Public spending cuts would hit the private sector too
We can’t complain about the amount of coverage for the TUC message on spending cuts in today’s media. There can be few that do not understand that we think that cuts in public spending would make the recession and unemployment worse.
But, perhaps inevitably, it has been reported as special pleading by public sector staff. Of course something like the ten per cent cut in spending or staff numbers that has been talked of in some circles would have a big effect on public sector jobs.
But it would hit the private sector too.
I’m writing this in Liverpool – a city with a higher than average proportion of its workforce in the public sector. If lots get the sack, local businesses would be hit hard when they stop spending.
Yet this won’t be the main effect on the private sector.
Not many seem to have noticed but the public sector now spends more on goods and services from the private sector than it does on the whole public sector wage bill.
In 2007/8 the public sector wage bill was £151 billion while the amount spent directly with the private sector was £167 billion. A ten per cent cut in spending would take one per cent of GDP out of the private sector.
And as we showed in a recent report spending with the private sector has been going up faster than the public sector wages bill.
I don’t buy the difference between front-line workers and the rest, but if a cuts programme did try to preserve the jobs of public sector staff who directly face the public, then the private sector would inevitably be hit hard.
Many businesses depend on public sector contracts to keep going. I wonder if their top people are IoD members…