1

Schools and hospitals are out-

Wednesday February 22rd 2011 of-bounds, the Tories have reassured
us, but pretty much everything else
is fair game. Nonetheless, the
PUBLIC Chancellor of the Exchequer, George
Osborne has indicated he wants to

SECTOR reduce the national deficit by £86

billion. Although this seems
reasonable, he plans for some £66
CUTS: billion (a remarkable 76.7% of the
target!) to be achieved by cutting
public expenditure over the next six

TEODROS years.

GEBREKAL Realistic Options

On How the Cuts Are A Not
Panacea to the Deficit But
an Crude Oxymoron
Posted by
Teodros Gebrekal
14:45 GMT
Understanding the Cuts:
What’s going on?
Without doubt the worldwide
global economies are awash with
debt and even more worryingly,
uncertainty. There has to be a review
on public service expenditure.
Clearly, all three major political
parties are in agreement that cuts
are needed in public sector
expenditure.
But how deep should the public
sector cut knife penetrate?
It has often been argued
(coincidently, usually by the Tories!)
that the public sector is a waste on
national budget. Certainly, the public
sector enjoys better pay, bigger
pensions, more sick leave and
greater job security than the private
sector. Taking this into account it
would seem plausible that certain
sacrifices are made in public sector
expenditure, just those as sacrifices
are being made in the private sector.
One of the reforms is the
reassessments of public sector
worker pensions. There is to be the
introduction of a 'pension’s levy',
which would require public servants
to contribute far more if they want to
continue to enjoy the benefits of
their pension schemes. Essentially,
the government will charge an extra
2.5 per cent of salaries in pension
contributions to raise approximately
£3 billion a year. Such a move would
effectively be a pay cut, a
phenomenon which has been
prevalent in the private sector. While
this particular line of action is not
void of challenges, it would seem
both a logical and plausible move to
help tackle the deficit.
Unnecessary Attack
However, it is the government’s
determination to cut thousands upon
thousands of public sector jobs which
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has been met with stern opposition.
The level of cuts that are planned is
dangerous and naive.
By making enormous cuts in
such a unique sector, the Tories have
overlooked that public sector workers
(especially those who have been long
standing servants) may become
disenchanted and feel almost like
scapegoats. The public sector is truly
unique and it retains an ethos that’s
just not present in other sectors.
Resultantly, many workers may
choose not to explore the possibility
of working outside the public sector
should they be made redundant.
Generally, public organisation
employees are usually associated
with safeguarding the interests of
the general public. There is a self-
worth and personal satisfaction that
comes with serving the public. Such
empowerment really does intensely
motivate public sector employees,
who may feel that this incentive can’t
be replicated in other lines of work.
Having undertaken a public sector
specialist subject and experienced
working in the public services,
personally I can relate to this
sensation. This also ties in with the
stereotype that the private sector, is
“a cut-throat and self-serving zone”
in comparison to the public sector.
The end product being many public
workers simply claiming benefits,
unless other similar employment is
available to them. Although, this
seems a trivial rationale at first
glance, with greater inspection such
entrenched feelings by workers who
will be made redundant could prove
to be a major problem for the
government.
There is more than an emotive
argument
against the
Tories’
cuts. The
general
lack of
Public sector job cuts hit employment
outlook Photo: Sky News
employment and stimulus in the UK
job market reduces the chances of
victims of the cut’s finding work.
Putting people out of work with such
high unemployment in general,
results in a loss of tax revenue and in
turn an increase spending on
benefits. Thanks to the recession,
demand for both permanent and
temporary staff has decreased
drastically, which really
does threaten the recovery of the UK
job market.
This is a vicious cycle that would
provide to be a major problem to the
Tories’ reforms. Ironically, tackling
the deficit through excessive cuts
could actually only serve to increase
it. Bewilderingly, according to
research carried out by the trade
union UNISON, the government’s
plans
“£6.6to cut 725,000
billion public
in lost taxsector
jobs could cost
revenue andtheanUK economy:
extra £8.8
billion to the nations
benefit funding.
Additionally, Small
businesses dependent on
public sector contracts will
take a hit. Unison estimates
that economic output will
fallThere
by £46 billion
seems to beas
a political
a result.that
consensus ” massive cuts are
obligatory for a country to manage
its national debt. More useful,
maybe, is to case study the fiscal
situation across the shore in Ireland.
Having taken a hard and fast
approach in carrying out cuts, Ireland
now has an economy that has become
too weak to sustain recovery and is
facing yet another economic crash.
Like their ancestors, many Irish
workers, especially graduates, are
migrating for employment and
greener pastures. Interestingly, in
comparison Spain has been cutting at
a significantly gradual pace and
coincidently, is much more equipped
for recovery after a disastrous
collapse to its economy.
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Without labouring the point,
more cuts could lead to fewer jobs as
aforementioned, which all in all
results in
no
economic
growth.
The cuts
will hit poor
people,
slow down
economic
recovery
and increase unemployment.
That is hardly a panacea for the
deficit, is it? Therefore, in retrospect,
it may have been wiser for David
Cameron to wait until there is clear
evidence of sustained growth in the
private Food for thought for the
sector, Prime Minster Photo: Getty Images
providing
jobs and support until introducing
such sweeping cuts.
As well the actually loss of
employment, the public sector cuts
directly impact on the British public.
Those at the lower end of the income
scale now face crippling crushes.
Many welfare programmes cuts are
planned. Certainly, the Tories are
right to tackle the culture of comfort
and the perverse incentives in certain
welfare schemes.
However, disappointingly, some
of the reforms are borderline
bullying. The chancellor recently
announced that mobility component
of the disability living allowance
would be removed from people living
in residential care. This is a
devastating notion considering it
helps to meet some of the extra costs
disabled people face when they
travel. This would affect the
independence of thousands of people
living with a disability. Arguably, this
move can be seen as Tories targeting
a section of society who are unable to
defend themselves, contradicting the
government’s claim before the
general election that vulnerable
people in society would not be
affected by their welfare reforms.
Traditionally, the Conservatives
have always desired to significantly
reduce the size of the state. Many
will claim that the Tories sole
motivation in driving through such
extensive public sector cuts is an
actualisation of their neo-liberal
ideology, instead of seeing the cuts
as measures that could address the
deficit. Even though such an
argument goes beyond the scope of
this blog, it is interesting to note that
many see these reforms as being
underpinned by sinister political
interest.
What’s the alternative? There
are better, simpler and more
equalitarian methods of reducing this
nation’s deficit. One of those
methods already exists precisely for
that function: Taxation. Yes, tax
increases are being introduced by the
Tories, but they are deceptive,
considering they balance for less
than 25% of the Chancellor’s £86
billion target mentioned earlier.
Moreover, it would be advantageous
if the Tories could raise plentiful
capital should they choose to
seriously confronting tax evasion and
avoidance. In actually fact, white
collar crimes strip billions from the
national economy each year. Again, a
discussion of the viable alternatives
to the cuts are beyond the scope of
this blog, but forcing the public
sector to be held responsible for
76.7% of the overall deficit reduction
target, is a clear show of
foolhardiness by the Tories.
The one certainty is that this is
one of the most important periods in
British fiscal politics. The Tories
simply have to hope they got it right,
and unfortunately we must pray it all
works out.