MAKING predictions for the coming year is a mug’s game.
But there is one forecast I feel confident in making: That the people who are contributing least to economic growth will be the ones reaping the rewards.
The Government need to be shrinking the unproductive public sector and boosting the private sector
AlamyIn the first three months of the Labour government the economy failed to grow at all[/caption]
Figures from the Resolution Foundation confirm what has been obvious for months: That public sector workers have been the big winners from Labour’s general election victory.
At the beginning of 2024 the average public sector worker was earning two per cent more than an equivalent worker in the private sector. Since then the gap has trebled to six per cent.
The differential in salaries, though, is only half the story. Many public sector workers continue to enjoy salary-linked pensions.
Private sector employers realised long ago that increasing longevity was making it unaffordable to offer workers guaranteed, index-linked pensions for life based on what they were earning while in work.
Yet public sector employers have carried on getting these generous pensions regardless, relying on taxpayers to pick up the burden.
Pleading poverty
Another shocking set of figures released yesterday shows that across Britain a quarter of council tax receipts are now swallowed up by pension contributions for council staff.
In some areas it is much more. Basingstoke and Deane Borough Council managed to spend more on pension contributions last year (£10.1million) than it raised in council tax (£9.5million).
Providing actual public services such as emptying the bins and running libraries and swimming pools has to be funded from other sources of revenue.
We have become used to councils pleading poverty, bleating that “Tory austerity” has bled them dry.
But now we know the truth: While the public sees services slashed, former council employees have been treated to extravagant pensions.
The Local Government Pension Scheme, though, is in some ways the responsible one.
It is one of the few public sector schemes which is “fully funded”, which means that today’s contributions are invested to pay tomorrow’s pensions.
Most schemes, such as those for NHS workers, teachers, firefighters and so on, are “unfunded, which means that there is no pot of cash being invested to pay future pensioners.
Instead, today’s pension contributions are going straight out of the door to meet current pension liabilities.
Were they in the private sector, these pensions would be called Ponzi schemes — they are like the scam operated by the late US financier Bernie Madoff.
They are committing future taxpayers to huge, unknown liabilities.
If the public sector was working efficiently and well, it wouldn’t matter quite so much. Yet disgracefully, public sector workers are being allowed to get away with producing less and less each year.
Astonishingly, the average public sector worker produces less now than when Tony Blair came to power nearly 28 years ago, with minor productivity gains in the years to 2019 wiped out since the pandemic.
The Labour government has made things worse
Ross Clark
This has been a period of huge technological advance, offering numerous opportunities for making work more efficient.
Instead, civil servants and others have been indulged with the right to work from home, or even from the beach.
Valuable work time is frittered on endless diversity courses and team-bonding exercises.
Some council staff have been put on four-day weeks without any loss of pay, based on the fantastical assumption that it will somehow make them so much happier that they will produce as much in four days as they used to in five.
Far from addressing the problem of falling public sector productivity, the Labour government has made things worse.
In one of its first acts it awarded fat pay rises to NHS staff, train drivers and others without any requirement to agree to improved working practices.
We can’t go on like this. If the private sector worked like the public sector we would be stuck with 1990s standards of living.
Like the Soviet Union in its last decades, Britain would have become the land which economic development forgot.
Energy crisis
As it is, we have a millstone of a public sector being dragged along by a private sector which is still just about able to generate enough wealth to stop the country falling into permanent recession.
But it is a close-run thing. In the first three months of the Labour government the economy failed to grow at all.
This was an economic downturn generated entirely in Downing Street.
Unlike the economic retreat caused by Covid-19 and the energy crisis following the Ukraine invasion, Britain’s sudden step backwards is not echoed internationally.
Rather, it has been caused by declining confidence in the face of higher business taxes coming into effect next year.
Labour came to office promising “growth, growth, growth”.
If they really want to achieve that, they need to be shrinking the unproductive public sector and boosting the private sector.
They are doing the opposite, while failing to undertake reforms to public sector pensions needed to avoid fiscal disaster in future.
The past few months have seen a generous payday for some.
But none of us will be shielded from the long-term decline caused by a slothful public sector.
Published: [#item_custom_pubDate]
