Expanding The State

Perhaps not too strangely, many of Jeremy Corbyn's suggested policies would result in a vast increase in the number of public sector employees.

Rail Strikes Are Common In UK These Days

1. The railways should be renationalised.
2. The energy industry should be renationalised.
3. Public sector salary caps should be lifted.

These three alone would bring in thousands of new public sector employees, and add billions to the public sector bills that the tax payer has to support. So why does that matter?

Well one of the key differences between Labour and the Conservatives is the number of people employed in the public sector. This a vital concern to the Labour Party, because the public sector is about 55% unionised, while the private sector is less than 15% unionised, and the union levy they use to fund the party, is based on membership numbers.

For example, during the 1997-2010 Labour governments, they increased number of public sector employees by about 800,000, which is phenomenal increase and drain on the public purse, both in wages and future final salary pensions to be supported by taxpayers.

Its worth noting here that the rail unions somehow managed to get their wage rises be pegged to the retail price index (RPI) measure of inflation, rather than the lower consumer price index (CPI). So they not only have done better than the private sector, but those higher salary and pension costs would accompany them back on to the public purse upon any renationalisation. 

But despite the lefts insistence that the public sector has suffered salary restraint during the governments public spending cuts (which is true), actually the private sector has generally done worse. So while in 2016-17, average weekly earnings in the public sector were 4 per cent lower than in 2007-08, on the same measure, private sector average earnings were 5 per cent lower. Outside of London and the South East, hourly wage rates in the public sector are 8 per cent higher, than those offered for the same types of work in the private sector. But even inside the public sector there are odd uneven pay rates. UK doctors generally get paid more money than their international equivalents, while UK's nurses get less than their international equivalents.

The other factor which is rarely mentioned about public sector pay, is how quickly public sector workers such as Teachers, NHS workers and Civil servants can reach the top of their pay bands. Not by extra merit, or hard work, but simply because they all get automatic progression based wage rises.

So for example a junior teacher outside of London may start on £23k pa, but with both annual national wage rises, plus automatic progression rises, they actually experience salary rises of up to 8 per cent per annum, until they reach the top of their pay bands. So the costs of employing staff mount quickly to the maximum possibly.

Public Versus Private Pensions - Part Of The Package

Similarly with public sector pensions, which are nearly all index linked and final salary based (and paid for by the tax and council tax payers) .... a privilege long gone in most of the private sector. In 2016 the Institute for Fiscal Studies reported that when pensions are included in the employment package, the public pay sector was generally 12 per cent better off than the private sector over most job types. Closer examination of pensions, also showed that 83 per cent of public sector employees also get an employers contribution to their pensions worth around 10 per cent of salary, whilst only 11 per cent of private sector employees get an employers pension contribution of that level.            

This difference is of vital importance to our economy for several reasons, not least because traditionally the public sector is considered less efficient than the private sector. That is not because the people working in it are particularly lazy, or are somehow deliberately working indifferently. Rather it is because of the combination of employment regulation (very hard to sack them), and automatic wage national and progression based pay rises, that therefore contribute to a lack of incentives, which don't encourage speed and efficiency.

In fact so great has the disparity grown between the two sectors pension costs, that its now estimated that the gap between the employee contributions, and the pension payouts in the public sector pension schemes, will be £16.2 billion pa by May 2022. This all has to be funded by us all, even though most us have less beneficial pension schemes, which we have had to fund from our wages as well.

So if we have a massive rise in that sector of the economy, then it will come at the expense of the private sector, and ultimately to our ability to support a public sector. In fact rather like the Greek economy ...... I can see why the hard left might enjoy such a scenario ... in fact possibly most of the Labour Membership might.

But for the majority of us, this may be a future we can't quite enjoy as much.