Tuesday, July 07, 2009

Insulating The Lazy Scapegoat With Rubbish

Swivel eyes not required to see this one

Unlike Tyler, Steve Bundred is no swivel-eyed small government zealot. He is a senior public servant, the head of the government's Audit Commission.

Yet on Sunday he told us:

"At a time when inflation is likely to be between 2% and 3%, a pain-free way of cutting public spending would be to freeze public sector pay, or at least impose severe pay restraint. This is especially true if real wages in the private sector are still falling.

Health and education will not be immune, partly for reasons of fairness to others, partly because the NHS is the world's third largest employer, and also because ministers will correctly assume that as public sector workers have done well over the past decade, they will tolerate some modest real reduction in earnings.

So whichever party wins the next election, we can expect a reduction of £5bn or more in real terms from public sector pay."

All eminently reasonable.

But needless to say, he has run into heavy flak from the promoters of Big Government. Pol says public sector workers should not be made a "lazy scapegoat":

"... just hold on to the basic fact that it is rare to find people who are not paid less by the state than in the commercial world. So when the cry goes up for all these feather-bedded public workers to "share the pain", will there be some idea that they should share in the good years too?

... If there must be spending cuts, don't let public sector pay be a lazy scapegoat for the nation's increasingly distorted pay structures."

According to Pol - and we've covered her arguments before - public sector workers are poorly rewarded relative to the private sector, so should not be penalised simply because we need to make savings and private sector pay is falling. In fact she reckons the entire argument is based on "rubbish statistics" cooked up by... well, waddyaknow - the TaxPayers' Alliance. She says:

"A rumbling campaign to squeeze the gold-plated, feather-bedded public workforce has been led until now by the TaxPayers' Alliance, using conveniently deceptive figures.

The TaxPayers' Alliance came up with the rubbish statistic that "state workers now earn an average of £62 a week more than their private sector counterparts," adding in the comment: "We cannot pay these enormous bills for people who are not creating wealth."

Conveniently deceptive? Rubbish statistics?

Pol may not have grasped this, but the TPA numbers are actually the official figures for median pay in the private and public sectors taken directly from the ONS's most recent Annual Survey of Hours and Earnings (ASHE), the definitive source of earnings data across the economy. And they show median pay of £523pw in the public sector, compared to £461pw in the private - so the typical public sector worker was £62pw, or 13%, ahead.

And remember that figure relates to April 2008. Since then, public sector earnings have increased by 3.6%, against only 3.1% in the private sector (see here). So the public sector has pulled further ahead.

And this is no short-term effect - here's the longer term perspective:

So public sector pay has more than kept pace under Labour.

Ah, says Pol, even if that's true, on a like-for-like basis, public employees are still underpaid relative to the private sector, because on average they are more professional. Whereas the private sector mainly employs the flotsam and jetsam of society, no fewer than a quarter of public sector employees are "professionals".

Now as we all understand, it's a mug's game trying to work out precise job comparibilities between the public and the private sectors - the patterns of business and employment are so different. But just so we know, here are the facts as the ONS records them:

So as we can see, the public sector does indeed employ more "professionals" than the private sector - in 2006 it was 22.5% vs 10.3%.

But at the same time, it employs far fewer "managers and senior officials", and virtually no "skilled trades" (aka highly paid professional plumbers).

Meanwhile at the bottom end of the scale, there is virtually no difference in public and private sector employment of "elementary occupations" (ie Pol's cleaners).

Or to put it another way, Pol's argument is conveniently deceptive. Not for the first time, she has been highly economical avec l'actualité.

So just to recap:

  • Public sector pay is currently running at about £160bn pa
  • Present plans are factoring in 2-3% pa pay increases
  • Implementing a freeze would save us £4-5bn pa - cumulative

Now all we need is the will to face down the strikes...


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