Why is the public sector controversial?

The government will be holding a review of public expenditure as part of the Autumn Budget process. The chancellor will receive demands to spend more and other demands to spend less on the public sector. This discussion will be politicised both between the government and the opposition and within both parties. Divisions will appear within the cabinet.

The public sector has shrunk

The public sector experienced drastic cuts during the age of austerity and has not recovered. Although this government has spent amazing amounts to try to deal with the Coronavirus pandemic, not all the money has gone to that sector. Consultants have done well, and of course a lot of money has gone to support businesses and individuals in various ways. The government has made a lot of spending promises, but these include infrastructure projects that will mainly involve contractors (and doubtless consultants).

What is the public sector?

This term covers the civil service, local government, the armed forces, the nationalised industries (some do remain) the universities and oh err… the NHS. I’ve probably missed a few bits. Sorry. There are many bodies that are not quite one thing or the other and people sometimes call them QUANGOs. Quasi-national government organisations. People often use the term in a derogatory way, because such bodies spend public money without direct democratic control. In fact, central or local government usually has indirect control.

Yes but what is different about the public sector?

Some people wrongly understand the term to mean organisations that provide services to the public. That is to think in terms of what they do rather than why they do it. Businesses provide certain essential services, especially as successive governments have outsourced many things. The essential difference, however, is that the public sector is owned by and, at least in theory, accountable to the public. The purpose of any organisation in the private sector is to make a profit, even if many individuals involved want to serve the public in the process.

Do people in the public sector really believe they are serving the public?

Having worked in local government most of my life, I can say YES! Of course people think of their own careers and some are more public-spirited than others, but the overall ethos is of public service. To reinforce this, many performance measures exist. I wrote about that when I examined the three E’s of management.

Why is the public sector important right now?

The government has spent huge amounts of money fighting the pandemic, as have all governments, and has incurred debts. They may be tempted to try to make savings to offset this. However, they have plans for infrastructure projects that will cost lots of money too. At least some of these will help stimulate the economy and will facilitate growth. However, most of the money will be going to the private sector. Meanwhile, the years of austerity have damaged almost all public services. The government needs to spend a vast amount if it is to repair the damage.

They’ve spent a lot on the public sector: in the NHS!

The government has spent a lot on the NHS to fight the pandemic, although Test and Trace was done by the private sector. However, the NHS was underfunded to start with. There is also a great backlog of cases because staff have had to deal with covid cases. The UK has been spending less as a percent of GDP than most comparable nations for years. What happened to the extra money Brexit was going to release for the NHS?

What’s the biggest reason for spending on the public sector?

One thing overshadows everything at present: climate change! You may have read what I have written before about the things individuals need to do – including myself!  I said in those blog posts that governments need to act as well. If we are to deal with climate change effectively, we will need to spend trillions, in addition to the money needed by the NHS and all the rest. Local and public authorities will need to spend money in order to become carbon-neutral and to assist businesses and individuals to do the same.

 

Who’s going to pay for increases in the public sector?

Some people believe that present levels of taxation, especially income tax, are the highest the economy can stand. The experience of the 1960’s and 1970’s would seem to contradict that. Keynesian economists argue that government spending stimulates the economy and leads to higher tax revenues in the long run. You may wish to read the works of John Maynard Keynes or a book or article about his works.

Are there not risks with public sector spending?

Spending now can save money later. Property maintenance saves structural repairs. Mental health services, youth service, probation and crime prevention save money on dealing with the effects of mental breakdowns and rising crime. The main danger of excessive spending is inflation, but there are ways of dealing with that other than cutting public expenditure. Many people are afraid of the possible consequences of spending too much. On the other hand, many are worried about the possible consequences of not spending enough. I am one of those.

DICE: there are risks with spending too little on the public sector

There are risks with spending too little on the public sector