David Cameron suggests, in fact he demands that the balance of our economy is changed so that the private sector is larger and the public sector smaller. His rationale for this is that only the private sector contains wealth creators, whereas the public sector only recycles taxes. To understate the point somewhat, this is both overly-simplistic and fatuous. In short, it is just plain wrong!
As was shown in my previous post "Does Privatisation Work?", neither is the private sector more efficient than the public sector. Indeed, any efficiency gains that are made benefit only the shareholders and senior managers of the organisation in question. There will be those who tell us that the public sector does not generate wealth and at the moment this may be true to some extent, but only because all of the wealth generating industries have been stripped from it and given to those who exploit assets purchased by the tax-payer to generate their own wealth. This means that the added value that is being generated from these divested industries is not reinvested to improve conditions in the UK.
Examples of this are easy to find, according to the Telegraph profits of the FTSE 100 companies doubled to £73Bn per year between 2003 and 2007, and again to £150Bn between 2007 and 2010 despite the economic conditions. The Guardian reports that the tax they pay as a percentage of profits had fallen to 26% from over 35% by 2011. The Telegraph goes on to develop this point explaining that 37% of FTSE companies paid no corporation tax whatsoever, while the others employed various means to significantly reduce their tax bills. Meanwhile UK unemployment was increasing, real wages were falling and the Government has used lack of money to justify an austerity push which has reduced all of our standards of living and decimated the public sector. Still being the socially responsible entities that they are the FTSE companies responded by setting up new ventures in tax havens so that they could avoid their tax obligations to an even greater extent – all but two of them have done this. And this money does not find its way back into our economy through spending as so many of the shareholders are based in other countries or are actually other organisations.
Nonetheless, we must take a leaf from Thatcher’s memoirs and rethink our public sector as she re-branded the private. We must hold on to the ideals of equality of opportunity and collective endeavour but design ways for national organisations to be more efficient. The public sector is more difficult to manage than the private sector precisely because it seeks far more than the one-dimensional aspiration of increasing the wealth for a few. This does not mean however that it is impossible and anyone with even the most rudimentary conception of our society’s problems must conclude that change is not only desirable but that the need for it is urgent.