500,000 job losses and the Spending Review – by John Redwood MP

At last the BBC and others accept what readers of this website have known for weeks – that cash spending carries on rising under the government’s  plans.  We have heard of the increases in Health, Schools, Pensions, EU, Overseas Aid and debt interest.  Today we hear of the programmes that are being cut, and doubtless there will be much reporting of those. Viewers and listeners need to remember that where cuts are being made, they will be made over a four year period, and are often reported in so called “real terms” where various estimates are made of how much extra cash a service says it needs to stand still.

Much  is being made today of the 500,000 job loss figure seen on Mr Alexander’s briefing document photographed through his car window. Let us put this into perspective. There are around 6 million public sector jobs in the UK, an increase of more than 1 million over the last decade. At least 250,000 public sector employees resign or retire every year, so over a four year period you could cut the workforce by 500,000 without a single redundancy, whilst replacing people in  all important posts like doctors, nurses and  teachers.

Let’s have one last go at putting public spending into a normal perspective. Let us say your salary last year was a healthy £60,000, thanks to Labour. You are told that you will have a cash rise every year, taking your salary up to £69,250 in 2014-15.  Unfortunately your interest bill is going up because you have a large mortgage and you are  still adding to your credit card debt.  How much do you think you would have to cut out from your “real” budget by 2014-15?   Would you be planning major surgery if your pay increase was only £9,250 a year by 2014-15? If you simply add 7 noughts to those figures you have current total public spending, or the public sector’s total income including  borrowing for current purposes.

In order to make the most of the extra £92.5 billion by 2014-15 the public sector needs to keep down its costs. If it buys more cheaply the money goes further. If there is a wage freeze there will be a bigger real increase in total spending, and more jobs can be saved. In the recession the private sector was most flexibile in cutting costs and preserving jobs, faced with a far worse revenue  position than today’s public sector.

I just hope the public sector will now seek to manage well and wisely. It might be surprised to see how far £650 billion can go. I will also be more interest in the 2011-12 figures, than alarm over the 2014-15 figures. A lot can happen before 2014-15 arrives.

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