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Friday, 9 January 2009

Low Cost Government

Well, here we are in '09, the last of the Noughties: a fitting epithet for a decade of both reckless abandon and total collapse on the fiscal and financial front.

There's a lot of soul-searching going on, as well as a search for inspiration and leadership. While the US President-elect seems to have risen to the challenge, in the UK the search continues.

Bereft of vision, we look to the past, and it's a sign of the times that I was given Speeches That Changed the World for Christmas. Of course it includes Franklin D Roosevelt's First Inaugural Address, heralding the "New Deal", which has often been referred to in the news lately. It can also be read here.

While FDR's speech and the New Deal must be seen in the context of a more parlous economic situation than today's, and many of FDR's tactics are being deployed today, I was struck by one that's yet to be honoured in the UK:
"... insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced."
I mention it not just because UK civil servants were promised a 2% pay increase in a time of rising unemployment (public sector teachers will get 2.3% extra this year and next, while the Daily Mail shrieks that private schools are closing). I also raise it because New Labour might just mistake the need for fiscal stimulus as a wheeze for saddling us with more civil servants in the long term, who'll generate further cost in terms of random policy initiatives and bureaucracy to justify their existence. See the Taxpayers' Alliance "non-jobs" for examples.

Of course, hiring more public sector workers flies in the face of last September's promise to cut jobs, as reported in the Guardian:
"Separate ONS figures on public sector employment showed the number of people employed by the government fell 44,000 in the second quarter to 5.8 million, the lowest total since the second quarter of 2004. The government has pledged to cut 84,000 jobs by next April as a result of a review conducted by Sir Peter Gershon in 2005."
But as Chancellor, Gordon Brown approved a 13% increase in the public sector workforce from 5.1 in 1997 to 5.8m in 2006, according to the Institute for Fiscal Studies. So, Sir Peter's 2005 review was merely borne on the rising tide.

The IFS also says that public sector pay has caught up with private sector pay, yet about 76% of public sector workers have final salary schemes, versus 17% in the private sector. And public sector pensions are worth 25% of salary versus 20% in the private sector. With pay the same, there's no reason for that gap - if there ever really was one.

But take heart! Perhaps it's a sign the trend is about to reverse that certain people in the public sector are bizarrely receiving their Honours now - it's to reward them before they can be accused of selling out their colleagues.

On that basis, we really should have welcomed the news that, for overseeing massive public sector expansion and bail outs at the taxpayer's expense, the Permanent Secretary of HM Treasury gets a knighthood, while the captains of private sector finance get hunted out of office for their part in Brown's Boom and Bust.

The last of the Naughties?

Let's hope so.

Enjoy the year as best you can!
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