RUTH SUNDERLAND: Reeves and Starmer plan to undo the Thatcher revolution
The pedant in me was provoked when a report recently arrived from the Left Resolution Foundation, ‘written by’ its interim chief executive Mike Brewer.
How ‘writing’ a report differs from ‘writing’ remains a mystery.
Language evolves, and sometimes it does so in ways that some of us find annoying. Most importantly, Mr. Brewer had interesting points to make.
He drew attention to the “major pivot” that Chancellor Rachel Reeves will make in 2025 towards the public sector, making it a priority over the private, wealth-creating part of the economy that pays for it all.
This is, as the Resolution Foundation notes, a striking change of direction, of a kind not seen in a generation outside the financial crisis and the pandemic.
Anyone listening to Reeves and her boss Sir Keir Starmer can imagine that public sector workers are morally superior and low paid. It is true that many people who work in the NHS, the military or in education, including members of my own family, are driven by a sense of calling. But the assumption that public sector workers are downtrodden compared to the private sector is not always correct.
Two unique ones: Chancellor Rachel Reeves with her boss, Prime Minister Sir Keir Starmer
According to the Foundation, average public sector salaries were 6 percent higher than those in the private sector in the three months to November. Frankly, this is just one period and there have been times when the public sector has lagged behind.
But any perceived disadvantage seems even more questionable when pensions are taken into account.
Approximately 9 million current and former public sector employees have an unfunded pension plan. Their retirement income is funded by contributions from members who are still working, with any shortfalls covered by taxpayers. The liability of these unfunded schemes is approximately £1.3 trillion.
Employees enjoy a gold-plated retirement income based on their salary, something that has largely disappeared in the private sector. On average, they receive a contribution from their employer – the taxpayer – which is valued by the government at 23 percent of the salary. This is an amount that typical private sector employees can only dream of.
It’s not cheap. The public sector workforce is 5.9 million, with a cost to the taxpayer of £270 billion in 2023-2024, around 10 percent of national income and 22 percent of total UK government spending.
As private sector companies scale back hiring and wage increases due to Labor’s employment tax hikes, the state will continue to expand. Greedy public sector unions will demand more wage increases without committing to productivity improvements. Reeves risks getting caught up in higher spending, higher borrowing and higher taxes, with no guarantee that services to the public will improve even one iota.
And this is the part of the picture that has been erased by Labor: service delivery. The public sector does not exist to serve the workforce, much less to serve a Labor government. Its purpose is to serve us.
Yet this has been turned upside down. Those of us who work in the private sphere are treated as if our only value lies in funding increasingly inadequate public ‘services’ through confiscatory levels of taxation.
Reeves and Starmer plan to reverse the Thatcher revolution, which involved shrinking the size of the state and creating conditions in which private enterprise could flourish. They think they know how to spend your money better than you do. They are arrogant and they are wrong.
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