrinking the state may well boost the creation of sustainable jobs in the longer term. But the immediate effect must be to increase unemployment.'

    In other words, for the first time in 13 years we've got a government that cares about the long term.

  • Comment number 60.

    Our large deficitit is due to almost entirely accounted for by the cost of bailing out the banks, I would like to know what are they going to do about the banks, or is it the usual of big boys scratching each other's back at the expense of everyone else.

  • Comment number 61.

    business leaders have been trimming the bills for nearly 2 years. I would say a lot of them could have ridden out the storm as a very large profit was still being turned in a lot of cases, just not as big as previous years, but the forseeable lack of income was the driving factor. They are not socialist so they had no reasons to maintain staffing levels (or inefficiencies if you'd prefer).

    Of course, business leaders are pragmatists and are likely as not able to see that spending your way out of debt is a fools idea. Restoring the balance sheet to a balance, however difficult in the short term, can only be beneficial to businesses in the long term as a stable and solvent economy breeds business opportunity and growth, especially if the tax burden is lessened.

  • Comment number 62.

    39. At 2:48pm on 24 May 2010, copperDolomite wrote:

    Anyone who has spent time in the States will see how ridiculous it is to rely on the private sector. While the population on the States are struggling to have an NHS and other services like we have, we are looking like we may just throw it all out. Stupidity in plain view!"

    No one else in the world is looking to have an NHS like we have. They all realise it's just a money pit. Unfortunately many British people get all religious about it, rather than going back to what the core reason for the NHS was.

    The rationale behind the NHS is good - the putting it into practice isn't - there are much cheaper and better ways of doing it.



    Countries tend to have

  • Comment number 63.

    The Regional Development Agencies are a good target. I'm a consultant who works for them and very little cash goes to support companies. It is almost entirely spent on a vast amount of red tape and an army of really not very good employees who add very little value to our SMEs. Even though I'll lose out with these cuts, it's exactly the right thing to do.

  • Comment number 64.

    #27. stanilic wrote:

    "2 John_from_Hendon

    If you wanted a peerage you should have purchased one"

    Thanks for the advice - you seemed to have missed the word 'give'!

    Did the strategy with LL/TB succeed for you?

    I was suggesting, as you a well aware, that there are other ways for the state if getting unbreakable private sector contracts re-negotiated!

  • Comment number 65.

    I said months ago when the Tories first suggested £6bn of cuts this year that it would hit the private sector possibly as hard as the public sector in jobs terms. It takes time to make public sector workers redundant whereas cancelling a contract to a private firm is a relatively quick process, so if you want cuts this year then private sector contracts is obvious place to make them, as is a public sector recruitment freeze. massive public sector job losses will follow later though.
    Conversely the easiest way for a government to stimulate the private sector is through public works contracts especially Public Investment projects (roads, hospitals, schools, bridges etc). Labour apparently planned to cut Public investment from 5% of GDP to 2.6% of GDP by 2014/15, I'm not sure whether this governments plans are the same. If they are then it could mean a very slow recovery. Slower growth means you probably end up cutting yet more public sector jobs to try and balance the books so the public sector may suffer more than currently planned in the coming years.
    The up side of cuts this year is that it will help keep the markets happy so hopefully our borrowing won't get more expensive which would also hit public & private sector jobs.

    There are many layers of useless management in the DWP but they're unlikely to get rid of themselves in any great number unless forced to. DWP cutbacks will probably mean they have to cut back on the already limited numbers of fraud investigation staff so there will be fewer savings from benefit fraud prevention. With increasing unemployment remaining staff will mainly have to concentrate on taking claims rather than finding people work so thst isn't necessarily such a clever area to cut at the moment unless you have a very specific plan of what the cuts are going to be.

    I'm rather more hopeful of Local government getting rid of silly jobs if the government change the rules so they no longer have to employ multiple layers of people checking up on each other, otherwise their scope is more limited.

    Cutting Government IT projects will probably be popular, except with IT firms, but while their have been some appallingly bad government IT projects one should be careful not to cut ones that could save money in the future, believe it or not there probably are some.

  • Comment number 66.

    The private sector are already swimming hard to cope with the aftermath of the credit crunch, but the government seem to be putting all their faith in the private sector's ability to absorb any jobs shed from the public sector, which may not be a realistic expectation.

    Though a lot of the cuts e.g. non-replacement or recruitment of staff may not involve redundancies, any staff rendered unemployed will increase government benefit expenditure which is self defeating.

    People who are unemployed do not pay National Insurance and only spend on essentials.It's vital therefore that we start taking action to get the unemployed back to work.If the private sector cannot do it we need to help the unemployed to form their own companies as the more small businesses there are the greater the likelihood that we can get people working.

    Many people on benefits are simply being paid to stay at home.The government needs to get its agencies to find work for these people to do.Businesses may not have jobs for them to do but they can provide work experience without cost to themselves and get the unemployed back into the habit of work, something they won't get by staying at home.

    Increasing the number of people in work increases productivity, National Insurance,income tax & VAT and in time will reduce the cost in unemployment benefits.It is therefore a vital component in getting the UK on the road to recovery.

    It will be interesting to see what the effects of these cuts will be.

  • Comment number 67.

    Falling Sales ?

    All depends which Business Person you ask !

    None of them want to foot the Bankers Bills thro higher Taxes tho'.

  • Comment number 68.

    Stopping the child trust fund payments makes sense - otherwise it's like borrowing money from your credit card and putting it into a saving's account - it looks like you've now got savings, but you've given yourself debt as well.

    The government borrowing money put into savings accounts is just silly.

  • Comment number 69.

    Government support for business is looking anemic. I guess if businesses still have the strength, they might applaud.
    The Coalition Government appears to be focused on Vince Cable’s area of responsibility, which will have to find savings of £900M. One can expect reduction in businesses grants & loans, as well as budget cuts for regional development agencies.
    Many business folk are gulping at the vastness, as well as speed of the cuts. Many businesses rely on government support in the form of grants &,loans. Premature withdrawal, or non-tapered withdrawal, could leave some of these businesses flopping on shore like dying fish yanked from the lake.
    The time to pay scheme is (for the most part) gone; this scheme extended deadlines for firms on outstanding tax. HM Revenue & Customs are less willing to offer extensions. When businessess cannot get bank loans, how are they supposed to pay?
    The UK Department for Business, Innovation and Skills (BIS) is a major casualty of Osbourne. It must save £700M from its budget. The cuts will no doubt affect regional development, especially in the south of England. Other areas expected to see cuts include university funding. The Coalition Government is working to decrease a budget deficit of £156B - with up to 30,000 jobs expected to be lost in the public sector all by itds lonesome. What happens to these people? Do they pressue the budget by slip-sliding onto the dole.
    Minister David Cameron visited BIS. He described it as a 'big economic department with a huge task in front of it, demonstrating that this country is open for business'.
    Really? Do Vince Cable and David Cameron talk to each other?
    Meanwhile the UK corporate tax rate will be lowered, rules simplified. In fact, Osborne has promised a five-year overhaul of the entire tax system. However (as usual) details are not forthcoming. Pre-election, the Conservatives had promised to cut the corporate tax rate to 25% from the current 28%. Paid for how - exactly?
    Osborne's office confirmed in March that it wouldn't reduce R & D but will "refocus" them to boost UK exports and key sectors like high-tech products. (As usual) no details.
    Osborne said he sees his key task as fostering the private sector recovery after a deep and protracted recession. The link between his cuts & fostering recovery seem rather weak to me. e.g. How do cutting university funding, allowing business R&D, and promoting high-tech production fit together? To me there seems to be a certain non-logic.
    More worrisome is the Coalition Government’s distant relationship with the European Union when Brussels has so much economic expertise to offer. The UK seems so isolationary, like it alone has all the answers - no help requested or needed. (Pride comes before the fall.)
    Cameron's “Open for business” seems very poorly planned and extremely poorly detailed - too quick towards implementation. He should slow down, tighten his relationship to the EU, and definitely wait till after the G-20 in Toronto to bring down any budgetary reform.

  • Comment number 70.

    Public IT Contracts ? Ah, the old blank cheque to Private Computer Firms !

    They'll lose money.

  • Comment number 71.

    Spot on Robert. However, as we are hardly blessed with brilliant business leaders brimming with foresight I doubt much of the 6 billion will translate easily into vigorous green shoots. Or have we all overlooked, been deaf to or just not been told about the brilliant business expansion plans that have foundered because the NI rate and capital gains tax was a tad too high? Can any of that plane load of business talent who moaned about the NI increase actually show where their companies will now create real new jobs now the yoke of G Brown et al has been lifted from their bent backs? Somehow doubt it. They will trouser their bigger profits and dividends and disappear back into their comfort zones.

  • Comment number 72.

    Why is Robert Peston the only person I can think of at the BBC on the telly who actually explains important points about the economy that I didn't know? Most others just repeat banal and obvious claptrap (and look nice). He's also the only commentator who treats us as intelligent adults. Is he allowed to pursue his openly intellectual approach because he slips through the increasingly airbrushed cracks in the glossy BBC facade. As news turns into pure entertainment, intellect seems to have less and less of a role. Or is the truth even more worrying - that the BBC can no longer attract the best, most incisive commentators who go elsewhere. Places like Al-Jazeera which has a much higher quality of journalism than its rival BBC World.

  • Comment number 73.

    29. At 2:21pm on 24 May 2010, yam yzf wrote:

    "I hope you have that the wrong way round, for how can the public sector exist without the taxes raised in the private sector, remembering that all public sector are paid from tax in the first place?"


    ...and lets make sure nobody is fooled by this statement - the public sector owes it's existence to the failures of the private sector.

    Should the private sector pay for providing something which is is unable to provide by itself?

    I think that's fair - otherwise we would have to employ this same logic to all 'sun-contractors' and insist everything is done in house - no matter what the cost

    Try and keep it balanced - promoting the idea that the public sector is 'bought and paid for' by the private sector gives the impression only 1 of them is required.

    This is clearly not the case.

  • Comment number 74.

    Now we are getting to the real cost of the reckless behavior of a few institutional investment bankers.Millions of people losing their jobs and families being forced out of their homes and on the bread line as the cuts come into force.
    Please bear in mind not one investment banker has gone to prison or had there own assets confiscated. You can be sure they will not lose their home, that cannot be said for the people being given their P45s.

  • Comment number 75.

    "To put it another way, the lesser efficiency of the public sector means that it creates more employment than the private sector when expanding, and sheds more when contracting."

    Nice piece of economic illiteracy. GDP is measured as the combined income from capital and labour. As long as the private sector absorbs the workers shed by the public sector, and pays them the same, GDP stays the same. However, if it is more productive, you get more goods and services at a given level of GDP than you did before.

    Similarly, the paper wealth created by appreciation of property is return on capital, and therefore supposedly part of our GDP. Only it is obvious that paying more or less for the same property does not give you any more or less housing. The crowding out effect of both the public sector and property both need to be addressed.

  • Comment number 76.

    Higher unemployment in the Public Sector = Less People with Money to spend = Less profits for Private Sector. Seems pretty simple to me... add in the Social 'cost' and its not looking good.... Mind you, if you are a banker with a private island, some landlord who bought up old concil stock a few years back or just simply rich then there is nothing to worry about. If the poor get uppity one can always smack them down a bit can't one....

  • Comment number 77.

    44. At 3:00pm on 24 May 2010, MONSTRA MIHI PECUNIAM wrote:

    "Its not the services that cost, its the employees. Sack 20% and dont worry."

    So how does a hosptial function well without any nurses?

    How does a school produce educated children with no teachers.

    If you cut 20% - how do you make sure it's not the 'good 20%' - I mean after decades of effort the Government is still unable to 'measure productivity' whether it be in the public sector (league tables, points systems) or in the private sector (profit...which turned out to be imaginary profit)

    I could cut 30% of the private sector today and nobody would notice - it's call the financial industry and it produces nothing of any value whatsoever.

    Some turkeys do vote for Christmas - those turkeys who can see the wider picture outside of their own narrow self interest.

  • Comment number 78.

    #56

    Couldn't agree more

  • Comment number 79.

    CopperDolomite 36

    When New Labour took over in 1997 unemployment was under 1.8 million and falling rapidly. When they left office it was 2.5 million and still rising. Rising unemployment is the price the country is going to pay for New Labour incompetence. Funny how you never criticise them though, eh CopperD ?

  • Comment number 80.

    "Most research proves that the productivity of public sector is indeed lower than the private sector"

    Indeed - my limited work experience at a local borough council made "Socialist Worker" my favourite oxymoron.

  • Comment number 81.

    51. At 3:32pm on 24 May 2010, Angela wrote:

    If we had to pay as individuals for everything we now get from our public sector, we would be paying a much higher price than we do now. How much does it cost to have your vehicle serviced or call out for a plumber/electrician etc etc. £40-£60+ per hour. Who would be prepared to pay that rate for their refuse to be collected or a consultation with your GP?"

    Yes.

    It takes about a minute to collect my refuse - so that's a pound a week (£52 a year). I bet the council charges me more than that at the moment!

    If I get a 10 minute appointment with my GP, that would be £10 - I'd pay £10 to see my GP, no problem. Most people would. Most countries charge to see a GP, with low-earners getting it refunded. It cuts down on abuses to the system.

  • Comment number 82.

    Well that is fine - but by the same token, when the government goes out to tender for some new job like a road (if it still does!) would you suggest that they should accept the most expensive rather than the lowest tender on the grounds that this creates more employment? Should we all go round the supermarket shelves buying the most expensive products for the same reason?

    But there is an obvious problem with this is there not - we would just run out of money sooner and thus not in fact create any more employment; which seems pretty much what has happened to the government....

  • Comment number 83.

    55. At 3:40pm on 24 May 2010, Paul wrote:

    'It's called Communism - and you just need to look at Soviet Russia for an example of how brilliantly it works.'

    Some would call it State Capitalism. I assume you are one of the 'I'm All Right Jack' brigade? How is the view from top of the pile?

  • Comment number 84.

    Angela wrote: "If we had to pay as individuals for everything we now get from our public sector, we would be paying a much higher price than we do now. How much does it cost to have your vehicle serviced or call out for a plumber/electrician etc etc. £40-£60+ per hour. Who would be prepared to pay that rate for their refuse to be collected or a consultation with your GP?"

    Oh Angela, if only it were so.

    I personally would hapilly selectively pay for my essential services. Its all the non essential crap that I take exception to.

    Do you forget that hundreds of billions in tax is taken to pay for things like outreach workers, quangos, pen pushers in the NHS, IT consultants etc?

    If the government gave me a list of all the services they offer broken down and told me their cost, I would hapilly pick those that I feel are worth it, such as doctors, nurses, police, firemen, teachers etc. (GP's are gloriously overpaid however, biggest NHS scandal of the last decade is GP pay)

    Don't forget we pay for all this crap and a lot of it we dont need nor want!

  • Comment number 85.

    The public sector is inefficient, but not for the reasons you think through here.
    The public sector is part of the service industry. As an industry it thinks it is different (because it doesn't make or sell goods for example) and hasn't developed the ability to maximise resource utilisation by identifying how much it costs to deliver or improve services. As a result it is unable to determine whether it is delivering value for money and doesn't benchmark unit costs across the industry. This doesn't necessarily mean it is less efficient than the private sector - it just can't demonstrate whether it is or not.

    The real issue is that the sector as a whole is padded with costs that just aren't necessary.

    Administrative staff are paid comparatively more than private counterparts, there are more of them than strictly necessary, and administrative systems are inefficient and often duplicated.

    Buildings are rarely fit for purpose and require more maintenance spend than they are worth, without actually improving the work environment.

    Back-office processes are often antiquated and resource intensive. Poor practices are built in and there is insufficient determination to make the right changes.

    Though it is seldom acknowledged, many public sector leaders and most managers are change averse - largely because it directly affects their position perhaps.

    And finally...please stop the comparison of public sector executive pay with that of the prime minister. CEOs don't get a free house (or two), or free transport, or free phone calls, etc. CEOs are appointed based on their professional experience and qualifications. Prime Ministers are elected...based on a few promises which may or may not be delivered.

  • Comment number 86.

    48. At 3:20pm on 24 May 2010, Anand wrote:

    "Am I the only one laughing at your ridiculously disingenuous comment?

    may I ask how you pay for the public sector with no private taxpayer income?"

    You may laugh, but only at your own foolishness. Your question is based on a monetary system and not a resource one. The question should be "How does the private sector protect itself without the provision of the public sector".

    I mean shops and other businesses don't tend to last very long in societies dependent on private security.

    Your whole question is based on the premise that the private sector:

    a) Makes profits
    b) Pays a percentage of those profits in tax.

    Neither of this appears to be the case - we have seen how much 'profit' the private sector made - because the Government is being asked to pay it all back from the last 10 years.

    Secondly many companies reduce their tax bill, moan about regulations, but then are still happy to accept all the benefits of our well run public sector - seems like another bunch of freeloaders to me.

    Why don't you look at Sweden as your model for what a good public sector can provide - it's not cheap by any means - but are they collapsing under the battering the private sector has taken over the last 2 years? - not really, seems they had more sense.

  • Comment number 87.

    No 58, that reminds me of Victorian London.

    Ordinary people working long hours just for a roof over head and a meal, no health service ( a couple of Charities), and lots of people starving to death on the streets, or dying of exposure in Winter.

    Funny how many Rich people saw a hard Winter as a mercy to the poor back in the 19th century.

    People don't change much do they?

  • Comment number 88.

    49. At 3:21pm on 24 May 2010, rob wrote:

    "The reality is this country needs to wean itself off the Public Sector and generate Private Sector manufacturing & service industries that can successfully export to the rest of the world.....it will be tough though"

    This is classic conserva-nonsense-conomics.

    Who exactly are we going to sell to? - haven't you notced they're all doing the same?

    Can we compete with the numbers in China? - nope.
    Can we compete with the bullying and trade embargos of the states - backed by their awesome military power? - nope.
    Can we compete with the well tuned efficient production machines of Japan or Germany? - nope
    Can we compete with the mass of devaluation of other currencies in an effort to 'cheat our way out of recession'? - nope.

    So I guess it's back to the moon for your 'new markets' then, because in case you hadn't noticed - the world is broke not just the UK. Nobody will be buying anything other than necessities for some time and even those necessities can be provided cheaper by slave labour camps in the far east.

    ...or maybe you propose in order to redress the balance we should start our own slave labour programme?

  • Comment number 89.

    58. At 3:50pm on 24 May 2010, writingsonthewall

    Nowhere did I say the public sector should not exist - but they should never be bigger than private otherwwise governments have to borrow more.

    The governemtn need to provide some basics:

    Security
    Health
    Education
    Welfare for those that need it

    Everything else is just a way of reducing unemployment figures.

    And of those 4, which is it doing well? I believe none of them. Why?

    1. under equipped armed forces
    2. hospitals where you wait weeks for appointments
    3. hospitals where they misdiagnose
    4. GPs which allow you to be ill only between certain hours and when you have pre-booked
    5. education where pupils run riot in classrooms
    6. education where teachers are not allowed to instil discipline
    7. education where if I resat my A-levels from the 80s I would probably get a degree
    8. Wefare where those who have worked all their life and fall on hard times do not get the help they deserve, yet those who have never worked a day, get all the help they want.

    Keep cutting I say

  • Comment number 90.

    55. At 3:40pm on 24 May 2010, Paul wrote:

    "It can work that everything is 'public sector' - the public sector just needs to produce everything, and sell everything as well. That way, all the money that the public sector workers earn is spent back into the public sector organisations.

    It's called Communism - and you just need to look at Soviet Russia for an example of how brilliantly it works."

    ...well actually you need to look at the Paris Commune to see how it should work - not the failed Socialist state of the USSR which turned out to be yet another dictatorship in the guise of a free workers society.

    Had the Paris commune not spent time being 'democratic' then they wouldn't have been massacred by the French army.

    Once you have the taste of real freedom, every slave owner in the world will do their best to bring it down.....which is coincidently probably why every effort since has resulted in dictatorship. For without strong leadership freedom is taken from you, but that leadership itself can also bring about the loss of freedom.

    This is teh only puzzle which needs solving - obtaining freedom without relying on a leader to achieve it.

  • Comment number 91.

    59. At 3:51pm on 24 May 2010, jobsagoodin wrote:

    "'Shrinking the state may well boost the creation of sustainable jobs in the longer term. But the immediate effect must be to increase unemployment.'

    In other words, for the first time in 13 years we've got a government that cares about the long term."

    What did someone just say about the line "soon they will be telling us the unemployment is worth it"?

  • Comment number 92.

    # 39. At 2:48pm on 24 May 2010, copperDolomite wrote:

    > Anyone who has spent time in the States will see how ridiculous it
    > is to rely on the private sector. While the population on the States
    > are struggling to have an NHS and other services like we have, we
    > are looking like we may just throw it all out. Stupidity in plain view!

    I like the States (I'm a Canadian) but it's too dear to live
    there - I don't know how they survive without the NHS (which
    we can afford in Canada, but they don't have one south of the 49th
    parallel). Viva la Difference, as we say in Quebec!

  • Comment number 93.

    62. At 3:54pm on 24 May 2010, Paul wrote:


    "The rationale behind the NHS is good - the putting it into practice isn't - there are much cheaper and better ways of doing it."

    Have you not seen by the myriad of broken Chinese toys and goods that block up your house that 'cheaper' is not always 'better'.

    ....and the provision of private health care in the states is one of the most expensive in the world - they pay more for their provision than we do.
    If you can show me a private health care system which is genuinely cheaper to produce and deliver than the NHS - which doesn't impact of patient care - then I would like to see that.

  • Comment number 94.

    80. At 4:25pm on 24 May 2010, R_Souls wrote:

    "Most research proves that the productivity of public sector is indeed lower than the private sector"

    Indeed - my limited work experience at a local borough council made "Socialist Worker" my favourite oxymoron."


    ...and maybe they viewed you as 'willing slave' - another favourite oxymoron.

  • Comment number 95.

    64 John_from_Hendon

    I was just having a quiet jest as nothing in this life is free.

    The real joke is that it is possible to tear up an unbreakable private sector contract so long as someone gets a suitable libation in return. Business is business! The problem the state has is that it has already screwed the seller to the wall at the start of the arrangement leaving little charity for later.

    When I supplied the public sector, we never tendered. We carried stock and would do a deal with the public body once their listed providers failed to deliver because the price they had tended for was too low. Mugs game!

    As for the peerage I do not play tennis and I have long chosen to follow a tradition set by my grandfather of refusing decorations from the state.

  • Comment number 96.

    79. At 4:24pm on 24 May 2010, jobsagoodin

    Are you saying GB et al are responsible for the global financial crisis? I don't think so. we've been on that track since the days of Thatcher. Labour just continued with her philosophies because they wanted to stay in power. They played the system of media and a few selfish voters who just happen to live in the swing constituencies.

  • Comment number 97.

    Many hundreds and thousands of jobs can be had, directly and indrectly, as well as £billions in extra taxes if all off-shored and off-sourced jobs are brought back into the UK.

  • Comment number 98.

    WOTW 91

    If it's a choice between people being unemployed for a short time or unemployed for a long time, I'd choose the latter. Which of those two would you choose ?

  • Comment number 99.

    89. At 4:42pm on 24 May 2010, yam yzf wrote:

    "Nowhere did I say the public sector should not exist - but they should never be bigger than private otherwwise governments have to borrow more."

    Have you not noticed - the world biggest private sector (the US) which has one of the smallest public sectors is in Trillions of dollars of debt - so much they are having to run th eprinting presses day and night just to avoid the gaze of the bond vingilantes...now what did you say about borrowing more?
    All Governments, whether private or public sector bias have borrowed more in their time. The ony exception to this was the last Tory Government which 'hid' it's borrowings by selling the family jewels.

    "The governemtn need to provide some basics:

    Security
    Health
    Education
    Welfare for those that need it"

    First problem 'those that need it' - and who decides that? - Beaurocrat or Bond holder? Who gives either the right to decide who 'deserves' and who doesn't?

    "Everything else is just a way of reducing unemployment figures."

    Oh the tragedy is that everything is done to reduce unemployment figures. We have an entire finance industry that hid thousands of unemployed - which it's been discarding onto the streets for the last year or two.

    "And of those 4, which is it doing well? I believe none of them. Why?

    1. under equipped armed forces
    2. hospitals where you wait weeks for appointments
    3. hospitals where they misdiagnose
    4. GPs which allow you to be ill only between certain hours and when you have pre-booked
    5. education where pupils run riot in classrooms
    6. education where teachers are not allowed to instil discipline
    7. education where if I resat my A-levels from the 80s I would probably get a degree
    8. Wefare where those who have worked all their life and fall on hard times do not get the help they deserve, yet those who have never worked a day, get all the help they want."

    All you have demonstrated is the reasons why Governments are well down the slippery path of insumountable debt.

    "Keep cutting I say"

    ...until there is nothing left - but it won't cure the problem for long. It's the fundamentals which are wrong, and they are not being addresses.

  • Comment number 100.

    But the sensible ones have a health care system that delivers free care at the point of delivery.

    If cheap is what you want then fine.
    Here's a little skit to demonstrate the point:
    I'll cheaply clean the ward and theatre while you have your appendix out. Sorry, but the super-dupper drugs you need to clear of the multiply resistant bug eating deep down into your wound are too exensive! But the voters and industry are all really chuffed with the fantastic conservative policies on cheap health and services, so....

    Handing profit over to someone is expensive. Cheap is not the point. Cheap and quality are rarely the best of friends. It's like food. Turkey sizzlers versus salmon? Frozen burgers or steak. We don't get religious over our NHS. We aren't stupid, however difficult that fact may be for those who think taking out a chunk of profit from our pockets is somehow good for the patient or the workers!

 

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