Cuts, Responsibility and the Public Sector

Last week saw large scale strike action from public sector workers here in the UK, campaigning against changes to pension arrangements and more generally ‘cuts’ to government spending. The most common refrain from these workers, as on similar days of action in the UK and elsewhere, was that because the public sector was not responsible for causing the financial crisis it is ‘unfair’ to expect its workers to pay towards undoing the morass. It seems to me that there is more than a grain of truth to this charge because whatever one thinks of high public spending it did not cause bankers to become over-exposed to sub-prime mortgage investments. It is equally true that banking institutions both on grounds of justice and the need to avoid future moral hazard should have faced more of the costs of their own failure.

All this said, the claims of ‘unfairness’ might warrant a more serious hearing if public sector workers in the UK and elsewhere had marched against the enormous increase in government spending (between 4 and 6 % of GDP in the UK) that took place on the back of the financial bubble that prevailed between 2001 and 2008. Few, if any of those spending increases were ‘deserved’ by public sector workers. They certainly didn’t come as result of productivity increases. Yet those who work for the public sector (and I include myself in that category) were perfectly willing to cash in on the spending increases that were funded in part by taxing the gains made in the banking boom. Now that boom has disappeared someone has to pay the full bill- including the public sector. If union leaders had marched through the streets demanding public spending restraint and campaigned for higher interest rates during the last ten years – as any genuine guardian of the ‘public interest’ should have been expected to do – then and only then might they have a valid reason to gripe about the present ‘injustice’.

2 thoughts on “Cuts, Responsibility and the Public Sector

  1. The Unions’ arguments are wholly erroneous. The public sector – at least the workers whose pensions are being mildly reduced – was not responsible for the financial crisis (although public policy clearly was, not ‘the banks’ as they are claiming) but it clearly was responsible for a good portion of the budget deficit and is also responsible for most of the national debt accumulated and still accumulating. Even without the financial crisis, it is clear that the public sector was already creating an unsustainable debt burden.
    Most critically, however, is that if the unfunded public sector pension liabilities were added to the national debt figures – as they ought to be – that debt would be far in excess of the current figure as the IEA has already shown, and would truly be viewed as unsustainable.
    http://www.iea.org.uk/publications/research/reforming-public-sector-pensions-solutions-to-a-growing-challenge
    http://www.iea.org.uk/publications/research/a-bankruptcy-foretold-2010-post-financial-crisis-update-web-publication
    …amongst others.
    It is also quite clear that there are some arguments against the Unions. For instance, they must be asked why their pensions are being funded by the taxpayer to the tune of £30bn over the next four years. Why ought the taxpayer bear such a burden. Also, given that the unfunded obligations will have to be passed on in future government debt the Unions are making future generations pay for their pensions. This argument has barely been deployed by the Government which failed to get its message across properly.

  2. I have always thought that fairness arguments were specious, especially with regard to public sector workers. Why should public sector workers have a special protection against financial loss? Because “promises” were made to them?

    I work in the private sector and am routinely made promises which are just as routinely reneged upon. Why is it that promises can be broken in the private sector and that’s “just business” but somehow public sector workers are a special caste not subject to the same vagaries.

    Cry me a river. I plan on working til I die. So too can public sector workers if the promises aren’t kept. All living creatures on earth work until they die including ninety-five percent of the humans on the planet. The notion that one can spend the last ten, fifteen or twenty years of one’s life in idleness is a very recent idea; an idea which is being shown to be unworkable with each succeeding day.

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