Tackling the deficit

Reform’s report, The Front Line, focused on the how of the public finance question – how to get the deficit down in practice.  We pointed out that since the public sector workforce accounts for around a third of the total government deficit, it should contribute a third of the reduction in the structural deficit.  That would mean reducing the costs of the public sector workforce by £30 billion, equivalent to a reduction of one million of the six million public sector jobs in the UK.  That would take public sector employment back to the levels of 1999 when the recent period of major spending increases began.  It means reducing the costs of front line workers such as doctors, teachers and police officers and changing their terms and conditions, contrary to the pledges of Gordon Brown and David Cameron to “protect the front line”.

The TUC and two of the public sector trade unions do not support our plan.  Debating with me on Today, Mark Serwotka of the PCS said that reducing public sector jobs would turn “the recession into a depression”.  Brendan Barber called the proposals “appalling” because “you can't make big spending cuts without hitting public services”.  Mary Maguire of Unison said that we should “go back to the drawing board”.  All three argued that the right approach to the deficit is to raise taxes (in particular on “bankers, financial institutions and tax avoiders”).

These arguments prefigure the debate in the next Parliament, when all main parties are committed to cutting the deficit by cutting spending.  Mark Serwotka (and David Blanchflower) are wrong that the economy would go into deep freeze.  Aggressive monetary policy and the automatic stabilisers are powerful boosts to the economy over and above any discretionary fiscal changes.  Tax rises would leave all of the inefficiencies of the public sector unchallenged.

I don’t think that this is evidence of universal trade union opposition to reform.  Other unions (including the public sector) are aware of the need for change and want to play their part.  In fact it is more evidence of the need for reform in public services, and the consequent improvement in management.  Employees in poorly managed organisations are more susceptible to proposals of radical action.  Reform will support the efforts of moderate trade unions.

As various Coffee House posts say, the Pre-Budget Report is not likely to shed much light on the plan to eliminate the public sector deficit.  But whoever comes to write that plan should include significant reductions in the costs of the public sector workforce.

Andrew Haldenby is director of Reform