PUBLIC SECTOR TENSIONS

John Boydell - Friday, 13 January 2023

As always, I’m not on anybody’s “side” politically, just trying to champion common sense.

Rishi #Sunak has championed the benefits of “transparency” this week and rightly so for it bolsters our old friend “confidence”, so important in keeping our country governable and generally onside.

We need a public sector for it performs all sorts of vital tasks to support our citizens and to keep the fabric of society intact. There is, of course, a cost attached for public sector workers, be they #NHS workers, police, fire service, civil service etc., while providing vital work do not create the money to pay for that work. Instead, it is the private sector that does that by creating wealth that, in turn, provides the taxes to pay for things (I acknowledge, for clarity that public sector workers pay taxes but it is, in effect, a rebate on the share of wealth that has been directed to them). So, there’s a social contract between the wealth takers and the wealth makers, and each needs the other.

Governing is not easy; it’s hard and complicated. Demand will always exceed the ability to supply what society in general and interest groups, in particular, clamour for. Choices will always have to be made and the government has to make those choices and explain its reasoning to keep citizens accepting that state provision has a limit. Politically, this is a problem, for saying “no” is generally not a vote winner, unless the voters see it is for their greater good.

We have a wave of public sector unrest and, indeed, strikes arising from the current cost of living crisis. In broad terms, wage demands are for those that would replace what is being lost to inflation (there are other issues, sometimes). There is, it appears, much public sympathy for the simple solution of “get round the table and sort it” – a euphemism for just give the rises. As I say, governing is hard and if the money is paid out, it has to be paid for. So, if 10% rises are given, that equates to many billions the government doesn’t have, increased by the commensurate rises in pension contributions and other benefits enjoyed by public sector workers, all baked in to future years (when inflation is likely to be lower). It would also mean borrowing more and/or raising (already high) taxes. The government is aware there’s a limit to what the wealth makers will pay for the wealth takers.

What to do? The cause of #publicsector workers is, generally, just in that they are poorer but wish not to be so, provide vital services and see the services they provide in danger of degradation if terms and conditions are not attractive to workers. But there’s no money. Public sector unions point to larger average rises in the private sector (6 – 7%) but that’s a feature of supply and demand of (scarce) workers. What’s not pointed out and which needs to be factored into the social contract is that, by and large, the public sector enjoys high job security, regular work, enhanced sick pay and pension provision the private sector can only dream of. By contrast, private sector workers enjoy limited or (none in the case of the self-employed) job security, often uncertain work (or sometimes none in the case of self-employed) and limited (none in the case of the self-employed) pension provision. There?is a big danger for the government that the grumblings of the private sector at the cost of and perceived security blanket of the public sector turns into a roar and that the willingness to keep on paying for it falls away.

How’s all this being handled? “Could do better” is a relatively mild way of putting it. Levelling with all workers and the public generally might help, rather than unexplained headlines of “Unaffordable”. It is, in reality, unaffordable but explain that! Here’s the messaging for a new social contract (based on reality) between the governing and the governed:

?a) We’re going to be absolutely “transparent” and level with you all:

?b) All workers matter but, as money is finite, nobody will ever be able to have all they want, just a fair share;

?c) Services the state can provide need to match what the country can afford – expenditure needs to match income and no matter how desirable certain services will not be available;

?d) The country’s credit card is maxed out: at the end of Quarter 2 of 2022 the country owed ￡2,436.7 trillion and the debt to pay public sector pensions exceeds ￡2.2 trillion and growing;

e) We can’t pay for this, it’s a time bomb and if it goes off, everybody’s life will be devastated and we, the government, and you the citizens need to stop that happening;

f) (To the public sector) While headline pay in the private sector may appear to be rising faster than in the public sector, the entire “package” enjoyed by the public sector is in financial and security terms, in many cases superior to the private sector;

g) Public sector pensions (going forward) will have to be adjusted, as started in the private sector 20 years ago;

?g) (To the private sector) We acknowledge your perception that the public sector has things you cannot have, we’re aware of it and intend to see there’s a fair balance;

h) (To everybody) Please re-set your sights. If we all get real you and your loved ones will have an acceptable level of support from the state, with the ability to top that up from your own efforts, if you’re so inclined.

In my lawyer days, this would have fallen into the arena of advice the client needed to know (vital), not what they wanted to know (fantasy). The government should tell the client (its citizens) what they need to know, not what they want to know. Is that going to happen? Of course not – ‘It’s politics, stupid’. Bad news repels #votes. Let’s duck it and leave it to the next lot.