What a good idea

Much has been written in recent weeks about Franklin Roosevelt\’s New Deal, the storm of activity with which, following his inauguration in March 1933, he sought to resurrect the US economy from the Great Depression. Among his less-noticed measures was a cut in public sector pay.

Today, is it credible that hundreds of millions of employees in the world\’s manufacturing, service and financial services industries should suffer, as they are going to, while public sector pay and benefits remain inviolate?

Hmm, there\’s an idea.

Let\’s say that public sector pay is around 50% of total government spending. No idea whether it is but imagine. So £300 billion of £600 billion.

If you look at the ONS ASHE survey (the same one we get the gender pay gap numbers from) then public sector pay is, on average, 8 % or so higher than private. Plus there\’s those pensions. So call it 10%.

A 10% haircut all round on public sector pay. Sounds fair doesn\’t it?

Of course, we don\’t want to upset the fiscal boostiness the economy needs at present so we need to make this neutral, so we can pass this along as tax cuts. Say, increase the personal allowance to £11,000. That would cost £30 billion.

Hmm. We equate public and private sector pay in this time of pain and we take the working poor entirely out of the tax net.

Or of course you could look at this the other way around. The reason we tax the working poor is so that government employees can get higher pay than private sector workers.

So, anyone know what the total wage bill actually is? Is 50% about right?

10 comments on “What a good idea

  1. Not sure about the total wage bill, but I know it’s about to get a lot higher because Gordon Brown is about to announce plans for an extra 100,000 public sector jobs to boost the economy.

  2. You’re right. The public sector is a racket run for the benefit of the mediocre middle-class — the sort of people who feel that they’re important, but who are incapable of doing anything that is actually useful. It is run (partly) at the expense of the working class and the lower-paid.

    The key to it is convincing the working class and the lower-paid that it’s in their interest to vote Labour and sustain the public sector bureaucracy. That might sound difficult to do, but remember that you have a whole quasi-religious ideology dedicated to achieving it, many of whose members work in the media and the arts.

    (Another sad aspect of all this is that the public sector has become so lucrative that genuinely talented people are being lured into it, depriving society of their talents).

  3. My private sector employer has cut staff pay by 20%, in an attempt to keep the enterprise going as orders have shrunk to near zero. There is also a big redundancy program under way. DB pensions scheme closed and frozen; we now have a DC only scheme, with company contributions halved from previous levels.

    10% off only for public employees ? That’s just got to be for starters – what do Chinese civil servants get? Chinese and Indian pay is what is driving down pay levels in industry.

  4. There are 8 million taxpayer funded jobs, average wages including NIC £30,000 (say). Yes, they pay income tax and NIC, but the value of their pension promises is roughly equal and opposite, which makes ‘only’ £240,000.

    OTOH, if you take total govt spending of £600 billion, about £180 billion goes in cash payments i.e. welfare and pensions, leaving us a balancing figure of £420 billion, it seems unlikely that the government spends £180 billion (£420 billion minus £240,000) on ‘other’ (neither welfare nor salaries).

    So £300 billion seems like a good place to start.

  5. Regardless of the actual cost of public sector wages, they are ripe as a very ripe ripe thing for being slashed. Not across the board, but heavily at the top lessening as you work down the pay scales such that the poorest (often the frontline staff) see no reduction. Get rid of a few levels of management while we’re at it.

    The prats at the top are the ones we were repeatedly told we had to pay the best to get the best. They have been shockingly poor value for money. There are too many of them, they are being paid too much and they are mediocre at best and criminally incompetent at worst.

  6. The New Deal didn’t really work. What pulled FDR’s chestnuts out of the fire was World War 2 and all the war orders for US manufacturing plants, workshops, factories and so on, quite a bit from the British too.

    That’s what we need. A Noo Labour inspired world war 3 to……..oh bugger, it jus went nuclear…….

  7. Surely the effect of all those pounds being printed (minted?) is going to be a lot of inflation. Thus everyone gets a pay cut without negotiation. I’ll guess that the private sector will be in a better negotiating position for an inflation related pay rise- so its all in hand (unless Brown chickens- but who would believe that?)

  8. Interesting figures, but a broad 10% reduction in public sector pay is a bad idea. A gimmick. Bit like the idea of a hiring freeze which I think the Tories mentioned some time ago. Why?
    * I don’t think we really want to reduce the pay of these folk, do we?
    * If we have too many people processing tax credit applications (hint, 0 is the correct number), and too few Arabic language specialists in GCHQ, a hiring freeze will not help.

    Sorry, but there is no substitute for evaluating every department, and every job position within each department, and deciding if it is a necessary function or not. Get rid of what we don’t need, and those that are bad at jobs we do need, and pay those we want to keep appropriately.

  9. maybe a market-based solution might help – a 20% pay rise for Arabic interpreters and a 30% cut for tax credit shifters…

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