Magazine article Public Finance

Spending Our Way to Success

Magazine article Public Finance

Spending Our Way to Success

Article excerpt

The rosy glow of job security in the public sector, painted by Tony Travers in Public Finance ('It's not as bad as you think', March 21-27), has been exposed for the myth that it is.

The latest Chartered Institute of Personnel and Development Labour market outlook, published this month, shows a sharp rise in the number of employers expecting to make staff redundant. And this is higher in the public sector (48%) than in the private services sector (35%) or even in manufacturing (36%).

This is a situation the institute puts down to the fact that 'employers in the public sector are being required to make further efficiency savings and cope with tighter budget settlements'.

Many economic commentators think that even the revised forecasts for growth and incoming public revenue in the Budget are optimistic.

Travers is right that a further fall-off in growth, or a move to recession, would leave the government three options: increase public sector borrowing, raise taxes, or cut public expenditure.

But any economist would tell you that cutting public expenditure is the last thing you want to do in the event of a further slowing of the economy.

It is spending on benefits and public services that cushions individuals, families and communities from the impact of any rise in unemployment, or loss of income.

Such spending also has an essential role to play in sustaining employment, demand and growth in the economy. That is why it was right for Prime Minister Gordon Brown to use the Comprehensive Spending Review process to protect investment in public services from the threat of an economic downturn.

Most economists agree that public sector investment has played a real role in maintaining relatively high and stable levels of growth and employment over the past decade.

When the economic going gets tough, the right thing to do is increase the tax take from those who can best afford it, instead of targeting the public sector for cuts and subjecting the workforce to a pay cap. There are people with incomes above £100,000 who are paying a lower rate of tax than they would have done for most of Margaret Thatcher's time in office.

Unison would like a 50% top rate on those earning more than that and further action to crack down on tax avoidance by high earners and the very wealthy.

Chancellor Alistair Darling made steps in this direction in the Budget with his plans to tax 'non-doms'. However, because the tax burden is greatest on the lowest paid, we need a wider public debate on the whole taxation system. …

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