Economics

Private sector will be hit by cuts

8th September 2010 — Filed under: Economics

Nigel Stanley Nigel Stanley

Ministers and the small-state right want us to think the cuts programme will mainly bear down on what they see as feather-bedded public servants, but the the state spends half as much again on buying good sand services from the private sector as it does on the public sector wage bill.

Just 25p in every tax pound is spent on public sector staff while 38p goes to the private sector.All together the private sector gets £236 billion of custom from the state – equivalent to more than £4,000 a year for every UK adult according to HMT stats. Table 5. (Some of this, of course, will be spent on imports though we do not know how much. Across the economy as a whole imports count for 30% of GDP. My guess is that it would be a little bit lower for the public sector.)

Cuts in spending will inevitably hit the private sector. While no private sector company has any right to contracts in perpetuity - and indeed some spending unions oppose – the macro-effect of the cuts will be deep.

For stats nerds, here’s a breakdown by government function. The first column is the total expenditure in that area, and the second external procurement.

  Total expenditure on services (£million) Total procurement on services (£million)
1. General public services 52,773 18,178
2. Defence 36,711 25,936
3. Public order and safety 33,628 16,142
4. Economic affairs 48,096 22,641
of which: enterprise and economic development 15,592 4,654
of which: science and technology 3,166 550
of which: employment policies 3,102 1,546
of which: agriculture, fisheries and forestry 5,417 1,341
of which: transport 20,820 14,551
5. Environment protection 9,627 9,897
6. Housing and community amenities 14,963 10,127
7. Health 109,972 71,136
8. Recreation, culture and religion 13,142 10,192
9. Education 82,593 18,042
10. Social protection 203,606 28,026
     
TOTALS 605,111 230,317

Thanks to Nicola for digging out the stats.

6 Responses to Private sector will be hit by cuts

  1. Trackback made by Tax Research UK » The Private sector will be hit by cuts on Sep 9th 2010 at 1:36 pm:

    [...] Note: based on an entry on the TUC Touchstone blog [...]

  2. Comment made by Matt on Sep 9th 2010 at 1:39 pm:

    “All together the private sector gets £236 billion of custom from the private sector – equivalent to…”

    i think you mean ‘from the public sector/state’, dont you?

  3. Nigel Stanley

    Comment made by Nigel Stanley on Sep 9th 2010 at 1:49 pm:

    Thanks Matt.

    Just checking to see if anyone reads this.

    I’ve corrected it now.

  4. Comment made by Georges on Sep 9th 2010 at 2:01 pm:

    According to people like Richard Murphy of TR-UK, the private sector is a venal, corrupt and malign actor in “society”.

    Therefore, shouldn’t some be celebrating this dimunition of transfer to the private sector?

    Georges

  5. Comment made by Matt on Sep 9th 2010 at 2:09 pm:

    I think its really important that we make the point continually that we live in a complex world where perceived barriers between public and private are increasingly illusory and the two sectors are becoming more and more inter-dependent and inter-related. I think some of the figures in this article are really, really useful in making that argument. We shall certainly be having a go at http://www.proudtoservethepublic.org.uk

  6. Trackback made by Why progressive women should care about spending cuts « Progressive Women on Sep 13th 2010 at 7:36 pm:

    [...] sector jobs will be lost by 2015, it is clear that working women will feel the impact. And with 38p of every pound of state expenditure going directly to the private sector, it won’t only be state employees who [...]